CHELVERTON SMALL COMPANIES DIVIDEND
TRUST PLC
Annual Report for the full year to 30
April 2017
A copy of the Company's Annual Report for the year ended
30 April 2017 will shortly be
available to view and download from the dedicated page on
Chelverton Asset Management’s website
http://chelvertonam.com. Neither the contents of this website
nor the contents of any website accessible from hyperlinks on this
website (or any other website) is incorporated into or forms part
of this announcement.
Printed copies of the Annual Report will be sent to shareholders
shortly. Additional copies may be obtained from the Corporate
Secretary – Maitland Administration services Limited, Springfield
Lodge, Colchester Road, Chelmsford, Essex CM2 5PW.
The Annual General Meeting of the Company will be held on
Thursday 7 September 2017 at
11.00am.
The following text is copied from the Annual Report &
Accounts.
Strategic Report
The Strategic Report comprising pages 1 to 13 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 Small Companies Dividend Trust PLC (‘the Company’)
and its subsidiary Chelverton Small Companies ZDP PLC (‘SCZ’)
together form the Group. The Group’s funds are invested principally
in 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
Capital |
30
April
2017 |
30
April
2016 |
%
change |
Total net assets
(£’000) |
41,724 |
35,077 |
18.96 |
Net asset value per
Ordinary share |
248.35p |
211.95p |
17.18 |
Mid-market price per
Ordinary share |
230.00p |
190.50p |
20.73 |
Discount |
7.39% |
10.12% |
|
Net asset
value per Zero Dividend Preference share |
131.65p |
123.87p |
6.28 |
|
|
Mid-market price per
Zero Dividend Preference share |
136.00p |
127.50p |
6.67 |
Premium |
3.30% |
2.93% |
|
|
Year
ended |
Year
ended |
|
|
30
April |
30
April |
|
Revenue |
2017 |
2016 |
%
change |
Return per Ordinary
share |
12.17p |
11.23p |
8.37 |
Dividends declared per
Ordinary share |
7.95p |
7.50p |
6.00 |
Special Dividends
declared per Ordinary share |
1.86p |
1.60p |
16.25 |
Total
Return |
|
|
|
Total return on
Group’s net assets* (prior to deduction for provision of Zero
Dividend Preference share entitlement) |
21.95% |
10.92% |
|
Total return on
Group’s net assets* |
23.46% |
12.42% |
|
Ongoing charges** |
1.93% |
1.88% |
|
* 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.
Chairman’s Statement
Results
The Company’s consolidated net asset value per Ordinary share as
at 30 April 2017 was 248.35p (2016:
211.95p), an increase over the year of 17.2%, and the ordinary
share price on that date was 230.00p per share (2016: 190.50p). In
the year total dividends of 9.81p per Ordinary share were paid and
proposed, including a special dividend of 1.86p. During the same
period the MSCI Index increased by 20.2% and the MSCI Small Cap
Index increased by 20.2%. Total assets less current liabilities at
the year end, excluding Zero Dividend Preference shares but
including revenue reserves, were £54.0m (2016: £45.6) and the total
net assets were £41.7m (2016: £35.1m).
The Company was launched on 12 May
1999, and the net asset value per Ordinary share has risen
by 148.35% and a total of 165.66p has been paid in dividends. Since
the year end, the net asset value per Ordinary share has fallen to
241.67p as at 30 June 2017; the
premium to market NAV is currently some 1.79%.
The increased share price and its move to a premium relative to
the net asset value per share enabled the Board to issue 250,000
ordinary shares on 24 March at 232.56p per share. Following the
year end, a further 550,000 ordinary shares were issued, taking the
total share capital to 17,350,000.
The Company has had another good year, with shares prices rising
across the course of the year, a full recovery from the severe
reduction in share prices following the result of the Referendum a
year ago.
The current underlying portfolio dividend growth has again been
positive in the past year with a portfolio yield today of 4.47%. As
a result of the underlying dividend growth and a number of special
dividends paid by portfolio companies in the year, it has been
possible to increase the dividend paid to shareholders, including a
special dividend, and also to retain the maximum revenue allowable
to add to the revenue reserves.
The Company’s portfolio is currently invested in 71 companies
spread across 26 sectors. This spread creates a well-diversified
portfolio, which should lead to steady revenue growth and, in time,
capital growth.
Zero Dividend Preference shares
(‘ZDP’)
The ZDP shares are held in a wholly owned subsidiary, Chelverton
Small Companies ZDP PLC. The net asset value per ZDP share at
30 April 2017 was 131.65p per share
(2016: 123.87p) with a share price of 136.00p per share (2016:
127.50p), an increase over the year of 6.3% and 6.7%
respectively.
The ZDP shares have traded throughout the year at a premium and
as at 30 June 2017 trade at a 2.56%
premium. As at the company year end the ZDP shares provided capital
gearing of 22.8% and are 4.2 times covered to final redemption
value of 136.70p on 8 January 2018
with an annual gross coupon of 6%. A further 849,000 ZDP were
issued on 24 March at 135.00p.
The Board have publicly stated that it is their intention to
renew and increase the number of ZDP shares in issue in
January 2018 whilst at the same
looking to increase further the number of Ordinary shares in
issue.
Dividend
The Board has declared a fourth interim dividend of 2.40p per
Ordinary share (2016: 2.40p) which when added to the three
quarterly interim dividends of 1.85p per Ordinary share (2016:
1.70p) brings the total to 7.95p (2016: 7.5p) in respect of the
year ended 30 April 2017, an increase
of 6.0% over the previous year. In addition the Board has declared
a special dividend of 1.86p per Ordinary share to be paid with the
fourth interim dividend. Shareholders will effectively receive a
fourth dividend of 4.26p per Ordinary share. This equates to a
total dividend for the year of 9.81p per Ordinary share.
As has been said before, it remains the Board’s intention, over
time, to move the dividend profile gradually to a position where
the four interim dividends paid are equal. This will be achieved by
maintaining the fourth interim dividend at the same level and
increasing the first, second and third dividends in future years to
reflect earnings.
The Company has revenue reserves which after payment of the
fourth interim dividend and special dividend represent some 135% of
the current annual dividend or 13.30p per Ordinary share.
Outlook
The last year has been a turbulent one politically with the EU
Referendum, terrorist incidents and the Election. The indecisive
outcome of the General Election resulting in a minority government
has contributed to increased uncertainty.
However, even in these uncertain times, it is important to
emphasise that the companies that have been selected for inclusion
in the Company’s portfolio are profitable, generate significant
cash flows, have low gearing, or indeed in a number of cases have
no gearing, and at the point of purchase are well priced.
The precise outcome of the negotiations with the EU will not be
known for at least two years which again will inevitably cause some
uncertainty. Given the UK focus of the portfolio the impact on the
economy will be critical. This underlines the importance of
selecting strong companies with good fundamentals.
Lord Lamont of Lerwick
Chairman
14 July
2017
Investment Manager’s Report
The year to 30 April 2017 saw a
steady growth in the Company’s net asset value per share, with a
solid increase in the dividend of 6%, which was in line with the
targeted increase. In addition, the Company has announced a special
dividend of 1.86p, which has been aggregated with the fourth
interim dividend. As we said last year, more companies are choosing
to return excess cash to shareholders by paying special dividends
and therefore, in turn, these unexpected receipts will be passed on
as special dividends to the Company’s shareholders.
It is pleasing to be able to report that the share price has
moved during the year so that it is more closely tracking the
reported net asset value per share. In the last few months the
shares have periodically traded at a premium to the net asset value
and consequently the Board have been able to issue blocks of shares
to meet investor demand.
Given the solid dividend growth and at the same time the maximum
allocation of surplus revenue to revenue reserves, it would be
reasonable to expect continued dividend growth over the next few
years. It is our objective to continue paying a steadily increasing
dividend and to then pay ‘excess revenue’ by way of a Special
Dividend. The fourth interim dividend of 2.40p was aggregated with
the Special Dividend of 1.86p to make a total payment of 4.26p.
Portfolio Review
In the last year we have had four takeovers (2016: 2): Premier
Farnell, Charlemagne Capital, Avesco Group and Dee Valley Group.
Whilst the takeover of Premier Farnell and Charlemagne Capital did
not make a material difference to the net asset value, the sale of
Dee Valley Group was positive and the takeover of Avesco Group was
very positive and beyond all expectations. These proceeds were
quickly recycled into new higher yielding holdings.
Including the four takeovers above, thirteen holdings from the
portfolio were sold in their entirety (2015: 12): Ashmore Group,
Avesco Group, Charlemagne Capital, Dee Valley Group,
Electrocomponents, Fenner, Grafenia, National Express Group, Novae
Group, NWF Group, Premier Farnell, RWS Holdings and Watkin Jones
Group.
Shareholdings were reduced in fifteen companies after strong
share price performances: Amino Technologies, Bioventix, Chesnara,
Dairy Crest Group, Galliford Try, Games Workshop Group, Go-Ahead
Group, GVC Holdings, Intermediate Capital Group, KCOM Group, Morgan
Sindall Group, Personal Group Holdings, Polar Capital Holdings,
Sanderson Group and StatPro Group.
Ten new shareholdings were added to the Company’s portfolio in
the year: Anglo African Oil and Gas – an AIM traded oil and gas
producer in the Republic of the Congo; Conviviality – independent drinks
distributor; DFS Furniture – upholstery retailer; Diversified Gas
and Oil – US based producer of gas and oil; Gattaca – provider of
specialist recruitment services; Murgitroyd Group – international
intellectual property attorneys; Produce Investments – a leading
operator in the fresh potato and daffodil sectors; Ramsdens
Holdings – a diversified financial services provider and retailer;
UP Global Sourcing Holdings – branding, sourcing and distribution
of consumer products; and Victrex – a producer of high performance
polymer solutions.
The shareholdings were increased in thirty one companies which
were in the portfolio at the beginning of the year, being almost
half the portfolio.
Outlook
There has already been a lot of coverage of matters political
and pertaining to Brexit over the past fifteen months. As we have
met our investee companies over the past year we have of course
asked them about the implications of ‘Brexit’ and generally their
mood is one of ‘cautious neutrality’. Those that trade rather more
with countries in the EU generally already have fully functioning
operational subsidiaries in various countries across Europe and therefore there would appear to be
no need to change the status quo, whatever the outcome of
negotiations.
