Annual Financial Report

RIGHTS AND ISSUES INVESTMENT TRUST P.L.C
Annual Report & Accounts for the full year to 31 December 2015

A copy of the Company's Annual Report for the year ended 31st December 2015 will shortly be available to view and download from the Company’s website www.rightsandissues.co.uk. 

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

The Annual General Meeting of the Company will be held on Monday 4th April 2016 at 12 noon at The Dome Room, 1 Cornhill, London, EC3V 3ND. 

The Directors have proposed the payment of a final dividend of 25.5p per income share and 1.8p per capital share which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 5th April 2016 to shareholders whose names appear on the register at the close of business on 11th March 2016 (ex-dividend 10th March 2016).

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

RIGHTS AND ISSUES INVESTMENT TRUST P.L.C
Annual Report & Accounts for the full year to 31 December 2015

CAPITAL STRUCTURE

CAPITAL
ISSUE
1,640,000 shares of 25p each.

INCOME ENTITLEMENT
A supplementary dividend payment of 2.75% net on the capital reserves in complete units of £160,000 in excess of £382,536 and 1/31st of the distribution of all profits after the payment of supplementary capital dividends.

CAPITAL ENTITLEMENT
36.1p per share and 75% of the surplus assets on liquidation.

VOTING
One and a half votes per share on ordinary business and ten votes on a motion to liquidate.

PRICE (at 31st December 2015):
4800.00p

GROSS YIELD
2.00%.

DISCOUNT
24.8%.

DESCRIPTION
Capital shares are of interest to capital orientated investors wishing some income.

INCOME
ISSUE
2,460,000 shares of 25p each.

INCOME ENTITLEMENT
30/31st of the distribution of all profits after the payment of supplementary capital dividends.

CAPITAL ENTITLEMENT
25.0p per share and 25% of the surplus assets on liquidation.

VOTING
One vote per share.

PRICE (at 31st December 2015):
1310.00p

GROSS YIELD
3.10%.

DISCOUNT
15.2%.

DESCRIPTION
Income shares are of interest to income orientated investors wishing some participation in capital growth.

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

RIGHTS AND ISSUES INVESTMENT TRUST P.L.C. ('THE TRUST” or 'THE COMPANY”) MAY BE LIQUIDATED AT ANY TIME, BUT THE BOARD OF DIRECTORS HAS INDICATED THAT IT IS NOT ITS PRESENT INTENTION TO DO SO PRIOR TO 25TH JULY 2021.

HISTORIC RECORD

Year to 31st December	Net asset value per Capital Share	Net asset value per Capital Share (Index 1984 = 100)	Net dividend per Capital Share	Net asset value per Income share	Net dividend per Income Share	FT All Share Index	FT All Share Index (Rebased 1984 = 100)
1984	116.2p	100	2.0275p	48.5p	3.8p	592.94	100
1990	301.7p	260	6.9375p	90.3p	7.5p	1032.6	174
1995	699.8p	602	12.0616p	182.7p	10.5p	1802.56	304
2000	1895.4p	1631	31.3238p	467.9p	25.5p	2983.81	503
2001	1858.4p	1599	41.2323p	465.8p	30.5p	2523.88	426
2002	1640.6p	1412	48.6012p	417.1p	33.0p	1893.70	319
2003	2194.5p	1889	50.8226p	542.9p	34.5p	2207.40	372
2004	2573.1p	2214	50.9226p	633.3p	36.5p	2410.80	407
2005	2928.1p	2520	58.0982p	751.8p	40.5p	2847.00	480
2006	3669.8p	3158	68.1750p	920.3p	43.5p	3221.40	543
2007	3342.1p	2876	70.9829p	851.4p	46.0p	3286.70	554
2008	1643.3p	1414	70.3329p	459.0p	33.0p	2209.29	373
2009	2158.5p	1858	69.9579p	549.3p	25.5p	2760.80	466
2010	3105.7p	2673	69.9579p	752.9p	25.5p	3094.41	522
2011	3004.6p	2586	69.9579p	735.2p	25.5p	2857.88	482
2012	3848.1p	3312	70.8253p	935.0p	26.75p	3093.41	522
2013	5529.9p	4759	83.8293p*	1334.0p	40.00p*	3609.63	609
2014	5188.4p	4465	88.1902p	1263.6p	36.00p	3532.74	596
2015â€	6382.2p	5492	88.4585p	1544.8p	36.00p	3444.26	580

* Includes special dividend

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

DIRECTORS AND ADVISERS

DIRECTORS
Dr D. M. BRAMWELL Chairman
D. M. BEST
S. J. B. KNOTT
J. B. ROPER

REGISTERED OFFICE
Springfield Lodge
Colchester Road
Chelmsford CM2 5PW
Company registration number 736898
Registered in England

ADMINISTRATOR/SECRETARY
PHOENIX ADMINISTRATION SERVICES LIMITED
Springfield Lodge Colchester Road
Chelmsford CM2 5PW

SOLICITORS
EVERSHEDS LLP
One Wood Street
London EC2V 7WS

AUDITOR
BEGBIES
9 Bonhill Street
London EC2A 4DJ

REGISTRARS
CAPITA REGISTRARS LTD
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

BROKERS
STOCKDALE SECURITIES LTD
Beaufort House
15 St. Botolph Street
London EC3A 7BB

BANKERS
HSBC BANK PLC
London EC2P 2BX
 

An investment Company under section 833 of the Companies Act 2006

NOTICE OF MEETING

NOTICE IS HEREBY GIVEN that the FIFTY THIRD ANNUAL GENERAL MEETING of the members of RIGHTS AND ISSUES INVESTMENT TRUST PUBLIC LIMITED COMPANY will be held in the Dome Room, 1 Cornhill, London EC3V 3ND, on 4th April 2016, at 12 noon, for the following purposes:

ORDINARY BUSINESS
1.        To receive the audited Financial Statements and Report of the Directors and Auditor for the year ended 31st December 2015.
2.        To approve the Annual Report on Directors’ Remuneration, set out on pages 19 to 24 (excluding the restated Remuneration Policy on pages 22 and 23), for the financial year ended 31st December 2015.
3.        To approve the payment of a final dividend of 25.5p per income share and to approve the payment of a final dividend of 1.8p per capital share for the financial year ended 31st December 2015.
4.        To re-elect Dr D. Bramwell as a Director.
5.        To re-elect D. M. Best as a Director.
6.        To re-elect S. J. B. Knott as a Director.
7.        To re-elect J. B. Roper as a Director.
8.        To reappoint the Auditor and authorise the Directors to determine its remuneration.

By Order of the Board,
PHOENIX ADMINISTRATION SERVICES LIMITED
Secretary
26th February 2016

Notes:

1.    Any shareholder who is entitled to attend and vote may appoint one or more proxies to attend and vote instead of them. A proxy need not be a shareholder. To appoint more than one proxy, additional proxy forms may be obtained by contacting the registrars. Please indicate in the box under the resolutions the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box provided if the proxy instructions are part of multiple instructions being given. All forms must be signed by the named shareholder and returned together in the same envelope.

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

3.    In order to be valid, a form of proxy, which is provided with this notice, and a power of attorney or other authority under which it is signed, or a notarially certified or office copy of such power or authority, must reach the Company’s registrars, Capita Registrars, PXS 1, 34 Beckenham Road, Beckenham, Kent BR3 4ZF, not less than 48 hours (excluding any part of a day which is a non-working day) before the time of the meeting or of any adjournment of the meeting. A form of proxy is enclosed with this notice.

