TIDMSDV
SMALL COMPANIES DIVID TRUST PLC
Annual Report for the full year to 30 April 2016
A copy of the Company's Annual Report for the year ended 30 April 2016 will
shortly be available to view and download from the dedicated page on Chelverton
Asset Management's website http://chelvertonam.com. Neither the contents of
this website nor the contents of any website accessible from hyperlinks on this
website (or any other website) is incorporated into or forms part of this
announcement.
Printed copies of the Annual Report will be sent to shareholders shortly.
Additional copies may be obtained from the Corporate Secretary - Maitland
Administration services Limited, Springfield Lodge, Colchester Road,
Chelmsford, Essex CM2 5PW.
The Annual General Meeting of the Company will be held on Thursday 8 September
2016 at 11.00am.
The following text is copied from the Annual Report & Accounts.
Strategic Report
The Strategic Report comprising pages 1 to 12 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.
Small Companies Dividend Trust PLC ('the Company'), incorporated on 3 September
2003 with number 3749536, and its subsidiary Small Companies ZDP PLC ('SCZ'),
incorporated on 13 July 2012 with number 8142169, together form the Group. The
Group's funds are invested principally in smaller capitalised UK companies. The
portfolio comprises companies listed on the Official List and companies
admitted to trading on AIM. The Group does not invest in other investment
trusts or in unquoted companies. No investment is made in preference shares,
loan stock or notes, convertible securities or fixed interest securities.
Financial Highlights
30 April 30 April
Capital 2016 2015 %
change
Total net assets (GBP'000) 35,077 32,349 8.44
Net asset value per Ordinary share 211.95p 195.46p 8.44
Mid-market price per Ordinary share 190.50p 162.25p 17.41
Discount 10.12% 16.99%
Net asset value per Zero Dividend Preference 123.87p 116.85p 6.01
share
Mid-market price per Zero Dividend 127.50p 126.00p 1.19
Preference share
Premium 2.93% 7.83%
Year ended Year ended
30 April 30 April
Revenue 2016 2015 %
change
Return per Ordinary share 11.23p 9.21p 21.96
Dividends declared per Ordinary share 7.50p 7.125p 5.26
Special Dividends declared per Ordinary 1.60p 0.30p 433.33
share
Total Return
Total return on Group's net assets* (prior 10.92% 6.91%
to deduction for provision of Zero Dividend
Preference share entitlement)
Total return on Group's net assets* 12.42% 7.18%
Ongoing charges** 1.88% 1.97%
* Adding back dividends paid in the year.
** Calculated in accordance with the Association of Investment Companies
('AIC') guidelines. Based on total expenses, excluding finance costs, for the
year and average net asset value.
Chairman's Statement
Results
The Company's net asset value per Ordinary share as at 30 April 2016 was
211.95p (2015 - 195.46p), an increase over the year of 8.44% with an ordinary
share price of 190.5p per share (2015 - 162.5p). Total assets, including
unaudited revenue reserves, were GBP45.6m (2015 - GBP42.3m) and the total net
assets were GBP35.1m (2015 - GBP32.3m).
Since the Company was launched, on 12 May 1999, the net asset value per
Ordinary share has risen by 120.8% and a total of 155.85p has been paid in
dividends. Since the year end, the net asset value per Ordinary share has
fallen to 180.84p as at 30 June 2016; the discount to market NAV at the same
date was 1.2%. The major part of this decline since the year end has occurred
since the Referendum Vote. I will comment more on this later in my report.
In the year total dividends of 9.1p per Ordinary share were paid and proposed
including a special dividend of 1.6p. During the same period the MSCI Total
Return Index decreased by 7.42% and the MSCI Small Cap Index increased by
1.72%.
This year, the Company has, again, had a steady year with shares prices
generally increasing. Recently, the focus of investor's attention has been more
on the largest of companies and this is reflected in the Small and Mid Cap
Indices largely trading sideways this calendar year until more recently.
The current underlying portfolio dividend growth has again been positive with a
prospective portfolio yield of 4.7%. As a result of the underlying dividend
growth and a number of special dividends paid by portfolio companies in the
year, it has been possible to increase the dividend paid to shareholders
including a small special dividend and also retain a revenue surplus which will
be added to reserves.
The Company's portfolio is currently invested in 70 companies spread across 26
sectors. This spread creates a well diversified portfolio which should lead to
steady revenue growth and, in time, capital growth.
Zero Dividend Preference Shares ('ZDP')
The ZDP shares are held in a wholly owned subsidiary Small Companies ZDP PLC.
The net asset value per ZDP share at 30 April 2016 was 123.87p per share (2015
- 116.85p) with a share price of 127.50p per share (2015 - 126.00p), an
increase over the year of 6% and 1.2% respectively.
The ZDP shares have traded throughout the year at a premium and as at 30 June
2016 trade at a 4.3% premium. As at the Company year end the ZDP shares
provided capital gearing of 23.1% and are 3.9 times covered to final redemption
value of 136.70p on 8 January 2018 with an annual gross coupon of 6%.
Dividend
The Board has declared a fourth interim dividend of 2.40p per Ordinary share
(2015 - 2.40p) which when added to the three quarterly interim dividends of
1.70p per Ordinary share (2015 - 1.575p) brings the total to 7.5p (2015 -
7.125p) in respect of the year ended 30th April 2016, an increase of 5.3% over
the previous year. In addition the Board has declared a special dividend of
1.6p per Ordinary share to be paid with the fourth interim dividend.
Shareholders will effectively receive a fourth dividend of 4.0p per Ordinary
share. This equates to a total dividend for the year of 9.1p per Ordinary
share.
It remains the Board's intention, over time, to move the dividend profile
gradually to a position where the four interim dividends paid are equal. This
will be achieved by maintaining the fourth interim dividend at the same level
and increasing the first, second and third dividends in future years to reflect
earnings.
The Company has revenue reserves, which represent 205% of the current annual
dividend (excluding the special dividend) or 15.4p per Ordinary share.
Change of Company Names
The Directors have decided to change the names of Small Companies Dividend
Trust PLC and Small Companies ZDP PLC to Chelverton Small Companies Dividend
Trust PLC and Chelverton Small Companies ZDP PLC respectively. These changes
will be effective from 1 August 2016.
This follows Chelverton Asset Management Limited recognition and strong
investment performance in the Mid and Small cap arena. Chelverton manage in
excess of GBP500m in this specialised area with four open and closed mandates for
income and growth.
There is no change to the investment objectives or dividend policy of the
trust. The stock exchange ticker will also remain the same SDV.L and SDVZ.L
Outlook
The Board decided to delay the publication of these results for two weeks in
order that the outcome of the Referendum was known and that some of the
immediate consequences of the decision had been absorbed by the market. There
is no real benefit in me adding here to the acres of column inches and hours of
commentary on the "why's" and "wherefore's" of the actual Vote. However it is
important that we outline our general views as to the impact and prospects, in
time, for the shares in which the Company is currently invested.
As time passes it is our belief that our companies, which are in the main
UK'centric in their trading relationships, will adapt and prosper. We believe
that current share prices largely take into account the general market decline
since 24th June and the possibility of a shallow recession. Of course the whole
"Brexit" outcome allows any company an easy excuse for a profit warning on
underperformance. However the portfolio is invested across a broad spread of
companies with strong balance sheets and strong cash flows and which are well
positioned to manage the Brexit process.
Any eventual agreement with the European Union is not expected take place for
at least two years and given the well documented political and economic
tensions in the European Union and more particularly the Eurozone it makes it
very difficult to make any precise prediction as to the eventual shape of any
agreement.
Lord Lamont of Lerwick
Chairman
20 July 2016
Investment Manager's Report
The year to 30 April 2016 saw a steady growth in the Company's net asset value
per share and a solid increase in the dividend of 5.3%. In addition the Company
has announced another small special dividend of 1.6p which has been aggregated
with the final dividend. Given the increasing occurrence of companies paying
special dividends it is likely that this will become a feature of the dividend
payment profile in future years.
During the year we saw the inverse of the monthly performance from the previous
year in that we experienced a strong increase in the asset values for the first
eight months of the year taking the net asset value per share up from 195.46p
as at 30 April 2015 to 219.16p at 31 December 2015. Since January, and in
particular since the outcome of the referendum, we have seen a reduction in the
net asset value per share from the end of December 2015 level of 219.16p to
180.84p at the end of June 2016, a 17.5% decrease in six months. Of this
decrease some 14.1% occurred in the month of June.
During the year, for long periods the shares traded at a large discount to net
asset value and have only very recently moved to a small premium. In the year
we discovered that the Association of Investment Companies had, in error,
placed the fund in the Equity and Bond Sector despite the fact that the Company
has never and will never own a bond. Now that this has been corrected, and the
fund is in a sector where it can be compared with the correct peer group, it is
ranked number 3 over one year and ranked number 1 over five years.
Given the solid dividend growth and at the same time the maximum allocation of
surplus revenue to revenue reserves it would be reasonable to see continued
dividend growth in the next year. We have seen, in the past year, continued
strong dividend growth and also a number of companies paying Special Dividends.
It is our objective to continue paying a steadily increasing dividend and to
then pay "excess revenue" by way of a Special Dividend. The fourth interim
dividend of 2.4p was aggregated with the Special Dividend of 1.6p to make a
total payment of 4.0p.
Portfolio Review
In the last year we have had two takeovers (2015 - 2), Amlin and Phoenix IT
Group and after the year end a recommended offer was received for Premier
Farnell. As we have said, for many years, we continue to expect to see a number
of takeovers from our portfolio once the future prospects become clearer.
Twelve holdings from the portfolio were sold in their entirety (2015 - 11),
Amlin, Flying Brands, Ladbrokes, Majestic Wine, Marshalls, Menzies (John),
Phoenix IT Group, Portmeirion Group, Sanne Group, Stadium Group, Trifast and
William Sinclair Holdings. Apart from William Sinclair Holdings, Flying Brands
and Ladbrokes the companies sold have all made a significant contribution to
both the income and the capital performance of the fund. To remind
shareholders, companies are generally sold when the dividend yield has declined
to a point where the income contribution has fallen below the level acceptable
to us for retention in an income fund.
Shareholdings were reduced in eighteen companies: Acal, Alumasc Group,
Bioventix, Clarke (T), Curtis Banks Group, Dairy Crest Group, Epwin Group,
Go-Ahead Group, Intermediate Capital Group, Kcom Group, Macfarlane Group, Novae
Group, NWF Group, Personal Group Holdings, Sanderson Group, Town Centre
Securities, St Ives and Wilmington Group after strong share price performances.
Nine new shareholdings were added to the Company's portfolio in the year:
Ashmore Group - a specialist emerging markets investment manager, Fenner - a
manufacturer of industrial polymer products, Galliford Try - a house building
and construction group, Martin McColl Retail Group - convenience store and
newsagent group, Regional REIT - a property company, RPS Group - international
consultancy, RWS Holdings - a patent translation and patent research company,
StatPro Group - software solutions for asset managers, XP Power - power supply
provider.
Holdings were increased in thirty companies, being almost half the portfolio.
Interesting situations in which holdings were increased include Belvoir
Lettings, Coral Products, Fairpoint Group, GLI Finance, Marstons and Moss Bros
Group.
Outlook
Clearly the result in the Referendum has taken many people by surprise and
highlights the stark divisions in the country. The result seems to have come as
a shock to some and there has been much subsequent contemplation and, of
course, robust discussion. As time passes and as a country we move on, and
accept that change must and will take place, people and companies will begin to
become more objective about the situation.
There is no doubt that companies will use the opportunity of blaming "Brexit"
for any problems that emerge in their companies over the next two years.
Despite being very vociferous opponents of the Leave proposal, The Governor of
the Bank of England and the Chancellor have put in place a whole range of
facilities to protect the economy from the shocks from the Brexit process.
However, the need is increasingly recognised by all to work towards a sensible
solution that is beneficial and acceptable to all.
The portfolio performance over the past month has been poor and reflects the
uncertainty created by the Referendum result. Looking at the portfolio and the
strength and trading of the individual companies we feel that this has been an
overreaction, albeit understandable in the circumstances.
In time as people become more used to the concept of Brexit, once the "new"
Conservative government is installed and members of the European Union, who
undoubtedly have their own political and economic issues, start working towards
an amicable solution for all parties then a more balanced view will emerge.
David Horner
Chelverton Asset Management Limited
20 July 2016
Breakdown of Portfolio by Industry and Breakdown of Portfolio by Market
Capitalisation
at 30 April 2016
http://content.prnewswire.com/documents/
PRNUK-2007161750-2C85_PDF_1_Breakdown_of_Portfolio_CC.pdf
Portfolio Statement
at 30 April 2016
Security Sector Market % of
value portfolio
GBP'000
Avesco Group Media & Photography 1,484 3.3
Coral Products Construction & Building 1,290 2.8
Materials
Belvoir Lettings Real Estate 1,100 2.4
GVC Holdings Software & Computer 1,084 2.4
Services
Connect Group Industrials 1,075 2.4
Shoe Zone General Retailers 1,035 2.3
Moss Bros Group Housing Goods & Textiles 990 2.2
GLI Finance Investment Companies 976 2.2
Games Workshop Group Leisure, Entertainment & 941 2.1
Hotels
Brown (N) Group General Retailers 938 2.1
Mucklow (A&J) Group Investment Companies 934 2.1
Alumasc Group Construction & Building 919 2.0
Materials
Braemar Shipping Support Services 900 2.0
Services
Marston's Leisure, Entertainment & 862 1.9
Hotels
Jarvis Securities Speciality & Other Finance 850 1.9
Photo-Me International Media & Photography 836 1.8
Clarke (T) Electronic & Electrical 835 1.8
Equipment
Kier Group Construction & Building 833 1.8
Materials
KCOM Group Telecommunications 826 1.8
Services
Fairpoint Group Speciality & Other Finance 810 1.8
Martin McColl Retail General Retailers 800 1.8
Group
Acal Electronic & Electrical 780 1.7
Equipment
Town Centre Securities Real Estate 760 1.7
Hansard Global Insurance 742 1.6
Cape Diversified Industrials 689 1.5
Polar Capital Holdings Investment Companies 688 1.5
Epwin Group Construction & Building 664 1.5
Materials
Dee Valley Group Water 650 1.4
Amino Technologies Information Technology 642 1.4
Hardware
Wilmington Group Support Services 636 1.4
Numis Corporation Speciality & Other Finance 626 1.4
Ashmore Group Investment Companies 614 1.4
Intermediate Capital Financials 614 1.4
Group
Bloomsbury Publishing Media & Photography 612 1.4
Chesnara Insurance 610 1.3
Park Group Speciality & Other Finance 604 1.3
Sanderson Group Software & Computer 600 1.3
Services
Curtis Banks Group Banks 593 1.3
Dairy Crest Group Consumer Goods 565 1.2
Randall & Quilter Insurance 555 1.2
Investment
Brewin Dolphin Holdings Speciality & Other Finance 548 1.2
Electrocomponents Support Services 542 1.2
Personal Group Holdings Health 540 1.2
Orchard Funding Group Speciality & Other Finance 535 1.2
DX Group Transport 531 1.2
Low & Bonar Housing Goods & Textiles 530 1.2
Centaur Media Media & Photography 528 1.2
St. Ives Support Services 518 1.1
Morgan Sindall Group Construction & Building 517 1.1
Materials
Galliford Try Construction & Building 510 1.1
Materials
Macfarlane Group Packaging 506 1.1
National Express Group Transport 486 1.1
Castings Construction & Building 475 1.0
Materials
Go-Ahead Group Transport 449 1.0
Bioventix Pharmaceuticals 425 0.9
Hilton Food Group Food Producers & Processors 422 0.9
RTC Group Support Services 412 0.9
Novae Group Insurance 401 0.9
RPS Group Support Services 346 0.8
Huntsworth Support Services 344 0.8
XP Power Electronic & Electrical 323 0.7
Equipment
Titon Holdings Construction & Building 319 0.7
Materials
Charlemagne Capital Investment Companies 319 0.7
Chamberlin Engineering & Machinery 315 0.7
Severfield Construction & Building 312 0.7
Materials
Foxtons Group Real Estate 303 0.7
StatPro Group Support Services 280 0.6
Premier Farnell Electronic & Electrical 278 0.6
Equipment
Grafenia Support Services 224 0.5
Regional REIT Investment Companies 158 0.3
RWS Holdings Support Services 152 0.3
Fenner Diversified Industrials 143 0.3
NWF Group Food Producers & Processors 123 0.3
Total Portfolio 45,376 100.0
Investment Objective and Policy
The investment objective of the Company is to provide Ordinary shareholders
with a high income and opportunity for capital growth, having provided a
capital return sufficient to repay the full final capital entitlement of the
Zero Dividend Preference shares issued by the wholly owned subsidiary company
SCZ.
