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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 Apr 2019 to Apr 2024
TIDMCGW
RNS Number : 5252O
Chelverton Growth Trust PLC
07 November 2016
CHELVERTON GROWTH TRUST PLC
FINAL RESULTS FOR THE YEARED 31 AUGUST 2016
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 01392 487056.
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
Hot Features
Premium
Benchmark MSCI Small Cap UK Index
Investment Manager Chelverton Asset Management Limited
Total net assets GBP3,987,000 as at 31 August 2016
Market capitalisation GBP5,229,000 as at 31 August 2016
Capital structure 6,377,088 Ordinary 1p shares carrying
one vote each
.
Performance statistics
Year ended Year ended
31 August 31 August
2016 2015 % Change
Net assets GBP3,987,000 GBP4,672,000 (14.66)
Net asset value per
share (NAV) 62.53p 54.95p 13.79
MSCI Small Cap UK Index 363.11 349.89 3.78
Share price 82.00p 42.50p 92.94
Premium/ (discount)
to net asset value 31.14% (22.66)%
Revenue loss after taxation GBP(140,000) GBP(68,000)
Revenue loss per share (1.86)p (0.75)p
Capital gain per share 8.26p 3.97p
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 good progress in which the fund's Net Asset Value ("NAV") per share has increased from 54.95p to 62.53p - an increase of 13.79% a significant outperformance over the Company's benchmark index, the MSCI Small Cap UK Index which rose by 3.78%.
The period under review has been dominated by the run-up to the EU Referendum Vote and the ensuing outcome. We have now entered a period of uncertainty fuelled by seemingly endless media speculation. This state of affairs is likely to last for a significant period of time.
Generally speaking, the companies in the portfolio are domestically focused and their business dealings are therefore linked directly to the prosperity and growth of the UK economy. With the substantial and sudden decline in sterling since the Referendum Vote many will see a rise in their impute costs, it is hoped that this will be compensated by increased export opportunity and increased market share in their UK markets due to the competitive advantage a lower pound gives vis a vis overseas products and services. It should be noted that many investee companies employ people from the EU whom have come to work in the UK, it is important that their future status is defined as quickly as possible.
In the period under review, the UK economy grew at, or around, the long-term average rate. Both the IMF and Treasury have had to consistently increase their assessment of the rate of economic growth in the UK. It no longer looks like the UK will slip into recession in the short term, as had been widely forecast before the Referendum vote, and whilst growth may be subdued for a period, it is widely expected that the Government will announce measures in the Autumn Statement to bolster the economy and provide a much needed investment in the infrastructure of the UK.
Inflation, although expected to rise in the short term, is still at historically low levels and well below the Bank of England's target of 2%. Whilst bank base rates look like they will remain at historically low levels the access to credit for many small companies is still difficult and even if secured, expensive.
The companies in the portfolio have generally made progress over the past year and as ever we hope that the investment and development that has taken place in the past few years will, notwithstanding the comments above, begin to bear fruit over the coming years.
As noted in my statement last year, the Board continue to examine strategic options that will enable all Shareholders to realise full value efficiently in the medium term. The tender process is a key element of this strategy and the Board remains committed to an annual tender as a means of offering Shareholders the ability to realise some of their shareholding at a modest discount to net asset value. In order to provide some logical consistency, the tender will take place the same time as it has this year, in March with the pricing to be decided when the interim accounts are produced at the end of February 2017. Given the continued strong performance of the unquoted portfolio and the oversubscribed tender earlier this year, it is the Board's intention, if possible, to maintain the tender at 25% in 2017.
I do not usually comment on short term fluctuation in the Company Share price as we are focussed upon the creation of long term value as measured by the NAV of the company.
It would be my reasonable expectation that the share price would trade around the NAV of the Company as reflected in the report and accounts (currently 62.53p). Therefore, I see no fundamental reason for the current 108% premium to the NAV to be maintained.
I would like to thank David Horner and his team for the excellent performance achieved over the last 12 months and although undoubtedly challenges exist the portfolio seems well positioned and I am hopeful of continued good performance over the longer term.