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

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

6.    The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001.

7.    A register showing the transactions of each Director and so far as he is aware the transactions of his family in the Company’s Income and Capital Shares will be available for inspection at the offices of the Secretary, Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW, during normal business hours every weekday except Saturdays, from the above date to the day preceding that of the Annual General Meeting. It will also be available for inspection at the place of the meeting for 15 minutes prior to the Annual General Meeting and during the meeting. Letters of appointment and memoranda in respect of Directors are also available for inspection.

8.    Any shareholder attending the general meeting is entitled, pursuant to section 319A of the 2006 Act to ask any question relating to the business being dealt with at the meeting. The Company will answer any such questions unless: (i) to do so would involve the disclosure of confidential information; (ii) the answer has already been given on a website in the form of an answer to a question; or (iii) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.

9.    From the date of this notice and for the following two years the following information will be available on the Company’s website and can be accessed at www.rightsandissues.co.uk: (i) the matters set out in this notice of general meeting; (ii) the total numbers of Shares and shares of each class, in respect of which shareholders are entitled to exercise voting rights at the meeting; and (iii) the totals of the voting rights that shareholders are entitled to exercise at the meeting in respect of the shares of each class. Any shareholders’ statements, shareholders’ resolutions and shareholders’ matters of business received by the Company after the date of this notice will be added to the information already available on the website as soon as reasonably practicable and will also be made available for the following two years.

10.  Where a poll is taken at the general meeting, from the date of this notice and for the following two years the following information will be available on the Company’s website and can be accessed at www.rightsandissues.co.uk: (i) the date of the general meeting; (ii) the text of the resolution or, as the case may be, a description of the subject matter of the poll; (iii) the number of votes validly cast; (iv) the proportion of the Company’s issued share capital represented by those votes; (v) the number of votes cast in favour; (vi) the number of votes cast against; and (vii) the number of abstentions (if counted).

11.  In order to attend and vote at this meeting by proxy you must comply with the procedures set out in Notes 1 to 3 by the date specified in Note 3.

12.  The right of shareholders to vote at the meeting is determined by reference to the register of shareholders. As permitted by section 360B(3) of the 2006 Act and Regulation 41 of the Uncertificated Securities Regulations 2001, shareholders (including those who hold shares in uncertificated form) must be entered on the Company’s share register at 18.00 on 31st March 2016 in order to be entitled to attend and vote at the meeting. Such shareholders may only cast votes in respect of shares held at such time. Changes to entries on the relevant register after that time shall be disregarded in determining the rights of any person to attend or vote at the meeting.

13.  The total number of Capital Shares of 25p each and Income Shares of 25p in issue as at 23rd February 2016, the last practicable day before printing this document was 1,640,000 Capital Shares and 2,460,000 Income Shares and the total level of voting rights was 4,920,000.

CHAIRMAN’S STATEMENT

2015 proved to be another difficult year for the UK market with the FTSE All-Share Index declining by 2.5% including a fall of 3.5% in the last six months.

The smaller company market performed better with the FTSE Small Cap Index increasing by 6.2% during the year though again this saw a slight fall of 0.9% in the second half.

After an excellent first six months of 2015, the Trust achieved further progress in the second half despite the decline in markets. The net asset value of the capital shares rose from 5188.4p to 6382.2p and that of the income shares from 1263.6p to 1544.8p, increases of 23.0% and 22.3% respectively.

During the year Discretionary Unit Fund Managers Limited (“DUFM”) recorded a pre-tax profit of £150,000 and appointed Phoenix Fund Services as its authorised corporate director on 1st November 2015. DUFM is for the first time not being consolidated into Group Accounts; further details on this change may be found in the Strategic Report and in the Accounting Policies.

As is usual, your Directors have considered the performance of the Trust over the last five years. During this period, the FTSE All-Share Index rose by 11.3% and shareholders’ funds increased by 105.4%. Your Directors are therefore pleased to recommend that the Trust should continue for another five years.

The dividend has been maintained at 36.0p per income share and 1.8p per capital share. The supplementary capital dividend of 86.6585p was paid on 4th January 2016.

The first six weeks of 2016 have seen a further setback with a fall of 7% in market indices. This year will clearly be challenging and the immediate outlook for corporate profitability appears to have worsened. However as can be seen in the performance of the last five years there are always opportunities even in less favourable circumstances.

Dr D. M. BRAMWELL
Chairman

STRATEGIC REPORT

The Strategic Report is designed to provide information primarily about the Company’s business and results for the year ended 31st December 2015 and should be read in conjunction with the Chairman’s Statement on page 5.

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

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, and subsequently, so as to qualify as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and has been approved by HM Revenue & Customs under Regulation 5 of the Investment Trust (Approved Company) (Tax) Regulations 2011. The Company continues to meet the eligibility conditions set out in section 1158 of the Corporation Tax Act 2010 and the ongoing requirements for approved companies in Chapter 3 of Part 2 of the Investment Trust (Approved Company) (Tax) Regulations 2011.

The circumstances of the Company’s wholly owned subsidiary, Discretionary Unit Fund Managers Limited, have changed and the Company is no longer permitted to prepare its Financial Statements on a consolidated basis. This is explained in more detail in Note 1 on pages 33 and 34 of the Financial Statements. As a result the Company has prepared sole entity Financial Statements. Historically its subsidiary has always paid (and still does pay) all of its profits for the year up to its parent in the form of dividends. This means that there is no difference between the net return calculated on a single entity or consolidated basis. In terms of the Balance Sheet the only difference is that under the previous UK accounting standards goodwill arising on consolidation was amortised. This in turn has led to a small uplift in the NAVs reported in these Financial Statements.

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

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

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

STRATEGY FOR MEETING THE OBJECTIVES
The Board continues with its long-term strategy of seeking out undervalued investments that have characteristics consistent with a matrix of criteria developed by the Investment Director. This is supported by the 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.

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.

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 5.

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 £116,294,000 to £142,669,000 and at 31st December 2015 the net asset values of the income and capital shares were 1544.8p and 6382.2p respectively.

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

KEY PERFORMANCE INDICATORS
Management provides the Board with detailed information on the Company’s performance at every Board meeting.

Key Performance Indicators are:

• Shareholders’ funds equity return compared to the FTSE All-Share Index.
• Dividends per income share.
• Total Expense Ratio.

Shareholders’ funds equity return
In reviewing the performance of the Company, the Board monitors shareholders’ funds in relation to the FTSE All-Share Index. During the year shareholders’ funds increased by 22.7% compared with a fall of 2.5% by the FTSE All-Share Index. Over the five years ended 31st December 2015 shareholders’ funds increased by 105.4% compared with a rise of 11.3% by the FTSE All-Share Index.

Dividends per income share
The total dividend per income share paid and proposed is 36.00p (2014: 36.00p).

Total Expense Ratio (“TER”)
The TER shows the efficiency of control of management costs. The TER for the year ended 31st December 2015 was 0.48%. The TER for the year ended 31st December 2014 was 0.42%.

PRINCIPAL RISKS

The Board of Directors has set up 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 42.

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 Manager 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 both income and capital shares.

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

Regulatory risk – The Company must abide by section 1158 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.

These and other risks facing the Company are reviewed regularly by the Audit Committee and the Board. Further information is given in Note 18 to the Financial Statements on page 42.

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 Manager 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 almost five 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 his carbon footprint.

In relation to greenhouse gas emissions, the Company does not purchase electricity, heat, steam or cooling for its own use. The Company falls outside the scope of the Modern Slavery Act 2015 and its suppliers are mostly professional firms.

