Annual Report
for the year ended 30 April 2023
ASSET MANAGEMENT
CHELVERTON
C
Contents
Section 1
Strategic Report including:
– Financial Highlights 1
– Chairman’s Statement 2
– Investment Manager’s Report 5
– Investment Objective and Policy 11
– Other Statutory Information 16
Section 2
Directors 25
Investment Manager, Secretary, Custodian and Registrar 26
Directors’ Report 27
Statement on Corporate Governance 32
Audit Committee Report 39
Directors’ Remuneration Report 41
Statement of Directors’ Responsibilities 45
Independent Auditor’s Report 47
Section 3
Financial Statements including:
– Consolidated Statement of Comprehensive Income 57
– Consolidated and Parent Company Statement of Changes in Net Equity 58
– Consolidated and Parent Company Balance Sheets 59
– Consolidated and Parent Company Statement of Cash Flows 60
– Notes to the Financial Statements 61
Shareholder Information 80
Company Summary 81
Capital Structure 82
Glossary of Terms 84
Directors and Advisers 85
Notice of Annual General Meeting 86
SECTION 1
1
Strategic Report
The Strategic Report comprising pages 1 to 23 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 duties under Section 172 of the Act to promote the success of the Company.
Chelverton UK Dividend Trust PLC (‘the Company’) and its subsidiary SDV 2025 ZDP PLC (‘SDVP’ or the
‘Subsidiary’) together form the Group. The Group’s funds are invested principally in mid and smaller
capitalised UK companies. The portfolio comprises companies listed on the Official List, admitted to trading
on AIM and traded on other qualifying UK marketplaces. 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 inter
est securities.
Financial Highlights
30 April 30 April
Capital 2023 2022 % change
Total gross assets (£’000) 53,674 58,805 (8.73)
Total net assets (£’000) 35,563 41,382 (14.07)
Net asset value per Ordinary share 168.15p 198.47p (15.28)
Mid-market price per Ordinary share 174.50p 192.50p (9.35)
Premium/(discount) 3.78% (3.01%)
Net asset value per Zero Dividend Preference share 2025 123.21p 118.52p 3.97
Mid-market price per Zero Dividend Preference share 2025 117.50p 118.50p (0.84)
Discount (4.64%) (0.02%)
Year ended Year ended
30 April 30 April
Revenue 2023 2022 % change
Return per Ordinary share 12.94p 10.00p 29.40
Dividends declared per Ordinary share 11.77p 11.00p 7.00
Total return
Total return on Group’s gross assets (4.78%) (4.92%)
Total return on Group’s net assets* (total return as proportion of net
assets after the provision for the Zero Dividend Preference shares) (4.64%) (4.71%)
Total return on Group’s net assets* (8.21%) (7.74%)
Ongoing charges** 2.44% 2.03%
Ongoing charges*** 1.62% 1.48%
* Adding back dividends paid in the year.
** Calculated in accordance with the Association of Investment Companies (‘AIC’) guidelines. Based
on total expenses, excluding finance costs, for the year and average net asset value.
*** Based on gross assets.
2
Strategic Report (continued)
Chairman’s Statement
It gives me great pleasure to present this Annual Report, my first one as Chairman, for the financial year to
30 April 2023.
I start by repeating what my predecessor Lord Lamont wrote in this report last year. The last 12 months
have undoubtedly continued to be challenging. Although the Covid-19 pandemic and the associated
lockdowns are now well in the past, the impact is still being felt, not only in the UK but also in Europe. In
addition, the war in Ukraine started by Russia in February 2022 continues and there are no signs of an end
to it this year.
Whilst we all recall the turmoil in the markets in the autumn, caused by a febrile political situation in addition
to the events around the ‘mini-budget’ and the more recent market volatility caused by the collapse of the
Silicon Valley Bank and the distressed emergency takeover of Credit Suisse, the UK appears to be gradually
recovering from these low points.
At this time in the UK, we are living with elevated inflation and inter
est rates at multi-year highs which,
since December 2021, have risen
multiple times from 0.1% to the current 5%. The Bank of England has
been forecasting for some time that the UK economy would move into recession, which we are very pleased
to see has, to date, proven to be wrong. Recently the International Monetary Fund (‘IMF’) announced that
the UK will be the worst performing economy in the G20 with a decline in GDP of 0.3% in the next year.
However, and true to past form, where it should also be noted that of the last 26 forecasts by the IMF, 24
have proven to be too pessimistic, I am pleased to say that this forecast has also proved to be too
pessimistic and they have now upgraded their forecast of the UK economy to grow by 0.4%!
In addition to an economy that has been stagnating, combined with a major uptick in industrial action and
a shortage of labour, there have been significant rises in ener
gy prices, industry-wide incr
eases in costs and
supply chain issues. However, there has been recent evidence that these issues are easing as time passes
and the economies of the world move away from the period of Covid-19 lockdowns.
In the last few months, a debate has begun in respect of the reduced interest in investing in UK equities,
in particular those shares outside the FTSE 100. The Government and the Treasury are consulting on the
introduction of new policies aimed at encouraging all parties to increase their weighting in UK equities.
With a highly UK-centric portfolio, invested only in smaller and mid-cap companies traded on UK markets,
the shares this Company is invested in are very underrated on an historical basis notwithstanding the fact
that the underlying trading performance of the companies is very satisfactory. However, history suggests
that a recovery will take place in time, leading to longer term outperformance.
Results
The Company’s net asset value per ordinary share as at 30 April 2023 was 168.15p (2022: 198.47p), a
decrease over the year of 15.3%, with an ordinary share price of 174.50p per share (2022: 192.50p). Total
assets, including audited revenue reserves, were £53.674m (2022: £58.805m), a decrease over the year of
8.7%, and the total net assets were £35.563m (2021: £41.382m). During the same period the MSCI Small
Cap Index decreased by 5.2%.
The Company was launched on 12 May 1999, and since that time the net asset value per Ordinary share
has risen by 70.35% while in addition a total of 228.89p has been paid to shareholders in the form of
dividends, including the fourth interim dividend announced with this report.
3
In the year under review, total dividends of 11.77p per Ordinary share were paid and proposed, including
the fourth interim dividend of 2.9425p. The total dividend in 2023 represents an increase of 7% year-on-
year. The Company has now returned to a position where the dividend is being paid entirely from the
current year revenue surplus after costs. The balance of the surplus of £280,000, after the payment of the
dividend, has been taken to bolster revenue reserves. The intention in the future is to increase dividends
by 7% per annum and to take any surplus to replenish the revenue reserves that have been used over the
past two years to ensure the dividend is not only being maintained but can be increased.
The underlying portfolio yield has increased this year as our investee companies have continued to grow
their dividends, whilst at the same time there has been a continued general derating of shares. The portfolio
yield is currently 5.6%, which is significantly higher than the normal range of 4% to 4.5% for this Company
over its 24-year life. It is also worth pointing out that 6.5% of the portfolio is currently not paying a dividend
as the Investment Manager manages the balance between revenue and capital growth.
The Company has increased its dividend each year for the last 13 years. Because of the strength of the
revenue reserves, and the intention to add to them in the future, the Company is in a strong position and
the Board is confident in the Company’
s ability to further gr
ow the annual dividend, assuming the current
macro-economic conditions continue to improve.
The Company is currently invested in 81 positions across 17 sectors. This spread creates a well-diversified
portfolio which should, in the future, lead to a strong return of dividend income and subsequently steady
growth in revenue and, in time, capital.
Capital structure
Over the year the Board has approved the modest issuance of shares at a small premium to the prevailing
net asset value. The number of ordinary shares has increased by 510,000 to 21,360,000 shares.
In the past, the Company has been regularly asked to issue new shares to meet market demand. However,
the Board’s policy is that it will only consider issuing new shares if it can do so at a premium to NAV which
is sufficient not only to cover all the costs of issuance but also to r
ecognise the value of the r
evenue reserves
that have been built up over many years and where there are attractive opportunities for investment.
Currently the Investment Manager considers that there are sufficient undervalued high yielding shar
es in
the market for the r
ecycling of existing funds and also for the proceeds of new share issuance to be invested.
The issue of new shares at a premium enhances net asset value per share, and the increase in the size of
the Company should improve liquidity in the market for its shares while making it more attractive to
potential new investors.
Dividend
As briefly discussed in the Results Section, the Board has declared a fourth interim dividend of 2.9425p
per Ordinary share (2022: 2.75p) which, when added to the three quarterly interim dividends of 2.9425p
per Ordinary share, brings the total paid and declared to 11.77p (2022: 11.00p) for the year ended 30 April
2023, an increase of 7% over the previous year.
Under the dividend distribution policy, the Board has not declared a special dividend (2022: nil) to be paid
with the fourth interim dividend. The Company has revenue reserves which, after payment of the fourth
interim dividend, represent 83.7% of the current annual dividend of 11.77p, or some 9.85p per Ordinary
share.
4
Strategic Report (continued)
The Board is committed to progressively improving the Company’s dividend for investors and expects that
the four interim dividends paid in respect of the financial year ending 30 April 2024 will very likely exceed,
but in any event will not be less than, that paid in respect of the financial year ended 30 April 2023.
Outlook
As mentioned above, there is currently a great deal of uncertainty across Europe and in the UK. Sadly, the
war in Ukraine is continuing and at this time there appears to be no end in sight. However, European
countries have rebalanced their economies and have achieved major savings in energy costs which it is to
be hoped will become embedded.
With the global impact of the draconian lockdown in China and after seeing the effect of the blocking of
the Suez Canal by the “Ever Given” container vessel, it has become clear to European investors that they
had been under-pricing the risk of sourcing products from China; as a result we are likely to see a major
rebalancing of production to much closer to home.
The UK economy is expected to flat-line in 2023 but to r
ecover to near long-term tr
end growth in 2024.
Inflation is expected to decline by the end of the year, and it might well be that inter
est rates are therefore
close to a peak. As the countries of Europe and the world return to ‘normal’ we can hope for a period of
steady growth in the UK economy.
Howard Myles
Chairman
29 June 2023
Investment Manager’s Report
The year to April 2023 has been another challenging one, with the global economy feeling the effects of
the war in Ukraine, supply chain challenges, inflation, rising interest rates and a banking crisis. In the UK,
these combined for
ces were exacerbated by political turmoil, culminating in multiple leadership changes
and the mini-budget in September, which severely dented both corporate and consumer confidence. With
this as the backdrop, it is not surprising that share prices have suffered, with the small and midcap
companies in which we invest particularly affected. It should also be noted that the large open-ended funds
which invest in small and midcap UK equities have seen significant r
edemptions over the past year
, which
has put further pressure on stock market valuations in our part of the market. In the year to 30 April 2023,
there was a 15.28% decline in the Company’s net asset value per share from 198.47p to 168.15p. During
the same period the MSCI Small Cap Index decreased by 5.18%. At the same time the core dividend
increased 7% to 11.77p, as explained in the half-year report in October 2022. The Company has not paid
a special dividend in respect of the 2022/2023 financial year
, in line with the dividend policy announced in
Mar
ch 2019.
It is encouraging that the underlying performance of the companies in the portfolio continues to be resilient
with the majority of businesses reporting results in line with market expectations during the recent reporting
season. The more efficient pr
ocesses developed during the pandemic have helped our investee companies
to navigate the difficult trading conditions over the past year and have left them well prepar
ed to take
advantage when the macro environment improves. Despite the resilient underlying trading, the small and
midcap market has de-rated, resulting in the decline in the Company’s NAV. This was something of a year
of two halves, however, with the above conditions resulting in a 22.92% reduction in the Company’s NAV
to 152.99p in the first six months of the year
, befor
e it rebounded to 168.15p at the end of the year. The
stock market is a forward-looking instrument and we believe the rebound in the second half of the year is
a signal that investors are starting to look forward towards the end of interest rate rises and generally more
stable macro conditions.
Equally encouragingly, the resilient underlying performance of our portfolio companies was reflected in
good cash generation and dividends which were generally in line with or ahead of expectations. This has
allowed us to continue rebuilding the income account after the pandemic shock, while also building
positions in companies which we believe will deliver strong capital growth in the coming years. We are
pleased to have delivered an annual 7% rise in the dividend and, after three years of utilising reserves to
pay the increasing dividends, the Company has a covered dividend and we are now able to pay the
increased dividend from current revenue.
Portfolio review
We reported last year that the de-rating of UK equities had resulted in a pickup in corporate activity across
the market. This trend continued into the year to April 2023, with six bids received for our portfolio
companies in the year. At the beginning of the year we saw a recommend bid by KKR for ContourGlobal.
As the year progressed and uncertainty over interest rates resulted in private equity deals drying up,
corporates took up the baton. Over the course of the year Appreciate, Curtis Banks, Devro, Numis and
RPS all received bids from trade buyers. While the takeout prices generally represented attractive premiums
to the prevailing share prices at the time, it is fair to say that, overall, we feel the buyers have managed to
purchase these assets at advantageous prices. Including five of the six bid situations (the Numis bid was
announced on 28 April 2023), we exited seven positions in their entirety with Braemar Shipping and Centaur
Media exited on yield grounds.
5
Strategic Report (continued)
Shareholdings were reduced in ten companies including Belvoir Lettings, Bloomsbury Publishing, Conduit,
Kitwave Group, ME Group, Ramsdens Holdings, TP ICAP and Wilmington Group.