Kevin Allen
Chairman
7 November 2016
Investment Manager's overview
In the past year the UK economy has again grown steadily. However, given the result of the EU Referendum in June no-one can now be sure how things will develop going forward. This uncertainty will, for a few years, become the "new normal" and companies and investors will have to adapt.
Given the instability and tensions, both political and economic, in the European Union this change in attitude is long overdue. The unexpected result of the EU Referendum has acted as a catalyst for investors, economists and politicians to consider the overall EU/UK relationship with more clarity. The position of the UK has been well documented but there are currently profound political and economic questions being asked in Italy, Austria, Holland, France, Germany and Hungary. There is little doubt that in a year's time the whole political landscape may have changed very dramatically.
Without wishing to appear complacent, we believe that the difficult change that the UK will need to go through over the next two to five years will leave the country in a better position politically and economically.
The companies that this portfolio invests in are essentially small UK businesses that will need to adapt and be "fleet of foot" to ensure that they are winners going into the future. The Government appear to have recognised that the SME sector is critical to the future wealth and development of the UK economy and that these businesses need help to prosper.
The Eurozone continues to sluggishly recover from the "Great Recession". The ongoing problems in Greece have not been resolved, and probably cannot be until Greece is allowed to leave the Euro. There is clear evidence that many parts of the EU banking system will require restructuring and substantial recapitalisation. The migrant crisis does not seem to abate and with major offensives in Syria and Iraq this human tragedy is only likely to get worse.
Portfolio review
The most important change to the portfolio was the sale of Parmenion Capital Partners LLP to Aberdeen Asset Management plc at the beginning of the year for GBP1.78m with a possible further payment, dependent on Parmenion's performance, up to a maximum of GBP674,000. Taking the progress of Parmenion since the sale and the many factors that could possibly de-rail any earn-out being achieved, it was decided at this stage to include GBP100,000 in these accounts in respect of this possible future sum. We will continue to closely monitor performance against the earn-out criteria and revalue the asset accordingly.
This year we have sold the balance of the shareholding in IDOX plc which has been a major contributor to the fund over many years. We have reduced our holding in LPA plc as its share price has finally recognised its value as a specialist supplier to the manufacturers of railway rolling stock.
Additional investments were made in Touchstar plc, the new name for Belgravium Technologies plc, which, following its interim results has begun to see some recognition in the share price of the operational progress that has been made. Further investments were made in Petards plc and Lombard Risk Management plc both of which we expect to make good contributions to the growth of the fund in the current year.
A new unquoted investment was made in Pedalling Forth Limited, trading as VeloVixen. This young business supplies by an internet "shop" cycling clothing for women. As most people are aware, cycling is enjoying a massive growth in participation and the percentage increase in women cyclists is probably greater than that of the overall market. This funding is to finance additional marketing of the business as it develops.
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 again revalued upwards reflecting the growth in funds under management. The investment in Transflex Vehicle Rental was also increased, recognising the significant progress made; this was highlighted with the company coming third in a league table of the fastest growing North East companies. The holding in La Salle Education was written off to reflect the disappointing take up in their product by the market place.
Outlook
The ongoing growth of Transflex Vehicle Rental, the largest holding in the fund, is expected to continue with the opening of new sales and operational outlets. Expected further recovery and growth in the share prices of a number of the AIM holdings should also contribute to the future increase in the asset value.
We expect to see further share price recovery and growth across the portfolio over the next twelve months and another year of good progress in 2016/17.
