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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Chelverton Growth Trust Plc | LSE:CGW | London | Ordinary Share | GB0002621349 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 26.50 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMCGW
RNS Number : 0690F
Chelverton Growth Trust PLC
09 November 2015
CHELVERTON GROWTH TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2015
The full Annual Report and Accounts can be accessed via the Company's website at www.chelvertonam.com or by contacting the Company Secretary on 01326 378 288
Investment objective
The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market with a market capitalisation at the time of investment of up to GBP50 million, which are believed to be at a "point of change". The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold. Its investment objective is to increase net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap UK Index.
It is the Company's policy not to invest in any listed investment companies (including listed investment trusts).
Company summary
Benchmark MSCI Small Cap UK Index Investment Manager Chelverton Asset Management Limited
See page 16 for further details
Total net assets GBP 4,672,000 as at 31 August 2015 Market capitalisation GBP 3,613,000 as at 31 August 2015 Capital structure 8,501,650 Ordinary 1p shares carrying one vote each.
Performance statistics
Hot Features
Premium
Year ended Year ended
31 August 31 August
2015 2014 % Change
Net
assets GBP4,672,000 GBP4,854,000 (3.75)
Net asset
value
per
share
(NAV) 54.95p 51.38p 6.95
MSCI
Small
Cap UK
Index 349.890 318.754 9.77
Share
price 42.50p 43.75p (2.86)
Discount
to net
asset
value 22.6% 14.8%
Revenue
loss
after
taxation GBP(68,000) GBP(75,000)
Revenue
loss per
share (0.75)p (0.76)p
Capital
gain per
share 3.97p 7.15p
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 the 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.
Chairman's Statement
I am pleased to announce another year of steady progress in which the fund's net asset value per share has increased from 51.38p to 54.95p - an increase of 6.95%. This compares to the Company's benchmark index, the MSCI Small Cap UK Index which rose by 9.77% in the period.
Since the end of the reporting period it has been announced that Parmenion, the Fund's largest investment (37% of the Fund), is to be acquired by Aberdeen Asset Management plc. The net asset value per share at the end of October increased to 58.24p, a rise of 5.98% from just two months earlier. Once the acquisition is completed the fund will benefit from a significant inflow of cash.
Particular thanks are due to David Horner our Investment Manager, as this outstanding investment has yielded in excess of 16 times since our early stage investment of just GBP115,000 seven years ago. In the last few years our investment in Parmenion has become a very large proportion of the Fund, but David's belief that we had a company of real value has been fully justified. The success demonstrates very much the ethos of Chelverton Growth Trust.
The return of a Conservative Government in the May UK general election gives a more stable political outlook. It is difficult to see beyond the view of most commentators that the UK economy is in for a period of steady, if unspectacular growth, with both inflation and interest rates forecast to remain at historically low levels.
UK economic growth statistics have been consistently revised upwards, this growth has been translated into solid job creation over the last few years. Until recently, there has been little pressure on employers to increase wages. However, we now seem to be at a turning point, as we are seeing the first signs of above average rises in salaries. This combined with the introduction of the "living wage" will mean labour costs for many businesses will begin to rise. Whether this rise in labour costs will lead to an increase in inflation or a decline in profitability, which remains at historically high levels, will provide a true guide to the health of the UK economy
The Government will continue to focus on deficit reduction. The Chancellor is expected to announce deep cuts in the Public Sector in his first Autumn Statement since the election. On balance, we would expect the strength in the domestic economy to absorb any reduction in demand.
This outlook of domestic stability is in stark contrast to that of many regions in the world. The political turmoil in the Middle East seems to be going from bad to worse. The mass migration of political and economic refugees will have massive economic, social and political repercussions, not only in the Middle East but also across Europe. The slowdown in the growth of the Chinese Economy has lead to significant declines in commodity prices and dramatic devaluation of many currencies linked to the Chinese economy. These factors are clear headwinds to the forward momentum of world economic growth and have already lead to an increase in negative sentiment towards financial markets.
The companies in the portfolio have generally made further progress over the past year and it is hoped that the investment and development that has taken place in the past three years will, notwithstanding the comments above, begin to bear fruit in the near future.
The Board continues to be committed to an annual tender process as a means of offering shareholders the ability to realise some of their shareholding at a modest discount to net asset value. Given the strong performance of the unquoted portfolio, and in particular the liquid resources released by the recently announced takeover of Parmenion by Aberdeen Asset Management plc. The Board has decided to review the level of the annual tender and have decided to increase it to 24.99% this year from 10% in previous years.
As in previous years, the Board remains of the view that the investment strategy employed by the Investment Manager remains valid and that the continuation of the Company's investment objective and policy should afford shareholders the opportunity to benefit from the significant underlying potential value in the portfolio. Going forward, the Board and Investment Manager believe that the portfolio characteristics may vary a little in respect of the percentages in quoted and unquoted shares and the number of holdings in the portfolio. This will not affect the portfolio risk profile or investment objective, which is to provide an attractive high income combined with the opportunity for capital growth, whilst outperforming the MSCI Small Cap UK Index over the long term.
The proposed tender offer will be the seventh return to shareholders. If the offer is fully taken up, Chelverton Growth Trust will over a period of eight years have repurchased a total of 12,506,808 shares representing 66.23% of the shares in issue at 31 August 2007.
The ability of the Company to be able to undertake share buybacks, including pursuant to the proposed tender offer, depends amongst other factors, on the Company having appropriate reserves which it can utilise in any manner as permitted by the Companies Act 2006.
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It is possible for a company to reduce its capital, or as in this case, cancel its share premium account in order to create distributable reserves which can be applied in any manner which the company's profits available for distribution (as determined in accordance with the Companies Act 2006) are able to be lawfully applied. The proposed cancellation of the Company's share premium account requires, under the Companies Act 2006, approval of the Company's shareholders and subsequent confirmation by the Court.
The Board is therefore proposing, subject to shareholder approval and confirmation by the Court, that the amount standing to the credit of the Company's share premium account (being GBP2.674 million as at the date of this statement) be cancelled.
