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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 : 9671V
Chelverton Growth Trust PLC
08 November 2017
CHELVERTON GROWTH TRUST PLC
LEI: 213800I86P8BAE6UVI83
FINAL RESULTS FOR THE YEARED 31 AUGUST 2017
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 ("AIM") 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 AIM 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 GBP5,460,000 as at 31 August 2017
Market capitalisation GBP4,018,000 as at 31 August 2017
Capital structure 6,377,088 Ordinary 1p shares carrying
one vote each
.
Performance statistics
Year ended Year ended
31 August 31 August
2017 2016 % Change
Net assets GBP5,460,000 GBP3,987,000 36.94
Net asset value per
share (NAV) 85.63p 62.53p 36.94
MSCI Small Cap UK
Index 412.80 363.11 13.68
Share price 63.00p 82.00p (23.17)
(Discount)/premium
to net asset value (26.43)% 31.14%
Revenue loss after
taxation GBP(136,000) GBP(140,000)
Revenue loss per
share (2.13)p (1.86)p
Capital gain per
share 25.23p 8.26p
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 report an excellent year of progress in which the Company's net asset value per share increased by 36.9% to 85.63p. This represents a significant outperformance over the Company's benchmark index, the MSCI Small Cap UK Index which rose by 13.7%.
The last 12 months has seen politics dominating the agenda serving to create an environment of considerable uncertainty. In March 2017, the Conservative Government exercised Article 50 to trigger Britain's exit from the European Union after 44 years of membership. In an opportunistic attempt to strengthen her hand ahead of the Brexit negotiation, Prime Minister Theresa May called an unexpected General Election in June 2017. Instead of achieving an enhanced position, the Conservative Government lost its overall majority in Parliament, thus weakening the Prime Minister's position, adding to the uncertainty around what the future relationship between the United Kingdom and Europe will look like.
Corporate Britain is maintaining what appears to be a "business as usual" position, but uncertainty is not a positive to running a business and is not conducive to investment decisions. Until there is more clarity this will be an undoubted headwind.
The companies held in the portfolio are highly UK-centric in their business dealings and therefore the prosperity and growth of the domestic economy is the biggest single driver of their future success. It is probable that the UK economy will continue to see steady but slow economic growth, together with modest inflationary pressures. The Bank of England has started to raise interest rates to check the rising level of consumer debt. This can be construed as a sign that the UK is in reasonable shape and reinforces the likelihood of future economic growth. The Government will probably add some fiscal stimuli to counter any negative effects of monetary tightening. Overall, the Board expects to see a benign but supportive backdrop for financial markets and the companies in which we are invested.
The Tender Offer
In September 2017, the Board announced a tender offer to acquire up to 15% of the outstanding shares at a price of 76.73p, a discount of 7.5% against the net asset value per share of 82.95p at 18 September 2017. In total, 956,563 shares were available to be tendered. However, in the event the total number of shares tendered was only 749,765 or 11.76% of the share in issue.
This is the Company's first tender offer which has not been over-subscribed. In this context, it is worth noting that the effect of the multiple tender offers and the occasional buy-back of shares over the last 11 years has reduced the Company's share capital by almost 70%, from 18.1 million to the current 5.6 million shares. The Board remains committed to the annual tender process as a means of offering Shareholders the ability to realise some of their shareholding at a modest discount to the net asset value.
It remains the Board's intention to carry out another tender of up to 15% of the outstanding shares in 2018.
The Future
As the number of shares in issue continues to decline, (as a direct result of the multiple tender offers) and, at the same time, the number of investment holdings reduces, the ongoing viability of Chelverton Growth Trust must logically be in question. Over the period of the tender offers, the fund has grown by a larger percentage than the percentage reduction in the share capital. Indeed, it is worth pointing out that five years ago the net assets were some GBP4.2 million against the current value of GBP5.5 million and over the same period, the share capital has been reduced by more than 50% by the acquisition of 6.2 million shares.