The Company's investment policy is that:
- The Company will invest in equities in order to achieve its investment
objectives, which are to provide both income and capital growth, predominantly
through investment in mid and smaller capitalised UK companies admitted to the
Official List of the UK Listing Authority and traded on the London Stock
Exchange Main Market or traded on AIM.
- The Company will not invest in preference shares, loan stock or notes,
convertible securities or fixed interest securities or any similar securities
convertible into shares; nor will it invest in the securities of other
investment trusts or in unquoted companies.
- There is no set limit on the Company's gearing.
Performance analysis using key performance indicators
At each quarterly Board meeting the Directors consider a number of key
performance indicators ('KPIs') to assess the Group's success in achieving its
objectives, including the net asset value ('NAV'), the dividend per share and
the total ongoing charges.
- The Group's Consolidated Statement of Comprehensive Income is set out on
page 36.
- A total dividend for the year to 30 April 2016 of 9.10p (2015: 7.425p)
per Ordinary share has been declared to shareholders by way of three payments
of 1.70p per Ordinary share and a fourth interim dividend payment of 2.40p per
Ordinary share and a special dividend of 1.60p per Ordinary share.
- The NAV per Ordinary share at 30 April 2016 was 211.95p (2015: 195.46p).
- The ongoing charges (including investment management fees and other
expenses but excluding performance fees and exceptional items) for the year
ended 30 April 2016 were 1.88% (2015: 1.97%).
Principal risks
The Directors confirm that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
objective, business model, future performance, solvency or liquidity. The Board
regularly considers the principal risks facing the Company. Mitigation of these
risks is sought and achieved in a number of ways as set out below:
Market risk
The Company is exposed to UK market risk due to fluctuations in the market
prices of its investments.
The Investment Manager actively monitors economic performance of investee
companies and reports regularly to the Board on a formal and informal basis.
The Board formally meets with the Investment Manager on a quarterly basis when
the portfolio transactions and performance are discussed and reviewed.
The Company is substantially dependent on the services of the Investment
Manager's investment team for the implementation of its investment policy.
The Company may hold a proportion of the portfolio in cash or cash equivalent
investments from time to time. Whilst during positive stock market movements
the portfolio may forego notional gains, during negative market movements this
may provide protection.
Discount volatility
As with many investment trust companies, discounts can fluctuate significantly.
The Board recognises that, as a closed ended company, it is in the long-term
interests of shareholders to reduce discount volatility and believes that the
prime driver of discounts over the longer term is performance. The Board, with
its advisers, monitors the Company's discount levels and shares may be bought
back should it be thought appropriate to do so by the Board.
Regulatory risks
A breach of Companies Act regulations and Financial Conduct Authority ('FCA')
rules may result in the Group's companies being liable to fines or the
suspension of either of the Group companies from listing and from trading on
the London Stock Exchange. The Board, with its advisers, monitors the Company's
and SCZ's regulatory obligations both on an ongoing basis and at quarterly
Board meetings.
Financial risk
The financial situation of the Group is reviewed in detail at each Board
meeting and monitored by the Audit Committee.
New developments in accounting standards and industry-related issues are
actively reported to and monitored by the Board and its advisers, ensuring that
appropriate accounting policies are adhered to.
A more detailed explanation of the financial risks facing the Group is given in
note 24 to the financial statements on pages 55 to 60.
Viability Statement
The Board reviews the performance and progress of the Company over various time
periods and uses these assessments, regular investment performance updates from
the Investment Manager and a continuing programme of monitoring risk, to assess
the future viability of the Company. The Directors consider that a period of
three years is the most appropriate time horizon to consider the Company's
viability and after careful analysis, the Directors believe that the Company is
viable over a three-year period. The following facts support the Directors'
view:
- The Company has a liquid investment portfolio invested predominantly in
readily realisable smaller capitalised UK-listed and AIM traded securities and
has some short-term cash on deposit.
- Expenses of the Company are covered more than three times by investment
income.
In order to maintain viability, the Company has a robust risk control framework
for the identification and mitigation of risk which is reviewed regularly by
the Board. The Directors also seek reassurance from suppliers that their
operations are well managed and they are taking appropriate action to monitor
and mitigate risk. The Directors have a reasonable 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, objective, review and business model
The Company was incorporated on 6 April 1999 and commenced trading on 12 May
1999. The Company's registered number is 3749536. Its capital structure
consists of 16,550,000 Ordinary shares of 25p each. The Company has only one
class of share and this figure represents 100% of the Company's issued share
capital and voting rights.
The Board has registered itself as the Alternative Investment Fund Manager
('AIFM') with the FCA and all required returns have been completed and filed.
The Group financial statements consolidate the audited annual report and
financial statements of the Company and SCZ, its subsidiary undertaking, for
the year ended 30 April 2016.
The Company owns 100% of the issued ordinary share capital of SCZ which was
incorporated on 13 July 2012. SCZ issued 8,500,000 Zero Dividend Preference
shares on 28 August 2012, which have been admitted to the Official List of the
UK Listing Authority and to trading on the London Stock Exchange. Further
details of the Zero Dividend Preference shares and the loan and contribution
agreements entered into by the Company and SCZ can be found in notes 15 and 16
to the financial statements on page 51. SCZ, at its Annual General Meeting on 8
September 2016, will put an Ordinary Resolution to its shareholders to allot
shares up to an aggregate value of 2,833,333, being one-third of the issued
Zero Dividend Preference share capital as at 30 April 2016.
The principal activity of the Company is to carry on business as an investment
trust. The Company has been granted approval from HMRC as an investment trust
under Sections 1158/1159 of the Corporation Tax Act 2010 ('1158/1159') on an
ongoing basis. The Company will be treated as an investment trust company
subject to there being no serious breaches of the conditions for approval. The
Company is also an investment company as defined in Section 833 of the
Companies Act 2006.
Employees, environmental, human rights and community issues
The Board recognises the requirement under Section 414C of the Companies Act to
detail information about employees, human rights and community issues,
including information about any policies it has in relation to these matters
and the effectiveness of these policies. These requirements and the
requirements of the Modern Slavery Act 2015 do not apply to the Company as it
has no employees and no physical assets, all the Directors are non-executive
and it has outsourced all its management and administrative functions to third
party service providers. The Company has therefore not reported further in
respect of these provisions. However, in carrying out its activities and in
relationships with suppliers, the Company aims to conduct itself responsibly,
ethically and fairly.
Current and future developments
A review of the main features of the year and the outlook for the Company are
contained in the Chairman's Statement on pages 2 and 3 and the Investment
Manager's Report on pages 4 to 8.
Dividends declared/paid
Payment date 30 April 2016 30 April 2015
pence pence
First interim 5 October 2015 1.70 1.575
Second interim 5 January 2016 1.70 1.575
Third interim 31 March 2016 1.70 1.575
Fourth interim 5 July 2016 2.40 2.40
7.50 7.125
Special dividend 5 July 2016 1.60 0.30
9.10 7.425
The Directors have not recommended a final dividend in respect of the year
ended 30 April 2016.
Diversity
The Board of Directors of the Company comprised four male Directors in the year
to 30 April 2016. The Board recognises the benefits of diversity in future
appointments to the Board, however the key criteria for the appointment of new
directors will be the appropriate skills and experience in the interests of
shareholder value. The Directors are satisfied that the Board currently
contains members with an appropriate breadth of skills and experience. No new
appointments to the Board have been made or are contemplated at present.
The Strategic Report is signed on behalf of the Board by
Lord Lamont of Lerwick
Chairman
20 July 2016
Directors
The Directors are:
The Rt Hon. Lord Lamont of Lerwick* (Chairman) was Chancellor of the Exchequer
between 1990 and 1993. Prior to his appointment, Lord Lamont was Chief
Secretary to the Treasury between 1989 and 1990. Following his retirement as a
Member of Parliament in 1997, he has held numerous positions as a director of
various organisations and funds, including NM Rothschild and Sons Limited. He
is an adviser to BC Partners and Stanhope Capital.
Lord Lamont was appointed to the Board on 27 February 2006.
David Harris* is chief executive of InvaTrust Consultancy Limited. The company
specialises in marketing issues relating to the investment and financial
services industry. He writes regular articles for the national and trade press
on investment matters. From 1995 to 1999 he was a director of the AIC with
specific responsibility for training and education of independent financial
advisers. He is a non-executive director of the Character Group PLC, Aseana
Properties Limited, F&C Managed Portfolio Trust PLC and Manchester and London
Investment Trust PLC.
Mr Harris was appointed to the Board on 30 May 2000 and was Audit Committee
Chairman until 15 June 2016.
William van Heesewijk began his career with Lloyds Bank International in 1981,
working for both the merchant banking and investment management arms. He has
been involved in the investment trust industry since 1987 in various
capacities. During his tenure with Fidelity Investments International, Gartmore
Investment Management PLC and BFS Investments PLC he managed several launches
of onshore and offshore investment funds, including a number of rollÂovers and
reconstructions involving complex capital structures and across several
geographic regions. His roles involved business development, project
management, sales and marketing. He is Business Development Director with
Chelverton Asset Management Limited. He is a member of the Association of
Investment Companies Managers forum.
Mr van Heesewijk was appointed to the Board on 1 December 2005.
Howard Myles* was a partner in Ernst & Young from 2001 to 2007 and was
responsible for the Investment Funds Corporate Advisory Team. He was previously
with UBS Warburg from 1987 to 2001. Mr Myles began his career in stockbroking
in 1971 as an equity salesman and in 1975 joined Touche Ross & Co, where he
qualified as a chartered accountant. In 1978 he joined W Greenwell & Co in the
corporate broking team and in 1987 moved to SG Warburg Securities, where he was
involved in a wide range of commercial and industrial transactions in addition
to leading Warburg's corporate finance function for investment funds. He is now
a non-executive director of Lazard World Trust Fund SICAF S.A., Aberdeen
Private Equity Fund Limited, Baker Steel Resources Trust Limited, JPMorgan
Brazil Investment Trust plc and BBGI SICAV S.A.
Mr Myles was appointed to the Board on 15 March 2011. He was Chairman of the
Management Engagement Committee, Nomination Committee and Remuneration
Committee until 15 June 2016. He became Chairman of the Audit Committee on 15
June 2016
* Independent
Investment Manager, Secretary and Registrar
Investment Manager: Chelverton Asset Management Limited ('Chelverton')
Chelverton was formed in 1998 by David Horner, who has considerable experience
of analysing investments and working with smaller companies. Chelverton is
largely owned by its employees.
Chelverton is a specialist fund manager focused on UK mid and small companies
and has a successful track record. At 31 May 2016, Chelverton had total funds
under management of approximately GBP520 million including two investment trust
companies and two OEICs. The fund management team comprises David Horner, David
Taylor and James Baker.
Chelverton is authorised and regulated by the FCA.
Administrator and Corporate Secretary: Maitland Administration Services Limited
Maitland Administration Services Limited (formerly Phoenix Administration
Services Limited) provides company secretarial and administrative services for
the Group. The Company is part of the Maitland group that provides
administration and regulatory oversight solutions for a wide range of
investment companies.
Registrar: Share Registrars
Share Registrars Limited is a CREST registrar established in 2004. The Company
provides registration services to over 220 client companies.
Directors' Report
The Directors present their Annual Report and financial statements for the
Group and the Company for the year ended 30 April 2016.
Directors
The Directors who served during the year ended 30 April 2016 are listed on page
13. None of the Directors nor any persons connected with them had a material
interest in any of the Company's transactions, arrangements or agreements
during the year, except Mr van Heesewijk who by virtue of his employment with
Chelverton is interested in the Investment Management Agreement. None of the
Directors has or has had any interest in any transaction which is or was
unusual in its nature or conditions or significant to the business of the
Company, and which was effected by the Company during the current financial
year. There have been no loans or guarantees from the Company or its subsidiary
undertakings, to any Director at any time during the year or thereafter.
Corporate Governance
A formal statement on Corporate Governance and the Company compliance with the
UK Corporate Governance Code and the AIC on Corporate Governance can be found
on pages 19 to 25.
Management agreements
The Company's investments are managed by Chelverton Asset Management Limited
under an agreement ('the Investment Management Agreement') dated 30 April 2006
(effective from 1 December 2005). A periodic fee is payable quarterly in
arrears at an annual rate of 1% of the value of the gross assets under
management of the Company.
The Investment Management Agreement may be terminated by 12 months' written
notice. There are no additional arrangements in place for compensation beyond
the notice period.
Under another agreement ('the Administration Agreement') dated 1 January 2016,
company secretarial services and the general administration of the Group are
undertaken by Maitland Administration Services Limited. Their fee is subject to
review at intervals of not less than three years. The Administration Agreement
may be terminated by six months' written notice.
It is the Directors' opinion that the continuing appointment of the Investment
Manager and the Administrator/Secretary on the terms agreed is in the best
interests of the Group and its shareholders. The Directors are satisfied that
Chelverton has the required skill and expertise to continue successfully to
manage the Group's assets, and is satisfied with the services provided by
Maitland.
Dividends
Details of the dividends declared and paid by the Board are set out in the
Strategic Report on page 12.
Substantial shareholdings
The Directors have been informed of the following notifiable interests in the
voting shares of the Company at 30 April 2016:
Ordinary shares Number of % of
shares voting rights
Charles Stanley Group (nominee 1,511,832 9.13
holding)
Consistent Unit Trust Management 775,000 4.03
Dartmoor Investment Trust 630,000 3.81
Philip J Milton & Company 622,275 3.76
Jupiter Asset Management Limited 600,000 3.63
Rath Dhu Limited 500,000 3.02
The Company has not been notified of any changes to the above holdings between
30 April 2016 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 8 September 2016. The
Notice of Meeting is set out on pages 66 to 69.
In addition to the ordinary business of the meeting, there are a number of
items of special business, as follows:
Authority to issue shares and disapply pre-emption rights
An Ordinary Resolution was passed at the last AGM held on 16 September 2015
giving Directors authority, pursuant to Section 551 of the Companies Act 2006,
to allot Ordinary shares up to an aggregate nominal value equal to GBP1,379,167
(which figure represented one-third of the issued share capital of the
Company). This authority expires at the conclusion of the next AGM. The
Directors are seeking renewal, pursuant to Section 551 of the Companies Act
2006, to allot up to an aggregate nominal value equal to GBP1,379,167, being
one-third of the Ordinary shares in issue at the date of this report, as set
out in Resolution 7 in the Notice of Meeting. This authority will expire at the
AGM to be held in 2017 or 15 months from the passing of the Resolution,
whichever is earlier.
