SDV 2025 ZDP PLC SDV 2025 ZDP PLC: Full Year Results for the year ended 30 April 2021
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SDV 2025 ZDP PLC (SDVP)
SDV 2025 ZDP plc Annual Report and Accounts for the year ended 30 April 2021
This Report and Accounts should be read in conjunction with the Report and Accounts of Chelverton UK Dividend Trust PLC ("SDV").
The financial information set out below does not constitute the Company's statutory accounts for the year ended 30 April 2021. The financial information for 2021 is derived from the statutory accounts for that year. The auditors, Hazlewoods LLP, have reported on the 2021 accounts. Their report was unqualified and did not include a reference to any matters to which the auditors draw attention by way of emphasis without qualifying their report. The financial information for 2020 is derived from the statutory accounts for that year. The following text is copied from the Annual Report & Accounts.
Strategic Report
The Strategic Report has been prepared in accordance with Section 414A of the Companies Act 2006 (the "Act"). Its purpose is to inform members of the Company and help them understand how the Directors have performed their duty under Section 172 of the Act to promote the success of the Company. The Directors are conscious of their duties to promote the success of the Company under Section 172 of the Companies Act 2006, for the benefit of the shareholders, giving careful consideration to wider stakeholders' interests and the environment in which it operates. The Board recognises that its decisions are material to the Company but also the Company's key stakeholders. Further details of how the Directors have performed their duty under Section 172 is contained within the Annual Report of SDV. A copy of the full SDV Annual Report can be found on the Investment Manager's website, www.chelvertonam.com or is available for inspection at the National Storage Mechanism ("NSM") which is situated at www.morningstar.co.uk/uk/nsm.
Chairman's Statement
The Chairman's report on the Group's activities for the year ended 30 April 2021 is contained within the Annual Report of SDV. A copy of the full SDV Annual Report can be found on the Investment Manager's website, www.chelvertonam.com or is available for inspection at the National Storage Mechanism ("NSM") which is situated at www.morningstar.co.uk/uk/nsm.
Howard Myles Chairman 24 June 2021
Investment Manager's Report
For details of the Group's activities, development and performance during the year to 30 April 2021 shareholders should refer to the Annual Report of SDV, which can be found on the Investment Manager's website, www.chelvertonam.com or is available for inspection at the NSM, which is situated at www.morningstar.co.uk/uk/nsm.
David Horner Chelverton Asset Management Limited 24 June 2021
Other Statutory Information
Company Activities, Strategy & Business Model
SDV 2025 ZDP plc ("SDVP" or the "Company") was incorporated on 25 October 2017 as a wholly owned subsidiary of SDV, together referred to as the "Group". SDVP was especially formed for the issuing of Zero Dividend Preference ("ZDP") shares. It raised £10,980,000 before expenses on 8 January 2018 by the conversion of ZDP's from Chelverton Small Companies ZDP PLC ("SDVP") of 10,977,747 ZDP shares and £1,802,000 before expenses on 8 January 2018 by a placing of 1,802,336 ZDP shares, which are listed on the UK Official List and admitted to trading on the London Stock Exchange. Between 11 April and 15 May 2018, the Company placed an additional 1,719,917 shares to raise a total of £1,775,500. Further detail is given in the Capital Structure section below.
Pursuant to a contribution agreement between SDVP and SDV, SDVP has lent the proceeds of ZDP share placings to SDV. The loan is non-interest bearing and is repayable three business days before the ZDP share redemption date of 30 April 2025, or if required by SDVP, at any time prior to that date in order to repay the ZDP share entitlement. The funds are to be managed in accordance with the investment policy of SDV.
SDVP investment objective & policy
The objective of SDVP is to provide the final capital entitlement of the ZDP shares to the holders of the ZDP shares at the redemption date of 30 April 2025. The proceeds of the placing of the ZDP shares have been lent to SDV under a contribution agreement and the funds are managed in accordance with the investment policy of SDV, which is as follows (as extracted from the Annual Report of SDV):
Capital Structure & Contribution Agreement
SDVP has a capital structure comprising unlisted Ordinary shares and ZDP shares listed on the Official List and traded on the London Stock Exchange by way of a standard listing. SDVP is a wholly owned subsidiary of SDV which is a closed-ended investment company. On 8 January 2018, 10,977,747 ZDP shares were converted from SDVP at 100p per share, and 1,802,336 ZDP shares were placed at 100p per share and this raised a net total of £12.4 million.