In considering whether to confirm the cancellation of the Company's share premium account, the Court takes account of the interests of the Company's creditors at the time of the cancellation (including any contingent and prospective creditors). The Court will require to be satisfied that the interests of the Company's creditors will not be prejudiced as a result of the reduction. The Company understands that it is likely that no creditor will be able to show that there is any real likelihood that the reduction would result in the Company being unable to discharge that creditor's debt or claim when it fell due, which is the relevant test under the Companies Act 2006, and, accordingly, that no form of creditor protection is likely to be required.
It is, however, for the Court, ultimately, to determine the question of whether any protection is required for creditors, and if so, what form it should take. If any is required, it would likely to take the form of an undertaking to the Court that any reserve arising from the cancellation of the share premium account would remain undistributable until the Company's creditors at the time of the cancellation had either consented to the cancellation or their debts at that time had been discharged or otherwise satisfied.
The cancellation will take effect upon the registration with the Registrar of Companies of the order of the Court confirming the cancellation, which is expected to occur in the first quarter of 2016.
The Board is aware that the current policy of returning funds to shareholders through an annual tender offer will inevitably lead to an increase in the cost ratio. The Board is thus exploring strategic options that will enable all shareholders to realise full value efficiently in the medium term.
The Board believes that to achieve the best outcome for shareholders a change in the Company's investment objective and policy is required, and this will be put to shareholders as a Resolution at the forthcoming annual General Meeting.
These changes, if approved, will result of in the Company's assets being concentrated in fewer investments and higher levels of cash being maintained. In addition, any new investments will require a shorter timeline to realisation than has previously been required. Although the changes may affect short-term performance, they will provide an effective route to the realisation of value for shareholders, which can be achieved in the medium term.
Accordingly, four Resolutions will be put forward at the forthcoming Annual General Meeting as special resolutions: (1) that the Company adopts the revised investment objective and policy as described above and stated in the strategic report on page 10 and (2) that it continues to operate as an investment trust; (3) that the Company be authorised to carry out the tender offer and (4) that the Company's share premium account be cancelled. The directors will vote in favour of these resolutions in respect of their own shareholdings.
Kevin Allen
Chairman
9(th) November 2015
Investment Manager's overview
The UK economy continues to grow relatively strongly with a continuing trend of upward revisions to initial estimates of UK economic growth. The economy is benefiting from low interest rates and benign inflation. We do however appear to be moving towards a point of full employment, which will inevitably lead to upward pressure on salary costs; this pressure will be increased by the political desire to bring in a "living wage" for employees. It is unclear whether companies will pass this cost on to customers, absorb it into their margins or try to improve productivity. Whatever the outcome, it is likely to take the edge off the rate of growth of corporate profitability.
The Eurozone appears to be slowly recovering; absorbing the damage to sentiment caused by the shocks of Greek political instability, disruption caused by the migration of people displaced by the fragmentation of the Middle East and the corporate scandal at Volkswagen. The United Kingdom by comparison, appears to be a place of calm and stability.
The result of the General Election in May was decisive leaving government policy clearly defined for the next five years. This should be supportive for business, although undoubtedly there will be a period of uncertainty ahead of the promised referendum on Europe. The Government will try to tackle the Government Deficit, which will inevitably lead to pressure on the Public Sector. However, the policy of supporting the introduction of the "Living Wage" in conjunction with a reduction in income tax and national insurance for lower earners should lead to a general increase in prosperity for all.
Bank lending is increasing, which is a positive, although anecdotal evidence seems to indicate that lending against property is growing dramatically which, if left unchecked, could result in a return of the "boom/bust" economy. Lending to small companies is not getting any easier, although less traditional lenders such as "crowd funding" and "peer to peer" continue to fill the void. Although not yet regulated this form of funding may, in time, replace the more cumbersome bank lending.
Portfolio review
The most important change to the portfolio has in fact taken place after the year-end with the sale of Parmenion to Aberdeen Asset Management plc. for a price for our shareholding of GBP1.84m at completion with a possible further payment after three years dependent on Parmenion's performance.
We originally invested GBP115,000 after start-up. The business has grown extremely well and we are delighted that its management and employees will also be sharing in this success. The total return from this investment is 16 times the original investment before any deferred performance payment. These accounts recognise the amount realised on sale, no account has been taken of any sum that might be due in the future. Over the next three years, the Board will consider whether some value should be ascribed to this contractual right. The maximum payment under the earn-out would be an additional payment of GBP600,000.
The realisation from our investment in Parmenion has enabled the Board to increase the level of this year's tender offer from the 10% level which has become the norm in prior years to 24.99% of the outstanding share capital which, if there is sufficient interest from shareholders, will result in the repurchase of up to 2,125,413 shares. In 2008, following a similarly large realisation on the takeover of Merrydown plc a successful tender was made for 2,624,973 shares.
This year we have continued the process of reducing the shareholding in IDOX plc, Alliance Pharmaceutical plc (following a sharp rise in its price) and Lombard Risk Management plc. The entire holdings of A B Dynamics plc and Tristel plc were sold after strong growth in their share prices. In the case of A B Dynamics this was from a flotation the year before and in the case of Tristel, a strong recovery in its share price.
Additional investments have been made in Plutus Powergen plc, (which has since seen a dramatic increase in its share price post year end), CEPS plc, Belgravium plc (on a change of management) and Petards plc (as it becomes evident that the work of the past three years in restoring this business appears to be finally bearing fruit).
No new unquoted investments were made in the year. The holding in Chelverton Asset Management Holdings Limited the company used to finance the MBO of Chelverton Asset Management, the Investment Manager of this fund, was revalued upwards reflecting the growth in funds under management. The investments in Transflex and Main Dental Partners were held at the same level as last year and the holdings in La Salle Education and Anaxsys were written down to reflect the disappointing take up of their product by the market place.