A Special Resolution was also passed on 16 September 2015 giving the Directors
power to issue Ordinary shares for cash notwithstanding the pre-emption
provisions of the Companies Act 2006 and permitting the Directors to issue
shares without being required to offer them to existing shareholders in
proportion to their current holdings. This power expires at the conclusion of
the next AGM and the Directors are seeking its renewal, pursuant to Sections
570 and 573 of the Companies Act 2006, to enable the Directors to issue up to
10% of the issued Ordinary share capital, representing 1,655,000 Ordinary
shares at the date of this report, as set out in the Notice of Meeting as
Resolution 8.
This authority will also cover the sale of shares held in Treasury, and will
expire at the AGM to be held in 2017 or 15 months from the passing of the
Resolution, whichever is earlier. The authorities to issue shares will only be
used when it would be in the interests of shareholders as a whole. The
Directors do not currently intend to issue or sell shares from treasury other
than above the prevailing NAV.
Purchase of own shares
At the AGM held on 16 September 2015 the Directors were granted the authority
to buy back in the market up to 14.99% of the Company's Ordinary shares in
circulation at that date for cancellation or placing into Treasury. No shares
have been purchased under this authority which remains in force. Resolution 9
as set out in the Notice of Meeting will renew this authority for up to 14.99%
of the current issued Ordinary share capital in circulation, which represents
2,480,845 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 be in the interests of all shareholders. The authority,
if given, will lapse at the AGM to be held in 2017 or 15 months from the
passing of this Resolution, whichever is earlier.
Purchases will be made on the open market. The price paid for Ordinary shares
will not be less than 25p and not more than the higher of (i) 5% above the
average of the middle market quotations (as derived from the Daily Official
List of the London Stock Exchange) of the Ordinary shares for the five business
days immediately preceding the date on which the Ordinary share is purchased,
and (ii) the higher of the price of the last independent trade and the current
highest independent bid on the London Stock Exchange. Shares may be cancelled
or placed in Treasury.
Pursuant to the loan agreement between the Company and SCZ, the Company will
not purchase any of its Ordinary shares out of capital reserves unless the
cover for the final redemption value of the Zero Dividend Preference shares is
at least 1.9 times after the purchase.
Notice period for general meetings
Resolution 10 is a Special Resolution that will give the Directors the ability
to convene general meetings, other than Annual General Meetings, on a minimum
of 14 clear days' notice. The minimum notice period for annual general meetings
will remain at 21 clear days. The approval will be effective until the
Company's Annual General Meeting to be held in 2017, at which it is intended
that renewal will be sought. The Company will have to offer facilities for all
shareholders to vote by electronic means for any general meeting convened on 14
days' notice. The Directors will only call a general meeting on 14 days' notice
where they consider it to be in the interests of shareholders to do so and the
relevant matter is required to be dealt with expediently.
Recommendation
The Board considers that the Resolutions to be proposed at the AGM are in the
best interests of shareholders as a whole and the Company and, accordingly,
recommends that shareholders vote in favour of each Resolution, as the
Directors intend to do in respect of their own beneficial shareholdings
representing c.1% of the issued share capital.
Company information
The following information is disclosed in accordance with the Companies Act
2006.
- The Group's capital structure and voting rights are summarised on page
63.
- Details of the substantial shareholders in the Company are listed on page
16.
- 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 15 and 16.
- There are no restrictions concerning the transfer of securities in the
Company; no restrictions on voting rights; no special rights with regard to
control attached to securities; no agreements between holders of securities
regarding their transfer known to the Company; and no agreements which the
Company is party to that might affect its control following a successful
takeover bid.
- Consideration of likely future developments is detailed in the Strategic
Report on pages 1 to 12.
ISA status
The Company's Ordinary shares are qualifying investments for Individual Savings
Accounts ('ISAs'), as are the Zero Dividend Preference shares of SCZ.
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
8. The financial position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the financial statements. In addition,
note 24 to the financial statements sets out the Group's objectives, policies
and processes for managing its capital; its financial risk management
objectives; details of its financial instruments; and its exposure to credit
risk and liquidity risk. The Group has adequate financial resources and, as a
consequence, the Directors believe that the Group is well placed to manage its
business risks successfully and it is appropriate to adopt the going concern
basis.
Global greenhouse gas emissions
The Company has no greenhouse gas emissions to report from its operations, nor
does it have responsibility for any other emission-producing sources under the
Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.
Auditor
The Auditor, Hazlewoods LLP, has indicated their willingness to continue in
office, and Resolution 6 proposing their reÂappointment and authorising the
Directors to determine their remuneration for the ensuing year will be
submitted at the AGM.
The Directors who were in office on the date of approval of these financial
statements have confirmed, as far as they are each aware, that there is no
relevant audit information of which the Auditor is unaware. Each of the
Directors have confirmed that they have taken all the steps that they ought to
have taken as Directors in order to make themselves aware of any relevant audit
information and to establish that it has been communicated to the Auditor.
On behalf of the Board
Lord Lamont of Lerwick
Chairman
20 July 2016
Statement on Corporate Governance
The Company is committed to maintaining high standards of corporate governance
and the Directors are accountable to shareholders for the governance of the
Group's affairs.
Statement of compliance with the UK Corporate Governance Code ('the Governance
Code')
The Directors have reviewed the detailed principles outlined in the Governance
Code and confirm that, to the extent that they are relevant to the Company's
business, they have complied with the provisions of the Governance Code
throughout the year ended 30 April 2016 except as explained in this section as
being non-compliant and that the Company's current practice is in all material
respects consistent with the principles of the Governance Code.
The Board also confirms that, to the best of its knowledge and understanding,
procedures were in place to meet the requirements of the Governance Code
relating to internal controls throughout the year under review. This statement
describes how the principles of the Governance Code have been applied in the
affairs of the Company.
As an investment trust, the Company has also taken into account the Code of
Corporate Governance produced by the Association of Investment Companies ('the
AIC Code'), which is intended as a framework of best practice specifically for
AIC member companies.
The AIC Code, as explained by the AIC Corporate Governance Guide ('the AIC
Guide'), addresses all the principles set out in the Governance Code, and there
are some areas where the AIC Code is more flexible than the Governance Code for
investment companies. The Board has taken steps to adhere to its principles and
follow the recommendations in the AIC Code where it believes they are
appropriate.
A copy of the AIC Code and the AIC Guide can be obtained via the AIC website,
www.theaic.co.uk, and a copy of the Governance Code can be obtained at
www.frc.org.uk.
The Company has not complied with the following provisions of the Governance
Code:
- Owing to the size of the Board, it is felt inappropriate to appoint a
senior independent non-executive Director.
- The Directors do not have service contracts, but all are required to
retire and seek re-election at least every three years. The recommendation of
the Governance Code is for fixed-term renewable contracts.
- As the Group has no staff, other than Directors, there are no procedures
in place in relation to whistle-blowing. The Board has satisfied itself there
are appropriate whistle-blowing procedures in place at its service providers.
Board responsibilities and relationship with Investment Manager
The Board is responsible for the investment policy and strategic and
operational decisions of the Group and for ensuring that the Group is run in
accordance with all regulatory and statutory requirements. These procedures
have been formalised in a schedule of matters reserved for decision by the
Board. These matters include:
- the maintenance of clear investment objectives and risk management
policies, changes to which require Board approval;
- the monitoring of the business activities of the Group, including
investment performance and annual budgeting; and
- review of matters delegated to the Investment Manager, Administrator or
Secretary.
The Group's day-to-day functions have been delegated to a number of service
providers, each engaged under separate legal agreements. At each Board meeting
the Directors follow a formal agenda prepared and circulated in advance of the
meeting by the Company Secretary to review the Group's investments and all
other important issues, such as asset allocation, gearing policy, corporate
strategic issues, cash management, peer group performance, marketing and
shareholder relations, investment outlook and revenue forecasts, to ensure that
control is maintained over the Group's affairs. The Board regularly considers
its overall strategy.
The management of the Group's assets is delegated to Chelverton. At each Board
meeting, representatives of Chelverton are in attendance to present verbal and
written reports covering its activity, portfolio composition and investment
performance over the preceding period. Ongoing communication with the Board is
maintained between formal meetings. The Investment Manager ensures that
Directors have timely access to all relevant management and financial
information to enable informed decisions to be made and contacts the Board as
required for specific guidance. The Company Secretary and Investment Manager
prepare briefing notes for Board consideration on matters of relevance, for
example changes to the Group's economic and financial environment, statutory
and regulatory changes and corporate governance best practice.
The Company has arranged a Directors' and Officers' Liability insurance policy
which includes cover for legal expenses.
The Articles of Association of both the Company and SCZ provide the Directors,
subject to the provisions of UK legislation, with an indemnity in respect of
liabilities which they may sustain or incur in connection with their
appointment. Save for this, there are no qualifying third party indemnity
provisions in force.
Board membership
At the year end the Board consisted of four Directors, all of whom are
non-executive. The Group has no employees. The Board seeks to ensure that it
has the appropriate balance of skills, experience and length of service amongst
its members. The Board's policy on tenure is that Directors can stand for more
than nine years. The Board considers that length of service does not
necessarily compromise the independence or contribution of directors of
investment trust companies where experience and continuity can be a significant
strength. The Directors possess a wide range of business and financial
expertise relevant to the direction of the Group and Company and consider that
they commit sufficient time to the Group and Company's affairs. On appointment
to the Board, Directors are fully briefed as to their responsibilities by the
Chairman and the Investment Manager. Brief biographical details of the
Directors can be found on page 13.
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 2016 the Board met four times and all Directors
were present at all Board meetings.
Board effectiveness
The Board conducts an annual review of the performance of the Board, its
Committees and the Directors. The Board is satisfied from the results of its
last evaluation that the Board, its Committees and Directors function
effectively, collectively and individually and that the Board contains an
appropriate balance of skills and experience to effectively manage the Company.
Chairman
The Chairman, Lord Lamont, is independent. He has shown himself to have
sufficient time to commit to the Group's affairs. The Company does not have a
chief executive officer, as it has no executive directors. The Chairman has no
relationships that may create a conflict of interest between the Chairman's
interest and those of the shareholders. The Chairman does not sit on the Board
of any other investment company managed by Chelverton.
Directors' independence
In accordance with the Listing Rules for investment entities, the Board has
reviewed the status of its individual Directors and the Board as a whole.
The Governance Code requires that this report should identify each
non-executive Director the Board considers to be independent in character and
judgement and whether there are relationships or circumstances which are likely
to affect, or could appear to affect, the Director's judgement, stating its
reasons if it determines that a Director is independent notwithstanding the
existence of relationships or circumstances which may appear relevant to its
determination.
Mr Myles is deemed to be independent of the Investment Manager. Despite being
on the Board for over nine years, the Board believes Lord Lamont and Mr Harris
are also independent. They all continue to perform their roles effectively. Mr
van Heesewijk is not deemed independent by virtue of his employment by
Chelverton. In accordance with the requirements of the Listing Rules, Mr van
Heesewijk is subject to annual re-election due to this connection. The majority
of the Board, being three of the four Directors, is therefore independent.
Under the Articles of Association, one-third of Directors will retire by
rotation at each AGM and no Director shall serve a term of more than three
years before re-election, in accordance with corporate governance principles.
The Board has reviewed the appointment of those Directors retiring at the
forthcoming AGM. In accordance with the Governance and AIC Codes, Lord Lamont
and Mr Harris will offer themselves for re-election (and do so on an annual
basis), having served on the Board for over nine years. Mr van Heesewijk as a
non-independent Director will also stand for re-election. Mr Myles will not
stand for re-election as he was re-elected in 2014. The Board recommends that
shareholders vote for the re-election of Lord Lamont, Mr Harris and Mr van
Heesewijk as it believes their contributions to the Board to be effective, that
they demonstrate commitment to their roles as non-executive Directors of the
Company and have actively contributed throughout the year.
Senior Independent Director
No separate Senior Independent Director has been appointed to the Board as, in
the view of the Directors, it is inappropriate to do so given the size and
composition of the Board. All the Directors make themselves available to
shareholders at general meetings of the Company. The Directors can be contacted
at other times via the Company Secretary.
Committees of the Board
The Board has appointed a number of Committees, as set out below, to which
certain Board functions have been delegated. Each of these Committees has
formal written terms of reference, which clearly define their responsibilities
and incorporate the best practice recommendations and requirements of the
Governance Code. The terms of reference can be inspected at the Registered
Office.
Audit Committee
The Audit Committee comprises the independent Directors. The Committee met
twice during the year ended 30 April 2016, with Mr Harris as Chairman. All
members of the Committee were present at both meetings. The Audit Committee has
direct access to the Group's Auditor, Hazlewoods LLP, and representatives of
Hazlewoods LLP attend the year end Audit Committee meeting.
The primary responsibilities of the Audit Committee are: to review the
effectiveness of the internal control environment of the Group and monitor
adherence to best practice in corporate governance; to make recommendations to
the Board in relation to the re-appointment of the Auditor and to approve their
remuneration and terms of engagement; to review and monitor the Auditor's
independence and objectivity and the scope and effectiveness of the audit
process and to provide a forum through which the Group's Auditor reports to the
Board. The Audit Committee also has responsibility for monitoring the integrity
of the financial statements and accounting policies of the Group and for
reviewing the Group's financial reporting and internal control policies and
procedures. Committee members consider that individually and collectively they
are appropriately experienced in accounting and audit processes to fulfil the
role required.
At the meeting held on 15 June 2016 it was decided that Mr Myles would assume
the role of Audit Committee Chairman for future meetings.
Management Engagement Committee
The Management Engagement Committee met once during the year during the year
ended 30 April 2016 and comprised the independent Directors, with Mr Myles as
Chairman. The Committee reviewed the performance of the Investment Manager's
obligations under the Investment Management Agreement. Based on this
performance, it has recommended to the Board that the Investment Manager's
appointment continues. It also reviewed the performance of the Company
Secretary, the Custodian and the Registrar and matters concerning their
respective agreements with the Company.
The Directors met on 15 June 2016 and decided that given the functions
performed by the Management Engagement Committee and the size and composition
of the Board, the Committee could be dissolved. The functions previously
undertaken by the Committee will in future years be performed by the Board of
the Company instead.
Nominations Committee
The Nominations Committee met once during the year ended 30 April 2016 and
comprised the independent Directors, with Mr Myles as Chairman. The Committee
evaluated the performance of Directors and the Chairman for the year ended 30
April 2016. As a result of the evaluation, and subsequent recommendation to the
Board, the Board considers that all Directors contribute effectively and have
the skills and experience relevant to the leadership and direction of the
Company. The Committee also recommended the re-appointment of those Directors
standing for re-election at the Annual General Meeting.
The Directors met on 15 June 2016 and decided that given the functions
performed by the Nomination Committee and the size and composition of the
Board, the Committee could be dissolved. The functions previously undertaken by
the Committee will in future years be performed by the Board of the Company
instead.
Remuneration Committee
The Remuneration Committee met once during the year ended 30 April 2016 and
comprised the entire Board, with Mr Myles as Chairman. The Committee assessed
the Directors' fees, following proper consideration of the role that individual
Directors fulfil in respect of Board and Committee responsibilities, the time
committed to the Group's affairs and remuneration levels generally within the
investment trust sector.
