DJ Chelverton UK Dividend Trust plc: Annual Financial Report
Chelverton UK Dividend Trust plc (SDV)
Chelverton UK Dividend Trust plc: Annual Financial Report
11-Jul-2019 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
CHEVERTON UK DIVIDEND TRUST PLC
Annual Financial Report
For the year ended 30 April 2019
Strategic Report
The Strategic Report has been prepared in accordance with Section 414A of
the Companies Act 2006 ('the Act'). Its purpose is to inform shareholders
and help them understand how the Directors have performed their duty under
Section 172 of the Act to promote the success of the Company.
Chelverton UK Dividend Trust PLC ('the Company') and its subsidiary SDV 2025
ZDP PLC ('SDVP') ('the subsidiary') together form the Group. The Group's
funds are invested principally in mid and smaller capitalised UK companies.
The portfolio comprises companies listed on the Official List and companies
admitted to trading on AIM. The Group does not invest in other investment
trusts or in unquoted companies. No investment is made in preference shares,
loan stock or notes, convertible securities or fixed interest securities.
Financial Highlights
30 April 30 April
Capital 2019 2018 % change
Total gross assets (GBP'000) 62,032 66,386 (6.56)
Total net assets (GBP'000) 44,659 51,794 (13.78)
Net asset value per Ordinary 214.19p 249.61p (14.19)
share
Mid-market price per Ordinary 173.50p 251.00p (30.88)
share
Premium/(discount) (19.00%) 0.56%
Net asset value per Zero Dividend 105.48p 101.41p 4.02
Preference share 2025
Mid-market price per Zero 110.00p 105.50p 4.27
Dividend Preference share 2025
Premium 4.29% 4.02%
Year ended Year ended
30 April 30 April
Revenue 2019 2018 % change
Return per Ordinary share 13.40p 11.49p 16.62
Dividends declared per Ordinary 8.97p 8.46p 6.03
share
Special dividends declared per 2.50p 0.66p 278.79
Ordinary share
Total return
Total return on Group gross (3.53%) 25.96%
assets
Total return on Group's net (6.39%) 25.95%
assets* (total return as
proportion of net
assets after the provision for
the Zero Dividend Preference
shares)
Total return on Group's net (9.90%) 28.59%
assets*
Ongoing charges** 1.95% 1.84%
Ongoing charges*** 1.45% 1.44%
* Adding back dividends paid in the year.
** Calculated in accordance with the Association of Investment Companies
('AIC') guidelines. Based on total expenses, excluding finance costs, for
the year and average net asset value.
*** Based on gross assets.
Chairman's Statement
Results
The Company's net asset value per Ordinary share as at 30 April 2019 was
214.19p (2018: 249.61p), a decrease over the year of 14.2% with an Ordinary
share price of 173.50p per share (2018: 251.00p). Total assets, including
revenue reserves, were GBP62.032m (2018: GBP66.386m) and the total net assets
were GBP44.659m (2018: GBP51.794m).
The Company was launched on 12 May 1999 and the net asset value per Ordinary
share has risen by 123% and a total of 186.25p has been paid in dividends
including the fourth interim and special dividends announced with this
report. Since the year end, the net asset value per Ordinary share has
decreased to 198.74p as at 28 June 2019; the discount to market NAV is
currently some 8.9%.
In the year total dividends of 11.47p per Ordinary share were paid and
proposed including a special dividend of 2.50p. During the same period the
MSCI UK Small Cap Index decreased by 3.12%.
The current underlying portfolio dividend growth has again been positive in
the past year, with a portfolio yield today of 5%. As a result of the
underlying dividend growth in the year, it has been possible to increase the
interim dividend paid to shareholders and to pay a special dividend, whilst
retaining a very significant amount of revenue to add to the revenue
reserves.
The Company's portfolio is currently invested in 75 companies spread across
26 sectors. This spread creates a well-diversified portfolio which the
manager expects to lead to steady revenue growth and, in time, capital
growth.
Capital Structure
The Zero Dividend Preference Shares issued in 2012 ('ZDP 2012') reached the
end of their life on 8 January 2018 and shareholders received their final
entitlement in full. In order to maintain the capital structure, a new class
of Zero Dividend Preference shares was issued which will mature on 30 April
2025 ('ZDP 2025') with a final capital entitlement of 133.18p. This form of
capital gearing has proven to be very important for the fund in enhancing
total returns for Ordinary shareholders.
The 2025 ZDP has been issued by a wholly owned subsidiary SDV 2025 ZDP PLC.
The net asset value per ZDP share at 30 April 2019 was 105.48p per share
with a share price of 110.00p per share.
Dividend
The Board has declared a fourth interim dividend of 2.40p per Ordinary share
(2018: 2.40p) which, when added to the three quarterly interim dividends of
2.19p per Ordinary share (2018: 2.02p), brings the total (excluding the
special dividend) to 8.97p (2018: 8.46p) in respect of the year ended 30
April 2019, an increase of 6.03% over the previous year. In addition, the
Board has declared a special dividend of 2.50p per Ordinary (2018: 0.66p)
share to be paid with the fourth interim dividend. Shareholders will
effectively receive a fourth dividend of 4.90p per Ordinary share. This
equates to a total dividend for the year of 11.47p per Ordinary share.
It remains the Board's intention, which has been stated several times over
the past few years, to move the dividend payment profile to a position where
the fund pays four equal interim dividends on a quarterly basis through the
year. This will be achieved in the year ending 30 April 2020 with four
payments of 2.40p being a total for the year of 9.60p of core dividend. In
that same year there may or may not be a special dividend, the payment of
which will be dependent on the level of total dividend revenue received by
the Company including any special dividends.
The Board announced earlier this year its decision that once the Company's
retained revenue reserves are equal to double the historic core dividend,
the Company will distribute to shareholders all additional current period
revenue as a special dividend. If the current period revenue is insufficient
to meet the proposed core dividend target, the Company will use some of the
retained revenue reserves with the aim of reinstating its policy as soon as
is practical.
The Company as at year end of 30th April 2019 had retained revenue reserves
of GBP4,000,000 or 19.19p per share, which represents some 199% of the
expected 2020 core annual dividend of 9.60p per Ordinary share.
Board Succession
As part of the Board's succession planning, Mr David Harris retired as a
Director at the Annual General Meeting held in September 2018. The Board
would like to express its thanks to Mr Harris for his support to the Board
over the years. Mr Andrew Watkins joined the Board after the last Annual
General Meeting, as David Harris's successor, Andrew Watkins has brought to
the Board a wealth of experience from the investment industry, and is
already making a valuable contribution to the Board.
Outlook
The outlook remains similar to that which we set out last year, namely that
uncertainty around the outcome of negotiations with the EU remains, and this
will continue to cause uncertainty in markets. We believe, however, that the
Company's strategy, of investing in stable, largely ungeared and well-valued
businesses, remains a sensible, sustainable model.
Lord Lamont of Lerwick
Chairman
10 July 2019
Investment Manager's Report
In the year to 30 April 2019 there was a decline in Company's net asset
value per share from 249.61p to 214.31p. At the same time the core dividend
was increased by 6.03% in line with the targeted increase. The Company has
also announced a special dividend of 2.50p which, as usual, has been
aggregated with the fourth interim dividend.
This disappointing performance is a result of the continuing political
turmoil and uncertainty caused by the ongoing Brexit process and the
additional concerns caused by the trade "discussions" taking place between
the United States, China and the European Union. It is interesting to note
in the brief period of the Easter Recess when Brexit was not discussed, as
much, there was a significant increase in the asset value of the Company.
It is generally acknowledged by global analysts that UK equities are lowly
rated relative to other world markets and that within the Public Markets,
Mid Cap companies, and especially Small Cap companies are even more
undervalued. This market has some similarities to the "exuberant" period of
1999/2000 when Telecommunications, Media and Technology ("TMT") shares
reached extraordinary values and profitable, cash generating steadily
growing companies were overlooked and disregarded. At this time growth
companies have enjoyed a very strong run-up in prices whereas the exact
opposite could be said about the cash generative, steady growing, dividend
paying companies which make up the Company's portfolio. As we did in early
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -2-
2000 we are using this period to acquire new holdings and increase our
existing shareholdings in what appears to be highly undervalued companies.
On one hand it is heartening to see an increase in the number of takeovers
as third parties recognise this undervalue and take the opportunity to
acquire high quality assets. On the other hand, whilst the uplifts in value
are very welcome and particularly when funds can be released to buy into
other significantly undervalued companies, one can't help feeling that the
"real value" should be higher than the price being paid. The takeovers and
offers set out below, in the Portfolio Review, have been announced in the
first six months of this calendar year, and therefore provide cash resources
that can be reinvested to produce a boost to the revenue account, and in
time, to the growth of the asset value.
Reflecting concern about the UK economy, the UK political position, the
periodic instability in Europe and the world trade position it is hardly
surprising that private investors have been holding back from buying the
Company's shares. The shares now trade in the region of a 10% discount which
over the life of the Company is historically very high. In the past the
discount has for very brief periods been at this level but has always
quickly narrowed. The yield on the shares is now at a healthy level, and
with a capital structure in place until April 2025 and with the statement
made by the Board on Dividend Policy the dividend pay out should grow
steadily into the future.
It is also concerning that in the past few weeks we have had several
enquiries about the percentage of the portfolio held in unquoted
investments. It is important to reiterate here that the Company has never,
does not and never will make unquoted investments. When a new company is
brought into the portfolio it is either traded on AIM or on the full list
(excluding the shares in the FTSE 100) and must yield at least 4%.
The Board made a public statement on the 6 March 2019 setting out a
clarification of the Dividend Policy. Given the strength of the underlying
dividend and the growth of the dividends of a lot of the portfolio it is the
Board's intention to pay four interim dividends of 2.40p in 2019/20, an
increase of 7%, and to increase the core dividend by the same 7% for the
foreseeable future. Obviously further distributions may or may not take
place as special dividends depending on the overall revenue account.
Portfolio Review
In the last year we have had two takeovers, Produce Investments and Dairy
Crest (2018 - 1), and just post the year end we received offers for KCom,
Mucklow (A & J) and BCA Marketplace. Including the takeovers of Produce
Investments and Dairy Crest, seven holdings from the portfolio were sold in
their entirety (2018 - 3), Curtis Banks, Discover IE, Macfarlane, Huntsworth
and Hilton Foods.
Shareholdings were reduced in sixteen companies including Amino
Technologies, BCA Marketplace, Bloomsbury Publishing, T. Clarke, Diversified
Gas & Oil, Go-Ahead Group, GVC Holdings, Jarvis Securities, Kin and Carta,
Numis Corporation, Polar Capital, Ramsdens, Randall and Quilter, Sanderson,
Titon Holdings and UP Global Sourcing, all after strong share price
performances.
Seven new shareholdings were added to the Company's portfolio in the year
including, Babcock International - specialising in managing complex assets
and infrastructure, Bakkavor - an international food manufacturing business
specialising in fresh prepared foods, Crest Nicholson - a housebuilder,
Devro - manufactures products derived from collagen, principally sausage
casings, FinnCap - the largest adviser on the Alternative Investment Market
("AIM") advising both public and private companies, Sabre Insurance Group -
a specialist car insurer, STV Group - a Scottish media company.
The shareholdings were increased in twenty-five companies which were in the
portfolio at the beginning of the financial year. Like last year this is a
significant part of the portfolio and included a number of holdings that
were "top sliced" in the early part of the year and then added to towards
the end of the year.
Outlook
Until the UK's relationship with the European Union is clarified it is hard
to see any reason for a change in the current valuations of our companies.
It is however our firm belief that agreement will be reached and that once
this is clear that there will be a significant rerating of the portfolio.
David Horner
Chelverton Asset Management Limited
10 July 2019
Breakdown of Portfolio by Industry
at 30 April 2019 Market value % of
Bid
Market sector GBP'000 portfolio
Support Services 8,240 13.70
Financial Services 7,531 12.50
Travel & Leisure 4,244 7.20
General Retailers 4,102 6.90
Household Goods & Home Construction 3,878 6.60
Construction & Materials 3,836 6.40
Industrial Engineering 3,141 5.20
Media 2,952 4.90
Real Estate Investment Trusts 2,874 4.80
Nonlife Insurance 2,840 4.80
Oil & Gas Producers 2,799 4.70
Real Estate Investment & Services 2,514 4.20
Electronic & Electrical Equipment 1,991 3.30
Software & Computer Services 1,943 3.20
Industrial Transportation 1,150 1.90
Life Insurance 1,083 1.80
Food Producers 1,038 1.80
General Industrials 991 1.60
Leisure Goods 911 1.50
Fixed Line Telecommunications 733 1.20
Food & Drug Retailers 658 1.10
Technology Hardware & Equipment 446 0.70
59,895 100.00
Breakdown of Portfolio by Market Capitalisation
at 30 April 2019
Number of Companies
GBP500m = 20
Source: Maitland Administration Services Limited
Portfolio Statement
at 30 April 2019 Market % of
value
Security Sector GBP'000 portfolio
Diversified Gas & Oil & Gas 2,223 3.7
Oil Producers
Randall & Quilter Nonlife 1,558 2.6
Insurance
Marston's Travel & 1,417 2.4
Leisure
UP Global Sourcing Household 1,363 2.3
Holdings Goods & Home
Construction
Mucklow (A&J) Real Estate 1,350 2.3
Group Investment
Trusts
Belvoir Lettings Real Estate 1,344 2.2
Investment &
Services
DFS Furniture General 1,255 2.1
Retailers
Shoe Zone General 1,248 2.1
Retailers
Strix Group Electronic & 1,190 2.0
Electrical
Equipment
De La Rue Support 1,101 1.8
Services
Clarke (T.) Construction 1,070 1.8
& Materials
Bloomsbury Media 1,066 1.8
Publishing
Crest Nicholson Household 1,059 1.8
Goods & Home
Construction
Restaurant Group Travel & 1,056 1.8
Leisure
Polar Capital Financial 1,045 1.7
Holdings Services
Park Group Financial 1,028 1.7
Services
Flowtech Fluid Industrial 1,020 1.7
Power Engineering
StatPro Group Software & 1,016 1.7
Computer
Services
Castings Industrial 968 1.6
Engineering
Go-Ahead Group Travel & 966 1.6
Leisure
Severfield Industrial 953 1.6
Engineering
Essentra Support 951 1.6
Services
Jarvis Securities Financial 935 1.6
Services
Kier Group Construction 935 1.6
& Materials
Sanderson Group Software & 927 1.5
Computer
Services
BCA Marketplace Support 925 1.5
Services
Photo-Me Leisure 911 1.5
International Goods
Personal Group Nonlife 884 1.5
Holdings Insurance
Alumasc Group Construction 882 1.5
& Materials
Murgitroyd Group Support 855 1.4
Services
Ramsdens Holdings Financial 855 1.4
Services
Premier Asset Financial 844 1.4
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -3-
Management Group Services
Financial Services
Centaur Media Media 836 1.4
Galliford Try Household 812 1.4
Goods & Home
Construction
XP Power Electronic & 801 1.3
Electrical
Equipment
Epwin Group Construction 800 1.3
& Materials
Regional REIT Real Estate 789 1.3
Investment
Trusts
RPS Group Support 772 1.3
Services
Braemar Shipping Industrial 760 1.3
Services Transportati
on
Brown (N) Group General 756 1.3
Retailers
Brewin Dolphin Financial 735 1.2
Holdings Services
Town Centre Real Estate 735 1.2
Securities Investment
Trusts
Northgate Support 734 1.2
Services
Chesnara Life 733 1.2
Insurance
KCom Group Fixed Line 733 1.2
Telecommunic
ations
Kin and Carta Support 705 1.2
Services
Palace Capital Real Estate 700 1.2
Investment &
Services
Numis Corporation Financial 686 1.1
Services
McColl's Retail Food & Drug 658 1.1
Group Retailers
Headlam Group Household 644 1.1
Goods & Home
Construction
Bakkavor Food 642 1.1
Producers
Orchard Funding Financial 638 1.1
Group Services
RTC Group Support 630 1.0
Services
Low & Bonar General 601 1.0
Industrials
Wilmington Group Media 600 1.0
Gattaca Support 580 1.0
Services
Anglo African Oil Oil & Gas 576 1.0
& Gas Producers
Finncap Group Financial 540 0.9
Services
Babcock Support 525 0.9
International Services
Foxtons Group Real Estate 470 0.8
Investment &
Services
Connect Group Support 462 0.8
Services
GVC Holdings Travel & 457 0.8
Leisure
STV Media 450 0.7
Amino Technologies Technology 446 0.7
Hardware &
Equipment
Saga General 441 0.7
Retailers
Moss Bros Group General 402 0.7
Retailers
Sabre Insurance Nonlife 398 0.7
Insurance
Devro Food 396 0.7
Producers
Coral Products General 390 0.6
Industrials
DX Group Industrial 390 0.6
Transportati
on
Hansard Global Life 350 0.6
Insurance
Revolution Bars Travel & 348 0.6
Group Leisure
GLI Finance Financial 225 0.4
Services
Chamberlin Industrial 200 0.3
Engineering
Titon Holdings Construction 149 0.2
& Materials
Total 59,895 100.0
Portfolio
Investment Objective and Policy
The investment objective of the Company is to provide Ordinary shareholders
with a high income and opportunity for capital growth, having provided a
capital return sufficient to repay the full final capital entitlement of the
Zero Dividend Preference shares issued by the wholly owned subsidiary
company SDVP.