Unfortunately our investment in Closed Loop Recycling has had to be written down to nil value, as the business was unable to survive the extraordinary reduction in the oil price and the consequent reduction in virgin PET and HDPE as compared to its recycled product. The company went into administration in April 2015 with no prospect of any recovery.
Outlook
The success of Parmenion, and its sale to Aberdeen Asset Management plc, means that the fund will, until the tender offer is completed have a higher than normal level of cash which may affect short term performance. In the first instance the inflow of cash will be used to pay off debt. Surplus funds will be invested selectively in current portfolio companies or additional investments if felt appropriate.
We expect to see further development in the portfolio over the next twelve months and remain positive about prospects and expect continued progress.
David Horner
Chelverton Asset Management Limited
9(th) November 2015
Portfolio Review
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as at 31 August 2015
Investment Sector Valuation % of
GBP'000 total
AIM traded
Alliance Pharma Pharmaceuticals & Biotechnology 56 1.1%
Acquisition of the manufacturing, sales
and distribution rights to pharmaceutical
products.
Technology Hardware
Belgravium Technologies and Equipment 337 6.7%
Software systems for warehousing and
distribution
CEPS Support Services 610 12.1%
Production and supply of components
for the footwear industry; personal
protection equipment; production of
printed lycra fabric; services to the
direct mail industry and trophies and
awards.
Software & Computer
IDOX Services 164 3.3%
Software company specialising in the
development of products for document
and information management
Software & Computer
Lombard Risk Management Services 144 2.9%
Lombard Risk is one of the world's
leading providers of collateral management,
liquidity analysis and regulatory compliance
software to financial organisations
Electronic & Electrical
LPA Group Equipment 118 2.3%
Design, manufacture and marketing of
industrial electrical accessories
Technology Hardware
MTI Wireless Edge & Equipment 86 1.7%
Developer and manufacturer of sophisticated
antennas and antenna systems
Northbridge Industrial
Services Industrial Engineering 60 1.2%
Specialist industrial hire and sale.
Petards Group Support Services 169 3.4%
Development, provision and maintenance
of advanced security systems and related
services
Plutus Powergen Flexible Energy Supply 290 5.8%
Provider of flexible electricity generation.
Universe Group Support Services 65 1.3%
Provision of credit fraud prevention
system, loyalty systems and retail
systems
Nasdaq Traded
One Horizon Group Support Services 134 2.7%
Mobile VOIP solution provider.
Unquoted
Airways Engineering Support Services
Ordinary B Shares - -
Loan Stock - -
Commercial aviation
maintenance
Anaxsys Technology Healthcare Equipment
& Services
Ordinary Shares 13 0.3%
A medical device company for patient
monitoring and screening
Chelverton Asset Support Services
Management
Holdings
Ordinary Shares 120 2.4%
Investment management, including
providing services to Chelverton
Growth Trust plc
Closed Loop Recycling Support Services
Ordinary B Shares - -
Loan Stock - -
Operation of a plastic (PET and HDPE)
recycling plant
La Salle Education Support Services
Limited
Ordinary Shares 25 0.5%
Provider of mathematics teaching programmes.
Main Dental Partners Support Services
Ordinary Shares 175 3.5%
Loan stock - -
Operator of dental
surgeries
Parmenion Capital Support Services
Partners
Ordinary Shares 1,839 36.6%
Provides fund-based discretionary
fund management services to independent
Financial Advisors
Security Research
Group Support Services 62 1.2%
Leading provider of Local Authority
residential property searches; provision
of packaging solutions and technical
surveillance countermeasure components.
Transflex Vehicle
Rental Support Services 555 11.0%
Ordinary Shares
Light commercial vehicle rental
Portfolio Valuation 5,022 100.0%
In Administration
Portfolio holdings
31 August 2015 31August 2014
Valuation % of total Valuation % of total
Investment GBP'000 GBP'000
Parmenion Capital Partners
LLP 1,839 36.6 1,105 22.0
CEPS 610 12.1 300 6.0
Transflex Vehicle Rental 555 11.0 480 9.5
Belgravium Technologies 337 6.7 315 6.3
Plutus Powergen 290 5.8 125 2.5
Main Dental 175 3.5 175 3.5
Petards Group 169 3.4 113 2.2
IDOX 164 3.3 325 6.5
Lombard Risk Management 144 2.9 255 5.1
One Horizon Group 134 2.7 191 3.8
Chelverton Asset Management
Holdings 120 2.4 167 3.3
LPA Group 118 2.3 193 3.8
MTI Wireless Edge 86 1.7 75 1.5
Universe Group 65 1.3 34 0.7
Security Research Group 62 1.2 55 1.1
Northbridge Industrial
Services 60 1.2 177 3.5
Alliance Pharma 56 1.1 195 3.9
La Salle Education Limited 25 0.5 100 2.0
Anaxsys Technology 13 0.3 52 1.0
Closed Loop Recycling
Limited - - 252 5.0
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Airways Engineering - - - -
Total 5,022 100 4,684 93.2
In Administration
Portfolio breakdown by sector and by Index
Percentage of portfolio by sector
Support Services 74.7%
Technology Hardware & Equipment Distribution 8.4% Software & Computer Services 6.2%
Financial Services 5.8%
Electronic & Electrical Equipment 2.3%
Industrial Engineering 1.2%
Pharmaceuticals & Biotechnology 1.1% Healthcare Equipment & Services 0.3%
Percentage of portfolio by Index
AIM 55.5%
Unquoted 41.8%
Nasdaq 2.7%
Directors (all non-executive)
Kevin Allen (Chairman)
David Horner
Ian Martin
Independent
Extracts from the Strategic Report
As explained within the Report of the Directors on page 25, the Company carries on business as an investment trust. Investment trusts are collective closed-ended public limited companies.
The Board of Directors is responsible for the overall stewardship of the Company, including investment and dividend policies, corporate and gearing strategy, corporate governance procedures and risk management. Biographical details of the three male Directors, can be found on page 15.