On 11 April 2018, SDVP placed an additional 1,419,917 ZDP shares at 103p per share and this raised a net total of £1.4 million.
On 10 May 2018, SDVP placed an additional 100,000 ZDP shares at 104p per share and this raised a net total of £104,500.
On 15 May 2018, SDVP placed an additional 200,000 ZDP shares at 105p per share and this raised a net total of £208,500.
A contribution agreement between SDV and SDVP has also been made whereby SDV will undertake to contribute such funds as would ensure that SDVP will have in aggregate sufficient assets on 30 April 2025 to satisfy the final capital entitlement of the ZDP shares of 133.18p per share, being £19,311,100 in total. This assumes that the parent company and the Company have sufficient assets as at 30 April 2025 to repay the ZDP shares. To this extent the Company is reliant upon the investment performance of the parent company and subject to the principal risks as set out in the Annual Report of SDV.
To protect the interests of ZDP shareholders, the contribution agreement contains a restriction on the Group incurring any other borrowings (other than short-term indebtedness in the normal course of business, such as when settling share transactions) except where such borrowings are for the purpose of paying the final capital entitlement due to holders of ZDP shares.
The value of the Group's net assets would have to fall by 69.7% (2020: 53.9%) for it to be unable to meet the full capital repayment entitlement of the ZDP shares on the scheduled repayment date of 30 April 2025.
Performance
The Board reviews performance by reference to a number of key performance indicators ("KPIs") and considers that the most relevant KPI is that which communicates the financial performance and strength of the Company as a whole being:
This is set out below:
Further KPIs for the parent company can be found in SDV's Annual Report.
Principal Risks and Uncertainties Facing the Company
Due to the Company's dependence on SDV to repay the loan and provide a contribution to meet the capital entitlement of the ZDP shareholders other risks faced by the Company are considered to be the same as for SDV and these are defined in note 23 of SDV's Annual Report.
Employees, Environmental, Human Rights and Community Issues
The Board recognises the requirement under Section 414C of the Act to detail information about employees, environmental, human rights and community issues, including information about any policies it had in relation to these matters and the effectiveness of these policies. The Company has no employees and the Board is comprised entirely of non-executive Directors. Day-to-day management of the Company and SDV is delegated to the Investment Manager (details of the respective management agreements are set out in the Director's Report of SDV's Annual Report). The Company itself has no environmental, human rights or community policies. However in carrying out its activities in relationships with suppliers, by way of SDV, the Company aims to conduct itself responsibly, ethically and fairly.
Culture and values
The Company's values are to act responsibly, ethically and fairly at all times. The Company's culture is driven by its values and is focused on providing the final capital entitlement of the ZDP shares to the holders of the ZDP shares at the redemption date of 30 April 2025, as set out on page 3. As the Company has no employees, its culture is represented by the values, conduct and performance of the Board, the Investment Manager and its key service providers.
Current and Future Developments
The current and future developments of the Company can be reviewed as part of the Group's activities for the year ended 30 April 2021 by reference to the Annual Report and financial statements of SDV.
Dividends
The Directors do not recommend the payment of a final dividend in respect of the year ended 30 April 2021.
Diversity and succession planning
The Board of Directors of the Company comprised three male Directors during the year to 30 April 2021. The Directors are satisfied that the Board currently contains members with an appropriate breadth of skills and experience and considers succession planning on at least an annual basis. No new appointments to the Board have been made or are contemplated at present. The key criteria for the appointment of new Directors will be the skills and experience of candidates having regard also to the benefits of diversity in the interests of shareholder value. In relation to future appointments the Board will seek to consider a wide range of candidates with due regard to diversity.
On behalf of the Board
Howard Myles 24 June 2021
Board of Directors
The Directors are:
Howard Myles* was a partner in Ernst & Young from 2001 to 2007 and was responsible for the Investment Funds Corporate Advisory Team. He was previously with UBS Warburg from 1987 to 2001. Mr Myles began his career in stockbroking in 1971 as an equity salesman and in 1975 joined Touche Ross & Co, where he qualified as a chartered accountant. In 1978 he joined W Greenwell & Co in the corporate broking team and in 1987 moved to SG Warburg Securities, where he was involved in a wide range of commercial and industrial transactions in addition to leading Warburg's corporate finance function for investment funds. He is now a non-executive director of Baker Steel Resources Trust Limited, Aberdeen Latin American Income Fund Limited and BBGI SICAV S.A., having stepped down from the Board of JPMorgan Brazil Investment Trust PLC in September 2020.
