DJ Rights and Issues Investment Trust PLC: Final Results for the year to 31st December 2021
Rights and Issues Investment Trust PLC (RIII) Rights and Issues Investment Trust PLC: Final Results for the year to 31st December 2021 18-Feb-2022 / 18:09 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
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RIGHTS AND ISSUES INVESTMENT TRUST PLC
Annual Results for the year to 31st December 2021
The following text is extracted from the Company's financial statements for the year ended 31st December 2021. Page numbers refer to the full financial statements.
CHAIRMAN'S STATEMENT
BREXIT is now well behind us but there are still several niggling trading issues to be resolved. The status of the border between Northern Ireland and the Republic of Ireland, sea fishing licences, mobility of labour and rights to work are rumbling on. Whilst the problems associated with the restrictions on labour movement have adversely affected the agricultural, leisure, tourist and catering sectors the most, there are distinct signs that the lack of skilled labour throughout the UK economy may limit future growth: it will certainly fuel an increase in labour costs and impact profits. The Board will continue to closely monitor related developments to inform decision making on behalf of the Company.
Due to the COVID 19 pandemic and the recent emergence of at least two variants it has been a year involving multiple forms of international and national restrictions and 'lock downs' which have adversely affected global trading. Supply chains were significantly disrupted due to manufacturing restrictions, working from home rules and travel restrictions. As a result commodity prices, shipping and other transport costs have increased massively.
During the year increases in labour, material and energy cost gradually increased stimulating a rise in inflation throughout the world, concerningly in the largest and most indebted economies. Understandably, there is a reluctance to increase interest rates but it seems likely that they will increase in the next few years.
The FTSE All-Share Index increased by 14.5% during the year and the Company's portfolio performed reasonably well with net asset value increasing from 2258.9p to 3036.6p per share, a rise of 34.4%. Due to the uncertainties outlined above and overall equity values, the composition of the portfolio remained largely unchanged but further investments were made to rebalance the risk profile. The share buy-back programme, which was paused for a time, was reinstated and has had a beneficial impact on the Company's net asset value.
172,369 shares were purchased under the Company's share buy-back programme during the year. The share capital at 31st December 2021 at was 7,367,952. The share buy-back programme will continue into 2022.
A final dividend of 24.0p is proposed, making 34.75p for the year, reflecting the Directors' awareness of the importance of dividend income to the Company's investors and its robust underlying financial position. The Directors are closely monitoring the implications of the continuing market volatility and global response to supply chain problems, inflation and the pandemic for the Company's net asset position and future income streams, and will make changes to the Company's dividend policy when deemed appropriate to do so.
Environmental, Social and Governance risks continue to be recognised as significant matters of global concern and the Board is committed to ensuring that the Company, through the Investment Director, appropriately manages and mitigates these risks through its investment strategy.
I am pleased to confirm that the composition of your Board continues to remain stable and I and my Board colleagues look forward to overseeing implementation of the Company's investment strategy and improving returns for shareholders in the future.
In the medium term, the economic outlook is still uncertain but with the continuing international roll-out of COVID 19 immunisation programmes, the lifting of travel restrictions and gradual improvements in supply chain efficiency good companies should be able to make modest progress.
Dr D. M. BRAMWELL
Chairman
18th February 2022
PORTFOLIO STATEMENT
Details of the investments held within the portfolio as at 31st December 2021 are given below by market value:
Holdings Market Value
UK Investments 2021 2020
2021 2020
GBP'000 GBP'000
Treatt 2,500,000 3,500,000 32,125 28,490
Hill & Smith 1,434,230 1,434,230 25,673 20,194
Macfarlane 17,250,000 17,250,000 22,425 14,869
Spirax-Sarco Engineering 120,714 120,714 19,368 13,635
Vp 1,800,000 1,800,000 16,236 13,500
Electrocomponents 1,300,000 1,300,000 15,678 11,317
Colefax 2,050,000 2,365,000 12,505 9,696
Renold 30,000,000 30,000,000 9,000 3,600
Vitec 500,000 400,000 7,100 3,656
IMI 400,000 275,000 6,944 3,204
Morgan Advanced Materials 1,500,000 1,000,000 5,370 3,110
Carr's 3,300,000 1,750,000 5,280 2,223
Bellway 130,000 80,000 4,337 2,364
Eleco 4,520,781 4,520,781 4,069 3,526
Menzies (John) 882,142 882,142 2,708 2,276
National Grid 137,500 137,500 1,457 1,189
Castings 400,000 400,000 1,400 1,448
Titon 1,265,000 1,265,000 1,391 1,139
GlaxoSmithKline 70,000 70,000 1,125 939
Dialight 238,095 238,095 738 600
Santander UK 10.375% Non Cumulative Preferred 400,000 400,000 700 640
LPA 650,000 650,000 403 520
Coral Products 2,000,000 2,000,000 290 170
Chamberlin 1,000,000 1,000,000 73 60
Dyson 1,000,000 1,000,000 2 2
Scapa - 8,000,000 - 14,880
Discretionary Unit Fund Managers 2 93,600 - 758
Costain 41 41 - -
Total Portfolio 196,397 158,005
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.
STRATEGIC REPORT
The Strategic Report is designed to provide information primarily about the Company's business and results for the year ended 31st December 2021 and should be read in conjunction with the Chairman's Statement.
PERFORMANCE STATISTICS 31-Dec-21 31-Dec-20 % change NAV per Ordinary Share 3,036.6p 2,258.9p 34.4% Discount to NAV -9.6% -6.8% -2.8% Closing mid-market price per Ordinary Share 2,745.0p 2,105.0p 30.4% Dividends per Ordinary Share 34.75p 32.25p Dividend yield* 1.3% 1.5% Ongoing Charges* 0.3% 0.5% Earnings per Ordinary Share - basic Revenue 38.8p 11.4p Capital 766.0p 4.6p NAV total return* 34.4% -0.7% FTSE All-Share Index 14.5% -12.5%
*These are Alternative Performance Measures.
EXPLANATION OF ALTERNATIVE PERFORMANCE MEASURES (APMS)
An alternative performance measure is a financial measure of historical or future financial performance, financial position or cash flow that is not prescribed by the relevant accounting standards. The APMs are the dividend yield, ongoing charges and NAV return as defined below.
