DJ Chelverton UK Dividend Trust plc: Full year results for the year ended 30 April 2021
Chelverton UK Dividend Trust plc (SDVP)
Chelverton UK Dividend Trust plc: Full year results for the year ended 30 April 2021
24-Jun-2021 / 07:00 GMT/BST
Dissemination of a Regulatory Announcement, transmitted by EQS Group.
The issuer is solely responsible for the content of this announcement.
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CHELVERTON UK DIVIDEND TRUST PLC
Annual Report and Accounts for the year to 30 April 2021
Printed copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the
Corporate Secretary - Maitland Administration Services Limited, Hamilton Centre, Rodney Way, Chelmsford, Essex CM1 3BY.
The financial information set out below does not constitute the Company's statutory accounts for the year ended 30
April 2021. The financial information for 2021 is derived from the statutory accounts for that year. The auditors,
Hazlewoods LLP, have reported on the 2021 accounts. Their report was unqualified and did not include a reference to any
matters to which the auditors draw attention by way of emphasis without qualifying their report. The financial
information for 2020 is derived from the statutory accounts for that year. The following text is copied from the Annual
Report & Accounts.
Strategic Report
The Strategic Report comprising pages 1 to 17 has been prepared in accordance with Section 414A of the Companies Act
2006 ('the Act'). Its purpose is to inform shareholders and help them understand how the Directors have performed their
duty under Section 172 of the Act to promote the success of the Company.
Chelverton UK Dividend Trust PLC ('the Company') and its subsidiary SDV 2025 ZDP PLC ('SDVP') ('the subsidiary')
together form the Group. The Group's funds are invested principally in mid and smaller capitalised UK companies. The
portfolio comprises companies listed on the Of?cial List and companies admitted to trading on AIM. The Group does not
invest in other investment trusts or in unquoted companies. No investment is made in preference shares, loan stock or
notes, convertible securities or ?xed interest securities.
Financial Highlights
30 April 30 April
Capital 2021 2020 % change
Total gross assets (GBP'000) 64,013 42,040 52.27
Total net assets (GBP'000) 47,345 26,034 81.86
Net asset value per Ordinary share 227.07p 124.86p 81.86
Mid-market price per Ordinary share 220.00p 127.50p
72.55
(Discount)/premium (3.11%) 2.11%
Net asset value per Zero Dividend Preference share 2025 114.01p 109.67p 3.96
Mid-market price per Zero Dividend Preference share 2025 116.00p
102.00p (6.99%) 13.73
Premium/(discount) 1.75%
Year ended Year ended
Revenue 2021 2020 % change
Return per Ordinary share 6.12p 9.45p (35.24)
Dividends declared per Ordinary share 10.00p 9.60p 4.17
Special dividends declared per Ordinary share 0.272p - 100
Total return
Total return on Group gross assets 57.18%
(28.16%)
Total return on Group's net assets* (total return as proportion of net
(25.85%)
assets after the provision for the Zero Dividend Preference shares) 57.24%
Total return on Group's net assets* 89.79% (36.06%)
Ongoing charges** 2.33% 2.12%
Ongoing charges*** 1.56% 1.50%
* Adding back dividends paid in the year.
** Calculated in accordance with the Association of Investment Companies ('AIC') guidelines. Based on total expenses, excluding ?nance costs, for the year and average net asset value.
*** Based on gross assets. Chairman's Statement
It gives me great pleasure to introduce this Annual Report for the ?nancial year to 30 April 2021 to shareholders.
The last 12 months as a whole have undoubtedly been challenging, with a continuation of the problems arising from the global Covid-19 pandemic and considerable ongoing economic uncertainty. Nevertheless your company has performed very well, bene?tting from a strong recovery in the performance of its investee companies and an improving business and economic outlook in the UK from early 2021 onwards.
I and the Board would like to thank David Horner and the Chelverton team for delivering these excellent results, which are a testament to the skill of their portfolio management. Results
The Company's net asset value per Ordinary share as at 30 April 2021 was 227.07p (2020: 124.86p), an increase over the year of 81.86% with an Ordinary share price of 220.00p per share (2020: 127.50p). Total assets, including audited revenue reserves, were GBP64.013m (2020: GBP42.040m), an increase over the year of 52.3%, and the total net assets were GBP47.345m (2020: GBP26.034m). During the same period the MSCI Small Cap Index increased by 42.75%.
The Company was launched on 12 May 1999, and the net asset value per Ordinary share has risen by 138.2% and a total of 206.12p has been paid in dividends, including the fourth interim dividend announced with this report. Since the year end, the net asset value per Ordinary share has risen to 239.16p as at 21 June 2021 and the discount to market NAV is currently 2.99%.
In the year total dividends of 10.272p per Ordinary share were paid and proposed, including the fourth interim dividend of 2.50p and a special dividend of 0.272p. The total dividend in 2021 represents an increase of 7.0% year on year (2020: 9.60p). The Company uses its revenue reserves built over many years to declare the core and any special dividends each year.
The underlying portfolio yield has considerably stabilised this year as our investee companies either return to paying dividends or outline their future plans to do so. As a result of the policy over the past eleven years of growing the annual dividend and retaining to revenue reserves the maximum permitted under the legislation, the Company is in a strong position and can continue to pay its dividend for some time from accumulated reserves should it be required. The Board is con?dent that the company is well positioned to further grow the annual dividend, assuming more favourable macro-economic conditions continue.
The Company's portfolio is currently invested in 74 companies spread across 16 sectors. This spread creates a well diversi?ed portfolio which should, in the future, lead to a strong return of dividend income and subsequently steady revenue growth and, in time, capital growth. Capital structure
During the year the Company's shares occasionally traded at a premium to net asset value, and we have been asked to issue new shares in order to meet market demand. 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 suf?cient not only to cover all the costs of issuance but also to recognise the value of the revenue reserves that have been built up over many years by retaining pro?ts which would otherwise have been distributed to holders of the existing share capital. Provided these criteria are met, the issue of new shares will enhance 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.