David Horner
Chelverton Asset Management Limited
7 November 2016
Portfolio Review
as at 31 August 2016
% of
Investment Sector Valuation total
GBP'000 portfolio
-------------------------------------------- ---------------------------- --------- ----------
AIM traded
Pharmaceuticals &
Alliance Pharma Biotechnology 49 1.3
Acquisition of the manufacturing,
sales and distribution rights to
pharmaceutical products
CEPS Support Services 614 15.6
Trading holding company for a number
of companies supplying services
and products
Software & Computer
Lombard Risk Management Services 201 5.1
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 123 3.1
Design, manufacture and marketing
of industrial electrical accessories
Technology Hardware
MTI Wireless Edge & Equipment 165 4.2
Developer and manufacturer of sophisticated
antennas and antenna systems
Northbridge Industrial
Services Industrial Engineering 32 0.8
Specialist industrial hire services
Petards Group Support Services 335 8.5
Development, provision and maintenance
of advanced security systems and
related services
Plutus Powergen Flexible Energy
Supply 400 10.2
Providers of management infrastructure
and expertise to operate power plants
and provide flexible electricity
generation
Technology Hardware
Touchstar * and Equipment 406 10.4
Software systems for warehousing
and distribution
Universe Group Support Services 73 1.9
Provision of credit fraud prevention,
loyalty and retail systems
Nasdaq Traded
One Horizon Group Support Services 84 2.1
Provider of mobile satellite communications
equipment and airtime
Unquoted
Airways Engineering Support Services
Ordinary B Shares - -
Loan Stock - -
Commercial aviation maintenance
Healthcare Equipment
Anaxsys Technology & Services 23 0.6
A medical device company for patient
monitoring and screening
Chelverton Asset
Management Holdings Support Services 141 3.6
Investment management, including
providing services to Chelverton
Growth Trust plc
La Salle Education Support Services - -
A UK based company dedicated to
improving mathematics education
Main Dental Partners Support Services
Ordinary B Shares 175 4.5
Loan stock - -
Operator of dental
surgeries
Pedalling Forth General Retailers 150 3.8
Internet retailer of cycling clothing
for women
Security Research
Group Support Services 52 1.3
Leading provider of Local Authority
residential property searches; provision
of packaging solutions
Transflex Vehicle
Rental Support Services 902 23.0
Light commercial vehicle rental
--------- ----------
Portfolio Valuation 3,925 100.0
--------- ----------
*Formerly Belgravium Technologies
Portfolio holdings
as at 31 August 2016
31 August 2016 31 August 2015
Valuation % of total Valuation % of total
Investment GBP'000 portfolio GBP'000 portfolio
---------------------------- --------- ---------- --------- ----------
Transflex Vehicle Rental 902 23.0 555 11.0
CEPS 614 15.6 610 12.1
Touchstar * 406 10.4 337 6.7
Plutus Powergen 400 10.2 290 5.8
Petards Group 335 8.5 169 3.4
Lombard Risk Management 201 5.1 144 2.9
Main Dental 175 4.5 175 3.5
MTI Wireless Edge 165 4.2 86 1.7
Pedalling Forth 150 3.8 - -
Chelverton Asset Management
Holdings 141 3.6 120 2.4
LPA Group 123 3.1 118 2.3
One Horizon Group 84 2.1 134 2.7
Universe Group 73 1.9 65 1.3
Security Research Group 52 1.3 62 1.2
Alliance Pharma 49 1.3 56 1.1
Northbridge Industrial
Services 32 0.8 60 1.2
Anaxsys Technology 23 0.6 13 0.3
Airways Engineering - - - -
IDOX ** - - 164 3.3
La Salle Education - - 25 0.5
Parmenion Capital Partners
LLP ** - - 1,839 36.6
Total 3,925 100.0 5,022 100.0
--------- ---------- --------- ----------
*Formerly Belgravium Technologies
** Sold during the year
Portfolio breakdown by sector and by Index
Percentage of portfolio by sector
Support Services 60.5% Technology Hardware & Equipment 14.6% Flexible Energy Supply 10.2% Software & Computer Services 5.1% General Retailers 3.8% Electronic & Electrical Equipment 3.1% Pharmaceuticals & Biotechnology 1.3% Industrial Engineering 0.8% Healthcare Equipment & Services 0.6%
Percentage of portfolio by index
AIM 61.1% Unquoted 36.8% Nasdaq 2.1%
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, the Company carries on business as an investment trust. Investment trusts are collective closed-ended public limited companies.
Chelverton Growth Trust plc is a public limited company incorporated in England and Wales (registration number 2989519) with its registered office being Suite 8, Bridge House, Courtenay Street, Newton Abbot TQ12 2QS.
The Company is an investment company under section 833 of the Companies Act.
The Company's shares are listed on the London Stock Exchange main market under the code CGW (sedol 0262134).
Board
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.
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 earnings prospects over a five-year time horizon.