Mr Myles was appointed to the Board of SDVP on 25 October 2017 and has been a director of the parent company, SDV since 2011. He is Audit Committee Chairman of SDV.
William van Heesewijk began his career with Lloyds Bank International in 1981, working for both the merchant banking and investment management arms. He has been involved in the investment trust industry since 1987 in various capacities. During his tenure with Fidelity Investments International, Gartmore Investment Management PLC, BFS Investments PLC and Chelverton Asset Management Limited, he managed several launches of onshore and offshore investment funds, including a number of roll-overs and reconstructions involving complex capital structures and across several geographic regions. His roles involved business development, project management, sales compliance and marketing. He was a member of the Association of Investment Companies Managers forum.
Mr van Heesewijk was appointed to the Board of SDVP on 25 October 2017 and has been a director of the parent company, SDV since 2005.
Andrew Watkins* has a wealth of experience in the financial services industry working in senior positions at Kleinwort Benson, Flemings, Jupiter and most recently as Head of Client Relations, Sales & Marketing for Investment Trusts at Invesco Perpetual, retiring in 2017. He is currently a non-executive director and chairman of Ashoka India Equity Investment Trust plc and a non-executive director of Baillie Gifford European Growth Trust plc and BMO UK High Income Trust plc.
Mr Watkins was appointed to the Board of SDVP on 6 September 2018 and also been a director of the parent company, SDV from the same date.
* Independent of the Investment Manager
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 30 April 2021, Chelverton had total funds under management of approximately £1.8 billion including two investment trust companies and three OEICs. The fund management team comprises David Horner, David Taylor, Oliver Knott, James Baker and Edward Booth.
Chelverton is authorised and regulated by the FCA.
Administrator and Corporate Secretary: Maitland Administration Services Limited Maitland Administration Services Limited provides company secretarial and administrative services for the Group. The Maitland group provides administration and regulatory oversight solutions for a wide range of investment companies.
Registrar: Share Registrars Limited Share Registrars Limited is a CREST registrar established in 2004. The Company provides registration services to over 200 client companies.
Directors' Report
The Directors present their Report and the financial statements of the Company for the year ended 30 April 2021. The comparative period covers the year to 30 April 2020. The Company's registered number is 11031268.
Directors Directors who served during the year ended 30 April 2021, all of whom are non-executive were as follows:
H Myles W van Heesewijk A Watkins
Biographical details of the Directors are given on page 6.
Under the Company's Articles of Association, Directors are required to retire at the first Annual General Meeting ("AGM") following their appointment, and thereafter at three-yearly intervals. At least one Director must retire at each annual general meeting. The Directors to retire by rotation are first, a Director who wishes to retire and offer himself for reappointment and, second, those Directors who have been longest in office since their last appointment or reappointment. However, in accordance with the Articles of Association and prevailing corporate governance best practice, all Directors will stand for re-election at the 2021 AGM.
None of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements during the year. None of the Directors has or has had any interest in any transaction which is or was unusual in its nature or conditions or significant to the business of the Company, and which was effected by the Company during the current financial year.
There have been no loans or guarantees from the Company to any Director at any time during the year or thereafter.
The Company's Articles of Association provide the Directors of the Company, 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 indemnities in place.
Formal performance evaluation of the Directors and the Board has been carried out and the Board considers that all of the Directors contribute effectively and have the skills and experience relevant to the future leadership and direction of the Company.
The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association.
Corporate Governance A formal statement on Corporate Governance is set out on page 10 below.
Share Capital At the date of this report, the issued share capital of the Company comprised of 50,000 Ordinary shares and 14,500,000 ZDP shares.
50,000 Ordinary shares of £1, each partly paid as to 25p (and each of which have been issued to SDV), represent 0.35% of the total share capital. Holders of Ordinary shares are entitled to receive notice of, attend and vote at General Meetings of the Company. Ordinary shares of the Company are not admitted to trading on a regulated market.
Share Capital (continued) 12,780,083 ZDP shares of £1 each were issued on 8 January 2018, pursuant to the placing ZDP shares represent 99.65% of the total share capital. 1,419,917 additional ZDP shares for a total consideration of £1.03 each were issued on 11 April 2018. 300,000 ZDP shares were issued in May 2018, and were issued at a premium for a total consideration of 104.50p each.