Under the Listing Rules, the Governance Code principles relating to directors'
remuneration do not apply to an investment trust company other than to the
extent that they relate specifically to non-executive directors. Detailed
information on the remuneration arrangements can be found in the Directors'
Remuneration Report on pages 28 to 31 and in note 5 to the financial
statements.
The Directors met on 15 June 2016 and decided that given the functions
performed by the Remuneration Committee and the size and composition of the
Board, the Committee could be dissolved. The functions previously undertaken by
the Committee will in future years be performed by the Board of the Company
instead.
Independent professional advice
The Board has formalised arrangements under which the Directors, in the
furtherance of their duties, may take independent professional advice at the
Company's expense.
Institutional investors - use of voting rights
The Investment Manager, in the absence of explicit instruction from the Board,
is empowered to exercise discretion in the use of the Company's voting rights.
Conflicts of interest
It is the responsibility of each individual Director to avoid an unauthorised
conflict arising. He must notify and request authorisation from the Board as
soon as he becomes aware of the possibility of a conflict arising.
The Board is responsible for considering Directors' requests for authorisation
of conflicts and for deciding whether or not the conflict should be authorised.
The factors to be considered will include whether the conflict could prevent
the Director from properly performing his duties, whether it has, or could
have, any impact on the Group and whether it could be regarded as likely to
affect the judgement and/or actions of the Director in question. When the Board
is deciding whether to authorise a conflict or potential conflict, only
Directors who have no interest in the matter being considered are able to take
the relevant decision, and in taking the decision the Directors must act in a
way they consider, in good faith, will be most likely to promote the Group's
success. The Directors are able to impose limits or conditions when giving
authorisation if they think this is appropriate in the circumstances.
A register of conflicts is maintained by the Company Secretary and is reviewed
at Board meetings, to ensure that any authorised conflicts remain appropriate.
Directors are required to confirm at these meetings whether there has been any
change to their position.
Internal control review
The Board is responsible for establishing and maintaining the Group's systems
of internal control and for reviewing their effectiveness.
An ongoing process, in accordance with the guidance supplied by the Financial
Reporting Council: 'Guidance on Risk Management, Internal Control and Related
Financial and Business Reporting', is in place for identifying, evaluating and
managing risks faced by the Company and the Group. This process ensures that
the Board maintains a sound system of internal control to safeguard
shareholders investments and the Group's assets. This process is based on 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, together with key procedures established
with a view to providing effective financial control, has been in place for the
full financial year and up to the date the financial statements were approved.
The risk management process and systems of internal control are designed to
manage rather than eliminate the risk of failure to achieve the Company's
objectives. It should be recognised that such systems can only provide
reasonable, rather than absolute, assurance against material misstatement or
loss. No significant failings or weaknesses have been identified.
Internal control assessment process
Risk assessment and the review of internal controls is undertaken by the Board
in the context of the Group's overall investment objective. The review covers
the key business, operational, compliance and financial risks facing the
Company. In arriving at its judgement of what risks the Company faces, the
Board has considered the Company's operations in the light of the following
factors:
- the threat of such risks becoming a reality;
- the Company's ability to reduce the incidence and impact of risk on its
performance;
- the cost to the Company and benefits related to the review of risk and
associated controls of the Group; and
- the extent to which third parties operate the relevant controls.
Against this background the Board has split the review into four sections
reflecting the nature of the risks being addressed. The sections are as
follows:
- corporate strategy;
- published information and compliance with laws and regulations;
- relationship with service providers; and
- investment and business activities.
Given the nature of the Company's activities and the fact that most functions
are subcontracted, the Group does not have an internal audit function. The
Directors have obtained information from key third-party suppliers regarding
the controls operated by them. To enable the Board to make an appropriate risk
and control assessment, the information and assurances sought from third
parties include the following:
- details of the control environment;
- identification and evaluation of risks and control objectives;
- assessment of the communication procedures; and
- assessment of the control procedures.
The key procedures which have been established to provide effective internal
financial controls are as follows:
- investment management is provided by Chelverton. The Board is responsible
for the implementation of the overall investment policy and monitors the
actions of the Investment Manager at regular Board meetings;
- the provision of administration, accounting and company secretarial
duties is the responsibility of Maitland Administration Services Limited;
- custody of assets is undertaken by Jarvis Investment Management Limited;
- the duties of investment management, accounting and custody of assets are
segregated. The procedures of the individual parties are designed to complement
one another;
- the non-executive Directors of the Group clearly define the duties and
responsibilities of their agents and advisers in the terms of their contracts.
The appointment of agents and advisers is conducted by the Board after
consideration of the quality of the parties involved; the Board via the
Management Engagement Committee monitors their ongoing performance and
contractual arrangements;
- mandates for authorisation of investment transactions and expense
payments are set by the Board; and
- the Board reviews detailed financial information provided by the
Administrator on a regular basis.
Company Secretary
The Board has direct access to the advice and services of the Company
Secretary, Maitland Administration Service Limited, which is responsible for
ensuring that Board and Committee procedures are followed and that applicable
regulations are complied with. The Secretary is also responsible to the Board
for ensuring timely delivery of information and reports and that the statutory
obligations of the Group are met.
Dialogue with shareholders
Communication with shareholders is given a high priority by both the Board and
the Investment Manager and all Directors are available to enter into dialogue
with shareholders at any time. Major shareholders of the Group have the
opportunity to meet with the independent non-executive Directors of the Board
in order to ensure that their views are understood. All shareholders are
encouraged to attend the AGM, during which the Board and the Investment Manager
are available to discuss issues affecting the Group and shareholders have the
opportunity to address questions to the Investment Manager, the Board and the
Chairmen of the Board's standing committees.
There are no significant issues raised by major shareholders to bring to all
shareholders' attention, topics of interest are covered in the Strategic Report
on pages 1 to 12.
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 65. The Company always responds
to letters from individual shareholders.
The Annual and Half Yearly Reports of the Group are prepared by the Board and
its advisers to present a full and readily understandable review of the Group's
performance. Copies are available for downloading from the Investment Manager's
website www.chelvertonam.com and on request from the Company Secretary on 01245
398950. Copies of the Annual Report are mailed to shareholders.
Audit Committee Report
I am pleased to present the Audit Committee Report for the year ended 30 April
2016.
Role of the Committee
The Audit Committee (the 'Committee') provides a forum through which the
Group's Auditor reports to the Board. The Committee is responsible for
monitoring the process of production and ensuring the integrity of the Group's
financial statements. The other primary responsibilities of the Committee are:
- to monitor adherence to best practice in corporate governance;
- to review the effectiveness of the internal control and risk management
environment of the Group;
- to receive compliance reports from the Investment Manager;
- to consider the accounting policies of the Group;
- to make recommendations to the Board in relation to the re-appointment of
the Auditor;
- to approve the Auditors' remuneration and terms of engagement; and
- to review and monitor the Auditor's independence and objectivity and the
effectiveness of the audit process.
Matters considered in the year
The Committee met twice during the financial year to consider the financial
statements and to review the internal control systems. The principal matters
considered by the Committee were the valuation of the Group's assets, proof of
ownership of its investments and cash, and the maintenance of its approval as
an investment trust.
The Manager and Administrator have reported to the Committee to confirm
continuing compliance with their individual regulatory requirements and for
maintaining the Company's investment trust status. These were also reviewed by
the Auditor as part of the audit process.
The Committee liaised with the appointed Investment Manager, Chelverton
Investment Management Limited, throughout the year, and received reports on
their legal compliance at each meeting. A Risk Assessment and Review of
Internal Controls document maintained by the Board was considered in detail and
amended as necessary. This document is reviewed by the Committee at each
meeting.
Internal Audit
The Group does not have an internal audit function as most of its day-to-day
operations are delegated to third parties, all of whom have their own internal
control procedures. The Committee discussed whether it would be appropriate to
establish an internal audit function, and agreed that the existing system of
monitoring and reporting by third parties remains appropriate and sufficient.
The need for an internal audit function is reviewed annually.
External Audit
The Audit Committee monitors and reviews the effectiveness of the external
third party service providers, audit process for the publication of the Annual
Report and makes recommendations to the Board on the re-appointment,
remuneration and terms of engagement of the Auditors.
Prior to each Annual Report being published, the Committee considers the
appropriateness of the scope of the audit plan, the terms under which the audit
is to be conducted, as well as the matter of remuneration, with a view to
ensuring the best interests of the Group are promoted.
Audit fees are computed on the basis of the time spent on Group affairs by the
Audit partners and staff and on the levels of skill and responsibility of those
involved.
Hazlewoods LLP was first appointed as Auditor to the Group on 2 May 2007. As
part of its review of the continuing appointment of the Auditor, the Committee
considers the length of tenure of the audit firm, its fees and independence,
along with any matters raised during each audit. The Committee has discussed
with Hazlewoods LLP its objectivity, independence and experience in the
investment trust sector.
The Committee has recommended the re-appointment of Hazlewoods LLP on each
occasion since their initial appointment, and no tender has been undertaken for
the audit of the Group. The Audit Partner for the Group has been rotated once
since their initial appointment, most recently in respect of the financial year
ended 30 April 2012. 2017 will be Hazlewoods LLP's tenth year as Auditor and in
accordance with Auditing Practice Board Ethical Standard 3 (Revised) the audit
will be put to tender in 2017 for the 2018 audit. In light of this tender the
Audit Committee consider it appropriate to extend the Audit Partner's period of
appointment for a further year to safeguard the quality of the audit, and
Hazlewoods LLP have confirmed that appropriate safeguards will be implemented
to ensure their continued objectivity and independence.
Hazlewoods LLP has indicated its willingness to continue in office as Auditor
of the Group. Following its review, the Committee considers that individually
and collectively the Auditor is appropriately experienced to fulfil the role
required and has recommended their re-appointment to the Board. A Resolution
for their re-appointment will be proposed at the forthcoming Annual General
Meeting.
The Committee has considered the independence and objectivity of the Auditor
and it is satisfied in these respects that Hazlewoods LLP has fulfilled its
obligations to the Group and its shareholders. During the year Hazlewoods
provided tax compliance services to the Group. These were not provided by the
audit team and the fee is not significant. No other non-audit services were
provided in the year. The Committee has advised that based on its assessment of
their performance and independence, Hazlewoods LLP has fulfilled its
obligations to the Group and its shareholders and on this basis recommends
their reappointment as Auditor.
At the Audit Committee meeting held on 15 June 2016 the directors decided that
Mr Myles would suceed me as the chair of this Committee. Both Mr Myles and I
will be present at the Annual General Meeting to deal with any questions from
shareholders relating to the financial statements.
David Harris
Audit Committee
Chairman
20 July 2016
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 33 to 36.
Statement from the Chairman of the Remuneration Committee - Howard Myles
I am pleased to present the Directors' Remuneration Report for the year ended
30 April 2016. Last year shareholders were asked to approve the Directors'
Remuneration Report at the Annual General Meeting ('AGM') through an advisory
vote, as has been the case in previous years and this will again be the case at
the next AGM. At the AGM held in 2014 shareholders were also asked to give a
binding vote on the Directors' Remuneration Policy and as there has been no
change to the Policy since its adoption, this will not be voted on at the next
AGM. The Remuneration Policy must be approved at least every three years,
therefore it will be submitted to the 2017 AGM.
An Ordinary Resolution to approve to receive and approve the Remuneration
Report will be put to shareholders at the forthcoming AGM on 8 September 2016.
The Company has a Remuneration Committee comprising the whole Board, which
considers and approves Directors' remuneration. No major decisions on or
changes to Directors' remuneration have been made during the year ended 30
April 2016. During the year ended 30 April 2016, the fees were continued at a
rate of GBP20,000 for the Chairman and GBP17,500 for other Directors, with an
additional payment of GBP2,500 to the Chairman of the Audit Committee.
The Company's performance
The graph below compares the total return (assuming all dividends are
reinvested) to Ordinary shareholders, compared to the total shareholder return
of the MSCI UK Small Cap Index. Although the Company has no formal benchmark,
the MSCI UK Small Cap Index has been selected as it is considered to represent
a broad equity market index against which the performance of the Company's
assets may be adequately assessed.
http://content.prnewswire.com/documents/
PRNUK-2007161750-2C85_PDF_2_Company_Performance_Chart_CC.pdf
Director's service contracts
None of the Directors has a contract of service with the Company, nor has there
been any contract or arrangement between the Company and any Director at any
time during the year. The terms of their appointment provide that a Director
shall retire and be subject to re-election at the first Annual General Meeting
after their appointment, and at least every three years after that. Directors
who have served on the Board for more than nine years must offer themselves for
re-election on an annual basis.
Directors' entitlements
Directors are only entitled to fees in accordance with the Directors'
Remuneration Policy as approved by shareholders. None of the Directors has any
entitlement to pensions or pension-related benefits, medical or life insurance,
share options, long-term incentive plans, or any form of performance-related
pay. Also, no Director has any right to any payment by way of monetary
equivalent, or any assets of the Company except in their capacity as
shareholders. There is no notice period and no provision for compensation upon
loss of office. The Directors' emoluments table below therefore does not
include columns for any of these items or their monetary equivalents.
Directors' emoluments for the year ended 30 April 2016 (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 2016 30 April
2015
Lord Lamont 20,000 20,000
(Chairman)
D Harris 20,000 20,000
H Myles 17,500 17,500
W van Heesewijk* - -
57,500 57,500
*William van Heesewijk has waived his entitlement to fees.
Directors' interests (audited)
The interests of the Directors and any connected persons in the Ordinary shares
and Zero Dividend Preference ('ZDP') shares of the subsidiary Company are set
out below:
Number of Number of Number of Number of
Ordinary ZDP shares Ordinary ZDP shares
shares held at held at shares held at
held at
Director 30 April 2016 30 April 2016 1 May 2015 1 May 2015
Lord Lamont 69,048 10,000 63,205 10,000
(Chairman)
D Harris 5,802 Nil 5,802 Nil
W van Heesewijk 90,000 Nil 90,000 Nil
H Myles Nil Nil Nil Nil
*Lord Lamont purchased 249 Ordinary Shares on 7 July 2016 under a dividend
reinvestment plan.
Significance of spend on pay
2016 2015 Change%
Dividends paid to 1,291,000 1,634,000 (20.99)
Ordinary
shareholders in
the year
Total remuneration 57,500 57,500 -
paid to Directors
None of the Directors nor any persons connected with them had a material
interest in the Company's transactions, arrangements or agreements during the
year.
The Directors' Remuneration Report for the year ended 30 April 2015 (Resolution
2) was approved by shareholders at the Annual General Meeting held on 16
September 2015. The votes cast by proxy were as follows:
Number of votes % of votes
cast
For 1,208,339 100.00
Against 0 0.00
At Chairman's discretion 0 0.00
Total votes cast 1,208,339
Number of votes abstained 0
Remuneration Policy
The Board's policy is that the remuneration of non-executive Directors should
be sufficient to attract and retain directors with suitable skills and
experience, and is determined in such a way as to reflect the experience of the
Board as a whole, in order to be comparable with other organisations and
appointments.
The fees of the non-executive Directors are determined within the limits set
out in the Company's Articles of Association. The approval of shareholders
would be required to increase the limits set out in the Articles of
Association. Directors are not eligible for bonuses, pension benefits, share
options, long-term incentive schemes or other benefits, as the Board does not
consider such arrangements or benefits necessary or appropriate. Fees for any
new Director appointed will be made on the same basis.
