DJ Rights and Issues Investment Trust PLC: Annual Report
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Rights and Issues Investment Trust PLC (RIII) Rights and Issues Investment Trust PLC: Annual Report 26-Feb-2019 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. RIGHTS AND ISSUES INVESTMENT TRUST PLC Annual Report & Accounts for the full year to 31 December 2018 Printed copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the Corporate Secretary - Maitland Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY. The Annual General Meeting of the Company will be held at The Gridiron Building, 8th Floor, Number One Pancras Square, Pancras Road, King's Cross, London N1C 4AG on Tuesday 2nd April 2019 at 12 noon. The Directors have proposed the payment of a final dividend of 21.0p per Income share which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 4th April 2019 to shareholders whose names appear on the register at the close of business on 15th March 2019 (ex-dividend 14th March 2019). The following text is copied from the Annual Report & Accounts. INVESTMENT OBJECTIVE & POLICY The Board's objective is to exceed the benchmark index over the long term whilst managing risk. The Company invests in equities with an emphasis on smaller companies. UK smaller companies will normally constitute at least 80% of the investment portfolio. UK smaller companies include both listed securities and those quoted on the Alternative Investment Market ("AIM"). The investment portfolio will normally lie in the range of 80% to 100% of shareholders' funds and therefore gearing will normally be between -20% and 0%. As a result of the Alternative Investment Fund Managers Regulations 2013 it has been decided that the Company will not use gearing. CAPITAL STRUCTURE ISSUED SHARE CAPITAL (at 31st December 2018) 8,006,179 Income shares of 25p each. INCOME ENTITLEMENT Equal entitlement to dividends and other distributions. CAPITAL ENTITLEMENT Equal entitlement to the surplus assets. VOTING One vote per share. PRICE (mid-market) (at 31st December 2018) 1970.00p. DIVIDEND YIELD 1.60%. DISCOUNT MANAGEMENT POLICY On 7th December 2016, the Company implemented share buy-back arrangements to encourage the level of discount to be not more than 10%. SHARE BUY BACKS During the year, the Company has bought back for cancellation a total of 369,079 Income shares for a total consideration of GBP7.9m, representing 4.1% of the share capital of the Company at 7th December 2016. DISCOUNT (at 31st December 2018) 6.99%. RIGHTS AND ISSUES INVESTMENT TRUST PLC ('THE TRUST" or 'THE COMPANY") MAY BE LIQUIDATED AT ANY TIME, BUT THE BOARD OF DIRECTORS HAS INDICATED THAT IT IS NOT ITS PRESENT INTENTION TO DO SO PRIOR TO 25TH JULY 2021. Note: The above is a summary of rights. For full information shareholders should refer to the Articles of Association. HISTORIC RECORD Year to Net asset Net asset Net FTSE All FTSE All value per value per Share Share share share Index (Rebased 31st dividend December per Income Index (Index share 1984 = 1984 = 100) 100) 1984 29.0p 100 3.80p 592.94 100 1990 75.4p 260 7.50p 1032.60 174 1995 175.0p 602 10.50p 1802.56 304 2000 473.9p 1631 25.50p 2983.81 503 2005 732.0p 2520 40.50p 2847.00 480 2010 776.4p 2673 25.50p 3094.41 522 2011 751.2p 2586 25.50p 2857.88 482 2012 962.0p 3312 26.75p 3093.41 522 2013 1382.5p 4759 40.00p* 3609.63 609 2014 1297.1p 4465 36.00p 3532.74 596 2015t 1595.6p 5492 36.00p 3444.26 581 2016 2002.2p 6892 52.50p* 3873.22 653 2017 2372.3p 8166 30.75p 4221.82 712 2018 2118.1p 7291 31.50p 3675.27 620 * Includes Special Dividend From 2015 onwards the historic record is for the Company only and not the Group. Note: Until 2016 net asset value per share is based on the Capital shares adjusted for the reconstruction (four Income shares for each Capital share). Thereafter, performance is based on the Income shares (the only remaining share class). DIRECTORS AND ADVISERS DIRECTORS Dr D. M. BRAMWELL (Chairman) D. M. BEST Dr A. J. HOSTY S. J. B. KNOTT J. B. ROPER REGISTERED OFFICE Hamilton Centre Rodney Way Chelmsford CM1 3BY WEBSITE www.maitlandgroup.com/investment-trusts/rights-and-issues-investment-trust-plc ADMINISTRATOR/SECRETARY MAITLAND ADMINISTRATION SERVICES LTD Hamilton Centre Rodney