Dividend Yield
The dividend yield is a financial ratio which indicates how much the Company pays out in dividends each year relative to its share price. The figure is calculated by dividing the aggregate value of dividends per share in a given year by the closing share price and is represented as a percentage.
The dividend yield was calculated as follows:
2021 2020
Total dividends per ordinary share (a) 34.75p 32.25p
Closing mid-market price per Ordinary Share (b) 2,745.0p 2,105.0p
Dividend Yield (a) / (b) *100 1.3% 1.5%
Ongoing Charges
Ongoing charges are expenses charged to revenue or capital that relate to the operation of the Company as an investment trust and are deemed likely to recur in the foreseeable future. They do not include the costs of acquisition or disposal of investments, financing costs and gains or losses arising on investments. Ongoing charges are calculated on the basis of the annualised ongoing charge as a percentage of the average net asset value in the period.
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The calculation methodology for ongoing charges is set out by the Association of Investment Companies ("AIC") and was calculated as follows:
2021 2020
(GBP000) (GBP000)
Total Expenses (a) 724 749
Average NAV (b) 207,111 145,673
Ongoing Charge (a) / (b) *100 0.3% 0.5%
NAV Return
NAV return is the percentage change in closing NAV per share compared with opening NAV per share. NAV return was calculated as follows:
NAV per Ordinary Share 31st December 2021 (a) 3,036.6p NAV per Ordinary Share 31st December 2020 (b) 2,258.9p Return [a/b-1]*100 34.4%
STATUS
The Company is a self-managed investment trust. The Company is registered as an investment company as defined in section 833 of the Companies Act 2006 and operates as such. The Company is not a close company within the meaning of the provisions of the Corporation Tax Act 2010.
The Company has been approved by the Financial Conduct Authority to be a Small Registered Alternative Investment Fund Manager ("AIFM").
In the opinion of the Directors, the Company has conducted its affairs during the year under review, so as to qualify as an investment trust for the purposes of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and continues to meet the eligibility conditions set out in section 1158 of the Corporation Tax Act 2010.
The Board is directly accountable to its shareholders. The Company is listed on the London Stock Exchange and is subject to the Listing Rules, Prospectus Rules and Disclosure Guidance and Transparency Rules published by the Financial Conduct Authority ("FCA"). The Company is governed by its articles of association, amendments to which must be approved by shareholders by special resolution. The Company is a member of the Association of Investment Companies ("AIC").
The FCA rules in relation to non-mainstream pooled investments do not apply to the Company.
STRATEGY FOR MEETING THE OBJECTIVES
The Board's objective is to exceed the benchmark index over the long term whilst managing risk.
To achieve this objective, the Board continues with its long-term strategy of seeking out undervalued investments that have characteristics consistent with a matrix of criteria developed by the Investment Director. This is supported by the five-yearly review that addresses the above objective. The latest review was conducted in January 2021, which concluded that the continuation of the Company for the period until July 2026 was in the best interests of shareholders.
The Board fulfils its investment objective and policy by operating as an investment company, enabling it to delegate operational matters to specialised third-party service providers. The close-ended nature of the Company allows a longer-term view on investments and means liquidity issues as a result of redemptions are less likely to arise. The Board has closely monitored performance in 2021 to ensure the Company's strategic objectives are continuing to be met.
In pursuing its strategy, close attention is also paid to the control of costs. Further information on this is contained in the Key Performance Indicators on pages 14 and 15.
INVESTMENT SELECTION
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.
Following a review by the Board in January 2021, the Investment Director has commenced a gradual refocusing of the portfolio to balance risk and reduce concentration whilst simultaneously further improving performance.
The investment portfolio is 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.
Full details of the Company's portfolio are set out on page 8 and further information is set out in Notes 8 to 11 inclusive.
SUSTAINABILITY OF BUSINESS MODEL AND PROMOTING THE SUCCESS OF THE COMPANY
The Board is responsible for the overall strategy of the Company and decisions regarding corporate governance, asset allocation, risk and control. The day-to-day management of the investments is delegated to the Investment Director and the management of the operations to specialist third-party suppliers.
The Directors are conscious of their duties under section 172 of the Companies Act 2006 and, in particular, the overarching duty to promote the success of the Company for the benefit of the shareholders, with careful attention paid to wider stakeholders' interests. The Board is aware of the importance of ensuring that the Company has a sustainable, well-governed business model to achieve its strategy and objectives.
As part of discharging its section 172 duties, the Company, through the Investment Director, uses its influence, where possible, as a shareholder to encourage the companies in which it invests to adopt best practice on environmental, social and corporate governance ("ESG") matters. During 2021, the Board successfully completed a programme of engagement with portfolio companies to gauge levels of integration of ESG matters into business strategies, investment plans and future product cycles. The Board intends to build on the positive response from across the investment portfolio in future years. Further related information can be found on pages 13 and 14.
The third party service providers are a key element of ensuring the success of the business model. The Board monitors the chosen service providers closely to ensure that they continue to deliver the expected level of service. The Board also receives regular reporting from them, evaluates the control environment and governing contract in place at each service provider and formally assesses their appointment annually.
The Board notes that the coronavirus pandemic has continued to have a significant impact in 2021, including on the operations of all of its third party service providers. Those service providers have continued to respond flexibly to the pandemic, including reliance upon remote working across much of the year. The Board continues to be satisfied that all have been able to respond appropriately to the disruption and each continues to function effectively. There have been no noticeable variations in either service levels or the Company's ability to operate effectively in 2021.
CULTURE & VALUES
All the Directors seek to discharge their responsibilities and meet shareholder expectations in an open and transparent manner. The Board seeks to recruit Directors who have diverse working experience including managing the types of companies in which the Company invests. The industry experience on the Board ensures there is detailed knowledge and constructive challenge in the decision-making process. This helps the Company achieve its overarching aim of enhancing shareholder value. The Directors are mindful of costs and seek to ensure that the best value is achieved in managing the Company.
The Company's values of skill, knowledge and integrity are aligned to the delivery of its investment objective and are monitored closely by the Board.
The Board seeks to employ third party providers who share the Company's culture and importantly will work with the Directors openly and transparently to achieve the Company's aims. As detailed in the Business Ethics section below, the Board expects and seeks assurance that the companies with which it works adopt working practices that are of a very high standard.
The Responsibilities as an Institutional Shareholder section below describes the Company's approach to managing its investments, including ESG matters.