As an exercise to try and scope the scale of the ‘Brexit’
problem, we aggregated all of the sales destinations of all of our
portfolio companies and the results were that 73% of sales were
made in the UK, 13% into Europe,
9% into North America and 5% to
the Rest of the World. The portfolio has ten companies who have
more than 30% of their sales to Europe and they represent the bulk of the
portfolio’s European sales. This exercise merely confirmed what we
have been saying since the fund was launched 18 years ago: that it
is very ‘UK-centric’ and that the health and growth of the UK
economy is the biggest determinant of the success and prosperity of
the bulk of the companies.
In all of the discussions and newspaper column inches, the tone
seems to be that EU countries are doing the UK a favour by buying
goods and services from British companies. However, in the real
world we know, for example, that French companies would prefer to
buy from French suppliers and German companies from German
suppliers, and will only look elsewhere in the event that the
service or product cannot be supplied by French or German
suppliers. In reality, UK companies have to compete not only with
all other potential suppliers from the EU but also suppliers from
around the world and they only win business on the basis of
providing the right product, at the right quality, on time at a
comparable or cheaper price. Clearly if the UK were to leave the EU
with no deal then UK companies would have to manage the tariff
barriers imposed by the EU; however, the ‘Brexit’ decline in
sterling has already gone a long way to equalising this.
The portfolio performance over the past month, since the
election, has been poor and reflects the market uncertainty created
by the election result. Looking at the portfolio and the strength
and trading of the individual companies, we feel that this has been
an overreaction, albeit understandable in the circumstances. We
feel that the valuation of the portfolio is not stretched and would
expect to see further progress in the current year.
David Horner
Chelverton Asset Management Limited
14 July 2017
Breakdown of Portfolio by Industry
at 30
April 2017
Market sector |
Market value |
% of
portfolio |
Financial
Services |
7,785 |
14.4 |
Construction &
Materials |
5,484 |
10.2 |
Support Services |
4,705 |
8.7 |
General Retailers |
3,401 |
6.4 |
Media |
2,538 |
4.7 |
Real Estate Investment
Trusts |
2,366 |
4.4 |
Travel &
Leisure |
2,269 |
4.3 |
Software &
Computer Services |
2,144 |
4.0 |
Food & Drug
Retailers |
2,140 |
4.0 |
Leisure Goods |
2,085 |
3.9 |
Food Producers |
1,994 |
3.7 |
Real Estate Investment
& Services |
1,893 |
3.5 |
Industrial
Engineering |
1,829 |
3.4 |
Oil & Gas
Producers |
1,685 |
3.1 |
Nonlife Insurance |
1,615 |
3.0 |
General
Industrials |
1,530 |
2.8 |
Industrial
Transportation |
1,389 |
2.6 |
Life Insurance |
1,359 |
2.5 |
Technology Hardware
& Equipment |
1,251 |
2.3 |
Household Goods &
Home Construction |
1,214 |
2.3 |
Equity Investment
Instruments |
760 |
1.4 |
Oil Equipment,
Services & Distribution |
722 |
1.3 |
Electronic &
Electrical Equipment |
529 |
1.0 |
Fixed Line
Telecommunications |
528 |
1.0 |
Pharmaceuticals &
Biotechnology |
373 |
0.7 |
Chemicals |
239 |
0.4 |
|
53,827 |
100.0 |
Breakdown of Portfolio by Market
Capitalisation
at 30 April 2017
Click here for graph.
Portfolio Statement
at 30 April 2017 |
|
Market
value |
%
of |
Security |
Sector |
£’000 |
portfolio |
StatPro Group |
Software &
Computer Services |
1,304 |
2.4 |
Amino
Technologies |
Technology Hardware
& Equipment |
1,251 |
2.3 |
McColl’s Retail
Group |
Food & Drug
Retailers |
1,230 |
2.3 |
Games Workshop
Group |
Leisure Goods |
1,219 |
2.3 |
Belvoir Lettings |
Real Estate Investment
& Services |
1,176 |
2.2 |
Acal |
Support Services |
1,128 |
2.1 |
Alumasc Group |
Construction &
Materials |
1,122 |
2.1 |
Curtis Banks
Group |
Financial
Services |
1,112 |
2.1 |
Braemar Shipping
Services |
Industrial
Transportation |
1,104 |
2.1 |
Galliford Try |
Household Goods &
Home Construction |
1,077 |
2.0 |
Connect Group |
Support Services |
1,071 |
2.0 |
Gattaca |
Support Services |
1,027 |
1.9 |
Jarvis Securities |
Financial
Services |
1,013 |
1.9 |
Moss Bros Group |
General Retailers |
1,000 |
1.9 |
Marston’s |
Travel &
Leisure |
998 |
1.9 |
Numis Corporation |
Financial
Services |
973 |
1.8 |
Diversified Gas &
Oil |
Oil & Gas
Producers |
960 |
1.8 |
Mucklow (A&J)
Group |
Real Estate Investment
Trusts |
960 |
1.8 |
Brown (N) Group |
General Retailers |
953 |
1.8 |
Polar Capital
Holdings |
Financial
Services |
939 |
1.7 |
Kier Group |
Construction &
Materials |
935 |
1.7 |
Personal Group
Holdings |
Nonlife Insurance |
930 |
1.7 |
Conviviality |
Food & Drug
Retailers |
910 |
1.7 |
Shoe Zone |
General Retailers |
900 |
1.7 |
Coral Products |
General
Industrials |
885 |
1.6 |
Park Group |
Financial
Services |
880 |
1.6 |
Low & Bonar |
Construction &
Materials |
873 |
1.6 |
Photo-Me
International |
Leisure Goods |
866 |
1.6 |
Dairy Crest Group |
Food Producers |
860 |
1.6 |
Sanderson Group |
Software &
Computer Services |
840 |
1.6 |
Brewin Dolphin
Holdings |
Financial
Services |
817 |
1.5 |
Chesnara |
Life Insurance |
764 |
1.4 |
GLI Finance |
Equity Investment
Instruments |
760 |
1.4 |
Clarke (T) |
Construction &
Materials |
750 |
1.4 |
Chamberlin |
Industrial
Engineering |
750 |
1.4 |
GVC Holdings |
Travel &
Leisure |
746 |
1.4 |
Epwin Group |
Construction &
Materials |
743 |
1.4 |
Anglo African Oil
& Gas |
Oil & Gas
Producers |
725 |
1.3 |
Cape |
Oil Equipment,
Services & Distribution |
722 |
1.3 |
Foxtons Group |
Real Estate Investment
& Services |
717 |
1.3 |
Ramsdens Holdings |
Financial
Services |
712 |
1.3 |
Town Centre
Securities |
Real Estate Investment
Trusts |
712 |
1.3 |
Regional REIT |
Real Estate Investment
Trusts |
694 |
1.3 |
Bloomsbury
Publishing |
Media |
685 |
1.3 |
Randall & Quilter
Investment |
Nonlife Insurance |
685 |
1.3 |
Centaur Media |
Media |
667 |
1.2 |
|
|
Market
value |
%
of |
Security |
Sector |
£’000 |
portfolio |
Orchard Funding
Group |
Financial
Services |
656 |
1.2 |
Macfarlane Group |
General
Industrials |
645 |
1.2 |
Morgan Sindall
Group |
Construction &
Materials |
636 |
1.2 |
Severfield |
Industrial
Engineering |
609 |
1.1 |
Hansard Global |
Life Insurance |
595 |
1.1 |
Wilmington Group |
Media |
595 |
1.1 |
Huntsworth |
Media |
591 |
1.1 |
Produce
Investments |
Food Producers |
570 |
1.1 |
Hilton Food Group |
Food Producers |
564 |
1.0 |
DFS Furniture |
General Retailers |
548 |
1.0 |
Intermediate Capital
Group |
Financial
Services |
546 |
1.0 |
XP Power |
Electronic &
Electrical Equipment |
529 |
1.0 |
KCOM Group |
Fixed Line
Telecommunications |
528 |
1.0 |
Go-Ahead Group |
Travel &
Leisure |
525 |
1.0 |
RPS Group |
Support Services |
507 |
0.9 |
Castings |
Industrial
Engineering |
470 |
0.9 |
Titon Holdings |
Construction &
Materials |
425 |
0.8 |
St. Ives |
Support Services |
396 |
0.7 |
RTC Group |
Support Services |
378 |
0.7 |
Bioventix |
Pharmaceuticals &
Biotechnology |
373 |
0.7 |
DX Group |
Industrial
Transportation |
285 |
0.5 |
Victrex |
Chemicals |
239 |
0.4 |
Murgitroyd Group |
Support Services |
198 |
0.4 |
Fairpoint Group |
Financial
Services |
137 |
0.3 |
UP Global Sourcing
Holdings |
Household Goods &
Home Construction |
137 |
0.3 |
Total
Portfolio |
|
53,827 |
100.0 |
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 SCZ.
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.
· There is no set limit on the Company’s
gearing.
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 2017 of 9.81p (2016: 9.10p) per Ordinary
share has been declared to shareholders by way of three payments of
1.85p per Ordinary share and a fourth interim dividend payment of
2.40p per Ordinary share and a special dividend of 1.86p per
Ordinary share.
· The NAV per Ordinary share at 30 April 2017 was 248.35p (2016: 211.95p).
· The ongoing charges (including investment
management fees and other expenses but excluding exceptional items)
for the year ended 30 April 2017 were
1.93% (2016: 1.88%).
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 notional
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 Company’s and SCZ’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 24 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
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.
Refinancing Bank
SCZ might issue Zero Dividend Preference shares but due to
adverse market conditions the demand might be limited. This would
restrict the growth capacity of the Company and potentially cause
shrinkage of the portfolio. The Investment Manager monitors market
conditions, receives regular updates from the Company’s Brokers and
meets potential investors in person in an effort to the extent of
investor demand.
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 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 suppliers that their operations are well managed
and they are taking appropriate action to monitor and mitigate
risk. The Directors have a reasonable expection 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.
On 1 August 2016, the Company
changed its name from Small Companies Dividend Trust plc.
The Group financial statements consolidate the audited annual
report and financial statements of the Company and SCZ, its
subsidiary undertaking, for the year ended 30 April 2017. The Company owns 100% of the
issued ordinary share capital of SCZ, which was incorporated on
13 July 2012.
Further information on the capital structure of the Company and
SCZ can be found on pages 68 and 69.
AIFM
The Board has registered itself 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, 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 suppliers,
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 on pages 2
and 3 and the Investment Manager’s Report on pages 4 to 9.