The Company's investment policy is that:
· The Company will invest in equities in order to achieve its investment
objectives, which are to provide both income and capital growth,
predominantly through investment in mid and smaller capitalised UK
companies admitted to the Official List of the UK Listing Authority and
traded on the London Stock Exchange Main Market or traded on AIM.
· The Company will not invest in preference shares, loan stock or notes,
convertible securities or fixed interest securities or any similar
securities convertible into shares; nor will it invest in the securities
of other investment trusts or in unquoted companies.
Performance Analysis using Key Performance Indicators
At each quarterly Board meeting, the Directors consider a number of key
performance indicators ('KPIs') to assess the Group's success in achieving
its objectives, including the net asset value ('NAV'), the dividend per
share and the total ongoing charges.
· The Group's Consolidated Statement of Comprehensive Income is set out on
page 42.
· A total dividend for the year to 30 April 2019 of 11.47p (2018: 9.12p)
per Ordinary share has been declared to shareholders by way of three
payments totalling 6.57p per Ordinary share plus a fourth interim dividend
payment of 2.40p per Ordinary share and a special dividend of 2.50p per
Ordinary share.
· The NAV per Ordinary share at 30 April 2019 was 214.19p (2018: 249.61p).
· The ongoing charges (including investment management fees and other
expenses but excluding exceptional items) for the year ended 30 April 2019
were 1.95% (2018: 1.84%).
Principal Risks
The Directors confirm that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
objective, business model, future performance, solvency or liquidity. The
Board regularly considers the principal risks facing the Company. Mitigation
of these risks is sought and achieved in a number of ways as set out below:
Market risk
The Company is exposed to UK market risk due to fluctuations in the market
prices of its investments.
The Investment Manager actively monitors economic performance of investee
companies and reports regularly to the Board on a formal and informal basis.
The Board formally meets with the Investment Manager on a quarterly basis
when the portfolio transactions and performance are discussed and reviewed.
The Company is substantially dependent on the services of the Investment
Manager's investment team for the implementation of its investment
policy.The Company may hold a proportion of the portfolio in cash or cash
equivalent investments from time to time. Whilst during positive stock
market movements the portfolio may forego potential gains, during negative
market movements this may provide protection.
Discount volatility
The Board recognises that, as a closed ended company, it is in the long-term
interests of shareholders to reduce discount volatility and believes that
the prime driver of discounts over the longer term is performance. The
Board, with its advisers, monitors the Company's discount levels and shares
may be bought back should it be thought appropriate to do so by the Board.
Regulatory risks
A breach of Companies Act provisions and Financial Conduct Authority ('FCA')
rules may result in the Group's companies being liable to fines or the
suspension of either of the Group companies from listing and from trading on
the London Stock Exchange. The Board, with its advisers, monitors the Group
and SDVP's regulatory obligations both on an ongoing basis and at quarterly
Board meetings.
Financial risk
The financial position of the Group is reviewed in detail at each Board
meeting and monitored by the Audit Committee.
New developments in accounting standards and industry-related issues are
actively reported to and monitored by the Board and its advisers, ensuring
that appropriate accounting policies are adhered to.
A more detailed explanation of the financial risks facing the Group is given
in note 23 to the financial statements on pages 60 to 65.
Gearing
The Company's shares are geared by the Zero Dividend Preference shares and
should be regarded as carrying above average risk, since a positive NAV for
the Company's shareholders will be dependent upon the Company's assets being
sufficient to meet those prior final entitlements of the holders of Zero
Dividend Preference shares. As a consequence of the gearing, a decline in
the value of the Company's investment portfolio will result in a greater
percentage decline in the NAV of the Ordinary shares and vice versa.
Viability Statement
The Board reviews the performance and progress of the Company over various
time 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 three years is the most appropriate time horizon to
consider the Company's viability and, after careful analysis, the Directors
believe that the Company is viable over a three-year period. The following
facts support the Directors' view:
· The Company has a liquid investment portfolio invested predominantly in
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -4-
readily realisable smaller capitalised UK-listed and AIM traded securities
and has some short-term cash on deposit.
· Revenue expenses of the Company are covered multiple 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 the Board. The Directors also seek reassurance from service
providers, to whom all management and administrative functions are
delegated, that their operations are well managed and they are taking
appropriate action to monitor and mitigate risk. The Directors 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 the
assessment.
Other Statutory Information
Company status and business model
The Company was incorporated on 6 April 1999 and commenced trading on 12 May
1999. The Company is a closed-ended investment trust with registered number
03749536. Its capital structure consists of Ordinary shares of 25p each,
which are listed and traded on the main market of the London Stock Exchange.
The principal activity of the Company is to carry on business as an
investment trust. The Company has been granted approval from HMRC as an
investment trust under Sections 1158/1159 of the Corporation Tax Act 2010
('1158/1159') on an ongoing basis. The Company will be treated as an
investment trust company subject to there being no serious breaches of the
conditions for approval. The Company is also an investment company as
defined in Section 833 of the Companies Act 2006. The current portfolio of
the Company is such that its shares are eligible for inclusion in ISAs up to
the maximum annual subscription limit and the Directors expect this
eligibility to be maintained.
The Group financial statements consolidate the audited annual report and
financial statements of the Company and SDVP, its subsidiary undertakings,
for the year ended 30 April 2019. The Company owns 100% of the issued
ordinary share capital of SDVP, which was incorporated on 25 October 2017.
Further information on the capital structure of the Company and SDVP can be
found below.
AIFM
The Board is registered as a Small Registered Alternative Investment Fund
Manager ('AIFM') with the FCA and all required returns have been completed
and filed.
Employees, environmental, human rights and community issues
The Board recognises the requirement under Section 414C of the Companies Act
to detail information about employees, environmental, human rights and
community issues, including information about any policies it has in
relation to these matters and the effectiveness of these policies. These
requirements and the requirements of the Modern Slavery Act 2015 do not
apply to the Company as it has no employees and no physical assets, all the
Directors are non-executive and it has outsourced all its management and
administrative functions to third-party service providers. The Company has
therefore not reported further in respect of these provisions. However, in
carrying out its activities and in relationships with service providers, the
Company aims to conduct itself responsibly, ethically and fairly.
Current and future developments
A review of the main features of the year and the outlook for the Company
are contained in the Chairman's Statement and the Investment Manager's
Report.
Dividends declared/paid
Payment date 30 April 2019 30 April 2018
First interim 2 October 2018 2.19 2.02
Second interim 2 January 2019 2.19 2.02
Third interim 3 April 2019 2.19 2.02
Fourth interim 11 July 2019 2.40 2.40
8.97 8.46
Special dividend 11 July 2019 2.50 0.66
11.47 9.12
The Directors have not recommended a final dividend in respect of the year
ended 30 April 2019.
Ten year dividend history
2019 2018 2017 2016 2015 2014 2013 2012 2011 2010
p p p p p p p p p p
1st 2.19 2.02 1.85 1.70 1.575 1.475 1.40 1.35 1.30 1.25
Quarter
2nd 2.19 2.02 1.85 1.70 1.575 1.475 1.40 1.35 1.30 1.25
Quarter
3rd 2.19 2.02 1.85 1.70 1.575 1.475 1.40 1.35 1.30 1.25
Quarter
6.57 6.06 5.55 5.10 4.725 4.425 4.20 4.05 3.90 3.75
4th 2.40 2.40 2.40 2.40 2.40 2.40 2.40 2.35 2.30 2.25
Quarter
8.97 8.46 7.95 7.50 7.125 6.825 6.60 6.40 6.20 6.00
% 6.03 6.47 6.00 5.26 4.40 3.41 3.12 3.23 3.33 -
increas
e of
core
dividen
d
Special 2.50 0.66 1.86 1.60 0.300 2.750 - - - -
dividen
d
Total 11.47 9.12 9.81 9.10 7.425 9.575 6.60 6.40 6.20 6.00
dividen
d
Diversity
The Board of Directors of the Company comprised four male Directors in the
year to 30 April 2019. The Board recognises the benefits of diversity in
future appointments to the Board; however, the key criteria for the
appointment of new Directors will be the appropriate skills and experience
in the interests of shareholder value. The Directors are satisfied that the
Board currently contains members with an appropriate breadth of skills and
experience.
The Strategic Report is signed on behalf of the Board by
Lord Lamont of Lerwick
Chairman
10 July 2019
Directors
The Rt Hon. Lord Lamont of Lerwick*+ (Chairman) was Chancellor of the
Exchequer between 1990 and 1993. Prior to that appointment, Lord Lamont was
Chief Secretary to the Treasury between 1989 and 1990. Following his
retirement as a Member of Parliament in 1997, he has held numerous positions
as a director of various organisations and funds, including NM Rothschild
and Sons Limited. He is an adviser to Stanhope Capital and a director of
Jupiter European Opportunities Trust plc.
Lord Lamont was appointed to the Board on 27 February 2006.
William van Heesewijk began his career with Lloyds Bank International in
1981, working for both the merchant banking and investment management arms.
He has been involved in the investment trust industry since 1987 in various
capacities. During his tenure with Fidelity Investments International,
Gartmore Investment Management PLC, BFS Investments PLC and Chelverton, he
managed several launches of onshore and offshore investment funds, including
a number of roll-overs and reconstructions involving complex capital
structures and across several geographic regions. His roles involved
business development, project management, sales compliance and marketing. He
was a member of the Association of Investment Companies Managers forum.
Mr van Heesewijk was appointed to the Board on 1 December 2005.
Howard Myles*+ was a partner in Ernst & Young from 2001 to 2007 and was
responsible for the Investment Funds Corporate Advisory Team. He was
previously with UBS Warburg from 1987 to 2001. Mr Myles began his career in
stockbroking in 1971 as an equity salesman and in 1975 joined Touche Ross &
Co, where he qualified as a chartered accountant. In 1978 he joined W
Greenwell & Co in the corporate broking team and in 1987 moved to SG Warburg
Securities, where he was involved in a wide range of commercial and
industrial transactions in addition to leading Warburg's corporate finance
function for investment funds. He is now a non-executive director of Baker
Steel Resources Trust Limited, JPMorgan Brazil Investment Trust PLC, The
Forest Company Limited and BBGI SICAV S.A.
Mr Myles was appointed to the Board on 15 March 2011. He became Chairman of
the Audit Committee on 15 June 2016.
Andrew Watkins*+ has a wealth of experience in the investment trust industry
across many sectors since the early 1990s. He has over 25 years' experience
in various senior roles with Invesco Perpetual, Jupiter and Flemings and has
served as an NED on the Board of an asset management company and the KI
Financials Master Fund, a Hedge Fund-of-Funds. He is currently a
non-executive director of F&C UK High Income Trust PLC.
Mr Watkins was appointed to the Board on 6 September 2018.
* Independent
+ Audit Committee member
Investment Manager, Secretary, Custodian and Registrar
Investment Manager: Chelverton Asset Management Limited ('Chelverton')
Chelverton was formed in 1998 by David Horner, who has considerable
experience of analysing investments and working with smaller companies.
Chelverton is predominantly owned by its employees.
Chelverton is a specialist fund manager focused on UK mid and small
companies and has a successful track record. At 30 April 2019, Chelverton
had total funds under management of approximately GBP1,080 million including
two investment trust companies and three OEICs. The fund management team
comprises David Horner, David Taylor, Edward Booth and James Baker.
Chelverton is authorised and regulated by the FCA.
Administrator and Corporate Secretary: Maitland Administration Services
Limited
Maitland Administration Services Limited provides company secretarial and
administrative services for the Group. The Maitland group provides
administration and regulatory oversight solutions for a wide range of
investment companies.
Custodian: Jarvis Investment Management Limited
Established for over 30 years, Jarvis Investment Management Limited offers a
wide range of administration services and solutions, including custody
services.
Registrar: Share Registrars Limited
Share Registrars Limited is a CREST registrar established in 2004 and
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -5-
provides share registration services to over 220 client companies.
Directors' Report
The Directors present their Annual Report and financial statements for the
Group and the Company for the year ended 30 April 2019.
Directors
The Directors who served during the year ended 30 April 2019 are listed on
page 15. None of the Directors nor any persons connected with them had a
material interest in any of the Company's transactions, arrangements or
agreements during the year, except Mr van Heesewijk, who by virtue of his
employment (until March 2019) with Chelverton during the year is interested
in the Investment Management Agreement. None of the Directors has or has had
any interest in any transaction which is or was unusual in its nature or
conditions or significant to the business of the Company, and which was
effected by the Company during the current financial year. There have been
no loans or guarantees from the Company or its subsidiary undertakings, to
any Director at any time during the year or thereafter.
Corporate Governance
A formal statement on Corporate Governance and the Company compliance with
the UK Corporate Governance Code and the AIC on Corporate Governance can be
found below.