Way Chelmsford CM1 3BY SOLICITORS EVERSHEDS SUTHERLAND One Wood Street London EC2V 7WS AUDITOR BEGBIES 9 Bonhill Street London EC2A 4DJ REGISTRARS LINK MARKET SERVICES LTD The Registry 34 Beckenham Road Beckenham Kent BR3 4TU BROKERS STOCKDALE SECURITIES LTD 100 Wood Street London EC2V 7AN BANKERS/CUSTODIAN HSBC BANK PLC London EC2P 2BX REGISTRATION DETAILS Company Registration Number: 00736898 (Registered in England) SEDOL number: 0739207 ISIN number: GB0007392078 London Stock Exchange (EPIC) Code: RIII Global Intermediary Identification Number (GIIN): I2ZVNY.99999.SL.826 Legal Entity Identifier (LEI): 2138002AWAM93Z6BP574 NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the fifty-sixth Annual General Meeting of the members of Rights and Issues Investment Trust Public Limited Company will be held in the Gridiron Building, 8th Floor, Number One Pancras Square, Pancras Road, King's Cross, London N1C 4AG, on 2nd April 2019, at 12 noon, for the following purposes: ORDINARY BUSINESS 1. To receive the audited financial statements and Reports of the Directors and Auditor for the year ended 31st December 2018. 2. To approve the Annual Report on Directors' Remuneration, set out on pages 21 to 26 (excluding the restated Remuneration Policy on pages 24 and 25), for the financial year ended 31st December 2018. 3. To approve the payment of a final dividend of 21.0 pence per Income share for the financial year ended 31st December 2018. 4. To re-elect Dr D. M. Bramwell as a Director. 5. To re-elect D. M. Best as a Director. 6. To re-elect Dr A. J. Hosty as a Director. 7. To re-elect S. J. B. Knott as a Director. 8. To re-elect J. B. Roper as a Director. 9. To reappoint Begbies as Auditor and authorise the Directors to determine the Auditor's remuneration. SPECIAL BUSINESS To consider and, if thought fit, pass resolutions 10 and 11 as Special Resolutions: 10. THAT the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the Companies Act 2006 to make market purchases (within the meaning of section 693 of the Companies Act 2006) of Income shares, provided that: 10.1 the maximum aggregate number of Income shares hereby authorised to be purchased shall be 1,196,769 (representing approximately 14.99% of the Income shares in issue on 21st February 2019); 10.2 the minimum price (exclusive of expenses) which may be paid for an Income share is 25 pence; 10.3 the maximum price (exclusive of expenses) which may be paid for an Income share is not more than the higher of (i) an amount equal to 105% of the average market value of the Income shares for the five business days immediately preceding the day on which the Income share is purchased; and (ii) the higher of the last independent bid and the highest current independent bid on the London Stock Exchange when the purchase is carried out, or such other amount as may be specified by the FCA from time to time; 10.4 the authority hereby conferred will expire at the conclusion of the Annual General Meeting of the Company in 2020 unless such authority is renewed prior to such time; and 10.5 the Company may make a contract to purchase Income shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiration of such authority and may make a purchase of Income shares pursuant to any such contract; provided that all Income shares purchased pursuant to this authority shall be cancelled or transferred into treasury immediately upon completion of the purchases. 11. THAT the Company's Income shares be renamed Ordinary shares and the draft new articles of association produced to the meeting and initialled for identification by the Chairman be adopted in substitution for and to the exclusion of all previous articles of association. By Order of the Board, MAITLAND ADMINISTRATION SERVICES LTD Secretary, 25th February 2019 Notes: 1. Any shareholder entitled to attend and vote at the above meeting is entitled to appoint one or more proxies (who need not be a shareholder of the Company) to attend and to vote instead of the shareholder. To appoint more than one proxy, additional proxy forms may be obtained by contacting the Company's registrars. Please also indicate by ticking the box provided if the proxy instructions are one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope.