BUSINESS ETHICS
The Company maintains a zero-tolerance policy towards the provision of illegal services, bribery and corruption in its business activities, including the facilitation of tax evasion. As the Company has no employees other than the Investment Director and the Company's operations are delegated to third-party service providers, the Board seeks assurances, at least annually, from its suppliers that they comply with the provisions of the Modern Slavery Act 2015 and maintain adequate safeguards in keeping with the provisions of the Bribery Act 2010 and Criminal Finances Act 2017.
As an investment vehicle the Company does not provide goods or services in the normal course of business, and does not have customers. Accordingly, the Directors consider that the Company is not within the scope of the Modern Slavery Act 2015.
BOARD DIVERSITY
The Company's affairs are overseen by a Board currently comprising four non-executive Directors and one executive Director - all of whom are male. In terms of progress in achieving diversity, 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. When the Board goes through its next recruitment process, improving the Board's gender and ethnic diversity will be important criteria.
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The Directors have broad experience, bringing knowledge of investment markets, business, financial services, accounting and regulatory expertise to discussions on the Company's business. The Directors regularly consider the leadership needs and specific skills required to achieve the Company's investment objective. Whilst appointments are based on skills and experience, the Board is conscious of diversity of gender, social and ethnic backgrounds, cognitive and personal strengths and experience. All appointments are based on objective criteria and merit, and are made following a formal, rigorous and transparent process.
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.
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's own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions-producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013 for the year to 31st December 2021 (2020: same). All printed material, wherever possible, is on recycled material. The Investment Director attempts to minimise the Company's carbon footprint. The Company's indirect impact occurs through the investments it makes.
The Company does not purchase electricity, heat, steam or cooling for its own use nor does it have responsibility for any other emissions producing sources.
ENVIRONMENTAL, SOCIAL & GOVERNANCE ('ESG') REPORTING
Of greater importance is the conduct of the companies in the investment portfolio. The Company does not invest in companies which have a significant adverse effect on the global environment and encourages those companies in which it has an investment to pursue responsible environmental policies.
The Company contributes to wider society by generating returns to shareholders whose ownership in shares in the Company affects their savings and by investing in companies which provide employment and innovation. No investments are made in tobacco or fossil fuel producing companies.
The Board now monitors ESG reporting across the Company's investments. Furthermore, during the year the Board, in conjunction with the Company Secretary, approached all portfolio companies to directly discuss their respective ESG strategies and policy frameworks. The following table summarises the key themes of those discussions:
Environment and Social Governance (ESG) Portfolio Review 2021
Company/ Market Consolidated Current
Sector Capitalisation* ESG Situation
(GBPm) Policy
Bellway plc Available on the company's website and
4,117 Comprehensive published in R&A
Household Utilities
Carr's Group plc e Comprehensive Available on the company's website and
Food Products published in R&A
Castings plc Available on the company's website and
156 Comprehensive published in R&A
Engineering Products
Chamberlin plc Work in
6 Progress QCA Corporate Governance Code, ESG in 2021
Engineering Products
Colefax Group plc ee 58 Work in A number of policies are in place which are
Progress applicable to ESG
Coral Products plc Industrials 12 Work in Partial ESG policies in place but not
Progress comprehensive
Costain Group plc 147 Comprehensive Available on the company's website and
Support published in R&A
Dialight plc Available on the company's website and
108 Comprehensive published in R&A
Electronic & Electrical Equipment
Dyson Not applicable -
unlisted securities None Delisted in 2011
Not applicable
Eleco plc Work in
77 Progress ESG to be implemented in 2021
IT Services
Electrocomponents plc Support 5,680 Comprehensive Available on the company's website and
published in R&A
GlaxoSmithKline plc
Available on the company's website and
Medicine & Biotech 80,841 Comprehensive published in R&A
Research
Hill & Smith Holdings plc 1,433 Work in A number of policies are in place which are
Engineering Products Progress applicable to ESG
IMI plc Available on the company's website and
4,525 Comprehensive published in R&A
Engineering Products
LPA Group plc
Available on the company's website and
Electronic & Electrical Equipment 9 Comprehensive published in R&A
Macfarlane Group plc Industrials 205 Comprehensive Available on the company's website and
published in R&A
Menzies (John) plc Industrial 287 Comprehensive Available on the company's website and
Transportation published in R&A
Morgan Advanced
Materials plc 1,023 Comprehensive Available on the company's website and
published in R&A
Electronic & Electrical Equipment
National Grid plc Available on the company's website and
Electricity Generation 38,334 Comprehensive published in R&A
and Distribution
Renold plc Work in Available on the company's website and
68 Progress published in R&A
Engineering Products
Santander Finance plc Banking Not applicable - fixed Not Applicable Fixed Interest Holding
interest
Spirax-Sarco Engineering plc Subject to
11,839 discussion Subject to discussion
Engineering Products
Titon Holdings plc Building and 13 Work in A number of policies are in place which are
Materials Progress applicable to ESG
Treatt plc Work in A number of policies are in place which are
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777 Progress applicable to ESG Industrial Chemicals Vitec Group plc 659 Comprehensive Available on the company's website and Engineering Products published in R&A VP plc 372 Work in A number of policies are in place which are Support Progress applicable to ESG
Rights and Issues survey undertaken in March 2021 *As at 31st December 2021
The Board was broadly content with the findings from the ESG review. The Company will continue to monitor the ESG status of the portfolio companies on an annual basis.
STREAMLINED ENERGY AND CARBON REPORTING
The Company is categorised as a lower energy user under the HMRC Environmental Reporting Guidelines March 2019 and is therefore not required to make the detailed disclosures of energy and carbon information set out within the guidelines. The Company's energy and carbon information is therefore not disclosed in this Report.
REVIEW OF THE BUSINESS
A review of the year and commentary on the future outlook is provided in the Chairman's Statement on page 7.
During the year under review, the assets of the Company were invested in accordance with the Company's investment policy.
During the year the Company's net assets have increased from GBP170.3m to GBP223.7m and at 31st December 2021 the net asset value per Ordinary share was 3,036.6p.
KEY PERFORMANCE INDICATORS
The Board is provided with detailed information on the Company's performance at every Board meeting. Key Performance Indicators are:
-- Shareholders' funds equity return compared to the FTSE All-Share Index (the Company's benchmark index).
-- Dividends per Ordinary share.