Management agreements
The Company's investments are managed by Chelverton Asset Management Limited
under an agreement ('the Investment Management Agreement') dated 30 April
2006 (effective from 1 December 2005). A periodic fee is payable quarterly
in arrears at an annual rate of 1% of the value of the gross assets under
management of the Company.
The Investment Management Agreement may be terminated by 12 months' written
notice. There are no additional arrangements in place for compensation
beyond the notice period.
Under another agreement ('the Administration Agreement') dated 1 January
2016, company secretarial services and the general administration of the
Group are undertaken by Maitland Administration Services Limited
('Maitland'). Their fee is subject to review at intervals of not less than
three years. The Administration Agreement may be terminated by six months'
written notice.
It is the Directors' opinion that the continuing appointment of the
Investment Manager and the Administrator/Secretary on the terms agreed is in
the best interests of the Group and its shareholders. The Directors are
satisfied that Chelverton has the required skill and expertise to continue
successfully to manage the Group's assets, and is satisfied with the
services provided by Maitland.
Dividends
Details of the dividends declared and paid by the Board are set out in the
Strategic Report.
Directors' indemnification and insurance
The Company's Articles of Association provide that, insofar as permitted by
law, every Director shall be indemnified by the Company against all costs,
charges, expenses, losses or liabilities incurred in the execution and
discharge of the Directors' duties, powers or office. The Company has
arranged appropriate insurance cover in respect of legal action against its
Directors. This cover was in place during the year and also to the date of
signing this report.
Substantial shareholdings
The Directors have been informed of the following notifiable interests in
the voting shares of the Company at 30 April 2019:
Ordinary shares Number of shares % of voting rights
Integrated Financial 1,021,264 5%
Arrangements Limited
The Company has not been notified of any changes to the above holdings
between 30 April 2019 and the date of this report.
Special business at the Annual General Meeting
The Company's AGM will be held at 11.00 am on Thursday 5 September 2019. The
Notice of Meeting is set out below.
In addition to the ordinary business of the meeting, there are a number of
items of special business, as follows:
Authority to issue shares and disapply pre-emption rights
An Ordinary Resolution was passed at the last AGM held on 6 September 2018
giving Directors authority, pursuant to Section 551 of the Companies Act
2006, to allot Ordinary shares up to an aggregate nominal value equal to
GBP1,445,833 (which figure represented one-third of the issued share capital
of the Company). This authority expires at the conclusion of the next AGM.
The Directors are seeking renewal, pursuant to Section 551 of the Companies
Act 2006, to allot up to an aggregate nominal value equal to GBP1,737,500,
being one-third of the Ordinary shares in issue at the date of this report,
as set out in Resolution 7 in the Notice of Meeting. This authority will
expire at the AGM to be held in 2020 or 15 months from the passing of the
Resolution, whichever is earlier.
A Special Resolution was also passed on 6 September 2018 giving the
Directors power to issue Ordinary shares for cash notwithstanding the
pre-emption provisions of the Companies Act 2006 and permitting the
Directors to issue shares without being required to offer them to existing
shareholders in proportion to their current holdings. This power expires at
the conclusion of the next AGM and the Directors are seeking its renewal,
pursuant to Sections 570 and 573 of the Companies Act 2006, to enable the
Directors to issue up to 10% of the issued Ordinary share capital,
representing 2,085,000 Ordinary shares at the date of this report, as set
out in the Notice of Meeting as Resolution 8.
This authority will also cover the sale of shares held in Treasury, and will
expire at the AGM to be held in 2020 or 15 months from the passing of the
Resolution, whichever is earlier. The authorities to issue shares will only
be used when it would be in the interests of shareholders as a whole. The
Directors do not currently intend to issue or sell shares from Treasury
other than above the prevailing NAV.
Purchase of own shares
At the AGM held on 6 September 2018 the Directors were granted the authority
to buy back in the market up to 14.99% of the Company's Ordinary shares in
circulation at that date for cancellation or placing into Treasury. No
shares have been purchased under this authority, which remains in force.
Resolution 9 as set out in the Notice of Meeting will renew this authority
for up to 14.99% of the current issued Ordinary share capital in
circulation, which represents 3,125,415 Ordinary shares at the date of this
report. The Directors do not intend to use the authority to purchase the
Company's shares unless to do so would result in an increase in the net
asset value per share for the remaining shareholders and would generally be
in the interests of all shareholders. The authority, if given, will lapse at
the AGM to be held in 2020 or 15 months from the passing of this Resolution,
whichever is earlier.
Purchases will be made on the open market. The price paid for Ordinary
shares will not be less than 25p and not more than the higher of (i) 5%
above the average of the middle market quotations (as derived from the Daily
Official List of the London Stock Exchange) of the Ordinary shares for the
five business days immediately preceding the date on which the Ordinary
share is purchased, and (ii) the higher of the price of the last independent
trade and the current highest independent bid on the London Stock Exchange.
Shares may be cancelled or placed in Treasury.
Pursuant to the loan agreement between the Company and SDVP, the Company
will not purchase any of its Ordinary shares out of capital reserves unless
the cover for the final redemption value of the Zero Dividend Preference
shares is at least 1.9 times after the purchase.
Notice period for general meetings
Resolution 10 is a Special Resolution that will give the Directors the
ability to convene general meetings, other than Annual General Meetings, on
a minimum of 14 clear days' notice. The minimum notice period for annual
general meetings will remain at 21 clear days. The approval will be
effective until the Company's Annual General Meeting to be held in 2020, at
which it is intended that renewal will be sought. The Company will have to
offer facilities for all shareholders to vote by electronic means for any
general meeting convened on 14 days' notice. The Directors will only call a
general meeting on 14 days' notice where they consider it to be in the
interests of shareholders to do so and the relevant matter is required to be
dealt with expediently.
Recommendation
The Board considers that the Resolutions to be proposed at the AGM are in
the best interests of shareholders as a whole and the Company and,
accordingly, recommends that shareholders vote in favour of each Resolution,
as the Directors intend to do in respect of their own beneficial
shareholdings representing approximately 0.9% of the issued share capital.
Company information
The following information is disclosed in accordance with the Companies Act
2006:
· The Group's capital structure and voting rights are summarised below.
· Details of the substantial shareholders in the Company are listed above.
· The rules concerning the appointment and replacement of Directors are
contained in the Company's Articles of Association.
· The Articles of Association can be amended by the passing of a Special
Resolution of the members in a General Meeting.
· Amendment of the Articles of Association and the giving of powers to
issue or buy back the Company's shares require the relevant Resolution to
be passed by shareholders. The Board's current powers to issue or buy back
shares and proposals for their renewal are detailed above.
· There are no restrictions concerning the transfer of securities in the
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -6-
Company; no restrictions on voting rights; no special rights with regard
to control attached to securities; no agreements between holders of
securities regarding their transfer known to the Company; and no
agreements which the Company is party to that might affect its control
following a successful takeover bid.
· Consideration of likely future developments is detailed in the Strategic
Report.
SDVP Annual General Meeting
The SDVP's AGM will be held on Thursday 5 September 2019 following the
Company's AGM. The Notice of Meeting is set out in the SDVP Annual Report.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position, are described in the
Chairman's Statement on pages 2 and 3 and in the Investment Manager's Report
on pages 4 to 9. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the financial
statements. In addition, note 23 on pages 60 to 65 to the financial
statements sets out the Group's objectives, policies and processes for
managing its capital; its financial risk management objectives; details of
its financial instruments; and its exposure to credit risk and liquidity
risk. The Group has adequate financial resources and, as a consequence, the
Directors believe that the Group is well placed to manage its business risks
successfully and it is appropriate to adopt the going concern basis.
Global greenhouse gas emissions
The Company has no greenhouse gas emissions to report from its operations,
nor does it have responsibility for any other emission-producing sources
under the Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013.
Auditor
The Auditor, Hazlewoods LLP, has indicated its willingness to continue in
office and Resolution 6 proposing its re-appointment and authorising the
Directors to determine its remuneration for the ensuing year will be
submitted at the AGM.
The Directors who were in office on the date of approval of these financial
statements have confirmed, as far as they are each aware, that there is no
relevant audit information of which the Auditor is unaware. Each of the
Directors has confirmed that they have taken all the steps that they ought
to have taken as Directors in order to make themselves aware of any relevant
audit information and to establish that it has been communicated to the
Auditor.
On behalf of the Board
Lord Lamont of Lerwick
Chairman
10 July 2019
Statement on Corporate Governance
The Company is committed to maintaining high standards of corporate
governance and the Directors are accountable to shareholders for the
governance of the Group's affairs.
Statement of compliance with the UK Corporate Governance Code ('the
Governance Code')
The Directors have reviewed the detailed principles outlined in the
Governance Code and confirm that, to the extent that they are relevant to
the Company's business, they have complied with the provisions of the
Governance Code throughout the year ended 30 April 2019 except as explained
in this section as being non-compliant and that the Company's current
practice is in all material respects consistent with the principles of the
Governance Code.
The Board also confirms that, to the best of its knowledge and
understanding, procedures were in place to meet the requirements of the
Governance Code relating to internal controls throughout the year under
review. This statement describes how the principles of the Governance Code
have been applied in the affairs of the Company.
As an investment trust, the Company has also taken into account the Code of
Corporate Governance produced by the Association of Investment Companies
('the AIC Code'), which is intended as a framework of best practice
specifically for AIC member companies.
The AIC Code, as explained by the AIC Corporate Governance Guide ('the AIC
Guide'), addresses all the principles set out in the Governance Code, and
there are some areas where the AIC Code is more flexible than the Governance
Code. The Board has taken steps to adhere to its principles for investment
companies and follow the recommendations in the AIC Code where it believes
they are appropriate.
A copy of the AIC Code and the AIC Guide can be obtained via the AIC
website, www.theaic.co.uk [1], and a copy of the Governance Code can be
obtained at www.frc.org.uk [2].
The Company has not complied with the following provisions of the Governance
Code:
· owing to the size of the Board, it is felt inappropriate to appoint a
senior independent non-executive Director.
· as the Group has no staff, other than Directors, there are no procedures
in place in relation to whistle-blowing. The Board has satisfied itself
there are appropriate whistle-blowing procedures in place at its service
providers.
Board responsibilities and relationship with Investment Manager
The Board is responsible for the investment policy and strategic and
operational decisions of the Group and for ensuring that the Group is run in
accordance with all regulatory and statutory requirements. These procedures
have been formalised in a schedule of matters reserved for decision by the
Board. These matters include:
· the maintenance of clear investment objectives and risk management
policies, changes to which require Board approval;
· the monitoring of the business activities of the Group, including
investment performance and annual budgeting; and
· review of matters delegated to the Investment Manager, Administrator,
Custodian or Secretary.
The Group's day-to-day functions have been delegated to a number of service
providers, each engaged under separate legal agreements. At each Board
meeting the Directors follow a formal agenda prepared and circulated in
advance of the meeting by the Company Secretary to review the Group's
investments and all other important issues, such as asset allocation,
gearing policy, corporate strategic issues, cash management, peer group
performance, marketing and shareholder relations, investment outlook and
revenue forecasts, to ensure that control is maintained over the Group's
affairs. The Board regularly considers its overall strategy.
The management of the Group's assets is delegated to Chelverton. At each
Board meeting, representatives of Chelverton are in attendance to present
verbal and written reports covering its activity, portfolio composition and
investment performance over the preceding period. Ongoing communication with
the Board is maintained between formal meetings. The Investment Manager
ensures that Directors have timely access to all relevant management and
financial information to enable informed decisions to be made and contacts
the Board as required for specific guidance. The Company Secretary and
Investment Manager prepare briefing notes for Board consideration on matters
of relevance, for example changes to the Group's economic and financial
environment, statutory and regulatory changes and corporate governance best
practice.
Board membership
At the year end the Board consisted of four Directors, all of whom are
non-executive. The Group has no employees. The Board seeks to ensure that it
has the appropriate balance of skills, experience and length of service
amongst its members. The Board's policy on tenure is that Directors can
stand for more than nine years. The Board considers that length of service
does not necessarily compromise the independence or contribution of
directors of investment trust companies where experience and continuity can
be a significant strength. The Directors possess a wide range of business
and financial expertise relevant to the direction of the Group and Company
and consider that they commit sufficient time to the Group and Company's
affairs. On appointment to the Board, Directors are fully briefed as to
their responsibilities by the Chairman, the Investment Manager and the
Company Secretary. Brief biographical details of the Directors can be found
above.
The Directors meet at regular Board meetings, held at least four times a
year, and additional meetings and telephone meetings are arranged as
necessary. During the year to 30 April 2019 the Board met six times and all
Directors were present at all Board meetings.
Board effectiveness
The Board conducts an annual review of the performance of the Board, its
Committees and the Directors. The Board is satisfied from the results of its
last evaluation that the Board, its Committees and Directors function
effectively, collectively and individually and that the Board contains an
appropriate balance of skills and experience to effectively manage the
Company.
Chairman
The Chairman, Lord Lamont, is independent. He has shown himself to have
sufficient time to commit to the Group's affairs. The Company does not have
a chief executive officer, as it has no executive directors. The Chairman
has no relationships that may create a conflict of interest between the
Chairman's interest and those of the shareholders. The Chairman does not sit
on the Board of any other investment company managed by Chelverton.
Directors' independence
In accordance with the Listing Rules for investment entities, the Board has
reviewed the status of its individual Directors and the Board as a whole.
The Governance Code requires that this report should identify each
non-executive Director the Board considers to be independent in character
and judgement and whether there are relationships or circumstances which are
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -7-
likely to affect, or could appear to affect, the Director's judgement,
stating its reasons if it determines that a Director is independent
notwithstanding the existence of relationships or circumstances which may
appear relevant to its determination.
Mr Myles and Mr Watkins are deemed to be independent of the Investment
Manager. Despite being on the Board for over nine years, the Board believes
Lord Lamont is also independent. They all continue to perform their roles
effectively. Mr van Heesewijk was not deemed independent during most of the
year by virtue of his employment with Chelverton. Following his departure
from Chelverton in March 2019 and in accordance with the Listing Rules he is
now an independent director. The Board members are therefore now all
independent.
Under the Articles of Association, one-third of Directors will retire by
rotation at each AGM and no Director shall serve a term of more than three
years before re-election, in accordance with corporate governance
principles. The Board has reviewed the appointment of those Directors
retiring at the forthcoming AGM. In accordance with the Governance and AIC
Codes, Lord Lamont will offer himself for re-election (and do so on an
annual basis), having served on the Board for over nine years. Mr van
Heesewijk as a non-independent Director will also stand for re-election. The
Board recommends that shareholders vote for the re-election of Lord Lamont,
Mr van Heesewijk and Mr Watkins, as it believes their contributions to the
Board to be effective, that they demonstrate commitment to their roles as
non-executive Directors of the Company and have actively contributed
throughout the year.
Senior Independent Director
No separate Senior Independent Director has been appointed to the Board as,
in the view of the Directors, it is inappropriate to do so given the size
and composition of the Board. All the Directors make themselves available to
shareholders at general meetings of the Company. The Directors can be
contacted at other times via the Company Secretary.