The Company's Investment Manager is Chelverton Asset Management Limited, an independent investment manager focussing exclusively on achieving returns for investors based on UK investment analysis of the highest quality. The founder and employee owners of Chelverton include experienced investment professionals with strong investment performance records who believe rigorous fundamental research allied to patience is the basis of long-term investment success.
The Chairman's statement and the Investment Manager's overview give details of the Company's activities during the year under review.
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 Manager's overview.
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.
Premium/discount volatility
As with many investment trust companies, premiums and 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"), the Alternative Investment Fund Manager's Directive ("AIFMD") 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 16 to 22. 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
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's share price and the premium/discount of the share price in relation to the NAV.
The Company's Income statement is set out below.
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 2016 was 62.53p (2015: 54.95p), an increase of 13.79%. By comparison the benchmark rose by 3.78%.
The Company's share price at the year-end was 82.00p (2015: 42.50p).
Viability Statement
The Board reviews the performance and progress of the Company over various time periods and uses these assessments, regular investment performance updates from the Investment Manager and a continuing programme of monitoring risk, to assess the future viability of the Company. The Directors consider that a period of three years is the most appropriate time horizon to consider the Company's viability and after careful analysis, the Directors believe that the Company is viable over a three-year period. The Directors are of the opinion that the Company has sufficient liquidity in the portfolio in readily realisable smaller capitalised AIM traded securities.
In order to maintain viability, the Company has a robust risk control framework for the identification and mitigation of risk which is reviewed regularly by the Board. The Directors also seek reassurance from suppliers that their operations are well managed and they are taking appropriate action to monitor and mitigate risk. The Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of assessment.
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 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
Kevin Allen
Chairman
7 November 2016
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. The Company will be treated as an investment trust company for each subsequent accounting period, subject to there being no serious breaches of the conditions. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2016 so as to be able to continue to qualify as an authorised investment trust. 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. Mr Horner is a director of CAM.
The Company pays CAM, in respect of its services as Investment Manager, an annual fee of 1% payable monthly in arrears.
The amount payable to CAM for the year ending 31 August 2016 was GBP46,000. At the year-end GBP3,500 was outstanding to CAM.
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 21 December 2015, company secretarial services and the general administration of the Company are undertaken by ISCA Administration Services Limited for an annual fee of GBP40,000.
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 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
7 November 2016
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 the Directors, Directors Remuneration Report and Corporate Governance Statement.
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 Strategic Report incorporating the Chairman's statement and Investment Manager's overview together with the 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
7 November 2016
NON- STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2016 and 2015 but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 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 (iii) 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
for the year ended 31 August 2016
2016 2015
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 - 565 565 - 406 406
Income 2/9 27 100 127 60 - 60
Investment management
fee 3 (12) (35) (47) (12) (37) (49)
Other expenses 4 (155) (7) (162) (116) (12) (128)
Net return on ordinary
activities before
taxation (140) 623 483 (68) 357 289
Taxation on ordinary
activities 5 - - - - - -
Net return on ordinary
activities after
taxation (140) 623 483 (68) 357 289
Revenue Capital Total Revenue Capital Total
Return per Ordinary
share 6 (1.86)p 8.26p 6.40p (0.75)p 3.96p 3.21p
------- ------- ------- ------- ------- -------
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 Other Comprehensive Income has not been prepared as all such gains and losses are included in the Income statement.
The notes form part of these accounts.