Twelve new shareholdings were added to the Company’s portfolio in the year including private and
commercial banking group Arbuthnot Banking Group, Conduit – pure-play reinsurance business, Fonix
Mobile – mobile payments, Hilton Foods – meat and fish pr
ocessing, Liontrust –
asset management,
Marshalls – building materials, OSB Group – specialist mortgage lending, One Health – outsourced NHS
Surgery, RWS – content and IP translation and Somero – concrete levelling equipment. Shareholdings were
also increased in 17 companies including Bakkavor, Chesnara, Close Brothers Group, Crest Nicholson,
Headlam Group, Personal Group Holdings, Regional REIT, Spectra Systems, UP Global Sourcing Holdings
and Vector Capital.
Outlook
After several years of significant negative events affecting markets, there are some positive signs on the
horizon for equity investors. Expectations are starting to shift towards interest rates peaking and inflation
falling to more manageable levels, while the spectre of a lasting UK recession appears to be receding. If this
is the case, we would expect investor sentiment to gradually improve over the coming year, which would
benefit our small and mid-cap universe.
We also continue to see an elevated number of companies undertaking share buy-backs, another
consequence of current valuations combined with good cash generation and strong balance sheets. As we
have previously said, buy-backs are a positive for our stocks, as long as they are instigated alongside an
appropriate dividend policy.
We continue to have confidence in our investee companies and believe we ar
e yet to benefit fr
om the
positive steps taken to improve the underlying operating efficiency of the businesses through the pandemic.
Having traded thr
ough the challenges of the last twelve months, our companies are generally entering the
next phase of the cycle as more lean, nimble enterprises. It will take a positive shift in investor sentiment for
our companies to receive the ratings they deserve, but we are confident that the small and midcap universe
in which we invest will return to outperformance over the medium term.
David Horner
Chelverton Asset Management Limited
29 June 2023
6
Breakdown of Portfolio by Industry
at 30 April 2023
Market
value
Bid % of
Market sector £’000 portfolio
Banks 1,149 2.2
Basic Resources 922 1.7
Chemicals 239 0.5
Construction & Materials 5,954 11.3
Consumer Products and Services 5,778 10.9
Energy 1,325 2.5
Financial Services 7,907 14.9
Food, Beverage & Tobacco 2,518 4.8
Health Care 623 1.2
Industrial Goods & Services 9,161 17.3
Insurance 4,426 8.4
Media 2,864 5.4
Personal Care, Drugs & Grocery Stores 1,197 2.3
Real Estate 3,441 6.5
Retail 3,251 6.2
Telecommunications 1,131 2.1
Travel & Leisure 939 1.8
52,825 100.0
7
Strategic Report (continued)
Breakdown of Portfolio by Market Capitalisation
at 30 April 2023
Number of Companies
% of Portfolio
Source: Apex Fund Administration Services (UK) Limited
8
£50–75m
9
£25–50m
3
<£25m
11
£75–100m
4
£100–250m
24
£250–500m
14
> £500m
16
£50–75m
11%
£25–50m
4%
<£25m
14%
£75–100m
5%
£100–250m
29%
£250–500m
17%
> £500m
20%
Portfolio Statement
at 30 April 2023
Market
value % of
Security Sector £’000 portfolio
Belvoir Lettings Real Estate 1,624 3.1
UP Global Sourcing Holdings Consumer Products and Services 1,375 2.6
Diversified Ener
gy Ener
gy 1,325 2.5
Smiths News Industrial Goods & Services 1,270 2.4
Alumasc Group Construction & Materials 1,256 2.3
ME Group Consumer Products and Services 1,143 2.3
Kitwave Group Personal Care, Drugs & Grocery Stores 1,197 2.2
Coral Products Industrial Goods & Services 1,120 2.1
Chesnara Insurance 1,110 2.1
MP Evans Group Food, Beverage & Tobacco 1,055 2.0
Ramsdens Holdings Financial Services 990 1.9
Redde Northgate Industrial Goods & Services 939 1.8
Castings Industrial Goods & Services 920 1.7
MTI Wireless Edge Telecommunications 918 1.7
Clarke (T.) Construction & Materials 881 1.7
STV Media 866 1.6
Duke Royalty Financial Services 853 1.6
Numis Corporation Financial Services 851 1.6
Conduit Insurance 847 1.6
Hilton Food, Beverage & Tobacco 845 1.6
Crest Nicholson Consumer Products and Services 805 1.5
Portmeirion Group Consumer Products and Services 805 1.5
Somero Industrial Goods & Services 800 1.5
Vistry Group Media 783 1.5
Fonix Mobile Industrial Goods & Services
780 1.5
Severfield Construction & Materials 753 1.4
Epwin Group Construction & Materials 740 1.4
Tyman Construction & Materials 738 1.4
Personal Group Holdings Insurance 735 1.4
Close Brothers Group Banks 726 1.4
Hargreaves Services Industrial Goods & Services 709 1.3
Jarvis Securities Financial Services 700 1.3
Regional REIT Real Estate 693 1.3
Bloomsbury Publishing Media 671 1.3
Palace Capital Real Estate 654 1.2
DFS Furniture Retail 630 1.2
Vector Capital Financial Services 630 1.2
Hansard Global Insurance 628 1.2
One Health Group Health Care 623 1.2
Bakkavor Food, Beverage & Tobacco 618 1.2
Spectra Systems Retail 615 1.2
Polar Capital Holdings Financial Services 611 1.2
R & Q Insurance Insurance 610 1.2
Genuit Group Construction & Materials 600 1.1
Ecora Resources Basic Resources 598 1.1
TP ICAP Financial Services 595 1.1
Headlam Group Consumer Products and Services 580 1.1
9
Strategic Report (continued)
Portfolio Statement
at 30 April 2023 (continued)
Market
value % of
Security Sector £’000 portfolio
Watkin Jones Consumer Products and Services 578 1.1
Vertu Motors Retail 577 1.1
Strix Group Industrial Goods & Services 549 1.0
Premier Miton Group Financial Services 546 1.0
Wilmington Group Media 544 1.0
TheWorks.co.uk Retail 542 1.0
Kier Group Construction & Materials 536 1.0
Orchard Funding Group Financial Services 525 1.0
Essentra Industrial Goods & Services 515 1.0
RWS Industrial Goods & Services 510 1.0
Sabre Insurance Insurance 496 0.9
Springfield Pr
operties Consumer Pr
oducts and Services 492 0.9
Topps Tiles Retail 480 0.9
Town Centre Securities Real Estate 470 0.9
Marshalls Construction & Materials 450 0.9
Gattaca Industrial Goods & Services 448 0.9
Liontrust Asset Management Financial Services 430 0.8
Arbuthnot Banking Group Banks 423 0.8
Brown (N) Group Retail 407 0.8
Marston's Travel & Leisure 348 0.7
DSW Capital Financial Services 345 0.7
Finncap Group Financial Services 341 0.6
Chamberlin Basic Resources 324 0.6
OSB Group Financial Services 298 0.6
Restaurant Group Travel & Leisure
243 0.5
iEnergizer Industrial Goods & Services 242 0.5
Synthomer Chemicals 239 0.5
RTC Group Industrial Goods & Services 234 0.4
Saga Travel & Leisure 228 0.4
Aferian Telecommunications 213 0.4
Paypoint Industrial Goods & Services 125 0.2
Arbuthnot Banking - Placing Financial Services 120 0.2
Revolution Bars Group Travel & Leisure 120 0.2
Sancus Lending Group Financial Services 72 0.1
Total Portfolio 52,825 100.0
10
Investment Objective and Policy
The investment objective of the Company is to provide Ordinary shareholders with a high income and the
opportunity for capital growth, having provided a capital return sufficient to repay the full final capital
entitlement of the Zer
o Dividend Preference shares issued by the wholly-owned subsidiary company, SDVP.
The Company’s investment policy is that:
• The Company will invest in equities in order to achieve its investment objectives, which are to provide
both income and capital growth, predominantly through investment in mid and smaller capitalised
UK companies admitted to the Official List of the UK Listing Authority and traded on the London
Stock Exchange Main Market, AIM, or other qualifying UK marketplaces.
• The Company will not invest in preference shares, loan stock or notes, convertible securities or fixed
interest securities or any similar securities convertible into shares; nor will it invest in the securities of
other investment trusts or in unquoted companies.
Performance Analysis using Key Performance Indicators
At each quarterly Board meeting, the Directors consider a number of key performance indicators (‘KPIs’)
to assess the Group’s success in achieving its objectives, including the net asset value (‘NAV’), the dividend
per share and the total ongoing charges.
• The Group’s Consolidated Statement of Comprehensive Income is set out on page 57.
• A total dividend for the year to 30 April 2023 of 11.77p (2022: 11.00p) per Ordinary share has been
declared to shareholders by way of three payments totalling 8.8275p per Ordinary share plus a
planned fourth interim dividend payment of 2.9425p per Ordinary share.
• The NAV per Ordinary share at 30 April 2023 was 168.15p (2022: 198.47p).
• The ongoing charges (including investment management fees and other expenses but excluding
exceptional items) for the year ended 30 April 2023 were 2.44% (2022: 2.03%). The increase in the
annualised ongoing charges is primarily due to the decrease in net asset value during the year.
Principal Risks
The Directors confirm that they have carried out a robust annual assessment of the principal risks facing
the Company, including those that would threaten its objectives, business model, future performance,
solvency or liquidity. The Board regularly monitors the principal risks facing the Company, the likelihood of
any risk crystallising, the potential implications for the Company and its performance, and any additional
mitigation that might be introduced. Mitigation of these risks is primarily 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 meets formally with the Investment
Manager on a quarterly basis when the portfolio transactions and performance are discussed and reviewed
to ensure that the Investment Manager is managing the portfolio within the scope of the investment policy.
11
Strategic Report (continued)
The Company is substantially dependent on the services of the Investment Manager’s investment team for
the implementation of its investment policy.
The Company may hold a proportion of the portfolio in cash or cash equivalent investments from time to
time. Whilst during positive stock market movements the portfolio may forego potential gains as a result
of maintaining such liquidity, during negative market movements this may provide downside 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 is pleased to report that discount volatility improved with the Company’s stronger
net asset value position and share price during the second half of the year. However, the Board, with its
advisers, continues to monitor the Company’s discount levels and shares may be bought back in future
should it be considered appropriate to do so by the Board.
Regulatory risk
A breach of Companies Act provisions or Financial Conduct Authority (‘FCA’) rules may result in the Group’s
companies being liable to fines or the suspension of either of the Gr
oup companies fr
om listing and from
trading on the London Stock Exchange. Furthermore, the Company must comply with the requirements of
section 1158 of the Corporation Tax Act 2010 to maintain its investment trust status. The Board, with its
advisers, monitors the Group’s regulatory obligations both on an ongoing basis and at quarterly Board
meetings.
Financial risk
The financial position of the Gr
oup is r
eviewed via detailed management accounts at each Board meeting
and both financial position and controls ar
e monitored by the Audit Committee.
Political risk
The Board recognises that changes in the political landscape may substantially affect the Company’s
prospects and the value of its portfolio companies. The Board and Investment Manager continue to monitor
the impact of sanctions imposed on Russia as a result of the war in Ukraine. The Company has no exposure
to Russian stocks within its investment portfolio, hence there was no requirement to amend the Company’s
investment policy. Potential future changes to the UK’s policies and regulatory landscape in light of the
UK’s departure from the EU could impact the Company and its portfolio companies. Potential political
consequences for the Company are regularly monitored and assessed by the Board.
Loss of key personnel
The Board recognises the crucial part the Investment Manager plays in the ongoing success of the
Company’s performance. The departure of the Investment Manager or a key individual at Chelverton Asset
Management Limited (‘Chelverton’) may therefore affect the Company’s performance.
As set out in the Investment Management Agreement, Chelverton is required to provide one or more
dedicated fund managers to the Company, who provides the Board with regular updates on developments
at Chelverton, such as succession planning and business continuity plans. Chelverton currently provides
two fund managers to the Company, therefore lowering the impact of the potential loss of key personnel.
12
Pandemic risk
The Board and Investment Manager continue to monitor the effects of the social and economic changes
arising from the Covid-19 pandemic, together with its impact on the market. The Investment Manager
seeks to mitigate exposure to any future pandemics or health crises by continuously monitoring the
performance and adaptability of portfolio companies, diversifying investments and seeking to learn valuable
lessons from the Covid-19 pandemic.
Accounting policies
New developments in accounting standards and industry-related issues are actively reported to and
monitored by the Audit Committee, the Board where applicable and the Company’s advisers, ensuring that
all appropriate accounting policies are adhered to.
A more detailed explanation of the financial risks facing the Gr
oup is given in note 21 to the financial
statements on pages
74 to 79.
Gearing
The Company’s shares are geared by the Zero Dividend Preference shares and should be regarded as
carrying above average risk, since a positive NAV for the Company’s shareholders will be dependent upon
the Company’s assets being sufficient to meet those prior final entitlements of the holders of Zer
o Dividend
Pr
eference shares. As a consequence of the gearing, a decline in the value of the Company’s investment
portfolio will result in a greater percentage decline in the NAV of the Ordinary shares and vice versa.