Holders of ZDP shares are entitled to receive notice of, attend and vote at those General Meetings where ZDP shareholders are entitled to vote. They are not entitled to attend or vote at any General Meeting of the Company unless the business includes any resolution to vary, modify or abrogate any of the special rights attached to the ZDP shares.
Shareholders' funds and market capitalisation At 30 April 2021 the Company had a market capitalisation of £16,820,000 and total net assets amounted to £13,000.
ISA status The ZDP shares are eligible for inclusion in ISAs.
Management agreements The Group's assets are managed by Chelverton under an agreement ('the Investment Management Agreement') dated 30 April 2006 (effective from 1 December 2005) with the parent company. 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 Group.
These fees are met entirely by the parent company.
The Investment Management Agreement may be terminated by twelve 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 2015, 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.
Management fee The management fee for the Group is charged to and paid in full by SDV.
Company Information
Viability Statement The Board reviews the performance and progress of the Company over various time periods and uses these assessments, regular 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 until the maturity of the ZDPs on 30 April 2025 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 this time period.
The Board has reviewed the viability statement of SDV and has assessed that SDV has the necessary financial strength to fulfil the obligations to SDVP under the contribution agreement. SDV has a liquid investment portfolio invested predominantly in readily realisable smaller and mid capitalised companies.
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.
Going concern The Company has adopted the going concern basis in preparing the financial statements consistent with the parent company. The parent company has adequate financial resources to ensure SDVP will have in aggregate sufficient assets to satisfy the accrued capital entitlement and future capital entitlement of the ZDP shares.
Global Greenhouse Gas Emissions The Company has no greenhouse gas emissions to report from its operations, nor does it have any responsibility for any other emission-producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.
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 Company's affairs.
As set out in the Prospectus dated 24 November 2017, SDVP, as a company with a standard listing, is not required to comply with the UK Corporate Governance Code and does not intend to do so. In the Directors' opinion, the interests of SDVP and SDVP shareholders are adequately covered by the governance procedures applicable to SDV. For example SDV's Audit Committee considers the financial reporting procedures and oversees the internal control and risk management systems for the Group as a whole and the Directors see no benefit in convening a separate Audit Committee for SDVP.
Auditor The Auditor, Hazlewoods LLP, has indicated their willingness to continue in office and resolutions proposing their re-appointment and authorising the Directors to determine their remuneration for the ensuing year will be submitted at the forthcoming Annual General Meeting on 9 September 2021.
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 Auditors are 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. The Directors consider that the accounts taken as a whole are fair, balanced and understandable.
Annual General Meeting A formal Notice convening the Annual General Meeting to be held on 9 September 2021 can be found on page 30.
On behalf of the Board
Howard Myles Chairman
24 June 2021
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) (Amendments) Regulations 2013. Ordinary resolutions for the approval of this report and the Directors' Remuneration Policy shall be put to shareholders at the forthcoming AGM.
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 14 to 18.
Report from the Company Chairman As set out in the Directors' Report, the Company has a standard listing and is not required to comply with the UK Corporate Governance Code and does not intend to do so as a matter of course. However the Board notes the expectations of the 2018 version of the code, to which the majority of the Board's governance arrangements are aligned. The Board of the SDV considers the Directors' remuneration for the Group as a whole.
Directors' Remuneration Policy The Remuneration Policy for the Company is that no fees are payable to the Directors in connection with their duties to SDVP. An Ordinary resolution will be put to shareholders to approve this Policy at the next appropriate AGM. It is intended that 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. Accordingly, a resolution to approve the Remuneration Policy will be considered at the AGM in September 2023.
Directors are also 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.
The Directors do receive fees relating to their duties to the parent company, SDV. This policy will continue for future years and is set out in full in the Directors' Remuneration Report of SDV.
Directors' service contracts None of the Directors has a contract of service with the Company or the parent company, nor has there been any contract or arrangement between the Company and any Director at any time during the year. The terms of their appointment provide that a Director shall retire and be subject to re-election at the first AGM after their appointment, and at least every three years after that. A Director's appointment can be terminated in accordance with the Articles and without compensation.
Directors' emoluments for the year (audited) No fees are payable to the Directors regarding their duties to SDVP.
Directors' beneficial and family interests (audited)
The Directors' interests in the shares of the parent company are shown in the Annual Report of SDV.