If the issue of new shares is considered in the future, the Board will take into account the two factors discussed above, and the potential to improve the underlying performance and returns of the company for the bene?t of all shareholders. Dividend
As brie?y discussed in the Results section, the Board has declared a fourth interim dividend of 2.50p per Ordinary share (2020: 2.40p) which, when added to the three quarterly interim dividends of 2.50p per Ordinary share, brings the total to 10.0p (2020: 9.60p) for the year ended 30 April 2021, an increase of 4.2% over the previous year.
In addition, the Board has declared a special dividend of 0.272p per Ordinary share (2020: nil) to be paid with the fourth interim dividend. Shareholders will effectively receive a fourth dividend of 2.772p per Ordinary share. This equates to a total dividend for the year of 10.272p per Ordinary share.
In 2020 the Board successfully balanced the Company's income ?ows and reserves such that interim dividends are declared as four equal payments paid quarterly across the ?nancial year. This approach was maintained in 2021 and is expected to form the foundation of the Company's dividend policy for the foreseeable future. The Company has revenue reserves which after payment of the fourth interim dividend represent some 97.3% of the current annual dividend or some 9.9p per Ordinary share.
The Board is committed to progressively improving the Company's dividend for investors and as such has decided that the four interim dividends paid in respect of the ?nancial year ending 30 April 2022 will very likely exceed, but in any event will not be less than, that paid in respect of the ?nancial year ended 30 April 2021. Outlook
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DJ Chelverton UK Dividend Trust plc: Full year -2-
While there is some uncertainty as to the economic recovery in sectors with exposure to global trade, the outlook across the Company's portfolio companies is promising. The Board is con?dent that it is well placed to bene?t from both improving domestic activity and a potential rebound in consumer spending and corporate investment.
The Board accordingly looks forward to continuing to work with David Horner and his Chelverton team to seek out opportunities in the UK smaller companies sector, and to maintaining the Company's strong performance relative to its investment company peers. Lord Lamont of Lerwick
Chairman
24 June 2021 Investment Manager's Report
In the year to 30 April 2021 the Company's net asset value per share rose from 124.86p to 227.07p. At the same time the core dividend was increased 4.2% to 10.0p, in line with the intentions outlined in September 2020. The Company also announced a special dividend of 0.272p, which has been aggregated with the fourth interim dividend.
Including the special dividend the total dividend for the year was 10.272p, a 7.0% increase on the 9.6p paid in 2020. Prior to the Covid-19 pandemic it was the manager's intention to deliver a 7% increase in the core dividend for the year to April 2021, however given the unprecedented reduction in dividends and uncertainty across the market at the time of the ?rst interim dividend decision, we prudently took a more conservative approach to dividend growth. With the trading outlook for our investee companies back on ?rmer footing and dividend payments gradually returning to 'normal' levels, we now have the con?dence to pay a special dividend, in effect boosting the core dividend to the level originally planned. It is the intention to use the total dividend of 10.272p as the base from which to grow the core dividend in the current year.
While the 81.9% increase in NAV in the period is clearly pleasing, it should be taken in the context of the sharp fall in NAV in February and March 2020 during the initial phase of the pandemic. With this in mind, the two-year performance since 30 April 2019 is perhaps a more appropriate measure. During this period the Company's net asset value rose 6.01% from 214.19p to 227.07p. A satisfactory performance over a period of extreme volatility which was delivered alongside increases in the core dividend in both years.
The turning point in the year was the announcement of an effective Covid-19 vaccine in November. Prior to this, uncertainty and fear governed both share prices and management actions at our investee companies, with guidance largely removed from the market and analyst estimates focusing on the "worst case scenario". The impact on dividends across the market has been widely reported and our portfolio was not unaffected, with dividend income versus 2019 (the last year unaffected by Covid-19) reducing 53.0% to GBP1.71m. Given the high level of government support, corporate balance sheets were not, in the main, put under the same pressure as in previous crises. Despite this, due to the ?xation on worst case scenarios, there was a signi?cant uptick in equity issuance. As long-term income focused investors we see dilution as a major headwind against achieving good returns over the medium/long term. As such we believe additional equity should be issued sparingly. Unfortunately, the period saw a number of management teams raise new equity at very low prices, to give their businesses a short-term buffer against potential downside scenarios. While in some instances, particularly in the leisure sector, a capital injection was genuinely required to see them through the pandemic, other businesses raised cash where there simply was no need, and the dilution from these raises is permanent.
The announcement of multiple successful vaccine trials in November brought about a substantial swing in sentiment, with optimism now the order of the day. The market largely shrugged off new waves of the pandemic and additional lockdowns, with the focus now ?rmly on the post pandemic recovery and the expected wave of consumerism, funded by savings built up during the pandemic. Importantly, companies have been very cautious in their return to guidance, largely keeping enough powder dry to weather any re- opening delays.
During this time the much anticipated free trade agreement with the EU was also agreed and signed. The impact on our companies was relatively benign given the extensive preparations which had been taken previously for a "no-deal" scenario, however it removed a signi?cant element of medium-term uncertainty and perceived risk.
The strong NAV performance delivered in 2021 was a direct result of the careful management of the Company's revenue reserves in prior years. Going into this downturn the Company had suf?cient revenue reserves to cover around two years' worth of dividend payments. This level of cover, and the stable ?nancial position of the trust provided by the Zero Dividend Preference shares, allowed us to focus on capital growth during the ?rst phase of the recovery, adding to existing holdings which we felt were materially undervalued despite short term uncertainty over the ability to pay dividends. With the UK vaccination program continuing apace, the outlook for the vast majority of our holdings is more certain, with many currently bene?tting from an element of "pent-up demand". As such we have seen share prices recover strongly since the initial vaccine announcement, with some share prices now materially higher than in February 2020.