Section 172 Statement
The Directors are mindful of their duties to promote the success of the Company in accordance with Section
172 of the Companies Act 2006, for the benefit of the shareholders, giving car
eful consideration to wider
stakeholders’ interests and the environment in which the Company operates. The Board recognises that its
decisions are material, not only to the Company and its future performance, but also to the Company’s key
stakeholders, as identified below
. In making decisions, the Boar
d considered the outcome from its
stakeholder engagement exercises as well as the need to act fairly as between the members of the Company.
Investors
The Company’s shareholders have a significant role in monitoring and safeguar
ding the governance of the
Company and can exercise their voting rights to do so at general meetings of the Company. Shareholders
also benefit fr
om impr
oving performance and returns.
All shareholders have access to the Board via the Company Secretary and the Investment Manager at key
company events, such as the Annual General Meeting, and throughout the year by contacting the Company
Secretary or the Chairman. These regular communications help the Board make informed decisions when
considering how to promote the success of the Company for the benefit of shar
eholders. Furthermor
e, the
Investment Manager prepares and publishes a monthly factsheet on their website.
This year’s Annual General Meeting is to be held on 7 September 2023 at the offices of Chelverton Asset
Management, Basildon House, 7 Moorgate, London EC2R 6EA. Shareholders are strongly encouraged to
vote by proxy and to appoint the Chairman as their proxy. Shareholders are also encouraged to put forward
any questions to the Company Secretary in advance of the Annual General Meeting.
The Board received enhanced Investor Relations themed reporting from its broker, Shore Capital, during the
year, including quarterly shareholder analysis, to ensure continuing awareness of key shareholder groups.
13
Strategic Report (continued)
Investment Manager
The Board recognises the critical role of the Investment Manager in delivering the Company’s future success.
The Investment Manager attends Board and Audit Committee meetings, to participate in transparent
discussions, where constructive challenge is encouraged. The Board and Investment Manager communicate
regularly outside of these meetings with the aim of maintaining an open relationship and momentum in the
Company’s performance and prospects. The Investment Manager’s performance is evaluated informally on a
regular basis, with a formal review carried out on an annual basis by the Board when performing the functions
of a management engagement committee. The Investment Management Agreement is reviewed as part of
this process as further discussed on page 27.
Key service providers
The Board relies on a number of advisors for support in the successful operation of the Company and in order
to meet its obligations. The Board therefore considers the Investment Manager, Company
Secretary/Administrator, Broker, Registrar and Custodian to be stakeholders.
The Company employs a collaborative approach and looks to build long term partnerships with these key
service providers. They are required to report to the Board on a regular basis and their performance and the
terms on which they are engaged are evaluated and considered annually, as detailed on page 35.
Portfolio companies
The Investment Manager regularly liaises with the management teams of companies within the Investment
Portfolio and reports on findings and the performance of investee companies to the Boar
d on at least a
quarterly basis.
Regulators
The Board regularly reviews the regulatory landscape and ensures compliance with rules and regulations
relevant to the Company via reporting at quarterly Board meeting from the Company Secretary. Compliance
with relevant rules and regulations is regularly formally assessed.
Community and environment
The Board believes that consideration of environmental, social and governance (‘ESG’) factors as part of
the investment process when pursuing the Company’s objectives is key. The Board therefore discusses this
with the Investment Manager on a regular basis.
Principal Decisions
The Board defines principal decisions as those that are material to the Company as well as those that are
significant to any of the Company’s key stakeholders as identified in the table above. In making the principal
decisions set out below
, the Board considered the outcome from its engagement with stakeholders as well
as the need to maintain a reputation for high standards of business conduct and the need to act fairly as
between the members of the Company.
Principal decision 1 – Issue of shares
Strong NAV performance for the first half of the financial year to 30 April 2023 enabled the Boar
d to
appr
ove the issuing of new shares in response to demand, as set out in more detail on page 28. Since the
beginning of the calendar year, the Company issued 510,000 shares at a premium to NAV.
14
Principal decision 2 – Block listing facility
As detailed further on page 28, the Board approved an application to the Financial Conduct Authority for
a Block Listing Facility of 2,750,000 Ordinary shares to be admitted to the Official List and to the London
Stock Exchange.
Principal decision 3 – Monthly factsheets
In order to enhance communications with the Company’s shareholders, the Investment Manager prepares
and publishes a monthly factsheet, which is available on the Chelverton website.
The Board decided that a notification of the publication of the monthly factsheet should be made to the
London Stock Exchange, which has happened every month since July 2022.
Principal decision 4 – Dividend policy
In accordance with the Company’s dividend policy, the Board approved four quarterly dividends of 2.9425p
per Ordinary share (totalling 11.77p for the year).
In the financial year to 30 April 2022, the Company incr
eased the quarterly dividend rate by 7% fr
om that
of the previous year. For the current financial year, the Boar
d took the decision to once again increase the
quarterly dividend rate by 7%.
Viability Statement
The Board and Investment Manager continuously consider the performance, progress and future prospects
of the Company over a variety of future timescales. These assessments, including regular investment
performance updates from the Investment Manager, and a continuing programme of risk monitoring and
analysis, form the foundations of the Board’s assessment of the future viability of the Company. The
Directors are mindful of the Company’s commitments to shareholders of the Subsidiary in 2025 in forming
their viability opinion for the Company each year.
With this in mind, the Directors currently believe that future demand from investors will enable the Group’s
subsidiary to issue new zero dividend preference shares (ZDPs) upon repayment of the existing ZDPs in
2025. The Directors remain of the view, therefore, that three years is a wholly realistic and the most
appropriate period over which to assess the viability of the Company. After careful analysis, taking into
account the potential impact of the current risks and uncertainties to which the Company is exposed, the
Directors confirm that in their opinion:
• it is appropriate to adopt the going concern basis for this Annual Report and Accounts; and
• the Company continues to be viable for a period of at least three years from the date of signing of
this Annual Report and Accounts. Three years is considered by the Board to be the maximum period
over which it is currently feasible to make a viability forecast based on known risks and macro-
economic trends.
The following facts, which have not materially changed in the last financial year
, support the Dir
ectors’ view:
• the Company has a liquid investment portfolio invested predominantly in readily realisable smaller
capitalised UK-listed and AIM traded securities and has a small amount of short-term cash on deposit;
and
• revenue expenses of the Company are covered multiple times by investment income.
15
Strategic Report (continued)
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 assurances from its
independent service providers, to whom all management and administrative functions are delegated, that
their operations are well managed and they are taking appropriate action to monitor and mitigate risk. The
Directors have a reasonable expectation that the Company will be able to continue in operation and meet
its liabilities as they fall due over the period of the assessment.
Other Statutory Information
Company status and business model
The Company was incorporated on 6 April 1999 and commenced trading on 12 May 1999. The Company
is a closed-ended investment trust with registered number 03749536. Its capital structure consists of
Ordinary shares of 25p each, which are listed and traded on the main market of the London Stock Exchange.
The Group financial statements consolidate the audited annual r
eport and financial statements of the
Company and SDVP for the year ended 30 April 2023. The Company owns 100% of the issued or
dinary
share capital and voting rights of SDVP, which was incorporated on 25 October 2017.
Further information on the capital structure of the Company and SDVP can be found on pages 77 to 78.
Alternative Investment Fund Manager (‘AIFM’)
The Board is compliant with the directive and the Company is registered as a Small Registered AIFM with
the FCA and all required returns have been completed and filed.
Employees, environmental, human rights and community issues
The Board recognises the requirement under Section 414C of the Companies Act to detail information
about employees, environmental, human rights and community issues, including information about any
policies it has in relation to these matters and the effectiveness of these policies. These requirements and
the requirements of the Modern Slavery Act 2015 do not directly apply to the Company as it has no
employees and no physical assets, all the Directors are non-executive and it has outsourced all its
management and administrative functions to third-party service providers. The Company has therefore not
reported further in respect of these provisions. However, in carrying out its activities and in relationships
with service providers, the Company aims to conduct itself responsibly, ethically and fairly at all times.
Environmental, Social, Governance (‘ESG’)
The Investment Manager is committed to delivering the long-term investment objectives of the Company.
This long-term lens involves careful consideration of systemic issues that can present investing opportunities
and challenges for investors, such as those relating to climate change and more sustainable business
practice.
16
Responsible investing and active stewardship lie at the heart of the investing approach and the Investment
Manager is signatory to the United-Nations backed Principles of Responsible Investing (‘PRI’) and the
revised UK Stewardship Code 2020.
As
signatory
to these best-practice principles the Investment Manager systematically incorporates relevant
ESG issues within their investment analysis and decision making and adhere to policies and processes designed
to ensure the responsible allocation, management, and oversight of capital with the aim of protecting and
enhancing value for investors, leading to benefits for the economy
, the envir
onment and society.
The Responsible Investing policies, plans, and risk controls that guide the
Investment Manager
’s investing
activities are detailed in a Responsible Investing Policies Pack, available to view on the Chelverton website
alongside an annual UK Stewardship Code Report and quarterly Engagement and Voting reports.
The Responsible Investing Pack includes:
• An ESG Policy detailing how E, S, and G issues are incorporated within the investment process and
how ESG risk is monitored and controlled.
• A Shareholder Engagement and Voting Policy detailing the principles that guide the Investment
Manager’s engagement and voting behaviour.
• An annual Engagement Plan, designed to ensure ESG issues are appropriately incorporated within
company engagements and detailing how the Investment Manager engages to support.
improvements in company ESG management and reporting and the control of systemic risk.
The internal roles, governance structures, and resources that support the responsible investing and active
stewardship activities of the Investment Manager include:
• A Head of Responsible Investing who leads an ESG Team that work alongside the Investment Manager
supporting E, S, and G analysis and engagement and voting activities.
• A regular cycle of ESG meetings that input to Board oversight of ESG risk.
• Proprietary ESG data collection and third-party ESG data services
ESG in a UK Small and Mid-cap Context
Small and medium-sized companies are neither immune from the impact of systemic risk, nor without a
significant role to play in the delivery of r
equired change. However, small and mid-sized companies are
typically poorly researched by external ESG ratings agencies and assessments show a recognised large-
cap bias. Consequently, the
Investment Manager
does not rely on external ESG ratings, considering these
for contextual purposes only. The
Investment Manager
prefers in-house analysis supported by proprietary
ESG data collection, considering this more appropriate for the small and mid-cap universe.
Corporate Governance Issues
The Investment Manager pays particular attention to corporate governance, believing purpose driven
companies, demonstrating strong and effective governance and a healthy corporate culture, are best placed
to succeed.
The Investment Manager has the support of the ESG Team in this assessment and access to information
and analysis gathered from proprietary ESG questionnaires.
The assessment is sensitive to company size, level of maturity, and specific cir
cumstances of each company
.
17
Strategic Report (continued)
The Investment Manager is supportive of the general principles expressed by the UK Corporate Governance
Code and Quoted Companies Alliance (QCA) Code for small and medium sized companies and expects
companies to adhere to these standards or explain why they have not done so.
The Investment Manager considers the following, engaging to understand individual circumstances and to
influence change wher
e this is deemed to be of value.
• Boar
d Size and Composition
The Investment Manager considers the boards of small and medium-sized companies should not become
too large for cost and efficiency r
easons and that the Boar
d should be well-balanced in terms of executive
and non-executive directors, with a majority of non-executive directors.
Non-executive directors are scrutinised for their independence and good historic behaviour.
The tenure of directors should ideally not exceed 10 years. However, this is always considered within the
company context.
The Investment Manager prefers non-executives to be on fewer rather than multiple boards whilst
acknowledging good non-executives are in short supply.
The Investment Manager looks for an appropriate mixture of abilities and knowledge on the Board and
consider the experience of an independent Chair to be particularly important.
Diversity and inclusion at board level is considered an indicator of an inclusive company culture and important
in relation to the quality of decision-making. Whilst encouraging boards to ensure their composition is reflective
of society, the
Investment Manager
accepts this can take time to achieve. However, the Investment Manager
will engage to ensure board diversity is a consideration in the nomination process, where appropriate.
• Remuneration
Executive remuneration proposals are reviewed annually using the company Report and Accounts and the
Investment Manager
will engage with the Chair or Chair of the Remuneration Committee where proposals
do not meet the following broad criteria:
Remuneration should encourage long-term value creation and the alignment of management and
shareholder interests, including claw back mechanisms in the event of misconduct.
Basic pay awards above inflation should be justified by performance. Performance thr
esholds should be
challenging and linked to clear tar
gets.
The Investment Manager favours the inclusion of material ESG management targets alongside financial
targets and that awards should be sensitive to the constraints on awards to the wider workforce during
periods of difficult trading.
Long term incentive schemes should be simple and share-based with minimum holding periods, and the
manager favours the inclusion of total shareholder return metrics in long term incentive schemes.
Shareholder dilution resulting from the issuance of options or new shares in remuneration packages should
not be excessive.
18
One-off recruitment awards to secure the right candidate should not become part of ongoing remuneration.
Executive pension contributions should progressively align with the pension contributions of the wider
workforce.
Capital Allocation, Dividend Policy and Capital Structure
Capital allocation, dividend policy and capital structure are regularly and openly discussed at company
engagement meetings, allowing a two-way dialogue.
The Investment Manager seeks to invest in companies that recognise their responsibilities to existing
shareholders and expect to be consulted regarding any changes in capital allocation or dividend policy.