Investment objective
The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market with a market capitalisation at the time of investment of up to GBP50 million, which are believed to be at a "point of change". The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold.
Investment policy
The Company invests principally in securities of publicly quoted UK companies, though it may invest in unquoted securities. The performance of the Company's investments is compared to the MSCI Small Cap UK Index.
The Company may also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold.
It is the Company's policy not to invest in any listed investment companies or listed investment trusts.
To comply with Listing Rules the Company's investment policy is detailed above and should be read in conjunction with the subsequent sections entitled investment strategy and the performance analysis.
It is intended from time to time, when deemed appropriate, that the Company will borrow for investment purposes.
The investment objective and policy stated are intended to distinguish the Company from other investment vehicles which have relatively narrow investment objectives and which are constrained in their decision making and asset allocation. The investment objective and policy allow the Company to be constrained in its investment selection only by valuation and to be pragmatic in portfolio construction by only investing in securities which the Investment Manager considers to be undervalued on an absolute basis. Portfolio risk is managed by investing in a diversified spread of investments.
Investment strategy
Investments are selected for the portfolio only after extensive research which the Investment Manager believes to be key. The whole process through which equity must pass in order to be included in the portfolio is very rigorous. Only a security where the Investment Manager believes that the price will be significantly higher in the future will pass the selection process. The Investment Manager believes the key to successful stock selection is to identify the long-term value of a company's shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long-term value involves detailed analysis of a company's earning prospects over a five year time horizon.
Investment of Assets
At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period.
Environment Emissions
All of the Company's activities are outsourced to third parties. As such it does not have any physical assets, property, or operations of its own and does not generate any greenhouse gas or other emissions.
Review of Performance and Outlook
Reviews of the Company's returns during the financial year, the position of the Company at the year end, and the outlook for the coming year are contained in the Investment Managers Report.
Principal risks and uncertainties and risk management
As stated within the Corporate Governance Statement, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.
The principal risks and uncertainties faced by the Company are described below and in note 15 which provides detailed explanations of the risks associated with the Company's financial instruments.
Market risk
The Company is exposed to market risk due to fluctuations in the market prices of its investments.
The Investment Manager actively monitors economic and company performance and reports regularly to the Board on a formal and informal basis. The Board formally meets with the Investment Manager quarterly when portfolio transactions and performance are reviewed. The Management Engagement Committee meets as required to review the performance of the Investment Manager.
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 significantly fluctuate.
The Board recognises that 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 does not intend to adopt a precise discount target at which shares will be bought back. However, Ordinary shares will not be bought back for cancellation or into Treasury at a discount to NAV of less than 7.5%.
Regulatory risks
Relevant legislation and regulations which apply to the Company include the Companies Act 2006, the Corporation Tax Act 2010 ("CTA") and the Listing Rules of the Financial Conduct Authority ("FCA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on pages 17 to 24. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.
The Board is not aware of any breaches of laws or regulations during the period under review and up to the date of this report.
Financial risk
The financial situation of the Company is reviewed in detail at each Board meeting. The content of the Company's annual report and financial statements is monitored and approved both by the Board and the Audit Committee.
Inappropriate accounting policies or failure to comply with current or new accounting standards may lead to a breach of regulations.
Liquidity risk
The Board monitors the liquidity of the portfolio at each Board meeting and regularly reviews the investments with the Investment Manager.
A more detailed explanation of the investment management risks facing the Company is given in note 15 to the financial statements.
Financial instruments
As part of its normal operations, the Company holds financial assets and financial liabilities. Full details of the role of financial instruments in the Company's operations are set out in note 15 to the financial statements.
The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's investment portfolio. Investment risk is spread through holding a wide range of securities in different industrial sectors.
Statement regarding annual report and accounts
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Following a detailed review of the Annual Report and Accounts by the Audit Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Performance analysis using key performance indicators
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives, for example: the NAV, the movement in the Company share price, the discount of the share price in relation to the NAV and the on going charges.
The movement of the NAV is compared to the MSCI Small Cap UK Index, the Company's benchmark. The NAV per Ordinary share at 31 August 2015 was 54.95p (2014: 51.38p).
The Company's share price at the year end was 42.50p (2014: 43.75p).
Current and future developments
A review of the main features of the year is contained in the Chairman's statement and the Investment Manager's overview.
The marketing and promotion of the Company will continue to involve the Board, led by the Investment Manager, with a proactive communications programme either directly or through its website, with existing and potential new shareholders and other external parties.
The Directors are seeking to renew the appropriate powers at the next Annual General Meeting to enable the issue and purchase of the company's own shares, when it is in the interests of shareholders as a whole.
Social, environmental and employee issues
The Company does not have any employees and the Board consists entirely of non-executive directors. As the Company is an investment trust, which invests in other companies, it has no direct impact on the community or the environment, and as such has no policies in this area.
Alternative Investment Fund Manager's Directive ("AIFMD")
The Board has registered itself as the AIFM with the FCA under the Directive and confirm that all required returns have been completed and filed.
By Order of the Board
K Allen
Chairman
9 November 2015
Extract from the Report of the Directors
Status, objective and review
The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs ('HMRC') as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010 for the year ended 31 August 2014. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2015 so as to be able to continue to obtain approval as an authorised investment trust, under Section 1158 of the Corporation Tax Act 2010. The Company is an investment company as defined in Section 833 of the Companies Act 2006.
Management and administration agreements
The Company's investments are managed by Chelverton Asset Management Limited ("CAM") under an agreement dated 28 June 2001. As previously stated above, Mr Horner is a director of CAM.
The Company pays CAM, in respect of its services as Investment Manager, a monthly fee (exclusive of VAT) payable in arrears as follows:
for the first GBP15 million of funds under management at the rate of 1/12% per month of the gross value of funds under management ("the Value");
for the next GBP15 million of funds under management, at the rate of 1/16% per month of the amount by which the Value exceeds GBP15 million; and
for funds under management above GBP30 million, at the rate of 1/24% per month.