Audit Committee
The Audit Committee comprises the independent Directors. The Committee met
twice during the year ended 30 April 2019, with Mr Myles as Chairman. All
members of the Committee were present at both meetings. The Audit Committee
has direct access to the Group's Auditor, Hazlewoods LLP, and
representatives of Hazlewoods LLP attend the year end Audit Committee
meeting.
The primary responsibilities of the Audit Committee are: to review the
effectiveness of the internal control environment of the Group and monitor
adherence to best practice in corporate governance; to make recommendations
to the Board in relation to the re-appointment of the Auditor and to approve
their remuneration and terms of engagement; to review and monitor the
Auditor's independence and objectivity and the scope and effectiveness of
the audit process and to provide a forum through which the Group's Auditor
reports to the Board. The Audit Committee also has responsibility for
monitoring the integrity of the financial statements and accounting policies
of the Group and for reviewing the Group's financial reporting and internal
control policies and procedures. Committee members consider that,
individually and collectively, they are appropriately experienced in
accounting and audit processes to fulfil the role required.
Management Engagement Committee
The functions performed by this type of Committee are carried out by the
Board of the Company.
The Board reviewed the performance of the Investment Manager's obligations
under the Investment Management Agreement. Based on this performance, the
Board decided that the Investment Manager's appointment should continue. It
also reviewed the performance of the Company Secretary, the Custodian and
the Registrar and matters concerning their respective agreements with the
Company.
Nominations Committee
The functions performed by this type of Committee are carried out by the
Board of the Company.
The Board evaluated the performance of Directors and the Chairman for the
year ended 30 April 2019. As a result of the evaluation, the Board remains
of the opinion that all Directors contribute effectively and have the skills
and experience relevant to the leadership and direction of the Company. The
Board also recommended the re-appointment of those Directors standing for
re-election at the Annual General Meeting.
Remuneration Committee
The functions performed by this type of Committee are carried out by the
Board of the Company.
The Board assessed the Directors' fees, following proper consideration of
the role that individual Directors fulfil in respect of Board and Committee
responsibilities, the time committed to the Group's affairs and remuneration
levels generally within the investment trust sector.
Under the Listing Rules, the Governance Code principles relating to
directors' remuneration do not apply to an investment trust company other
than to the extent that they relate specifically to non-executive directors.
Detailed information on the remuneration arrangements can be found in the
Directors' Remuneration Report on pages 30 to 32 and in note 5 to the
financial statements.
Independent professional advice
The Board has formalised arrangements under which the Directors, in the
furtherance of their duties, may take independent professional advice at the
Company's expense.
Institutional investors - use of voting rights
The Investment Manager, in the absence of explicit instruction from the
Board, is empowered to exercise discretion in the use of the Company's
voting rights.
Conflicts of interest
It is the responsibility of each individual Director to avoid an
unauthorised conflict arising. He must notify and request authorisation from
the Board as soon as he becomes aware of the possibility of a conflict
arising.
The Board is responsible for considering Directors' requests for
authorisation of conflicts and for deciding whether or not the conflict
should be authorised. The factors to be considered will include whether the
conflict could prevent the Director from properly performing his duties,
whether it has, or could have, any impact on the Group and whether it could
be regarded as likely to affect the judgement and/or actions of the Director
in question. When the Board is deciding whether to authorise a conflict or
potential conflict, only Directors who have no interest in the matter being
considered are able to take the relevant decision, and in taking the
decision the Directors must act in a way they consider, in good faith, will
be most likely to promote the Group's success. The Directors are able to
impose limits or conditions when giving authorisation if they think this is
appropriate in the circumstances.
A register of conflicts is maintained by the Company Secretary and is
reviewed at Board meetings, to ensure that any authorised conflicts remain
appropriate. Directors are required to confirm at these meetings whether
there has been any change to their position.
Internal control review
The Board is responsible for establishing and maintaining the Group's
systems of internal control and for reviewing their effectiveness.
An ongoing process, in accordance with the guidance supplied by the
Financial Reporting Council, 'Guidance on Risk Management, Internal Control
and Related Financial and Business Reporting', is in place for identifying,
evaluating and managing risks faced by the Company and the Group. The
Company's risks are documented and evaluated using a risk register. This
register is reviewed regularly by Directors to ensure appropriate risk
mitigation actions are in place. This process helps to ensure that the Board
maintains a sound system of internal control to safeguard shareholders'
investments and the Group's assets. This process also involves a review by
Directors of reports on the internal control systems of the service
providers who perform all the Company's administrative and managerial
functions. As described below, this process, together with key procedures
established with a view to providing effective financial control, have been
in place for the full financial year and up to the date the financial
statements were approved.
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, rather than absolute, assurance against material misstatement or
loss. No significant failings or weaknesses have been identified.
Internal control assessment process
Risk assessment and the review of internal controls is undertaken by the
Board in the context of the Group's overall investment objective. The review
covers the key business, operational, compliance and financial risks facing
the Company. In arriving at its judgement of what risks the Company faces,
the Board has considered the Company's operations in the light of the
following factors:
· the threat of such risks becoming a reality;
· the Company's ability to reduce the incidence and impact of risk on its
performance;
· the cost to the Company and benefits related to the review of risk and
associated controls of the Group; and
· the extent to which third parties operate the relevant controls.
Against this background the Board has split the review into four sections
reflecting the nature of the risks being addressed. The sections are as
follows:
· corporate strategy;
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -8-
· published information and compliance with laws and regulations;
· relationship with service providers; and
· investment and business activities.
Given the nature of the Company's activities and the fact that most
functions are subcontracted, the Group does not have an internal audit
function. The Directors have obtained information from key third-party
suppliers regarding the controls operated by them. To enable the Board to
make an appropriate risk and control assessment, the information and
assurances sought from third parties include the following:
· details of the control environment;
· identification and evaluation of risks and control objectives;
· assessment of the communication procedures; and
· assessment of the control procedures.
The key procedures which have been established to provide effective internal
financial controls are as follows:
· Investment management is provided by Chelverton. The Board is
responsible for the implementation of the overall investment policy and
monitors the actions of the Investment Manager at regular Board meetings.
· The provision of administration, accounting and company secretarial
duties is the responsibility of Maitland Administration Services Limited.
· Custody of assets is undertaken by Jarvis Investment Management Limited.
· The duties of investment management, accounting and custody of assets
are segregated. The procedures of the individual parties are designed to
complement one another.* The non-executive Directors of the Group clearly
define the duties and responsibilities of their agents and advisers in the
terms of their contracts. The appointment of agents and advisers is
conducted by the Board after consideration of the quality of the parties
involved; the Board, via the Management Engagement Committee, monitors
their ongoing performance and contractual arrangements.
· Mandates for authorisation of investment transactions and expense
payments are set by the Board.
· The Board reviews detailed financial information provided by the
Administrator on a regular basis.
Company Secretary
The Board has direct access to the advice and services of the Company
Secretary, Maitland Administration Service Limited, which is responsible for
ensuring that Board and Committee procedures are followed and that
applicable regulations are complied with. The Secretary is also responsible
to the Board for ensuring timely delivery of information and reports and
that the statutory obligations of the Group are met.
Dialogue with shareholders
Communication with shareholders is given a high priority by both the Board
and the Investment Manager and all Directors are available to enter into
dialogue with shareholders at any time. Major shareholders of the Group have
the opportunity to meet with the independent non-executive Directors of the
Board in order to ensure that their views are understood. All shareholders
are encouraged to attend the AGM, during which the Board and the Investment
Manager are available to discuss issues affecting the Group and shareholders
have the opportunity to address questions to the Investment Manager, the
Board and the Chairmen of the Board's standing committees.
There are no significant issues raised by major shareholders to bring to all
shareholders' attention, topics of interest are covered in the Strategic
Report on pages 1 to 13.
Any shareholder who would like to lodge questions in advance of the AGM is
invited to do so either on the reverse of the Proxy Form or in writing to
the Company Secretary at the address given on page 72. The Company always
responds to letters from individual shareholders.
The Annual and Half Yearly Reports of the Group are prepared by the Board
and its advisers to present a full and readily understandable review of the
Group's performance. Copies are available for downloading from the
Investment Manager's website www.chelvertonam.com [3] and on request from
the Company Secretary on 01245 398950. Copies of the Annual Report are
mailed to shareholders.
Audit Committee Report
Role of the Committee
The Audit Committee ('the Committee') provides a forum through which the
Group's Auditor reports to the Board. The Committee is responsible for
monitoring the process of production and ensuring the integrity of the
Group's financial statements. The other primary responsibilities of the
Committee are:
· to monitor adherence to best practice in corporate governance;
· to review the effectiveness of the internal control and risk management
environment of the Group;
· to receive compliance reports from the Investment Manager;
· to consider the accounting policies of the Group;
· to make recommendations to the Board in relation to the re-appointment
of the Auditor;
· to make recommendations to the Board in relation to the Auditors'
remuneration and terms of engagement; and
· to review and monitor the Auditor's independence and objectivity and the
effectiveness of the audit process.
Matters considered in the year
The Committee met twice during the financial year to consider the financial
statements and to review the internal control systems. The principal matters
considered by the Committee were the valuation of the Group's assets, proof
of ownership of its investments and cash, and the maintenance of its
approval as an investment trust.
The Manager and Administrator have reported to the Committee to confirm
continuing compliance with their individual regulatory requirements and for
maintaining the Company's investment trust status. These were also reviewed
by the Auditor as part of the audit process.
The Committee liaised with the appointed Investment Manager, Chelverton
Investment Management Limited, throughout the year, and received reports on
their legal compliance. A Risk Assessment and Review of Internal Controls
document maintained by the Board was considered in detail and amended as
necessary. This document is reviewed by the Committee at each meeting.
Internal audit
The Group does not have an internal audit function, as most of its
day-to-day operations are delegated to third parties, all of whom have their
own internal control procedures. The Committee discussed whether it would be
appropriate to establish an internal audit function, and agreed that the
existing system of monitoring and reporting by third parties remains
appropriate and sufficient. The need for an internal audit function is
reviewed annually.
External audit
The Audit Committee monitors and reviews the effectiveness of the external
third-party service providers, audit process for the publication of the
Annual Report and makes recommendations to the Board on the re-appointment,
remuneration and terms of engagement of the Auditors.
Prior to each Annual Report being published, the Committee considers the
appropriateness of the scope of the audit plan, the terms under which the
audit is to be conducted, as well as the matter of remuneration, with a view
to ensuring the best interests of the Group are promoted.
Audit fees are computed on the basis of the time spent on Group affairs by
the Audit partners and staff and on the levels of skill and responsibility
of those involved.
Hazlewoods LLP was first appointed as Auditor to the Group on 2 May 2007. As
part of its review of the continuing appointment of the Auditor, the
Committee considers the length of tenure of the audit firm, its fees and
independence, along with any matters raised during each audit. The Committee
has discussed with Hazlewoods LLP its objectivity, independence and
experience in the investment trust sector.
The Committee has recommended the re-appointment of Hazlewoods LLP on each
occasion since their initial appointment. The audit was put out to tender in
2017, and, as a result of that process, the Committee recommended to the
Board, and the Board approved, the re-appointment of Hazlewoods LLP. The
Senior Statutory Auditor for the Group has been rotated twice since the
initial appointment, most recently in respect of the financial year ended 30
April 2018.
Hazlewoods LLP has indicated its willingness to continue in office as
Auditor of the Group. Following its review, the Committee considers that,
individually and collectively, the Auditor is appropriately experienced to
fulfil the role required, and have recommended its re-appointment to the
Board. A resolution for its reappointment will be proposed at the
forthcoming Annual General Meeting.
The Committee has considered the independence and objectivity of the Auditor
and it is satisfied in these respects that Hazlewoods LLP has fulfilled its
obligations to the Group and its shareholders. During the year, Hazlewoods
provided tax compliance services to the Group. These were not provided by
the audit team and the fee is not significant (refer to note 4 on page 50).
No other non-audit services were provided in the year. The Committee has
advised that, based on its assessment of their performance and independence,
Hazlewoods LLP has fulfilled its obligations to the Group and its
shareholders.
I intend to be present at the Annual General Meeting to address any
questions from shareholders relating to the financial statements.
Howard Myles
Audit Committee
Chairman
10 July 2019
Directors' Remuneration Report
The Board has prepared this Report in accordance with the requirements of
Schedule 8 to the Large and Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013. The law requires the Group's Auditor,
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -9-
Hazlewoods LLP, to audit certain disclosures provided. Where disclosures
have been audited, they are indicated as such. The Auditor's opinion is
included in their report on pages 35 to 40.
Last year, shareholders were asked to approve the Directors' Remuneration
Report at the Annual General Meeting ('AGM') through an advisory vote, as
has been the case in previous years, and this will again be the case at the
next AGM. At the AGM held in 2018 shareholders were also asked to give a
binding vote on the Directors' Remuneration Policy. The Remuneration Policy
must be approved at least every three years.
An Ordinary Resolution to approve the Remuneration Report will be put to
shareholders at the forthcoming AGM on 5 September 2019.
The Board considers and approves Directors' remuneration. No major decisions
on or changes to Directors' remuneration have been made during the year
ended 30 April 2019. During the year ended 30 April 2019, the fees were
continued at a rate of GBP20,000 for the Chairman and GBP17,500 for other
Directors, with an additional payment of GBP2,500 to the Chairman of the Audit
Committee.
The Company's performance
The graph below compares the total return (assuming all dividends are
reinvested) to Ordinary shareholders, compared to the total shareholder
return of the MSCI UK Small Cap Index. Although the Company has no formal
benchmark, the MSCI UK Small Cap Index has been selected as it is considered
to represent a broad equity market index against which the performance of
the Company's assets may be adequately assessed.
Directors' service contracts
None of the Directors has a contract of service with the Company, nor has
there been any contract or arrangement between the Company and any Director
at any time during the year. The terms of their appointment provide that a
Director shall retire and be subject to re-election at the first Annual
General Meeting after their appointment, and at least every three years
after that. Directors who have served on the Board for more than nine years
must offer themselves for re-election on an annual basis.
Directors' entitlements
Directors are only entitled to fees in accordance with the Directors'
Remuneration Policy as approved by shareholders. None of the Directors has
any entitlement to pensions or pension-related benefits, medical or life
insurance, share options, long-term incentive plans, or any form of
performance-related pay. Also, no Director has any right to any payment by
way of monetary equivalent, or any assets of the Company except in their
capacity as shareholders. There is no notice period and no provision for
compensation upon loss of office. The Directors' emoluments table below
therefore does not include columns for any of these items or their monetary
equivalents.
Directors' emoluments for the year ended 30 April 2019 (audited)
The Directors who served in the year received the following emoluments
wholly in the form of fees:
Fees/Total
Year to 30 April 2019 Year to
30 April 2018
Lord Lamont (Chairman) 20,000 20,000
D Harris - retired 6 6,102 17,500
September 2018
H Myles 20,000 20,000
W van Heesewijk* - -
A Watkins - appointed 6 11,352 -
September 2018
57,454 57,500
* Mr van Heesewijk has
waived his entitlement to
fees.
During the year no Directors received taxable benefits (2018: same).