The Investment Manager is not opposed to the retention of cashflow within a business to fund opportunities
at attractive rates of return but favour excess cashflow to be paid out in line with a clear policy
.
Dividend policies should be appr
opriate for the current and future cash flows of the business, while
recognising the need to deliver returns to shareholders.
Where dividend policies are expressed as a payout ratio, the
Investment Manager
typically favours a target
range rather than an explicit ratio. If there is excess capital to distribute, the preferred method is a gradual
increase in the ordinary dividend. The Investment Manager is not opposed to special dividends or share
buy-backs in line with policy, but expects any shares bought back to be cancelled.
The Investment Manager does not favour unnecessary equity issuance, or the dilution of existing
shareholder returns through aggrandising corporate activity. However, all proposals for new equity are
considered on a case-by -case basis.
Environmental Issues
The Investment Manager considers each company’s approach to the identification, management and
reporting of material environmental issues, asking targeted questions via ESG questionnaire and relying
on the support of the ESG Team for additional insight where appropriate.
A review of company policies, standards, and commitments in relation to environmental responsibilities is
undertaken.
In addition, the Investment Manager writes annually to committed holdings outlining expectations regarding
issues considered so pervasive that they have become the responsibility of all system participants to manage
regardless of materiality.
Climate
The Investment Manager accepts that limiting global warming to 1.5 degrees above pre-industrials, in line
with the Paris Agreement and national commitments to Net Zero, is a central consideration for a responsible
investor.
The Investment Manager is committed to using shareholder influence to ensur
e all investee companies ar
e
working towards the adoption of a net zero strategy.
19
Strategic Report (continued)
Biodiversity
The Investment Manager is mindful of the depletion in the natural capital upon which we all depend and
the urgency to reverse biodiversity loss and is committed to engaging with investee companies to ensure
focus on natural resource efficiency
, the contr
ol of negative impacts, and the adoption of policies and
practices that can support nature restoration.
Social Issues
The Investment Manager considers each company’s approach to the identification, management and
reporting of material social issues, asking targeted questions via ESG questionnaire and relying on the
support of the ESG Team for additional insight where appropriate.
A review of company policies, standards, and commitments in relation to social issues is undertaken.
In addition, the Investment Manager writes annually to committed holdings outlining expectations regarding
issues considered so pervasive that they have become the responsibility of all system participants to manage
regardless of materiality.
Human Rights
The Investment Manager follows a process to understand each company’s focus on the effective
management of human rights issues, including within supply chains. Questions are asked via an ESG
questionnaire and a review company policies, standards, and commitments in relation to human rights is
undertaken with the support of the ESG Team.
Human Capital
Competition for talent across all sectors of the economy has rarely been so fierce and the employment
expectations and training and support needs of the workforce have rapidly evolved in recent years.
Therefore, the Investment Manager considers company focus on recruitment, employee satisfaction, and
retention to be central to ingredients of company success.
Questions are asked via the ESG questionnaire and a review of company policies, standards, and
commitments in relation to human capital management is undertaken with the support of the ESG Team.
In addition, the Investment Manager is committed to using shareholder influence to ensure all investee
companies are focussed on improving diversity, equity and inclusion within leadership and the wider workforce.
Health and Safety
As a part of understanding company culture and the Company’s focus on human capital, the Investment
Manager reviews company policies, including performance statistics where relevant, relating the
occupational Health and Safety, asking questions via the ESG questionnaire and reviewing the approach
with the support of the ESG Team where relevant.
Engagement
Engagement lies at the heart of the Investment Manager’s approach to managing ESG risk and significant
time and resources are devoted to company engagement.
The Investment Manager fosters constructive relationships with the executive and non-executive
management teams, and increasingly with sustainability and other professionals such as investor relations,
seeking purposeful dialogue on ESG issues.
20
Engagement activity is reported on an annual basis in the Investment Managers UK Stewardship Code
Report and is guided by the Chelverton Shareholder Engagement and Voting Policy.
The Investment Manager considers their skill and expertise when engaging with companies to be value
enhancing and follow a structured approach, relying on the support of the ESG Team to ensure the
appropriate inclusion of ESG issues and progress in relation to active engagement objectives.
The Investment Manager writes to all committed holdings on an annual basis outlining ESG management
and reporting expectations and asking for focus on systemic issues, including climate change, diversity
equity and inclusion, ESG targets within executive remuneration packages, and more recently natural
resource usage and nature restoration.
Collaborative engagement aims to support the needs of small and mid-sized companies within the financial
system and promote their participation in more sustainable business practice and the Investment Manager
targets collaborative engagements that address the market-wide and systemic risks identified thr
ough the
investment process as important.
The desired outcome of active engagement is to reduce investment risk and enhance the prospects of
investee companies through dialogue and support. However, the Investment Manager is not a ‘forever’
investor and may look to sell holdings where the investment case is considered at risk due to inadequate
management focus on material ESG risk.
Proxy Voting
The Investment Manager considers voting an important shareholder right and seek to vote every eligible
vote in line with the principles laid out in the Chelverton Asset Management Shareholder Engagement and
Voting Policy and active engagement objectives laid out in the annual Engagement Plan. However, in
principle, having satisfied themselves r
egar
ding the integrity of the investment case, the Investment
Manager is likely to be supportive of company management.
The Investment Manager does not rely on the services of a third-party proxy voting advisor, believing in-
house governance analysis by the ESG Team’s Corporate Governance Manager, considered alongside the
contextual knowledge of the Investment Manager, is more pertinent for small and mid-sized companies.
Voting behaviour, including the rationale for any vote that is not supportive of a management resolution,
is reported on a quarterly basis on the Chelverton website and summarised annually in the UK Stewardship
Code Report.
Data Science and Third-party Data Resources
The Chelverton ESG Team have built a proprietary ESG data base using company ESG questionnaire
responses supplemented by desk-based research. The Investment Manager also maintains a shared
Corporate Engagement Log recording relevant company engagements and progress in relation to
engagement objectives.
The Investment Manager has access to several external ESG data services that provide contextual insight
in relation to ESG risk factors, including MSCI ESG data, Bloomberg ESG Data that includes summary ESG
ratings from Sustainalytics, ISS and RobecoSam, signatory CDP data (Carbon Disclosure Project) relating
to climate, water and deforestation, and ASR Macro ESG research.
21
Strategic Report (continued)
Screening
The
Investment Manager does
not currently set limits or apply exclusion or inclusion criteria in relation to
sustainability objectives, except where required by law or in relation to banned activities under international
conventions. The
Investment Manager relies
on MSCI ESG data to provide data regarding involvement in
controversial business exposures or banned weaponry.
However, the
Investment Manager
’s investment focus on quality characteristics will tend to exclude
companies assessed as managing ESG risks badly and/or without a credible strategy. For example, if a
company operating in a high ESG risk sector is identified as managing ESG risk poorly
, the company will
tend to be excluded fr
om consideration by our selection criteria, as paid out in the
Investment Manager
’s
ESG Policy.
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.
Streamlined energy and carbon reporting
The Company is categorised as a lower energy user under the HMRC Environmental Reporting Guidelines
March 2019 and is therefore not required to make the detailed disclosures of energy and carbon information
set out within the guidelines. The Company has therefore not reported further in respect of these guidelines.
Culture and values
The Company’s values are to act responsibly, ethically and fairly at all times. The Company’s culture is driven
by its values and is focused on providing Ordinary shareholders with a high income and opportunity for
capital growth, as set out on page 11. As the Company has no employees, its culture is represented by the
values, conduct and performance of the Board, the Investment Manager and its key service providers, all
of whom work collaboratively to support delivery of the Company’s strategy.
Current and future developments
A review of the main features of the year and the outlook for the Company is contained in the Chairman’s
Statement on pages 2 to 4 and the Investment Manager’s Report on pages 5 and 6.
Dividends declared/paid
30 April 2023 30 April 2022
Payment date p p
First interim 14 October 2022 2.9425 2.75
Second interim 9 January 2023 2.9425 2.75
Third interim 14 April 2023 2.9425 2.75
Fourth interim 14 July 2023 2.9425 2.75
11.77 11.00
The Directors do not declare a final dividend.
22
Ten year dividend history
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
p p p p p p p p p p
1st Quarter 2.9425 2.75 2.50 2.40 2.19 2.02 1.85 1.70 1.575 1.475
2nd Quarter 2.9425 2.75 2.50 2.40 2.19 2.02 1.85 1.70 1.575 1.475
3rd Quarter 2.9425 2.75 2.50 2.40 2.19 2.02 1.85 1.70 1.575 1.475
8.8275 8.25 7.50 7.20 6.57 6.06 5.55 5.10 4.725 4.425
4th Quarter 2.9425 2.75 2.50 2.40 2.40 2.40 2.40 2.40 2.40 2.40
11.77 11.00 10.00 9.60 8.97 8.46 7.95 7.50 7.125 6.825
% increase of core
dividend 7.00 7.087 4.17 7.02 6.03 6.47 6.00 5.26 4.40 3.41
Special dividend – – 0.272 – 2.50 0.66 1.86 1.60 0.30 2.75
Total dividend 11.77 11.00 10.272 9.60 11.47 9.12 9.81 9.10 7.425 9.575
Diversity and succession planning
As at 30 April 2023 the Board comprised three Directors, two male and one female.
The Company did not meet the FCA Listing Rules target on diversity which requires 40% of the individuals
on the board to be women and for at least one senior board position to be held by a woman. Furthermore,
one director should come from an ethnic minority background. As at 30 April 2023, the Company did not
meet this gender diversity requirement as only one out of three directors (33%) is female. The Board also
does not have a director from an ethnic minority background. The Board recognises the need to consider
the benefits of diversity when considering new appointments to the Boar
d. All appointments ar
e made on
the basis of merit against objective criteria; however, the Board seeks to consider a wide range of candidates
with due regard to diversity, spanning gender, ethnicity, background and experience. As all appointments
are based on merit, and in view of the small size of the Board, the Board does not consider it appropriate
to set diversity targets. The Board will continue to consider succession planning on an annual basis.
The Strategic Report is signed on behalf of the Board by
Howard Myles
Chairman
29 June 2023
23
SECTION 2
Directors
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 charter
ed accountant. In 1978 he joined W Gr
eenwell & 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 and chairman of Baker Steel Resources Trust Limited and during the
year was chairman of abrdn Latin American Income Fund Limited which went into voluntary liquidation on
12 June, having retired from the Board of BBGI SICAV S.A. in April 2022.
Mr Myles was appointed to the Board in 2011 and became Chairman on 8 September 2022 upon the
retirement of Lord Lamont. On that date he stepped down from the chair of the Audit Committee but
remains a member thereof.
Andrew Watkins*
+
has a wealth of experience in the financial services industry working in senior positions
at Kleinwort Benson, Flemings, Jupiter and most recently as Head of Client Relations, Sales & Marketing for
Investment Trusts at Invesco Perpetual, retiring in 2017. He is currently a non-executive director and chairman
of Ashoka India Equity Investment Trust plc and a non-executive director of Baillie Gifford European Growth
Trust plc, CT UK High Income Trust plc and Consistent Unit Trust Management Ltd.
Mr Watkins was appointed to the Board on 6 September 2018. He became Chairman of the Audit
Committee on 8 September 2022.
Denise Hadgill*
+
has spent 35 years in the investment industry, first in the Eurobond market at SGST and
then in the equity oil sector at Smith New Court. She moved into fund management at Schroders where she
was a UK Equity Fund Manager and Director responsible for the firm’
s r
elationship with UK pension funds
and charity clients with multi asset portfolios. Denise went on to be a Managing Director and Head of the
UK Product Strategy group at BlackRock where she was responsible for delivering the firm’
s investment
message and economic outlook to an extensive range of UK clients. Denise is a non-executive dir
ector of
Henderson Diversified Income T
rust Plc and Smithson Investment T
rust plc as well as the mutual society,
Pharmaceutical and General Provident Society Limited.
Ms Hadgill was appointed to the Board on 1 May 2022.
The Rt Hon. Lord Lamont of Lerwick*+ was Chancellor of the Exchequer between 1990 and 1993. Prior
to that appointment, Lord Lamont was Chief Secretary to the Treasury between 1989 and 1990. Following
his retirement as a Member of Parliament in 1997, he has held numerous positions as a director of various
organisations and funds, including NM Rothschild and Sons Limited. He is a director of European
Opportunities Trust plc, Stanhope Gate Architecture Limited, Rocklea Limited and OMFIF Foundation
Limited. He was formerly a director of The British-Iranian Chamber of Commerce.
Lord Lamont was appointed to the Board on 27 February 2006 and retired on 8 September 2022.
* Independent
+
Audit Committee member
25
Investment Manager, Secretary, Custodian and
Registrar
Investment Manager: Chelverton Asset Management Limited (‘Chelverton’)
Chelverton was formed in 1998 by David Horner, who has considerable experience of analysing investments
and working with smaller companies. Chelverton is predominantly owned by its employees.
Chelverton is a specialist fund manager focused on UK mid and small companies and has a successful track
record. At 31 March 2023, Chelverton had total funds under management of approximately £1.6 billion,
including two investment companies and three OEICs. The Income Fund Management Team comprises
David Horner, Oliver Knott and David Taylor.
Chelverton is authorised and regulated by the FCA.