The amount payable to CAM for the year ending 31 August 2015 was GBP48,884.
The appointment of CAM as Investment Manager may be terminated by either party giving to the other not less than twelve months' notice of such termination. There are no specific provisions contained within the Investment Management Agreement relating to the compensation payable in the event of termination of the agreement other than entitlement to fees, which would be payable within any notice period.
Under an agreement dated 1 January 2013, company secretarial services and the general administration of the Company were undertaken by John Girdlestone for an annual fee of GBP30,000 plus VAT at the prevailing rate.
Appointment of Chelverton Asset Management ("CAM") as the Investment Manager
The Board, excluding Mr Horner, continually reviews the performance of the Investment Manager. In the opinion of the independent Directors the continuing appointment of CAM, as Investment Manager, on the terms outlined in the Investment Management Agreement dated 28 June 2001 and amended on 1 December 2006, is in the best interests of the shareholders as a whole. Further, the Board is satisfied that CAM has the required skill and expertise to continue to manage the Company's portfolio and charges fees that are reasonable when compared with those of similar investment trusts.
Going concern
In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. They have considered the current cash position of the Company, and forecast revenues for the current financial year. The Directors have also taken into account the Company's investment policy, which is described on page 11 and which is subject to regular Board monitoring processes, and is designed to ensure the Company holds sufficient liquid securities to meet possible cash flow needs.
The Company retains title to all assets held by its custodian. Note 15 to the financial statements sets out the financial risk profile of the Company and indicates the effect on its assets and liabilities of falls and rises in the value of securities, market rates of interest and changes in exchange rates.
The Directors believe, in the light of the controls and review processes noted above and bearing in mind the nature of the Company's business and assets, that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts.
On behalf of the Board
Kevin Allen
Chairman
9 November 2015
Statement of Directors' responsibilities in respect of the financial statements
The Directors are responsible for preparing the Annual Report and the financial statements and have elected to prepare them in accordance with applicable United Kingdom law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.
In preparing the financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- present information, including accounting policies, in a manner that provides relevant, reliable, comparable
and understandable information;
- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
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 to enable them to ensure that the 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.
Under applicable law and regulations, the Directors are also responsible for preparing a Report of Directors, Directors remuneration report and statement on corporate governance.
The Directors, to the best of their knowledge, state that:
the financial statements, prepared in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and net return of the Company; and
the Chairman's statement, Investment Manager's overview and Report of the Directors include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.
The Directors are responsible for the maintenance and integrity of the corporate and financial information related to the Company including on the website of the Investment Manager www.chelvertonam.com.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
On behalf of the Board
Kevin Allen
Chairman
9 November 2015
NON- STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2015 and 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the registrar of companies, and those for 2015 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Investment Manager's website: www.chelvertonam.com.
Income statement
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for the year ended 31 August 2015
2015 2014
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on investments
at fair value 7 - 406 406 - 752 752
Income 2 60 - 60 57 - 57
Investment management
fee 3 (12) (37) (49) (13) (38) (51)
Other expenses 4 (116) (12) (128) (119) (8) (127)
-------- -------- -------- -------- -------- --------
Net return on ordinary
activities before
taxation (68) 357 289 (75) 706 631
Taxation on ordinary 5 - - - - - -
activities
Net return on ordinary
activities after
taxation (68) 357 289 (75) 706 631
-------- -------- -------- -------- -------- --------
Revenue Capital Total Revenue Capital Total
Return per Ordinary
share 6 (0.75)p 3.96p 3.21p (0.76)p 7.15p 6.39p
-------- -------- -------- -------- -------- --------
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the year.
A separate statement of total recognised gains and losses has not been prepared as all such gains and losses are included in the income statement.
The notes on pages 40 to 55 form part of these accounts.
Statement of changes in equity
for the year ended 31 August 2015
Called
up Share Capital
Share Premium Capital Redemption Revenue
Capital Account Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31 August
2015
1 September 2014 96 2,674 556 93 1,435 4,854
Cost of shares purchased
for cancellation under
tender offer (10) - - 10 (446) (446)
Net return after
taxation for the year - - 357 - (93) 264
31 August 2015 86 2,674 913 103 896 4,672
-------- -------- -------- ----------- -------- --------
Year ended 31 August
2014
1 September 2013 106 2,674 (150) 83 1,996 4,709
Cost of shares purchased
for cancellation under
tender offer (10) - - 10 (486) (486)
Net return after
taxation for the year - - 706 - (75) 631
31 August 2014 96 2,674 556 93 1,435 4,854
-------- -------- -------- ----------- -------- --------
Statement of financial position
as at 31 August 2015
2015 2014
Notes GBP'000 GBP'000
Fixed assets
Investments at fair value 7 5,022 5,027
Current assets
Debtors 9 9 8
Cash at bank 69 40
-------- --------
78 48
Creditors - amounts falling
due within one year 10 (428) (221)
-------- --------
Net current (liabilities)/
assets (350) (173)
-------- --------
Net assets 4,672 4,854
-------- --------
Share capital and reserves
Called up share capital 11 86 96
Share premium account 12 2,674 2,674
Capital reserve 12 913 556
Capital redemption reserve 12 103 93
Revenue reserve 12 896 1,435
-------- --------
Equity shareholders' funds 4,672 4,854
-------- --------
Net asset value per Ordinary
share 13 54.95p 51.38p
These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 9 November 2015. They were signed on its behalf by
Kevin Allen
Chairman
Statement of cash flows
for the year ended 31 August 2015
2015 2014
GBP'000 GBP'000
Cash flows from operating activities
Net revenue return 289 631
Adjustment for:
Net capital return (357) (706)
Expenses charged to capital (48) (46)
Interest paid 15 11
Increase/(decrease) in creditors 7 (3)
Increase in prepayments and accrued
income 1 -
Other (2) -
-------- --------
Cash from operations (95) (113)
Cash flows from investing activities
Purchase of investments (549) (560)
Proceeds from sales of investments 960 993
Net cash from investing activities 411 433
-------- --------
Cash flows from financing activities
Cost of shares purchased for cancellation
under tender offer (472) (486)
New loan advanced 200 400
Capital repayment of loan - (200)
Interest paid (15) (11)
-------- --------
Net cash used in financing activities (287) (297)
-------- --------
Net increase in cash 29 23
-------- --------
Cash at the beginning of the year 40 17
-------- --------
Cash at the end of the year 69 40
-------- --------
1 ACCOUNTING POLICIES
Accounting convention
The financial statements are prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS 102"), the Companies Act 2006 and with the AIC Statement of Recommended Practice ("SORP") issued in January 2014, regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts. All the Company's activities are continuing.