Dividends declared/paid
|
Payment date |
30
April 2017
pence |
30 April
2016
pence |
First interim |
5
October 2016 |
1.85 |
1.70 |
Second interim |
5
January 2017 |
1.85 |
1.70 |
Third interim |
31 March
2017 |
1.85 |
1.70 |
Fourth interim |
3 July
2017 |
2.40 |
2.40 |
|
|
7.95 |
7.50 |
Special dividend |
3 July
2017 |
1.86 |
1.60 |
|
|
9.81 |
9.10 |
The Directors have not recommended a final dividend in respect
of the year ended 30 April 2017.
Diversity
The Board of Directors of the Company comprised four male
Directors in the year to 30 April
2017. 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. No new appointments
to the Board have been made or are contemplated at present.
The Strategic Report is signed on behalf of the Board by
Lord Lamont of Lerwick
Chairman
14 July
2017
Directors
The Directors are:
The Rt Hon. Lord Lamont of Lerwick*+ (Chairman) was Chancellor of the
Exchequer between 1990 and 1993. Prior to his 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 BC Partners and Stanhope Capital.
Lord Lamont was appointed to the Board on 27 February 2006.
David Harris*+ is chief
executive of InvaTrust Consultancy Limited. The company specialises
in marketing issues relating to the investment and financial
services industry. He writes regular articles for the national and
trade press on investment matters. From 1995 to 1999 he was a
director of the AIC with specific responsibility for training and
education of independent financial advisers. He is a non-executive
director of the Character Group PLC, Aseana Properties Limited,
F&C Managed Portfolio Trust PLC and Manchester and London Investment Trust
PLC.
Mr Harris was appointed to the Board on 30 May 2000 and served as Audit Committee
Chairman until 15 June 2016.
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 and BFS Investments PLC 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 and marketing. He is the
Business Development Director of Chelverton Asset Management
Limited. He is 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 Lazard World Trust Fund SICAF S.A.,
Aberdeen Private Equity Fund Limited, 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.
* Independent
+ Audit Committee member
Investment Manager, Secretary 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
largely owned by its employees.
Chelverton is a specialist fund manager focused on UK mid and
small companies and has a successful track record. At 31 May 2017, Chelverton had total funds under
management of approximately £650 million including two investment
trust companies and two OEICs. The fund management team comprises
David Horner, David Taylor 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.
Registrar: Share Registrars
Limited
Share Registrars Limited is a CREST registrar established in
2004 and 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 2017.
Directors
The Directors who served during the year ended 30 April 2017 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 with Chelverton
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 on pages 22 to 28.
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 on page 13.
Substantial shareholdings
The Directors have been informed of the following notifiable
interests in the voting shares of the Company at 30 April 2017:
|
Number
of |
%
of |
Ordinary
shares |
shares |
voting
rights |
Hargreaves Lansdown
Asset Management |
3,018,024 |
17.96% |
Alliance Trust
Savings |
1,400,603 |
8.34% |
Barclays Wealth
Management (UK) |
850,997 |
5.07% |
TD Direct
Investing |
771,895 |
4.59% |
Halifax Share
Dealing |
735,220 |
4.38% |
Integrated
Financial |
694,915 |
4.14% |
AJ Bell
Securities |
692,805 |
4.12% |
Interactive Investor
Sharedealing |
679,637 |
4.05% |
Charles Stanley &
Co |
672,444 |
4.00% |
Jarvis Investment
Management |
661,441 |
3.94% |
Equinti |
620,693 |
3.70% |
Consistent Unit Trust
Management |
600,000 |
3.57% |
Jupiter Asset
Management |
600,000 |
3.57% |
Philip J Milton &
Company |
622,275 |
3.76% |
The Company has not been notified of any changes to the above
holdings between 30 April 2017 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 7 September
2017. The Notice of Meeting is set out on pages 72 to
76.
In addition to the ordinary business of the meeting, there are a
number of items of special business, as follows:
Remuneration Policy
An Ordinary Resolution was passed at the AGM held in 2014
approving the Remuneration Policy. This Policy must be approved at
least every three years, therefore it will be submitted at this
year’s AGM as Resolution 8. The proposed Policy is set out on page
33 of the Directors’ Remuneration Report, which if approved, shall
take effect immediately after the end of the Annual General
Meeting. There are no substantive changes to the Policy that is
already in place.
Authority to issue shares and
disapply pre-emption rights
An Ordinary Resolution was passed at the last AGM held on
8 September 2016 giving Directors
authority, pursuant to Section 551 of the Companies Act 2006, to
allot Ordinary shares up to an aggregate nominal value equal to
£1,379,167 (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 £1,445,833, being one-third of the Ordinary
shares in issue at the date of this report, as set out in
Resolution 9 in the Notice of Meeting. This authority will expire
at the AGM to be held in 2018 or 15 months from the passing of the
Resolution, whichever is earlier.
A Special Resolution was also passed on 8
September 2016 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 1,735,000 Ordinary shares at
the date of this report, as set out in the Notice of Meeting as
Resolution 10.
This authority will also cover the sale of shares held in
Treasury, and will expire at the AGM to be held in 2018 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 8 September
2016 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 12 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 2,600,765 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 2018 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 SCZ, 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 12 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 2018, 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 c.1% 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 on pages 68 to 69.
· Details of the substantial shareholders in the
Company are listed on page 18.
· 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 on pages 18 and 19.
· There are no restrictions concerning the transfer
of securities in the 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 on pages 1 to 13.
Special business at the SCZ Annual
General Meeting
The SCZ’s AGM will be held on Thursday 7
September 2017 following the Company’s AGM. The Notice of
Meeting is set out in the SCZ Annual Report.
In addition to the ordinary business of the meeting, there are a
number of items of special business, as follows:
Authority to issue shares
An Ordinary Resolution was passed at the last AGM held on
8 September 2016 giving Directors
authority, pursuant to Section 551 of the Companies Act 2006, to
allot shares up to an aggregate nominal value equal to £2,833,333
(which figure represented one-third of the issued share capital of
the SCZ). 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 £3,166,333, being one-third of the Zero Dividend Preference
shares in issue at the date of this report, as set out in
Resolution 6 in the SCZ Notice of Meeting. This authority will
expire at the AGM to be held in 2018 or 15 months from the passing
of the Resolution, whichever is earlier.
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 Report 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 24 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 until such time as the audit tender process for
the 2018 audit is completed, and Resolution 7 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 have 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
14 July
2017
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 2017 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 for investment companies.
The Board has taken steps to adhere to its principles 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, and a copy of the Governance Code
can be obtained at www.frc.org.uk.
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 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.
The Company has arranged a Directors’ and Officers’ Liability
insurance policy which includes cover for legal expenses.
The Articles of Association of both the Company and SCZ provide
the Directors, subject to the provisions of UK legislation, with an
indemnity in respect of liabilities which they may sustain or incur
in connection with their appointment. Save for this, there are no
qualifying third-party indemnity provisions in force.
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 and the Investment Manager. Brief biographical details of
the Directors can be found on page 15.
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 2017 the Board met four 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 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 is deemed to be independent of the Investment Manager.
Despite being on the Board for over nine years, the Board believes
Lord Lamont and Mr Harris are also independent. They all continue
to perform their roles effectively. Mr van
Heesewijk is not deemed independent by virtue of his
employment by Chelverton. In accordance with the requirements of
the Listing Rules, Mr van Heesewijk
is subject to annual re-election due to this connection. The
majority of the Board, being three of the four Directors, is
therefore 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 and Mr
Harris will offer themselves 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. Mr Myles will also stand
for re-election as he was last re-elected in 2014. The Board
recommends that shareholders vote for the re-election of Lord
Lamont, Mr Harris, Mr Myles and Mr van
Heesewijk 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 2017, 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 continues. 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
2017. As a result of the evaluation, the Board considers
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 reappointment 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 31 to 34 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;
· 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; and
· 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
71. 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 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 at each meeting. 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, and no tender
has been undertaken for the audit of the Group. The Audit Partner
for the Group has been rotated once since their initial
appointment, most recently in respect of the financial year ended
30 April 2012. In accordance with
Auditing Practice Board Ethical Standard 3 (Revised) the audit will
be put to tender in 2017 for the 2018 audit.
Hazlewoods LLP has indicated its willingness to continue in
office as Auditor of the Group until such time as the audit tender
process for the 2018 audit is completed. 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 re-appointment 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. 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
14 July
2017
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, 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 37 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 2014
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; therefore, it will be
submitted at this year’s AGM.
An Ordinary Resolution to approve to receive and approve the
Remuneration Report will be put to shareholders at the forthcoming
AGM on 7 September 2017.
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
2017. During the year ended 30 April
2017, the fees were continued at a rate of £20,000 for the
Chairman and £17,500 for other Directors, with an additional
payment of £2,500 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.
Click here for graph.
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 2017 (audited)
The Directors who served in the year received the following
emoluments wholly in the form of fees:
Fees/Total
|
Year
to
30 April 2017 |
Year
to
30 April 2016 |
Lord Lamont
(Chairman) |
20,000 |
20,000 |
D Harris |
17,813 |
20,000 |
H Myles |
19,687 |
17,500 |
W van Heesewijk* |
– |
– |
|
57,500 |
57,500 |
* William van Heesewijk has waived his entitlement to fees.
During the year no Directors received taxable benefits (2016:
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 Ordinary shares
held at |
Number
of ZDP shares held at |
Number
of Ordinary shares
held at |
Number
of ZDP shares held at |
Director |
30
April 2017 |
30
April 2017 |
30 April
2016 |
30 April
2016 |
Lord Lamont
(Chairman)* |
69,588 |
10,000 |
69,048 |
10,000 |
D Harris |
5,802 |
Nil |
5,802 |
Nil |
W van Heesewijk |
90,000 |
Nil |
90,000 |
Nil |
H Myles |
Nil |
Nil |
Nil |
Nil |
* Lord Lamont purchased 216 Ordinary Shares on 7 July 2017 under a dividend reinvestment
plan.