Statement of changes in equity
for the year ended 31 August 2016
Called Share Capital
up Share Premium Special Capital Redemption Revenue
Capital Account Reserve Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
August 2016
1 September 2015 86 2,674 - 913 103 896 4,672
Cost of shares
purchased for
cancellation under
tender offer (22) - (1,149) - 22 - (1,149)
Cancellation of
share premium
account - (2,674) 2,674 - - - -
Costs of cancelling
share premium
account - - (19) - - - (19)
Net return after
taxation for the
year - - - 623 - (140) 483
31 August 2016 64 - 1,506 1,536 125 756 3,987
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
--------- -------- --------- -------- ----------- -------- -------
Statement of financial position
as at 31 August 2016
2016 2015
Notes GBP'000 GBP'000
Fixed assets
Investments at fair
value 7 3,925 5,022
Current assets
Debtors 9 6 9
Cash at bank 261 69
267 78
Creditors - amounts
falling due within
one year 10 (305) (428)
Net current liabilities (38) (350)
Debtors -amounts
falling due after
one year 9 100 -
Net assets 3,987 4,672
------- -------
Share capital and
reserves
Called up share
capital 11 64 86
Share premium account 12 - 2,674
Special reserve 12 1,506 -
Capital reserve 12 1,536 913
Capital redemption
reserve 12 125 103
Revenue reserve 12 756 896
Equity shareholders'
funds 3,987 4,672
Net asset value
per Ordinary share 13 62.53p 54.95p
These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 7 November 2016. They were signed on its behalf by
Kevin Allen
Chairman
Statement of cash flows
For the year ended 31 August 2016
2016 2015
GBP'000 GBP'000
Cash flows from operating
activities
Net return on ordinary
activities 483 289
Adjustment for:
Net capital return (623) (357)
Income credited to capital 100 -
Expenses charged to capital (42) (48)
Interest paid 11 15
Increase in creditors 27 7
(Increase)/decrease in
debtors (97) 1
Other - (2)
Cash used in operations (141) (95)
Cash flows from investing
activities
Purchase of investments (420) (549)
Proceeds from sales of
investments 2,082 960
Net cash from investing
activities 1,662 411
Cash flows used in financing
activities
Cost of shares purchased
for cancellation under
tender offer (1,149) (472)
Costs of cancelling share
premium account (19) -
New loan advanced 300 200
Capital repayment of loans (450) -
Interest paid (11) (15)
Net cash used in financing
activities (1,329) (287)
Net increase in cash 192 29
Cash at the beginning
of the year 69 40
Cash at the end of the
year 261 69
------- -------
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 November 2014, regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts. All the Company's activities are continuing.
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.
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 estimation uncertainty'.
Significant judgements and estimation uncertainty
Preparation of the financial statements requires the Investment Manager to make significant judgements. The items in the financial statements where these judgements 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.
Special reserve
The Special reserve was created by the cancellation of the Share Premium account by order of the High Court on 13 January 2016. It can be used for the repurchase of the Company's own shares.
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
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income from
investments
Income from
LLP investments 15 100 115 35 - 35
UK net dividend
income 12 - 12 21 - 21
Income from
loan interest - - - 4 - 4
Total income 27 100 127 60 - 60
------- ------- ------- ------- ------- -------
3 INVESTMENT MANAGEMENT FEE
2016 2015
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
management
fee 12 35 47 12 37 49
------- ------- ------- ------- ------- -------
The investment management fee is calculated at the rate of 0.0833% per month, equating to 1% per annum, of the gross value of funds under management and is payable monthly in arrears. At 31 August 2015 there was GBP3,500 outstanding (2015: GBP4,000).
4 OTHER EXPENSES 2016 2015
GBP'000 GBP'000
Administrative and secretarial
services 59 36
Directors' remuneration 34 34
Audit fee 19 15
Other expenses 50 43
162 128
------- -------
5 TAXATION 2016 2015
Revenue Capital Total Revenue Capital Total
Analysis of charge GBP'000 GBP'000 GBP'000 '000 GBP'000 GBP'000
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 20%. The differences are explained below:
2016 2015
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 20.00%
(2015: 20.42%)
Corporation tax (28) 125 97 (14) 73 59
Investment income
not taxable (5) (20) (25) (12) - (12)
Non-taxable investment
gains - (113) (113) - (83) (83)
Excess expenses