We wrote in last year's report that we expected companies to emerge from this downturn stronger and ?tter than before, as had been the case in previous crises. Having now been through several results seasons and been in regular contact with our management teams through the pandemic, we are increasingly convinced that this will be the case. Companies have not been idle through the pandemic, using the period of reduced business activity to accelerate planned improvement programs and speed up the digital transformation process. The pandemic forced us all to adopt new ways of working and interacting with each other. We see multiple examples across the portfolio where this has led to increased acceptance of more ef?cient business models, which would otherwise have taken a number of years to implement. How much of the changes in working practices will be permanent once the economy fully re-opens remains to be seen, but we believe the "hybrid" models which will likely emerge will leave our companies both more ef?cient and more scalable. Portfolio review
In the last year takeover activity in the portfolio signi?cantly reduced from the level seen in 2020 (7 takeovers). Moss Bros Group and Low & Bonar were the only deals completed in the year, although both were originally announced in the prior year. In addition to the takeovers, eight other holdings from the portfolio were sold in their entirety (2020: 2): Elementis, Entain, Foxtons Group, Galliford Try Holdings, Kin & Carter, Titon Holdings, XP Power and XPS Pensions.
Shareholdings were reduced in 21 companies (2020: 11) including Alumasc Group, Amino Technologies, Bloomsbury Publishing, Braemar Shipping Services, Diversi?ed Gas & Oil (now renamed Diversi?ed Energy), DX Group, Headlam Group, Polar Capital Holdings, Randall & Quilter, Strix Group, Tyman and UP Global Sourcing Holdings, all after strong share price performance.
Eight new shareholdings were added to the Company's portfolio in the year (2020: 8), including: Anglo Paci?c - a diversi?ed natural resources royalty company, Contour Global - wholesale power generation, Curtis Banks Group - pension administration services, Duke Royalty - private SME ?nancing, Hargreaves Services - industrial and property services, iEnergizer - business process outsourcing and content delivery services, MP Evans - sustainable palm oil producer and Vector Capital - commercial lending.
Shareholdings were increased in 33 companies (2020: 19) which were in the portfolio at the start of the year. As ever, this represents a signi?cant part of the portfolio and this year includes a number of holdings which were increased at the lows during the ?rst half of the year and were subsequently "top sliced" once the shares had rallied. Outlook
The positive momentum from the second half of last year has continued into the beginning of this year, with the Company's net asset value rising a further 5.3% since 30th April 2021 to 239.16p as at 21 June 2021.
As outlined above, we believe our investee companies are, in the main, emerging as better companies with more ef?cient processes. As the recovery continues, we expect the supply of skilled labour to become increasingly tight. This will make adoption of more ?exible working practices to access new pools of talent increasingly important, with processes which will allow businesses to grow without requiring additional labour also to be encouraged. The market is currently focused on how quickly businesses can return to pre- pandemic levels of activity however, in time, we believe our companies will get the credit they deserve for improving their business models over the course of the downturn.
Finally, while it feels like a long time ago now, the impact of Brexit on this portfolio should not be forgotten. While we now have a free trade agreement in place with the European Union, Covid-19 has focused investor attention elsewhere. We ?rmly believe the "Brexit discount" which our investee companies were suffering from has not yet reversed, a situation which we believe will start to rectify itself over the coming periods. David Horner
Chelverton Asset Management Limited
24 June 2021 Breakdown of Portfolio by Industry
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DJ Chelverton UK Dividend Trust plc: Full year -3-
at 30 April 2021
Market
Value
% of
Bid
Market sector GBP'000 portfolio
Financial Services 10,776 17.1
Industrial Goods & Services 10,460 16.6
Construction & Materials 6,050 9.7
Consumer Products and Services 5,582 9.0
Retail 4,442 7.1
Insurance 4,326 6.8
Real Estate 4,182 6.6
Travel & Leisure 3,526 5.6
Media 3,509 5.5
Food, Beverage & Tobacco 2,873 4.7
Telecommunications 2,184 3.5
Energy 1,827 2.9
Basic Resources 1,232 2.0
Banks 794 1.3
Utilities 597 1.0
Personal Care, Drugs & Grocery Stores 408 0.6
62,768 100.0 Breakdown of Portfolio by Market Capitalisation
at 30 April 2021
Number of Companies
>GBP500m - 20
GBP250-500m - 11
GBP100-250m - 17
GBP75-100m - 6
GBP50-75m - 9
GBP25-50m - 5
% of Portfolio as at 30 April 2021
>GBP500m - 27%
GBP250-500m - 15%
GBP100-250m - 23%
GBP75-100m - 8%
GBP50-75m - 12%
GBP25-50m - 7%
Source: Maitland Administration Services Limited Portfolio Statement
at 30 April 2021
at 30 April 2021 (continued)
Total Portfolio 62,768 100.0
Investment Objective and Policy
The investment objective of the Company is to provide Ordinary shareholders with a high income and opportunity for capital growth, having provided a capital return suf?cient to repay the full ?nal capital entitlement of the Zero Dividend Preference shares issued by the wholly owned subsidiary company SDVP.
The Company's investment policy is that: - The Company will invest in equities in order to achieve its investment objectives, which are to provide both income
and capital growth, predominantly through investment in mid and smaller capitalised UK companies admitted to the
Of?cial List of the UK Listing Authority and traded on the London Stock Exchange Main Market or traded on AIM. - The Company will not invest in preference shares, loan stock or notes, convertible securities or ?xed 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 47. - A total dividend for the year to 30 April 2021 of 10.272p (2020: 9.60p) per Ordinary share has been declared to
shareholders by way of three payments totalling 7.50p per Ordinary share plus a planned fourth interim dividend
payment of 2.50p per Ordinary share and a special dividend of 0.272p per Ordinary share. - The NAV per Ordinary share at 30 April 2021 was 227.07p (2020: 124.86p). - The ongoing charges (including investment management fees and other expenses but excluding exceptional items) for
the year ended 30 April 2021 were 2.33% (2020: 2.12%). The increase in the annualised ongoing charges during the
year is primarily due to the reduction in net asset value for the ?rst half of the year due to the uncertainties
around Covid-19.