Administrator and Corporate Secretary: Apex Fund Administration Services (UK) Limited (formerly
Maitland Administration Services Limited)
Apex Fund Administration Services (UK) Limited (‘Apex’) provides company secretarial and administrative
services for the Group. The Apex group provides administration and regulatory oversight solutions for a
wide range of investment companies.
Custodian: Jarvis Investment Management Limited
Established for over 30 years, Jarvis Investment Management Limited offers a wide range of administration
services and solutions, including custody services.
Registrar: Share Registrars Limited
Share Registrars Limited is a CREST registrar established in 2004 and provides share registration services
to over 200 client companies.
26
Directors’ Report
The Directors present their Annual Report and financial statements for the Group and the Company for
the year ended 30 April 2023.
Directors
The Directors who served during the year ended 30 April 2023 are listed on page 25. 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. 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 ef
fected by the Company during the current financial year. Ther
e 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’s compliance with the UK Corporate
Governance Code and the AIC Code of Corporate Governance can be found on pages 32 to 38.
Management agreements
The Company’s investments are managed by Chelverton 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 Apex. 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 confident that Chelverton has the r
equir
ed skill and expertise to continue to successfully
manage the Group’s assets, and continues to be satisfied with the services provided by Apex
.
Dividends
Details of the dividends declared and paid by the Board are set out in the Strategic Report on page 1.
Directors’ indemnification and insurance
The Company’s Articles of Association provide that, insofar as permitted by law, every Director shall be
indemnified by the Company against all costs, charges, expenses, losses or liabilities incurr
ed in the
execution and discharge of the Directors’ duties, powers or office. The Company has arranged appropriate
insurance cover in r
espect of legal action against its Directors. This cover was in place during the year,
having been reviewed and renewed, and also to the date of signing this report.
27
Directors’ Report (continued)
Block listing facility
In order to satisfy investor demand for the Company’s shares, which could not be met through the secondary
market, on 6 April 2023 the Company applied to the Financial Conduct Authority for a block listing facility
of 2,750,000 Ordinary shares to be admitted to the Official List and to trading on the London Stock
Exchange with new shares to rank pari passu with the existing Ordinary shares of the Company.
The Company issued an additional 300,000 shares during the year to 30 April 2023 and a further 210,000
shares were issued subsequent to the year end and up to 28 June 2023 at a premium to NAV.
Substantial shareholdings
The Directors have been informed of the following notifiable interests in the voting shares of the Company
at 30 April 2023:
Number of % of
Ordinary shares shares voting rights
IntegraFin Holdings plc 1,460,756 7.01%
Philip J Milton & Company Plc 1,051,833 5.04%
Integrated Financial Arrangements Limited 801,748 4.05%
The Company has not been notified of any changes to the above holdings between 30 April 2023 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 2023. The Notice of Meeting is
set out on pages 86 to 90.
In addition to the ordinary business of the meeting, there are items of special business, as follows:
Authority to issue shares and disapply pre-emption rights
A Special Resolution was passed at the last AGM held on 8 September 2022 giving the Directors authority,
pursuant to Section 551 of the Companies Act 2006, to allot Ordinary shares up to an aggregate nominal
value equal to £781,875 (which figur
e r
epresented 15% of the issued share capital of the Company). This
authority expires at the conclusion of the next AGM. The Directors are accordingly seeking authorisation,
pursuant to Section 551 of the Companies Act 2006, to allot up to an aggregate nominal value equal to
£801,000, being 15% 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 2024 or 15 months from the
passing of the Resolution, whichever is earlier.
A Special Resolution was also passed on 8 September 2022 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
accordingly seeking its renewal, pursuant to Sections 570 and 573 of the Companies Act 2006, to enable
the Directors to issue up to 10% of the issued Ordinary share capital, representing 2,136,000 Ordinary
shares at the date of this report, as set out in the Notice of Meeting as Resolution 10.
28
This authority will also cover the sale of shares held in Treasury, and will expire at the AGM to be held in
2024 or 15 months from the passing of the Resolution, whichever is earlier. The authority 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 2022 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 11 as set
out in the Notice of Meeting will renew this authority for up to 14.99% of the current issued Ordinary share
capital in circulation, which represents 3,201,864 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 2024 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 Or
dinary shares for the five business days
immediately preceding the date on which the Ordinary share is purchased, and (ii) the higher of the price
of the last independent trade and the current highest independent bid on the London Stock Exchange.
Shares may be cancelled or placed in Treasury.
Pursuant to the loan agreement between the Company and SDVP, the Company will not purchase any of
its Ordinary shares out of capital reserves unless the cover for the final r
edemption value of the Zer
o
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 2024, 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 shar
eholdings
r
epresenting approximately 0.5% of the issued share capital.
29
Directors’ Report (continued)
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 82 and 83.
• Details of the substantial shareholders in the Company are listed on page 28.
• 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 granting of powers to issue or buy back the
Company’s shares require the relevant Resolutions 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 28 and 29.
• 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 potential future developments is detailed in the Strategic Report on page 22.
SDVP Annual General Meeting
SDVP’s AGM will be held on Thursday 7 September 2023 following the Company’s AGM. The Notice of
Meeting is set out in the SDVP Annual Report.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance
and position, are described in the Chairman’s Statement on pages 2 to 4 and in the Investment Manager’s
Report on pages 5 and 6. The financial position of the Gr
oup, its cash flows, liquidity position and borr
owing
facilities are described in the financial statements. In addition, note 21 on pages 74 to 79 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 exposur
e to cr
edit risk and liquidity risk.
The Audit Committee has conducted stress testing of the balance sheet and future dividend streams in
different scenarios to support the opinion regarding financial position and outlook.
Notwithstanding the Company’s stable performance and financial position during the financial year
, the
Dir
ectors have determined that there is continuing uncertainty as to the prospects for and timing of a full
recovery from the economic effects of the war in Ukraine and Covid-19 pandemic. It is likely that different
sectors of the domestic economy, and countries globally, will recover at different speeds and trajectories.
The Group continues to benefit fr
om adequate
financial resources however and, as a consequence, having
assessed the principal risks facing the Company and the other matters set out in the Viability Statement,
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.
Climate Disclosures
Statements regarding the Company’s climate related activities and Board policies where applicable can be
found in the Strategic Report on pages 19 and 20.
30
Auditor
The Auditor, Hazlewoods LLP, has indicated its willingness to continue in office and Resolutions 7 and 8
proposing its re-appointment and authorising the Directors to determine its remuneration for the ensuing
year will be submitted for approval at the AGM.
The Directors who were in office on the date of appr
oval of these fi
nancial statements have confirmed, as
far as they are each aware, that there is no relevant audit information of which the Auditor is unaware. Each
of the Directors has confirmed that they have taken all the steps that they ought to have taken as Dir
ectors
in or
der 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
Howard Myles
Chairman
29 June 2023
31
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 2018 (‘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 2023 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, pr
ocedur
es 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 2019
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 addresses all the principles set out in the Governance Code, and there are some areas where
the AIC Code is more flexible than the Governance Code. The Boar
d has taken steps to adher
e to its
principles for investment companies and follow the recommendations in the AIC Code where it believes
they are appropriate.
A copy of the AIC Code and the AIC Guide can be obtained via the AIC website, www.theaic.co.uk, and a
copy of the Governance Code can be obtained at www.frc.org.uk.
The Company has complied with the recommendations of the AIC Code and the relevant provisions of the
Governance Code except as set out below:
• owing to the size of the Board, it is felt inappropriate to appoint a senior independent non-executive
Director as further detailed on page 34.
• as the Group has no staff, other than Directors, there are no procedures in place in relation to raising
concerns anonymously and in confidence. The Boar
d has satisfied itself ther
e are appropriate
procedures in place for the workforce to raise concerns at its service providers.
• the Board has not established a remuneration committee as the function of this is performed by the
Board.
• the Board has not established a nomination committee as the function of this is also performed by
the Board.
• Mr Myles has served on the Board for over nine years. As detailed on page 33, it is the Board’s firm
view, however, that length of service does not in itself compromise a Director’s ability to act
independently. The Board considers Mr Myles to be independent, but his role and contribution will
be subject to regular review, in accordance with the Code. He will, along with the other Directors,
stand for re-election at the AGM each year.
32
Board responsibilities and relationship with Investment Manager
The Board is responsible for the investment policy and strategic and operational decisions of the Group and
for ensuring that the Group is run in accordance with all regulatory and statutory requirements. These procedures
have been formalised in a schedule of matters reserved for decision by the Board. These matters include:
• the maintenance of clear investment objectives and risk management policies, changes to which
require Board approval;
• the monitoring of the business activities of the Group, including investment performance and annual
budgeting; and
• review of matters delegated to the Investment Manager, Administrator, Custodian or Secretary.
The Group’s day-to-day functions have been delegated to a number of service providers, each engaged
under separate legal agreements. At each Board meeting the Directors follow a formal agenda prepared
and circulated in advance of the meeting by the Company Secretary to review the Group’s investments
and all other important issues, such as asset allocation, gearing policy, corporate strategic issues, cash
management, peer group performance, marketing and shareholder relations, investment outlook and
revenue forecasts, to ensure that control is maintained over the Group’s affairs. The Board regularly
considers its overall strategy and also conducts one-off and more focused reviews of all matters within its
remit, and the focus during the financial year was on monitoring the continued ef
fective working of the
Investment Manager and thir
d party advisers together with modelling changes to the Company’s dividend
income streams as discussed throughout this Strategic Report.
The management of the Group’s assets is delegated to Chelverton. At each Board meeting, one or more
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 Secr
etary and Investment
Manager prepare briefing notes for Board consideration on matters of r
elevance, for example changes to
the Group’s economic and financial environment, statutory and r
egulatory changes and corporate
governance best practice.
Board membership
At the year end the Board consisted of three 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 str
ength. The Dir
ectors possess a wide range of business and financial expertise relevant to the
direction of the Group and Company and consider that they commit sufficient time to the Group and
Company’
s affairs. On appointment to the Board, Directors are fully briefed as to their responsibilities by
the Chairman, the Investment Manager and the Company Secretary. Brief biographical details of the
Directors, along with recent changes to the Board, are set out on page 25.
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 2023 the Board and its
Committees met four times and all Directors were present at all formal Board meetings, and those specific
purpose Committee meetings.
33
Statement on Corporate Governance (continued)
Board effectiveness
The Board, acting as the Nomination Committee, conducts a formal annual review of the size, composition
and balance of the Board and the performance of the Board, its Committees and the Directors facilitated
by feedback provided by each Director. The Chairman provides a summary of the findings which ar
e
discussed at the meeting and an action plan is agr
eed if required. During the year, no issues were identified
requiring an action plan. The performance of the Chairman of the Board is evaluated by the other Directors.
The Board is satisfied fr
om the r
esults of the evaluation completed this year 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 manage the Company.
Chairman
The Chairman, Howard Myles, 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 dir
ectors.
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 Watkins and Ms Hadgill are deemed to be independent of the Investment Manager. Despite being on
the Board for over nine years, the Board believes Mr Myles is also independent. All Directors continue to
perform their roles effectively.
Under the Articles of Association, one-third of the Directors are required to retire by rotation at each AGM
and no Director shall serve a term of more than three years before re-election. However, in line with
prevailing corporate governance best practice, all Directors retire and offer themselves for annual re-
election. The Board has therefore reviewed the appointment of all Directors and recommends that
shareholders vote for their re-election at this year's AGM.
The Board believes that although the Chairman has served as a Director for more than the recommended
nine years, the Board continues to benefit fr
om his individual expertise, his contributions to the Boar
d
remain effective, that he demonstrates commitment to his role as a non-executive Director of the Company
and has 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. The Chairman’s performance is
evaluated annually by the Board when carrying out the functions performed by a nomination committee as
detailed on page 35. 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.
34
Audit Committee
The Audit Committee comprises the Directors of the Board. The Committee met twice during the year
ended 30 April 2023. Mr Myles chaired the first of these meetings and Mr Watkins chair
ed the other
following his appointment as Chairman of the Audit Committee with effect from 8 September 2022. 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 Gr
oup and for r
eviewing 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 r
ole r
equired.
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 and considered whether the terms and conditions of the Investment Management
Agreement remain appropriate. Based on its performance, the Board concluded that the Investment
Manager’s appointment should continue. It also reviewed the performance of the Company Secretary, the
Custodian and the Registrar and matters concerning their respective agreements with the Company.
Nominations Committee
The functions performed by this type of Committee are carried out by the Board of the Company. The rules
concerning the appointment and replacement of Directors are contained in the Company's Articles of
Association.
The Board, acting as the Nomination Committee, evaluated the performance of Directors and the Chairman
for the year ended 30 April 2023. No third party was engaged to carry out an external evaluation of the
Board. As a result of the evaluation, the Board remains of the opinion that all Directors contribute effectively
and have the skills and experience relevant to the leadership and direction of the Company as detailed on
page 34. The Board assessed the time commitment for each Board post and agreed that sufficient time
was being spent by each Director to fulfil their duties. The Boar
d also recommended the re-appointment
of all Directors standing for re-election at the AGM.
Remuneration Committee
The functions performed by this type of Committee are carried out by the Board of the Company.
The Board continues to assess the Directors’ fees, following proper consideration of the role that individual
Directors fulfil in r
espect of Boar
d and Committee responsibilities, the time committed to the Group’s affairs
and remuneration levels generally within the investment trust sector.