for the period 33 8 41 26 10 36
Current tax charge - - - - - -
for the period
------- ------- ------- ------- ------- -------
At 31 August 2016 the Company had surplus management expenses of GBP3,925,000 (2015: GBP3,720,000) 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 SHARE
2016 2015
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic (1.86)p 8.26p 6.40p (0.75)p 3.96p 3.21p
------- ------- ----- ------- ------- -----
Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of GBP140,000 (2015: GBP68,000) and on 7,538,051 (2015: 9,019,251) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
Capital return per Ordinary share is based on the net capital gain of GBP623,000 (2015: GBP357,000) and on 7,538,051 (2015: 9,019,251) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
Total return per Ordinary share is based on the total gain of GBP483,000 (2015: GBP289,000) and on 7,538,051 (2015: 9,019,251) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
INVESTMENTS 2016 2015
7
GBP'000 GBP'000
AIM 2,398 2,099
Unquoted 1,443 2,789
NASDAQ 84 134
3,925 5,022
--------- ------- -------
AIM Unquoted* NASDAQ Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 2,990 1,539 166 4,695
Opening investment
holding (losses)/gains (891) 1,250 (32) 327
2,099 2,789 134 5,022
Movements in the
year:
Purchases at cost 232 188 - 420
Sales - proceeds (300) (1,782) - (2,082)
gains on sales 233 1,667 - 1,900
Movement in investment
holding (losses)/gains 134 (1,419) (50) (1,335)
Closing valuation 2,398 1,443 84 3,925
Closing book cost 3,155 1,612 166 4,933
Closing investment
holding losses (757) (169) (82) (1,008)
Closing valuation 2,398 1,443 84 3,925
2016 2015
GBP'000 GBP'000
Realised gains on sales 1,900 511
Movement in fair value of investments (1,335) (105)
Net gains on investments 565 406
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 Costs Valuation Valuation
at 31 at 31 at 31 at 31
August August Realised Holding August August
2015 Additions Disposals 2016 gain gain 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
Anaxys
Technology 284 8 - 292 - 2 23 13
Airways
Engineering
Loan stock 45 - - 45 - - - -
Ordinary
B shares 30 - - 30 - - - -
Chelverton
Asset
Management
Holdings 2 - - 2 - 21 141 120
Closed
Loop Recycling
*
Loan stock 252 - - 252 - - - -
Ordinary
B shares 84 - - 84 - - - -
La Salle
Education 100 30 - 130 - (55) - 25
Main Dental
Loan stock 75 - - 75 - - - -
Ordinary
B shares 175 - - 175 - - 175 175
Parmenion
Capital
Partners
LLP 115 - (115) - 1,667 (1,724) - 1,839
Pedalling
Forth - 150 - 150 - - 150 -
Security
Research
Group 52 - - 52 - (10) 52 62
Transflex
Vehicle
Rental 325 - - 325 - 347 902 555
1,539 188 (115) 1,612 1,667 (1,419) 1,443 2,789
------------------- --------- --------- ------- -------- ------- --------- ---------
*In administration
Transaction costs
During the year, the Company incurred transaction costs of GBPnil (2015: GBP366) and GBP667 (2015: GBP2,309) 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
Cost Valuation Costs Valuation Last
at 31 at 31 at 31 at 31 accounts Pre-
August August August August year Net tax (loss)/
2016 2016 2015 2015 end assets Turnover profit
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Anaxsys
Technology 292 23 284 13 31/01/16 59 - -
Airways
Engineering 31/10/15 (65) - -
Loan Stock 45 - 45 -
Ordinary
B shares 30 - 30 -
Chelverton
Asset Management
Holdings
* 2 141 2 120 31/03/16 2,005 3,797 1,384
Closed Loop
Recycling
** 30/06/13 (10,534) 15,424 (5,666)
Loan stock 252 - 252 -
Ordinary
B shares 84 - 84 -
La Salle
Education 130 - 100 25 31/12/15 965 - -
Main Dental 31/03/16 806 - -
Loan stock 75 - 75 -
Ordinary
B shares 175 175 175 175
Pedalling
Forth 150 150 - - 31/12/15 (210) - -
Security
Research
Group 52 52 52 62 31/03/16 10,527 6,843 (57)
Transflex
Vehicle
Rental 325 902 325 555 31/12/15 6,666 11,504 1,253
* Consolidated figures
** In administration
8 SIGNIFICANT INTERESTS
At 31 August 2016 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 Percentage
of shares of issued Issued share
Security held share capital capital
Main Dental 23,000 24.08 95,500
CEPS 1,535,000 16.03 9,573,822
Pedalling Forth 150,000 12.00 1,250,000
Touchstar 625,000 9.91 6,308,750
Transflex Vehicle
Rental 277,500 8.15 3,405,000
Anaxsys Technology 39,525 6.17 640,791
Petards 2,000,000 5.70 35,089,677
La Salle Education 160,000 5.07 3,158,179
Plutus Powergen 33,333,334 4.82 691,428,935
9 DEBTORS 2016 2015
GBP'000 GBP'000
Amounts falling due within
one year
Prepayments and other debtors 6 9
Amounts falling due after one
year
Other debtors * 100 -
------- -------
*The other debtor relates to
capital income due from Parmenion
Capital Partners LLP as detailed
in the Investment Manager's
overview.