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.

COMPANY’S DIRECTORS AND EMPLOYEES
The number of directors and employees during the year were 4 (2014: 5).

	2015		2014
	Male	Female	Male	Female
Directors (Non-Executive)	3	0	3	0
Directors (Executive)	1	0	1	0
Employees	0	0	1	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 2016

REPORT OF THE DIRECTORS
The Directors have pleasure in submitting their fifty third Annual Report, together with audited Financial Statements in respect of the year ended 31st December 2015.

DIRECTORS
The Directors who served during the year were as follows:

Dr D. M. Bramwell	Chairman	68 Years	He was Chairman of Intelek PLC
D. M. Best	Chairman of Audit Committee	57 Years	He is a former Managing Director of YFM Group and former Group Financial Director of Peterhouse Group PLC
S. J. B. Knott	Investment Director	57 Years	He has been investment manager for more than 30 years.
J. B. Roper	Chairman of Nominations and Remuneration Committee	65 years	He is a solicitor and former partner of Eversheds LLP specialising in corporate transactions until his retirement from the firm in 2011.

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

DIVIDENDS
The Board is recommending a final dividend on the income shares of 25.50p per share (2014: 25.50p). If approved, taken together with the interim dividend of 10.50p per share (2014: 10.50p), this will result in a total dividend for the year of 36.00p per share (2014: 36.00p).

In addition the Board is recommending a final dividend on the capital shares of 1.80p per share (2014: 1.80p). If approved, taken together with the supplementary capital dividend of 86.6585p per share (2014: 86.3902p), this will result in an increase in the total dividend for the year to 88.4585p per share (2014: 88.1902p).

SUBSTANTIAL SHAREHOLDINGS
The Company has received notification to 12th February 2016, in accordance with Chapter 5 of the Disclosure and Transparency Rules, of the following voting rights:

	Capital Shares	Income Shares	% of Voting Rights
Dartmoor Investment Trust	137,660	363,800	10.2
Rathbone Brothers plc	94,340	176,073	6.5
J. Knott	69,670	203,505	6.3
P&J Allen	45,017	236,740	6.2
Henderson Global Investors	175,500	–	5.3
H. J. D. Knott	93,200	55,789	4.0
CG Asset Management Limited	74,300	80,000	3.9
S. J. B. Knott	118,000	5,000	3.7

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 the inside cover of this document and in Note 14 of the Financial Statements.

GLOBAL GREENHOUSE GAS EMISSIONS
As an investment company, the Company has no greenhouse gas emissions to report from its operations for the year to 31st December 2015 (2014: same), nor does it have responsibility for any other emissions producing sources.

CORPORATE GOVERNANCE
Full details are given in the Corporate Governance Statement on pages 12 to 15. The Corporate Governance Statement forms part of this Directors’ Report.

DIRECTORS’ REMUNERATION REPORT
The Annual Report on Directors’ Remuneration on pages 19 to 24 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.

The Company’s Policy on Directors’ Remuneration provided on pages 22 to 23 was approved at the Annual General Meeting held on 20th March 2014. There have been no changes to the Policy since it was last approved by shareholders. The Policy must be reconsidered by shareholders at the 2017 Annual General Meeting.

ADMINISTRATION & SECRETARIAL AGREEMENT
Until 31st January 2015 the Company and its affairs were administered on an agreed cost-sharing basis by Discretionary Unit Fund Managers Limited. Pursuant to an agreement dated 19th December 2014, accounting, company secretarial and administrative services from 1st February 2015 are provided by Phoenix Administration Services Limited (“Phoenix”). The agreement is terminable by either party on not less than six months’ notice. The services provided by Phoenix will be reviewed regularly by the Board.

DISCLOSURE OF INFORMATION TO AUDITOR
So far as each Director at the date of approval of this report is aware:

– there is no relevant audit information of which the Company’s Auditor is unaware; and

– the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditor is aware of that information.

GOING CONCERN
The 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 twelve 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 accounts 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
26th February 2016

CORPORATE GOVERNANCE STATEMENT
The Board of Rights and Issues Investment Trust plc 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 Rights and Issues Investment Trust plc.

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 10, are Dr D. M. Bramwell, Mr D. M. Best, Mr S. J. B. Knott and Mr J. B. Roper. All served throughout the year under review. Their biographical details, set out on page 10, demonstrate a breadth of investment, commercial and professional experience.

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

The Board delegates all investment matters to the Investment Director but reserves to itself all decisions concerning unquoted investments. The Investment Director takes decisions as to the purchase and sale of individual investments and is responsible for effecting those decisions on the best available terms in accordance with the investment policy as stated in the Strategic Report on page 6.

The Chairman leads the Board and ensures that it deals effectively with all the aspects of its role. In particular, he ensures that the 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	Remuneration Committee	Board meetings attended	Committee meetings attended
Dr D. M. Bramwell	Chairman, Non-Executive	Yes	Yes	9	5
S. J. B. Knott	Chief Executive and Investment Director	–	–	9	0
D. M. Best	Non-Executive	Chairman	Yes	9	5
J. B. Roper	Non-Executive	Yes	Chairman	9	5

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

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

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

NOMINATIONS AND REMUNERATION COMMITTEE
The Committee oversees a formal review procedure and evaluates the overall composition of the Board from time to time, taking into account the existing balance of skills and knowledge. Its chairman is an independent non-executive director. No new directors were appointed during the year. There are procedures for a new director to receive relevant information on the Company together with appropriate induction. 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 19.

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

The Chairman is responsible for performing this review. Mr D. M. Best and Mr J. B. Roper perform a similar role in respect of the performance of the Chairman. The evaluation confirmed that all Directors continue to be effective on behalf of the Company and committed to the role.

The Nominations and Remuneration Committee conducts an annual review of the Investment Director’s performance. The review of the Investment Director’s performance in 2015 was output-based, but had regard to all other relevant factors.

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

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

No Director, apart from the Investment Director, has, or during the financial year had, a contract of service with the Company. The terms of the Investment Director’s current basis of remuneration are detailed in the Directors’ Remuneration Report on pages 19 to 24.

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

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

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

AUDIT COMMITTEE
The Audit Committee is a formally constituted committee of the Board with defined terms of reference, which include its role and the authority delegated to it by the Board, and which are available for inspection at the Company’s registered office. Its specific responsibilities include to review of 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 16 to 18.

REMUNERATION
The remuneration of the Investment Director is decided by the Nominations and Remuneration Committee. The Board considers that the interests of the Investment Director, who is himself a shareholder (see page 20), are aligned with those of other shareholders.

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

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

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

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

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

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

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

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

STATEMENT OF COMPLIANCE
The Directors consider that the Company has complied during the year ended 31st December 2015 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 2016

REPORT OF THE AUDIT COMMITTEE

ROLE OF THE AUDIT COMMITTEE
The Audit Committee’s main functions are as follows:

• To monitor the internal financial control and risk management systems on which the Company is reliant.
• To monitor the integrity of the half-year and annual Financial Statements of the Company by reviewing and challenging, where necessary, the actions and judgements of the Investment Director.
• To meet the Auditor to review its proposed audit programme and the subsequent Audit Report, to review the effectiveness of the audit process and the levels of fees paid in respect of both audit and non-audit work.
• To make recommendations to the Board in relation to the appointment, reappointment or removal of the Auditor and to negotiate their remuneration and terms of engagement on audit and non-audit work.
• To monitor and review annually the Auditor’s independence, objectivity, effectiveness, resources and qualification.