Directors' interests (audited)
The interests of the Directors and any connected persons in the Ordinary
shares and Zero Dividend Preference ('ZDP') shares of the subsidiary Company
are set out below:
Number of Number of Number of Number of
Ordinary ZDP shares Ordinary ZDP shares
shares held at shares held at
held at held at
Director 30 April 30 April 30 April 30 April
2019 2019 2018 2018
Lord Lamont 75,085 10,000 70,039 10,000
(Chairman)
W van 100,000 Nil 90,000 Nil
Heesewijk
H Myles Nil Nil Nil Nil
A Watkins 13,100 Nil n/a n/a
Significance of spend on pay
Change
2019 2018 %
Dividends paid to 2,008,000 1,857,000 8.13
Ordinary shareholders
in the year
Total remuneration paid 57,454 57,500 (0.08)
to Directors
None of the Directors nor any persons connected with them had a material
interest in the Company's transactions, arrangements or agreements during
the year.
The Directors' Remuneration Report for the year ended 30 April 2018
(Resolution 2) was approved by shareholders at the Annual General Meeting
held on 6 September 2018. The votes cast by proxy were as follows:
Number of votes % of votes cast
For 1,465,634 99.26
Against 11,000 0.74
Total votes cast 1,476,634
Number of votes abstained 16,959
Remuneration Policy
The Board's policy is that the remuneration of non-executive Directors
should be sufficient to attract and retain directors with suitable skills
and experience, and is determined in such a way as to reflect the experience
of the Board as a whole, in order to be comparable with other organisations
and appointments.
The fees of the non-executive Directors are determined within the limits of
GBP250,000, as set out in the Company's Articles of Association. The approval
of shareholders would be required to increase the limits set out in the
Articles of Association. Directors are not eligible for bonuses, pension
benefits, share options, long-term incentive schemes or other benefits, as
the Board does not consider such arrangements or benefits necessary or
appropriate. Fees for any new Director appointed will be made on the same
basis.
The Directors' Remuneration Policy (Resolution 6) was approved by
shareholders at the Annual General Meeting held on 6 September 2018. The
votes cast by proxy were as follows:
Number of votes % of votes cast
For 1,465,203 99.23
Against 11,431 0.77
Total votes cast 1,476,634
Number of votes abstained 16,959
Expected Fees for Fees for Year to
Year to 30 April 30 April 2019
2020
Chairman basic fee 20,000 20,000
Non-Executive Director 17,500 17,500
basic fee
Audit Committee Chairman 2,500 2,500
additional fee
The Company intends to continue with the Directors' Remuneration Policy over
the next financial year. Fees payable in respect of subsequent periods will
be determined following an annual review. Any views expressed by
shareholders on remuneration being paid to Directors would be taken into
consideration by the Board. In accordance with the regulations, an Ordinary
Resolution to approve the Directors' Remuneration Policy will be put to
shareholders at least once every three years.
Approval
The Directors' Remuneration Report was approved by the Board on 10 July
2019.
On behalf of the Board
Lord Lamont
Chairman
10 July 2019
Statement of Directors' Responsibilities
in respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the
financial statements. The Directors have elected to prepare financial
statements in accordance with International Financial Reporting Standards
('IFRSs') as adopted by the EU. Company law requires the Directors to
prepare such financial statements in accordance with IFRSs and the Companies
Act 2006.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they present fairly the financial position,
financial performance and cash flows of the Group and the Company for that
period.
In preparing each of the Group and the Company's financial statements, the
Directors are required to:
· select suitable accounting policies in accordance with International
Accounting Standard ('IAS') 8: 'Accounting Policies, Changes in Accounting
Estimates and Errors' and then apply them consistently;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with specific
requirements in IFRSs is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Group and the Company's financial position and financial performance;
· state that the Group and the Company have complied with IFRSs, as
adopted by the EU subject to any material departures disclosed and
explained in the financial statements; and
· make judgements and estimates that are reasonable and prudent.
The Directors are responsible for keeping adequate accounting records that
are sufficient to show and explain the Group's transactions and disclose
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -10-
with reasonable accuracy at any time the financial position of the Group and
enable them to ensure that the Group's 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 Group 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 Strategic Report, a Directors' Report, Directors' Remuneration
Report and Statement on Corporate Governance that comply with that law and
those regulations, and for ensuring that the Annual Report includes
information required by the Listing Rules of the FCA.
The Directors are responsible for the integrity of the information relating
to the Company on the Investment Manager's website. Legislation in the UK
governing the preparation and dissemination of financial statements differs
from legislation in other jurisdictions.
The Directors confirm that, to the best of their knowledge and belief:
· the financial statements, prepared in accordance with IFRSs as adopted
by the EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Group;
· the Annual Report includes a fair review of the development and
performance of the Group, together with a description of the principal
risks and uncertainties faced;
· the Annual Report is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
performance, business model and strategy; and
* the Investment Managers' Report includes a fair review of the development
and performance of the business and the Group and its undertakings included
in the consolidation taken as a whole and adequately describes the principal
risks and uncertainties they face.
On behalf of the Board of Directors
Lord Lamont of Lerwick
Chairman
10 July 2019
Independent Auditor's Report
to the members of Chelverton UK Dividend Trust PLC
Opinion
We have audited the financial statements of Chelverton UK Dividend Trust plc
(the 'Parent Company') and its subsidiaries (the 'Group') for the year ended
30 April 2019, which comprise the Consolidated Statement of Comprehensive
Income, the Consolidated and Parent Company Statement of Changes in Net
Equity, the Consolidated and Parent Company Balance Sheets, the Consolidated
and Parent Company Statement of Cash Flows and the related notes, including
a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards ('IFRSs') as adopted by the
European Union.
In our opinion, the financial statements:
· give a true and fair view of the state of the Group's and Parent
Company's affairs as at 30 April 2019 and of the Group's and the Parent
Company's loss for the year then ended;
· have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
· have been prepared in accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial statements, Article 4 of the
IAS Regulation.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the Group financial statements, the Group, in
addition to complying with its legal obligation to apply IFRSs as adopted by
the European Union, has also applied IFRSs as issued by the International
Accounting Standards Board (IASB).
In our opinion, the Group financial statements give a true and fair view of
the consolidated financial position of the Group as at 30 April 2019 and of
its consolidated financial performance and its consolidated cash flows for
the year then ended in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) ('ISAs (UK)') and applicable law. Our responsibilities under
those standards are further described in the Auditor's responsibilities for
the audit of the financial statements section of our report. We are
independent of the Group in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including
the FRC's Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and viability
statement
We have nothing to report in respect of the following information in the
annual report, in relation to which the ISAs (UK) require us to report to
you whether we have anything material to add or draw attention to:
· the disclosures in the annual report set out on pages 10 to 11 that
describe the principal risks and explain how they are being managed or
mitigated;
· the Directors' confirmation set out on page 10 in the annual report that
they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future
performance, solvency or liquidity;
· the Directors' statement set out on page 20 in the financial statements
about whether the Directors considered it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the
Directors' identification of any material uncertainties to the Group and
the Parent Company's ability to continue to do so over a period of at
least 12 months from the date of approval of the financial statements;
· whether the Directors' statement relating to going concern required
under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit; or
· the Directors' explanation set out on page 20 in the annual report as to
how they have assessed the prospects of the Group, 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
Group 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.
Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
The key audit matters identified were valuation, ownership and existence of
investments and the allocation of capital and revenue items. Revenue
recognition and management override of controls are always deemed risks in
any audit. This is not a complete list of all risks identified by our audit.
Audit Risk How we responded to the risk
Valuation, ownership and
existence of investments
The Group's business is to Our audit work included, but
invest predominantly in small was not restricted to:
capitalised UK companies, listed
on the Official List and
admitted to trading on AIM, to
achieve a high income and · understanding management's
opportunity for capital growth. process to recognise and
Accordingly, the investment measure quoted investments;
portfolio is a significant,
material balance in the · assessing whether the
financial statements. We Group's accounting policy for
therefore identified the valuation of quoted
valuation, ownership and investments is in accordance
existence of the investment with IAS 39;
portfolio as a risk that
requires particular audit · comparing quoted investment
attention. valuations to an independent
source of market prices;
· testing investment
additions and disposals to
contracts and bank
statements; and
· confirming investment
holdings to either third
party confirmations, direct
investee confirmations or
share certificates.
The Group's accounting policy
on valuation of investments is
shown in note 1 to the
financial statements and
related disclosures are
included in note 10. The Audit
Committee identified the
valuation and ownership of
investments as a significant
issue in its report on page 28,
where the Committee also
described the action that it
has taken to address this risk.
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -11-
Allocation of capital and
revenue items
The Group is required to Our audit work included, but
apportion its expenses between was not restricted to,
revenue and capital. This examining the historical trends
allocation is of the Company and assessing
whether the allocation of cost
between
important as the Group can only
pay dividends out
revenue and capital is fair and
reasonable.
of revenue reserves.
The split has to be performed on
the basis of 'the
Board's expected long-term split
of returns'.
Management override of controls
Under ISA 240 there is a Our audit work included, but
presumption that the risk was not restricted to:
of management override of · reviewing material
controls is always estimates, judgements and
present. decisions made by management;
and
· testing all material manual
journal entries.
The Group's accounting policies
in respect of material
estimates and judgements are
set out in note 1.
Revenue recognition
Under ISA 240 there is always a Our audit work included, but
presumed risk that revenue may was not restricted to:
be misstated due to the improper
recognition of revenue. In
particular we identified
completeness and occurrence of · assessing whether the
investment income as a risk that Group's accounting
requires particular audit
attention.
policy for revenue recognition
is in accordance
with IAS 18 'Revenue';
· obtaining an understanding
of management's process to
recognise revenue in
accordance with the stated
accounting policy;
· testing income transactions
by comparing
dividends during the year
obtained from an independent
source with those recognised
by the group;
· testing gains and losses on
investments to third party
contracts;
· performing cut-off testing
of dividend income around the
year end; and
· checking the classification
of special dividends as
either revenue or capital
receipts.
The accounting policy on
income, including its
recognition, in shown in note 1
to the financial statements and
the components of that income
are included in note 2.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of any identified misstatements and in forming our
opinion. For the purpose of determining whether the financial statements are
free from material misstatement, we define materiality as the magnitude of
an omission or misstatement that, individually or in the aggregate, could
reasonably be expected to influence the economic decisions of the users of
the financial statements. We also determine a level of performance
materiality, which we use to determine the extent of testing needed, to
reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
We established materiality for the financial statements as a whole to be
GBP620,000, which is 1% of the value of the Group's net assets. For income and
expenditure items we determined that misstatements of lesser amounts than
materiality for the financial statements as a whole would make it probable
that the economic decisions of the users of the financial statements would
have been changed or influenced by the misstatement or omission.
Accordingly, we established materiality for revenue items within the income
statement to be GBP155,000, which is 25% of the financial statement
materiality, based on long-term expectations of the split of revenue and
capital income.
An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the Group's
business and is risk-based. The day-to-day management of the Group's
investment portfolio and the maintenance of the Group's accounting records
is managed internally, with the custody of its investments outsourced to
third-party service providers. Accordingly, our audit work is focused on
obtaining an understanding of, and evaluating, internal controls by the
Group and inspecting records and documents held by the third-party service
providers. We undertook substantive testing on significant transactions,
balances and disclosures, the extent of which was based on various factors
such as our overall assessment of the control environment, the effectiveness
of controls over individual systems and the management of specific risks.
Other information
The other information comprises the information included in the annual
report, other than the financial statements and our Auditor's Report
thereon. The Directors are responsible for the other information. Our
opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required
to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of the other
information where we conclude that those items meet the following
conditions:
* Fair, balanced and understandable, set out on page 33 - the statement
given by the Directors that they consider the annual report and financial
statements taken as a whole is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group's
performance, business model and strategy, is materially inconsistent with
our knowledge obtained in the audit; or
* Audit Committee reporting, set out on pages 28 and 29 - the section
describing the work of the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee; or
· Directors' statement of compliance with the UK Corporate Governance
Code, set out on page 21 - the parts of the Directors' statement required
under the Listing Rules relating to the Group's compliance with the UK
Corporate Governance Code containing provisions specified for review by
the Auditors in accordance with Listing Rule 9.8.10R (2) do not properly
disclose a departure from a relevant provision of the UK Corporate
Governance Code.
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
· 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 and those reports have been
prepared in accordance with applicable legal requirements;
· the information about internal control and risk management systems in
relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 in the
Disclosure Rules and Transparency Rules sourcebook made by the Financial
Conduct Authority ('the FCA Rules'), is consistent with the financial
statements and has been prepared in accordance with applicable legal
requirements; and
· information about the Group's corporate governance code and practices
and about its administrative, management and supervisory bodies and their
committees complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report by exception
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -12-
In the light of the knowledge and understanding of the Group and the Parent
Company and its environment obtained in the course of the audit, we have not
identified material misstatements in:
· the Strategic Report or the Directors' Report; or
· the information about internal control and risk management systems in
relation to financial reporting processes and about share capital
structures, given in compliance with rules 7.2.5 and 7.2.6 of the FCA
Rules.
We have nothing to report in respect of the following matters in relation to
which the Companies Act 2006 requires us to report to you if, in our
opinion:
· adequate accounting records have not been kept by the Parent Company, or
returns adequate for our audit have not been received from branches not
visited by us; or
· the Parent Company financial statements and the part of the Directors'
Remuneration Report to be audited are not in agreement with the accounting
records and 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; or
· a corporate governance statement has not been prepared by the Parent
Company.
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities Statement, set
out on pages 33 and 34, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and
fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group's and the Parent Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to cease operations,
or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an Auditor's Report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always
detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities [4]. This description forms part of
our Auditor's Report.
Other matters which we are required to address
Following the recommendation of the Audit Committee, we were appointed by
the Board on 13 October 2017 to audit the financial statements for the year
ending 30 April 2018 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and reappointments of
the firm is 13 years.
As disclosed in the Corporate Governance Report, tax compliance services
were provided in the year as permitted by the FRC's Ethical Standard.
Separate teams were engaged to complete the work and the work was performed
after the audit was complete and the audit report signed with no reliance
placed on the tax compliance work by the audit team. Other than those
disclosed in the Corporate Governance Report, we have provided no non-audit
services to the Group and Parent Company in the period from 1 May 2018 to 30
April 2019.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Group and Parent Company and we remain independent of the
Group and Parent Company in conducting our audit.
Our audit opinion is consistent with the additional report to the audit
committee.
Use of this report
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 auditors' 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.