35
Statement on Corporate Governance (continued)
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 41 to 44 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 in investee companies.
Conflicts of interest
It is the responsibility of each individual Director to avoid an unauthorised conflict arising. Each Director
must notify and request authorisation from the Board as soon as they become 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 consider
ed will include whether the
con
flict could prevent the Dir
ector from properly performing their 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.
The Board is not aware of any conflicts having arisen during the year
.
A r
egister of conflicts is maintained by the Company Secr
etary and is r
eviewed at Board meetings, to ensure
that any authorised conflicts remain appr
opriate. 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 contr
ol, have been in
place for the full financial year and up to the date the financial statements were appr
oved.
36
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.
Reflecting r
ecent macr
o-economic and political uncertainty, the Board, on the recommendation of the Audit
Committee, completed additional reviews of the Company’s internal control environment during the year,
with updates at each quarterly meeting.
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 r
elated to the r
eview 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 natur
e of the risks
being addressed. The sections are as follows:
• corporate strategy and performance;
• 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 and have also sought reassurance from each as to their
continuing performance across the financial year
. T
o 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 pr
ocedures; and
• assessment of the control procedures.
The key procedures which have been established to provide effective internal financial controls ar
e as
follows:
37
Statement on Corporate Governance (continued)
• 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
Apex Fund Administration Services (UK) 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 Boar
d after consideration of the quality of the parties involved; the Board, acting as the
Management Engagement Committee, monitors their ongoing performance and contractual
arrangements.
• Mandates for authorisation of investment transactions and expense payments are set by the Board.
• The Board reviews detailed financial information provided by the Administrator on a r
egular basis.
Company Secretary
The Board has direct access to the advice and services of the Company Secretary, who 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.
Shareholders are able to contact any of the Directors at any time via the Company Secretary. The Chairman
has also included a letter to this effect to all shareholders with the Annual Report. 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 and the Board.
There are no significant issues raised by major shar
eholders to bring to all shar
eholders’ attention, topics
of interest are covered in the Strategic Report on pages 1 to 23.
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 85. 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 circulated to shareholders.
38
Audit Committee Report
Role of the Audit 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 r
esponsibilities of the Committee ar
e:
• 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.
The Committee’s terms of reference were reviewed and updated in June 2022 to reflect curr
ent
r
ecommended best practice.
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, recognition of income 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 Investment Manager throughout the year, and received reports on their
legal compliance. A Risk Assessment and Review of Internal Controls document maintained by the Board
was considered in detail and amended as necessary. This document is reviewed by the Committee at each
meeting.
Internal audit
The Group does not have an internal audit function, as most of its day-to-day operations are delegated to
third parties, all of whom have their own internal control procedures. The Committee discussed whether it
would be appropriate to establish an internal audit function and agreed that the existing system of
monitoring and reporting by third parties remains appropriate and sufficient. The need for an internal audit
function is reviewed annually.
External audit
The Audit Committee monitors and reviews the effectiveness of the third-party service providers and the
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.
39
Audit Committee Report (continued)
Prior to each financial year end, 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 Senior Statutory
Auditor and staff and on the levels of skill and responsibility of those involved.
Hazlewoods LLP was first appointed as Auditor to the Gr
oup on 2 May 2007. As part of its r
eview of the
continuing appointment of the Auditor, the Committee considers the length of tenure of the audit firm, its
fees and independence, along with any matters raised during each audit. The Committee has discussed
with Hazlewoods LLP its objectivity, independence and experience in the investment trust sector.
The Committee has recommended the re-appointment of Hazlewoods LLP on each occasion since their
initial appointment. The audit was put out to tender in 2017, and, as a result of that process, the Committee
recommended to the Board, and the Board approved, the re-appointment of Hazlewoods LLP. The Senior
Statutory Auditor for the Group has been rotated three times since the initial appointment, most recently
in respect of the financial year ended 30 April 2018, and again for the curr
ent year ended 30 April 2023.
Hazlewoods LLP has indicated its willingness to continue in office as Auditor of the Gr
oup. Following its
review, the Committee considers that, individually and collectively, the Auditor is appropriately experienced
to fulfil the r
ole r
equired and has recommended its re-appointment to the Board. A resolution for its re-
appointment will be proposed at the forthcoming AGM.
The Committee has considered the independence and objectivity of the Auditor and has assessed its
performance. The Committee is satisfied in these r
espects that Hazlewoods LLP has fulfi
lled its obligations
to the Group and its shareholders.
Andrew Watkins
Audit Committee Chairman
29 June 2023
40
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 47 to 55.
Last year, shareholders were asked to approve the Directors’ Remuneration Report at the AGM through an
advisory vote, as has been the case in previous years, and this will again be the case at this year’s AGM.
Similarly, shareholders were also asked to give a binding vote on the Directors’ Remuneration Policy at the
2020 AGM. The Remuneration Policy must be the subject of a binding vote at least every three years and
will therefore be proposed at this year’s AGM.
The Board considers Directors’ remuneration annually. The level of remuneration is designed to attract and
retain individuals with the appropriate skills and experience necessary for the effective stewarding of the
Company. The annual review includes an assessment of the time commitment to the Group’s affairs, as well
as a comparison with the remuneration paid to directors of similar investment trusts. The fees are paid at
a rate of £30,000 for the Chairman and £22,000 for the other Directors, with an additional payment of
£3,000 to the Chairman of the Audit Committee in recognition of the greater workload and responsibilities
required in that role.
The Company’s performance
The graph below compares the total return (assuming all dividends are reinvested) to Ordinary shareholders,
compared to the total shareholder return of the MSCI UK Small Cap Index. Although the Company has no
formal benchmark, the MSCI UK Small Cap Index has been selected as it is considered to represent a broad
equity market index against which the performance of the Company’s assets may be adequately assessed.
Directors’ service contracts
None of the Directors has a contract of service with the Company, nor has there been any contract or
arrangement between the Company and any Director at any time during the year. The terms of their
appointment provide that a Director shall retire and be subject to re-election at the first
AGM
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.
41
Chelverton UK Dividend Trust plc NAV rebased to 100
MSCI UK Small Cap (Total Return) rebased to 100
2020 20222021 20232013 2014 2015 2016 2018 2019
2017
350
400
200
250
300
50
0
100
150
Directors’ Remuneration Report (continued)
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 Dir
ectors’ emoluments table below ther
efore does not include columns for any of these
items or their monetary equivalents.
Directors’ emoluments for the year ended 30 April 2023 (audited)
The Directors who served in the year received the following emoluments wholly in the form of fees:
Fees/Total
Year to Year to
30 April 2023 30 April 2022
£ £
Lord Lamont (former Chairman)* 10,692 20,000
H Myles (current Chairman)** 28,276 20,000
A Watkins** 23,974 17,500
D Hadgill 22,000 –
84,942 57,500
* Lord Lamont resigned as Chairman on 8 September 2022.
** Mr Myles’ and Mr Watkins’ directors’ fees were £25,000 and £22,000 respectively from 1 May 2022 until
they took over in their new roles on 8 September 2022 when their fees increased to £30,000 and £25,000
respectively.
During the year no Directors received taxable benefits (2022: same).
Directors’ interests (audited)
The interests of the Directors and any connected persons in the Ordinary shares and Zero Dividend
Preference (‘ZDP’) shares of the subsidiary Company are set out below:
Number of Number of Number of Number of
Ordinary shares ZDP shares Ordinary shares ZDP shares
held at held at held at held at
Director 30 April 2023 30 April 2023 30 April 2022 30 April 2022
D Hadgill 2,762 Nil – –
H Myles Nil Nil Nil Nil
A Watkins 13,100 Nil 13,100 Nil
In August 2020 the Board, acting its capacity as the Remuneration Committee, approved a revised and
updated Share Dealing Policy for Directors.
Significance of spend on pay
2023 2022 Change
£ £ %
Dividends paid to Ordinary shareholders in the year 2,424,000 2,298,000 5.48
Total remuneration paid to Directors 84,942 57,500 49.02
42
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 2022 (Resolution 2) was approved by
shareholders at the AGM held on 8 September 2022. The votes cast by proxy were as follows:
Number of votes % of votes cast
For 709,886 85.7
Against 83,290 10.1
At Chairman’s discretion 0 0.0
Total votes cast 828,669
Number of votes abstained 35,513
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 similar organisations and appointments.
The fees of the non-executive Directors are determined within the limits of £250,000, as set out in the
Company’s Articles of Association. The approval of shareholders would be required to increase the limits
set out in the Articles of Association. Directors are not eligible for bonuses, pension benefits, shar
e options,
long-term incentive schemes or other benefits, as the Board does not consider such arrangements or
bene
fits necessary or appropriate. Fees for any new Dir
ector appointed will be made on the same basis.
The Directors’ Remuneration Policy (Resolution 7) was approved by shareholders at the Annual General
Meeting held on 9 September 2020. The votes cast by proxy were as follows:
Number of votes % of votes cast
For 991,995 91.9
Against 87,732 8.1
Total votes cast 1,079,727
Number of votes abstained 16,282
As noted on page 30, from 1 May 2022 the fees will increase as shown below:
Fees for Year to Fees for Year to
30 April 2024 30 April 2023
Chairman 30,000 30,000
Non-Executive Director 22,000 22,000
Audit Committee Chairman additional fee 3,000 3,000
The Company intends to continue with the Directors’ Remuneration Policy approved by shareholders in
2020 over the next financial year
, subject to appr
oval by the shareholders at the AGM. 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 and will therefore be proposed at this year’s AGM.
43
Directors’ Remuneration Report (continued)
Approval
The Directors’ Remuneration Report on pages 41 to 44 was approved by the Board on 29 June 2023.
On behalf of the Board
Howard Myles
Chairman
29 June 2023
44
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. Company law
requires the Directors to prepare financial statements for each financial year. Under that law the Dir
ectors
have elected to prepare financial statements in accordance with UK adopted international accounting
standar
ds and with the requirements of the Companies Act 2006 as applicable to companies reporting
under international accounting standards.
Under company law the Directors must not approve the financial statements unless they ar
e satisfi
ed that
they present fairly the financial position, financial performance and cash flows of the Group and the
Company for that period.
In pr
eparing each of the Group and the Company’s financial statements, the Dir
ectors ar
e required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state that the Group and the Company have complied with UK adopted international accounting
standards subject to any material departures disclosed and explained in the financial statements;
• present information, including accounting policies, in a manner that provides relevant, reliable,
comparable and understandable information;
• provide additional disclosures when compliance with specific r
equir
ements in UK adopted
international accounting standards 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; and
• make an assessment of the Group’s ability to continue as a going concern.
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. 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 maintenance and integrity of the corporate and financial information
relating to the Company on the Investment Manager’s website. Legislation in the UK governing the
preparation and dissemination of financial statements dif
fers fr
om legislation in other jurisdictions.
The Directors confirm that, to the best of their knowledge and belief:
• the financial statements, pr
epar
ed in accordance with the relevant financial framework, give a true
and fair view of the assets, liabilities, financial position and profi
t of the Group;
• the Annual Report includes a fair review of the development and performance of the Group and the
position of the Group, together with a description of the principal risks and uncertainties faced;
45
Statement of Directors’ Responsibilities (continued)
• the Annual Report is fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company’s performance, business model and strategy; and
• the Investment Managers’ Report includes a fair review of the development and performance of the
business and the Group and its undertakings included in the consolidation taken as a whole and
adequately describes the principal risks and uncertainties they face.
On behalf of the Board of Directors
Howard Myles
Chairman
29 June 2023
46
Independent Auditor’s Report
to the members of Chelverton UK Dividend Trust PLC
Opinion
We have audited the financial statements of Chelverton UK Dividend Trust Plc (the ‘Parent Company’) and
its subsidiaries (the ‘Group’) for the year ended 30 April 2023, 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 to the financial statements, including a summary of significant
accounting policies. The financial r
eporting framework that has been applied in their pr
eparation is
applicable law and UK adopted International Accounting Standards.
In our opinion the financial statements:
• give a true and fair view of the state of the Group’s and Parent Company’s affairs as at 30 April 2023
and of the Group’s and the Parents Company’s profit for the year then ended;
• have been properly prepared in accordance with UK adopted International Accounting Standards;
and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ((ISAs UK)) and
applicable law. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the audit of the financial statements section of our r
eport. W
e are independent of the
Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical r
esponsibilities in accor
dance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to pr
ovide a basis for our opinion.
Our approach to the 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 are 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 inspecting records and documents held by the third-party service providers. We undertook substantive
testing on significant transactions, balances and disclosur
es, the extent of which was based on various
factors such as our overall assessment of the contr
ol environment, the effectiveness of controls over
individual systems and the management of specific risks.
The audit team communicated throughout the audit with the directors and investment managers in order
to ensure we had good knowledge of the business of the Group. During the audit, we reassessed and re-
evaluated audit risks and tailored our approach accordingly.
We communicated with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant findings, including significant deficiencies in internal contr
ol
that we identified during the audit, if any.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is appropriate.