The Directors, in conjunction with the Investment Manager, also took time during the 2020-21 ?nancial year to speci?cally benchmark the Group's performance against different comparator peer groups and performance metrics to inform decision making.
Further detailed information is available in the Company's Key Information Document which was updated during the year and can be found on the Company's website: https://www.chelvertonam.com/fund/ chelverton-uk-dividend-trust-plc/ Principal Risks
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DJ Chelverton UK Dividend Trust plc: Full year -4-
The Directors con?rm 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 crystallisation, 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 ?uctuations in the market prices of its investments.
The Investment Manager actively monitors economic performance of investee companies and reports regularly to the Board on a formal and informal basis. The Board formally meets with the Investment Manager on a quarterly basis when the portfolio transactions and performance are discussed and reviewed.
The Company is substantially dependent on the services of the Investment Manager's investment team for the implementation of its investment policy.
The Company may hold a proportion of the portfolio in cash or cash equivalent investments from time to time. Whilst during positive stock market movements the portfolio may forego potential gains, during negative market movements this may provide protection.
Discount volatility
The Board recognises that, as a closed ended company, it is in the long-term interests of shareholders to reduce discount volatility and believes that the prime driver of discounts over the longer term is performance. The Board are pleased to report that discount volatility improved with Company's stronger Net Asset Value position and share price during 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 thought appropriate to do so by the Board.
Regulatory risks
A breach of Companies Act provisions and Financial Conduct Authority ('FCA') rules may result in the Group's companies being liable to ?nes or the suspension of either of the Group companies from listing and from trading on the London Stock Exchange. The Board, with its advisers, monitors the Group and SDVP's regulatory obligations both on an ongoing basis and at quarterly Board meetings.
Financial risk
The ?nancial position of the Group is reviewed via detailed management accounts at each Board meeting and both ?nancial position and controls are 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. There is continuing uncertainty as to the nature of and prospects for future global trading relationships following the end of the 'Brexit' transition period and the UK's departure from the European Union ('EU'). Potential future changes to the UK's policies and regulatory landscape following the UK's departure from the EU could also impact the Company and its portfolio companies. Potential consequences for the Company are regularly monitored and assessed by the Board.
Climate change risk
The Board and Investment Manager consider and discuss how climate change could affect the Company's portfolio companies and shareholder returns. Environmental, social and governance factors increasingly form a part of the dialogue between the Investment Manager and the management teams of portfolio companies and may also contribute to portfolio investment decisions.
The coronavirus pandemic
The Board recognises that despite an improving outlook as a result of successful vaccine rollouts, in the UK in particular, the pandemic continues to negatively impact economies and ?nancial markets worldwide. Certain sectors of economies, globally and in the UK, have been severely affected by the restrictions imposed by governments to reduce the spread of the virus and may in turn take considerable time to recover. The Board and Investment Manager continue to monitor the effects of the pandemic on the market and the future prospects of all portfolio companies.
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 ?nancial risks facing the Group is given in note 22 to the ?nancial statements on pages 65 to 69.
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 suf?cient to meet those prior ?nal entitlements of the holders of Zero Dividend Preference shares. As a consequence of the gearing, a decline in the value of the Company's investment portfolio will result in a greater percentage decline in the NAV of the Ordinary shares and vice versa. Section 172 Statement
The Directors are conscious of their duties to promote the success of the Company under Section 172 of the Companies Act 2006, for the bene?t of the shareholders, giving careful consideration to wider stakeholders' interests and the environment in which the Company operates. The Board recognises that its decisions are material to the Company and its future performance but also the Company's key stakeholders as identi?ed below. In making decisions, the Board considered the outcome from its stakeholder engagement exercises as well as the need to act fairly between the members of the Company.
Key stakeholders
Investors - The Company's shareholders have a signi?cant role in monitoring and safeguarding the governance of the Company and exercise voting rights to do so at general meetings of the Company. Shareholders also bene?t from improving 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 if appropriate. These regular communications help the Board make informed decisions when considering how to promote the success of the Company for the bene?t of shareholders. This year, the Annual General Meeting to be held on 9 September 2021 is currently anticipated to be open to shareholders to attend in person. However, the Board reserves the right to change the arrangements for the meeting, if necessary at short notice, in order to ensure adherence to prevailing Government guidance in light of the ongoing Covid-19 pandemic. In any event, and to ensure all travel is minimised, 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, as was the case in 2020.
The Board received enhanced Investor Relations themed reporting from its broker Shore Capital during the year to ensure continuing awareness of key shareholder matters.
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 and collegiate 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 21.
Key suppliers - The Company employs a collaborative approach and looks to build long term partnerships with its key suppliers. Key suppliers 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 from page 30.
Portfolio companies - The Investment Manager regularly liaises with the management teams of companies within the Investment Portfolio and reports on ?ndings and the performance of investee companies to the Board 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 formally assessed on at least an annual basis. 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 SDVP in 2025 in forming their viability opinion for the Company each year.
The Directors consider that a period of three years is currently the most appropriate time horizon to consider the Company's future viability. After careful analysis, taking into account the potential impact of the current risks and uncertainties the Company is exposed to including the continuing implications of the Covid-19 pandemic and government responses globally, the Directors con?rm that in their opinion: - it is appropriate to adopt the going concern basis for this Annual Report & Accounts - the Company continues to be viable for a period of at least three years from the date of signing of this Annual
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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 ?nancial year, support the Directors' view: - the Company has a liquid investment portfolio invested predominantly in readily realisable smaller capitalised
UK-listed and AIM traded securities and has some short-term cash on deposit; and - revenue expenses of the Company are covered multiple times by investment income, even in the event that lower
income levels as a result of the Covid-19 pandemic continue for some considerable time.
In order to maintain viability, the Company has a robust risk control framework for the identi?cation and mitigation of risk, which is reviewed regularly by the Board. The Directors also seek reassurance from 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 principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HMRC as an investment trust under Sections 1158/1159 of the Corporation Tax Act 2010 ('1158/1159') on an ongoing basis. The Company will be treated as an investment trust company subject to there being no serious breaches of the conditions for approval. The Company is also an investment company as de?ned in Section 833 of the Companies Act 2006. The current portfolio of the Company is such that its shares are eligible for inclusion in ISAs up to the maximum annual subscription limit and the Directors expect this eligibility to be maintained.