The Audit Committee meets at least twice each year and operates within defined terms of reference which are available for inspection on the Company’s website.

COMPOSITION OF THE AUDIT COMMITTEE
The Audit Committee comprises three independent non-executive Directors, at least one of whom has recent and relevant financial experience.

SIGNIFICANT ISSUES AND RISKS
In planning its own work and reviewing the audit plan of the Auditor, the Audit Committee takes account of the most significant issues and risks, both operational and financial, likely to impact upon the Company’s Financial Statements.

The valuation of the investment portfolio is a significant risk factor; however all investments can be verified against daily market prices.

A further significant risk control issue is to ensure that the investment portfolio accounted for in the Financial Statements reflects physical ownership of the relevant securities. The Company uses the services of an independent custodian, HSBC Bank plc, to hold the assets of the Company. The investment portfolio is regularly reconciled to the custodian’s records and that reconciliation is also reviewed by the Auditor.

The incomplete or inaccurate recognition of income in the Financial Statements are risks. Internal control systems, including frequent reconciliations, are in place to ensure income is fully accounted for. The Board is provided with information on the Company’s income account at each meeting.

Financial statements issued by the Company need to be fair, balanced and understandable. The Audit Committee reviews the Annual Report as a whole and makes suitable recommendations to the Board.

The Company’s half-yearly report is approved by the Audit Committee prior to publication and is also reviewed by the Auditor.

The Audit Committee assesses whether it is appropriate to prepare the Company’s Financial Statements on a going concern basis and makes recommendations to the Board. The Board’s conclusions are set out in the Report of the Directors.

INTERNAL CONTROLS
The Audit Committee is responsible for ensuring that suitable internal control systems to prevent and detect fraud and error are designed and implemented and is also responsible for reviewing the effectiveness of such controls. The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place for the year under review and up to the date of approval of this report and is regularly reviewed. In particular it has reviewed and updated the process for identifying and evaluating the significant risks affecting the Company and the policies by which these are managed. The risks of failure of any such controls are identified in a risk assessment which identifies the likelihood and severity of the impact of such risks and the controls in place to minimise the probability of such risks occurring; the risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company’s objectives. It should be recognised that such systems can only provide reasonable, but not absolute, assurance against material misstatement or loss. Equally, it must be stressed that undertaking an acceptable degree of controlled risk is always necessary in the conduct of any investment trust if above average performance is to be achieved.

The following are the key components which the Company has in place to provide effective internal control:

• The Board has agreed clearly defined investment criteria; reports on compliance therewith are regularly reviewed by the Board.
• The Board has a procedure to ensure that the Company can continue to be approved as an investment company by complying with section 1158 of the Corporation Tax Act 2010.
• The Administrator prepares forecasts and management accounts which allow the Board to assess the Company’s activities and review its performance.
• The performance of the Investment Director and any contractual agreements with other third party service providers, and adherence to them, are regularly reviewed.
• An appropriate “whistle-blowing” policy is in place to enable concerns to be raised, in confidence, about possible wrongdoing in financial reporting or all other matters.

The Audit Committee has reviewed the need for an internal audit function, but has concluded that, given the size of the organisation and the clear segregation of investment management and control of the assets, there is no need for such a function at the current time, but has also agreed to keep such a requirement under review.

EXTERNAL AUDIT PROCESS
The Audit Committee meets at least twice a year with the Auditor. The Auditor provides a planning report in advance of the annual audit, a report on the annual audit, and a report of its review of the half-year Financial Statements. The Committee has an opportunity to question and challenge the Auditor in respect of each of these reports; it also agrees the level and scope of materiality to be adopted in respect of the annual audit.

In addition, at least once a year, the Audit Committee has an opportunity to discuss any aspect of the Auditor’s work with the Auditor in the absence of the Investment Director.

After each audit, the Audit Committee will review the audit process and consider its effectiveness.

AUDITOR ASSESSMENT AND INDEPENDENCE
The Company’s auditor is Begbies which has been the Company’s auditor since 2006. Rotation of the Audit Partner takes place in accordance with Ethical Standard 3; “Long Association with the Audit Engagement” of the Auditing Practices Board (“APB”).

The fees for audit purposes were £15,000 (2014: £11,000).

The Audit Committee has approved and implemented a policy on the engagement of the Auditor to supply non-audit services, taking into account the recommendations of the APB and does not believe there is any impediment to the Auditor’s objectivity and independence. All non-audit work to be carried out by the Auditor must be approved by the Audit Committee in advance.

The cost of non-audit services provided by the Auditor for the financial year ended 31st December 2015 was £5,000 (2014: £4,000). These non-audit services are assurance and tax compliance related. The Committee believes Begbies is best placed to provide them on a cost effective basis. The fees for non-audit services are not considered material in the context of the Financial Statements as a whole.

INDEPENDENCE
During the year the Committee reviewed the independence policies and procedures of Begbies, including quality assurance procedures. It was considered that those policies and procedures remained fit for purpose.

DISCLOSURE OF INFORMATION TO THE AUDITOR
It is the Company’s policy to allow the Auditor unlimited access to its records. The Directors confirm that, so far as each of them is aware, there is no relevant audit information of which the Company’s Auditor is unaware and they have taken all the steps which they should have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Auditor is aware of that information. This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

CONCLUSION
The Audit Committee has reviewed the matters within its terms of reference and reports as follows:

• it has approved the Financial Statements for the year ended 31st December 2015;
• it has reviewed the effectiveness of the Company’s internal controls and risk management;
• it has reviewed the need for a separate internal audit function;
• it has recommended to the Board that a resolution be proposed at the Annual General Meeting for the reappointment of the Auditor and it has considered the proposed terms of its engagement;
• it has satisfied itself as to the independence of the Auditor; and
• it has satisfied itself that the contents of the Annual Report are consistent with the Financial Statements.

D. M. Best, Director
Chairman, Audit Committee
26th February 2016
 

DIRECTORS’ ANNUAL REMUNERATION REPORT

INTRODUCTION

This Report is submitted in accordance with the requirements of sections 420 to 422 of the Companies Act 2006 in respect of the year ended 31st December 2015. An ordinary resolution to approve this report will be put to members at the forthcoming Annual General Meeting, but the Directors’ remuneration is not conditional upon the resolution being passed.

The Company has a Nominations and Remuneration Committee, the terms of reference of which include annually reviewing and recommending to the Board the level of Directors’ fees and remuneration. The full terms of reference are posted on the Company’s website. The Committee is chaired by J. B. Roper and the other members are Dr D. M. Bramwell and D. M. Best.

DIRECTORS’ REMUNERATION AS A SINGLE FIGURE (AUDITED)

Director	Salary and fees 2015 £	Annual bonuses 2015 £	Total for 2015 £	Salary and fees 2014 £	Annual bonuses 2014 £	Annual Bonuses Total for 2014 £
D. M. Best	17,000	–	17,000	15,000	15,000	15,000
Dr D. M. Bramwell (Chairman)	22,000	–	22,000	20,000	20,000	20,000
S. J. B. Knott (Executive)	184,000	30,000	214,000	184,000	184,000	184,000
J. B. Roper	17,000	–	17,000	15,000	15,000	15,000
Total	240,000	30,000	270,000	234,000	234,000	234,000

The tables above omit other columns because 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 2016 the fees payable to the Directors are as follows (previous rates are shown in brackets): Chairman £24,000 (£22,000), other non-executive Directors £18,500 (£17,000) and Investment Director/CEO (base salary excluding discretionary bonus) £213,000 (£184,000).