-- Ongoing Charge (formerly titled the Total Expense Ratio).
Shareholders' funds equity return
In reviewing the performance of the Company, the Board monitors shareholders' funds in relation to the FTSE All-Share Index. During the year shareholders' funds increased by 34.4% compared to an increase of 14.5% by the FTSE All-Share Index. Over the five years ended 31st December 2021 shareholders' funds increased by 24.6% compared with a rise of 8.6% by the FTSE All-Share Index.
Dividends per Ordinary share
The total dividend per Ordinary share paid and proposed is 34.75p (2020: 32.25p).
Ongoing Charge
Ongoing charges are expenses charged to revenue or capital that relate to the operation of the Company as an investment trust and are deemed likely to recur in the foreseeable future. They do not include the costs of acquisition or disposal of investments, financing costs and gains or losses arising on investments. Ongoing charges are calculated on the basis of the annualised ongoing charge as a percentage of the average net asset value in the period. The Ongoing Charge for the year ended 31st December 2021 was 0.3% (2020: 0.5%).
PRINCIPAL RISKS
The Board of Directors has a process for identifying, evaluating and managing the key risks of the Company. This process operated during the year and has continued to the date of this report. The Directors confirm that during the year 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 pages 54 and 55.
Additional key risks identified by the Company, together with the Board's approach in dealing with them are as follows:
Investment performance - The performance of the investment portfolio will deviate from the performance of the benchmark index. The Board's objective is to exceed the benchmark index over the long term whilst managing risk. The Board ensures that the Investment Director is managing the portfolio within the scope of the investment policy; the Board monitors the Company's performance against the benchmark; and the Board also receives detailed portfolio attribution analysis. The Board has a clearly defined investment philosophy and operates a diversified portfolio.
Share price discount - Investment trust shares often trade at discounts to their underlying net asset values. The Board monitors the level of the discount of the Ordinary shares. On 7th December 2016, the Company implemented share buy-back arrangements to mitigate the risk of the discount increasing. In August 2021, following a hiatus during the market volatility caused by the pandemic, the Board announced the reintroduction of the share buyback programme. The Board has authorised the repurchase of shares up to a rolling GBP1 million per month until July 2022 (subject to the renewal of the buyback authority at the forthcoming AGM).
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, Northern Trust Company, and the Board monitors the custodian to ensure assets remain protected. In addition, the Company operates clear internal controls to safeguard all assets.
Political risk - Changes in the political landscape could substantially affect the Company's prospects and the value of its investment portfolio.
Climate change risk - Climate change will bring fundamental shifts to economic activity and human behaviour across the planet. The Board and Investment Manager regularly consider how climate change could affect the Company's investment portfolio and shareholder returns.
Pandemic Risk - The SARS-Coronavirus-2 and its variants have continued to exert strain on both global and localised economies, healthcare infrastructure and social, travel and work patterns. Whilst clear signs of recovery have been visible in 2021 as vaccines allowed more normalised levels of activity, the structural changes that have been accelerated by the pandemic continue to present risks and opportunities for different sectors and their products, markets and supply chains. The Investment Director mitigates exposure to these risks by carefully monitoring Covid responses of portfolio companies and diversifying investments.
Economic conditions - Changes in economic conditions including, but not limited to, interest rates, rates of inflation, competition and tax legislation, could have a substantial effect on the Company's prospects and the value of its investment portfolio. At the time that this Report is published, there is wide speculation that the economic backdrop may become more turbulent in the short to medium term as the world adapts to address post-pandemic challenges, including a much higher rate of inflation both domestically and internationally than has been experienced in last two decades. The pandemic has affected, and will continue to affect, the value of the portfolio companies and has created continuing uncertainty around levels of future revenue from dividends. The investment objective and policy has not changed. The Company's service providers have implemented business continuity plans to ensure their services remain as unaffected as possible and, as such, the Board does not expect there to be adverse changes in the level of service provided.
These and other risks facing the Company are reviewed regularly by the Audit and Compliance Committee and the Board.
SECTION 172 STATEMENT
The Board seeks to promote the success of the Company for the benefit of its shareholders, giving consideration to the likely long term consequences of any decision with regard to the interests of its business relationships and the environment in which it operates. The Company has one employee, the Investment Director.
Stakeholder Engagement in the year and their material issues
Group
Shareholders play an important role in monitoring and safeguarding the governance of the Company and have
access to the Board via the Company Secretary throughout the year. Under normal circumstances, the Board
welcomes the opportunity to engage with shareholders at its Annual General Meeting, however both the 2020
and 2021 AGMs were held as closed meetings due to the social distancing and travel restrictions in place
Investors as a result of the coronavirus pandemic.
During the year, the Company has continued to communicate with shareholders via the Company Secretary,
its website and its financial reports. It is planned that the 2022 AGM will be open to shareholders to
attend in person, subject to any applicable Government regulations in force at that time. Shareholders
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continue to have the option to vote by proxy and to appoint the Chairman as their proxy.
We encourage shareholders to ask questions of the Chairman of the Board, the Investment Director and all
other Directors via the Company Secretary. Shareholders may submit questions to cosec@maitlandgroup.com.
Communication with shareholders enables the Board to make informed decisions when
considering how to promote the success of the Company over the long term.
Key suppliers are required to report to the Board on a regular basis and, as detailed on page 11, there
is a robust framework in place to evaluate their performance annually. The Company employs a
collaborative approach and looks to build long term partnerships based on open terms of business and fair
Suppliers payment terms. Following the coronavirus pandemic, the Company's key suppliers have implemented business
continuity plans to ensure their services remain as unaffected as possible. There has been enhanced
dialogue between the Company and its suppliers during the year to monitor their responses to COVID-19, to
ensure that plans were operating effectively and that there were no adverse changes in the level of
service provided.
Investee The Investment Director meets with the management of companies in which the Company has a significant
Companies interest and reports on findings to the Board regularly.
As a company listed on the London Stock Exchange, the Board ensures compliance with the necessary rules
Regulators and regulations relevant to the Company in order to build trust and maintain its reputation in the
market.
As discussed in more detail on pages 15 and 16 and throughout this report, in pursuing the Company's
Community and objectives, various factors that may impact on performance are considered. These may include
environment environmental, social and governance ('ESG') issues. The Board believes that poor practices can have an
impact on the value of investments and potential investments and consideration of ESG factors as part of
the investment process is therefore key.