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DJ Rights and Issues Investment Trust PLC: Annual -2-
Completion and return of a form of proxy will not preclude a shareholder from attending and voting at the meeting in person, should he subsequently decide to do so. 2. The right to appoint a proxy does not apply to persons whose Income shares in the Company (the "Shares") are held on their behalf by another person and who have been nominated to receive communications from the Company in accordance with section 146 of the Companies Act 2006 ("nominated persons"). Nominated persons may have a right under an agreement with the registered shareholder who holds the Shares on their behalf to be appointed (or to have someone else appointed) as a proxy. Alternatively, if nominated persons do not have such a right, or do not wish to exercise it, they may have a right under such an agreement to give instructions to the person holding the Shares as to the exercise of voting rights. 3. In order to be valid, a form of proxy, which is provided with this notice, and a power of attorney or other authority under which it is signed, or certified by a notary or office copy of such power or authority, must reach the Company's registrars, Link Asset Services, PXS, 34 Beckenham Road, Beckenham BR3 4TU not less than 48 hours (excluding any part of a day which is a non-working day) before the time of the meeting or of any adjournment of the meeting. A form of proxy is enclosed with this notice. 4. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the procedures described in the CREST manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 5. In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST message must be transmitted so as to be received by the Company's agent, Link Market Services (whose CREST ID is RA10) by the specified latest time(s) for receipt of proxy appointments. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST applications host) from which the Company's agent is able to retrieve the message by enquiry to CREST in the manner prescribed. 6. The Company may treat as invalid a CREST proxy instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. A register showing the interests of each Director and their connected persons, so far as they are aware, in the Income shares will be available for inspection at the offices of the Company Secretary, Maitland Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY, during normal business hours every weekday except Saturdays, from the above date to the day preceding that of the general meeting. It will also be available for inspection at the place of the meeting for 15 minutes prior to the general meeting and during the meeting. Apart from the Investment Director, there are no contracts of service existing between the Company and any of the Directors. 7. Any shareholder attending the general meeting is entitled, pursuant to section 319A of the Companies Act 2006, to ask any question relating to the business being dealt with at the meeting. The Company will answer any such questions unless: i. to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information; ii. the answer has already been given on a website in the form of an answer to a question; or iii. it is undesirable in the interests of the Company or the good order of the meeting that the question be answered. From the date of this notice and for the following two years the following information will be available on the Company's website and can be accessed at www.maitlandgroup.com/investment-trust/rights-and-issues-investment-trust-plc: [1] i. the matters set out in this notice of general meeting; ii. the total numbers of Shares in respect of which shareholders are entitled to exercise voting rights at the meeting; and iii. the totals of the voting rights that shareholders are entitled to exercise at the meeting in respect of the Shares. 8. Any shareholders' statements, shareholders' resolutions and shareholders' matters of business received by the Company after the date of this notice will be added to the information already available on the website as soon as reasonably practicable and will also be made available for the following two years. 9. Where a poll is taken at the general meeting, from the date of this notice and for the following two years the following information will be available on the Company's website and can be accessed at www.maitlandgroup.com/investment-trust/rights-and-issues-investment-trust-plc: [2]: i. the date of the general meeting; ii. the text of the resolution or, as the case may be, a description of the subject matter of the poll; iii. the number of votes validly cast; iv. the proportion of the Company's issued share capital represented by those votes; v. the number of votes cast in favour; vi. the number of votes cast against; and vii. the number of abstentions (if counted). 