10 CREDITORS - amounts falling
due within one year
2016 2015
GBP'000 GBP'000
Accruals and other creditors 55 28
Short term loan 250 400
305 428
------- -------
On 17 June 2016 the Company entered in to a GBP250,000 loan agreement with Jarvis Investment Management Limited. Interest is payable monthly in arrears at the rate of 4.5% plus the Bank of England base rate.
At the year-end GBP250,000 is outstanding of which GBP125,000 was drawn down on 17 June 2016 and GBP125,000 on 8 August 2016. The loan is secured on the assets of the Company and is repayable on demand.
On 18 November 2015 the Company entered in to a GBP50,000 loan agreement with Chelverton Asset Management Limited. Interest was payable at the rate of 4.75%. The loan was repaid in full on 14 January 2016.
The GBP400,000 loan outstanding at 31 August 2015 was repaid in full on 13 January 2016
11 CALLED UP SHARE CAPITAL 2016 2015
GBP'000 GBP'000
Allotted, called up and fully
paid:
6,377,088 (2015: 8,501,650)
Ordinary shares of 1p each 64 86
------- -------
Pursuant to the Tender Offer, 2,124,562 ordinary shares being 24.99 per cent of the issued ordinary shares were repurchased and cancelled with settlement on 18 March 2016. As a result, there are 6,377,088 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 2020 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.
12 RESERVES Capital
Special Revenue
Share reserve Capital redemption reserve
premium * reserve reserve *
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
August 2016
At 1 September
2015 2,674 - 913 103 896
Net gains on
realisation of
investments - - 1,900 - -
Movement in fair
value of investments - - (1,335) - -
Cost of shares
purchased for
cancellation
under tender
offer - (1,149) - 22 -
Cancellation
of share premium
account (2,674) 2,674 - - -
Costs of cancelling
share premium
account - (19) - - -
Income of a capital
nature - - 100 - -
Costs charged
to capital - - (42) - -
Retained net
loss for the
year - - - - (140)
At 31 August
2016 - 1,506 1,536 125 756
-------- -------- -------- ---------- --------
*Distributable reserves. The Special Reserve may be used for the repurchase of the Company's own shares.
Capital
Capital Redemption Revenue
Share premium reserve 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
------------- -------- ----------- --------
13 NET ASSET VALUE PER ORDINARY SHARE
The basic net asset value per Ordinary share is based on net assets of GBP3,987,000 (2015: GBP4,672,000) and on 6,377,088 (2015: 8,501,650) Ordinary shares, being the number of shares in issue at the year end.
14 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At 31 August 2016 there were no capital commitments or contingent liabilities (2015: 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, existing reserves and the loan from its custodian as detailed in note 10.
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 2016 would have decreased net assets attributable to Shareholders by 12 pence per share (2015: 12 pence per share). An increase of the same percentage would have an equal but opposite effect on net assets available to Shareholders.
2016 2015
GBP'000 GBP'000
Fair value through profit or
loss investments 3,925 5,022
------- -------
(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:
2016 2015
GBP'000 GBP'000
Cash at bank 261 69
------- -------
Loan from custodian 250 400
------- -------
As the Company receives no interest on its bank balances and pays interest on its loan then the effect of an interest rate increase of 1% would decrease net revenue before taxation on an annualised basis by GBP2,500 (2015: GBP4,000). If there was a decrease in interest rates of 0.5% net revenue before taxation would increase by GBP1,250 (2015: GBP2,000). These calculations are based on balances as at 31 August 2016 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
Sixty one percent of the Company's assets are AIM quoted securities and two percent 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 thirty seven 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 further investment the Company borrowed on a short term loan GBP250,000 from its Custodians, Jarvis Investment Management. At the year-end an amount of GBP250,000 was outstanding. The previous loan of GBP400,000 was repaid during the year. Further details are given in note 10.