Factoring Stakeholders into Principal Decisions
The Board defines principal decisions as not only those that are material to the Company but also those that are significant to any of the Company's key stakeholders as identified above. In making the following principal decisions, the Board considered the outcome from its stakeholder engagement as well as the need to maintain a reputation for high standards of business conduct and the need to act fairly between the members of the Company.
Refocusing the Investment Portfolio
Principal
Decision 1 Following a detailed review, the Board agreed that the Investment Director would gradually rebalance and
refocus the investment portfolio during 2021 in order to mitigate risk, improve performance and reinvest
a proportion of the Company's significant cash reserves in line with the Investment Objectives.
Share buy back programme
Principal
Decision 2 The Directors announced in August 2021 that the Company would recommence the share buyback programme. The
Board has authorised repurchases of shares up to a rolling GBP1 million per month until July 2022. The
reactivation of the programme is designed to address the share price discount.
Dividend Policy
Principal The Board continues to operate a progressive dividend policy. Despite continuing uncertainty as a result
Decision 3 of the pandemic and economic outlook, the Board has increased the annual dividend, having paid and
recommended dividends totalling 34.75p per share to shareholders for the financial year ended 31st
December 2021.
Principal ESG Review
Decision 4
Reflecting the importance of ESG matters globally in 2021, and in particular the increasing emphasis on
actions to be taken at business, community and individual level, the Board took the decision to engage
with portfolio companies to gauge levels of integration of ESG matters into strategies, investment plans
and product cycles. The results are discussed in more detail on pages 13 and 14.
Principal Remuneration
Decision 5
During the year the Nominations and Remuneration Committee undertook a review of the level of
non-executive Directors' fees. The Committee considered the level of fees relative to the Company's peer
group, together with the
Company's performance and the need to attract and retain directors of a high calibre. The Committee
concluded that the fees for each non-executive director should be increased by GBP2,000 per annum with
effect from 1st January 2022 and that the fees should continue to be reviewed annually to ensure that the
levels of remuneration remained attractive to current and prospective directors. On the recommendation of
the Nominations and Remuneration Committee the Board considered and approved the proposed increase in
directors' fees.
VIABILITY STATEMENT
The Board reviews the performance and progress of the Company over five-year periods and uses these assessments, regular investment performance updates from the Investment Director and a continuing programme of risk monitoring 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 portfolio invested predominantly in readily realisable smaller UK-listed and AIMtraded securities and has short-term cash on deposit.
-- The Company does not use gearing.
-- Expenses of the Company are normally covered four times by investment income and, in 2021, this was againachieved, having reduced to two times in 2020 as a result of the effects of the pandemic.
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. Consideration was also given to the principal risks and uncertainties faced by the Company, as detailed on pages 15 and 16. The Directors seek assurances from suppliers that their operations are well managed and that they are taking appropriate action to monitor and mitigate risk. The Board also considered the implications of the pandemic and resultant economic uncertainty in relation to the Company's investment positions, its future income streams and its ability to continue trading.
Based on the above, the Directors confirm that 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.
SHAREHOLDER COMMUNICATION
The Board is committed to maintaining open channels of communication 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 Board remains cognisant of the importance of clear communications with shareholders and will respond to all reasonable requests for information or meetings.The Investment Director maintains a regular dialogue with major shareholders and reports to the Board. In the event shareholders wish to raise issues or concerns with the Directors, they are welcome to do so at any time via the Company Secretary at cosec@maitlandgroup.com. The Annual Report and half-year results are circulated to shareholders wishing to receive them and are available on the Company's website. These provide shareholders with a clear understanding of the Company's portfolio and financial position. This information is supplemented by the daily calculation and publication of the NAV per share. Shareholders are encouraged to ask questions either at the Annual General Meeting or via the Company Secretary.
COMPANY'S DIRECTORS AND EMPLOYEES
The number of directors and employees during the year was 5 (2020: 5).
2021 2020
Male Female Male Female Directors (non-executive) 4 0 4 0 Directors (executive) 1 0 1 0 Other Employees 0 0 0 0
The Directors have considered the Strategic Report and believe that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance and strategy.
The Strategic Report was approved by the Board and signed on its behalf by:
S. J. B. Knott, Director 18th February 2022
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 cash flows 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 judgments and estimates that are reasonable and prudent;
-- present information, including accounting policies, in a manner that provides relevant, reliable,comparable and understandable information;
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-- provide additional disclosures when compliance with the specific requirements of IFRS is insufficient toenable users to understand the impact of particular transactions, other events and conditions on the Company'sfinancial position and financial performance;
-- state that the Company has complied with IFRS subject to any material departures disclosed and explainedin the financial statements; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume thatthe 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 position and performance, business model and strategy.
The Directors confirm that to the best of their knowledge:
-- the financial statements, prepared in accordance with applicable accounting standards, give a true andfair view of the assets, liabilities, financial position and profit or loss of the Company; and
-- the Strategic Report includes a fair review of the development and performance of the business and theposition of the Company, together with a description of the principal risks and uncertainties that it faces.
Dr D. M. Bramwell, Director S. J. B. Knott, Director
18th February 2022
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31st December 2021
Year ended 31st December Year ended 31st December
2021 2020
Notes
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment income 2 3,640 - 3,640 1,603 - 1,603
Other operating income 2 - - - 3 - 3
Total income 3,640 - 3,640 1,606 - 1,606
Gains on fair value through 9 - 58,259 58,259 - 349 349
profit or loss assets
(Losses) on subsidiary holding 9 - (758) (758) - - -
3,640 57,501 61,141 1,606 349 1,955
Expenses
Investment management fee - - - - - -
Other expenses 3 724 34 758 749 - 749
724 34 758 749 - 749
Profit before finance costs and 2,916 57,467 60,383 857 349 1,206
taxation
Finance costs - - - - - -
Profit before tax 2,916 57,467 60,383 857 349 1,206
Tax 5 - - - - - -
Profit for the year 2,916 57,467 60,383 857 349 1,206
Earnings per share
Return per Ordinary share 7 38.8p 766.0p 804.8p 11.4p 4.6p 16.0p
The total column of this statement represents the Statement of Comprehensive Income prepared in accordance with International Financial Reporting Standards as adopted by the EU. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.
The profit for the year disclosed above represents the Company's total Comprehensive Income. The Company does not have any other Comprehensive Income.