Significance of spend on pay
|
|
|
Change |
|
2017 |
2016 |
% |
Dividends paid to Ordinary
shareholders in the year |
1,585,000 |
1,291,000 |
22.78 |
Total remuneration paid to
Directors |
57,500 |
57,500 |
– |
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 2016 (Resolution 2) was
approved by shareholders at the Annual General Meeting held on
8 September 2016. The votes cast by
proxy were as follows:
|
Number of votes |
% of
votes cast |
For |
1,125,488 |
100.00 |
Against |
0 |
0.00 |
At Chairman’s
discretion |
0 |
0.00 |
Total votes cast |
1,125,488 |
|
Number of votes
abstained |
0 |
|
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 £112,500, 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 3) was approved
by shareholders at the Annual General Meeting held on 17 September 2014. The votes cast by proxy were
as follows:
|
Number of votes |
% of
votes cast |
For |
2,034,679 |
99.65 |
Against |
7,070 |
0.35 |
At Chairman’s
discretion |
0 |
0.00 |
Total votes cast |
2,041,749 |
|
Number of votes
abstained |
1,200 |
|
|
|
|
|
Expected
Fees for Year to |
Fees for
Year to |
|
30 April
2018 |
30 April
2017 |
Chairman basic
fee |
20,000 |
20,000 |
Non-Executive Director
basic fee |
17,500 |
17,500 |
Audit Committee
Chairman additional fee |
2,500 |
2,500 |
The Company intends to continue with the Directors’ Remuneration
Policy over the next financial year on the above basis. 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 on pages 31 to 34 was
approved by the Board on 14 July
2017.
On behalf of the Board
Lord Lamont of Lerwick
Chairman
14 July 2017
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 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 Company
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
14 July
2017
Auditor’s Report
to the members of Chelverton Small Companies Dividend Trust
PLC
We have audited the Group financial statements of Chelverton
Small Companies Dividend Trust PLC for the year ended 30 April 2017 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. The financial
reporting framework that has been applied in their preparation is
applicable law and IFRSs as adopted by the EU.
This report is made solely to the Group’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
Group’s members those matters we are required to state to them in
an audit 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 Group and the Group’s members as a body, for
our audit work, for this report or for the opinions we have
formed.
Respective responsibilities of
Directors and Auditor
As explained more fully in the Statement of Directors’
Responsibilities set out on pages 35 and 36, the Directors are
responsible for the preparation of the Group financial statements
and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the Group
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards required us to
comply with the Auditing Practices Board’s (‘APB’s’) Ethical
Standards for Auditors.
Scope of the audit of the financial
statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the Directors; and the overall
presentation of the financial statements. In addition, we read all
the financial and non-financial information in the Strategic Report
and Directors’ Report to identify material inconsistencies with the
audited financial statements and to identify any information that
is apparently materially incorrect based on, or materially
inconsistent with the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent material
misstatements or inconsistencies, we consider the implications for
our report.
Opinion on financial statements
In our opinion the Group financial statements:
· give a true and fair view of the state of the
Group’s and of the Company’s affairs as at 30 April 2017 and of its net return and
comprehensive income for the year then ended;
· have been properly prepared in accordance with
IFRSs as adopted by the EU; and
· have been prepared in accordance with the
requirements of the Companies Act 2006 and Article 4 of the IAS
Regulations.
Our assessment of risks of material
misstatement
Without modifying our opinion, we highlight the following
matters that are, in our judgement, likely to be most important to
users’ understanding of our audit. Our audit procedures relating to
these matters were designed in the context of our audit of the
financial statements as a whole, and not to express an opinion on
individual transactions, balances or disclosures.
Allocation of costs between capital
and revenue
The Group is required to apportion its expenses between revenue
and capital. This allocation is important as the company can only
pay dividends out of revenue. The split has to be performed on the
basis of the Board’s expected long-term capital and revenue
returns. Our audit work included, but was not restricted to, a
detailed review of the actual dividend and capital income received
in the past 11 years compared to the Board’s expected long-term
capital and revenue returns. The Group’s accounting policy on this
allocation is included in note 1.
Revenue recognition
Investment income is the Group’s main source of revenue and is
recognised when the Group’s right to the return is established in
accordance with the Statement of Recommended Practice. Our audit
work included, but was not restricted to, a detailed review of
those sources of income recorded in the financial statements and
further consideration of other potential sources of income. The
Group’s accounting policy on income is included in note 1 and its
disclosures about income are included in note 2.
Management override of financial
controls
The Group operates a system of financial controls to mitigate
its vulnerability to fraud and its financial statements to material
error and is reliant upon the efficacy of these controls to ensure
that its financial statements present a true and fair view. The
financial statements contain a number of significant accounting
estimates that require an element of judgement on behalf of
management and that are, therefore, potentially open to
manipulation. Our audit work included, but was not restricted to, a
review of all significant management estimates and detailed
consideration of all material judgements applied during the
completion of the financial statements. We also reviewed material
journal entries processed by management during the period. The
Group’s principal accounting policies are included in note 1.
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 a misstatement or an
omission from the financial statements or related disclosures that
would make it probable that the judgement of a reasonable person
relying on the information would have been changed or influenced by
the misstatement or omission. 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 £457,000, which is 1% of the value of the Group’s total
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 judgement of
a reasonable person, relying on the information, would have been
changed or influenced by the misstatement or omission. Accordingly,
we established materiality for revenue items within the income
statement to be £108,000.
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, the custody of its investments
and the maintenance of the Group’s accounting records is outsourced
to third-party service providers. Accordingly, our audit work is
focused on obtaining an understanding of, and evaluating, internal
controls at the Group and the third-party service providers, 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.
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion based on the work undertaken in the course of the
audit:
· the part of the Directors’ Remuneration Report to
be audited has been properly prepared in accordance with the
Companies Act 2006;
· the information given in the Strategic Report and
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
· the Strategic Report and Directors’ Report have
been prepared in accordance with applicable legal requirements.
In the light of our knowledge and understanding of the Group and
its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report and the
Directors’ Report.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to the
Board if, in our opinion, information in the Strategic Report and
the Directors’ Report is:
· materially inconsistent with the information in
the audited financial statements; or
· apparently materially incorrect based on, or
materially inconsistent with, our knowledge of the Group acquired
in the course of performing our audit; or
· is otherwise misleading.
In particular, we are required to consider whether we have
identified any inconsistencies between our knowledge acquired
during the audit and the Directors’ statement that they consider
the Annual Report is fair, balanced and understandable and whether
the Annual Report appropriately discloses those matters that we
communicated to the Audit Committee which we consider should have
been disclosed.
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
· adequate accounting records have not been kept, or
returns adequate for our audit have not been received from branches
not visited by us; or
· the 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.
· the Directors’ statement, set out on page 20, in
relation to going concern; and
· the part of the Statement on Corporate Governance
relating to the Group’s compliance with the nine provisions of the
UK Corporate Governance Code specified for our review.
Scott
Lawrence (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Cheltenham
14 July
2017
Consolidated Statement of
Comprehensive Income
for the year ended 30 April
2017
|
Note |
Revenue
£’000 |
2017
Capital
£’000 |
Total
£’000 |
Revenue
£’000 |
2016
Capital
£’000 |
Total
£’000 |
Gains on investments
at fair value through profit or loss |
10 |
– |
6,642 |
6,642 |
– |
3,104 |
3,104 |
Investment income |
2 |
2,361 |
– |
2,361 |
2,180 |
– |
2,180 |
Investment management
fee |
3 |
(119) |
(357) |
(476) |
(115) |
(345) |
(460) |
Other expenses |
4 |
(224) |
(12) |
(236) |
(206) |
(2) |
(208) |
Net return before
finance costs and taxation |
|
2,018 |
6,273 |
8,291 |
1,859 |
2,757 |
4,616 |
Finance
costs |
6 |
– |
(633) |
(633) |
– |
(597) |
(597) |
Net return before
taxation |
|
2,018 |
5,640 |
7,658 |
1,859 |
2,160 |
4,019 |
Taxation |
7 |
– |
– |
– |
– |
– |
– |
Total comprehensive
income for the year |
|
2,018 |
5,640 |
7,658 |
1,859 |
2,160 |
4,019 |
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
pence |
pence |
pence |
pence |
pence |
pence |
Net return
per: |
|
|
|
|
|
|
|
Ordinary share |
8 |
12.17 |
34.03 |
46.20 |
11.23 |
13.05 |
24.28 |
Zero Dividend
Preference share |
8 |
– |
7.37 |
7.37 |
– |
7.02 |
7.02 |
|
|
|
|
|
|
|
|
|
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 65 form part of these financial
statements.
Consolidated and Parent Company
Statement of Changes in Net Equity
for the year ended 30 April
2017
|
|
Share
capital |
Share
premium account |
Capital
reserve |
Revenue reserve |
Total |
|
Note |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Year ended 30 April
2017 |
|
|
|
|
|
|
30 April 2016 |
|
4,138 |
12,403 |
15,992 |
2,544 |
35,077 |
Total comprehensive
income for the year |
|
– |
– |
5,640 |
2,018 |
7,658 |
Ordinary shares
issued |
|
62 |
519 |
– |
– |
581 |
Expenses of ordinary
share issue |
|
– |
(7) |
– |
– |
(7) |
Dividends paid |
9 |
– |
– |
– |
(1,585) |
(1,585) |
30 April 2017 |
|
4,200 |
12,915 |
21,632 |
2,977 |
41,724 |
Year ended 30 April
2016 |
|
|
|
|
|
|
30 April 2015 |
|
4,138 |
12,403 |
13,832 |
1,976 |
32,349 |
Total comprehensive
income for the year |
|
– |
– |
2,160 |
1,859 |
4,019 |
Dividends paid |
9 |
– |
– |
– |
(1,291) |
(1,291) |
30 April 2016 |
|
4,138 |
12,403 |
15,992 |
2,544 |
35,077 |
The notes on pages 46 to 65 form part of these financial
statements.
Consolidated and Parent Company
Balance Sheets
as at 30 April 2017
|
Note |
Group
2017
£’000 |
Group
2016
£’000 |
Company
2017
£’000 |
Company
2016
£’000 |
Non-current
assets |
|
|
|
|
|
Investments at fair
value through profit or loss |
10 |
53,827 |
45,376 |
53,827 |
45,376 |
Investments in
subsidiary |
12 |
– |
– |
13 |
13 |
|
|
53,827 |
45,376 |
53,840 |
45,389 |
Current
assets |
|
|
|
|
|
Trade and other
receivables |
13 |
262 |
333 |
262 |
333 |
Cash and cash
equivalents |
|
89 |
29 |
89 |
29 |
|
|
351 |
362 |
351 |
362 |
Total
assets |
|
54,178 |
45,738 |
54,191 |
45,751 |
Current
liabilities |
|
|
|
|
|
Trade and other
payables |
14 |
(146) |
(132) |
(159) |
(145) |
Zero Dividend
Preference shares |
15 |
(12,308) |
– |
– |
– |
Loan from
subsidiary |
16 |
– |
– |
(
12,308) |
– |
|
|
(12,454) |
(132) |
(12,467) |
(145) |
Total assets less
current liabilities |
|
41,724 |
45,606 |
41,724 |
45,606 |
Non-current
liabilities |
|
|
|
|
|
Zero Dividend
Preference shares |
15 |
– |
(10,529) |
– |
– |
Loan from
subsidiary |
16 |
– |
– |
– |
(10,529) |
|
|
– |
(10,529) |
– |
(10,529) |
Total
liabilities |
|
(12,454) |
(10,661) |
(12,467) |
(10,674) |
Net assets |
|
41,724 |
35,077 |
41,724 |
35,077 |
Represented
by: |
|
|
|
|
|
Share capital |
17 |
4,200 |
4,138 |
4,200 |
4,138 |
Share premium
account |
18 |
12,915 |
12,403 |
12,915 |
12,403 |
Capital reserve |
18 |
21,632 |
15,992 |
21,632 |
15,992 |
Revenue reserve |
18 |
2,977 |
2,544 |
2,977 |
2,544 |
Equity
shareholders’ funds |
|
41,724 |
35,077 |
41,724 |
35,077 |
The notes on pages 46 to 65 form part of these financial
statements.