Your Company's performance The objective of SDVP is to provide the accrued capital entitlement to the ZDP shareholders. The Company has lent all of its assets to SDV and therefore the performance of the Company is best reflected by looking at the performance of SDV. The Directors' remuneration report within the Annual Report of SDV contains a graph comparing the total return (assuming all dividends are reinvested) to SDV Ordinary shareholders, compared to the total shareholder return of the MSCI UK Small Cap Index. A copy of SDV's Annual Report can be found on the Investment Manager's website www.chelvertonam.com or is available for inspection at the NSM, which is situated at www.morningstar.co.uk/uk/nsm.
There has been no demonstration of relative importance of spend on pay for the Company as no remuneration is payable to Directors.
Approval The Directors' Remuneration Report was approved by the Board on 24 June 2021.
On behalf of the Board of Directors
Howard Myles Chairman 24 June 2021
Statement of Directors' Responsibilities in respect of the Annual Report and the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the EU in conformity with the requirements of the Companies Act 2006 and applicable law.
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 Company for that period.
In preparing the Company's financial statements, the Directors are required to:
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Company's financial statements comply with the Companies Act 2006 . They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Directors' Report and other information included in the Annual Report is prepared in accordance with applicable company law. They are also responsible for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.
The Directors are responsible for the maintenance and integrity of the corporate and financial information relating to the Company on the Investment Manager's website. Legislation in the UK governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.
The Directors confirm that, to the best of their knowledge and belief:
On behalf of the Board of Directors Howard Myles Chairman 24 June 2021
Independent auditor's report to the members of SDV 2025 ZDP plc
Opinion In our opinion, the financial statements:
* give a true and fair view of the state of the Company's affairs as at 30 April 2021 and of the Company's profit for the year then ended; * have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards ("IFRSs") as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board ("IASB);
We have audited the financial statements of SDV 2025 ZDP plc (the 'Company') for the year ended 30 April 2021, which comprise the Statement of Comprehensive Income, the Statement of Changes in Net Equity, the Balance Sheet and the related notes, including a summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the European Union and IFRSs as issued by the IASB.
Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our audit procedures to evaluate the directors' assessment of the company's ability to continue to adopt the going concern basis of accounting included but were not limited to:
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
In relation to the entities reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors' statement in the financial statements about whether the director's considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Our approach to the audit Our audit approach is based on a thorough understanding of the company's activities and is risk-based. The maintenance of the company'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 by the company 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.
Our approach to the audit is also based on the key audit matters identified. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The key audit matter identified was recoverability of the inter-company loan. Revenue recognition and management override of controls are always deemed risks in any audit. This is not a complete list of all risks identified by our audit.
Our application of materiality We apply the concept of materiality in planning and performing our audit, in evaluating the effect of any identified misstatements and in forming our opinion. For the purpose of determining whether the financial statements are free from material misstatement, we define materiality as the magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. We also determine a level of performance materiality, which we use to determine the extent of testing needed, to reduce to an appropriately low-level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality for the financial statements as a whole.
We established materiality for the financial statements as a whole to be £165,000, which is 1% of the value of the Company's gross assets. We agreed with the Audit Committee that we would report all differences in excess of 5% of materiality as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified during the course of assessing the overall presentation of the financial statements.
Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006 In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
Matters on which we are required to report by exception In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
Responsibilities of Directors As explained more fully in the Directors' responsibilities statement, set out on page 13, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
Based on our understanding of the group and the parent company and its activities, we identified that the principal risks of non-compliance with laws and regulations related to UK tax legislation, money laundering, and the Listing Rules, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006.
We evaluated the directors' and management's incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls) and determined that the principal risks were related to posting manual journal entries to manipulate financial performance, management bias through judgements and assumptions and significant one-off or unusual transactions.
Our audit procedures were designed to respond to those identified risks, including non-compliance with laws and regulations (irregularities) and fraud that are material to the financial statements. Our audit procedures included but were not limited to:
Our audit procedures in relation to fraud included but were not limited to:
We consider that our procedures are sufficient to detect irregularities, including fraud, although they are not designed specifically for the detection of irregularities. The primary responsibility for the prevention and detection of irregularities including fraud rests with both those charged with governance and management. As with any audit, there remains a risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal controls. The risks of material misstatement that had the greatest effect on our audit, including fraud, are discussed under "Audit Approach" within this report.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Other matters which we are required to address We were appointed by the Board on 29 May 2018 to audit the financial statements for the year ending 30 April 2021. Our total uninterrupted period of engagement is 4 years, covering the year ending 30 April 2021.