10. In order to attend and vote at this meeting you must comply with the procedures set out in notes 1 to 3 by the time specified in note 3. 11. The right of shareholders to vote at the meeting is determined by reference to the register of shareholders. As permitted by section 360B(3) of the Companies Act 2006 and Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders (including those who hold Shares in uncertificated form) must be entered on the Company's share register at close of business on 29th March 2019 in order to be entitled to attend and vote at the meeting. Such shareholders may only cast votes in respect of Shares held at such time. Changes to entries on the relevant register after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting. 12. The total number of Income shares of 25p in issue as at 21st February 2019, the last practicable day before printing this document, was 7,983,785 Shares and the total level of voting rights was 7,983,785. CHAIRMAN'S STATEMENT Weakness in US tech stocks have led to a very sharp correction in equity markets since September and the FTSE All-Share Index declined by 12.9% in 2018. The UK smaller company market was impacted with the FTSE Small Cap Index falling by 13.2%. Your Company's portfolio was also affected with the net asset value of the Income shares down by 10.7% to 2118.1p. The final income dividend proposed is 21.0p making 31.5p for the year, a 2.4% increase. The share buy-back programme amounted to GBP7.9m in 2018. During the year, the average discount of Income shares to net asset value was 8.8% and therefore, in accordance with the Articles, no tender offer is required. The programme is again being extended for a further twelve months to February 2020. With only weeks now left, Brexit remains uncertain and there is no clarity on the nature of the future relationship. This is now having discernible impacts on the UK economy. Dr D. M. BRAMWELL Chairman 25th February 2019 STRATEGIC REPORT The Strategic Report is designed to provide information primarily about the Company's business and results for the year ended 31st December 2018 and should be read in conjunction with the Chairman's Statement on page 7. STATUS The Company is a self-managed investment trust. The Company is registered as an investment company as defined in section 833 of the Companies Act 2006 and operates as such. The Company is not a close company within the meaning of the provisions of the Corporation Tax Act 2010. The Board has been approved by the Financial Conduct Authority to be a Small Registered Alternative Investment Fund Manager ("AIFM"). In the opinion of the Directors, the Company has conducted its affairs during the year under review, so as to qualify as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and continues to meet the eligibility conditions set out in section 1158 of the Corporation Tax Act 2010. The Financial Conduct Authority rules in relation to non-mainstream pooled investments do not apply to the Company. STRATEGY FOR MEETING THE OBJECTIVES The Board's objective is to exceed the benchmark index over the long term whilst managing risk. To achieve this objective, the Board continues with its long-term strategy of seeking out undervalued investments that have characteristics consistent with a matrix of criteria developed by the Investment Director. This is supported by the five-yearly review that addresses the above objective. The latest review was conducted in November 2015, which concluded that the continuation of the Company for the period until July 2021 was in the best interests of shareholders. In pursuing its strategy, close attention is paid to the control of costs. Further information on this is contained in the Key Performance Indicators on page 9. BUSINESS MODEL There is a rigorous process of risk analysis at the level of the individual investment, based on the characteristics of the investee company. This controls the overall risk profile of the investment portfolio, allowing a higher level of concentration in the investment portfolio. The investment portfolio is then managed on a medium-term basis with a low level of investment turnover. This minimises transaction costs and ensures medium-term consistency of the investment approach.