These financial statements were approved by the Board of
Chelverton Small Companies Dividend Trust PLC and authorised for
issue on 14 July 2017.
Lord Lamont of Lerwick
Chairman
Company Registered Number: 03749536
Consolidated and Parent Company
Statement of Cash Flows
for the year ended 30 April
2017
|
Note |
2017
£’000 |
2016
£’000 |
Operating
activities |
|
|
|
Investment income
received |
|
2,419 |
2,158 |
Refund of loan
interest |
|
– |
2 |
Investment management
fee paid |
|
(457) |
(510) |
Administration and
secretarial fees paid |
|
(64) |
(59) |
Other cash
payments |
|
(185) |
(133) |
Net cash inflow
from operating activities |
20 |
1,713 |
1,458 |
Investing
activities |
|
|
|
Purchases of
investments |
|
(13,776) |
(14,714) |
Sales of
investments |
|
11,988 |
14,087 |
Net cash
(outflow)/inflow from investing activities |
|
(75) |
831 |
Financing
activities |
|
|
|
Issue of Zero Dividend
Preference shares |
|
1,146 |
– |
Issue of ordinary
shares |
|
581 |
– |
Expenses of ordinary
share issue |
|
(7) |
– |
Dividends paid |
9 |
(1,585) |
(1,291) |
Net cash
inflow/(outflow) from financing activities |
|
135 |
(1,291) |
Change in cash and
cash equivalents for year |
21 |
60 |
(460) |
Cash and cash
equivalents at start of year |
21 &
22 |
29 |
489 |
Cash and cash
equivalents at end of year |
21 &
22 |
89 |
29 |
Comprises of: |
|
|
|
Cash and cash
equivalents |
22 |
89 |
29 |
The notes on pages 46 to 65 form part of these financial
statements.
Notes to the Financial Statements
as at 30 April 2017
1 ACCOUNTING POLICIES
Chelverton Small Companies Dividend Trust PLC is a company
domiciled in the UK. The consolidated financial statements for the
year ended 30 April 2017 comprise the
financial statements of the Company and its subsidiary, SCZ
(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 accounting policies adopted in the preparation of the
consolidated financial statements are consistent with those of the
previous financial year.
There were no IFRS standards or IFRIC interpretations adopted
for the first time in these financial statements that had a
material impact on the Group’s financial statement.
At the date of authorisation of the financial statements, the
following Standards which have not been applied in these financial
statements were in issue but were not yet effective:
· IFRS 7 Financial Instruments: Disclosures – Amendments
requiring disclosures about the initial application of IFRS 9
(effective 1 January 2016 or
otherwise 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 Directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Group in future periods.
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, 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, SCZ, drawn up to the same accounting date.
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 profit of
£7,658,000 (2016: £4,019,000).
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 January 2017) 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
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% (2016: 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 income and capital gains respectively.
Cash and cash equivalents
Cash in hand and in banks 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.
Capital Reserve
Capital reserve (other) includes:
· gains and losses on the disposal of investments;
· exchange difference 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.
Revenue Reserve
This reserve includes net revenue recognised in the revenue
column of the Statement of Comprehensive Income.
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
|
|
|
|
2017 |
2016 |
|
£’000 |
£’000 |
Income from listed
investments |
|
|
UK dividend
income |
2,009 |
1,962 |
Overseas dividend
income |
255 |
177 |
Property income
distibution |
97 |
39 |
Other
income |
|
|
Refund of loan
interest |
– |
2 |
Total
income |
2,361 |
2,180 |
Total income
comprises: |
|
|
Dividends |
2,361 |
2,178 |
Interest |
– |
2 |
|
2,361 |
2,180 |
3 INVESTMENT MANAGEMENT FEE
|
2017 |
|
|
2016 |
|
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Investment management
fee
|
119 |
357 |
476 |
115 |
345 |
460 |
At 30 April 2017 there
were amounts outstanding of £72,000 (2016: £53,000). |
4 OTHER EXPENSES
|
|
|
|
|
|
|
2017 |
|
2016 |
|
|
£’000 |
|
£’000 |
|
Administration and
secretarial fees |
64 |
|
64 |
|
Directors’
remuneration (note 5) |
58 |
|
58 |
|
Auditor’s
remuneration: |
|
|
|
|
audit
services* |
21 |
|
20 |
|
non-audit
services* |
3 |
|
3 |
|
Insurance |
4 |
|
4 |
|
Other
expenses* |
86 |
|
59 |
|
|
236 |
|
208 |
|
Subsidiary operating
costs |
(12) |
|
(2) |
|
|
224 |
|
206 |
|
* The above amounts
include irrecoverable VAT where applicable. |
|
|
|
|
|
|
|
|
5 DIRECTORS’ REMUNERATION
|
|
|
|
|
|
|
2017 |
|
2016 |
|
|
£ |
|
£ |
|
Total
fees |
57,500 |
|
57,500 |
|
Remuneration to
Directors |
|
|
|
|
Lord Lamont
(Chairman) |
20,000 |
|
20,000 |
|
D
Harris |
17,813 |
|
20,000 |
|
H
Myles |
19,687 |
|
17,500 |
|
W van
Heesewijk* |
– |
|
– |
|
* Mr van Heesewijk has
waived his entitlement to fees. |
|
|
|
|
|
|
|
|
6 FINANCE COSTS
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
|
|
2016 |
|
|
|
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
|
Appropriations in respect of |
|
|
|
|
|
|
|
|
Zero Dividend Preference shares |
|
– |
633 |
– |
597 |
597 |
– |
7
TAXATION
|
|
|
|
|
|
|
2017 |
2016 |
|
£’000 |
£’000 |
Based on the revenue return for
the year |
|
|
Current tax |
– |
– |
The current tax charge for the year is lower than the standard
rate of corporation tax in the UK of 20% to 30 April 2017 and 30 April
2016. The differences are explained below:
|
2017
Revenue Capital |
Total |
Revenue |
2016
Capital |
Total |
|
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
£’000 |
Return on ordinary
activities before taxation |
2,018 |
5,640 |
7,691 |
1,859 |
2,160 |
4,019 |
Theoretical
corporation tax at 20% |
404 |
1,128 |
1,538 |
372 |
432 |
804 |
Effects of: |
|
|
|
|
|
|
Capital items not
taxable |
– |
(1,202) |
(1,208) |
– |
(501) |
(501) |
UK and
overseas dividends which are
not liable to corporation tax |
(453) |
– |
(453) |
(428) |
– |
(428) |
Excess expenses in the
year |
49 |
74 |
123 |
56 |
69 |
125 |
Actual
current tax charged to the |
|
|
|
|
|
|
revenue account |
– |
– |
– |
– |
– |
– |
The Group has unrelieved excess expenses of £20,299,712 (2016:
£19,678,000). 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 £2,018,000 (2016: £1,859,000)
and on 16,575,343 (2016: 16,550,000) 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 profit
of £5,640,000 (2016: £2,160,000) and on 16,575,343 (2016:
16,550,000) 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 is based on
allocations from the Company of £633,000 (2016: £597,000) and on
8,586,063 (2016: 8,500,000) Zero Dividend Preference shares, being
the weighted average number of Zero Dividend Preference shares in
issue during the year.
9
DIVIDENDS |
|
|
|
2017 |
2016 |
|
£’000 |
£’000 |
Declared and paid
per Ordinary share |
|
|
Fourth interim
dividend for the year ended 30 April 2016 of 2.40p (2015:
2.40p) |
397 |
397 |
Special dividend for
the year ended 30 April 2016 of 1.60p (2015: 0.30p) |
265 |
50 |
First interim dividend
of 1.85p (2016: 1.70p) |
306 |
281 |
Second interim
dividend of 1.85p (2016: 1.70p) |
306 |
281 |
Third interim dividend
of 1.85p (2016: 1.70p) |
311 |
282 |
|
1,585 |
1,291 |
Declared per
Ordinary share* |
|
|
Fourth interim
dividend for the year ended 30 April 2017 of 2.40p (2016:
2.40p) |
413 |
397 |
Special dividend for
the year ended 30 April 2017 of 1.86p (2016: 1.60p) |
320 |
265 |
|
733 |
662 |
* Dividend paid
subsequent to the year end. |
|
|
10 INVESTMENTS – Group and Company
|
Listed
£’000 |
AIM
£’000 |
2017
Total
£’000 |
Year ended 30 April
2017 |
|
|
|
Opening book cost |
23,700 |
15,084 |
38,784 |
Opening investment
holding gains |
3,982 |
2,610 |
6,592 |
Opening valuation |
27,682 |
17,694 |
45,376 |
Transfer of GVC
Holdings from AIM to listed |
524 |
(524) |
– |
Movements in the
year: |
|
|
|
Purchases at cost |
5,632 |
8,144 |
13,776 |
Disposals: |
|
|
|
Proceeds |
(5,826) |
(6,141) |
(11,967) |
Net realised gains on
disposals |
1,881 |
3,632 |
5,513 |
Movement in investment
holding gains |
1,864 |
(735) |
1,129 |
Closing valuation |
31,757 |
22,070 |
53,827 |
Closing book cost |
25,911 |
20,195 |
46,106 |
Closing investment
holding gains |
5,846 |
1,875 |
7,721 |
|
31,757 |
22,070 |
53,827 |
Realised gains on
disposals |
1,881 |
3,632 |
5,513 |
Movement in investment
holding gains |
1,864 |
(735) |
1,129 |
Gains on
investments |
3,745 |
2,897 |
6,642 |
|
Listed
£’000 |
AIM
£’000 |
2016
Total
£’000 |
Year ended 30 April
2016 |
|
|
|
Opening book cost |
22,561 |
11,815 |
34,376 |
Opening investment
holding gains |
4,247 |
3,058 |
7,305 |
Opening valuation |
26,808 |
14,873 |
41,681 |
Movements in the
year: |
|
|
|
Purchases at cost |
7,969 |
6,745 |
14,714 |
Disposals: |
|
|
|
Proceeds |
(8,846) |
(5,277) |
(14,123) |
Net realised gains on
disposals |
2,016 |
1,801 |
3,817 |
Movement in investment
holding gains |
(265) |
(448) |
(713) |
Closing valuation |
27,682 |
17,694 |
45,376 |
Closing book cost |
23,700 |
15,084 |
38,784 |
Closing investment
holding gains |
3,982 |
2,610 |
6,592 |
|
27,682 |
17,694 |
45,376 |
Realised gains on
disposals |
2,016 |
1,801 |
3,817 |
Movement in investment
holding gains |
(265) |
(448) |
(713) |
Gains on
investments |
1,751 |
1,353 |
3,104 |
Transaction costs
During the year the Group incurred transaction costs of £52,000
(2016: £64,000) and £29,000 (2016: £35,000) 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 2017:
|
|
30 April
2017 |
Name of issuer |
Class of
share |
% held |
Coral Products Plc |
Ordinary |
7.6 |
RTC Group Plc |
Ordinary |
6.9 |
Chamberlin Plc |
Ordinary |
6.3 |
Anglo African Oil & Gas Plc |
Ordinary |
4.7 |
Orchard Funding Group Plc |
Ordinary |
3.3 |
Belvoir Lettings
Plc |
Ordinary |
3.1 |
12 INVESTMENT IN SUBSIDIARY
The Company owns the whole of the issued ordinary share capital
of SCZ, especially formed for the issuing of Zero Dividend
Preference shares, which is incorporated and registered in
England and Wales, under company number: 08142169.