The non-audit services prohibited by the FRC's Ethical Standard were not provided to the Company and we remain independent of the Company in conducting our audit.
Our audit opinion is consistent with the additional report to the Board.
Use of this report This report is made solely to the Company's members, as a body, in accordance with chapter 3 of part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Ryan Hancock Senior Statutory Auditor For and on behalf of Hazlewoods LLP Statutory Auditor Cheltenham Date 24 June 2021
Statement of Comprehensive Income for the year ended 30 April 2021
The total column of this statement is the Statement of Comprehensive Income of the Company, prepared in accordance with IFRSs, as adopted by the EU. All revenue and capital return columns in the above statement derive from continuing operations. No operations were acquired or discontinued during the year. All of the net return for the year is attributable to the shareholders of the Company. The supplementary revenue and capital columns are presented for information purposes as recommended by the Statement of Recommended Practice issued by the AIC.
The notes on pages 22 to 27 form part of these financial statements.
Statement of Changes in Net Equity for the year ended 30 April 2021
The notes on pages 22 to 27 form part of these financial statements.
Balance Sheet as at 30 April 2021
The notes on pages 22 to 27 form part of these financial statements.
These financial statements were approved by the Board of SDV 2025 ZDP PLC and authorised for issue on 24 June 2021 and were signed on behalf of the Company by:
Howard Myles, Chairman 24 June 2021
Company Registered No: 11031268
Notes to the Financial Statements as at 30 April 2021
1. General information
SDVP is a public company incorporated and registered in England and Wales on 25 October 2017 with limited liability under the Companies Act 2006. All of its Ordinary shares are held by SDV. It is not regulated by the Financial Conduct Authority or any commission.
The financial information of the Company for the year ended 30 April 2021 has also been consolidated into the results of SDV.
2. Accounting policies
Basis of preparation The financial statements of the Company have been prepared in conformity with IFRSs issued by the International Accounting Standards Board (as adopted by the United Kingdom), and Interpretations issued by the International Financial Reporting Interpretations Committee, 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 Company There are no amendments to standards effective this year, being relevant and applicable to the Company.
Critical accounting judgments and uses of estimation
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimate and assumptions that affect the application of policies and the amounts reported in the Balance Sheet and the Statement of Comprehensive Income. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimate are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future period if the revision affects both current and future periods. There were no significant accounting estimates or significant judgments in the current year.
Convention The financial statements are presented in Sterling, rounded to the nearest £'000. The financial statements have been prepared on a going concern basis. Where presentational guidance set out in the Statement of Recommended Practice regarding the 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('SORP'), issued by the Association of Investment Companies (dated April 2021) is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a consistent basis compliant with the recommendations of the SORP.
Segmental reporting The Company does not engage in any business activities from which it can earn revenues and therefore segmental reporting does not apply.
2. Accounting policies (continued)
Loans and receivables The Company holds a non-interest bearing secured loan in SDV. Under IAS 39 'Financial Instruments: Recognition and Measurement' the loan is carried at amortised cost using the effective interest method. Amortised cost represents the initial cost of the loan plus a proportion of the expected surplus on redemption. The expected surplus on redemption is allocated to capital at a constant rate over the life of the loan.
Expenses All operating expenses (including the auditors remuneration) of the Company are borne by SDV.
ZDP shares ZDP shares issued by the Company are treated as a liability under IAS 32 'Financial Instruments: Disclosure and Presentation', and are shown in the Balance Sheet at their redemption value at the Balance Sheet date. The appropriations in respect of the ZDP shares necessary to increase the Company's liabilities to the redemption values are allocated to capital in the Statement of Comprehensive Income. This treatment reflects the Board's long-term expectations that the entitlements of the ZDP shareholders will be satisfied out of gains arising on SDV investments held primarily for capital growth.
Cash flow statementThe Company is a wholly-owned subsidiary of SDV and the cash flows of the Company are included in the consolidated cash flow statement of the parent undertaking. During the prior period the receipt of loan funding from the issue of ZDP shares was received directly by SDV.
There were no cash flows during the year ended 30 April 2021 therefore no cash flow statement is presented within the financial statements. TaxationThere is no charge to UK income taxation as the Company does not have any income. There are no deferred tax assets in respect of unrelieved excess expenses as all expenses are borne by SDV.