The Directors' Remuneration Policy (Resolution 3) was approved by shareholders
at the Annual General Meeting held on 17 September 2014. The votes cast by
proxy were as follows:
Number of votes % of votes
cast
For 2,034,679 99.65
Against 7,070 0.35
At Chairman's discretion 0 0.00
Total votes cast 2,041,749
Number of votes abstained 1,200
Expected Fees for Fees for Year
Year to to
30 April 2017 30 April 2016
Chairman basic fee 20,000 20,000
Non-Executive Director basic fee 17,500 17,500
Audit Committee Chairman additional fee 2,500 2,500
The Company intends to continue with the Directors' Remuneration Policy over
the next financial year on the above basis. Fees payable in respect of
subsequent periods will be determined following an annual review. Any views
expressed by shareholders on remuneration being paid to Directors would be
taken into consideration by the Board. In accordance with the regulations, an
Ordinary Resolution to approve the Directors' remuneration policy will be put
to shareholders at least once every three years.
Approval
The Directors' Remuneration Report on pages 28 to 31 was approved by the Board
on 20 July 2016.
On behalf of the Board
Howard Myles
Chairman of the Remuneration Committee
20 July 2016
Statement of Directors' Responsibilities
in respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the financial
statements. The Directors have elected to prepare financial statements in
accordance with International Financial Reporting Standards ('IFRSs') as
adopted by the EU. Company law requires the Directors to prepare such financial
statements in accordance with IFRSs and the Companies Act 2006.
Under company law the Directors must not approve the financial statements
unless they are satisfied that they present fairly the financial position,
financial performance and cash flows of the Group and the Company for that
period.
In preparing each of the Group and the Company's financial statements, the
Directors are required to:
- select suitable accounting policies in accordance with International
Accounting Standard ('IAS') 8: 'Accounting Policies, Changes in Accounting
Estimates and Errors' and then apply them consistently;
- present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
- provide additional disclosures when compliance with specific requirements
in IFRSs is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the Group and the Company's
financial position and financial performance;
- state that the Group and the Company have complied with IFRSs, as adopted
by the EU subject to any material departures disclosed and explained in the
financial statements; and
- make judgements and estimates that are reasonable and prudent.
- The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Group's transactions and disclose
with reasonable accuracy at any time the financial position of the Group and
enable them to ensure that the Group's financial statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
- Under applicable law and regulations, the Directors are also responsible
for preparing a Strategic Report, a Directors' Report, Directors' Remuneration
Report and Statement on Corporate Governance that comply with that law and
those regulations, and for ensuring that the Annual Report includes information
required by the Listing Rules of the FCA.
- The Directors are responsible for the integrity of the information
relating to the Company on the Investment Manager's website. Legislation in the
UK governing the preparation and dissemination of financial statements differs
from legislation in other jurisdictions.
- The Directors confirm that, to the best of their knowledge and belief:
- the financial statements, prepared in accordance with IFRSs as adopted by
the EU, give a true and fair view of the assets, liabilities, financial
position and profit of the Group;
- the Annual Report includes a fair review of the development and
performance of the Group, together with a description of the principal risks
and uncertainties faced;
- the Annual Report is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's performance,
business model and strategy; and
- the Investment Managers' Report includes a fair review of the development
and performance of the business and the Company and its undertakings included
in the consolidation taken as a whole and adequately describes the principal
risks and uncertainties they face.
On behalf of the Board of Directors
Lord Lamont of Lerwick
Chairman
20 July 2016
Auditor's Report
to the members of Small Companies Dividend Trust PLC
We have audited the Group financial statements of Small Companies Dividend
Trust PLC for the year ended 30 April 2016 which comprise the Consolidated
Statement of Comprehensive Income, the Consolidated and Parent Company
Statement of Changes in Net Equity, the Consolidated and Parent Company Balance
Sheets, the Consolidated and Parent Company Statement of Cash Flows and the
related notes. The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the EU.
This report is made solely to the Group's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Group's members those matters we are
required to state to them in an audit report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Group and the Group's members as a body, for our audit
work, for this report or for the opinions we have formed.
Respective responsibilities of Directors and Auditor
As explained more fully in the Statement of Directors' Responsibilities set out
on page 32, the Directors are responsible for the preparation of the Group
financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the Group
financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards required us to comply
with the Auditing Practices Board's ('APB's') Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the Group's circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates
made by the Directors; and the overall presentation of the financial
statements. In addition, we read all the financial and non-financial
information in the Strategic Report and Directors' Report to identify material
inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially
inconsistent with the knowledge acquired by us in the course of performing the
audit. If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the Group financial statements:
- give a true and fair view of the state of the Group's and of the
Company's affairs as at 30 April 2016 and of its net return and comprehensive
income for the year then ended;
- have been properly prepared in accordance with IFRSs as adopted by the
EU; and
- have been prepared in accordance with the requirements of the Companies
Act 2006 and Article 4 of the IAS Regulations.
Our assessment of risks of material misstatement
Without modifying our opinion, we highlight the following matters that are, in
our judgement, likely to be most important to users' understanding of our
audit. Our audit procedures relating to these matters were designed in the
context of our audit of the financial statements as a whole, and not to express
an opinion on individual transactions, balances or disclosures.
Allocation of costs between capital and revenue
The Group is required to apportion its expenses between revenue and capital.
This allocation is important as the company can only pay dividends out of
revenue. The split has to be performed on the basis of the Board's expected
long-term capital and revenue returns. Our audit work included, but was not
restricted to, a detailed review of the actual dividend and capital income
received in the past 11 years compared to the Board's expected long-term
capital and revenue returns. The Group's accounting policy on this allocation
is included in note 1.
Revenue recognition
Investment income is the Group's main source of revenue and is recognised when
the Group's right to the return is established in accordance with the Statement
of Recommended Practice. Our audit work included, but was not restricted to, a
detailed review of those sources of income recorded in the financial statements
and further consideration of other potential sources of income. The Group's
accounting policy on income is included in note 1 and its disclosures about
income are included in note 2.
Management override of financial controls
The Group operates a system of financial controls to mitigate its vulnerability
to fraud and its financial statements to material error and is reliant upon the
efficacy of these controls to ensure that its financial statements present a
true and fair view. The financial statements contain a number of significant
accounting estimates that require an element of judgement on behalf of
management and that are, therefore, potentially open to manipulation. Our audit
work included, but was not restricted to, a review of all significant
management estimates and detailed consideration of all material judgements
applied during the completion of the financial statements. We also reviewed
material journal entries processed by management during the period. The Group's
principal accounting policies are included in note 1.
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of any identified misstatements and in forming our
opinion. For the purpose of determining whether the financial statements are
free from material misstatement we define materiality as the magnitude of a
misstatement or an omission from the financial statements or related
disclosures that would make it probable that the judgement of a reasonable
person relying on the information would have been changed or influenced by the
misstatement or omission. We also determine a level of performance materiality
which we use to determine the extent of testing needed to reduce to an
appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as a
whole.
We established materiality for the financial statements as a whole to be GBP
457,000, which is 1% of the value of the Group's total assets. For income and
expenditure items we determined that misstatements of lesser amounts than
materiality for the financial statements as a whole would make it probable that
the judgement of a reasonable person, relying on the information, would have
been changed or influenced by the misstatement or omission. Accordingly, we
established materiality for revenue items within the income statement to be GBP
114,000.
An overview of the scope of our audit
Our audit approach was based on a thorough understanding of the Group's
business and is risk-based. The day-to-day management of the Group's investment
portfolio, the custody of its investments and the maintenance of the Group's
accounting records is outsourced to third-party service providers. Accordingly,
our audit work is focused on obtaining an understanding of, and evaluating,
internal controls at the Group and the third-party service providers, and
inspecting records and documents held by the third-party service providers. We
undertook substantive testing on significant transactions, balances and
disclosures, the extent of which was based on various factors such as our
overall assessment of the control environment, the effectiveness of controls
over individual systems and the management of specific risks.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
- the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
- the information given in the Strategic Report and Directors' Report for
the financial year for which the financial statements are prepared is
consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the ISAs (UK and Ireland), we are required to report to the Board if, in
our opinion, information in the Strategic Report and the Directors' Report is:
- materially inconsistent with the information in the audited financial
statements; or
- apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the Group acquired in the course of performing our
audit; or
- is otherwise misleading.
In particular, we are required to consider whether we have identified any
inconsistencies between our knowledge acquired during the audit and the
Directors' statement that they consider the Annual Report is fair, balanced and
understandable and whether the Annual Report appropriately discloses those
matters that we communicated to the Audit Committee which we consider should
have been disclosed.
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
- adequate accounting records have not been kept, or returns adequate for
our audit have not been received from branches not visited by us; or
- the financial statements and the part of the Directors' Remuneration
Report to be audited are not in agreement with the accounting records and
returns; or
- certain disclosures of directors' remuneration specified by law are not
made; or
- we have not received all the information and explanations we require for
our audit.
Under the Listing Rules we are required to review:
- the Directors' statement, set out on page 18, in relation to going
concern; and
- the part of the Statement on Corporate Governance relating to the Group's
compliance with the nine provisions of the UK Corporate Governance Code
specified for our review.
Scott Lawrence (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Cheltenham
20 July 2016
Consolidated Statement of Comprehensive Income
for the year ended 30 April 2016
2016 2015
Revenue Capital Total Revenue Total
Capital
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments at fair 10 - 3,104 3,104 - 1,638 1,638
value through profit or loss
Investment income 2 2,180 - 2,180 1,825 - 1,825
1,825
Investment management fee 3 (115) (345) (460) (101) (303) (404)
Other expenses 4 (206) (2) (208) (200) (20) (220)
Net return before finance costs 1,859 2,757 4,616 1,524 1,315 2,839
and taxation
Finance costs 6 - (597) (597) - (562) (562)
Net return before taxation 1,859 2,160 4,019 1,524 753 2,277
Taxation 7 - - - - - -
Total comprehensive income 1,859 2,160 4,019 1,524 753 2,277
for the year
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Net return per:
Ordinary share 8 11.23 13.05 24.28 9.21 4.55 13.76
Zero Dividend Preference 8 - 7.02 7.02 - 6.61 6.61
share
The total column of this statement is the Statement of Comprehensive Income of
the Group prepared in accordance with IFRS as adopted by the EU. All revenue
and capital items in the above statement derive from continuing operations. No
operations were acquired or discontinued during the year. All of the net return
for the period and the total comprehensive income for the period is
attributable to the shareholders of the Group. The supplementary revenue and
capital return columns are presented for information purposes as recommended by
the Statement of Recommended Practice issued by the AIC.
The notes on pages 41 to 60 form part of these financial statements.
Consolidated and Parent Company Statement of Changes in Net Equity
for the year ended 30 April 2016
Share Share Capital Revenue Total
capital premium reserve reserve
account
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 30 April 2016
30 April 2015 4,138 12,403 13,832 1,976 32,349
Total comprehensive return - - 2,160 1,859 4,019
for the year
Dividends paid 9 - - - (1,291) (1,291)
30 April 2016 4,138 12,403 15,992 2,544 35,077
Year ended 30 April 2015
30 April 2014 4,138 12,403 13,079 2,086 31,706
Total comprehensive return - - 753 1,524 2,277
for the year
Dividends paid 9 - - - (1,634) (1,634)
30 April 2015 4,138 12,403 13,832 1,976 32,349
The notes on pages 41 to 60 form part of these financial statements.
Consolidated and Parent Company Balance Sheets
as at 30 April 2016
Note Group Group Company Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Investments at fair value through 10 45,376 41,681 45,376 41,681
profit or loss
Investments in subsidiary 12 - - 13 13
45,376 41,681 45,389 41,694
Current assets
Trade and other receivables 13 333 278 333 278
Cash and cash equivalents 29 489 29 489
362 767 362 767
Total assets 45,738 42,448 45,751 42,461
Current liabilities
Trade and other payables 14 (132) (167) (145) (180)
Total assets less current 45,606 42,281 45,606 42,281
liabilities
Non-current liabilities
Zero Dividend Preference shares 15 (10,529) (9,932) - -
Loan from subsidiary 16 - - (10,529) (9,932)
(10,529) (9,932) (10,529) (9,932)
Total liabilities (10,661) (10,099) (10,674) (10,112)
Net assets 35,077 32,349 35,077 32,349
Represented by:
Share capital 17 4,138 4,138 4,138 4,138
Share premium account 18 12,403 12,403 12,403 12,403
Capital reserve 18 15,992 13,832 15,992 13,832
Revenue reserve 18 2,544 1,976 2,544 1,976
Equity shareholders' funds 35,077 32,349 35,077 32,349
The notes on pages 41 to 60 form part of these financial statements.
These financial statements were approved by the Board of Small Companies
Dividend Trust PLC and authorised for issue on 20 July 2016.
Lord Lamont of Lerwick
Chairman
Company Registered Number: 3749536
Consolidated and Parent Company Statement of Cash Flows
for the year ended 30 April 2016
Note 2016 2015
GBP'000 GBP'000
Operating activities
Investment income received 2,158 1,839
Refund of loan interest 2 -
Investment management fee paid (510) (404)
Administration and secretarial (59) (69)
fees paid
Other cash payments (133) (156)
Net cash inflow from operating 20 1,458 1,210
activities
Investing activities
Purchases of investments (14,714) (8,667)
Sales of investments 14,087 9,444
Net cash inflow from investing 831 1,987
activities
Financing activities
Dividends paid 9 (1,291) (1,634)
Net cash outflow from financing (1,291) (1,634)
activities
Change in cash and cash 21 (460) 353
equivalents for year
Cash and cash equivalents at 22 489 136
start of year
Cash and cash equivalents at end 22 29 489
of year
Comprises of:
Cash and cash equivalents 29 489
The notes on pages 41 to 60 form part of these financial statements.
Notes to the Financial Statements
as at 30 April 2016
1 ACCOUNTING POLICIES
Small Companies Dividend Trust PLC is a company domiciled in the UK. The
consolidated financial statements for the Group for the year ended 30 April
2016 comprise the Company and its subsidiary, SCZ (together referred to as the
'Group').
Basis of preparation
The consolidated financial statements of the Group and the financial statements
of the Company have been prepared in conformity with IFRSs issued by the
International Accounting Standards Board (as adopted by the EU) and
Interpretations issued by the International Financial Reporting Interpretations
Committee ('IFRIC'), and applicable requirements of UK company law, and reflect
the following policies which have been adopted and applied consistently.
New standards, interpretations and amendments adopted by the Group
The accounting policies adopted in the preparation of the consolidated
financial statements are consistent with those of the previous financial year.
There were no IFRS standards or IFRIC interpretations adopted for the first
time in these financial statements that had a material impact on the Group's
financial statement.
At the date of authorisation of the financial statements, the following
Standards which have not been applied in these financial statements were in
issue but were not yet effective:
- Amendments to IAS 1: Presentation of financial statements (effective 1
January 2017)
- IFRS 7 Financial Instruments: Disclosures - Amendments requiring
disclosures about the initial application of IFRS 9 (effective 1 January 2016
or otherwise when IFRS 9 is first applied)
- IFRS 9 Financial Instruments - Classification and measurement of
financial assets (effective 1 January 2018)
- IFRS 9 Financial Instruments - Classification and measurement of
financial liabilities and de-recognition requirements from IAS 39 Financial
Instruments Recognition and Measurement (effective 1 January 2018)
The Directors do not expect that the adoption of the Standards listed above
will have a material impact on the financial statements of the Group in future
periods.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its wholly-owned subsidiary undertaking, SCZ, drawn up to the same
accounting date.