The Group ?nancial statements consolidate the audited annual report and ?nancial statements of the Company and SDVP, its subsidiary undertaking, for the year ended 30 April 2021. The Company owns 100% of the issued ordinary 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 73 to 74.
AIFM
The Board is compliant with the directive and is registered as a Small Registered Alternative Investment Fund Manager ('AIFM') with the FCA and all required returns have been completed and ?led.
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')
ESG matters will have an increasing prominence in future ?nancial and regulatory reporting. In company meetings, the Investment Manager routinely questions the corporate management on a variety of topics, such as safety records, environmental footprint and the key areas of focus of their board papers, to ensure that portfolio companies and prospective investments are adhering to best practice and emerging market trends at all times.
The way companies respond to ESG issues can affect their business performance, both directly and indirectly. ESG factors are considered by Chelverton Asset Management investment teams and increasingly contribute to investment decision making, however investment decisions also continue to balance ESG performance in the context of overall investment potential.
The Investment Manager is successfully integrating responsible investing considerations more closely into investment processes for the Company and the other investment vehicles it operates on behalf of investors, a journey that began in 2018. The appointment and integration in 2018 of a Corporate Governance Manager within the investment team at Chelverton Asset Management has been supported by the appointment of an experienced ESG professional to the position of Responsible Investing Manager in October 2020. This renewed commitment is strengthening the Chelverton team's drive to focus on ESG priorities within all Chelverton's investment processes. Misjudgements on ESG matters can increasingly incur major additional costs to the portfolio holdings, as well as undermining their equity returns through reputational damage.
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, who all 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 are contained in the Chairman's Statement on pages 2 and 3 and the Investment Manager's Report on pages 4 to 6.
Dividends declared/paid
The Directors have not recommended a ?nal dividend in respect of the year ended 30 April 2021 (2020: nil).
Diversity and succession planning
As there were no changes to Board composition during the year, the Board of Directors of the Company comprised four male Directors in the year to 30 April 2021. The key criteria for the appointment of new Directors will be the skills and experience of candidates having regard also to the bene?ts of diversity in the interests of shareholder value. The Directors are satis?ed that the Board currently contains members with an appropriate breadth of skills and relevant sector experience. Succession planning is considered on at least an annual basis, further details of which are on page 27. In relation to future appointments the Board will seek to consider a wide range of candidates with due regard to diversity, spanning gender, ethnicity, background and experience.
The Strategic Report is signed on behalf of the Board by Lord Lamont of Lerwick
Chairman
24 June 2021
Directors
The Rt Hon. Lord Lamont of Lerwick*+ (Chairman) was Chancellor of the Exchequer between 1990 and 1993. Prior to that appointment, Lord Lamont was Chief Secretary to the Treasury between 1989 and 1990. Following his retirement as a Member of Parliament in 1997, he has held numerous positions as a director of various organisations and funds, including NM Rothschild and Sons Limited. He is a director of European Opportunities Trust plc.
Lord Lamont was appointed to the Board on 27 February 2006.
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DJ Chelverton UK Dividend Trust plc: Full year -6-
William van Heesewijk began his career with Lloyds Bank International in 1981, working for both the merchant banking and investment management arms. He has been involved in the investment trust industry since 1987 in various capacities. During his tenure with Fidelity Investments International, Gartmore Investment Management PLC, BFS Investments PLC and Chelverton Asset Management Limited, he managed several launches of onshore and offshore investment funds, including a number of roll-overs and reconstructions involving complex capital structures and across several geographic regions. His roles involved business development, project management, sales compliance and marketing. He was a member of the Association of Investment Companies Managers forum.
Mr van Heesewijk was appointed to the Board on 1 December 2005.
Howard Myles*+ was a partner in Ernst & Young from 2001 to 2007 and was responsible for the Investment Funds Corporate Advisory Team. He was previously with UBS Warburg from 1987 to 2001. Mr Myles began his career in stockbroking in 1971 as an equity salesman and in 1975 joined Touche Ross & Co, where he quali?ed as a chartered accountant. In 1978 he joined W Greenwell & Co in the corporate broking team and in 1987 moved to SG Warburg Securities, where he was involved in a wide range of commercial and industrial transactions in addition to leading Warburg's corporate ?nance function for investment funds. He is now a non-executive director of Baker Steel Resources Trust Limited, Aberdeen Latin American Income Fund Limited and BBGI SICAV S.A., having stepped down from the Board of JPMorgan Brazil Investment Trust PLC in September 2020.
Mr Myles was appointed to the Board on 15 March 2011. He became Chairman of the Audit Committee on 15 June 2016.
Andrew Watkins*+ Has a wealth of experience in the ?nancial 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 and BMO UK High Income Trust plc.
Mr Watkins was appointed to the Board on 6 September 2018.
* Independent
+ Audit Committee member Investment Manager, Secretary, Custodian and Registrar Investment Manager: Chelverton Asset Management Limited ('Chelverton')
Chelverton was formed in 1998 by David Horner, who has considerable experience of analysing investments and working with smaller companies. Chelverton is predominantly owned by its employees.
Chelverton is a specialist fund manager focused on UK mid and small companies and has a successful track record. At 31 March 2021, Chelverton had total funds under management of approximately GBP1.8 billion, including two investment trust companies and three OEICs. The fund management team comprises David Horner, David Taylor, Oliver Knott, James Baker and Edward Booth.