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DJ Rights and Issues Investment Trust PLC: Annual -3-
The Company's investment activities are subject to the following limitations and restrictions: The policy does not envisage hedging either against price or currency fluctuations. Whilst performance is compared against major UK indices, the composition of indices has no influence on investment decisions or the construction of the portfolio. As a result, it is expected that the Company's investment portfolio and performance will deviate from the comparator indices. REVIEW OF THE BUSINESS A review of the year and commentary on the future outlook is provided in the Chairman's Statement on page 7. During the year under review, the assets of the Company were invested in accordance with the Company's investment policy. During the year the Company's assets have decreased from GBP198.7m to GBP169.6m and at 31st December 2018 the net asset value was 2,118.1p per Income share. KEY PERFORMANCE INDICATORS The Board is provided with detailed information on the Company's performance at every Board meeting. Key Performance Indicators are: ? Shareholders' funds equity return compared to the FTSE All-Share Index (the Company's benchmark index). ? Dividends per Income share. ? Ongoing Charge (formerly titled the Total Expense Ratio). Shareholders' funds equity return In reviewing the performance of the Company, the Board monitors shareholders' funds in relation to the FTSE All-Share Index. During the year shareholders' funds decreased by 14.7% compared to a decrease of 12.9% by the FTSE All-Share Index. Over the five years ended 31st December 2018 shareholders' funds increased by 37% compared with a rise of 1.8% by the FTSE All-Share Index. Dividends per Income share The total dividend per Income share paid and proposed is 31.50p (2017: 30.75p). Ongoing Charge The Ongoing Charge shows the efficiency of control of management costs. The Ongoing Charge for the year ended 31st December 2018 was 0.48% (2017: 0.41%). PRINCIPAL RISKS The Board of Directors has a process for identifying, evaluating and managing the key risks of the Company. This process operated during the year and has continued to the date of this report. The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Directors describe below those risks and how they are being managed or mitigated. Investment in an individual smaller company inherently carries a higher risk than investment in an individual large company. In a diversified portfolio, the portfolio risk of a smaller company portfolio is only slightly greater than the portfolio risk of a large company portfolio. The Company manages a diversified portfolio. Additionally, the Company invests overwhelmingly in smaller UK listed and AIM traded companies and has no exposure to derivatives. The principal risks are therefore market price risk and liquidity risk. Further details on these risks and how they are managed may be found in Note 18 to the financial statements on page 45. Additional key risks identified by the Company, together with the Board's approach in dealing with them are as follows: Investment performance - The performance of the investment portfolio will deviate from the performance of the benchmark index. The Board's objective is to exceed the benchmark index over the long term whilst managing risk. The Board ensures that the Investment Director is managing the portfolio within the scope of the investment policy; the Board monitors the Company's performance against the benchmark; and the Board also receives detailed portfolio attribution analysis. The Board has a clearly defined investment philosophy and operates a diversified portfolio. Share price discount - Investment trust shares often trade at discounts to their underlying net asset values. The Board monitors the level of the discount of the Income shares. On 7th December 2016, the Company implemented share buy-back arrangements to mitigate the risk of the discount increasing. Loss of key personnel - The Investment Director is crucial to performance and the loss of the Investment Director could adversely affect performance in the medium term. The Board reviews its strategy for this risk annually. Regulatory risk - The Company must abide by section 1158 of the Corporation Tax Act 2010 to maintain its investment trust status. This is achieved by the consistent investment policy and is monitored by the Board. The Board seeks assurance from the Administrator that the investment trust status is being maintained. The Board also reviews a schedule of regulatory risk items at its Board meetings in order to monitor and take action to address any regulatory changes. Protection of assets - The Company's assets are protected by the use of an independent custodian, HSBC Bank plc, and the Board monitors the custodian to ensure assets remain protected. In addition, the Company operates clear internal controls to safeguard all assets. Brexit - The risk associated with the decision of a majority of the UK electorate to leave EU membership ("Brexit") could be considerable for the UK and also for continental European countries. The links between the UK and the EU are wide-ranging and the future relationship remains unclear, creating conditions that could mean that markets react unpredictably to the uncertainty created. This risk is challenging to mitigate but the Investment Director is considering the Brexit risk for each investment in the portfolio based on its individual circumstances. These and other risks facing the Company are reviewed regularly by the Audit and Compliance Committee and the Board. VIABILITY The Board reviews the