STATEMENT OF DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS (AUDITED)
The Company has not set any requirements or guidelines for the Directors to own shares in the Company. The beneficial interests of the Directors and their connected persons in the shares of the Company are shown in the table below.

	Capital		Income
	31st December 2015	31st December 2014	31st December 2015	31st December 2014
D. M. Best	–	–	–	–
Dr D. M. Bramwell (Chairman)	–	–	22,625	22,625
S. J. B. Knott (Executive)	118,000	118,000	5,000	5,000
J. B. Roper	–	–	–	–

Please click here to view 5 Year cumulative performance graph

No changes in the Directors’ interests shown above have occurred since 31st December 2015.

PERFORMANCE GRAPH AND CEO REMUNERATION TABLE
The graph below illustrates the total shareholder return for each class of share relative to the FTSE All-Share index. This has been used as the appropriate index as it is the Company’s benchmark index.

CEO REMUNERATION TABLE

	CEO Single Figure of Total Remuneration	Annual Bonus Paid Out
2011	110,000	10,000
2012	115,000	10,000
2013	140,000	25,000
2014	184,000	–
2015	184,000	30,000
Total	733,000	75,000

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

The table below shows the percentage change in the remuneration of the Director undertaking the role of CEO (the Investment Director) and the Company’s employees as a whole between the years 2014 and 2015.

	Percentage change
	in salary	in annual bonus
CEO	0%	N/A
Workforce	11.1%	N/A

SIGNIFICANCE OF SPEND ON PAY	Employee remuneration	Shareholder distribution
	£	£
2015	270,000	2,336,311
2014	234,000	2,458,200
Difference	26,000	(121,889)
% Change	11.1%	(5.0%)

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

There are letters of appointment for two non-executive directors:

Director	Date
D. M. Best	31st May 2011
J. B. Roper	31st May 2011

There are written memoranda setting out the terms of the contract of service for S. J. B. Knott and the terms of the contract for services for Dr D. M. Bramwell, together with memoranda varying the provisions of the above letters of appointment.

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

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

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

The maximum aggregate level of fees payable to the Directors is fixed by the Company’s Articles of Association, amendment of which is by way of an ordinary resolution. The current level (effective from 21st March 2013) is that aggregate fees should not exceed £100,000 per annum. The Investment Director is not paid a fee for acting as a Director of the Company but is remunerated separately in respect of his executive roles.

The Company’s policy as regards, S. J. B. Knott, the Investment Director and only Executive Director of the Company, is to align his remuneration to the principal investment benchmark of the Company. 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 fulfillment of his duties, but with provision for discretionary bonuses to recognise significant outperformance of the Company’s investment portfolio. As noted on page 20, he is a significant shareholder in the Company.

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

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

Investment Director

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

Chairman and other Non-Executive Directors

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.
Discretionary bonus	To motivate the Investment Director to achieve measured outperformance.

Notes:

No Director is entitled to receive any pension provision.

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

The policy on remuneration for employees generally is to incentivise them to perform effectively and to recognise market comparators, but remuneration packages are structurally different from that of the only Executive Director, the Investment Director.

APPROACH TO RECRUITMENT REMUNERATION
The principles the Company would apply in setting remuneration for new Board members would be in line with the Remuneration Policy. Fees and salary for new appointees would therefore be commensurate with existing Board members and their relevant peer group.

STATEMENT OF CONSIDERATION OF EMPLOYMENT CONDITIONS ELSEWHERE IN THE COMPANY
The employees were not consulted when setting the Directors’ remuneration policy and no remuneration comparison measurement with employees was used.

It is intended that the Directors’ Remuneration Policy will continue until the Annual General Meeting of the Company to be held in 2017.

ILLUSTRATION OF APPLICATION OF REMUNERATION POLICY
Investment Director

	Minimum % (£)	In line with Expectations % (£)	Maximum % (£)
Bonus	0% (£ nil)	0% (£ nil)	17% (£44,000)
Salary	100% (£213,000)	100% (£213,000)	83% (£213,000)

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

VOTING AT ANNUAL GENERAL MEETING
A binding Ordinary Resolution approving the Directors’ Remuneration Policy was approved on 24th March 2014. The votes cast were as follows:

Remuneration Policy

For – % of votes cast	99.61%
Against – % of votes cast	0.00%
At Chairman’s discretion – % of votes cast	0.39%
Total votes cast	1,303,664.5
Number of votes withheld	0

A non-binding Ordinary Resolution adopting the Annual Report on Directors’ Remuneration for the year ended 31st December 2014 was approved by shareholders at the Annual General Meeting held on 19th March 2015. The votes cast by proxy were as follows:

Annual Report on Directors’ Remuneration

For – % of votes cast	98.85%
Against – % of votes cast	0.10%
At Chairman’s discretion – % of votes cast	0.05%
Total votes cast	1,225,970
Number of votes withheld	520

ANNUAL STATEMENT
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 2015:

• the major decisions on Directors’ remuneration;
• any substantial changes relating to Directors’ remuneration made during the year; and
• the context in which the changes occurred and decisions that have been taken.

J. B. Roper, Director
Chairman, Nominations and Remuneration Committee
26th February 2016
 

STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable United Kingdom law and International Financial Reporting Standards (“IFRS”) as adopted by the European Union.

The Directors are required to prepare the Financial Statements for each financial year which present fairly the financial position, the financial performance and cashflows of the Company for that period. In preparing those Financial Statements the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• provide additional disclosures when compliance with the specific requirements of IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Company’s financial position and financial performance;
• state that the Company has complied with IFRS subject to any material departures disclosed and explained in the Financial Statements; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the Financial Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors’ Report, Strategic Report and Directors’ Remuneration Report that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Visitors to the website need to be aware that legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide shareholders with the information necessary to assess the Company’s performance, business model and strategy.

The Directors confirm that to the best of their knowledge that:

• the Financial Statements, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
• the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties.

Dr D. M. Bramwell, Director
S. J. B. Knott, Director
26th February 2016
 

INDEPENDENT AUDITOR’S REPORT

To the Members of Rights and Issues Investment Trust PLC

OPINION ON FINANCIAL STATEMENTS
In our opinion:

• the Financial Statements give a true and fair view of the state of the Company’s affairs as at 31st December 2015 and of the Company’s profit for the year then ended;
• the Company’s Financial Statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the Financial Statements have been prepared in accordance with the Companies Act 2006 and as regards the Company Financial Statements, Article 4 of IAS Regulation

WHAT WE HAVE AUDITED
We have audited the Financial Statements of Rights and Issues Investment Trust PLC for the year ended 31st December 2015 which comprised the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement and the related notes 1 to 18. The reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body for our audit work, for this report or for the opinions we have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Directors’ Responsibilities Statement set out on page 25, the Directors are responsible for preparing the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENTS
The purpose of the Company is to invest in equities with a view to achieving capital appreciation and a dividend income stream. Consequently we have identified the following risks of material misstatements that have the greatest effect on the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team:

• the incorrect valuation of the investment portfolio held by the Company;
• the ownership of the investments and the risk of the misappropriation of those assets;
• the incomplete or inaccurate recognition of the Company’s investment income. The risks we have identified are consistent with those risks that were identified in the prior year.

OUR APPLICATION OF MATERIALITY
We determined our planning materiality to be £1.4 million, which is 1% of total equity. Given the importance of the distinction between revenue and capital for the company we also decided on a separate testing materiality of £265,000 for the revenue column of the Income Statement, which is 10% of the net return.