All items in the above statement are those of the single entity and derive from continuing operations. No operations were acquired or discontinued during the year.
The accompanying notes form part of these financial statements.
BALANCE SHEET
as at 31st December 2021
Non-current assets 2021 2020
Notes
Investments - fair value through profit GBP'000 GBP'000
or loss 9 196,397 158,005
196,397 158,005
Current assets
Trade and other receivables 12 641 681
Amounts due from Group undertakings - -
Cash and cash equivalents 26,761 12,474
27,402 13,155
Total assets 223,799 171,160
Current liabilities
Trade and other payables 13 67 73
Amounts due to Group undertakings - 758
67 831
Total assets less current liabilities 223,732 170,329
Net assets 223,732 170,329
Equity
Called up share capital 14 1,842 1,885
Capital redemption reserve 15 413 370
Retained reserves:
Capital reserve 15 81,410 63,842
Revaluation reserve 15 137,959 102,833
Revenue reserve 15 2,108 1,399
Total equity 223,732 170,329
Net asset value per share
Ordinary shares 16 3036.6p 2258.9p
The accompanying notes form part of these financial statements.
The financial statements were approved by the Board and authorised for issue on 18th February 2022. They were signed on its behalf by:
Dr D. M. Bramwell, Director
S. J. B. Knott, Director
STATEMENT OF CHANGES IN EQUITY
for the year ended 31st December 2021
Capital
Share Redemption Capital Revaluation Revenue Total
Balance at capital reserve reserve reserve
reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
31st December 2019 1,885 370 64,742 101,584 2,974 171,555
Changes in equity for 2020
Profit for the year - - (900) 1,249 857 1,206
Total recognised income and expense 1,885 370 63,842 102,833 3,831 172,761
Ordinary shares bought back and - - - - - -
cancelled
Dividends 6 - - - - (2,432) (2,432)
As at 31st December 2020 1,885 370 63,842 102,833 1,399 170,329
Capital
Share Redemption Capital Revaluation Revenue Total
Balance at capital reserve reserve reserve
reserve GBP'000
GBP'000 GBP'000 GBP'000 GBP'000
GBP'000
31st December 2020 1,885 370 63,842 102,833 1,399 170,329
Changes in equity for 2021
Profit for the year - - 22,341 35,126 2,916 60,383
Total recognised income and expense 1,885 370 86,183 137,959 4,315 230,712
Ordinary shares bought back and (43) 43 (4,551) - - (4,551)
cancelled
Dividends 6 - - (222) - (2,207) (2,429)
As at 31st December 2021 1,842 413 81,410 137,959 2,108 223,732
The accompanying notes form part of these financial statements.
STATEMENT OF CASH FLOWS
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for the year ended 31st December 2021
2021 2020
Cashflows from operating activities Notes
GBP'000 GBP'000
Profit before tax 60,383 1,206
Adjustments for:
Gains on investments (57,501) (349)
Purchases of investments 9 (9,502) (6,697)
Proceeds on disposal of investments 9 28,611 4,742
Operating cash flows before movements in working capital 21,991 (1,098)
Decrease/(increase) in receivables 40 (147)
Decrease in payables (6) (7)
(Decrease)/increase in amounts payable to group undertakings (758) 836
Net cash from operating activities before income taxes 21,267 (416)
Income taxes received - -
Net cash from operating activities 21,267 (416)
Cashflows from financing activities
Ordinary shares bought back (4,551) -
Dividends paid 6 (2,429) (2,432)
Net cash used in financing activities (6,980) (2,432)
Net increase/(decrease) in cash and cash equivalents 14,287 (2,848)
Cash and cash equivalents at beginning of year 12,474 15,322
Cash and cash equivalents at end of year 26,761 12,474
The accompanying notes form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31st December 2021
1. ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Company have been prepared under the historical cost basis as modified by the revaluation of certain financial assets and liabilities held at fair value through profit or loss and in accordance with the International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards ("IAS") and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union ("EU").
The Company's assets consist mainly of equity shares in companies listed on recognised stock exchanges and in most circumstances, including in the current market environment, are considered to be realisable within a short timescale and, accordingly, the Board believes that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. The Board has considered the impact of COVID-19 and believes this will have a limited impact on the Company's operational resources and existence. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Board considers it appropriate to continue to adopt the going concern basis in the preparation of the financial statements.
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 October 2019 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
In accordance with IFRS 10 (Investment Entities Amendments), the Company measures its subsidiary at fair value through profit and loss and does not consolidate it.
The following new and amended standards are effective this year and have been adopted although they have no material impact on the financial statements.
There have been minor amendments to IAS 39 and IFRS 4, 7, 9, 16 (interest rate benchmark reform phase 2) which were effective for annual periods beginning on or after 1st January 2021 and therefore have not had any material impact on the financial statements. Amendments to IAS 16 (proceeds before intended use), IAS 37 (onerous contracts -cost of fulfilling a contract), IFRS 3 (reference to the conceptual framework) and those relating to the Annual Improvements 2018-2020 Cycle are effective for annual periods beginning on or after 1st January 2022 and do not impact on the financial statements.
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 theinvestment.
-- Expenses which are incidental to the disposal of an investment are deducted from the disposal proceeds ofthe 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 in the financial statements when they are paid or, in the case of final dividends, when they are approved by the shareholders.
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 transaction 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
2021 2020
Income from investments
GBP'000 GBP'000
Franked investment income 2,882 1,603
Dividend from subsidiary 758 -
Other operating income
Other income - 3
Total income 3,640 1,606
Income from investments
UK equity listed 2,800 1,565
AIM traded 82 38
Unlisted stock - -
Dividend from subsidiary 758 -
3,640 1,603
3. OTHER EXPENSES
2021 2020
GBP'000 GBP'000
Staff costs (note 4) 293 367
Non-executive Directors' fees 94 94
Administration fees 145 102
Auditor's remuneration
- Audit 17 17
- Review of the half yearly report 4 4
- Other services to the Company and its subsidiaries - 4
Secretarial services 42 42
Other 129 119
724 749
Capital expenses 34 -
758 749
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In 2020 Auditor's other services comprised tax compliance services. These services are no longer provided by the Auditor.