47
Independent Auditor’s Report (continued)
In making this assessment we have considered the directors’ procedures for overseeing the activities of
the Group and reviewing its results and forecasts. The application of those procedures has been supported
by us reviewing Board minutes and other accessible documentation which confirm that the dir
ectors
r
egularly benchmark key performance indicators which include but is not restricted to, reviewing the net
asset value per share and net asset value total return per share and the frequent monitoring of available
funds, anticipated cash outflows and financial headr
oom.
In conjunction with the evaluation of management’s assessment of going concern, we have observed that
resources are carefully planned and managed with the intention of ensuring that the Group has sufficient
resources available and accessible to ensure that the Group’s commitments and obligations are capable of
being met as they fall due.
Our procedures also included an assessment of whether the going concern disclosure in note 1 to the
financial statements gives a complete and accurate description of the dir
ectors’ assessment of going
concern.
Based on the work we have performed, we have not identified any material uncertainties r
elating to events
or conditions that, individually or collectively
, may cast significant doubt on the Group and Par
ent
Company’s ability to continue as a going concern for a period of at least twelve months from when the
financial statements ar
e authorised for issue. However
, as we cannot predict all future events or conditions
and as subsequent events may result in outcomes that are inconsistent with judgements that were
reasonable at the time they were made, the above conclusions are not a guarantee that the Group or Parent
Company will continue in operation.
In relation to the Group and Parent Company’s reporting on how it has applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in relation to the Directors’
Statement of Responsibilities in the financial statements about whether the dir
ectors consider
ed it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in
the relevant sections of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our
audit of the financial statements of the current period and include the most signifi
cant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest
ef
fect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the
engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our
audit opinion above, key audit matters identified wer
e valuation, ownership and existence of investments,
and the allocation of capital and r
evenue items. Revenue recognition and management override of controls
are always deemed risks in any audit. This is not a complete list of all risks identified by our audit.
48
Key Audit Matter How our scope addressed this matter and key
observations
49
Valuation, ownership and existence of
investments
The Company’s investment portfolio is the key
drivers of its results, of which is wholly represented
by quoted investments.
Quoted investments are not considered to be at a
high risk of material misstatement in terms of
valuation, or to be subject to a significant level of
judgement, because they comprise liquid
investments, for which evidence of the market price
is readily available. However, due to their materiality
in the context of the financial statements as a whole,
they are considered to be a significant risk ar
ea.
Ownership and existence are also considered
significant risks.
Allocation of capital and revenue items
The Group has elected to determine capital profits
refl ecting indirect and dir
ect costs incurred in
generating capital gains. The Group is therefore
required to apportion its expenses between
revenue and capital. This allocation is important as
the Parent Company can only pay dividends out of
revenue reserves.
The split has to be performed on the basis of the
Board’s expected long-term split of returns.
Management override of controls
ISA 240 – The Auditor’s Responsibilities Relating
to Fraud in an Audit of Financial Statements (‘ISA
240’) states that the risk of management override
of controls is present in all entities.
Our audit work included, but was not restricted to,
consideration of the design and implementation of
controls over the pricing of quoted investments
and agreeing 100% of investment prices to
independent sources. We considered the
appropriateness of the use of the quoted bid price
by reviewing the liquidity of the market of the
quoted investments held. We confirmed
investment holdings to custodian report, share
certificates and Companies House.
The Group’s accounting policy on valuation of
investments is shown in note 1 to the financial
statements and related disclosures are included in
note 10.
Our audit work included, but was not restricted to,
examining the historical and forecast trends of
revenue and capital gains of the Parent Company
and assessing whether the allocation of expenses
between revenue and capital is fair and reasonable.
To address this risk our audit work included, but
was not restricted to:
• reviewing material estimates, judgements and
decisions made by management; and
• testing all material manual journal entries.
The Group’s accounting policies in respect of
material estimates and judgements are set out in
note 1.
Independent Auditor’s Report (continued)
Key Audit Matter How our scope addressed this matter and key
observations
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 r
elated disclosur
es 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 £537,000, which is 1% of the value
of the Group’s and Parent Company’s total assets at planning. This is the amount representing the total
magnitude of misstatements that we expect to influence the economic decisions of the users of these
financial statements.
50
Revenue recognition
ISA 240 notes that there is a rebuttable assumption
that there is a risk of fraud as a result of revenue
being misstated due to the improper recognition.
In particular, we identified completeness and
occurrence of investment income as a risk that
requires particular audit attention.
Valuation, ownership and existence of
investments
The Group’s business is to invest predominantly in
small capitalised UK companies, listed on the
Official List and admitted to trading on AIM, to
achieve a high income and opportunity for capital
growth. Accordingly, the investment portfolio is a
significant, material balance in the Financial
Statements. We therefore identified the valuation,
ownership and existence of the investment portfolio
as a risk that requires particular audit attention.
Our audit work included, but was not restricted to:
• assessing whether the Group’s accounting
policy for revenue recognition is in accordance
with IAS 18 ‘Revenue’;
• obtaining an understanding of management’s
process to recognise revenue in accordance
with the stated accounting policy;
• testing income transactions by comparing
dividends during the year obtained from an
independent source with those recognised by
the group;
• testing gains and losses on investments to third
party contracts;
• performing cut-off testing of dividend income
around the year end; and
• checking the classification of special dividends
as either revenue or capital receipts.
The accounting policy on income, including its
recognition, in shown in note 1 to the financial
statements and the components of that income are
included in note 2.
A key judgement in determining materiality (and performance materiality) is the appropriate benchmark to
select. We considered which benchmarks and key performance indicators have the greatest bearing on
shareholder decisions. We determined that the total assets is the key benchmark to use in setting materiality
given the Group’s and Parent Company's objective is for capital appreciation (increase value of investments).
When using total assets to determine overall materiality, our approach is to apply a percentage between
0.5% and 2% to the amount. In setting overall materiality, we applied a rate of 1% being a listed and
regulated entity with solely quoted investments.
We have considered performance materiality at a level of 80% of materiality for the Company’s financial
statements as a whole, which equates to £429,000. We applied this percentage in our determination of
performance materiality because the Group is a listed and regulated entity, that invests in solely quoted
investments.
Audit misstatement posting threshold is determined to be £7,000, which is 5% of materiality. This is the
amount below which identified misstatements are consider
ed to be clearly trivial from a quantitative point
of view. We may become aware of differences below this threshold which could alter the nature, timing and
scope of our audit procedures, for example if we identify smaller differences which are indicators of fraud.
For income and expenditure items we determined that misstatements of lesser amounts than materiality for
the financial statements as a whole would make it improbable 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 £134,000, which
is 25% of the Company’s net revenue return on ordinary activities before taxation at the planning stage of
the audit. Net revenue return excludes realised gain or loss on sale of investments and unrealised gain or
loss on valuation of investments as these were considered in testing of investments using balance sheet
materiality of £429,000.
Other information
The directors are responsible for the other information contained within the annual report. The other
information comprises the information included in the annual report, other than the financial statements
and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our r
esponsibility is to r
ead the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
We have nothing to report in this regard.
51
Independent Auditor’s Report (continued)
In this context, we also have nothing to report in regard to our responsibility to specifically address the
following items in the other information and to report as uncorrected material misstatements of the other
information where we conclude that those items meet the following conditions:
• Fair, balanced and understandable, set out on page 46 – the statement given by the directors that
they consider the annual report and financial statements taken as a whole is fair
, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s and
Parent Company’s performance, business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
• Audit committee reporting, set out on pages 39 to 40 – the section describing the work of the
audit committee does not appropriately address matters communicated by us to the audit committee;
or
• Directors’ statement of compliance with the UK Corporate Governance Code, set out on page
31 – the parts of the Directors’ Report required under the Listing Rules relating to the Group’s and
Parent Company’s compliance with the UK Corporate Governance Code containing provisions
specified for r
eview by the auditors in accor
dance with Listing Rule 9.8.10R (2) do not properly disclose
a departure from a relevant provision of the UK Corporate Governance Code.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, 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 the Directors’ Report for the financial year for which
the financial statements ar
e pr
epared is consistent with the financial statements and those reports
have been prepared in accordance with applicable legal requirements;
• the information about internal control and risk management systems in relation to financial r
eporting
pr
ocesses and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the
Disclosure Rules and Transparency Rules sourcebook made by the Financial Conduct Authority (the
FCA Rules), is consistent with the financial statements and has been pr
epar
ed in accordance with
applicable legal requirements; and
• information about the Group’s and Parent Company’s corporate governance code and practices and
about its administrative, management and supervisory bodies and their committees complies with
rules 7.2.2, 7.2.3 and 7.2.7 of the FCA Rules.
Matters on which we are required to report by exception
In light of the knowledge and understanding of the Group and Parent Company and its environment
obtained in the course of the audit, we have not identified material misstatements in:
• the Strategic Report or the Directors’ Report; or
• the information about internal control and risk management systems in relation to financial r
eporting
pr
ocesses and about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 of the
FCA Rules.
52
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
• adequate accounting records have not been kept, 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 Dir
ectors’ Remuneration Report to be audited ar
e not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law ar
e not made; or
• we have not received all the information and explanations we require for our audit; or
• a corporate governance statement has not been prepared by the Group or Parent Company.
Corporate governance statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term
viability and that part of the Corporate Governance Statement relating to the Group’s and Parent Company's
compliance with the provisions of the UK Corporate Governance Statement specified for our r
eview
.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements
of the Corporate Governance Statement is materially consistent with the financial statements or our
knowledge obtained during the audit:
• the disclosures in the annual report set out on pages 11 to 13 that describe the principal risks and
explain how they are being managed or mitigated;
• the directors’ confirmation set out on page 11 in the annual report that they have carried out a robust
assessment of the principal risks facing the Group and Parent Company, including those that would
threaten its business model, future performance, solvency or liquidity;
• section in the annual report set out on pages 36 to 38 that describes the review of the effectiveness
of the Group’s and Parent Company's risk management and internal control systems, covering all
material controls, including financial, operational and compliance contr
ols;
• section in the annual r
eport set out on page 35 that describes the work of the audit committee,
including the significant issues that the audit committee considered r
elating to the financial statements,
if any, and how these issues were addressed;
• the directors’ statement set out on page 30 in the financial statements about whether the directors
consider
ed it appropriate to adopt the going concern basis of accounting in preparing the financial
statements and the directors’ identification of any material uncertainties to the Gr
oup’
s and Parent
Company’s ability to continue to do so over a period of at least twelve months from the date of
approval of the financial statements;
• whether the directors’ statement relating to going concern required under the Listing Rules in accordance
with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or
• the directors’ explanation set out on pages 15 and 16 in the annual report as to how they have assessed
the prospects of the Group and Parent Company, over what period they have done so and why they
consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group and Parent Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
53
Independent Auditor’s Report (continued)
Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement (set out on pages 45 and 46), the
directors are responsible for the preparation of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that ar
e fr
ee from material misstatement, whether due to fraud or error.
In preparing the financial statements, the dir
ectors ar
e responsible for assessing the Group’s and Parent
Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate the Group or
Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below:
We considered the nature of the Group’s and Parent Company’s industry and its control environment and
reviewed the Group’s and Parent Company’s documentation of its policies and procedures relating to fraud
and compliance with laws and regulations. We also enquired of management about their own identification
and assessment of the risks of irregularities.
We obtained an understanding of the legal and regulatory framework that the Group and Parent Company
operates in and identified the key laws and r
egulations that had a dir
ect effect on the determination of
material amounts and disclosures in the financial statements, including the UK Companies Act and tax
legislation, and, those that do not have a direct effect on the financial statements but compliance with
which may be fundamental to the Group and Parent Company’s ability to operate or to avoid a material
penalty.
We discussed among the audit engagement team regarding the opportunities and incentives that may
exist within the organisation for fraud and how and where fraud might occur in the financial statements.
In common with all audits under ISAs (UK), we are also required to perform specific pr
ocedures to respond
to the risk of management override. In addressing the risk of fraud through management override of
controls, we tested the appropriateness of journal entries and other adjustments; assessed whether the
judgments made in accounting estimates are indicative of a potential bias; and evaluated the business
rationale of any significant transactions that ar
e unusual or outside the normal course of business.
54
In addition to the above, our procedures to respond to the risks identified included the following:
• reviewing financial statement disclosures by testing to supporting documentation to assess
compliance with provisions of relevant laws and regulations described as having a direct effect on the
financial statements;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate
risks of material misstatements due to fraud;
• enquiring of management concerning actual and potential litigation and claims and instances of non-
compliance with laws and regulations; and
• reading minutes of meetings of those charged with governance.
Our audit procedures were designed to respond to risks of material misstatement in the financial
statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than
the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the
events and transactions reflected in the financial statements, the less likely we are to become awar
e of it.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at www.frc.org.uk/auditorsresponsibilities. This description forms part
of our auditor’s report.
Other matters which we are required to address
We were appointed by the Audit Committee on 13 October 2017. The period of total uninterrupted
engagement including previous renewals and reappointments of the firm is 17 years.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or Parent
Company and we remain independent of the Group and Parent Company in conducting our audit.
We have provided no non-audit services to the Group or Parent Company in the period from 1 May 2022
to 30 April 2023.
Our audit opinion is consistent with the additional report to the audit committee.
Use of this report
This report is made solely to the Parent Company's members, as a body, in accordance with chapter 3 of
part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the
Parent Company’s members those matters we are required to state to them in an auditors’ report and for
no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Parent Company and the Parent Company’s members as a body, for our audit work,
for this report, or for the opinions we have formed.