The Audit Committee requested our materiality to be set at the lower level of £500,000 for the Financial Statements as a whole. Due to the significance of the Company’s net assets compared with the amounts in the revenue column of the Income Statement, they asked us to set a separate materiality level for the revenue column of £100,000.

We have also agreed with the Audit Committee that we would report to them all audit differences in excess of £50,000 as well as any other differences below that threshold which in our view should be reported to them because of their nature, relevance and prominence in the Financial Statements.

AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The scope of our audit is discussed in other parts of our audit report. However, because of the nature of investment trusts and the significance of their investments and the related income, additional importance was placed on these areas without compromising other aspects of the audit.

Therefore particular emphasis was placed in examining and testing the processes of measuring and recognising investments including ownership of those investments together with the testing of its income. We obtained confirmation of investments held at the year end from the custodian, testing this to the records maintained by the Company. We tested a selection of investment additions and disposals shown in the Company’s records to supporting documentation and agreed the valuation of quoted investments. We also tested dividends receivable and confirmed that the income was recorded in accordance with the Company’s accounting policy.

The Company’s accounting policy on the valuation of quoted investments is included in note 1 and its disclosures about investments held at the year end are included in note 9.

OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are prepared is consistent with the Financial Statements.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:

• materially inconsistent with the information in the audited Financial Statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the Company acquired in the course of performing our audit; or
• is otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors’ statement that they consider the Annual Report is fair, balanced and understandable and whether the Annual Report appropriately discloses those matters that we communicated to the Audit Committee which we consider should have been disclosed.

In addition we have not identified anything material to add or to draw attention to in relation to:

• the Directors’ confirmation in the Annual Report 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 disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated;
• the Directors’ statement in the Financial Statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the Financial Statements; and
• the Directors’ explanation in the Annual Report as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Under the Companies Act 2006 we are required to report to you if, in our opinion:

• adequate accounting records have not been kept; or
• the Company’s Financial Statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records or returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review:
• the Directors’ statement, set out on page 11, in relation to going concern; and
• the part of the Corporate Governance Statement relating to the Company’s compliance with the ten provisions of the UK Corporate Governance Code specified for our review.

Colin Wain (Senior Statutory Auditor)
For and on behalf of Begbies
Chartered Accountants and Statutory Auditor
9 Bonhill Street
London
26th February 2016
 

INCOME STATEMENT
for the year ended 31st December 2015

			Year ended 31st December 2015			Year ended 31st December 2014
	Notes	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Investment income	2	3,271	–	3,271	3,171	–	3,171
Other operating income	2	6	–	6	1	–	1
Total income		3,277	–	3,277	3,172	–	3,172
Gains/(losses) on fair value through profit or loss assets	9	–	25,875	25,875	–	(7,544)	(7,544)
Gains on subsidiary holding		–	212	212	–	–	–
		3,277	26,087	29,364	3,172	(7,544)	(4,372)
Expenses
Investment management fee		–	–	–	–	–	–
Other expenses	3	682	–	682	492	–	492
		682	–	682	492	–	492
Profit before tax		2,595	26,087	28,682	2,680	(7,544)	(4,864)
Tax	5	29	–	29	39	–	39
Profit for the period		2,624	26,087	28,711	2,719	(7,544)	(4,825)
Earnings per share
Return per income share	7	47.3p	265.1p	312.4p	49.3p	(78.7p)	(29.4p)
Return per capital share	7	89.0p	1193.0p	1282.0p	88.9p	(342.0p)	(253.1p)

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

All items in the above statement are those of the single entity and derive from continuing operations.

BALANCE SHEET
as at 31st December 2015

Non-current assets Investments – Fair value through profit	Notes	2015 £’000	2014 £’000
or loss	9	123,256	111,739
		123,256	111,739
Current assets
Trade and other receivables	12	412	421
Current tax receivable		29	39
Amounts due from Group undertakings		140	717
Cash and cash equivalents		18,909	3,415
		19,490	4,592
Total assets		142,746	116,331
Current liabilities
Trade and other payables	13	77	37
Current tax payable		–	–
		77	37
Total assets less current liabilities		142,669	116,294
Net assets		142,669	116,294
Equity
Called up share capital	14	1,025	1,025
Share premium account	15	225	225
Retained reserves:
Capital reserve	15	63,709	51,973
Revaluation reserve	15	74,883	60,532
Dividend equalisation reserve	15	2,827	2,539
Total equity		142,669	116,294
Net asset value per share
Income shares	16	1544.8p	1268.3p
Capital shares	16	6382.2p	5188.6p

The Financial Statements were approved by the Board and authorised for issue on 26th February 2016. They were signed on its behalf by:

Dr D. M. Bramwell, Director
S. J. B. Knott, Director

Company Registration Number: 736898

STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2015

Balance at	Share capital £’000	Share premium account £’000	Capital reserve £’000	Revaluation reserve £’000	Dividend equalisation reserve £’000	Total £’000
31st December 2013	1,225	225	51,796	68,253	2,328	123,827
Changes in equity for 2014
Profit/(loss) for the period	–	–	177	(7,721)	2,719	(4,825)
Total recognised income and expense	1,225	225	51,973	60,532	5,047	119,002
Redemption of preference shares	(200)	–	–	–	(50)	(250)
Dividends	–	–	–	–	(2,458)	(2,458)
Balance at 31st December 2014	1,025	225	51,973	60,532	2,539	116,294
Changes in equity for 2015
Profit/(loss) for the period	–	–	11,736	14,351	2,624	28,711
Total recognised income and expense	1,025	225	63,709	74,883	5,163	145,005
Dividends	–	–	–	–	(2,336)	(2,336)
Balance at 31st December 2015	1,025	225	63,709	74,883	2,827	142,669

CASH FLOW STATEMENTS
for the year ended 31st December 2015

Cashflows from operating activities	Notes	2015 £’000	2014 £’000
Profit/(loss) before tax		28,682	(4,864)
Adjustments for:
(Gains)/losses on investments		(25,875)	7,544
Gain on revaluation of subsidiary		(212)	–
Purchases of investments	9	(1,733)	(2,261)
Proceeds on disposal of investments	9	16,283	1,195
Operating cash flows before movements in working capital		17,145	1,614
Decrease in receivables		586	447
Increase/(decrease) in payables		40	(24)
Net cash from operating activities before income taxes		17,771	2,037
Income taxes received/(paid)		39	81
Net cash from operating activities		17,810	2,118
Cash flows from financing activities
Preference shares redeemed		–	(250)
Disposal of subsidiary		20	–
Dividends paid		(2,336)	(2,458)
Net cash (used in)/from financing activities		(2,316)	(2,708)
Net increase/(decrease) in cash and cash equivalents		15,494	(590)
Cash and cash equivalents at beginning of year		3,415	4,005
Cash and cash equivalents at end of year		18,909	3,415

NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2015

1.        ACCOUNTING POLICIES

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”).

In accordance with IFRS 10 Consolidated Financial Statements the Company has in the past prepared Group Financial Statements which consolidate the Financial Statements of the Company and its subsidiaries Discretionary Unit Fund Managers Limited and Rights Securities Limited (a dormant subsidiary). Rights Securities Limited was dissolved during the year.

Under IFRS 10, the Company meets the definition of an investment entity and as such is not permitted to consolidate its subsidiaries. However, where the subsidiary provides services that relate to the investment entity’s activities then the Company is still required to consolidate the subsidiary and prepare Group Financial Statements.