The subsidiary is consolidated from the date of its incorporation, being the
date on which the Company obtained control, and will continue to be
consolidated until the date that such control ceases. Control comprises the
power to govern the financial and operating policies of the investee so as to
obtain benefit from its activities and is achieved through direct or indirect
ownership of voting rights. The financial statements of the subsidiary are
prepared for the same reporting year as the Company, using consistent
accounting policies. All inter-company balances and transactions, including
unrealised profits arising from them, are eliminated.
As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own Statement of Comprehensive Income. The amount of the
Company's return for the financial period dealt with in the financial
statements of the Group is a profit of GBP4,019,000 (2015: GBP2,277,000).
Convention
The financial statements are presented in Sterling rounded to the nearest
thousand. The financial statements have been prepared on a going concern basis
under the historical cost convention, except for the measurement at fair value
of investments classified as fair value through profit or loss and interest
rate swaps taken out as cash flow hedges. Where presentational guidance set out
in the Statement of Recommended Practice 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts' ('SORP'), issued by the Association
of Investment Companies (dated November 2014) is consistent with the
requirements of IFRS, the Directors have sought to prepare the financial
statements on a consistent basis compliant with the recommendations of the
SORP.
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business. The Group only invests in companies
listed in the UK.
Investments
All investments held by the Group are recorded at 'fair value through profit or
loss'. Investments are initially recognised at cost, being the fair value of
the consideration given.
After initial recognition, investments are measured at fair value, with
unrealised gains and losses on investments and impairment of investments
recognised in the Consolidated Statement of Comprehensive Income and allocated
to capital. Realised gains and losses on investments sold are calculated as the
difference between sales proceeds and cost.
For investments actively traded in organised financial markets, fair value is
generally determined by reference to quoted market bid prices at the close of
business on the Balance Sheet date, without adjustment for transaction costs
necessary to realise the asset.
Trade date accounting
All 'regular way' purchases and sales of financial assets are recognised on the
'trade date', i.e. the day that the Group commits to purchase or sell the
asset. Regular way purchases, or sales, are purchases or sales of financial
assets that require delivery of the asset within a time frame generally
established by regulation or convention in the market place.
Income
Dividends receivable on quoted equity shares are taken into account on the
ex-dividend date. Where no ex-dividend date is quoted, they are brought into
account when the Group's right to receive payment is established. Other
investment income and interest receivable are included in the financial
statements on an accruals basis. Dividends received from UK registered
companies are accounted for net of imputed tax credits.
Expenses
All expenses are accounted for on an accruals basis. All expenses are charged
through the revenue account in the Consolidated Statement of Comprehensive
Income except as follows:
- expenses which are incidental to the acquisition of an investment are
included within the costs of the investment;
- expenses which are incidental to the disposal of an investment are
deducted from the disposal proceeds of the investment;
- expenses are charged to capital reserve where a connection with the
maintenance or enhancement of the value of the investments can be demonstrated;
and
- operating expenses of the subsidiary are borne by the Company and taken
100% to capital.
All other expenses are allocated to revenue with the exception of 75% (2015:
75%) of the Investment Manager's fee which is allocated to capital. This is in
line with the Board's expected long-term split of returns from the investment
portfolio, in the form of income and capital gains respectively.
Cash and cash equivalents
Cash in hand and in banks and short-term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as cash in hand,
demand deposits and short-term, highly liquid investments readily convertible
to known amounts of cash and subject to insignificant risk of changes in value.
Loans and borrowings
All loans and borrowings are initially recognised at cost, being the fair value
of the consideration received, less issue costs, where applicable. After
initial recognition, all interest-bearing loans and borrowings are subsequently
measured at amortised cost. Any difference between cost and redemption value is
recognised in the Consolidated Statement of Comprehensive Income over the
period of the borrowings on an effective interest basis.
Zero Dividend Preference shares
Shares issued by the subsidiary are treated as a liability of the Group, and
are shown in the Balance Sheet at their redemption value at the Balance Sheet
date. The appropriations in respect of the Zero Dividend Preference shares
necessary to increase the subsidiary's liabilities to the redemption values are
allocated to capital in the Consolidated Statement of Comprehensive Income.
This treatment reflects the Board's long-term expectations that the
entitlements of the Zero Dividend Preference shareholders will be satisfied out
of gains arising on investments held primarily for capital growth.
Share issue costs
Costs incurred directly in relation to the issue of shares in the subsidiary
are borne by the Company and taken 100% to capital. Share issue costs relating
to Ordinary share issues by the Company are taken 100% to share premium
account.
Capital Reserve
Capital reserve - other - The following are taken to this reserve:
- gains and losses on the disposal of investments;
- exchange difference of a capital nature; and
- expenses, together with the related taxation effect, allocated to this
reserve in accordance with the above policies.
Capital reserve - investment holding gains - The following are taken to this
reserve:
- increase and decrease in the valuation of investments held at the year
end.
Revenue Reserve
The following are taken to this reserve:
- net revenue recognised in the revenue column of the Statement of
Comprehensive Income.
Taxation
There is no charge to UK income tax as the Group's allowable expenses exceed
its taxable income. Deferred tax assets in respect of unrelieved excess
expenses are not recognised as it is unlikely that the Group will generate
sufficient taxable income in the future to utilise these expenses. Deferred tax
is not provided on capital gains and losses because the Company meets the
conditions for approval as an investment trust company.
Dividends payable to shareholders
Dividends to shareholders are recognised as a liability in the period in which
they are paid or approved in general meetings and are taken to the Statement of
Changes in Net Equity. Dividends declared and approved by the Group after the
Balance Sheet date have not been recognised as a liability of the Group at the
Balance Sheet date.
2 INCOME
2016 2015
GBP'000 GBP'000
Income from listed investments
UK dividend income 1,962 1,515
Overseas dividend income 177 250
PID income 39 60
Other income
Refund of loan interest 2 -
Total income 2,180 1,825
Total income comprises:
Dividends 2,178 1,825
Interest 2 -
2,180 1,825
3 INVESTMENT MANAGEMENT FEE
2016 2015
Revenue Capital Total GBP'000 GBP'000 Total
GBP'000 GBP'000 GBP'000 Revenue Capital GBP'000
Investment management fee 115 345 460 101 303 404
4 OTHER EXPENSES
2016 2015
GBP'000 GBP'000
Administration and secretarial fees 64 64
Directors' remuneration (note 5) 58 58
Auditor's remuneration:
audit services* 20 20
non-audit services* 3 2
Insurance 4 4
Other expenses* 59 72
208 220
Subsidiary operating costs (2) (20)
206 200
* The above amounts include irrecoverable
VAT where applicable.
During the year there were GBP12,000 of capital expenses paid by the Company,
however after a GBP10,000 accrued capital expense for stock exchange listing fees
being written off, there was a GBP2,000 net position.
5 DIRECTORS' REMUNERATION
2016 2015
GBP GBP
Total fees 57,500 57,500
Remuneration to Directors
Lord Lamont (Chairman) 20,000 20,000
D Harris 20,000 20,000
H Myles 17,500 17,500
W van Heesewijk* - -
* Mr van Heesewijk has waived his
entitlement to fees.
6 FINANCE COSTS
2016 2015
Revenue Capital Total GBP'000 GBP'000 Total
GBP'000 GBP'000 GBP'000 Revenue Capital GBP'000
Appropriations in respect - 597 597 - 562 562
of
Zero Dividend Preference
shares
7 TAXATION
2016 2015
GBP'000 GBP'000
Based on the revenue return for
the year
Current tax - -
The current tax charge for the year is lower than the standard rate of
corporation tax in the UK of 20% to 30 April 2016 and 30 April 2015. The
differences are explained below:
2016 2015
Revenue Capital Total GBP'000 GBP'000 Total
GBP'000 GBP'000 GBP'000 Revenue Capital GBP'000
Return on ordinary 1,859 2,160 4,019 1,524 753 2,277
activities before taxation
Theoretical corporation tax 372 432 804 319 157 476
at 20%
(2015: 20.93%)
Effects of:
Capital items not taxable - (501) (501) - (225) (225)
UK and overseas dividends (428) - (428) (371) - (371)
which are not liable to
corporation tax
Excess expenses in the year 56 69 125 52 68 120
Actual current tax charged - - - - - -
to the revenue account
The Group has unrelieved excess expenses of GBP19,678,000 (2015: GBP19,053,000). It
is unlikely that the Group will generate sufficient taxable profits in the
future to utilise these expenses and therefore no deferred tax asset has been
recognised.
8 RETURN PER SHARE
Ordinary shares
Revenue return per Ordinary share is based on revenue on ordinary activities
after taxation of GBP1,859,000 (2015: GBP1,524,000) and on 16,550,000 (2015:
16,550,000) Ordinary shares, being the weighted average number of Ordinary
shares in issue during the year.
Capital return per Ordinary share is based on the capital profit of GBP2,160,000
(2015: GBP753,000) and on 16,550,000 (2015: 16,550,000) Ordinary shares, being
the weighted average number of Ordinary shares in issue during the year.
Zero Dividend Preference shares
Capital return per Zero Dividend Preference share is based on allocations from
the Company of GBP597,000 (2015: GBP562,000) and on 8,500,000 (2015: 8,500,000)
Zero Dividend Preference shares, being the weighted average number of Zero
Dividend Preference shares in issue during the year.
9 DIVIDS
2016 2015
GBP'000 GBP'000
Declared and paid per Ordinary share
Fourth interim dividend for the year ended 397 397
30 April 2015 of 2.40p (2014: 2.40p)
Special dividend for the year ended 50 455
30 April 2015 of 0.30p (2014: 2.75p)
First interim dividend of 1.70p (2015: 281 260
1.575p)
Second interim dividend of 1.70p (2015: 281 261
1.575p)
Third interim dividend of 1.70p (2015: 282 261
1.575p)
1,291 1,634
Declared per Ordinary share*
Fourth interim dividend for the year ended 397 397
30 April 2016 of 2.40p (2015: 2.40p)
Special dividend for the year ended 265 50
30 April 2016 of 1.60p (2015: 0.30p)
662 447
* Dividend paid subsequent to the year end.
10 INVESTMENTS - Group and Company
Listed AIM 2016
GBP'000 GBP'000 Total
GBP'000
Year ended 30 April 2016
Opening book cost 22,561 11,815 34,376
Opening investment holding gains 4,247 3,058 7,305
Opening valuation 26,808 14,873 41,681
Movements in the year:
Purchases at cost 7,969 6,745 14,714
Disposals:
Proceeds (8,846) (5,277) (14,123)
Net realised gains on disposals 2,016 1,801 3,817
Movement in investment holding gains (265) (448) (713)
Closing valuation 27,682 17,694 45,376
Closing book cost 23,700 15,084 38,784
Closing investment holding gains 3,982 2,610 6,592
27,682 17,694 45,376
Realised gains on disposals 2,016 1,801 3,817
Movement in investment holding gains (265) (448) (713)
Gains on investments 1,751 1,353 3,104
Listed AIM 2015
GBP'000 GBP'000 Total
GBP'000
Year ended 30 April 2015
Opening book cost 23,193 8,625 31,818
Opening investment holding gains 5,442 3,560 9,002
Opening valuation 28,635 12,185 40,820
Movements in the year:
Purchases at cost 4,546 4,121 8,667
Disposals:
Proceeds (7,453) (1,991) (9,444)
Net realised gains on disposals 2,275 1,060 3,335
Movement in investment holding gains (1,195) (502) (1,697)
Closing valuation 26,808 14,873 41,681
Closing book cost 22,561 11,815 34,376
Closing investment holding gains 4,247 3,058 7,305
26,808 14,873 41,681
Realised gains on disposals 2,275 1,060 3,335
Movement in investment holding gains (1,195) (502) (1,697)
Gains on investments 1,080 558 1,638
Transaction costs
During the year the Group incurred transaction costs of GBP64,000 (2015: GBP34,000)
and GBP35,000 (2015: GBP26,000) on purchases and sales of investments respectively.
These amounts are included in gains on investments, as disclosed in the
Consolidated Statement of Comprehensive Income.
11 SIGNIFICANT INTERESTS
The Company has a holding of 3% or more in the following investments:
Name of undertaking Class of share 30 April 2016
% held
Coral Products Ordinary 7.3
Chamberlin Ordinary 6.3
RTC Group Ordinary 3.8
Grafenia Ordinary 3.8
Avesco Group Ordinary 3.7
Belvoir Lettings Ordinary 3.3
12 INVESTMENT IN SUBSIDIARY
The Company owns the whole of the issued ordinary share capital of SCZ,
especially formed for the issuing of Zero Dividend Preference shares, which is
incorporated and registered in England and Wales, under company number:
8142169.
13 TRADE AND OTHER RECEIVABLES
Group Group Company Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due from Brokers 36 - 36 -
Dividends receivable 295 271 295 271
Prepayments and accrued income 2 7 2 7
333 278 333 278
14 TRADE AND OTHER PAYABLES
Group Group Company Company
2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other payables 132 167 132 167
Loan from subsidiary undertaking - - 13 13
132 167 145 180
15 ZERO DIVID PREFERENCE SHARES
On 28 August 2012, SCZ issued 8,500,000 Zero Dividend Preference shares at 100p
per share and with net proceeds of GBP8.3 million. The expenses of the placing
were borne by the Company and the Investment Manager. The Zero Dividend
Preference shares each have an initial capital entitlement of 100p per share,
growing by an annual rate of 6% compounded daily to 136.70p on 8 January 2018,
a total of GBP11,620,000. The accrued entitlement as per the Articles of
Association of SCZ at 30 April 2016 was 123.87p (2015: 116.85p) per share,
being GBP10,529,000 (2015: GBP9,932,000) in total, and the total amount accrued for
the year of GBP597,000 (2015: GBP562,000) has been charged to capital.
16 SECURED LOAN
Pursuant to a loan agreement between SCZ and the Company, SCZ has lent the
gross proceeds of GBP8,500,000, raised from the placing on 28 August 2012 of
8,500,000 Zero Dividend Preference shares at 100p, to the Company. The loan is
non-interest bearing and is repayable three business days before the Zero
Dividend Preference share redemption date of 8 January 2018 or, if required by
SCZ, at any time prior to that date in order to repay the Zero Dividend
preference share entitlement. The funds are to be managed in accordance with
the investment policy of the Company.
The loan is secured by way of a floating charge on the Company's assets under a
debenture entered into between the Company and SCZ dated 1 August 2012.
A contribution agreement between the Company and SCZ has also been made whereby
the Company will undertake to contribute such funds as would ensure that SCZ
will have in aggregate sufficient assets on 8 January 2018 to satisfy the final
capital entitlement of the Zero Dividend Preference shares. At 30 April 2016
the contribution due from the Company to cover the accrued entitlement was GBP
597,000 (2015: GBP562,000).
Company Company
2016 2015
GBP'000 GBP'000
Value at 1 May 9,932 9,370
Contribution to accrued capital 597 562
entitlement of Zero Dividend Preference
shares
Value at 30 April 10,529 9,932
17 SHARE CAPITAL
2016 2015
Number GBP'000 Number GBP'000
Issued, allotted and fully 16,550,000 4,138 16,550,000 4,138
paid Ordinary shares of
25p each
The rights attaching to the Ordinary shares are:
As to dividends each year
Ordinary shares are entitled to all the revenue profits of the Company
available for distribution, including all undistributed income.
As to capital on winding up
On a winding up, holders of Zero Dividend Preference shares issued by SCZ are
entitled to a payment of an amount equal to 100p per share, increased daily
from 28 August 2012 at such a compound rate as will give a final entitlement to
136.70p for each Zero Dividend Preference share at 8 January 2018, GBP11,620,000
in total.