4. STAFF COSTS 2021 2020
GBP'000 GBP'000
Wages and salaries 255 320
Social security costs 38 47
293 367
Number Number
The average number of staff employed by the Company was 1 1
GBP'000 GBP'000
Directors' emoluments 349 414
349 414
The highest paid Director received total emoluments of GBP255,000 (2020: GBP319,500).
5. TAX ON ORDINARY ACTIVITIES
2021 2020
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
UK corporation tax at 19.00% (2020: - - - - - -
19.00%)
Tax receivable - - - - - -
- - - - - -
Profit before tax 2,916 57,467 60,383 857 349 1,206
Tax on profit at standard rate 554 10,919 11,473 163 66 229
Factors affecting the recovery/charge
for the year:
Income not taxable (692) - (692) (305) - (305)
Capital items not taxable - (10,925) (10,925) - (66) (66)
Unutilised losses carried forward 138 6 144 142 - 142
- - - - - -
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
Amounts recognised as distributions to equity holders in the year:
2021 2020
GBP'000 GBP'000
Ordinary (Paid)
Final dividend for the year ended 31st December 2020 of 21.5p per share
(18.56p per share from Revenue and 2.94p per share from Capital)
(year ended 31st December 2019: 21.5p) 1,621 1,621
Interim dividend for the year ended 31st December 2021 of 10.75p per share (year ended 31st December 2020: 808 811
10.75p)
2,429 2,432
2021 2020
GBP'000 GBP'000
Ordinary
Proposed final dividend payable for the year ended 31st December 2021 of 24.0p
per share (year ended 31st December 2020: 21.5p) based on shares in issue of
7,304,369 at 15th February 2022 (7,540,321 at 15th February 2021) 1,753 1,621
The final dividend payable is subject to approval by shareholders at the Annual General Meeting and has 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.
2021 2020
GBP'000 GBP'000
Revenue available for distribution by way of dividend for the year 2,916 857
Ordinary
Interim dividend for the year ended 31st December 2021 of 10.75p per share (808) (811)
(year ended 31st December 2020: 10.75p)
Proposed final dividend for the year ended 31st December 2021 of 24.0p per share
(1,753) (1,621)
(year ended 31st December 2020: 21.5p)
Net addition/(reduction) to Revenue reserve 355 (1,575) 7. RETURN PER SHARE
2021 2020
Income Income
GBP'000 GBP'000
Return attributable to equity shareholders:
Revenue return 2,916 857
Capital return 57,467 349
60,383 1,206
p p
Revenue return per share 38.8 11.4
Capital return per share 766.0 4.6
804.8 16.0
Return per share is calculated using the weighted average number of Ordinary shares in issue during the year of 7,502,568 (2020: 7,540,321).
8. INVESTMENTS
Analysis of the investments
The number of companies or institutions in which equities, convertibles or fixed interest securities were held
was 28 (2020: 28).
EQUITY GROUPS 2021 2020
Basic Materials
GBP'000 % GBP'000 %
Chemicals 42,775 21.78 28,490 18.03
Industrials
General Industrials 22,425 11.42 14,869 9.41
Electronic & Electrical Equipment 738 0.37 3,710 2.35
Industrial Engineering 60,485 30.80 42,136 26.66
Support Services 34,622 17.63 27,093 17.15
Consumer Goods
Household Goods & Home Construction 4,337 2.21 2,364 1.50
Food Producers - - 2,223 1.41
Healthcare
Pharmaceuticals & Biotechnology 1,125 0.57 940 0.59
Utilities
Gas, Water & Multiutilities 1,457 0.74 1,189 0.75
AIM Traded Stocks 27,731 14.12 33,591 21.26
Unlisted 2 - 2 -
Subsidiary - - 758 0.48
FIXED INTEREST
Preference 700 0.36 640 0.41
Total UK 196,397 100.00 158,005 100.00
9. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
Investments listed on a recognised 2021 2020
investment exchange
GBP'000 GBP'000
UK equity listed investments at fair value 168,664 123,654
AIM traded stocks 27,731 33,591
Unlisted stock 2 2
Subsidiary undertakings (note 10) - 758
196,397 158,005
Listed Subsidiary undertakings Total
Unlisted
2021 2021 2021
2021
GBP'000 GBP'000 GBP'000
GBP'000
Opening book cost 33,392 21,369 411 55,172
Opening unrealised appreciation 90,262 12,224 347 102,833
Opening valuation 123,654 33,593 758 158,005
Movements in the year
Purchases at cost 9,502 - - 9,502
Sales - proceeds (9,475) (19,136) - (28,611)
Sales - realised gains on sales 8,914 13,872 - 22,786
Decrease in subsidiary bookcost - - (411) (411)
Increase/(decrease) in unrealised appreciation 36,069 (596) (347) 35,126
Closing valuation 168,664 27,733 - 196,397
Closing book cost 42,333 16,105 - 58,438
Closing unrealised appreciation 126,331 11,628 - 137,959
168,664 27,733 - 196,397
Realised gains on sales 8,914 13,872 (411) 22,375
Increase/(decrease) in unrealised appreciation 36,069 (596) (347) 35,126
Gains on investments 44,983 13,276 (758) 57,501
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With the exception of the subsidiary and the unlisted stock, 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 GBP77,763 were incurred on the acquisition of investments (2020: GBP49,241). Costs relating to disposals of investments during the year amounted to GBP30,894 (2020: GBP12,434). All transaction costs have been included within investments at fair value. 10. SUBSIDIARY UNDERTAKINGS
The Company has one wholly owned subsidiary undertaking:
Proportion of nominal
value
of issued shares and
Country of incorporation and voting
Principal operation Description of shares
activity held rights held
Name
Discretionary Unit
Fund Dormant England Ordinary 100%
Managers Limited
Discretionary Unit Fund Managers Limited had capital and reserves of GBP2 and a loss of nil taking into account the dividend paid of GBP758,397 for the year ended 31st December 2021. 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 2021:
Name % holding
Colefax 25.83
Renold 13.31
Titon 11.35
Macfarlane 10.93
Eleco 5.44
LPA 4.83
Vp 4.48
Treatt 4.18
Carr's 3.52
12. TRADE AND OTHER RECEIVABLES
2021 2020
GBP'000 GBP'000
Prepayments and accrued income 641 681
641 681
13. TRADE AND OTHER PAYABLES
2021 2020
GBP'000 GBP'000
Accruals 67 73
67 73
14. SHARE CAPITAL
2021 2020
Allotted, Called Up and Fully Paid GBP'000 GBP'000
7,367,952 Ordinary shares of 25p each (2020: 7,540,321)
1,842 1,885
Number of Ordinary
shares
2021
Balance at beginning of year 7,540,321
Ordinary shares bought back and cancelled (172,369)
Balance at end of year 7,367,952
15. RESERVES
Capital redemption reserve Capital Revaluation reserve Revenue reserve
reserve
GBP'000 GBP'000 GBP'000
GBP'000
Beginning of year 370 63,842 102,833 1,399
Ordinary shares bought back and cancelled 43 (4,551) - -
Increase in unrealised appreciation - - 35,126 -
Net gains on realisation of investments - 22,375 - -
Capital expenses - (34) - -
Profit for year - - - 2,816
Dividends - (222) - (2,207)
End of year 413 81,410 137,959 2,108
The capital reserve represents those realised profits and losses arising on the disposal of investments. The revaluation reserve represents unrealised profits and losses arising on the revaluation of investments held.