performance and progress of the Company over five-year periods and uses these assessments, regular investment performance updates from the Investment Director and a continuing programme of monitoring risk to assess the future viability of the Company. The Directors consider that a period of five years is a reasonable time horizon to consider the viability of the Company. The Company also uses this period for its strategic planning. The following facts support the Directors' view of the viability of the Company: - The Company has a liquid investment portfolio invested predominantly in readily realisable smaller UK-listed and AIM traded securities and has some short-term cash on deposit. - The Company does not use gearing. - Expenses of the Company are covered greater than four times by investment income. In order to maintain viability, the Company has a robust risk control framework for the identification and mitigation of risk which is reviewed regularly by Board. The Directors also seek reassurance from suppliers that their operations are well managed and that they are taking appropriate action to monitor and mitigate risk. CORPORATE AND SOCIAL RESPONSIBILITY When investments are made, the primary objective is to achieve the best investment return while allowing for an acceptable degree of risk. In pursuing this objective, various factors that may impact on the performance are considered and these may include socially responsible investment issues. As an investment trust, the Company has a limited impact on either environment or social and community issues. All printed material, wherever possible, is on recycled material. The Investment Director attempts to minimise the Company's carbon footprint. The Company has no greenhouse gas emissions to report from its operations for the year to 31st December 2018 (2017: same). The Company does not purchase electricity, heat, steam or cooling for its own use nor does it have responsibility for any other emissions producing sources. Of more importance is the conduct of the companies in the investment portfolio. The Company does not invest in companies which have significant adverse effect on the global environment and encourages those companies in which it has an investment to pursue responsible environmental policies. As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not within the scope of the Modern Slavery Act 2015. COMPANY'S DIRECTORS AND EMPLOYEES The number of directors and employees during the year was 5 (2017: 5). *2018* 2017 Male Female Male Female Directors (non-executive) 4 0 4 0 Directors (executive) 1 0 1 0 Employees 0 0 0 0 The Directors have considered the Strategic Report and believe that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance and strategy. The Strategic Report was approved by the Board and signed on its behalf by: S. J. B. Knott, Director 25th February 2019 REPORT OF THE DIRECTORS The Directors have pleasure in submitting their fifty-sixth Annual Report, together with audited financial statements in respect of the year ended 31st December 2018. DIRECTORS The Directors who served during the year were as follows: Dr D. M. Chairman 71 Years He was Chairman Bramwell of Intelek PLC. D. M. Best Chairman of Audit 60 Years He is a former Committee Managing Director of YFM Group and former Group Financial
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Director of Peterhouse Group PLC. Dr A. J. Hosty Director 54 Years He is a Director of Consort Medical PLC, RHI Magnesita N.V. and James Cropper PLC. S. J. B. Knott Investment Director 60 Years He has been investment manager for more than 30 years. J. B. Roper Chairman of Nominations 68 years He is a and Remuneration solicitor and Committee former partner of Eversheds LLP specialising in corporate transactions. The Company purchases liability insurance covering the Directors and Officers of the Company. DIVIDENDS The Board is recommending a final dividend of 21.0p per Income share (2017: 20.50p). If approved, taken together with the interim dividend of 10.50p per Income share (2017: 10.25p) this will result in a total dividend to the holders of Income shares for the year of 31.50p per Income share (2017: 30.75p). SUBSTANTIAL SHAREHOLDINGS The Company has received notification to 21st February 2019, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following voting rights: Income shares % of voting rights* Dartmoor Investment Trust 742,892 8.24% Henderson Global Investors 702,000 7.78% Rathbone Brothers PLC 553,433 6.13% S. J. B. Knott 488,111 6.03% J. Knott 482,185 5.35% CG Asset Management Ltd 441,200 4.89% H. J. D. Knott 428,589 4.75% P & J Allen 323,511 3.99% * The percentage of voting rights is as at the time of the notification. DISCLOSURE OF SECTION 414C (11) SCHEDULE 7 INFORMATION The Company has chosen to set out in the Strategic Report all information relating to the above. SECTION 992 COMPANIES ACT 2006 DISCLOSURES Details of the Company's capital structure and voting rights are given on page 1 of this document and in Note 14 on page 43 of the financial statements. CORPORATE GOVERNANCE Full details are given in the Corporate Governance Statement on pages 14 to 17. The Corporate Governance Statement forms part of this Directors' Report. SPECIAL BUSINESS AT THE ANNUAL GENERAL MEETING The Notice of the Annual General Meeting to be held on 2nd April 2019 is set out on pages 4 to 6. Share Buy Back Facility (resolution 10): The Board is seeking to renew the authority granted at the Annual General Meeting held on 26th March 2018 that authorises the Company to make market purchases of Income shares for cancellation. At the forthcoming Annual General Meeting