Chelverton is authorised and regulated by the FCA. Administrator and Corporate Secretary: Maitland Administration Services Limited
Maitland Administration Services Limited provides company secretarial and administrative services for the Group. The Maitland group provides administration and regulatory oversight solutions for a wide range of investment companies. Custodian: Jarvis Investment Management Limited
Established for over 30 years, Jarvis Investment Management Limited offers a wide range of administration services and solutions, including custody services. Registrar: Share Registrars Limited
Share Registrars Limited is a CREST registrar established in 2004 and provides share registration services to over 200 client companies. Directors' Report
The Directors present their Annual Report and ?nancial statements for the Group and the Company for the year ended 30 April 2021. Directors
The Directors who served during the year ended 30 April 2021 are listed on page 19. 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 signi?cant to the business of the Company, and which was effected by the Company during the current ?nancial year. There have been no loans or guarantees from the Company or its subsidiary undertakings, to any Director at any time during the year or thereafter. Corporate governance
A formal statement on corporate governance and the Company compliance with the UK Corporate Governance Code and the AIC Code of Corporate Governance can be found on pages 25 to 31. Management agreements
The Company's investments are managed by Chelverton Asset Management Limited under an agreement ('the Investment Management Agreement') dated 30 April 2006 (effective from 1 December 2005). A periodic fee is payable quarterly in arrears at an annual rate of 1% of the value of the gross assets under management of the Company. Fees payable under the Investment Management Agreement increased during the year, re?ecting the Company's improving underlying Net Asset Value over the ?nancial year.
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.
During the year the Board completed a bespoke review of the Investment Management Agreement and agreed minor changes with the Manager which the Directors considered to be neutral or bene?cial for the Company and more appropriately re?ect changes in operation of the agreement since inception.
Under another agreement ('the Administration Agreement') dated 1 January 2016, company secretarial services and the general administration of the Group are undertaken by Maitland Administration Services Limited ('Maitland'). Their fee is subject to review at intervals of not less than three years. The Administration Agreement may be terminated by six months' written notice.
It is the Directors' opinion that the continuing appointment of the Investment Manager and the Administrator/ Secretary on the terms agreed is in the best interests of the Group and its shareholders. The Directors are con?dent that Chelverton has the required skill and expertise to continue successfully to manage the Group's assets, and continues to be satis?ed with the services provided by Maitland. Dividends
Details of the dividends declared and paid by the Board are set out in the Strategic Report on page 1. Directors' indemni?cation and insurance
The Company's Articles of Association provide that, insofar as permitted by law, every Director shall be indemni?ed by the Company against all costs, charges, expenses, losses or liabilities incurred in the execution and discharge of the Directors' duties, powers or of?ce. The Company has arranged appropriate insurance cover in respect 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. Substantial shareholdings
The Directors have been informed of the following noti?able interests in the voting shares of the Company at 30 April 2021:
Number of % of
The Company has not been noti?ed of any changes to the above holdings between 30 April 2021 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 9 September 2021. The Notice of Meeting is set out on pages 77 to 81.
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
An Ordinary Resolution was passed at the last AGM held on 9 September 2020 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 GBP781,875 (which ?gure represented 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 GBP781,875, being 15% of the Ordinary shares in issue at the date of this report, as set out in Resolution 10 in the Notice of Meeting. This authority will expire at the AGM to be held in 2022 or 15 months from the passing of the Resolution, whichever is earlier.
A Special Resolution was also passed on 9 September 2020 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 2,085,000 Ordinary shares at the date of this report, as set out in the Notice of Meeting as Resolution 10.
This authority will also cover the sale of shares held in Treasury, and will expire at the AGM to be held in 2022 or 15 months from the passing of the Resolution, whichever is earlier. The authorities to issue shares will only be used when it would be in the interests of shareholders as a whole. The Directors do not currently intend to issue or sell shares from Treasury other than above the prevailing NAV.
Purchase of own shares
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DJ Chelverton UK Dividend Trust plc: Full year -7-
At the AGM held on 9 September 2020 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 3,125,415 Ordinary shares at the date of this report. The Directors do not intend to use the authority to purchase the Company's shares unless to do so would result in an increase in the net asset value per share for the remaining shareholders and would generally be in the interests of all shareholders. The authority, if given, will lapse at the AGM to be held in 2022 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 Of?cial List of the London Stock Exchange) of the Ordinary shares for the ?ve 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 ?nal redemption value of the Zero Dividend Preference shares is at least 1.9 times after the purchase.
Notice period for general meetings
Resolution 12 is a Special Resolution that will give the Directors the ability to convene general meetings, other than Annual General Meetings, on a minimum of 14 clear days' notice. The minimum notice period for annual general meetings will remain at 21 clear days. The approval will be effective until the Company's Annual General Meeting to be held in 2022, 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 bene?cial shareholdings representing approximately 1.0% of the issued share capital. Company information
The following information is disclosed in accordance with the Companies Act 2006: - The Group's capital structure and voting rights are summarised on pages 73 and 74. - Details of the substantial shareholders in the Company are listed on page 22. - The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of
Association. - The Articles of Association can be amended by the passing of a Special Resolution of the members in a General
Meeting. - Amendment of the Articles of Association and the giving of powers to issue or buy back the Company's shares require
the relevant Resolution to be passed by shareholders. The Board's current powers to issue or buy back shares and
proposals for their renewal are detailed on pages 22 and 23. - There are no restrictions concerning the transfer of securities in the Company; no restrictions on voting rights;
no special rights with regard to control attached to securities; no agreements between holders of securities
regarding their transfer known to the Company; and no agreements which the Company is party to that might affect
its control following a successful takeover bid. - Consideration of likely future developments is detailed in the Strategic Report on page 16. SDVP Annual General Meeting
SDVP's AGM will be held on Thursday 9 September 2021 following the Company's AGM. The Notice of Meeting is set out in the SDVP Annual Report. This year's arrangements for SDVP's AGM will mirror those for the Company's AGM, in line with the latest legislation and government guidance. The Board reserves the right to change arrangements for the meeting at short notice. Shareholders are strongly encouraged to vote by proxy and to appoint the Chairman of SDVP as their proxy. Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position, are described in the Chairman's Statement on pages 2 and 3 and in the Investment Manager's Report on pages 4 to 6. The ?nancial position of the Group, its cash ?ows, liquidity position and borrowing facilities are described in the ?nancial statements. In addition, note 22 on pages 65 to 69 to the ?nancial statements sets out the Group's objectives, policies and processes for managing its capital; its ?nancial risk management objectives; details of its ?nancial instruments; and its exposure to credit 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 ?nancial position and outlook. Despite the ongoing challenges arising from the impact of Covid-19 and the economic effects of government restrictions to reduce the spread of the virus, the Investment Manager continues to operate and administer the Company in accordance with relevant accounting standards.