Ryan Hancock (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Cheltenham
10 July 2019
Consolidated Statement of Comprehensive Income
for the year ended 30 April 2019
2019 2018
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains 10 - (7,083) (7,083) - 999 999
on investments
at fair
value through
profit or loss
Investment 2 3,221 - 3,221 2,526 - 2,526
income
Investment 3 (153) (459) (612) (156) (469) (625)
management fee
Other expenses 4 (274) (37) (311) (275) (446) (721)
Net 2,794 (7,579) (4,785) 2,095 84 2,179
(defecit)/retu
rn before
finance costs
and taxation
Finance costs 6 (1) (582) (583) - (630) (630)
Net 2,793 (8,161) (5,368) 2,095 (546) 1,549
(defecit)/retu
rn before
taxation
Taxation 7 - - - - - -
Total 2,793 (8,161) (5,368) 2,095 (546) 1,549
comprehensive
(expense)/inco
me for the
year
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Net return
per:
Ordinary share 8 13.40 (39.15) (25.75) 11.49 (2.99) 8.50
Zero Dividend 8 - 4.02 4.02 - 1.21 1.21
Preference
share 2025
Zero Dividend 8 - - - - 5.50 5.50
Preference
share 2018
The total column of this statement is the Statement of Comprehensive Income
of the Group prepared in accordance with IFRS as adopted by the EU. All
revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the year. All
of the net return for the period and the total comprehensive income for the
period is attributable to the shareholders of the Group. The supplementary
revenue and capital return columns are presented for information purposes as
recommended by the Statement of Recommended Practice issued by the AIC.
The notes on pages 46 to 66 form part of these financial statements.
Consolidated and Parent Company Statement of Changes in Net Equity
for the year ended 30 April 2019
Share Share Capital Capital Revenue Total
Capit Premiu redempt reserve reserve
al m ion
Accoun reserve
t
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 30
April 2019
30 April 2018 5,188 17,301 5,004 21,086 3,215 51,794
Total - - - (8,161) 2,793 (5,368)
comprehensive
(expense)/
income for
the year
Ordinary 25 228 - - - 253
shares issued
Expenses of - (12) - - - (12)
Ordinary
share issue
Dividends 9 - - - - (2,008) (2,008)
paid
30 April 2019 5,213 17,517 5,004 12,925 4,000 44,659
Year ended 30
April 2018
30 April 2017 4,200 12,915 - 21,632 2,977 41,724
Total - - - (546) 2,095 1,549
comprehensive
(expense)/
income for
the year
Ordinary 492 4,543 - - - 5,035
shares issued
Expenses of - (157) - - - (157)
Ordinary
share issue
C shares 5,500 - - - - 5,500
issued
Cancellation (5,00 - 5,004 - - -
of deferred 4)
shares
Dividends 9 - - - - (1,857) (1,857)
paid
30 April 2018 5,188 17,301 5,004 21,086 3,215 51,794
The notes form part of these financial statements.
Consolidated and Parent Company Balance Sheets
as at 30 April 2019
Note Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments at fair 10 59,895 65,412 59,895 65,412
value through profit or
loss
Investments in 12 - - 13 63
subsidiary
59,895 65,412 59,908 65,475
Current assets
Trade and other 13 447 863 447 863
receivables
Cash and cash 1,690 111 1,690 111
equivalents
2,137 974 2,137 974
Total assets 62,032 66,386 62,045 66,449
Current liabilities
Trade and other 14 (2,078) (192) (2,091) (255)
payables
(2,078) (192) (2,091) (255)
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -13-
Total assets less 59,954 66,194 59,954 66,194
current liabilities
Non-current liabilities
Zero Dividend 15 (15,295) (14,400) - -
Preference shares
Loan from subsidiary 16 - - (15,295) (14,400)
(15,295) (14,400) (15,295) (14,400)
Total liabilities (17,373) (14,592) (17,386) (14,655)
Net assets 44,659 51,794 44,659 51,794
Represented by:
Share capital 17 5,213 5,188 5,213 5,188
Share premium account 18 17,517 17,301 17,517 17,301
Capital redemption 18 5,004 5,004 5,004 5,004
reserve
Capital reserve 18 12,925 21,086 12,925 21,086
Revenue reserve 18 4,000 3,215 4,000 3,215
Equity shareholders' 44,659 51,794 44,659 51,794
funds
The notes form part of these financial statements.
These financial statements were approved by the Board of Chelverton UK
Dividend Trust PLC and authorised for issue on 10 July 2019.
Lord Lamont of Lerwick
Chairman
Company Registered Number: 03749536
Consolidated and Parent Company Statement of Cash Flows
for the year ended 30 April 2019
Note 2019 2018
GBP'000 GBP'000
Operating activities
Investment income received 3,160 2,526
Investment management fee paid (614) (536)
Administration and secretarial fees paid (72) (66)
Other cash payments (254) (204)
Loan interest paid (1) -
Cash generated from operations 20 2,219 1,720
Purchases of investments (9,841) (20,970)
Sales of investments 10,032 10,399
Net cash inflow/(outflow) from operating 2,410 (8,851)
activites
Financing activities
Redemption of Zero Dividend Preference - (1,802)
shares
Issue of Zero Dividend Preference shares 313 3,265
Expenses for redemption and issue of Zero
Dividend Preference shares - (325)
Issue of C shares - 5,500
Expenses of C shares issue - (163)
Issue of Ordinary shares 876 4,412
Expenses of Ordinary share issue (12) (157)
Dividends paid 9 (2,008) (1,857)
Net cash (outflow)/inflow from financing (831) 8,873
activities
Change in cash and cash equivalents 21 1,579 22
Cash and cash equivalents at start of year 22 111 89
Cash and cash equivalents at end of year 22 1,690 111
The notes form part of these financial statements.
Notes to the Financial Statements
as at 30 April 2019
1 ACCOUNTING POLICIES
Chelverton UK Dividend Trust PLC is a public company, limited by shares,
domiciled and registered in the UK. The consolidated financial statements
for the year ended 30 April 2019 comprise the financial statements of the
Company and its subsidiary SDVP (together referred to as the 'Group').
Basis of preparation
The consolidated financial statements of the Group and the financial
statements of the Company have been prepared in conformity with IFRSs issued
by the International Accounting Standards Board (as adopted by the EU) and
Interpretations issued by the International Financial Reporting
Interpretations Committee ('IFRIC'), and applicable requirements of UK
company law, and reflect the following policies which have been adopted and
applied consistently.
New standards, interpretations and amendments adopted by the Group
The following amendments to standards effective this year, being relevant
and applicable to the Group, have been adopted, although they have no impact
on the financial statements:
· IFRS 7 Financial Instruments: Disclosures - Amendments requiring
disclosures about the initial application of IFRS 9 (effective when IFRS 9
is first applied)
· IFRS 9 Financial Instruments - Classification and measurement of
financial assets (effective 1 January 2018)
· IFRS 9 Financial Instruments - Classification and measurement of
financial liabilities and de-recognition requirements from IAS 39
Financial Instruments Recognition and Measurement (effective 1 January
2018)
The revised IFRS 9 Financial Instruments replaces IAS 39 and applies to the
classification, measurement and impairment of financial assets and
liabilities, and hedge accounting. The adoption of IFRS 9 will have an
effect on the classification but not the measurement of the Company's
financial assets, but will potentially have no impact on the classification
and measurement of financial liabilities. It will also introduce a new
expected loss impairment model requiring more timely recognition of expected
credit losses and a reformed model for hedge accounting with enhanced
disclosure of risk management activity. The Standard is effective for annual
period beginning on or after 1 January 2018 (please see note 25 on pages 65
and 66 for further details).
The following accounting standards and their amendments were in issue at the
period end but will not be in effect until after this financial year end.
The following accounting standards will not have any impact on the financial
statements.
· IFRS 16 Leases (effective 1 January 2019)
Critical accounting judgements and uses of estimation
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and the amounts reported in the Balance Sheet and
the Statement of Comprehensive Income. The estimates and associated
assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of
which form the basis of making judgements about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the
period of the revision and future period if the revision affects both
current and future periods. There were no significant accounting estimates
or significant judgements in the current period.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its wholly-owned subsidiary undertaking, SDVP, drawn up to the
same accounting date. SCZ was consolidated to the date that it entered
liquidation and the Company ceased to have control.
The subsidiary is consolidated from the date of its incorporation, being the
date on which the Company obtained control, and will continue to be
consolidated until the date that such control ceases. Control comprises the
power to govern the financial and operating policies of the investee so as
to obtain benefit from its activities and is achieved through direct or
indirect ownership of voting rights. The financial statements of the
subsidiary are prepared for the same reporting year as the Company, using
consistent accounting policies. All inter-company balances and transactions,
including unrealised profits arising from them, are eliminated.
As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. The amount of the
Company's return for the financial period dealt with in the financial
statements of the Group is a loss of GBP5,368,000 (2018: profit of
GBP1,549,000).
Convention
The financial statements are presented in Sterling rounded to the nearest
thousand. The financial statements have been prepared on a going concern
basis under the historical cost convention, except for the measurement at
fair value of investments classified as fair value through profit or loss.
Where presentational guidance set out in the Statement of Recommended
Practice 'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' ('SORP'), issued by the Association of Investment Companies
(dated November 2014 and updated in February 2018 with consequential
amendments) is consistent with the requirements of IFRS, the Directors have
sought to prepare the financial statements on a consistent basis compliant
with the recommendations of the SORP.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single
segment of business, being investment business. The Group only invests in
companies listed in the UK.
Investments
All investments held by the Group are recorded at 'fair value through profit
or loss'. Investments are initially recognised at cost, being the fair value
of the consideration given.
After initial recognition, investments are measured at fair value, with
unrealised gains and losses on investments and impairment of investments
recognised in the Consolidated Statement of Comprehensive Income and
allocated to capital. Realised gains and losses on investments sold are
calculated as the difference between sales proceeds and cost.
For investments actively traded in organised financial markets, fair value
is generally determined by reference to quoted market bid prices at the
close of business on the Balance Sheet date, without adjustment for
transaction costs necessary to realise the asset.
Trade date accounting
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -14-
All 'regular way' purchases and sales of financial assets are recognised on
the 'trade date', i.e. the day that the Group commits to purchase or sell
the asset. Regular way purchases, or sales, are purchases or sales of
financial assets that require delivery of the asset within a time frame
generally established by regulation or convention in the market place.
Income
Dividends receivable on quoted equity shares are taken into account on the
ex-dividend date. Where no ex-dividend date is quoted, they are brought into
account when the Group's right to receive payment is established. Other
investment income and interest receivable are included in the financial
statements on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. All expenses are
charged through the revenue account in the Consolidated Statement of
Comprehensive Income except as follows:
· expenses which are incidental to the acquisition of an investment are
included within the costs of the investment;
· expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment;
· expenses are charged to capital reserve where a connection with the
maintenance or enhancement of the value of the investments can be
demonstrated; and
· operating expenses of the subsidiary are borne by the Company and taken
100% to capital.
All other expenses are allocated to revenue with the exception of 75% (2018:
75%) of the Investment Manager's fee which is allocated to capital. This is
in line with the Board's expected long-term split of returns from the
investment portfolio, in the form of capital and income gains respectively.
Cash and cash equivalents
Cash in hand and in banks including where held by custodians and short-term
deposits which are held to maturity are carried at cost. Cash and cash
equivalents are defined as cash in hand, demand deposits and short-term,
highly liquid investments readily convertible to known amounts of cash and
subject to insignificant risk of changes in value.
Loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair
value of the consideration received, less issue costs, where applicable.
After initial recognition, all interest-bearing loans and borrowings are
subsequently measured at amortised cost. Any difference between cost and
redemption value is recognised in the Consolidated Statement of
Comprehensive Income over the period of the borrowings on an effective
interest basis.
Zero Dividend Preference shares
Shares issued by the subsidiary are treated as a liability of the Group, and
are shown in the Balance Sheet at their redemption value at the Balance
Sheet date. The appropriations in respect of the Zero Dividend Preference
shares necessary to increase the subsidiary's liabilities to the redemption
values are allocated to capital in the Consolidated Statement of
Comprehensive Income. This treatment reflects the Board's long-term
expectations that the entitlements of the Zero Dividend Preference
shareholders will be satisfied out of gains arising on investments held
primarily for capital growth.
Share issue costs
Costs incurred directly in relation to the issue of shares in the subsidiary
are borne by the Company and taken 100% to capital. Share issue costs
relating to Ordinary share issues by the Company are taken 100% to the share
premium account in respect of premiums on issue of such shares. Where there
is no premium on issue, costs are taken directly to equity against revenue
reserves.
Capital reserve
Capital reserve (other) includes:
· gains and losses on the disposal of investments;
· exchange differences of a capital nature; and
· expenses, together with the related taxation effect, allocated to this
reserve in accordance with the above policies.
Capital reserve (investment holding gains) includes increase and decrease in
the valuation of investments held at the year end. This reserve is
distributable to the extent that gains have been realised.
Revenue reserve
This reserve includes net revenue recognised in the revenue column of the
Statement of Comprehensive Income. This reserve is distributable.
Capital redemption reserve
This reserve represents the cancellation of the C shares when they were
converted into Ordinary shares and deferred shares. This reserve is not
distributable.
Taxation
There is no charge to UK income tax as the Group's allowable expenses exceed
its taxable income. Deferred tax assets in respect of unrelieved excess
expenses are not recognised as it is unlikely that the Group will generate
sufficient taxable income in the future to utilise these expenses. Deferred
tax is not provided on capital gains and losses because the Company meets
the conditions for approval as an investment trust company.
Dividends payable to shareholders
Dividends to shareholders are recognised as a liability in the period in
which they are paid or approved in general meetings and are taken to the
Statement of Changes in Net Equity. Dividends declared and approved by the
Group after the Balance Sheet date have not been recognised as a liability
of the Group at the Balance Sheet date.
2 INCOME
2019 2018
GBP'000 GBP'000
Income from listed investments
UK dividend income 3,077 2,408
Property income distibution 144 118
Total income 3,221 2,526
Total income comprises entirely of dividends
3 INVESTMENT MANAGEMENT FEE
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment 153 459 612 156 469 645
management
fee
At 30 April 2019 there were amounts outstanding of GBP121,000 (2018:
GBP123,000).
4 OTHER EXPENSES
2019 2018
GBP'000 GBP'000
Administration and secretarial fees 66 66
Directors' remuneration (note 5) 57 58
Auditor's remuneration:
audit services* 21 20
non-audit services* 2 5
Insurance 3 4
Other expenses* 162 568
311 721
Subsidiary operating costs (37) (11)
Redemption and issue of ZDP costs - (309)
Issue of C Share costs - (126)
274 275
* The above amounts include irrecoverable VAT where
applicable.
5 DIRECTORS' REMUNERATION
2019 2018
GBP GBP
Directors' fees 57,454 57,500
Social security costs 1 3
57,455 57,503
Remuneration to Directors
Lord Lamont (Chairman) 20,000 20,000
D Harris 6,102 17,500
H Myles 20,000 20,000
W van Heesewijk* - -
A Watkins 11,352 -
* Mr van Heesewijk has waived his
entitlement to fees.
Note: Mr Harris resigned on 6 September 2018 and Mr Watkins was appointed on
the same date.
6 FINANCE COSTS
2019 Total Revenue 2018 Total
Capit
al
Revenue Capital
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Overdraft 1 - 1 - - -
interest
Appropriations
in respect of
Zero Dividend - 582 582 - 630 630
Preference
shares
1 582 583 - 630 630
7 TAXATION
2019 2018
GBP'000 GBP'000
Based on the
revenue return
for the year
UK tax - -
The current tax charge for the year is lower than the standard rate of
corporation tax in the UK of 19% to 30 April 2019 and 30 April 2018. The
differences are explained below:
2019 2018
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Return on 2,793 (8,161) (5,368) 2,095 (546) 1,549
ordinary
activities
before
taxation
Theoretical 531 (1,550) (1,019) 398 (104) 294
corporation
tax at 19%
(2018: 19%)
Effects of:
Capital - 1,456 1,456 - (70) (70)
items not
taxable
UK and (585) - (585) (458) - (458)
overseas
dividends
which are
not liable
to UK
corporation
tax
Excess 54 94 148 60 174 234
expenses in
the year
Actual - - - - - -
current tax
charged to
the
revenue
account
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -15-
The Group has unrelieved excess expenses of GBP21,855,995 (2018: GBP21,073,407).