3. Directors' remuneration/Management fee
The Directors and Manager are remunerated by SDV and the amounts in respect of their services as Directors and Manager of SDVP are not separately identifiable.
4. Return per share
ZDP shares The capital return per ZDP share is based on appropriations of £630,000 (2020: £607,000) and on 14,500,000 shares (2020: 14,500,000), being the weighted average number of ZDP shares in issue during the year.
5. Loans and receivables
The Company has entered into a contribution agreement agreement with SDV whereby the Company lent SDV the gross proceeds of £12,782,000 raised from the conversion of SVC ZDP shares of 10,977,747 and the placing on 8 January 2018 of 1,802,336 ZDP shares at 100p.
On 11 April 2018, the Company lent SDV the gross proceeds of £1,462,514 raised from the additional placing of 1,419,917 ZDP shares at 103p each.
On 10 May 2018, the Company lent SDV the gross proceeds of £104,500 raised from the additional placing of 100,000 ZDP shares at 104p each.
On 15 May 2018, the Company lent SDV the gross proceeds of £208,500 raised from the additional placing of 200,000 ZDP shares at 105p each.
The loan is non-interest bearing and is secured on SDV's total assets by a floating charge debenture entered into between the Company and SDV. The loan is repayable three business days prior to the ZDP share redemption date of 30 April 2025 or, if required by the Company at any time prior to that date in order to repay the ZDP share entitlement.
A contribution agreement between the Company and SDV has also been entered into whereby SDV will undertake to contribute such funds as would ensure that the Company will have in aggregate sufficient assets on 30 April 2025 to satisfy the final capital entitlement of the ZDP shares.
6. Trade and other receivables
7. Share capital
Allotted, issued:
The Company was incorporated on 25 October 2017 with 50,000 ordinary shares in issue partly paid as to 25p each. All of the ordinary shares are held by SDV.
On 8 January 2018, 12,780,083 ZDP shares were issued at 100p each. The share issue costs were borne by SDV.
On 11 April 2018, 1,149,917 additional ZDP shares were issued at 103p each. The share costs were borne by SDV.
On 10 May 2018, 100,000 ZDP shares were issued at 104.5p each. The share issue costs were borne by SDV.
On 15 May 2018, 200,000 ZDP shares were issued at 104.25p each. The share costs were borne by SDV.
As to dividends Ordinary shares are entitled to any revenue profits which the Company may determine to distribute as dividends in respect of any financial period. It is not expected that any such dividends will be declared.
The holders of ZDP shares are not entitled to dividends or other distributions out of the revenue or any other profits of the Company.
As to capital on a winding up On a winding up, and after payment of SDVP's liabilities in full, holders of ZDP shares are entitled to a payment of an amount equal to 100p per share, increased daily from 8 January 2018 at such compound rate, equivalent to 4%, as will give an entitlement to 133.18p for each ZDP share at 30 April 2025, £19,311,100 in total.
Following payment of the capital entitlement to the ZDP shareholders, Ordinary shareholders are entitled to any surplus assets of the Company.
As to voting Holders of Ordinary shares are entitled to receive notice of, attend and vote at General Meetings of the Company.
Holders of ZDP shares are entitled to receive notice of, attend and vote at those general meetings where ZDP shareholders are entitled to vote. They are not entitled to attend or vote at any general meeting of the Company unless the business includes any resolution to vary, modify or abrogate any of the special rights attached to the ZDP shares.
Commitment to contribute to the capital entitlement of the ZDP shares The Company has entered a contribution agreement with its parent company, SDV, pursuant to which SDV will undertake to contribute such funds as would ensure that SDVP will have in aggregate sufficient assets on 30 April 2025 to satisfy the final capital entitlement of the ZDP shares or, if required by the Company, the accrued capital entitlement at any time prior to that date. This assumes that SDV has sufficient assets to repay the capital entitlement of the ZDP shares. As at 30 April 2021, the Group had total assets less current liabilities available for repayment of the ZDP shares of £63,875,694 (2020: £41,935,628). The value of the Group's assets would have to fall at a rate of 69.7% (2020: 53.9%) for it to be unable to meet the full capital repayment entitlement of the ZDP shares on the scheduled repayment date of 30 April 2025.