Notwithstanding the Company's improved performance and ?nancial position during the ?nancial year, the Directors have determined that there is continuing uncertainty as to the prospects for and timing of a full recovery from the economic effects of the 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 bene?t from adequate ?nancial 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 15 and 16. Auditor
The Auditor, Hazlewoods LLP, has indicated its willingness to continue in of?ce 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 of?ce on the date of approval of these ?nancial statements have con?rmed, 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 con?rmed that they have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the Auditor.
On behalf of the Board Lord Lamont of Lerwick
Chairman
24 June 2021 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 con?rm 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 2021 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 con?rms that, to the best of its knowledge and understanding, procedures were in place to meet the requirements of the Governance Code relating to internal controls throughout the year under review. This statement describes how the principles of the Governance Code have been applied in the affairs of the Company.
As an investment trust, the Company has also taken into account the Code of Corporate Governance 2019 produced by the Association of Investment Companies ('the AIC Code'), which is intended as a framework of best practice speci?cally 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 ?exible than the Governance Code. The Board has taken steps to adhere to its principles for investment companies and follow the recommendations in the AIC Code where it believes they are appropriate.
A copy of the AIC Code and the AIC Guide can be obtained via the AIC website, www.theaic.co.uk, 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 27. - as the Group has no staff, other than Directors, there are no procedures in place in relation to raising concerns
in con?dence and anonymously. The Board has satis?ed itself there are appropriate procedures for the workforce to
raise concerns in place at its service providers. - the Board has not established a remuneration committee or nomination committee as the functions of these are
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DJ Chelverton UK Dividend Trust plc: Full year -8-
performed by the Board. 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 regularly conducts one-off and more focused reviews of all matters within its remit, and the focus during the ?nancial year was on monitoring the continued effective working of the Investment Manager and third 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, 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 ?nancial information to enable informed decisions to be made and contacts the Board as required for speci?c guidance. The Company Secretary and Investment Manager prepare brie?ng notes for Board consideration on matters of relevance, for example changes to the Group's economic and ?nancial environment, statutory and regulatory changes and corporate governance best practice. Board membership
At the year end the Board consisted of four Directors, all of whom are non-executive. The Group has no employees. The Board seeks to ensure that it has the appropriate balance of skills, experience and length of service amongst its members. The Board's policy on tenure is that Directors can stand for more than nine years. The Board considers that length of service does not necessarily compromise the independence or contribution of directors of investment trust companies where experience and continuity can be a signi?cant strength. The Directors possess a wide range of business and ?nancial expertise relevant to the direction of the Group and Company and consider that they commit suf?cient time to the Group and Company's affairs. On appointment to the Board, Directors are fully briefed as to their responsibilities by the Chairman, the Investment Manager and the Company Secretary. Brief biographical details of the Directors can be found on page 19.
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 2021 the Board and its Committees met six times and all Directors were present at all formal Board meetings, and those speci?c purpose Committee meetings they were asked to attend. 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 ?ndings which are discussed at the meeting and an action plan is agreed if required. During the year, no issues were identi?ed requiring an action plan. The performance of the Chairman of the Board is evaluated by the other Directors. The Board is satis?ed from the results 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, Lord Lamont, is independent. He has shown himself to have suf?cient time to commit to the Group's affairs. The Company does not have a chief executive of?cer, as it has no executive directors. The Chairman has no relationships that may create a con?ict of interest between the Chairman's interest and those of the shareholders, and in fact is a shareholder himself. 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 is deemed to be independent of the Investment Manager. Despite being on the Board for over nine years, the Board believes Lord Lamont and Mr Myles are also independent. They all continue to perform their roles effectively. Mr van Heesewijk was not deemed independent by virtue of his role as a consultant to Chelverton.
Under the Articles of Association, one-third of Directors is 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 will retire and offer themselves for annual re-election at this year's annual general meeting. The Board has therefore reviewed the appointment of all Directors and recommends that shareholders vote for the re-election of Lord Lamont, Mr Myles, Mr van Heesewijk and Mr Watkins respectively.
The Board believes that although certain Board members have served for more than the recommended nine years, the Board continues to bene?t from Directors' individual and collective expertise, their individual contributions to the Board remain effective, that they demonstrate commitment to their roles as non- executive Directors of the Company, and each 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 28. All the Directors make themselves available to shareholders at general meetings of the Company. The Directors can be contacted at other times via the Company Secretary. Audit Committee
The Audit Committee comprises the independent Directors. The Committee met twice during the year ended 30 April 2021, with Mr Myles as Chairman. All members of the Committee were present at both meetings. The Audit Committee has direct access to the Group's Auditor, Hazlewoods LLP, and representatives of Hazlewoods LLP attend the year end Audit Committee meeting.
The primary responsibilities of the Audit Committee are: to review the effectiveness of the internal control environment of the Group and monitor adherence to best practice in corporate governance; to make recommendations to the Board in relation to the re-appointment of the Auditor and to approve their remuneration and terms of engagement; to review and monitor the Auditor's independence and objectivity and the scope and effectiveness of the audit process and to provide a forum through which the Group's Auditor reports to the Board. The Audit Committee also has responsibility for monitoring the integrity of the ?nancial statements and accounting policies of the Group and for reviewing the Group's ?nancial reporting and internal control policies and procedures. Committee members consider that, individually and collectively, they are appropriately experienced in accounting and audit processes to ful?l the role required. Management Engagement Committee
The functions performed by this type of Committee are carried out by the Board of the Company.