The holders of Ordinary shares will receive all the remaining Group assets
available for distribution to shareholders after payment of all debts and
satisfaction of all liabilities of the Company rateably according to the
amounts paid or credited as paid up on the Ordinary shares held by them
respectively.
Voting
Each holder of Ordinary shares on a show of hands will have one vote and on a
poll will have one vote for each Ordinary share held. Each holder of Zero
Dividend Preference shares on a show of hands will have one vote at meetings
where Zero Dividend Preference shareholders are entitled to vote and on a poll
will have one vote for every Zero Dividend Preference share held.
Duration
Under the Parent Company's Articles of Association, the Directors are required
to convene a General Meeting of the Company to be held in October 2017 or on a
date which is either four months before or four months after this date so as to
align the vote with any timetable for a further issue of Zero Dividend
Preference shares or to save costs by proposing the Continuation Resolution (as
defined below) at the Annual General Meeting or some other General Meeting of
the Company ('the First GM'), at which an Ordinary Resolution will be proposed
to the effect that the Company continues in existence ('the Continuation
Resolution'). In the event that such Resolution is not passed the Directors
shall, subject to the Statutes, put forward further proposals to shareholders
regarding the future of the Company (which may include voluntary liquidation,
unitisation or other reorganisation of the Company) ('the Restructuring
Resolution') at a General Meeting of the Company to be convened not more than
four months after the date of the First GM (or such adjournment).
The Restructuring Resolution shall be proposed as a Special Resolution. If the
Restructuring Resolution is either not proposed or not passed then the
Directors shall convene a General Meeting not more than four months after the
date of the First GM (or such adjournment). If the Restructuring Resolution is
not proposed or four months after the date the Restructuring Resolution is not
passed, an Ordinary Resolution pursuant to Section 84 of the Insolvency Act
1986 to voluntarily wind up the Company shall be put to shareholders and the
votes taken on such Resolution shall be on a poll.
18 RESERVES - Group and Company
Share Capital Revenue
premium reserve reserve
account GBP'000 GBP'000
GBP'000
At 1 May 2015 12,403 13,832 1,976
Net return on realisation of investments - 3,817 -
Movement in investment holding gains - (713) -
Costs charged to capital - (347) -
Appropriations in respect of Zero Dividend - (597) -
Preference shares
Net return after dividends for the year - - 568
retained
At 30 April 2016 12,403 15,992 2,544
At 1 May 2014 12,403 13,079 2,086
Net return on realisation of investments - 3,335 -
Movement in investment holding gains - (1,697) -
Costs charged to capital - (323) -
Appropriations in respect of Zero Dividend - (562) -
Preference shares
Net return after dividends for the year - - (110)
retained
At 30 April 2015 12,403 13,832 1,976
19 NET ASSET VALUE PER SHARE
The net asset value per share and the net assets attributable to the Ordinary
shareholders and Zero Dividend Preference shareholders are as follows:
Net asset Net assets Net asset Net assets
value per attributable value per attributable
share to share to
shareholders shareholders
2016 2016 2015 2015
pence GBP'000 pence GBP'000
Ordinary shares 211.95 15,077 195.46 32,349
Zero Dividend Preference 123.87 10,529 116.85 9,932
shares
The net asset value per Ordinary share is calculated on 16,550,000 (2015:
16,550,000) Ordinary shares, being the number of Ordinary shares in issue at
the year end.
The net asset value per Zero Dividend Preference share is calculated on
8,500,000 (2015: 8,500,000) Zero Dividend Preference shares, being the number
of Zero Dividend Preference shares in issue at the year end.
20 RECONCILIATION OF NET RETURN BEFORE AND AFTER TAXATION
TO NET CASH FLOW FROM OPERATING ACTIVITIES - Group and Company
2016 2015
GBP'000 GBP'000
Net return before taxation 4,019 2,277
Taxation - -
Net return after taxation 4,019 2,277
Net capital return (2,160) (753)
(Increase)/decrease in receivables (19) 13
Decrease in payables (35) (4)
Interest and expenses charged to the (347) (323)
capital reserve
Net cash inflow from operating activities 1,458 1,210
21 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET CASH/(DEBT) - Group and
Company
2016 2015
GBP'000 GBP'000
(Decrease)/increase in cash in (460) 353
year
Net cash at 1 May 489 136
Net cash at 30 April 29 489
22 ANALYSIS OF CHANGES IN NET CASH - Group and Company
At 1 May At 30 April
2015 Cash flows 2016
GBP'000 GBP'000 GBP'000
Cash at bank 489 (460) 29
23 RELATED PARTY TRANSACTIONS
Under the terms of an agreement dated 30 April 2006 (effective from 1 December
2005), the Company appointed Chelverton to be Investment Manager. The fee
arrangements for these services and fees payable are set out in the Directors'
Report on page 15 and in note 3 to the financial statements.
24 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
Objectives, policies and strategies
The Group primarily invests in companies with a market capitalisation of up to
GBP500 million. All of the Group's investments comprise ordinary shares in
companies listed on the Official List and companies admitted to AIM.
The Group finances its operations through Zero Dividend Preference shares
issued by SCZ and equity. Cash, liquid resources and short-term debtors and
creditors arise from the Group's day-to-day operations.
It is, and has been throughout the year under review, the Group's policy that
no trading in financial instruments shall be undertaken.
In pursuing its investment objective, the Group is exposed to a variety of
risks that could result in either a reduction in the Group's net assets or a
reduction of the profits available for distribution. These risks are market
risk (comprising currency risk, interest rate risk and other price risk),
credit risk and liquidity risk. The Board reviews and agrees policies for
managing each of these risks and they are summarised below.
As required by IFRS 7: Financial Instruments: Disclosures, an analysis of
financial assets and liabilities, which identifies the risk to the Group of
holding such items, is given below.
Market risk
Market risk arises mainly from uncertainty about future prices of financial
instruments used in the Group's business. It represents the potential loss the
Group might suffer through holding market positions by way of price movements
and movements in exchange rates and interest rates. The Investment Manager
assesses the exposure to market risk when making each investment decision and
these risks are monitored by the Investment Manager on a regular basis and the
Board at quarterly meetings with the Investment Manager.
Market price risk
Market price risks (i.e. changes in market prices other than those arising from
currency risk or interest rate risk) may affect the value of investments.
The Board manages the risks inherent in the investment portfolios by ensuring
full and timely reporting of relevant information from the Investment Manager.
Investment performance is reviewed at each Board meeting.
The Group's exposure to changes in market prices at 30 April on its investments
is as follows:
2016 2015
GBP'000 GBP'000
Fair value through profit or loss investments 45,376 41,681
Sensitivity analysis
A 10% increase in the market value of investments at 30 April 2016 would have
increased net assets by GBP4,538,000 (2015: GBP4,168,000). An equal change in the
opposite direction would have decreased the net assets available to
shareholders by an equal but opposite amount.
Foreign currency risk
All the Group's assets are denominated in Sterling and accordingly the only
currency exposure the Group has is through the trading activities of its
investee companies.
Interest rate risk
Interest rate movements may affect the level of income receivable on cash
deposits. The Group does not currently receive interest on its cash deposits.
The majority of the Group's financial assets are non-interest bearing. As a
result the Group's financial assets are not subject to significant amounts of
risk due to fluctuations in the prevailing levels of market interest rates.
The possible effects on fair value and cash flows that could arise as a result
of changes in interest rates are taken into account when making investment
decisions.
The exposure at 30 April 2016 of financial assets and financial liabilities to
interest rate risk is limited to cash and cash equivalents of GBP29,000 (2015: GBP
489,000). Cash and cash equivalents are all due within one year.
Credit risk
Credit risk is the risk of financial loss to the Group if the contractual party
to a financial instrument fails to meet its contractual obligations.
The carrying amounts of financial assets best represent the maximum credit risk
exposure at the Balance Sheet date.
Listed investments are held by Jarvis Investment Management Limited acting as
the Company's custodian. Bankruptcy or insolvency of the custodian may cause
the Company's rights with respect to securities held by the custodian to be
delayed. The Board monitors the Group's risk by reviewing the custodian's
internal controls reports.
Investment transactions are carried out with a number of brokers whose
creditworthiness is reviewed by the Investment Manager. Transactions are
ordinarily undertaken on a delivery versus payment basis whereby the Company's
custodian bank ensures that the counterparty to any transaction entered into by
the Group has delivered in its obligations before any transfer of cash or
securities away from the Group is completed.
Cash is only held at banks that have been identified by the Board as reputable
and of high credit quality.
The maximum exposure to credit risk as at 30 April 2016 was GBP45,738,000 (2015:
GBP42,448,000). The calculation is based on the Group's credit risk exposure as
at 30 April 2016 and this may not be representative of the year as a whole.
None of the Group's assets are past due or impaired.
Liquidity risk
The majority of the Group's assets are listed securities in small companies,
which can under normal conditions be sold to meet funding commitments if
necessary. They may however be difficult to realise in adverse market
conditions.
Please see notes 15 and 16 for details of liabilities that fall due for payment
in more than one year. All other payables are due in less than one year.
Financial instruments by category
The financial instruments of the Group fall
into the following categories:
30 April 2016 At Loans and Assets at Total
cost receivables fair
value
through
profit or
loss
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per Balance Sheet
Investments - - 45,376 45,376
Trade and other receivables - 333 - 333
Cash and cash equivalents 29 - - 29
Total 29 333 45,376 45,738
Liabilities as per Balance Sheet
Trade and other payables 132 - - 132
Total 132 - - 132
30 April 2015 At Loans and Assets at Total
cost receivables fair
value
through
profit or
loss
Assets as per Balance Sheet GBP'000 GBP'000 GBP'000 GBP'000
Investments - - 41,681 41,681
Trade and other receivables - 278 - 278
Cash and cash equivalents 489 - - 489
Total 489 278 41,681 42,448
Liabilities as per Balance Sheet
Trade and other payables 167 - - 167
Total 167 - - 167
IFRS 7 hierarchy
As required by IFRS 7 the Company is required to classify fair value
measurements using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy consists of
the following three levels:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
An active market is a market in which transactions for the asset or liability
occur with sufficient frequency and volume on an ongoing basis such that quoted
prices reflect prices at which an orderly transaction would take place between
market participants at the measurement date. Quoted prices provided by external
pricing services, brokers and vendors are included in Level 1, if they reflect
actual and regularly occurring market transactions on an arm's length basis.
Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices).
Level 2 inputs include the following:
- quoted prices for similar (i.e. not identical) assets in active markets;
- quoted prices for identical or similar assets or liabilities in markets
that are not active. Characteristics of an inactive market include a
significant decline in the volume and level of trading activity, the available
prices vary significantly over time or among market participants or the prices
are not current;
- inputs other than quoted prices that are observable for the asset (for
example, interest rates and yield curves observable at commonly quoted
intervals); and
- inputs that are derived principally from, or corroborated by, observable
market data by correlation or other means (market-corroborated inputs).
Level 3 - Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a Level 3
measurement. Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors specific to
the asset or liability.
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to investments
actively traded in organised financial markets. Fair value is generally
determined by reference to Stock Exchange quoted market bid prices (or last
traded in respect of SETS) at the close of business on the Balance Sheet date,
without adjustment for transaction costs necessary to realise the asset.
Investments whose values are based on quoted market prices in active markets,
and therefore classified within Level 1, include active listed equities. The
Company does not adjust the quoted price for these investments.
Financial instruments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer quotations or
alternative pricing sources supported by observable inputs are classified
within Level 2.
Investments classified within Level 3 have significant unobservable inputs.
Level 3 instruments include private equity and corporate debt securities. As
observable prices are not available for these securities, the Company has used
valuation techniques to derive the fair value. The Company has no Level 2 or
Level 3 investments (2015: same).
25 CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Group's capital management objectives are:
- to ensure the Group's ability to continue as a going concern;
- to provide an adequate return to shareholders;
- to support the Group's stability and growth;
- to provide capital for the purpose of further investments.
The Group actively and regularly reviews and manages its capital structure to
ensure an optimal capital structure and to maximise equity holder returns,
taking into consideration the future capital requirements of the Group and
capital efficiency, prevailing and projected profitability, projected operating
cash flows and projected strategic investment opportunities. The management
regards capital as total equity and reserves, for capital management purposes.
Shareholder Information
Financial calendar
Group's year end 30 April
Quarterly interim dividends paid July, October, January and April
Special dividend paid July
Annual results announced June
Annual General Meeting September
Group's half year 31 October
Half year results announced December
Share prices and performance information
The Company's Ordinary shares and the Zero Dividend Preference shares issued
through SCZ are listed on the London Stock Exchange Main Market.
The net asset values are announced weekly to the London Stock Exchange and
published monthly via the AIC.
Information about the Group can be obtained on the Chelverton website at
www.chelvertonam.com. Any enquiries can also be e-mailed to
cam@chelvertonam.com.
Share register enquiries
The register for the Ordinary shares and the Zero Dividend Preference shares
are maintained by Share Registrars Limited. In the event of queries regarding
your holding, please contact the Registrar on 01252 821390. Changes of name and
/or address must be notified in writing to the Registrar.
Company Summary
History
The Company was launched on 12 May 1999, raising GBP21.38 million before
expenses, by a placing of 15,000,000 Ordinary shares and, through its former
subsidiary company, Small Companies PLC, 6,250,000 Zero Dividend Preference
shares and 31,260 Preference shares. A further 750,000 Ordinary shares were
issued as a result of a placing for cash on 3 March 2000 and on 26 October 2005
a further 500,000 shares were issued. The subsidiary, Small Companies PLC, was
placed into members' voluntary liquidation on 30 April 2007, following which
the capital entitlements of the Zero Dividend Preference and Preference shares
were repaid.
Group structure
The Company has in issue one class of Ordinary share. In addition, it has a
wholly owned subsidiary, SCZ, through which Zero Dividend Preference shares
have been issued. The new subsidiary was incorporated on 13 July 2012 and has a
capital structure comprising unlisted Ordinary shares and Zero Dividend
Preference shares listed on the Official List and traded on the London Stock
Exchange. SCZ was incorporated specifically for the issue of Zero Dividend
Preference shares. On 28 August 2012, SCZ issued 8,500,000 Zero Dividend
Preference shares at 100p per share and with net proceeds of GBP8.3 million. The
expenses of the placing were borne by the Company. Pursuant to a loan agreement
between SCZ and the Company, SCZ has lent the proceeds of the placing to the
Company. The loan is non-interest bearing and is repayable three business days
before the Zero Dividend Preference share redemption date of 8 January 2018 or,
if required by SCZ, at any time prior to that date in order to repay the Zero
Dividend Preference share entitlement. The funds are to be managed in
accordance with the investment policy of the Company.
A contribution agreement between the Company and SCZ has also been made whereby
the Company will undertake to contribute such funds as will ensure that SCZ
will have in aggregate sufficient assets on 8 January 2018 to satisfy the final
capital entitlement of the Zero Dividend Preference shares.
Total net assets and market capitalisation at year end
As at 30 April 2016, the Company had a market capitalisation of GBP31,528,000
(2015: GBP26,852,000) and total net assets amounted to GBP35,077,000 (2015: GBP
32,349,000).
Management fee
The fee payable to the Investment Manager is 1% of the combined gross assets of
the Group.
Capital structure
Details of share structure and entitlements and voting rights of each class can
be found on page 63.
ISA status
The Company's Ordinary shares are qualifying investments for Individual Savings
Accounts ('ISAs'), as are the Zero Dividend Preference shares of SCZ.