Up until 2014, Discretionary Unit Fund Managers Limited had always provided such services to its parent. However, at the beginning of 2015 this function was taken over by Phoenix Administration Services Limited. Under IFRS 10 the Company is therefore no longer allowed to consolidate its subsidiary and as required has measured its investment in the subsidiary at fair value through profit and loss. As highlighted in the Strategic Report, the Company now therefore prepares single entity Financial Statements. The comparative figures are those of the single entity.

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 November 2014 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.

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning on or after 1st January 2016 and have not been applied in preparing these Financial Statements.

In particular there are amendments to IAS 1 Presentation of Financial Statements to revise the way other comprehensive income is presented. Also IFRS 9 Financial Instruments (effective for financial periods beginning on or after 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 Company will apply IFRS 9 from 1st July 2018, subject to endorsement by the EU.

Neither of these nor any other changes are expected to have a significant effect on the measurement of the amounts recognised in the Financial Statements of the Company.

Presentation of Income Statement
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement and distinguishes items that are of a revenue and capital nature has been presented alongside the Income Statement.

In accordance with the Company's Articles of Association, net capital returns may not be distributed by way of a dividend. Additionally, the net revenue is the measure the Directors believe is appropriate in assessing the Group's compliance with certain requirements set out in the Investment Trust (Approved Company) (Tax) Regulations 2011.

Income
Dividend income is included in the Financial Statements on the ex-dividend date. All other income is included on an accruals basis.

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

• Expenses which are incidental to the acquisition of an investment are included within the cost of the investment.
• Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds of the investment.

Taxation
The charge for taxation is based on the net revenue for the year. Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Investment trusts which have approval under section 1158 of the Corporation Tax Act 2010 are not liable for taxation on capital gains.

Dividends
Dividends payable to shareholders are recognised when they are paid or, in the case of the Supplementary Capital Dividend, when the Company’s obligation to make a payment is established.

Cash and cash equivalents
Cash comprises cash in hand and deposits payable on demand. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash.

Investments

Investments are classified as fair value through profit or loss as the Company’s business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or capital growth.

Changes in the value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Income Statement as “Gains or losses of investments held at fair value through profit or loss”. Also included within this heading are transactions costs in relation to the purchase or sale of investments.

All investments, classified as fair value through profit or loss, are further categorised into the following fair value hierarchy:
Level 1 – Unadjusted prices quoted in active markets for identical assets and liabilities.
Level 2 – Having inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
Level 3 – Having inputs for the asset or liability that are not based on observable data.

Investments traded in organised markets are valued at their fair value, which is determined by the quoted market bid price at the close of business at the Balance Sheet date. Where trading in a security is suspended, the investment is valued at the Board’s estimate of its fair value.

Unquoted investments are valued by the Board at fair value using the International Private Equity and Venture Capital Valuation Guidelines.

2.       INCOME

	Income from investments	2015	2014
	Franked investment income	3,271	3,171
		3,271	3,171
	Other operating income
	Deposit interest	2	1
	Other	4	–
		6	1
	Total income	3,277	3,172
	Total income comprises:
	Dividends	3,271	3,171
	Interest	2	1
	Other income	4	–
		3,277	3,172
	Income from investments
	UK equity listed	2,879	2,790
	AIM traded	271	220
	Dividend from Subsidiary	121	161
		3,271	3,171

3.       OTHER EXPENSES

		2015	2014
		£’000	£’000
	Staff costs (note 4)	316	273
	Non-Executive Directors’ fees	56	50
	Administration fees	94	–
	Auditor’s remuneration
	– Audit	15	11
	– Other services to the Company and its subsidiaries	5	4
	Secretarial services	42	–
	Other	154	154
		682	492

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

		2015 £’000	2014 £’000
Wages and salaries		247	232
Social security costs		29	38
Pensions		40	3
		316	273
		Number	Number
The average number of staff employed by the Company was		1	2
		£’000	£’000
Directors’ emoluments		270	234
		270	234
The highest paid Director received total emoluments of £214,000 (2014:	£184,000).

5.         TAX ON ORDINARY ACTIVITIES

	2015 £’000	2014 £’000
UK Corporation Tax at 20.25% (2014: 20.47%)	–	–
Tax receivable	(29)	(39)
	(29)	(39)
Profit before tax	2,595	2,680
Tax on profit at standard rate	525	549
Factors affecting the recovery/charge for the year:
Income not taxable	(663)	(649)
Unutilised losses carried forward	109	61
	(29)	(39)

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.

6.         DIVIDENDS AND OTHER APPROPRIATIONS

Amounts recognised as distributions to equity holders paid in the period:

2015: Income	Ex-Dividend Date	Record Date	Payment Date	2015 £’000	2014 £’000
Interim dividend of 10.5p per share (2014: 10.5p)	27/08/15	28/08/15	30/09/15	258	258
Final dividend of 25.5p per share (2014: 20.5p)	05/03/15	06/03/15	31/03/15	627	504
Special dividend of nil p per share (2014: 10.0p)	–	–	–	–	246
Capital
Supp cap dividend of 86.6585p per share
(2014: 86.3902p)	03/12/15	04/12/15	04/01/16	1,421	1,417
Final dividend of 1.8p per share (2014: 1.5p)	05/03/15	06/03/15	31/03/15	30	25
Special dividend of nil p per share (2014: 0.5p)	–	–	–	–	8
				2,336	2,458

The Articles of Association provide for a supplementary dividend to be paid to Capital shareholders. Although the Supplementary Capital Dividend was paid to shareholders on 4 January 2016, the payment left the Company's account in 2015.

Income	Ex-Dividend Date	Record Date	Payment Date	2016 £’000
Proposed final dividend of 25.5p per share for the year ended 31st December 2015	10/03/16	11/03/16	05/04/16	627
Capital
Proposed final dividend of 1.8p per share for the year ended 31st December 2015	10/03/16	11/03/16	05/04/16	30

The proposed final dividends are subject to approval by shareholders as 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.

	2015 £’000
Revenue available for distribution by way of dividend for the year	2,624
Income
Interim dividend of 10.5p per share paid on 30th September 2015	(258)
Proposed final dividend of 25.5p per share to be paid on 5th April 2016	(627)
Capital
Supp Cap dividend of 86.6585p per share paid on 4th January 2016	(1,421)
Proposed final dividend of 1.8p per share to be paid on 5th April 2016	(30)
Net addition to dividend equalisation reserve	288

7.         RETURN PER SHARE

	Income	Capital	Preference Share Redemption	Total	Income	Capital	Preference Share Redemption	Total
Return attributable to equity shareholders:	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Revenue return	1,164	1,460	–	2,624	1,212	1,457	50	2,719
Capital return	6,522	19,565	–	26,087	(1,936)	(5,608)	–	(7,544)
	7,686	21,025	–	28,711	(724)	(4,151)	50	(4,825)
	p	p			p	p
Revenue return	47.3	89.0			49.3	88.9
Capital return	265.1	1193.0			(78.7)	(342.0)
	312.4	1282.0			(29.4)	(253.1)

8.         INVESTMENTS

Analysis of the investments
The number of companies or institutions in which equities, convertibles or fixed interest securities were held was 27 (2014: 31).