13 TRADE AND OTHER RECEIVABLES
|
Group |
Group |
Company |
Company |
|
2017 |
2016 |
2017 |
2016 |
|
£’000 |
£’000 |
£’000 |
£’000 |
Amounts due from
Brokers |
15 |
36 |
15 |
36 |
Dividends
receivable |
235 |
295 |
235 |
295 |
Prepayments and
accrued income |
12 |
2 |
12 |
2 |
|
262 |
333 |
262 |
333 |
14 TRADE AND OTHER PAYABLES
|
|
|
|
|
|
Group |
Group |
Company |
Company |
|
2017 |
2016 |
2017 |
2016 |
|
£’000 |
£’000 |
£’000 |
£’000 |
Trade and other
payables |
146 |
132 |
146 |
132 |
Loan from subsidiary
undertaking |
– |
– |
13 |
13 |
|
146 |
132 |
159 |
145 |
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 £8.3 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 a premium of 135p per share and with
net proceeds of £1,146,000. The Zero Dividend Preference shares
each have 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 £12,780,000. The
accrued entitlement as per the Articles of Association of SCZ at
30 April 2017 was 131.65p (2016:
123.87p) per share, being £12,308,000 (2016: £10,529,000) in total,
and the total amount accrued for the year of £633,000 (2016:
£597,000) has been charged to capital.
16 SECURED LOAN
Pursuant to a loan agreement between SCZ and the Company, SCZ
has lent the gross proceeds of £8,500,000, raised from the placing
on 28 August 2012 of 8,500,000 Zero
Dividend Preference shares at 100p, to the Company. SCZ has lent
the gross proceeds of £1,146,000 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 is non-interest bearing and is 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 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 debenture entered into between the Company and SCZ
dated 1 August 2012.
A contribution agreement between the Company and SCZ has also
been made whereby the Company will undertake to contribute such
funds as would ensure that SCZ will have in aggregate sufficient
assets on 8 January 2018 to satisfy
the final capital entitlement of the Zero Dividend Preference
shares. At 30 April 2017 the
contribution due from the Company to cover the accrued entitlement
was £633,000 (2016: £597,000).
|
Company
2017
£’000 |
Company
2016
£’000 |
Value at 1 May |
10,529 |
9,932 |
Loan issued during
year |
1,146 |
– |
Contribution to
accrued capital entitlement of Zero Dividend Preference shares |
633 |
597 |
Value at 30 April |
12,308 |
10,529 |
17 SHARE CAPITAL
|
2017 |
|
2016 |
|
|
Number |
£’000 |
Number |
£’000 |
Issued, allotted
and fully paid: |
|
|
|
|
Opening balance |
16,550,000 |
4,138 |
16,550,000 |
4,138 |
Issue of Ordinary
shares |
250,000 |
62 |
– |
– |
|
16,800,000 |
4,200 |
16,550,000 |
4,138 |
On 24 March 2017, the Company
announced the issue of 250,000 Ordinary shares of 25p each at an
issue price of 232.56p per Ordinary share.
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 SCZ are entitled to a payment of an amount equal to 100p
per share, increased daily from 28 August
2012 at such a compound rate as will give a final
entitlement to 136.70p for each Zero Dividend Preference share at
8 January 2018, £12,780,000 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 October 2017 or on a
date which is either four months before or four months after this
date 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 RESERVES – Group and Company
|
Share
premium account £’000 |
Capital
reserve
£’000 |
Revenue reserve
£’000 |
At 1 May 2016 |
12,403 |
15,992 |
2,544 |
Net return on
realisation of investments |
– |
5,513 |
– |
Movement in investment
holding gains |
– |
1,129 |
– |
Costs charged to
capital |
– |
(369) |
– |
Issue of ordinary
shares |
519 |
– |
– |
Expenses of ordinary
share issue |
(7) |
– |
– |
Appropriations in
respect of Zero Dividend Preference shares |
– |
(633) |
– |
Net return after
dividends for the year retained |
– |
– |
433 |
At 30 April 2017 |
12,915 |
21,632 |
2,977 |
At 1 May 2015 |
12,403 |
13,832 |
1,976 |
Net return on
realisation of investments |
– |
3,817 |
– |
Movement in investment
holding gains |
– |
(713) |
– |
Costs charged to
capital |
– |
(347) |
– |
Appropriations in
respect of Zero Dividend Preference shares |
– |
(597) |
– |
Net return after
dividends for the year retained |
– |
– |
568 |
At 30 April 2016 |
12,403 |
15,992 |
2,544 |
19 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
value per share |
Net assets
attributable to shareholders |
Net asset
value per share |
Net assets
attributable to
shareholders |
|
2017 |
2017 |
2016 |
2016 |
|
pence |
£’000 |
pence |
£’000 |
Ordinary shares |
248.36 |
41,724 |
211.95 |
15,077 |
Zero Dividend Preference shares |
131.65 |
12,308 |
123.87 |
10,529 |
The net asset value per Ordinary share is calculated on
16,800,000 (2016: 16,550,000) 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 9,349,000 (2016: 8,500,000) Zero Dividend Preference
shares, being the number of Zero Dividend Preference shares in
issue at the year end.
20 RECONCILIATION OF NET RETURN BEFORE
AND AFTER TAXATION
TO NET CASH FLOW FROM OPERATING
ACTIVITIES – Group and Company
|
2017
£’000 |
2016
£’000 |
Net return before
taxation |
7,658 |
4,019 |
Taxation |
– |
– |
Net return after
taxation |
7,658 |
4,019 |
Net capital
return |
(5,640) |
(2,160) |
Decrease/(increase) in
receivables |
50 |
(19) |
Increase/(decrease) in
payables |
14 |
(35) |
Interest and expenses
charged to the capital reserve |
(369) |
(347) |
Net cash inflow from
operating activities |
1,713 |
1,458 |
21 RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET CASH – Group and Company
|
2017
£’000 |
|
2016
£’000 |
Increase/(decrease) in
cash in year |
60 |
|
(460) |
Net cash at 1 May |
29 |
|
489 |
Net cash at 30
April |
89 |
|
29 |
22 ANALYSIS OF CHANGES IN NET CASH –
Group and Company
|
|
|
|
|
At 1
May |
|
At 30
April |
|
2016 |
Cash
flows |
2017 |
|
|
|
|
£’000 |
£’000 |
£’000 |
Cash at bank |
29 |
60 |
89 |
23 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.
24 ANALYSIS OF FINANCIAL ASSETS AND
LIABILITIES
Objectives, policies and
strategies
The Group primarily invests in companies with a market
capitalisation of up to £500 million. 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 SCZ 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.
Objectives, policies and
strategies
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:
|
2017 |
2016 |
|
£’000 |
£’000 |
Fair value through profit or loss
investments |
53,827 |
45,376 |
Sensitivity analysis
A 10% increase in the market value of investments at
30 April 2017 would have increased
net assets by £5,383,000 (2016: £4,538,000). 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.
24 ANALYSIS OF FINANCIAL ASSETS AND
LIABILITIES
Interest rate risk
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 2017 of
financial assets and financial liabilities to interest rate risk is
limited to cash and cash equivalents of £89,000 (2016: £29,000).
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 2017
was £54,178,000 (2016: £45,738,000). The calculation is based on
the Group’s credit risk exposure as at 30
April 2017 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.
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 2017 |
|
|
|
|
|
At cost |
Loans and
receivables |
Assets
at
fair value
through profit |
|
|
|
cost |
|
or loss |
Total |
|
|
|
|
£’000 |
£’000 |
£’000 |
£’000 |
Assets as per
Balance Sheet |
|
|
|
|
|
Investments |
|
– |
– |
53,827 |
53,827 |
Trade and other
receivables |
|
– |
262 |
– |
262 |
Cash and cash
equivalents |
|
89 |
– |
– |
89 |
Total |
|
89 |
262 |
53,827 |
54,178 |
Liabilities as per
Balance Sheet |
|
|
|
|
|
Trade and other
payables |
|
146 |
– |
– |
146 |
Zero Dividend
Preference shares |
|
– |
12,308 |
– |
12,308 |
Total |
|
146 |
12,308 |
– |
12,454 |
|
|
|
|
|
|
30 April 2016 |
|
At
cost |
Loans and
receivables |
Assets at fair value through profit
or loss |
|
|
|
Total |
|
|
£’000 |
£’000 |
£’000 |
£’000 |
Assets as per
Balance Sheet |
|
|
|
|
|
Investments |
|
– |
- |
45,376 |
45,376 |
Trade and other
receivables |
|
– |
333 |
– |
333 |
Cash and cash
equivalents |
|
29 |
- |
– |
29 |
Total |
|
29 |
333 |
45,376 |
45,738 |
Liabilities as per
Balance Sheet |
|
|
|
|
|
Trade and other
payables |
|
132 |
- |
– |
132 |
Zero Dividend
Preference shares |
|
– |
10,529 |
– |
10,529 |
Total |
|
132 |
10,529 |
– |
10,661 |
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 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); and
· 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 (2016:
same).