the Directors will seek to renew this authority to buy back for cancellation up to 14.99% of Income shares in issue, representing 1,196,769 Income shares as at 21st February 2019. The authority will expire at the conclusion of the next Annual General Meeting of the Company in 2020 unless the authority is renewed. The Board considers this authority an important part of the Company's discount management policy. Stockdale, the Company's brokers, will be asked to continue the facilitation of these buy backs on the Company's behalf and in accordance with the relevant provisions of the Companies Act 2006 and Listing Rules. Changing the name of Income shares to Ordinary shares and updating the Articles of Association (resolution 11): The Board is seeking approval to change the name of the Company's Income shares to call them Ordinary shares. As the Company only has one class of share and the investment strategy does not focus on income, the Board believes it would be clearer and good practice to change the name. It is also proposed that the shareholders adopt new articles of association, this is to update the references within the articles to reference Ordinary shares rather than Income shares. There are no changes to shareholders' underlying rights in respect of the shares and no other changes to the articles of association to bring to the attention of shareholders. Recommendation: The Directors recommend that shareholders vote in favour of the resolutions to be proposed at the Annual General Meeting, as they intend to do in respect of their own beneficial holdings; all resolutions are considered to be in the best interests of the Company and its members. DIRECTORS' REMUNERATION REPORT The Annual Report on Directors' Remuneration on pages 21 to 26 provides information on the Directors' remuneration and their interests in the share capital of the Company, together with details of their letters of appointment and memoranda of service. ADMINISTRATION & SECRETARIAL AGREEMENT The accounting, company secretarial and administrative services are provided by Maitland Administration Services Limited ("Maitland") under an agreement terminable by either party on not less than six months' notice. The services provided by Maitland are reviewed regularly by the Board. DISCLOSURE OF INFORMATION TO AUDITOR So far as each Director at the date of approval of this report is aware: · there is no relevant audit information of which the Company's Auditor is unaware; and · the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditor is aware of that information. GOING CONCERN The Company's assets comprise mainly readily realisable equity securities and cash and the value of its assets is greater than its liabilities. Additionally, after reviewing the Company's budget including the current financial resources and projected expenses for the next 12 months and its medium-term plans, the Directors believe that the Company's resources are adequate for continuing in business for the foreseeable future. Accordingly, it is appropriate to continue to prepare the financial statements on a going concern basis. GENERAL No political contributions have been made during the year. In accordance with section 489 of the Companies Act 2006, a resolution proposing the reappointment of Begbies as Auditor of the Company will be put to the Annual General Meeting. The Directors' Report was approved by the Board and signed on its behalf by: Dr D. M. Bramwell, Chairman 25th February 2019 CORPORATE GOVERNANCE STATEMENT AIC CODE & AIC GUIDE The Board has considered the principles and recommendations of the AIC Code of Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and recommendations of the AIC Code and by reference to the AIC Guide will provide better information to shareholders. However, as a self-managed investment trust company, not all of the provisions of the AIC Code are directly applicable to the Company. Full consideration has been given by the Board to the principles of good governance. In so far as they are applicable to a smaller self-managed investment trust, the Directors believe that they comply with the principles other than the following matter: · The Board had elected not to designate a senior independent non-executive Director, as it considers that each Director has different strengths and qualities on which they may provide leadership. OPERATION OF THE BOARD OF DIRECTORS The Directors of the Company, as shown on page 12, are Dr D. M. Bramwell, Mr D. M. Best, Dr A. J. Hosty, Mr S. J. B. Knott and Mr J. B. Roper. All directors served throughout the year under review. Their biographical details, also set out on that page, demonstrate a breadth of investment, commercial and professional experience. The Board is collectively responsible for promoting the success of the Company. It deals with the important aspects of the Company's affairs, including the setting of parameters for, and the monitoring of investment strategy and the review of, investment performance. It reviews the share price and the discount or premium to net asset value. The Board sets limits on the size and concentration of new investments. The application of these and other restrictions, including those which govern the Company's tax status as an investment trust, are reviewed regularly at meetings of the Board. The Board delegates all investment matters to the Investment Director but reserves to itself all decisions concerning unquoted investments. The Investment Director takes decisions as to the purchase and sale of individual investments and is responsible for effecting those decisions on the best
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