16. NET ASSET VALUE PER SHARE
The net asset value per Ordinary share calculated in accordance with the Articles of Association was as
follows:
Net asset value per
Net asset value attributable
Ordinary share attributable
2021 2020 2021 2020
p p GBP'000 GBP'000
Ordinary shares 3036.6 2258.9 223,732 170,329
The movements during the year were as follows:
Ordinary
shares
GBP'000
Total net assets attributable at beginning of year 170,329
Ordinary shares bought back and cancelled (4,551)
Total recognised gains for the year 58,225
Transfer to reserves (271)
Total net assets attributable at end of year 223,732
Number of Ordinary shares in issue 7,367,952
The Company may repurchase its own shares and then cancel them, reducing the freely traded shares ranking for dividends and enhancing returns and earnings per Ordinary Share to the remaining Shareholders. When the Company repurchases its shares, it does so at a total cost below the prevailing NAV per share.
The estimated percentage added to the NAV per share from buybacks of 0.3% is derived from the repurchase of shares in the market at a discount to the prevailing NAV at the point of repurchase. The shares were bought back at a weighted average discount of 10.8%. No shares were repurchased in 2020.
2021 2020 Weighted average discount of buybacks 10.8% 0.0% a Percentage of shares bought back 2.3% 0.0% b NAV accretion from buyback 0.3% 0.0% (a*b)/(100%-b)
17. RELATED PARTY TRANSACTIONS
During the year the Company had the following transactions with Discretionary Unit Fund Managers Limited,
its subsidiary undertaking:
2021 2020
GBP'000 GBP'000
Dividends received 758 -
Amounts (due to)/owed by subsidiary undertaking - (758)
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 are stated on page 1.
As an investment trust, the Company invests in securities for the long term. Accordingly it is, and has been, throughout the year under review, the Company's policy that no short-term trading in investments or other financial instruments shall be undertaken.
The main risks arising from the Company's financial instruments are market price risk, liquidity risk and credit risk. The Board's policy for managing these risks is summarised below. These policies have remained unchanged since the beginning of the year to which these financial statements relate.
Market price risk
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February 18, 2022 13:09 ET (18:09 GMT)
DJ Rights and Issues Investment Trust PLC: Final -10-
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 2021 on its quoted equity investments was GBP196,395,000 (2020: GBP157,245,000).
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:
2021 2020
GBP'000 GBP'000
Trade and other receivables 641 681
Cash and cash equivalents 26,761 12,474
27,402 13,155
The risk is managed by dealing only with brokers and banks who have satisfactory credit ratings and are approved by the Audit and Compliance Committee.
Financial assets and liabilities
All assets and liabilities are included at fair value.
Valuation of financial instruments
IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The valuation techniques used by the Company are explained in the accounting policies note 1 Investments.
The fair value hierarchy has the following levels:
Level 1 - Unadjusted prices quoted in active markets for identical assets and liabilities.
Level 2 - Having inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (ie as prices) or indirectly (ie derived from prices).
Level 3 - Having inputs for the asset or liability that are not based on observable data.
31st December 2021 Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss GBP'000 GBP'000 GBP'000 GBP'000
UK Equity Listed 168,664 - 168,664
AIM traded stocks 27,731 - - 27,731
Unlisted stock - 2 - 2
Investment in subsidiary - - - -
Net fair value 196,395 2 - 196,397
31st December 2020 Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss GBP'000 GBP'000 GBP'000 GBP'000
UK Equity Listed 123,654 - - 123,654
AIM traded stocks 33,591 - - 33,591
Unlisted stock - 2 - 2
Investment in subsidiary - - 758 758
Net fair value 157,245 2 758 158,005
There were no transfers between Level 1 and Level 2 during the period.
A reconciliation of fair value measurements in Level 3 is set out in the following table.
2021 2020
GBP'000 GBP'000
Opening Balance 758 758
Purchases - -
Sales - -
Total gains or losses included in gains on investments in the income statement:
- on assets sold - -
- on assets held at year end (758) -
Closing Balance - 758
The Level 3 investment relates to the Company's subsidiary, Discretionary Unit Fund Managers Limited, which has been valued based on the most recent estimated NAV.
A copy of the Company's Annual Report for the year ended 31st December 2021 will shortly be available to view and download from the Company's website https://www.maitlandgroup.com/investment-trusts/ rights-and-issues-investment-trust-plc/.
Printed copies of the Annual Report will be sent to those shareholders electing to receive hard copies shortly. Additional copies may be obtained from the Company Secretary - Maitland Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY.
The Annual General Meeting of the Company will be held in the James Watt Room at The Brewery, 52 Chiswell Street, London EC1Y 4SD, on Thursday 24th March 2022, at 12 noon.
The Directors have proposed the payment of a final dividend of 24.0p per Ordinary share which, if approved by shareholders at the forthcoming Annual General Meeting, will be payable on 31st March 2022 to shareholders whose names appear on the register at the close of business on 4th March 2022 (ex-dividend 3rd March 2022).
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ISIN: GB0007392078 Category Code: FR TIDM: RIII LEI Code: 2138002AWAM93Z6BP574 OAM Categories: 1.1. Annual financial and audit reports Sequence No.: 144123 EQS News ID: 1283893 End of Announcement EQS News Service =------------------------------------------------------------------------------------
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(END) Dow Jones Newswires
February 18, 2022 13:09 ET (18:09 GMT)