25 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.
26 POST BALANCE SHEET EVENTS
Between the year end and the 14 July
2017, the latest practicable date before the publication of
these financial statements, the Company has issued 550,000 ordinary
shares for a consideration of £1,581,000.
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 |
June |
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 SCZ 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. 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 £21.38 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.
Group structure
The Company has in issue one class of Ordinary share. In
addition, it has a wholly owned subsidiary, SCZ, through which Zero
Dividend Preference shares have been issued. The new subsidiary was
incorporated on 13 July 2012 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. SCZ was incorporated specifically for
the issue of 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 £8.3 million. The expenses of the placing were borne by the
Company. On 24 March 2017, SCZ issued
a further 849,000 Zero Dividend Preference shares at a premium of
135p per share and with net proceeds of £1,146,000. Pursuant to a
loan agreement between SCZ and the Company, SCZ 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 8 January 2018 or, if required by SCZ, 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 SCZ has also
been made whereby the Company will undertake to contribute such
funds as will ensure that SCZ will have in aggregate sufficient
assets on 8 January 2018 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 2017, the Company
had a market capitalisation of £38,640,000 (2016: £31,528,000) and
total net assets amounted to £41,724,000 (2016: £35,077,000).
Management fee
The fee payable to the Investment Manager is 1% of the combined
gross assets of the Group.
Capital structure
Details of share structure and entitlements and voting rights of
each class can be found on page 68.
ISA status
The Company’s Ordinary shares are qualifying investments for
Individual Savings Accounts (‘ISAs’), as are the Zero Dividend
Preference shares of SCZ.
Registered in England
No. 03749536
A member of the Association of
Investment Companies
Capital Structure
Chelverton Small Companies Dividend
Trust PLC (‘the Company’)
Chelverton Small Companies Dividend Trust PLC was registered on
3 September 2003 with number
03749536. The Company has in issue one class of Ordinary share. In
addition, it has a wholly owned subsidiary, Chelverton Small
Companies ZDP PLC, which was registered on 13 July 2012 with number 08142169, through which
Zero Dividend Preference shares have been issued.
Ordinary shares of 25p each (‘Ordinary
shares’) – 16,800,000 in issue as at 30
April 2017
Share Capital Events
On 24 March 2017, the Company
announced the issue of 250,000 Ordinary shares at a price of
232.56p each, which were to rank pari passu in all respects with
the Ordinary shares in issue. The shares were issued for cash in
order to meet investor demand. Following this admission there were
16,800,000 Ordinary shares in issue. The Company has only one class
of share and this figure represents 100% of the Company’s share
capital and voting rights.
Since 30 April 2017 and
14 July 2017, the latest practicable
date before the publication of these financial statements, a
further 550,000 ordinary shares have been issued for a total
consideration of £1,581,000. The number of shares in issue at the
date of this report is 17,350,000.
Dividends
Holders of Ordinary shares are entitled to dividends.
Capital
On a winding up of the Company, Ordinary shareholders will be
entitled to all surplus assets of the Company available after
payment of the Company’s liabilities, including the full and final
capital entitlement of the Zero Dividend Preference shares.
Voting
Each holder on a show of hands will have one vote and on a poll
will have one vote for each Ordinary share held.
Chelverton Small Companies ZDP PLC
(‘SCZ’)
Ordinary shares of 100p each
(‘ordinary shares’) – 50,000 in issue (partly paid up as to 25p
each)
The ordinary shares are owned by the Company. References to
Ordinary shares within this Annual Report are to the Ordinary
shares of Chelverton Small Companies Dividend Trust PLC.
Capital
Following payment of any liabilities and the capital entitlement
to the Zero Dividend Preference shareholders, ordinary shareholders
are entitled to any surplus assets of SCZ.
Voting
Each holder on a show of hands will have one vote and on a poll
will have one vote for each ordinary share held.
Zero Dividend Preference shares of
100p each – 9,349,000 in issue as at 30
April 2017
Share Capital Events
On 24 March 2017, the Company
announced the issue of 849,000 Zero Dividend Preference shares at a
price of 135p each. Following this admission there were 9,349,000
Zero Dividend Preference shares in issue.
Dividends
Holders of Zero Dividend Preference shares are not entitled to
dividends.
Capital
On a winding up of SCZ, after the satisfaction of prior ranking
creditors and subject to sufficient assets being available, Zero
Dividend Preference shareholders are entitled to an amount equal to
100p share increased daily from 28 August
2012 at such compound rate as will give an entitlement to
136.7p per share at 8 January
2018.
Voting
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.
Holders of Zero Dividend Preference shares are not entitled to
attend, speak or vote at General Meetings unless the business of
the meeting includes a resolution to vary, modify or abrogate the
rights attached to the Zero Dividend Preference shares.
Glossary of Terms
Net asset value (‘NAV’)
The NAV is shareholders’ funds expressed as an amount per
individual share. Shareholders’ funds are the total value of all
the Company’s assets, at current market value, having deducted all
prior charges at their par value (or at their asset value).
Discount
If the share price of an investment trust is lower than the NAV
per share, the shares are said to be trading at a discount. The
size of the discount is calculated by subtracting the share price
from the NAV per share and is usually expressed as a percentage of
the NAV per share. If the share price is higher than the NAV per
share, the shares are said to be trading at a premium.
Gearing
Gearing is the process whereby changes in the total assets of a
company have an exaggerated effect on the net assets of that
company’s ordinary shares due to the presence of borrowing or share
classes with a prior ranking entitlement to capital.
Ongoing charges
The total expenses incurred by a company, including those
charged to capital (excluding performance fee and finance costs and
exceptional costs) as a percentage of average quarterly net
assets.
Total return
The combined effect of any dividends paid, together with the
rise or fall in the share price or NAV. Total return statistics
enable the investor to make performance comparisons between trusts
with different dividend policies. Any dividends (after tax)
received by a shareholder are assumed to have been reinvested in
either additional shares of the trust at the time the shares go
ex-dividend (the share price total return) or in the assets of the
trust at its NAV per share (the NAV total return).
Directors and Advisers
Directors |
Lord Lamont of Lerwick
(Chairman) |
|
David Harris |
|
William van Heesewijk |
|
Howard Myles |
Investment Manager |
Chelverton Asset Management
Limited |
|
11 Laura Place |
|
Bath BA2 4BL |
|
Tel: 01225 483030 |
Secretary and |
Maitland Administration Services
Limited |
Registered Office |
Springfield Lodge |
|
Colchester Road, Chelmsford Essex
CM2 5PW Tel: 01245 398950 |
Registrar and |
Share Registrars Limited |
Transfer Office |
Suite E |
|
First Floor |
|
9 Lion and Lamb Yard |
|
Farnham |
|
Surrey GU9 7LL |
|
Tel: 01252 821390 |
|
www.shareregistrars.uk.com |
Auditors |
Hazlewoods LLP |
|
Windsor House |
|
Bayshill Road |
|
Cheltenham GL50 3AT |
Custodian |
Jarvis Investment Management
Limited |
|
78 Mount Ephraim Tunbridge
Wells |
|
Kent TN4 8BS |
Notice of Annual General Meeting
This document is important and requires your immediate
attention. If you are in any doubt as to what action you should
take, you are recommended to seek your own financial advice from
your stockbroker or other independent adviser authorised under the
Financial Services and Markets Act 2000 immediately.
If you have sold or otherwise transferred all of your shares in
Chelverton Small Companies Dividend Trust PLC, please forward this
document as soon as possible to the purchaser or transferee or to
the stockbroker, bank or other agent through whom the sale or
transfer was effected for transmission to the purchaser or
transferee.
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the
Company will be held at 11.00 am on
Thursday 7 September 2017 at
the offices of Chelverton Asset Management, 3rd Floor, 20
Ironmonger Lane, London EC2V 8EP
for the following purposes:
Ordinary Business – Resolutions 1 to 7
will be proposed as Ordinary Resolutions
1 To receive the Strategic Report, Directors’ Report and the
audited financial statements for the year ended 30 April 2017.
2 To receive and approve the Directors’ Remuneration Report for
the year ended 30 April 2017.
3 To re-elect Lord Lamont as a Director.
4 To re-elect Mr Harris as a Director.
5 To re-elect Mr van Heesewijk as
a Director.
6 To re-elect Mr Myles as a Director.
7 To appoint Hazlewoods as Auditor and to authorise the
Directors to determine their remuneration.
Special Business
To consider and, if thought fit, to pass the following
Resolutions of which Resolutions 8 and 9 will be proposed as an
Ordinary Resolution and Resolutions 10 to 12 will be proposed as
Special Resolutions.
8 To approve the Directors’ Remuneration Policy, as set out on
page 33 of the Directors’ Remuneration Report, which takes effect
immediately after the Annual General meeting.
9 THAT the Directors be and are hereby generally and
unconditionally authorised pursuant to Section 551 of the Companies
Act 2006 (‘the Act’) (in substitution for any existing allotment
authorities, provided that such substitution shall not have
retrospective effect) to exercise all the powers of the Company to
allot shares and to grant rights to subscribe for, or to convert
any security into, shares in the Company (‘the Rights’) up to an
aggregate nominal value equal to £1,445,833, being one-third of the
issued Ordinary share capital as at 14 July 2017, during the
period commencing on the date of the passing of this Resolution and
expiring (unless previously renewed, varied or revoked by the
Company in general meeting) at the conclusion of the Annual General
Meeting of the Company to be held in 2018, or 15 months from the
passing of this Resolution, whichever is earlier (the ‘Period of
Authority’), but so that the Directors may, at any time prior to
the expiry of the Period of Authority, make offers or agreements
which would or might require shares to be allotted and/or Rights to
be granted after the expiry of the Period of Authority and the
Directors may allot shares or grant Rights in pursuance of such
offers or agreements as if the authority had not expired.