This is the first year in which the financial statements have been prepared under FRS 102. There have been no transitional adjustments needed to the financial statements.
Income recognition
Dividends receivable on quoted equity shares are included as revenue when the investments concerned are quoted 'ex-dividend'. UK dividends are disclosed excluding the associated tax credit. Dividends receivable on equity and non-equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. All other income is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis and charged through the revenue account in the income statement except as follows:
expenses which are incidental to the acquisition or disposal of an investment are treated as capital and separately identified and disclosed (see note 7):
management fees, bank interest and loan interest have been allocated 75% to capital reserve and 25% to revenue reserve in the income statement, being in line with the Board's expected long-term split of returns, in the form of capital gains and income respectively, from the investment portfolio of the Company.
Investments
All investments held by the Company are classified as '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 changes in the fair value of investments and impairment of investments recognised in the income statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost.
Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.
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For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset. For investments traded on other financial markets such as the OTCQB, fair value is generally determined by reference to the share price at close of business on the balance sheet date, discounted to reflect the best estimate of the discount that may need to be applied for the shares to be sold as a single investment.
For investments that are not actively traded in organised financial markets, fair value is determined as set out below under the heading 'significant judgements and estimates'.
Significant judgements and estimates
Preparation of the financial statements requires the Investment Manager to make significant judgements. The items in the financial statements where these judgments have been made are:
Investments that are not actively traded in organised financial markets, are valued at the Directors' estimate of the investment's net realisable value being their estimate of fair value. Generally, fair value will be at cost or, where applicable, at the most recent transaction price. In the case of direct investments in unquoted companies the following valuation technique is applied. Initial valuation is based on the transaction price. Where better indications of fair value become available, such as through subsequent issues of capital or dealings between third parties, the valuation is adjusted to reflect the new evidence. This represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction.
Capital reserve
The following are accounted for in this reserve:
gains and losses on the realisation of investments;
net movement arising from changes in the fair value of investments that can be readily converted to cash without accepting adverse terms;
realised exchange differences of a capital nature;
expenses, together with related taxation effect, charged to this account in accordance with the above policies; and
net movement arising from the changes in the fair value of investments that cannot be readily converted to cash without accepting adverse terms, held at the year end.
Taxation
The charge for taxation, where relevant, is based on the revenue before taxation for the year. Tax deferred or accelerated can arise due to timing differences between the treatment of certain items for accounting and taxation purposes.
Full provision is made for deferred taxation under the liability method, on all timing differences not reversed by the balance sheet date, in accordance with FRS 102.
The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company's effective rate of tax for the accounting period.
2 INCOME 2015 2014
GBP'000 GBP'000
Income from investments
Income from LLP investments 35 23
UK net dividend income 21 29
Income from loan interest 4 5
Total income 60 57
3 INVESTMENT MANAGEMENT FEE 2015 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 12 37 49 13 38 51
------- ------- ------- ------- ------- -------
The investment management fee is calculated at the rate of 1/12% per month of the gross value of funds under management and is payable monthly in arrears. At 31 August 2015 there was GBP4,000 outstanding (2014: GBP4,200).
4 OTHER EXPENSES 2015 2014
Total Total
GBP'000 GBP'000
Administrative and secretarial services 36 36
Directors' remuneration 34 34
Audit fee 15 14
Other expenses 43 43
128 127
-------- --------
5 TAXATION 2015 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Analysis of charge in
period
Current tax - - - - - -
============== ============ ======== ======== ======== ========
Factors affecting current tax charge for the period
The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 21% to 31 March 2015 and 20% from 1 April 2015. The differences are explained below:
2015 2014
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Theoretical tax at UK corporation tax rate
of 20.42% (2014:22.17%)
Corporation tax (14) 73 59 (17) 156 139
Investment income
not taxable (12) - (12) (13) - (13)
Non-taxable investment
gains - (83) (83) - (167) (167)
Excess expenses for
the period 26 10 36 30 11 41
Current tax charge - - - - - -
for the period
-------- -------- -------- -------- -------- --------
At 31 August 2015 the Company had surplus management expenses of GBP3,720,000 (2014: GBP3,634,000) which have not been recognised as a deferred tax asset. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses. Due to the Company's status as an investment trust and the intention to continue meeting the conditions required to obtain approval as an investment trust in the foreseeable future, the Company has not provided for deferred tax on any gains and losses arising on the revaluation or disposal of investments.
6 RETURN PER ORDINARY 2015 2014
SHARE
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic (0.75)p 3.96p 3.21p (0.76)p 7.15p 6.39p
======= ======= ====== =========== ======= =====
Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of GBP68,000 (2014: GBP75,000) and on 9,019,251 (2014: 9,871,859) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.
Capital return per Ordinary share is based on the net capital gain of GBP358,000 (2014: GBP706,000) and on 9,019,251 (2014: 9,871,859) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.
Total return per Ordinary share is based on the total gain of GBP290,000 (2014: GBP631,000) and on 9,019,251 (2014: 9,871,859) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.