Registered in England
No. 3749536
A member of the Association of Investment Companies
Capital Structure
Small Companies Dividend Trust PLC ('the Company')
Small Companies Dividend Trust PLC was registered on 3 September 2003 with
number 3749536. The Company has in issue one class of Ordinary share. In
addition, it has a wholly owned subsidiary, Small Companies ZDP PLC, which was
registered on 13 July 2012 with number 8142169, through which Zero Dividend
Preference shares have been issued.
Ordinary shares of 25p each ('Ordinary shares') - 16,550,000 in issue
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.
Small Companies ZDP PLC ('SCZ')
Ordinary shares of 100p each ('ordinary shares') - 50,000 in issue (partly paid
up as to 25p each)
The ordinary shares are owned by the Company. References to Ordinary shares
within this Annual Report are to the Ordinary shares of Small Companies
Dividend Trust PLC.
Capital
Following payment of any liabilities and the capital entitlement to the Zero
Dividend Preference shareholders, ordinary shareholders are entitled to any
surplus assets of SCZ.
Voting
Each holder on a show of hands will have one vote and on a poll will have one
vote for each ordinary share held.
Zero Dividend Preference shares of 100p each - 8,500,000 in issue
Dividends
Holders of Zero Dividend Preference shares are not entitled to dividends.
Capital
On a winding up of SCZ, after the satisfaction of prior ranking creditors and
subject to sufficient assets being available, Zero Dividend Preference
shareholders are entitled to an amount equal to 100p share increased daily from
28 August 2012 at such compound rate as will give an entitlement to 136.7p per
share at 8 January 2018.
Voting
Each holder of Zero Dividend Preference shares on a show of hands will have one
vote at meetings where Zero Dividend Preference shareholders are entitled to
vote and on a poll will have one vote for every Zero Dividend Preference share
held.
Holders of Zero Dividend Preference shares are not entitled to attend, speak or
vote at General Meetings unless the business of the meeting includes a
resolution to vary, modify or abrogate the rights attached to the Zero Dividend
Preference shares.
Glossary of Terms
Net asset value ('NAV')
The NAV is shareholders' funds expressed as an amount per individual share.
Shareholders' funds are the total value of all the Company's assets, at current
market value, having deducted all prior charges at their par value (or at their
asset value).
Discount
If the share price of an investment trust is lower than the NAV per share, the
shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium.
Gearing
Gearing is the process whereby changes in the total assets of a company have an
exaggerated effect on the net assets of that company's ordinary shares due to
the presence of borrowing or share classes with a prior ranking entitlement to
capital.
Ongoing charges
The total expenses incurred by a company, including those charged to capital
(excluding performance fee and finance costs and exceptional costs) as a
percentage of average quarterly net assets.
Total return
The combined effect of any dividends paid, together with the rise or fall in
the share price or NAV. Total return statistics enable the investor to make
performance comparisons between trusts with different dividend policies. Any
dividends (after tax) received by a shareholder are assumed to have been
reinvested in either additional shares of the trust at the time the shares go
ex-dividend (the share price total return) or in the assets of the trust at its
NAV per share (the NAV total return).
Directors and Advisers
Directors
Lord Lamont of Lerwick (Chairman)
David Harris
William van Heesewijk
Howard Myles
Investment Manager
Chelverton Asset Management Limited
12b George Street Bath BA1 2EH
Tel: 01225 483030
Secretary and Registered Office
Maitland Administration Services Limited
Springfield Lodge
Colchester Road, Chelmsford Essex CM2 5PW Tel: 01245 398950
Registrar and Transfer Office
Share Registrars Limited
Suite E, First Floor
9 Lion and Lamb Yard
Farnham
Surrey GU9 7LL
Tel: 01252 821390
www.shareregistrars.uk.com
Auditors
Hazlewoods LLP
Windsor House, Bayshill Road
Cheltenham GL50 3AT
Custodian
Jarvis Investment Management Limited
78 Mount Ephraim Tunbridge Wells Kent TN4 8BS
Small Companies 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 stockbroker or other independent adviser
authorised under the Financial Services and Markets Act 2000 immediately.
If you have sold or otherwise transferred all of your shares in Small Companies
Dividend Trust PLC, please forward this document as soon as possible to the
purchaser or transferee or to the stockbroker, bank or other agent through whom
the sale or transfer was effected for transmission to the purchaser or
transferee.
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the Company will be
held at 11.00 am on Thursday 8 September 2016 at the offices of Chelverton
Asset Management, 3rd Floor, 20 Ironmonger Lane, London EC2V 8EP for the
following purposes:
Ordinary Business - Resolutions 1 to 6 will be proposed as Ordinary Resolutions
1 To receive the Strategic Report, Directors' Report and the audited financial
statements for the year ended 30 April 2016.
2 To receive and approve the Directors' Remuneration Report for the year ended
30 April 2016.
3 To re-elect Lord Lamont as a Director.
4 To re-elect Mr Harris as a Director.
5 To re-elect Mr van Heesewijk as a Director.
6 To re-appoint Hazlewoods LLP as Auditor and to authorise the Directors to
determine their remuneration.
Special Business
To consider and, if thought fit, to pass the following Resolutions of which
Resolution 7 will be proposed as an Ordinary Resolution and Resolutions 8 to 10
will be proposed as Special Resolutions.
7 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 GBP1,379,167, being one-third of the issued Ordinary share capital as at
30 April 2016, 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 2017, 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.
8 THAT, subject to the passing of Resolution 7 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 7 above
as if Section 561(1) of the Act did not apply to any such allotment, provided
that this power shall be limited to:
a) the allotment of equity securities in connection with a rights
issue, open offer or any other offer in favour of Ordinary shareholders where
the equity securities respectively attributable to the interests of all
Ordinary shareholders are proportionate (as nearly as may be) to the respective
number of Ordinary shares held by them subject to such exclusions or other
arrangements as the Directors may deem fit to deal with fractional
entitlements, record dates, legal, regulatory or practical problems arising
under the laws of any overseas territory or the requirements of any regulatory
authority or any stock exchange; and
b) to the allotment (otherwise than pursuant to paragraph (a) above)
of equity securities up to an aggregate nominal amount of GBP413,750, being 10%
of the issued Ordinary share capital as at 30 April 2016 and shall expire at
the conclusion of the Annual General Meeting of the Company to be held in 2017,
or 15 months from the passing of this Resolution, whichever is earlier, save
that the Company may before such expiry make offers, agreements or arrangements
which would or might require equity securities to be allotted after such expiry
and so that the Directors of the Company may allot equity securities in
pursuance of such offers, agreements or arrangements as if the power conferred
hereby had not expired.
9 THAT the Company is hereby generally and unconditionally authorised in
accordance with Section 701 of the Act to make market purchases (within the
meaning of Section 693(4) of the Act) of Ordinary shares of 25p each in the
capital of the Company ('Ordinary shares') for cancellation or for placing into
Treasury provided that:
a) the maximum aggregate number of Ordinary shares authorised to be
acquired is 2,480,845, or if less, 14.99% of the Ordinary shares in issue and
in circulation immediately following the passing of this Resolution;
b) the minimum price which may be paid for each Ordinary share is 25p
(exclusive of expenses);
c) the maximum price which may be paid for each Ordinary share is, in
respect of a share contracted to be purchased on any day, an amount which shall
not be more than the higher of (i) 5% above the average of the middle market
quotations (as derived from the Daily Official List of the London Stock
Exchange) of the Ordinary shares for the five business days immediately
preceding the date on which the Ordinary share is purchased, and (ii) the
higher of the price of the last independent trade and the highest current
independent bid on the London Stock Exchange;
d) this authority will (unless renewed) expire at the conclusion of
the next Annual General Meeting of the Company or, if earlier, 15 months from
the date on which this Resolution is passed; and
e) any Ordinary shares bought back under the authority hereby granted
may, at the discretion of the Directors, be cancelled or held in treasury and
if held in treasury may be cancelled at the discretion of the Directors.
10 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
Maitland Administration Services Limited
Secretary
20 July 2016
Registered office:
Springfield Lodge
Colchester Road
Chelmsford CM2 5PW
Explanatory notes to the notice of meeting
Ordinary shareholders have the right to attend, speak and vote at the
forthcoming Annual General Meeting or at any adjournment(s) thereof. In order
to exercise all or any of these rights you should read the following
explanatory notes to the business of the Annual General Meeting.
Notes
1. A member entitled to attend, vote and speak at this meeting may appoint one
or more persons as his/her proxy to attend, speak and vote on his/her behalf at
the meeting. A proxy need not be a member of the Company. If multiple proxies
are appointed they must not be appointed in respect of the same shares. To be
effective, the enclosed form of proxy, together with any power of attorney or
other authority under which it is signed or a certified copy thereof, should be
lodged at the office of the Company's Registrar, Share Registrars Limited,
Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL not later
than 48 hours before the time of the meeting. The appointment of a proxy will
not prevent a member from attending the meeting and voting and speaking in
person if he/she so wishes. A member present in person or by proxy shall have
one vote on a show of hands and on a poll shall have one vote for every
Ordinary share of which he/she is the holder.
In the case of joint holders of a share, the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
vote or votes of the other joint holder or holders, and seniority shall be
determined by the order in which the names of the holders stand in the
register.
Any question relevant to the business of the Annual General Meeting may be
asked at the meeting by anyone permitted to speak at the meeting. You may
alternatively submit your question in advance by letter addressed to the
Company Secretary at the registered office.
2. A person to whom this notice is sent who is a person nominated under Section
146 of the Companies Act 2006 to enjoy information rights (a 'Nominated
Person') may, under an agreement between him/her and the shareholder by whom he
/she was nominated, have a right to be appointed (or to have someone else
appointed) as a proxy for the Annual General Meeting. If a Nominated Person has
no such proxy appointment right or does not wish to exercise it, he/she may,
under any such agreement, have a right to give instructions to the shareholder
as to the exercise of voting rights.
3. The statements of the rights of members in relation to the appointment of
proxies in Note 1 above do not apply to a Nominated Person. The rights
described in that Note can only be exercised by registered members of the
Company.
4. As at 13 July 2016 (being the last business day prior to the publication of
this notice) the Company's issued share capital amounted to 16,550,000 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 6 September 2016 (or
in the event that the meeting is adjourned, only those Ordinary shareholders
registered on the Register of Members of the Company as at 11.00 am on the day
which is 48 hours prior to the adjourned meeting) shall be entitled to attend
in person or by proxy and vote at the Annual General Meeting in respect of the
number of Ordinary shares registered in their name at that time. Changes to
entries on the Register of Members after that time shall be disregarded in
determining the rights of any person to attend or vote at the meeting.
6. In accordance with Section 319A of the Companies Act 2006, the Company must
cause any question relating to the business being dealt with at the meeting put
by a member attending the meeting to be answered. No such answer need be given
if:
a) to do so would:
i) interfere unduly with the preparation for the meeting, or
ii) involve the disclosure of confidential information;
b) the answer has already been given on a website in the form of an answer to a
question; or
c) it is undesirable in the interests of the Company or the good order of the
meeting that the question be answered.
7. A person authorised by a corporation is entitled to exercise (on behalf of
the corporation) the same powers as the corporation could exercise if it were
an individual member of the Company (provided, in the case of multiple
corporate representatives of the same corporate shareholder, they are appointed
in respect of different shares owned by the corporate shareholder or, if they
are appointed in respect of those same shares, they vote those shares in the
same way). To be able to attend and vote at the meeting, corporate
representatives will be required to produce prior to their entry to the meeting
evidence satisfactory to the Company of their appointment. Corporate
shareholders can also appoint one or more proxies in accordance with Note 1. On
a vote on a Resolution on a show of hands, each authorised person has the same
voting rights to which the corporation would be entitled.On a vote on a
Resolution on a poll, if more than one authorised person purports to exercise a
power in respect of the same shares:
a) if they purport to exercise the power in the same way as each
other, the power is treated as exercised in that way;
b) if they do not purport to exercise the power in the same way as
each other, the power is treated as not exercised.
8. CREST members who wish to appoint a proxy or proxies by utilising the
CREST electronic proxy appointment service may do so for this meeting by
following the procedures described in the CREST Manual. CREST personal members
or other CREST sponsored members, and those CREST members who have appointed a
voting service provider(s), should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate action on their
behalf.
In order for a proxy appointment or instruction made by means of CREST to be
valid, the appropriate CREST message (a 'CREST Proxy Instruction') must be
properly authenticated in accordance with Euroclear's specifications and must
contain the information required for such instructions, as described in the
CREST Manual. The message, in order to be valid, must be transmitted so as to
be received by the Company's agent (ID 7RA36) by the latest time for receipt of
proxy appointments specified in Note 1 above. For this purpose, the time of
receipt will be taken to be the time (as determined by the timestamp applied to
the message by the CREST Applications Host) from which the Company's agent is
able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST. After this time, any change of instructions to proxies appointed through
CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service
providers, should note that Euroclear does not make available special
procedures in CREST for any particular messages. Normal system timings and
limitations will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take
(or, if the CREST member is a CREST personal member or sponsored member or has
appointed a voting service provider(s), to procure that his CREST sponsor or
voting service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any particular
time. In this connection, CREST members and, where applicable, their CREST
sponsors or voting service providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the CREST
system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances
set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations
2001.
9. Shareholders should note that it is possible that, pursuant to
requests made by shareholders of the Company under Section 527 of the Companies
Act 2006, the Company may be required to publish on a website a statement
setting out any matter relating to: (i) the audit of the Company's accounts
(including the auditor's report and the conduct of the audit) that are to be
laid before the Annual General Meeting; or (ii) any circumstance connected with
an auditor of the Company ceasing to hold office since the previous meeting at
which annual accounts and reports were laid in accordance with Section 437 of
the Companies Act 2006. The Company may not require the shareholders requesting
any such website publication to pay its expenses in complying with Sections 527
or 528 of the Companies Act 2006. Where the Company is required to place a
statement on a website under Section 527 of the Companies Act 2006, it must
forward the statement to the Company's auditor not later than the time when it
makes the statement available on the website. The business which may be dealt
with at the Annual General Meeting includes any statement that the Company has
been required under Section 527 of the Companies Act 2006 to publish on a
website.
10. Members satisfying the thresholds in Section 338 of the Companies Act
2006 may require the Company to give, to members of the Company entitled to
receive notice of the Annual General Meeting, notice of a Resolution which
those members intend to move (and which may properly be moved) at the Annual
General Meeting. A Resolution may properly be moved at the Annual General
Meeting unless (i) it would, if passed, be ineffective (whether by reason of
any inconsistency with any enactment or the Company's constitution or
otherwise); (ii) it is defamatory of any person; or (iii) it is frivolous or
vexatious. A request made pursuant to this right may be in hard copy or
electronic form, must identify the Resolution of which notice is to be given,
must be authenticated by the person(s) making it and must be received by the
Company not later than six weeks before the date of the Annual General Meeting.
11. Members satisfying the thresholds in Section 338A of the Companies Act
2006 may request the Company to include in the business to be dealt with at the
Annual General Meeting any matter (other than a proposed Resolution) which may
properly be included in the business at the Annual General Meeting. A matter
may properly be included in the business at the Annual General Meeting unless
(i) it is defamatory of any person or (ii) it is frivolous or vexatious. A
request made pursuant to this right may be in hard copy or electronic form,
must identify grounds for the request, must be authenticated by the person(s)
making it and must be received by the Company not later than six weeks before
the date of the Annual General Meeting.
12. The Annual Report incorporating this notice of Annual General Meeting
and, if applicable, any members' statements, members' Resolutions or members'
matters of business received by the Company after the date of this notice will
be available on the Company's website www.chelvertonam.com.
13. None of the Directors has a contract of service with the Company.
END
END
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