(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 2016
Assets
at fair
Loans value
At amortised and through
profit
cost receivables or loss Total
GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the
Balance Sheet
Investments - - 3,925 3,925
Debtors - 106 - 106
Cash at bank 261 - - 261
Total 261 106 3,925 4,292
------------ ----------- -------- -------
Liabilities as per
the Balance Sheet
Creditors 55 250 -305
Total 55 250 -305
--- ---
31 August 2015
Assets
at fair
Loans value
At amortised and through
profit
cost receivables or 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 -428
--- ---
Fair value hierarchy
In accordance with FRS 102, the Company must disclose the fair value hierarchy of financial instruments.
The fair value hierarchy consists of the following three classifications:
Classification A - Quoted prices in active markets for identical assets or liabilities.
Quoted in an active market in this context means quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm's length basis.
Classification B - The price of a recent transaction for an identical asset, where quoted prices are unavailable.
The price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If it can be demonstrated that the last transaction price is not a good estimate of fair value (e.g. because it reflects the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that price is adjusted.
Classification C - Inputs for the asset or liability that are based on observable market data and unobservable market data, to estimate what the transaction price would have been on the measurement data in an arm's length exchange motivated by normal business considerations.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a classification C measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices or last traded in respect of SETS at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset.
Investments, whose values are based on quoted market prices in active markets, and therefore classified within classification A, include active listed equities. The Company does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as B.
Investments classified within classification C have significant unobservable inputs. Classification C instruments include unquoted holdings. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value. The Company has no classification B investments, and classification C investments consist only of unquoted holdings.
Financial assets at fair value
through profit or loss
Classification Classification Classification
A B C Total
At 31 August
2016 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 2,482 - 1,443 3,925
Total 2,482 - 1,443 3,925
-------------- -------------- -------------- -------
Classification Classification Classification
A B C Total
At 31 August
2015 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 2,233 - 2,789 5,022
Total 2,233 - 2,789 5,022
-------------- -------------- -------------- -------
The following table presents the movement in the classification C investments for the period ended 31 August 2016:
Equity
Investments
GBP'000
Opening balance 2,789
Purchases 188
Sales at cost (115)
Total losses on investments in the
Income statement (1,419)
Closing balance 1,443
------------
16 RELATED PARTY TRANSACTIONS
Under the terms of the agreement dated 28 June 2001, the Company has appointed Chelverton Asset Management Limited to be the Investment Manager. The fee arrangements for these services and fees payable are set out in the Report of the Directors on page 26 of the Annual Report and in note 3 to the accounts. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited and chairman of CEPS PLC in which the Company holds an investment. Mr Martin is the chairman of Touchstar plc, in which the Company holds an investment.
The three Directors also have individual holdings in Chelverton Asset Management Holdings, a company which has Mr Horner as a director and which the company also has a direct holding. The directors' holdings are detailed below:
Percentage
Percentage Ordinary of Loan Loan
of holding shares stock stock
in shares held holding held
% GBP'000 % GBP'000
K J Allen 1 1 - -
D A Horner 56 56 93 1,000
I P Martin 2 2 - -
17 CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Company's capital management objectives are:
-- to ensure the Company's ability to continue as a going concern; -- to provide an adequate return to Shareholders; -- to support the Company's stability and growth; -- to provide capital for the purpose of further investments.
The Company actively and regularly reviews and manages its capital structure to ensure an optimal capital structure, taking into consideration the future capital requirements of the Company and capital efficiency, projected operating cash flows and projected strategic investments opportunities. The management regards capital as total equity and reserves, for capital management purposes.
ANNUAL REPORT AND AGM
The foregoing represents extracts from the full text of the Annual Report and Accounts for the year ended 31 August 2016. The full Report will shortly be available for download from the following website: www.chelvertonam.com
Copies will be posted to Shareholders shortly.
The AGM will be held on 15 December 2016 at 12.00 pm at the offices of Chelverton Asset Management, 12B George Street, Bath BA1 2EH
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
November 07, 2016 09:53 ET (14:53 GMT)
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