It is unlikely that the Group will generate sufficient taxable profits in
the future to utilise these expenses and therefore no deferred tax asset has
been recognised.
8 RETURN PER SHARE
Ordinary shares
Revenue return per Ordinary share is based on revenue on ordinary activities
after taxation of GBP2,780,000 (2018: GBP2,095,000) and on 20,847,534 (2018:
18,237,864) Ordinary shares, being the weighted average number of Ordinary
shares in issue during the year.
Capital return per Ordinary share is based on the capital loss of GBP8,161,000
(2018: profit of GBP546,000) and on 20,847,534 (2018: 18,237,864) Ordinary
shares, being the weighted average number of Ordinary shares in issue during
the year.
Zero Dividend Preference shares
Capital return per Zero Dividend Preference share 2025 is based on
allocations from the Company of GBP582,000 (2018: GBP157,000) and on 14,489,863
(2018: 13,033,639) Zero Dividend Preference shares 2025, being the weighted
average number of Zero Dividend Preference shares in issue during the year.
Capital return per Zero Dividend Preference share 2018 is based on
allocations from the Company of GBPnil (2018: GBP473,000) and on nil (2018:
9,646,150) Zero Dividend Preference shares 2018, being the weighted average
number of Zero Dividend Preference shares in issue during the year.
9 DIVIDENDS
2019 2018
GBP'000 GBP'000
Declared and paid per Ordinary share
Fourth interim dividend for the year ended 30 April 500 413
2018 of 2.40p (2017: 2.40p)
Special dividend for the year ended 30 April 2018 of 138 320
0.66p (2017: 1.86p)
First interim dividend of 2.19p (2018: 2.02p) 456 351
Second interim dividend of 2.19p (2018: 2.02p) 457 359
Third interim dividend of 2.19p (2018: 2.02p) 457 414
2,008 1,857
Declared per Ordinary share*
Fourth interim dividend for the year ended 30 April 500 500
2019 of 2.40p (2018: 2.40p)
Special dividend for the year ended 30 April 2019 of 521 138
2.50p (2018: 0.66p)
1,021 638
All dividends are paid from Revenue Reserve.
* Dividend paid subsequent to the year end.
10 INVESTMENTS - Group and Company
Listed AIM 2019
Total
GBP'000 GBP'000
GBP'000
Year ended 30 April 2019
Opening book cost 38,133 23,307 61,440
Opening investment holding gains 2,414 1,558 3,972
Opening valuation 40,547 24,865 65,412
Titon holding transferred from listed (316) 316 -
to A/M on 9 November 2018
Movements in the year:
Purchases at cost 10,173 1,568 11,741
Disposals:
Proceeds (6,885) (3,290) (10,175)
Net realised gains on disposals 2,808 1,122 3,930
Movement in investment holding gains (9,652) (1,361) (11,013)
Closing valuation 36,675 23,220 59,895
Closing book cost 43,913 23,023 66,936
Closing investment holding (7,238) 197 (7,041)
(losses)/gains
36,675 23,220 59,895
Realised gains on disposals 2,808 1,122 3,930
Movement in investment holding gains (9,652) (1,361) (11,013)
Losses on investments (6,844) (239) (7,083)
Listed AIM 2018
Total
GBP'000 GBP'000
GBP'000
Year ended 30 April 2018
Opening book cost 25,911 20,195 46,106
Opening investment holding gains 5,846 1,875 7,721
Opening valuation 31,757 22,070 53,827
Movements in the year:
Purchases at cost 16,287 4,683 20,970
Disposals:
Proceeds (7,550) (2,834) (10,384)
Net realised gains on disposals 3,485 1,263 4,748
Movement in investment holding gains (3,432) (317) (3,749)
Closing valuation 40,547 24,865 65,412
Closing book cost 38,133 23,307 61,440
Closing investment holding gains 2,414 1,558 3,972
40,547 24,865 65,412
Realised gains on disposals 3,485 1,263 4,748
Movement in investment holding gains (3,432) (317) (3,749)
Gains on investments 53 946 999
Transaction costs
During the year the Group incurred transaction costs of GBP59,000 (2018:
GBP83,000) and GBP15,000 (2018: GBP22,000) on purchases and sales of investments
respectively. These amounts are included in gains on investments, as
disclosed in the Consolidated Statement of Comprehensive Income.
11 SIGNIFICANT INTERESTS
The Company has provided notifications of holdings of 3% or more in relevant
issuers. The following issuer notifications remain effective as at 30 April
2019:
Name of issuer Class of share 30 April 2019
% held
Coral Products Plc Ordinary 7.3
RTC Group Plc Ordinary 6.8
Chamberlin Plc Ordinary 6.3
Orchard Funding Group Plc Ordinary 3.5
Belvoir Lettings Plc Ordinary 3.4
12 INVESTMENT IN SUBSIDIARY
Company Company
2019 2018
GBP'000 GBP'000
Cost as at 1 May 63 13
Additions * - 50
Disposals * (50) -
Cost as at 30 April 13 63
* On 8 January 2019, the share capital of 50,000 ordinary shares of SCZ was
fully paid up to GBP50,000. During the year SCZ was liquidated. On 8 January
2019, 50,000 share was capital was issued for SDVP. This has been partially
paid up to 25p, amounting to GBP12,500.
The Company owns the whole of the issued ordinary share capital of SDVP,
especially formed for the issuing of Zero Dividend Preference shares, which
is incorporated and registered in England and Wales, under company number:
11031268.
13 TRADE AND OTHER RECEIVABLES
Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due from Brokers 143 - 143 -
Amounts due from Brokers in respect - 623 - 623
of shares issued by the Group
Dividends receivable 293 236 293 236
Tax withheld on dividends received 6 - 6 -
Prepayments and accrued income 5 4 5 4
447 863 447 863
14 TRADE AND OTHER PAYABLES
Group Group Company Company
2019 2018 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due to Brokers 1,900 - 1,900 -
Trade and other payables 178 192 178 192
Loan from subsidiary undertaking - - 13 63
2,078 192 2,091 255
15 ZERO DIVIDEND PREFERENCE SHARES
On 28 August 2012, SCZ issued 8,500,000 Zero Dividend Preference shares at
100p per share and with net proceeds of GBP8.3 million. The expenses of the
placing were borne by the Company and the Investment Manager. On 24 March
2017, SCZ issued a further 849,000 Zero Dividend Preference shares at 135p
per share giving a premium of 35p and net proceeds of GBP1.1 million. The Zero
Dividend Preference shares each had an initial capital entitlement of 100p
per share, growing by an annual rate of 6% compounded daily to 136.70p on 8
January 2018, a total of GBP12,780,000. Further to redemption on 8 January
2018, the accrued entitlement as per the Articles of Association of SCZ at
30 April 2019 was GBPnil (2018: GBPnil) per share, being GBPnil (2018: GBPnil) in
total, and the total amount charged for the year of GBPnil (2018: GBP472,000)
has been charged as a finance cost to capital.
On 8 January 2018, 9,349,000 Zero Dividend Preference Shares were redeemed
at a compound value of 136.70p and SCZ was put into Administration. Holders
of the Zero Dividend Preference shares were entitled to either roll over
their investment into SDVP or receive cash in respect of their investment.
Valid elections were received from eligible holders of 8,030,547 Zero
Dividend Preference Shares 2018 to be transferred into Zero Dividend
Preference Shares 2025. The remaining holders of Zero Dividend Preference
Shares 2018 received cash of GBP1,802,326.
On 8 January 2018, SDVP issued 10,977,747 Zero Dividend Preference shares at
100p per share from the conversion of Zero Dividend Preference shares of
SCZ. On 8 January 2018, 1,802,336 Zero Dividend Preference shares were also
issued at 100p per share by a placing with net proceeds of GBP1.8 million. The
expenses of the placing were borne by the Company and the Investment
Manager. On 11 April 2018, SDVP issued a further 1,419,917 Zero Dividend
Preference shares at 103p per share (a premium of 3p per share), and net
proceeds of GBP1.5 million. On the 10 May 2018 and 15 May 2018, SDVP issued a
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -16-
further 100,000 and 200,000 Zero Dividend Preference shares at 104p per
share (a premium of 4p per share), and net proceeds of GBP313,000. The Zero
Dividend Preference shares each have an initial capital entitlement of 100p
per share, growing by an annual rate of 4% compounded daily to 133.18p on 30
April 2025, a total of GBP19,311,000. The accrued entitlement as per the
Articles of Association of SDVP at 30 April 2019 was 105.48 (2018: 101.41p)
per share, being GBP15,295,000 in total, and the total amount accrued for the
year of GBP582,000 (2018: GBP157,000) has been charged as a finance cost to
capital.
16 SECURED LOAN
Pursuant to a loan agreement between SCZ and the Company, SCZ lent the gross
proceeds of GBP8,500,000, raised from the placing on 28 August 2012 of
8,500,000 Zero Dividend Preference shares at 100p, to the Company. On 8
January 2018 the loan was settled in full by the Company.
SCZ lent the gross proceeds of GBP1,146,000 raised from the additional placing
on 24 March 2017 of 849,000 Zero Dividend Preference shares at a premium of
135p per share to the Company. The loan was non-interest bearing and was
repayable three business days before the Zero Dividend Preference share
redemption date of 8 January 2018 or, if required by SCZ, at any time prior
to that date in order to repay the Zero Dividend preference share final
redemption entitlement. The funds were managed in accordance with the
investment policy of the Company.
The loan was secured by way of a floating charge on the Company's assets
under a loan agreement entered into between the Company and SCZ dated 1
August 2012.
Pursuant to a loan agreement between SDVP and the Company, SDVP has lent the
gross proceeds of the following Zero Dividend Preference transactions to the
Company:
· Gross proceeds of GBP10,978,000 raised from the conversion of 10,977,747
Zero Dividend Preference shares at 100p on 8 January 2018
· Gross proceeds of GBP10,978,000 raised from the placing of 1,802,336 Zero
Dividend Preference share at 100p on 8 January 2018
· Gross proceeds of GBP1,463,000 raised from the placing of 1,419,917 Zero
Dividend Preference shares at a premium of 103p on 11 April 2018
· Gross proceeds of GBP313,000 raised from the placings of 300,000 Zero
Dividend Preference shares at a premium of on the 10 and 15 May 2018
The loan is non-interest bearing and is repayable three business days before
the Zero Dividend Preference share redemption date of 30 April 2025 or, if
required by SDVP, at any time prior to that date in order to repay the Zero
Dividend preference share entitlement. The funds are to be managed in
accordance with the investment policy of the Company.
The loan is secured by way of a floating charge on the Company's assets
under a loan agreement entered into between the Company and SDVP dated 27
November 2017.
A contribution agreement between the Company and SDVP has also been made
whereby the Company will undertake to contribute such funds as would ensure
that SDVP will have in aggregate sufficient assets on 30 April 2025 to
satisfy the final capital entitlement of the Zero Dividend Preference
shares. At 30 April 2019 the contribution due from the Company to cover the
accrued entitlement was GBP582,000 (2018: GBP157,000).
2019 2018
GBP'000 GBP'000
Value at 1 May 14,400 -
Loan issued in year 313 14,243
for Zero Dividend
Preference Shares 2025
Contribution to 582 157
accrued capital
entitlement of Zero
Dividend Preference
shares 2025
15,295 14,400
17 SHARE CAPITAL
2019 2018
Number GBP'000 Number GBP'000
Issued,
allotted and
fully paid:
Ordinary
shares of
25p each
Opening 20,750,000 5,188 16,800,00 4,200
balance 0
Issue of 100,000 25 1,967,172 492
Ordinary
shares
Conversion - - 1,982,828 496
of C shares
to Ordinary
shares
20,850,000 5,213 20,750,00 5,188
0
During the year, the Company announced the following issuances of new
Ordinary Shares of 25p each:
Date Shares Price GBP'000
10/05/2018 100,000 253p 25
The rights attaching to the Ordinary shares are:
As to dividends each year
Ordinary shares are entitled to all the revenue profits of the Company
available for distribution, including all undistributed income.
As to capital on winding up
On a winding up, holders of Zero Dividend Preference shares issued by SDVP
are entitled to a payment of an amount equal to 100p per share, increased
daily from 8 January 2018 at such a compound rate as will give a final
entitlement to 133.18p for each Zero Dividend Preference share at 30 April
2025, GBP19,311,000 in total.
The holders of Ordinary shares will receive all the remaining Group assets
available for distribution to shareholders after payment of all debts and
satisfaction of all liabilities of the Company rateably according to the
amounts paid or credited as paid up on the Ordinary shares held by them
respectively.
Voting
Each holder of Ordinary shares on a show of hands will have one vote and on
a poll will have one vote for each Ordinary share held. Each holder of Zero
Dividend Preference shares on a show of hands will have one vote at meetings
where Zero Dividend Preference shareholders are entitled to vote and on a
poll will have one vote for every Zero Dividend Preference share held.
Duration
Under the Parent Company's Articles of Association, the Directors are
required to convene a General Meeting of the Company to be held in April
2025 so as to align the vote with any timetable for a further issue of Zero
Dividend Preference shares or to save costs by proposing the Continuation
Resolution (as defined below) at the Annual General Meeting or some other
General Meeting of the Company ('the First GM'), at which an Ordinary
Resolution will be proposed to the effect that the Company continues in
existence ('the Continuation Resolution'). In the event that such Resolution
is not passed, the Directors shall, subject to the Statutes, put forward
further proposals to shareholders regarding the future of the Company (which
may include voluntary liquidation, unitisation or other reorganisation of
the Company) ('the Restructuring Resolution') at a General Meeting of the
Company to be convened not more than four months after the date of the First
GM (or such adjournment).
The Restructuring Resolution shall be proposed as a Special Resolution. If
the Restructuring Resolution is either not proposed or not passed then the
Directors shall convene a General Meeting not more than four months after
the date of the First GM (or such adjournment). If the Restructuring
Resolution is not proposed or four months after the date the Restructuring
Resolution is not passed, an Ordinary Resolution pursuant to Section 84 of
the Insolvency Act 1986 to voluntarily wind up the Company shall be put to
shareholders and the votes taken on such Resolution shall be on a poll.
18 NET ASSET VALUE PER SHARE
The net asset value per share and the net assets attributable to the
Ordinary shareholders and Zero Dividend Preference shareholders are as
follows:
Net asset Net assets Net asset Net assets
value per attributabl value per attributabl
share e to share e to
shareholder shareholder
s s
2019 2019 2018 2018
pence GBP'000 pence GBP'000
Ordinary 214.19 44,659 249.61 51,794
shares
Zero Dividend 105.48 15,295 101.41 14,400
Preference
shares
The net asset value per Ordinary share is calculated on 20,850,000 (2018:
20,750,000) Ordinary shares, being the number of Ordinary shares in issue at
the year end.
