CHELVERTON UK DIVIDEND TRUST PLC The net asset value per Zero Dividend Preference share is calculated on 14,500,000 (2020: 14,500,000) Zero Dividend Preference shares, being the number of Zero Dividend Preference shares in issue at the year end. 19. RECONCILIATION OF NET RETURN BEFORE AND AFTER TAXATION TO CASH GENERATED FROM OPERATIONS - Group and Company
2021 2020
GBP'000 GBP'000
Net surplus/(de?cit) before taxation 23,402 (16,064)
Taxation (27) (38)
Net de?cit after taxation 23,375 (16,102)
Net capital return (22,098) 18,073
(Increase)/decrease in receivables 223 225
Increase/(decrease) in payables 32 (74)
Interest and expenses charged to the capital reserve (382) (420)
Net cash in?ow from operating activities 1,702
704
20 RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET CASH - Group and Company
2021 2020
GBP'000 GBP'000
Decrease in cash in year (778) (424)
Net cash at 1 May 1,266 1,690
Net cash at 30 April 1,266
488
21 ANALYSIS OF CHANGES IN NET CASH - Group and Company
At 1 May
At 30 April
2020 Cash ?ows 2021
GBP'000 GBP'000 GBP'000
Cash at bank (including those held by custodians) 1,266 (778= 488
22 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES Objectives, policies and strategies The Group primarily invests in mid and small capitalised companies. All of the Group's investments comprise ordinary shares in companies listed on the Of?cial List and companies admitted to AIM.
The Group ?nances its operations through Zero Dividend Preference shares issued by SDVP 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 ?nancial 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 pro?ts 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 ?nancial assets and liabilities, which identi?es the risk to the Group of holding such items, is given below. Market risk
Market risk arises mainly from uncertainty about future prices of ?nancial 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:
2021 2020
GBP'000 GBP'000
Fair value through pro?t or loss investments 62,768 40,588 Sensitivity analysis A 10% increase in the market value of investments at 30 April 2021 would have increased net assets by
GBP6,277,000 (2020: GBP4,059,000). An equal change in the opposite direction would have decreased the net assets available to shareholders by an equal but opposite amount. 22 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES (continued)
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 ?nancial assets are non-interest bearing. As a result the Group's ?nancial assets are not subject to signi?cant amounts of risk due to ?uctuations in the prevailing levels of market interest rates.
The possible effects on fair value and cash ?ows that could arise as a result of changes in interest rates are taken into account when making investment decisions.
The exposure at 30 April 2021 of ?nancial assets and ?nancial liabilities to interest rate risk is limited to cash and cash equivalents of GBP488,000 (2020: GBP1,266,000). Cash and cash equivalents are all due within one year. Credit risk
Credit risk is the risk of ?nancial loss to the Group if the contractual party to a ?nancial instrument fails to meet its contractual obligations.
The carrying amounts of ?nancial 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 identi?ed by the Board as reputable and of high credit quality. The maximum exposure to credit risk as at 30 April 2021 was GBP64,013,000 (2020: GBP42,040,000). The calculation is based on the Group's credit risk exposure as at 30 April 2021 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 dif?cult 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 ?nancial instruments of the Group fall into the following categories:
30 April 2021 Assets at
fair value through
At Loans and pro?t
cost receivables or loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per Balance Sheet
Investments - - 62,768 62,768
Trade and other receivables - 757 - 757
Cash and cash equivalents 488 - - 488
Total 488 757 62,768 64,013
Liabilities as per Balance Sheet
Trade and other payables 136 - - 136
Zero Dividend Preference shares - 16,532 - 16,532
Total 136 16,532 - 16,668 22 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES (continued)
Financial instruments by category (continued)
30 April 2020 Assets at
fair value through
At Loans and pro?t
cost receivables or loss
Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per Balance Sheet
Investments - - 40,588 40,588
Trade and other receivables - 186 - 186
Cash and cash equivalents 1,266 - - 1,266
Total 1,266 186 40,588 42,040
Liabilities as per Balance Sheet
Trade and other payables 104 - - 104
Zero Dividend Preference shares - 15,902 - 15,902
Total 104 15,902 - 16,006 IFRS 7 hierarchy
As required by IFRS 7 the Company is required to classify fair value measurements using a fair value hierarchy that re?ects the signi?cance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:
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