7 INVESTMENTS 2015 2014
GBP'000 GBP'000
AIM 2,099 2,505
Unquoted 2,789 2,331
NASDAQ 134 191
------------------ ------------------
5,022 5,027
------------------ ------------------
AIM Unquoted* NASDAQ Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 2,917 1,512 166 4,595
Opening investment holding
(losses)/gains (412) 819 25 432
2,505 2,331 191 5,027
Movements in the year:
Purchases at cost 474 75 - 549
Sales (349) (100) - (449)
Gains on sales 511 - - 511
Movement in investment
holding losses (1,042) 483 (57) (616)
Transfer from AIM to Unquoted (52) 52 - -
Closing valuation 2,099 2,789 134 5,022
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-------- ------------ --------------- -------------
Closing book cost 2,990 1,539 166 4,695
Closing investment holding
(losses)/gains (891) 1250 (32) 327
Closing valuation 2,099 2,789 134 5,022
-------- ------------ --------------- -------------
GBP'000 GBP'000
Realised gains on sales 511 295
Movement in fair value of investments (105) 457
======= =========
Net gains on investments 406 752
======= =========
All quoted investments are made up of
equity shares.
* Unquoted investments are valued at the Directors' estimate of their net realisable value, being their estimate of fair value.
Analysis of movements in unquoted investments
Cost Valuation Realised Movement Cost at Valuation
at at at
31 August 31 August in in 31 August 31 August
2015 2015 Year Year 2014 2014
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Anaxys Technology 284 13 - (39) 284 52
Airways Engineering
Loan stock 45 - - - 45 -
Ordinary B
shares 30 - - - 30 -
Chelverton
Asset Management
Holdings
Loan stock - - 100 (100) 100 100
Ordinary shares 2 120 - 53 2 67
Closed Loop
Recycling
Loan stock 252 - - (252) 252 252
Ordinary B
shares 84 - - - 84 -
La Salle
Education
Limited 100 25 - (75) 100 100
Main Dental
Loan stock 75 - - - 75 -
Ordinary B
shares 175 175 - - 175 175
Parmenion
Capital Partners
LLP 115 1,839 - 734 115 1,105
Security Research
Group 52 62 - 62 6 -
Transflex
Vehicle Rental 325 555 - 75 250 480
1,539 2,789 100 458 1,512 2,331
-------------------- ---------- --------- --------- ---------- ----------
Transaction costs
During the year, the Company incurred transaction costs of GBP366 (2014: GBP601) and GBP2,309 (2014: GBP3,329) on purchases and sales of investments, respectively. These amounts are included in 'Gains on investments at fair value' as disclosed in the income statement.
Details of material holdings in unquoted investments
Valuation Valuation Last
Cost at Cost at accounts Pre
at at tax
31(st) 31(st) 31(st) 31(st)
August August August August period Net Turnover (loss)/
2015 2015 2014 2014 end assets profit
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Anaxsys Technology 284 13 284 52 31/01/15 492 - -
Airways Engineering 31/10/14 (64) - -
Loan Stock 45 - 45 -
Ordinary
B shares 30 - 30 -
Chelverton
Asset Management
Holdings 31/03/15 650 3,230 772
Loan Stock - - 100 100
Ordinary A
Shares 2 120 2 67
Closed Loop
Recycling 30/06/13 (10,534) 15,424 (5,666)
Loan stock 252 - 252 252
Ordinary B
shares 84 - 84 -
La Salle Education
Limited 100 25 100 100 31/12/14 553 38 (435)
Main Dental
Loan stock 75 - 75 -
Ordinary B
shares 175 175 175 175 31/03/15 891 1,656 (58)
Parmenion
Capital Partners
LLP 115 1,839 115 1,105 31/03/15 2,563* 7,371* 1,681*
Security Research
Group 52 62 52 55 31/03/15 10,444* 9,446* 1,100*
Transflex
Vehicle Rental 325 555 250 480 31/12/14 5,553 7,048 903
* Consolidated figures
8 SIGNIFICANT INTERESTS
At 31 August 2015 the Company had a holding of 3% or more of the issued class of share that is material in the context of the accounts in the following investments:
Number of Percentage of
shares held issued share Issued share
Security capital capital
23,000
Main Dental 23, 24.08 95,300
CEPS, Ord 5p 1,525,000 15.93 9,573,822
Belgravium Technologies,
Ord 5p 9,000,000 8.92 100,936,547
Transflex Vehicle Rental 277,500 8.15 3,405,000
Plutus Powergen 33,333,334 5.83 571,428,935
Anaxsys Technology 26,000 4.16 624,917
La Salle Education Limited 100,000 3.57 2,658,179
In addition to the above, the Company has a 4.6% interest in the capital and profits of Parmenion Capital Partners LLP. On 4 September 2015 Aberdeen Asset Management Plc. purchased 100% of the Company's interest in Parmenion, subject to FCA approval.
9 DEBTORS - amounts falling due within
one year 2015 2014
GBP'000 GBP'000
Prepayments and other debtors 9 8
-------- --------
10 CREDITORS - amounts falling due within 2015 2014
one year
GBP'000 GBP'000
Accruals and other creditors 28 21
Short term loan 400 200
428 221
-------- --------
During the year the Company utilised a loan facility with Jarvis Investment Management Limited. An additional GBP200,000 was borrowed in February 2015 to help facilitate the Tender Offer. At the year end GBP400,000 is still outstanding. The loan was secured on the assets of the Company and is repayable on demand.
11 CALLED UP SHARE CAPITAL 2015 2014
GBP'000 GBP'000
Allotted, called up and fully paid: 86 96
8,501,650 (2014: 9,466,274) Ordinary shares
of 1p each
Pursuant to the Tender Offer, 944,624 ordinary shares being 10 per cent of the issued ordinary shares were repurchased and cancelled with settlement on 20 March 2015. As a result, there are 8,501,650 ordinary shares of 1p each in issue and circulation.
Duration of Company
At the annual general meeting of the Company falling in the calendar year 2019 and, if the Company has not then been liquidated, unitised or reconstructed, at each fifth annual general meeting of the Company convened by the Board thereafter, the Board shall propose an ordinary resolution that the Company should continue as an investment trust for a further five year period.