10 THAT, subject to the passing of Resolution 9 above, the
Directors of the Company be and they are hereby empowered pursuant
to Section 570 and Section 573 of the Act to allot equity
securities (within the meaning of Section 560 of the Act) or sell
shares held in Treasury (within the meaning of Section
560(3) of the Act) for cash pursuant to the authority conferred
by Resolution 9 above as if Section 561(1) of the Act did not apply
to any such allotment, provided that this power shall be limited
to:
a) the allotment of equity securities in connection
with a rights issue, open offer or any other offer in favour of
Ordinary shareholders where the equity securities respectively
attributable to the interests of all Ordinary shareholders are
proportionate (as nearly as may be) to the respective number of
Ordinary shares held by them subject to such exclusions or other
arrangements as the Directors may deem fit to deal with fractional
entitlements, record dates, legal, regulatory or practical problems
arising under the laws of any overseas territory or the
requirements of any regulatory authority or any stock exchange;
and
b) to the allotment (otherwise than pursuant to
paragraph (a) above) of equity securities up to 10% of the issued
Ordinary share capital, representing 1,735,000 Ordinary shares at
14 July 2017.
and shall expire at the conclusion of the Annual General Meeting
of the Company to be held in 2017, or 15 months from the passing of
this Resolution, whichever is earlier, save that the Company may
before such expiry make offers, agreements or arrangements which
would or might require equity securities to be allotted after such
expiry and so that the Directors of the Company may allot equity
securities in pursuance of such offers, agreements or arrangements
as if the power conferred hereby had not expired.
11 THAT the Company is hereby generally and unconditionally
authorised in accordance with Section 701 of the Act to make market
purchases (within the meaning of Section 693(4) of the Act) of
Ordinary shares of 25p each in the capital of the Company
(‘Ordinary shares’) for cancellation or for placing into Treasury
provided that:
a) the maximum aggregate number of Ordinary shares
authorised to be acquired is 2,600,765, or if less, 14.99% of the
Ordinary shares in issue and in circulation immediately following
the passing of this Resolution;
b) the minimum price which may be paid for each
Ordinary share is 25p (exclusive of expenses);
c) the maximum price which may be paid for each
Ordinary share is, in respect of a share contracted to be purchased
on any day, an amount which shall not be 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
highest current independent bid on the London Stock Exchange;
d) this authority will (unless renewed) expire at
the conclusion of the next Annual General Meeting of the Company
or, if earlier, 15 months from the date on which this Resolution is
passed; and
e) any Ordinary shares bought back under the
authority hereby granted may, at the discretion of the Directors,
be cancelled or held in treasury and if held in treasury may be
cancelled at the discretion of the Directors.
12 THAT a general meeting other than an annual general meeting
may be called on not less than 14 clear days’ notice.
By order of the Board |
Registered office: |
Maitland Administration Services
Limited |
Springfield Lodge |
Secretary |
Colchester Road |
14 July 2017 |
Chelmsford CM2 5PW |
Explanatory notes to the notice of
meeting
Ordinary shareholders have the right to attend, speak and vote
at the forthcoming Annual General Meeting or at any adjournment(s)
thereof. In order to exercise all or any of these rights you should
read the following explanatory notes to the business of the Annual
General Meeting.
Notes
1. A member entitled to attend, vote and
speak at this meeting may appoint one or more persons as his/her
proxy to attend, speak and vote on his/her behalf at the meeting. A
proxy need not be a member of the Company. If multiple proxies are
appointed they must not be appointed in respect of the same shares.
To be effective, the enclosed form of proxy, together with any
power of attorney or other authority under which it is signed or a
certified copy thereof, should be lodged at the office of the
Company’s Registrar, Share Registrars Limited, Suite E, First
Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL not later than 48 hours before
the time of the meeting. The appointment of a proxy will not
prevent a member from attending the meeting and voting and speaking
in person if he/she so wishes. A member present in person or by
proxy shall have one vote on a show of hands and on a poll shall
have one vote for every Ordinary share of which he/she is the
holder.
In the case of joint holders of a
share, the vote of the senior who tenders a vote, whether in person
or by proxy, shall be accepted to the exclusion of the vote or
votes of the other joint holder or holders, and seniority shall be
determined by the order in which the names of the holders stand in
the register.
Any question relevant to the business
of the Annual General Meeting may be asked at the meeting by anyone
permitted to speak at the meeting. You may alternatively submit
your question in advance by letter addressed to the Company
Secretary at the registered office.
2. A person to whom this notice is sent
who is a person nominated under Section 146 of the Companies Act
2006 to enjoy information rights (a ‘Nominated Person’) may, under
an agreement between him/her and the shareholder by whom he/she was
nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the Annual General Meeting. If a
Nominated Person has no such proxy appointment right or does not
wish to exercise it, he/she may, under any such agreement, have a
right to give instructions to the shareholder as to the exercise of
voting rights.
3. The statements of the rights of members
in relation to the appointment of proxies in Note 1 above do not
apply to a Nominated Person. The rights described in that Note can
only be exercised by registered members of the Company.
4. As at 14 July
2017 (being the last business day prior to the publication
of this notice) the Company’s issued share capital amounted to
17,350,000 Ordinary shares carrying one vote each.
5. The Company specifies that only those
Ordinary shareholders registered on the Register of Members of the
Company as at 11.00 am on
7 September 2017 (or in the event
that the meeting is adjourned, only those Ordinary shareholders
registered on the Register of Members of the Company as at
11.00 am on the day which is 48 hours
prior to the adjourned meeting) shall be entitled to attend in
person or by proxy and vote at the Annual General Meeting in
respect of the number of Ordinary shares registered in their name
at that time. Changes to entries on the Register of Members after
that time shall be disregarded in determining the rights of any
person to attend or vote at the meeting.
6. In accordance with Section 319A of the
Companies Act 2006, the Company must cause any question relating to
the business being dealt with at the meeting put by a member
attending the meeting to be answered. No such answer need be given
if:
a) to do so would:
i) interfere unduly with the preparation
for the meeting, or
ii) involve the disclosure of confidential
information;
b) the answer has already been given
on a website in the form of an answer to a question; or
c) it is undesirable in the interests
of the Company or the good order of the meeting that the question
be answered
7. A person authorised by a
corporation is entitled to exercise (on behalf of the corporation)
the same powers as the corporation could exercise if it were an
individual member of the Company (provided, in the case of multiple
corporate representatives of the same corporate shareholder, they
are appointed in respect of different shares owned by the corporate
shareholder or, if they are appointed in respect of those same
shares, they vote those shares in the same way). To be able to
attend and vote at the meeting, corporate representatives will be
required to produce prior to their entry to the meeting evidence
satisfactory to the Company of their appointment. Corporate
shareholders can also appoint one or more proxies in accordance
with Note 1. On a vote on a Resolution on a show of hands, each
authorised person has the same voting rights to which the
corporation would be entitled.
On a vote on a Resolution on a poll,
if more than one authorised person purports to exercise a power in
respect of the same shares:
a) if they purport to exercise
the power in the same way as each other, the power is treated as
exercised in that way;
b) if they do not purport to
exercise the power in the same way as each other, the power is
treated as not exercised.
8. CREST members who wish to appoint
a proxy or proxies by utilising the CREST electronic proxy
appointment service may do so for this meeting by following the
procedures described in the CREST Manual. CREST personal members or
other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to take the
appropriate action on their behalf.
In order for a proxy appointment or
instruction made by means of CREST to be valid, the appropriate
CREST message (a ‘CREST Proxy Instruction’) must be properly
authenticated in accordance with Euroclear’s specifications and
must contain the information required for such instructions, as
described in the CREST Manual. The message, in order to be valid,
must be transmitted so as to be received by the Company’s agent (ID
7RA36) by the latest time for receipt of proxy appointments
specified in Note 1 above. For this purpose, the time of receipt
will be taken to be the time (as determined by the timestamp
applied to the message by the CREST Applications Host) from which
the Company’s agent is able to retrieve the message by enquiry to
CREST in the manner prescribed by CREST. After this time, any
change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
CREST members and, where applicable,
their CREST sponsors or voting service providers, should note that
Euroclear does not make available special procedures in CREST for
any particular messages. Normal system timings and limitations will
therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a voting service
provider(s), to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where
applicable, their CREST sponsors or voting service providers are
referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings.
The Company may treat as invalid a
CREST Proxy Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001.
9. Shareholders should note that it
is possible that, pursuant to requests made by shareholders of the
Company under Section 527 of the Companies Act 2006, the Company
may be required to publish on a website a statement setting out any
matter relating to: (i) the audit of the Company’s accounts
(including the auditor’s report and the conduct of the audit) that
are to be laid before the Annual General Meeting; or (ii) any
circumstance connected with an auditor of the Company ceasing to
hold office since the previous meeting at which annual accounts and
reports were laid in accordance with Section 437 of the Companies
Act 2006. The Company may not require the shareholders requesting
any such website publication to pay its expenses in complying with
Sections 527 or 528 of the Companies Act 2006.
Where the Company is required to
place a statement on a website under Section 527 of the Companies
Act 2006, it must forward the statement to the Company’s auditor
not later than the time when it makes the statement available on
the website. The business which may be dealt with at the Annual
General Meeting includes any statement that the Company has been
required under Section 527 of the Companies Act 2006 to publish on
a website.
10. Members satisfying the thresholds in
Section 338 of the Companies Act 2006 may require the Company to
give, to members of the Company entitled to receive notice of the
Annual General Meeting, notice of a Resolution which those members
intend to move (and which may properly be moved) at the Annual
General Meeting. A Resolution may properly be moved at the Annual
General Meeting unless (i) it would, if passed, be ineffective
(whether by reason of any inconsistency with any enactment or the
Company’s constitution or otherwise); (ii) it is defamatory of any
person; or (iii) it is frivolous or vexatious. A request made
pursuant to this right may be in hard copy or electronic form, must
identify the Resolution of which notice is to be given, must be
authenticated by the person(s) making it and must be received by
the Company not later than six weeks before the date of the Annual
General Meeting.
11. Members satisfying the thresholds in
Section 338A of the Companies Act 2006 may request the Company to
include in the business to be dealt with at the Annual General
Meeting any matter (other than a proposed Resolution) which may
properly be included in the business at the Annual General Meeting.
A matter may properly be included in the business at the Annual
General Meeting unless (i) it is defamatory of any person or (ii)
it is frivolous or vexatious. A request made pursuant to this right
may be in hard copy or electronic form, must identify grounds for
the request, must be authenticated by the person(s) making it and
must be received by the Company not later than six weeks before the
date of the Annual General Meeting.
12. The Annual Report incorporating this
notice of Annual General Meeting and, if applicable, any members’
statements, members’ Resolutions or members’ matters of business
received by the Company after the date of this notice will be
available on the Company’s website
www.chelvertonam.com.
13. None of the Directors has a contract
of service with the Company.
END