The Board reviewed the performance of the Investment Manager's obligations under the Investment Management Agreement and considered whether the terms and conditions of the Investment Management Agreement remain appropriate. The more detailed review of the terms of the Investment Management Agreement completed by the Board this year is discussed on page 21. Based on continuing performance, the Board decided that the Investment Manager's appointment should continue and no performance related changes would be made to the Investment Management Agreement. 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.
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Market value % of
Security Sector GBP'000 portfolio
Belvoir Lettings Real Estate 2,150 3.4
Diversi?ed Gas & Oil Energy 1,827 2.9
Alumasc Group Construction & Materials 1,712 2.7
UP Global Sourcing Holdings Consumer Products and Services 1,610 2.6
Jarvis Securities Financial Services 1,500 2.4
Finncap Group Financial Services 1,320 2.1
Randall & Quilter Insurance 1,320 2.1
Flowtech Fluid Power Industrial Goods & Services 1,265 2.0
Devro Food, Beverage & Tobacco 1,230 2.0
STV Media 1,220 1.9
MTI Wireless Edge Telecommunications 1,206 1.9
DFS Furniture Retail 1,197 1.9
Redde Northgate Industrial Goods & Services 1,091 1.7
Vistry Group Consumer Products and Services 1,065 1.7
Tyman Construction & Materials 1,056 1.7
Epwin Group Construction & Materials 1,045 1.7
Premier Miton Group Financial Services 1,032 1.6
Coral Products Industrial Goods & Services 1,015 1.6
Brewin Dolphin Holdings Financial Services 1,014 1.6
Clarke (T.) Construction & Materials 1,000 1.6
Brown (N) Group Retail 983 1.6
Amino Technologies Telecommunications 978 1.6
Sever?eld Construction & Materials 975 1.6
Marston's Travel & Leisure 970 1.5
Chesnara Insurance 964 1.5
Polar Capital Holdings Financial Services 958 1.5
Numis Corporation Financial Services 950 1.5
MP Evans Food, Beverage & Tobacco 918 1.5
Castings Industrial Goods & Services 915 1.5
Bloomsbury Publishing Media 903 1.4
Vertu Motors Retail 902 1.4
TheWorks.co.uk Retail 876 1.4
Regional REIT Real Estate 840 1.3
Crest Nicholson Consumer Products and Services 818 1.3
Ramsdens Holdings Financial Services 810 1.3
Headlam Group Consumer Products and Services 796 1.3
Close Brothers Group Banks 794 1.3
Essentra Industrial Goods & Services 794 1.3
Appreciate Group Financial Services 760 1.2
Smiths News Industrial Goods & Services 760 1.2
Braemar Shipping Services Industrial Goods & Services 756 1.2
Bakkavor Food, Beverage & Tobacco 725 1.2
Restaurant Group Travel & Leisure 720 1.1
Centaur Media Media 714 1.1
Personal Group Holdings Insurance 708 1.1
Photo-me International Consumer Products and Services 693 1.1
Anglo Paci?c Basic Resources 692 1.1 Portfolio Statement
Market value % of
Security Sector GBP'000 portfolio
Curtis Banks Group Financial Services 690 1.1
Hansard Global Insurance 684 1.1
Palace Capital Real Estate 674 1.1
Wilmington Group Media 672 1.1
Saga Travel & Leisure 665 1.1
Sabre Insurance Insurance 650 1.0
Duke Royalty Financial Services 630 1.0
iEnergizer Industrial Goods & Services 612 1.0
Go-Ahead Group Travel & Leisure 611 1.0
Portmeirion Group Consumer Products and Services 600 1.0
Contour Global Utilities 597 1.0
Gattaca Industrial Goods & Services 592 0.9
Babcock International Industrial Goods & Services 576 0.9
Revolution Bars Group Travel & Leisure 560 0.9
Chamberlin Basic Resources 540 0.9
Town Centre Securities Real Estate 518 0.8
Hargreaves Services Industrial Goods & Services 505 0.8
Strix Group Industrial Goods & Services 493 0.8
Shoe Zone Retail 484 0.8
Orchard Funding Group Financial Services 480 0.8
RTC Group Industrial Goods & Services 441 0.7
RPS Group Industrial Goods & Services 440 0.7
McColl's Retail Group Personal Care, Drugs & Grocery Stores 408 0.6
Vector Capital Financial Services 352 0.6
GLI Finance Financial Services 280 0.4
Kier Group Construction & Materials 262 0.4
DX Group Industrial Goods & Services 205 0.3
30 April 2021 30 April 2020
Payment date p p
First interim 2 October 2020 2.50 2.40
Second interim 2 January 2021 2.50 2.40
Third interim 3 April 2021 2.50 2.40
Fourth interim 16 July 2021 2.50 2.40
10.00 9.60
Special dividend 0.272 -
10.272 9.60
Ten year dividend history
2021 2020 2019 2018 2017 2016 2015 2014 2013 2012
p p p p p p p p p p
1st Quarter 2.50 2.40 2.19 2.02 1.85 1.70 1.575 1.475 1.40 1.35
2nd Quarter 2.50 2.40 2.19 2.02 1.85 1.70 1.575 1.475 1.40 1.35
3rd Quarter 2.50 2.40 2.19 2.02 1.85 1.70 1.575 1.475 1.40 1.35
7.50 7.20 6.57 6.06 5.55 5.10 4.725 4.425 4.20 4.05
4th Quarter 2.50 2.40 2.40 2.40 2.40 2.40 2.40 2.40 2.40 2.35
10.00 9.60 8.97 8.46 7.95 7.50 7.125 6.825 6.60 6.40
% increase of core
dividend 4.17 7.02 6.03 6.47 6.00 5.26 4.40 3.41 3.12 3.23
Special dividend 0.272 - 2.50 0.66 1.86 1.60 0.30 2.75 - -
Total dividend 10.272 9.60 11.47 9.12 9.81 9.10 7.425 9.575 6.60 6.40
Ordinary shares shares voting rights
Philip J Milton & Company Plc 1,051,833 5.04%
Integrated Financial Arrangements Limited 801,748 4.05%