The net asset value per Zero Dividend Preference share is calculated on
14,500,000 (2018: 14,200,000) Zero Dividend Preference shares, being the
number of Zero Dividend Preference shares in issue at the year end.
19 RECONCILIATION OF NET RETURN BEFORE AND AFTER TAXATION TO CASH GENERATED
FROM OPERATIONS - Group and Company
2019 2018
GBP'000 GBP'000
Net return before taxation (5,368) 1,549
Taxation - -
Net return after taxation (5,368) 1,549
Net capital return 8,161 546
(Increase)/decrease in receivables (64) 6
(Decrease)/increase in payables (14) 99
Interest and expenses charged to the capital (496) (480)
reserve
Cash generated from operations 2,219 1,720
20 RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET CASH - Group and Company
2019 2018
GBP'000 GBP'000
Increase in cash in year 1,579 22
Net cash at 1 May 111 89
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
DJ Chelverton UK Dividend Trust plc: Annual -17-
Net cash at 30 April 1,690 111
21 ANALYSIS OF CHANGES IN NET CASH - Group and Company
At 1 May 2018 Cash flows At 30 April
GBP'000 GBP'000 2019
GBP'000
Cash at bank (including 111 1,579 1,690
those held by custodians
22 RELATED PARTY TRANSACTIONS
Under the terms of an agreement dated 30 April 2006 (effective from 1
December 2005), the Company appointed Chelverton to be Investment Manager.
The fee arrangements for these services and fees payable are set out in the
Directors' Report on page 17 and in note 3 to the financial statements.
23 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
Objectives, policies and strategies
The Group primarily invests in mid and small capitalised companies. All of
the Group's investments comprise ordinary shares in companies listed on the
Official List and companies admitted to AIM.
The Group finances its operations through Zero Dividend Preference shares
issued by SDVP and equity. Cash, liquid resources and short-term debtors and
creditors arise from the Group's day-to-day operations.
It is, and has been throughout the year under review, the Group's policy
that no trading in financial instruments shall be undertaken.
In pursuing its investment objective, the Group is exposed to a variety of
risks that could result in either a reduction in the Group's net assets or a
reduction of the profits available for distribution. These risks are market
risk (comprising currency risk, interest rate risk and other price risk),
credit risk and liquidity risk. The Board reviews and agrees policies for
managing each of these risks and they are summarised below.
As required by IFRS 7: Financial Instruments: Disclosures, an analysis of
financial assets and liabilities, which identifies the risk to the Group of
holding such items, is given below.
Market risk
Market risk arises mainly from uncertainty about future prices of financial
instruments used in the Group's business. It represents the potential loss
the Group might suffer through holding market positions by way of price
movements and movements in exchange rates and interest rates. The Investment
Manager assesses the exposure to market risk when making each investment
decision and these risks are monitored by the Investment Manager on a
regular basis and the Board at quarterly meetings with the Investment
Manager.
Market price risk
Market price risks (i.e. changes in market prices other than those arising
from currency risk or interest rate risk) may affect the value of
investments.
The Board manages the risks inherent in the investment portfolios by
ensuring full and timely reporting of relevant information from the
Investment Manager. Investment performance is reviewed at each Board
meeting.
The Group's exposure to changes in market prices at 30 April on its
investments is as follows:
2019 2018
GBP'000 GBP'000
Fair value through profit or loss investments 59,895 65,412
Sensitivity analysis
A 10% increase in the market value of investments at 30 April 2019 would
have increased net assets by GBP5,989,000 (2018: GBP6,541,000). An equal change
in the opposite direction would have decreased the net assets available to
shareholders by an equal but opposite amount.
Foreign currency risk
All the Group's assets are denominated in Sterling and accordingly the only
currency exposure the Group has is through the trading activities of its
investee companies.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits. The Group does not currently receive interest on its cash
deposits.
The majority of the Group's financial assets are non-interest bearing. As a
result the Group's financial assets are not subject to significant amounts
of risk due to fluctuations in the prevailing levels of market interest
rates.
The possible effects on fair value and cash flows that could arise as a
result of changes in interest rates are taken into account when making
investment decisions.
The exposure at 30 April 2019 of financial assets and financial liabilities
to interest rate risk is limited to cash and cash equivalents of GBP1,690,000
(2018: GBP111,000). Cash and cash equivalents are all due within one year
Credit risk
Credit risk is the risk of financial loss to the Group if the contractual
party to a financial instrument fails to meet its contractual obligations.
The carrying amounts of financial assets best represent the maximum credit
risk exposure at the Balance Sheet date.
Listed investments are held by Jarvis Investment Management Limited acting
as the Company's custodian. Bankruptcy or insolvency of the custodian may
cause the Company's rights with respect to securities held by the custodian
to be delayed. The Board monitors the Group's risk by reviewing the
custodian's internal controls reports.
Investment transactions are carried out with a number of brokers whose
creditworthiness is reviewed by the Investment Manager. Transactions are
ordinarily undertaken on a delivery versus payment basis whereby the
Company's custodian bank ensures that the counterparty to any transaction
entered into by the Group has delivered in its obligations before any
transfer of cash or securities away from the Group is completed.
Cash is only held at banks that have been identified by the Board as
reputable and of high credit quality. The maximum exposure to credit risk as
at 30 April 2019 was GBP62,032,000 (2018: GBP66,386,000). The calculation is
based on the Group's credit risk exposure as at 30 April 2019 and this may
not be representative of the year as a whole.
None of the Group's assets are past due or impaired.
Liquidity risk
The majority of the Group's assets are listed securities in small companies,
which can under normal conditions be sold to meet funding commitments if
necessary. They may, however, be difficult to realise in adverse market
conditions.
Please see notes 15 and 16 for details of liabilities that fall due for
payment in more than one year. All other payables are due in less than one
year.
Financial instruments by category
The financial instruments of the Group fall
into the following categories:
30 April 2019 Assets at
fair value
through
At Loans and profit
cost receivables or loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per
Balance Sheet
Investments - - 59,895 59,895
Trade and other - 447 - 447
receivables
Cash and cash 1,690 - - 1,690
equivalents
Total 1,690 447 59,895 62,032
Liabilities as per
Balance Sheet
Trade and other 2,078 - - 2,078
payables
Zero Dividend - 15,295 - 15,295
Preference shares
Total 2,078 15,295 - 17,373
30 April 2018 Assets at
fair value
through
At Loans and profit
cost receivables or loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per
Balance Sheet
Investments - - 65,412 65,412
Trade and other - 863 - 863
receivables
Cash and cash 111 - - 111
equivalents
Total 111 863 65,412 66,386
Liabilities as per
Balance Sheet
Trade and other 192 - - 192
payables
Zero Dividend - 14,400 - 14,400
Preference shares
Total 192 14,400 - 14,592
IFRS 7 hierarchy
As required by IFRS 7 the Company is required to classify fair value
measurements using a fair value hierarchy that reflects the significance of
the inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets
or liabilities.
An active market is a market in which transactions for the asset or
liability occur with sufficient frequency and volume on an ongoing basis
such that quoted prices reflect prices at which an orderly transaction would
take place between market participants at the measurement date. Quoted
prices provided by external pricing services, brokers and vendors are
included in Level 1, if they reflect actual and regularly occurring market
transactions on an arm's length basis.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices)
or indirectly (that is, derived from prices).
Level 2 inputs include the following:
· Quoted prices for similar (i.e. not identical) assets in active markets.
· Quoted prices for identical or similar assets or liabilities in markets
that are not active. Characteristics of an inactive market include a
significant decline in the volume and level of trading activity, the
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
available prices vary significantly over time or among market participants
or the prices are not current.
· Inputs other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly quoted
intervals).
· Inputs that are derived principally from, or corroborated by, observable
market data by correlation or other means (market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value
measurement is categorised in its entirety is determined on the basis of the
lowest level input that is significant to the fair value measurement in its
entirety. If a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that measurement is a
Level 3 measurement. Assessing the significance of a particular input to the
fair value measurement in its entirety requires judgement, considering
factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to
investments actively traded in organised financial markets. Fair value is
generally determined by reference to Stock Exchange quoted market bid prices
(or last traded in respect of SETS) at the close of business on the Balance
Sheet date, without adjustment for transaction costs necessary to realise
the asset.
Investments whose values are based on quoted market prices in active
markets, and therefore classified within Level 1, include active listed
equities. The Company does not adjust the quoted price for these
investments.
Financial instruments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer quotations or
alternative pricing sources supported by observable inputs are classified
within Level 2.
Investments classified within Level 3 have significant unobservable inputs.
Level 3 instruments include private equity and corporate debt securities. As
observable prices are not available for these securities, the Company has
used valuation techniques to derive the fair value.
The Company has no Level 2 or Level 3 investments (2018: same).
24 CAPITAL MANAGEMENT POLICIES AND PROCEDURES The Group's capital management
objectives are:
· to ensure the Group's ability to continue as a going concern;
· to provide an adequate return to shareholders;
· to support the Group's stability and growth;
· to provide capital for the purpose of further investments.
The Group actively and regularly reviews and manages its capital structure
to ensure an optimal capital structure and to maximise equity holder
returns, taking into consideration the future capital requirements of the
Group and capital efficiency, prevailing and projected profitability,
projected operating cash flows and projected strategic investment
opportunities. The management regards capital as total equity and reserves,
for capital management purposes. The Group currently do not have any loans
and the Directors do not intend to have any loans or borrowings.
25 TRANSITION TO IFRS 9 FINANCIAL INSTRUMENTS
IFRS 9 'Financial Instruments' is effective for periods beginning on or
after 1 January 2018 and has been adopted by the Company in the year. IFRS 9
sets out requirements for recognising and measuring financial assets and
financial liabilities and replaces IAS 39 'Financial Instruments:
Recognition and Measurement'. The impact on the consolidated financial
statements of the Company is detailed below.
Classification of financial assets
IFRS 9 contains a new classification and measurement approach for financial
assets that reflects the business model in which assets are managed and the
cash flow characteristics of the assets.
IFRS 9 contains three principal classification categories for financial
assets: measured at amortised cost, fair value through other comprehensive
income and fair value through profit or loss. The standard eliminates the
existing IAS 39 categories of held to maturity, loans and receivables and
available for sale. The new classification requirements do not impact the
accounting for the Group's financial assets.
Impairment of financial assets
IFRS 9 replaces the incurred loss model in IAS 39 with a forward-looking
'expected credit loss' model. The new impairment model will apply to
financial assets measured at amortised cost. There is no impact on the
values reported in the financial statements from adopting IFRS 9 in respect
of expected credit losses.
Cash and cash equivalents
Cash and cash equivalents are held at banks with a strong credit rating and
are not subject to any period of notice. The Group typically maintains a low
value of cash and cash equivalents. There is no impact on the values
reported in the financial statements from adopting IFRS 9 in respect of
expected credit losses.
Classification of financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for the
classification of financial liabilities. The classification requirements of
IFRS 9 do not impact the financial statements.
Transition
There is no impact on the financial statements from the adoption of IFRS 9.
Shareholder Information
Financial calendar
Group's year end: 30 April
Quarterly interim dividends paid: July, October, January and April
Special dividend paid: July
Annual results announced: July
Annual General Meeting: September
Group's half year: 31 October
Half year results announced: December
Share prices and performance information
The Company's Ordinary shares and the Zero Dividend Preference shares issued
through SDVP are listed on the London Stock Exchange Main Market.
The net asset values are announced weekly to the London Stock Exchange and
published monthly via the AIC.
Information about the Group can be obtained on the Chelverton website at
www.chelvertonam.com [3]. Any enquiries can also be e-mailed to
cam@chelvertonam.com.
Share register enquiries
The register for the Ordinary shares and the Zero Dividend Preference shares
are maintained by Share Registrars Limited. In the event of queries
regarding your holding, please contact the Registrar on 01252 821390.
Changes of name and/or address must be notified in writing to the Registrar.
Company Summary
History
The Company was launched on 12 May 1999, raising GBP21.38 million before
expenses, by a placing of 15,000,000 Ordinary shares and, through its former
subsidiary company, Small Companies PLC, 6,250,000 Zero Dividend Preference
shares and 31,260 Preference shares. A further 750,000 Ordinary shares were
issued as a result of a placing for cash on 3 March 2000 and on 26 October
2005 a further 500,000 shares were issued. The subsidiary, Small Companies
PLC, was placed into members' voluntary liquidation on 30 April 2007,
following which the capital entitlements of the Zero Dividend Preference and
Preference shares were repaid.
A further subsidiary, Chelverton Small Companies ZDP PLC, was incorporated
on 13 July 2012, to issue Zero Dividend Preference shares. A total of
8,500,000 Zero Dividend Preference shares were issued on 24 August 2012, and
a further 849,000 on 24 March 2017. This subsidiary was placed into members'
voluntary liquidation on 5 January 2018, following which the capital
entitlements of the Zero Dividend Preference shares were repaid.
Group structure
The Company has in issue one class of Ordinary share. In addition, it has a
wholly owned subsidiary, SDVP, through which Zero Dividend Preference shares
have been issued. SDVP was incorporated on 25 October 2017 and has a capital
structure comprising unlisted Ordinary shares and Zero Dividend Preference
shares listed on the Official List and traded on the London Stock Exchange.
SDVP was incorporated specifically for the issue of Zero Dividend Preference
shares.
On 8 March 2018, SDVP issued 12,780,083 Zero Dividend Preference shares at
100p per share. The expenses of the placing were borne by the Company. On 11
April 2018, SDVP issued a further 1,419,917 Zero Dividend Preference shares
at 103p per share (a premium of 3p per share) and net proceeds of
GBP1,500,000. On the 10 and 15 May 2018, SDVP issued a further 100,000 and
200,000 Zero Dividend Preference shares at 104p per share (a premium of 4p
per share), and net proceeds of GBP313,000. Pursuant to a loan agreement
between SDVP and the Company, SDVP has lent the proceeds of the placing to
the Company. The loan is non-interest bearing and is repayable three
business days before the Zero Dividend Preference share redemption date of
30 April 2025 or, if required by SDVP, at any time prior to that date in
order to repay the Zero Dividend Preference share entitlement. The funds are
to be managed in accordance with the investment policy of the Company.
A contribution agreement between the Company and SDVP has also been made
whereby the Company will undertake to contribute such funds as will ensure
that SDVP will have in aggregate sufficient assets on 30 April 2025 to
satisfy the final capital entitlement of the Zero Dividend Preference
shares.
Total net assets and market capitalisation at year end
As at 30 April 2019, the Company had a market capitalisation of GBP36,175,000
(2018: GBP52,083,000) and total net assets amounted to GBP44,646,000 (2018:
GBP51,794,000).
Management fee
The fee payable to the Investment Manager is 1% of the combined gross assets
of the Group.
Capital structure
(MORE TO FOLLOW) Dow Jones Newswires
July 11, 2019 02:02 ET (06:02 GMT)
© 2019 Dow Jones News