EQUITY GROUPS Oil & Gas			2015			2014
		£’000	%	£’000		%
Oil & Gas Producers		–	–	892		0.80
Basic Materials
Chemicals		9,471	7.68	7,854		7.03
Industrials
Construction & Materials		4,062	3.30	3,045		2.73
General Industrials		26,873	21.80	19,889		17.80
Electronic & Electrical Equipment		1,071	0.87	5,208		4.66
Industrial Engineering		24,139	19.58	19,052		17.05
Support Services		24,117	19.57	27,769		24.85
Healthcare
Pharmaceuticals & Biotechnology		961	0.78	963		0.86
Consumer Services
Food & Drug Retailers		–	–	734		0.66
Utilities
Electricity	–		–	1,379	1.23
Gas, Water & Multiutilities	1,406		1.14	–	–
Technology
Software & Computer Services	149		0.12	169	0.15
AIM Traded Stocks	29,780		24.16	23,794	21.29
Subsidiary	623		0.51	431	0.39
Fixed Interest
Preference	604		0.49	560	0.50
Total UK	123,256		100.00	111,739	100.00

9.         INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

	2015 £’000	2014 £’000
Investments listed on a recognised investment exchange
UK equity listed investments at fair value	92,853	87,514
AIM traded stocks	29,780	23,794
Subsidiary undertakings (Note 10)	623	431
	123,256	111,739

	Listed 2015 £’000	Unlisted 2015 £’000	Subsidiary undertakings 2015 £’000	Total 2015 £’000
Opening book cost	43,551	7,225	431	51,207
Opening unrealised appreciation	43,963	16,569	–	60,532
Opening valuation	87,514	23,794	431	111,739
Movements in the year
Purchases at cost	1,733	–	–	1,733
Sales – proceeds	(11,330)	(4,953)	(20)	(16,303)
Sales – realised gains on sales	7,525	4,211	–	11,736
Increase in unrealised appreciation	7,411	6,728	212	14,351
Closing valuation	92,853	29,780	623	123,256
Closing book cost	41,479	6,483	411	48,373
Closing unrealised appreciation	51,374	23,297	212	74,883
	92,853	29,780	623	123,256
Realised gains on sales	7,525	4,211	–	11,736
Increase in unrealised appreciation	7,411	6,728	212	14,351
Gains on investments	14,936	10,939	212	26,087

With the exception of the subsidiary, 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 £nil were incurred on the acquisition of investments (2014: £14,000). Costs relating to disposals of investments during the year amounted to £33,000 (2014: £2,000). All transaction costs have been included within the capital column of the Income Statement.

10.       SUBSIDIARY UNDERTAKINGS

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 £225,000 and profits of £121,000 for the year ended 31st December 2015.

On 22nd September 2015 the Company’s dormant wholly owned subsidiary Rights Securities Limited was dissolved.

11.       SIGNIFICANT INTERESTS

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 2015:

Name
Chamberlin	12.60%
Colefax	18.90%
Coral Products	3.10%
DRS Data Services	4.10%
Elecosoft	6.00%
LPA	5.50%
Macfarlane	13.10%
Renold	3.80%
Scapa	5.30%
Titon	12.00%
Treatt	11.20%
VP	4.50%

12.       TRADE AND OTHER RECEIVABLES

	2015	2014
	£’000	£’000
Prepayments and accrued income	412	421
	412	421

13.       TRADE AND OTHER PAYABLES

	2015	2014
	£’000	£’000
Accruals	77	37
	77	37

14.       SHARE CAPITAL

			2015	2014
			£’000	£’000
	Authorised
	2,400,000 Capital Shares of 25p each		600	600
	3,600,000 Income Shares of 25p each		900	900
			1,500	1,500
	Allotted, Called Up and Fully Paid	%
	1,640,000 Capital Shares of 25p each	40.0	410	410
	2,460,000 Income Shares of 25p each	60.0	615	615
			1,025	1,025

15.       RESERVES

	Share premium account £’000	Capital reserve £’000	Revaluation reserve £’000	Dividend equalisation reserve £’000
Beginning of year	225	51,973	60,532	2,539
Net gain/(loss) on realisation of investments	–	11,736	–	–
Increase/(decrease) in unrealised appreciation	–	–	14,351	–
Profit for the year	–	–	–	2,624
Dividends	–	–	–	(2,336)
End of year	225	63,709	74,883	2,827

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

According to guidance issued by the Institute of Chartered Accountants in England and Wales (TECH 02/10) changes in the fair value of investments held that are readily convertible into cash can be treated as realised.

At the year end, with the exception of the subsidiary, the Company’s portfolio was considered to be sufficiently liquid to be regarded as readily convertible into cash. Consequently the capital and revaluation reserves may be treated as realised and therefore distributable. However, the Company is precluded by its Articles of Association from distributing such sums as dividends.

16.     NET ASSET VALUE PER SHARE

The net asset value per share and the net asset values attributable to each class of share calculated in accordance with the Articles of Association were as follows:

		Net asset value per share attributable		Net asset value attributable
	2015 p	2014	2015 £’000	2014 £’000
Income shares	1544.8	1268.3	38,001	31,201
Capital shares	6382.2	5188.6	104,668	85,093
			142,669	116,294

The movements during the year attributable to each class of share were as follows:

	Income shares £‘000	Capital shares £‘000	Total £‘000
Total net assets attributable at beginning of year	31,201	85,093	116,294
Total recognised gains for the year	6,522	19,565	26,087
Transfer to reserves	278	10	288
Total net assets attributable at end of year	38,001	104,668	142,669
No. of shares in issue	2,460,000	1,640,000

17.    RELATED PARTY TRANSACTIONS

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

	2015	2014
	£’000	£’000
Rent recharged	–	29
Dividends received	121	161
	121	190
Amounts owed by subsidiary undertaking	140	717

18.     FINANCIAL ASSETS AND LIABILITIES

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

The investment policy and objectives of the Company is stated on page 6.

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

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

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

The Company’s exposure to changes in market prices at 31st December 2015 on its quoted equity investments was £122,633,000 (2014: £111,308,000).

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:

	2015	2014
	£’000	£’000
Trade and other receivables	412	421
Cash and cash equivalents	18,909	3,415
	19,321	3,836

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.

APPENDIX
Details of the twenty largest investments as at 31st December 2015 are given below by market value:

UK Investments		Holdings		Market Value
	2015	2014	2015 £’000	2014 £’000
Scapa	8,000,000	10,425,000	17,200	13,787
VP	1,800,000	1,800,000	13,401	11,160
RPC*	1,500,000	1,625,000	12,495	8,054
Hill & Smith	1,434,230	1,434,230	10,771	8,290
Colefax	2,050,000	2,050,000	9,738	7,380
Treatt	5,775,000	5,775,000	9,471	7,854
Macfarlane	16,325,851	16,325,851	9,142	5,877
British Polythene Industries	764,325	764,325	5,236	5,010
Brammer	2,700,000	2,700,000	4,921	9,173
Renold	8,480,000	8,480,000	4,664	4,834
Spirax-Sarco Engineering	120,714	125,185	3,963	3,592
Electrocomponents	1,300,000	1,300,000	3,098	2,799
Low & Bonar	4,440,000	4,440,000	2,886	2,198
Menzies (John)	650,000	650,000	2,698	2,283
Vitec	400,000	400,000	2,380	2,354
Castings	400,000	400,000	1,860	1,581
National Grid	150,000	150,000	1,406	1,379
Elecosoft	4,520,781	4,520,781	1,221	769
Titon	1,265,000	1,265,000	1,176	848
Dialight	238,095	238,095	1,071	1,908
			118,797	101,130
Balance held in other investments			4,459	10,609
			123,256	111,739

Note: * this does not include the nil paid rights in RPC.

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.