Duration The Articles of Association provide that the Directors shall convene a general meeting of the Company to be held on 30 April 2025 or, if that is not a business day, on the immediately following business day, at which a special resolution will be proposed requiring the Company to be wound up unless the Directors shall have previously been released from their obligations to do so by a special resolution of the Company (such special resolution having been sanctioned by any necessary class approval). If no variation of such date is approved and the Company is not wound up on such date, any holder of more than 1,000 ZDP shares shall have the right to requisition a general meeting of the Company to consider a resolution to wind it up.
At the general meeting, those shareholders present, in person or by proxy or by duly authorised representative who vote in favour of the resolution to wind up the Company will collectively have such total number of votes on a poll as is one more than the number of votes which are required to be cast for the resolution to be carried. The vote will be taken on a poll.
8. Net asset value per share
The net asset value per ZDP share and the net assets attributable to the ZDP shareholders are as follows:
9. Ultimate parent undertaking The Company is a wholly owned subsidiary of SDV which is registered in England and Wales under company number 03749536. The Annual Report of SDV is available from the website of the Manager at www.chelvertonam.com
10. Financial instruments
Investment objective and investment policy The objective of SDVP is to provide the final capital entitlement of the ZDP shares to the holders of the ZDP shares at the redemption date of 30 April 2025.
The Company will fulfil its investment objective through the contribution agreement it has with SDV, as detailed in note 5 and 7. The contribution from SDV will provide the capital entitlement of the ZDP shareholders. The principal risk the Company faces is therefore, that SDV would not have sufficient assets to repay the loan and to make a contribution to fulfil the amount of the capital entitlement due to the ZDP shareholders. Covenants are in place between SDV and the Company that ensure that SDV will not undertake certain actions in relation to both itself and the Company.
Due to the Company's dependence on SDV to repay the loan and provide a contribution to meet the capital entitlement of the ZDP shareholders other risks faced by the Company are considered to be the same as for SDV and these are defined in note 23 of SDV's Annual Report.
SDV has considerable financial resources and therefore the Directors believe that the Company is well placed to manage its business risks and also believe that SDV will have sufficient resources to continue in operational existence for the foreseeable future.
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 requirement of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows and projected strategic investment opportunities. The management regards capital as total equity and reserves, for capital management purposes. The Group currently do not have any loans and the Directors do not intend to have any loans or borrowings.
Directors and Advisers
Directors
Principal Group Advisers
Shareholder Information
Sources of further information The Company's ZDP shares are listed on the London Stock Exchange.
The Company's ZDP NAV is released to the London Stock Exchange on a daily basis and published monthly via the AIC.
Information about the Company and SDV can be obtained on the Manager's website: www.chelvertonam.com. Any enquiries can also be emailed to cam@chelvertonam.com.
Share registrar enquiries The register for the ZDP shares is 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.
SDV 2025 ZDP PLC - Notice of Annual General Meeting
The Directors currently anticipate that this year's Annual General Meeting will be open to shareholders, but reserve the right to change arrangements for the meeting at short notice. Therefore, shareholders are strongly encouraged to vote by proxy and to appoint the Chairman as their proxy.
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the Company will take place at 11.30am (or as soon thereafter as the Annual General Meeting of the parent company, Chelverton UK Dividend Trust PLC has concluded) on 9 September 2021 at the offices of Chelverton Asset Management, 3rd Floor, 20 Ironmonger Lane, London, EC2V 8EP for the following purposes:
Ordinary Business: Ordinary Resolutions
Special Business To consider, and if thought fit to pass the following Resolutions which will be proposed as Ordinary Resolutions
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.
Explanatory Notes to the Notice of Annual General Meeting
To be effective, the enclosed proxy form, together with any power of attorney or other authority under which it is signed or a certified copy thereof, should be lodged at the office of the Company's Registrar, Share Registrars Limited, The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR not later than 48 hours before the time of the meeting. In the case of joint holders of a share, the vote of the senior who tenders a vote 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.
You may submit any questions relevant to the business of the Annual General Meeting in advance by email addressed to the Company Secretary at cosec@maitlandgroup.com.
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| ISIN: | GB00BZ7MQD81 |
| Category Code: | FR |
| TIDM: | SDVP |
| LEI Code: | 213800KMX33J3VAJUU95 |
| OAM Categories: | 1.1. Annual financial and audit reports |
| Sequence No.: | 113202 |
| EQS News ID: | 1211382 |
| End of Announcement | EQS News Service |
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