Scott Lawrence FCA (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP
Cheltenham
29 June 2023
55
SECTION 3
Consolidated Statement of Comprehensive Income
for the year ended 30 April 2023
2023 2022
Revenue Capital Total Revenue Capital Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Losses on investments at fair value
through profit or loss 10 – (5,543 ) (5,543 ) – (4,610 ) (4,610 )
Investment income 2 3,202 – 3,202 2,576 – 2,576
Investment management fee 3 (133 ) (400 ) (533 ) (158 ) (473 ) (631 )
Other expenses 4 (333 ) (14 ) (347 ) (302 ) (12 ) (314 )
Net deficit before finance costs
and taxation
Finance costs 6 – (680 ) (680 ) – (654 ) (654 )
Net deficit before taxation 2,736 (6,637 ) (3,901 ) 2,116 (5,749 ) (3,633 )
Taxation 7 (32 ) – (32 ) (32 ) – (32 )
Total comprehensive expense
for the year 2,704 (6,637 ) (3,933 ) 2,084 (5,749 ) (3,665 )
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Net return per:
Ordinary share 8 12.94 (31.77 ) (18.83 ) 10.00 (27.57 ) (17.57 )
Zero Dividend Preference share 2025 8 – 4.69 4.69 – 4.51 4.51
The total column of this statement is the Statement of Comprehensive Income of the Group prepared in
accordance with UK adopted IFRS and with the requirements of the Companies Act 2006. 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 61 to 79 form part of these financial statements.
57
Consolidated and Parent Company Statement of
Changes in Net Equity
for the year ended 30 April 2023
Share Capital
Share premium
redemption
Capital Revenue
capital account reserve reserve reserve Total
Note £’000 £’000 £’000 £’000 £’000 £’000
Year ended 30 April 2023
30 April 2022 5,213 17,517 5,004 11,201 2,447 41,382
Total comprehensive expense
for the year – – – (6,637 ) 2,704 (3,933 )
Ordinary shares issued 75 466 – – – 541
Expenses of Ordinary share issue – (3 ) – – – (3 )
Dividends paid 9 – – – – (2,424 ) (2,424 )
30 April 2023 5,288 17,980 5,004 4,564 2,727 35,563
Year ended 30 April 2022
30 April 2021 5,213 17,517 5,004 16,950 2,661 47,345
Total comprehensive expense
for the year – – – (5,749 ) 2,084 (3,665 )
Dividends paid 9 – – – – (2,298 ) (2,298 )
30 April 2022 5,213 17,517 5,004 11,201 2,447 41,382
The notes on pages 61 to 79 form part of these financial statements.
58
Consolidated and Parent Company Balance Sheets
as at 30 April 2023
Group Group Company Company
2023 2022 2023 2022
Note £’000 £’000 £’000 £’000
Non-current assets
Investments at fair value through profit or loss 10 52,825 57,751 52,825 57,751
Investments in Subsidiary 12 – – 13 13
Current assets
Trade and other receivables 13 469 520 469 520
Cash and cash equivalents 380 534 380 534
Total assets 53,674 58,805 53,687 58,818
Current liabilities
Trade and other payables 14 (245 ) (237 ) (258) (250)
(245 ) (237 ) (258) (250)
Total assets less current liabilities 53,429 58,568 53,429 58,568
Non-current liabilities
Zero Dividend Preference shares 15 (17,866 ) (17,186 ) – –
Loan from Subsidiary 16 – – (17,866) (17,186)
(17,866 ) (17,186 ) (17,866) (17,186)
Total liabilities (18,111 ) (17,423 ) (18,124) (17,436)
Net assets 35,563 41,382 35,563 41,382
Represented by:
Share capital 17 5,288 5,213 5,288 5,213
Share premium account 18 17,980 17,517 17,980 17,517
Capital redemption reserve 18 5,004 5,004 5,004 5,004
Capital reserve 18 4,564 11,201 4,564 11,201
Revenue reserve 2,727 2,447 2,727 2,447
Equity shareholders’ funds 35,563 41,382 35,563 41,382
The notes on pages 61 to 79 form part of these financial statements.
Company Registered Number: 03749536
59
60
Consolidated and Parent Company Statement of
Cash Flows
for the year ended 30 April 2023
2023 2022
Note £’000 £’000
Operating activities
Investment income received 3,170 2,370
Investment management fee paid (546 ) (643 )
Administration and secretarial fees paid (64 ) (67 )
Other cash payments (273 ) (236 )
Cash generated from operations 19 2,287 1,424
Purchases of investments (12,624 ) (8,795 )
Sales of investments 12,069 9,715
Net cash (outflow)/inflow from operating activities (555 ) 2,344
Financing activities
Issue of Ordinary shares 541 –
Expenses of Ordinary share issue (3 ) –
Dividends paid 9 (2,424 ) (2,298 )
Net cash outflow from financing activities (1,886 ) (2,298 )
Change in cash and cash equivalents 20 (154 ) 46
Cash and cash equivalents at start of year 20 534 488
Cash and cash equivalents at end of year 20 380 534
The notes on pages 61 to 79 form part of these financial statements.
Notes to the Financial Statements
as at 30 April 2023
61
Notes to the Financial Statements (continued)
as at 30 April 2023
62
63
Notes to the Financial Statements (continued)
as at 30 April 2023
64
65
Notes to the Financial Statements (continued)
as at 30 April 2023
66
67
Notes to the Financial Statements (continued)
as at 30 April 2023
68
69
Notes to the Financial Statements (continued)
as at 30 April 2023
70
71
Notes to the Financial Statements (continued)
as at 30 April 2023
72
73
Notes to the Financial Statements (continued)
as at 30 April 2023
74
75
Notes to the Financial Statements (continued)
as at 30 April 2023
76
77
Notes to the Financial Statements (continued)
as at 30 April 2023
78
79
Shareholder Information
Financial calendar
Group’s year end 30 April
Quarterly interim dividends usually paid July, October, January and April
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 SDVP are listed
on the London Stock Exchange Main Market.
The net asset values are announced daily 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.
C Share Conversion Ratio
On 26 January 2018 the Company converted its entire issued C share capital (5,500,000 C Shares) into new
Ordinary shares. The conversion ratio was 0.36051421 Ordinary shares in respect of each C share, with
entitlements rounded down to the nearest whole number.
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
.
80
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
to those investors.
A further subsidiary, Chelverton Small Companies ZDP PLC, was incorporated on 13 July 2012, to issue
Zero Dividend Preference shares. A total of 8,500,000 Zero Dividend Preference shares were issued on 24
August 2012, and a further 849,000 on 24 March 2017. This subsidiary was placed into members’ voluntary
liquidation on 5 January 2018, following which the capital entitlements of the Zero Dividend Preference
shares were repaid.
Group structure
The Company has in issue one class of Ordinary share. In addition, it has a wholly owned subsidiary, SDVP,
through which Zero Dividend Preference shares have been issued. SDVP was incorporated on 25 October
2017 and has a capital structure comprising unlisted Ordinary shares and Zero Dividend Preference shares
listed on the Official List and traded on the London Stock Exchange. SDVP was incorporated specifically
for the issue of Zero Dividend Preference shares.
On 8 March 2018, SDVP issued 12,780,083 Zero Dividend Preference shares at 100p per share. The
expenses of the placing were borne by the Company. On 11 April 2018, SDVP issued a further 1,419,917
Zero Dividend Preference shares at 103p per share (a premium of 3p per share) and net proceeds of
£1,500,000. On 10 and 15 May 2018, SDVP issued a further 100,000 and 200,000 Zero Dividend Preference
shares at 104p per share (a premium of 4p per share), and net proceeds of £313,000. Pursuant to a loan
agreement between SDVP and the Company, SDVP has lent the proceeds of the placing to the Company.
The loan is non-interest bearing and is repayable three business days before the Zero Dividend Preference
share redemption date of 30 April 2025 or, if required by SDVP, at any time prior to that date in order to
repay the Zero Dividend Preference share entitlement. The funds are to be managed in accordance with
the investment policy of the Company.
A contribution agreement between the Company and SDVP has also been made whereby the Company
will undertake to contribute such funds as will ensure that SDVP will have in aggregate sufficient assets on
30 April 2025 to satisfy the final capital entitlement of the Zer
o Dividend Pr
eference shares.
Total net assets and market capitalisation at year end
As at 30 April 2023, the Company had a market capitalisation of £36,907,000 (2022: £40,136,000) and total
net assets amounted to £35,563,000 (2022: £41,382,000).
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 pages 74 and 75.
ISA status
The Company’s Ordinary shares are qualifying investments for Individual Savings Accounts (‘ISAs’), as are
the Zero Dividend Preference shares of SDVP.
Registered in England
No. 03749536
A member of the Association of Investment Companies
81
Capital Structure
Chelverton UK Dividend Trust PLC (‘the Company’)
Chelverton UK Dividend Trust PLC was registered on 3 September 2003 with company number 03749536.
The Company has in issue one class of Ordinary share. In addition, it has a wholly owned subsidiary, SDV
2025 ZDP PLC, which was registered on 25 October 2017 with company number 11031268, through which
Zero Dividend Preference shares have been issued.
Ordinary shares of 25p each (‘Ordinary shares’) – 21,150,000 in issue as at 30 April 2023
Share Capital Events
A number of share issuances took place during the year, increasing the total number of shares in issue as
at 30 April 2023 to 21,150,000. The Company applied to the FCA for a block listing authority in order to
expedite further any future share issuances. The block listing authority was approved on 5 April 2023. The
Company only has one class of shares and the stated number of shares in issue represents 100% of the
Company’s share capital and voting rights.
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.
SDV 2025 ZDP PLC (‘SDVP’)
Ordinary shares of 100p each (‘ordinary shares’) – 50,000 in issue (partly paid up as to 25p each)
The ordinary shares in the Subsidiary are owned by the Company. References to Ordinary shares within this
Annual Report are to the Ordinary shares of Chelverton UK 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 SDVP.
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 – 14,500,000 in issue as at 30 April 2023
Share Capital Events
No Zero Dividend Preference shares were issued during the year.
Dividends
Holders of Zero Dividend Preference shares are not entitled to dividends.
82
Capital
On a winding up of SDVP, 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 8 January 2019 at such compound rate, equivalent to 4%, as will give an entitlement
to 133.18p per share at 30 April 2025).
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.
83
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/Premium
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).
84
Directors and Advisers
Directors Howard Myles (Chairman)
Andrew Watkins
Denise Hadgill (appointed on 1 May 2022)
Lord Lamont of Lerwick (retired on 8 September 2022)
Investment Manager Chelverton Asset Management Limited
11 Laura Place
Bath BA2 4BL
Tel: 01225 483030
Secretary and Apex Fund Administration Services (UK) Limited
Registered Office (formerly Maitland Administration Services Limited)
Tel: 01245 398950
Registrar and Share Registrars Limited
Transfer Office 3 Millennium Centre
Crosby Way
Farnham
Surrey GU9 7XX
Tel: 01252 821390
www.shareregistrars.uk.com
Auditors Hazlewoods LLP
Staverton Court
Staverton
Cheltenham, GL51 0UX
Brokers Shore Capital
Cassini House
57 St James’s Street
London SW1A 1LD
Custodian Jarvis Investment Management Limited
78 Mount Ephraim
Tunbridge Wells
Kent TN4 8BS
85
Chelverton UK Dividend Trust PLC
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 stockbr
oker 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 UK 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 2023 at the offices of Chelverton Asset Management, Basildon House,
7 Moorgate, London EC2R 6AF for the following purposes:
Ordinary Business – Resolutions 1 to 8 will be proposed as Ordinary Resolutions
1 To receive the Strategic Report, Directors’ Report, Auditor’s Report and the audited financial statements
for the year ended 30 April 2023.
2 To receive and approve the Directors’ Remuneration Report for the year ended 30 April 2023.
3 To approve the Directors’ Remuneration Policy.
4 To re-elect Mr Myles as a Director.
5 To re-elect Mr Watkins as a Director.
6 To re-elect Ms Hadgill as a Director
7 To re-appoint Hazlewoods as the Company’s Auditor.
8 To authorise the Directors to determine the remuneration of the Company’s Auditor.
Special Business
To consider and, if thought fit, to pass the following Resolutions of which Resolution 9 will be proposed as
an Ordinary Resolution and Resolutions 10 to 12 will be proposed as Special Resolutions:
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 £801,000, being 15% of the issued Ordinary
share capital as at 28 June 2023, 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 2024, 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:
86
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, r
ecor
d 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 2,136,000 Ordinary shares as at 28 June 2023.
and shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2024,
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 3,201,864, 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 pr
eceding the date on which
the Or
dinary 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:
Apex Fund Administration Services (UK) Limited Hamilton Centre
Secretary Rodney Way
29 June 2023 Chelmsford CM1 3BY
87
Chelverton UK Dividend Trust PLC (continued)
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 proxy
form, 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, 3 The Millennium Centre, Crosby
Way, Farnham, Surrey GU9 7XX 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 28 June 2023 (being the last business day prior to the publication of this notice) the Company’s issued share
capital amounted to 21,360,000 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 5 September 2023 (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.
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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.
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Chelverton UK Dividend Trust PLC (continued)
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.
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ASSET MANAGEMENT
CHELVERTON
C