Continuation Vote
On behalf of the Board and in accordance with the Company's Articles, we have consulted with major shareholders, representing an overall majority, from which they were all in favour of Company continuing as an investment trust and the Continuation Vote.
The Board remains of the view that the investment strategy employed by the Investment Manager remains essentially valid and that the continuation of the company's investment objective and policy should afford shareholders the opportunity to benefit from the very significant underlying potential value in the portfolio.
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Accordingly, a Resolution will be put forward at the forthcoming AGM that the Company continues as an investment trust.
12 RESERVES Capital
Share redemption Revenue
premium Capitalreserve reserve reserve
Year ended 31 August
2015 GBP'000 GBP'000 GBP'000 GBP'000
At 1 September 2014 2,674 556 93 1,435
Net gains on realisation
of investments - 511 - -
Movement in fair value
of investments - (105) - -
Cost of shares purchased
for cancellation under
tender offer - - 10 (471)
Costs charged to capital - (49) - -
Retained net loss for
the year - - - (68)
At 31 August 2015 2,674 913 103 896
--------- --------------- ----------- ---------
Capital
Share redemption Revenue
premium Capitalreserve reserve reserve
Year ended 31 August
2014 GBP'000 GBP'000 GBP'000 GBP'000
At 1 September 2013 2,674 (150) 83 1,996
Net gains on realisation
of investments - 295 - -
Movement in fair value
of investments - 457 - -
Cost of shares purchased
for cancellation under
tender offer and buyback
offer - - 10 (486)
Costs charged to capital - (46) - -
Retained net loss for
the year - - - (75)
At 31 August 2014 2,674 556 93 1,435
--------- --------------- ----------- ---------
13 NET ASSET VALUE PER ORDINARY SHARE
The basic net asset value per Ordinary share is based on net assets of GBP4,672,000 (2014: GBP4,854,000) and on 8,501,650 (2014: 9,446,274) Ordinary shares, being the number of shares in issue at the year end, less Treasury shares.
14 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At 31 August 2015 there were no capital commitments or contingent liabilities (2014: GBPnil).
15 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES
The Company's financial instruments comprise securities and other investments, cash balances and debtors and creditors that arise from its operations, for example, in respect of sales and purchases awaiting settlement and debtors for accrued income.
The Company primarily invests in companies traded on AIM with a market capitalisation at the time of investment of up to GBP50 million. The Company finances its operations through its issued capital and existing reserves.
In following its investment objective, the Company is exposed to a variety of risks that could result in a reduction in the Company's net assets. These risks are market risk (comprising exchange rate 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:
(i) Market risk - market price risk
Market price risk arises mainly from uncertainty about future prices of financial investments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions by way of price movements other than movements in exchange rates and interest rates.
The Company's investment portfolio is exposed to market price fluctuations which are monitored by the
Investment Manager who gives timely reports of relevant information to the Directors. Investment performance is also reviewed at each Board meeting.
The Directors are conscious of the fact that the nature of AIM investments is such that prices can be volatile. Investors should be aware that the Company is exposed to a higher rate of risk than exists within a fund which holds traditional blue chip securities.
Adherence to the investment objectives and the internal control limits on investments set by the Company mitigates the risk of excessive exposure to any one particular type of security or issuer.
The Company's exposure to other changes in market prices at 31 August on its investments is as follows:
A 20% decrease in the market value of investments at 31 August 2015 would have decreased net assets attributable to shareholders by 11 pence per share (2014: 6 pence per share). An increase of the same percentage would have an equal but opposite effect on net assets available to shareholders.
2015 2014
GBP'000 GBP'000
Fair value through profit or loss
investments 4,672 4,854
(ii) Market risk - exchange rate risk
All of the Company's assets are in sterling and accordingly the only currency exposure the Company has is through the trading activities of its investee companies.
(iii) Market risk - interest rate risk
Changes in interest rates may cause fluctuations in the income and expenses of the Company.
The majority of the Company's financial assets are non-interest bearing. As a result, the Company'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 31 August of financial assets and financial liabilities to interest rate risk is as follows:
2015 2014
GBP'000 GBP'000
Cash at bank 69 40
The effect of an interest rate increase of 1% would increase net revenue before taxation on an annualised basis by GBP690 (2014: GBP400). If there was a decrease in interest rates of 0.5% net revenue before taxation would decrease by GBP345 (2014: GBP200). These calculations are based on balances as at 31 August 2015 and may not be representative of the year as a whole.
The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held with the custodian to be delayed.
(v) Liquidity risk
Forty two percent of the Company's assets are AIM quoted securities and three percent on NASDAQ quoted securities, which under normal conditions can be sold to meet funding commitments if necessary. These may however be difficult to realise in adverse market conditions. The Company's unquoted investments, representing the remaining fifty five percent of the portfolio, could be more difficult to realise as they are not tradable instruments.
(vi) Maturity Analysis of Financial Liabilities
The Company's financial liabilities comprise of creditors as disclosed in note 10. All items are due within one year.
(vii) Managing Capital
The Company's capital management objectives are to increase net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap UK Index.
Primarily the Company finances its operations through its issued capital and existing reserves. However to help fund the Tender Offer last year the Company borrowed on a short term loan GBP400,000 from its Custodians Jarvis Investment Management. At the year end an amount of GBP400,000 was outstanding.
(viii) Fair values of financial assets and financial liabilities
All of the financial assets and liabilities of the Company are held at fair value.
(ix) Financial instruments by category
The financial instruments of the Company fall into the following categories
31 August 2015
Assets at
Loans fair value
At amortised and through
profit or
cost receivables loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the
Balance Sheet
Investments - - 5,022 5,022
Debtors - 9 - 9
Cash at bank 69 - - 69
Total 69 9 5,022 5,100
------------- ------------ ------------ --------
Liabilities as per
the Balance Sheet
Creditors 28 400 - 428
Total 28 400 0 4,672
--- ---- ------
31 August 2014 Assets
At at fair
Loans value
amortised and through
profit
cost receivables or loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the
Balance Sheet
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