The Board is mindful of the ongoing cost of running a Company in which only the investment management fee is designed to flex with the size of the Company. The Board continues to review options for the future which maximise shareholder value, whilst the investment manager continues to effectively manage the reducing portfolio.
The Outlook
The companies in the portfolio have generally made steady progress over the past year. We anticipate that the investment and development that has taken place in the past few years will continue to bear fruit in the future period.
Kevin Allen
Chairman
8 November 2017
Investment Manager's overview
In the past year the UK economy has again grown steadily, albeit at a somewhat slower rate than in previous years. "On the ground" when meeting and visiting with current or potential investee companies there seems to be very little sense of the doom and gloom that one reads about every day in the papers or is broadcast on television. There will be no certainty on the UK's position with the European Community for some time and this same uncertainty will, for a few years, become the "new normal". Companies and investors are already "getting on with getting on" and will in turn position themselves to changing circumstances.
We have said before that as the portfolio is invested in small AIM traded or smaller unquoted UK companies the health and growth of the UK economy is by far and away the most important determinant of our underlying companies' success. Indeed, a review of the sales of all our portfolio companies shows that 83% of sales are made in the UK and only 5% are made to countries in the EU. For information and completeness 3% are made to North America and 9% to the Rest of the World.
Without wishing to appear complacent, in the longer-term we believe that the changes that the UK will go through over the next five years will leave the country in a better position politically and economically. We are also relaxed about the impact of leaving the European Union in respect of the portfolio as there are of course no investments in Pharmaceutical, Aerospace, Automotive and complex Financial Services companies, the sectors that we consider could possibly be most impacted by leaving the European Union.
Portfolio review
The biggest change in the year to the portfolio was the sale of Transflex Vehicle Rental Limited ("Transflex") for 335p per share producing cash proceeds of GBP929,625. The Company backed Transflex from start-up in January 2012 with a modest investment of GBP100,000 and then added a further GBP225,000 over the next two years to fund the rapid growth of the business. The sales price represented a cash return of 2.86 times, and whilst being very satisfactory, was probably a bit less than the management had been hoping for.
A further investment was made as part of a placing by CEPS plc, and this investment coupled with the disposal of Transflex has meant that CEPS has become the largest holding in the Company. CEPS has multiple subsidiary trading companies and has just announced its interim results for the six months ended 30 June 2017 which were very positive and their view is that there will be further progress in the second half of 2017 and on into 2018.
The Board has chosen to recognise in these accounts the full amount of the Company's share of the earn-out of GBP673,652 in respect of the sale of Parmenion Capital Partners two years ago to Aberdeen Asset Management plc. The relevant date for the earn-out calculation was 29 September 2017. These proceeds were received on 23 October 2017 and GBP250,000 was used to repay the loan from Jarvis Investment Management Limited, the fund's custodian.
This year we have sold the balance of the shareholdings in LPA Group plc, Alliance Pharma plc and Northbridge Industrial Services plc at what now appear to be advantageous prices. The holding in Petards plc was reduced as the share price moved up very sharply and then towards the end of the year the holding was modestly added to at much lower prices despite very positive interim results. Petards plc supplies sophisticated products to the rail industry and is building a very large order book to be delivered over the next two to three years.
Plutus Powergen plc has continued its rapid development of the past few years and is broadening its business to help mitigate the impact of political risk on energy policy.
The holding in Chelverton Asset Management Holdings Limited, the company used to finance the MBO of Chelverton Asset Management, the Investment Manager of this Company, was again revalued upwards reflecting the continued success of their funds which has led to a growth in their funds under management.
Security Research plc announced that it was self-liquidating and will be returning funds to shareholders over the next period.
The holding in Anaxsys Technology was written down to nil to reflect the disappointing take up in their product by the market place. The product rights have been sold to a third party from whom royalty payments will become due in the event of future sales.
Outlook
The ongoing growth of CEPS plc, the largest holding in the Company, is expected to continue with the share price beginning to recognise the profits, cash generation and value created in the subsidiaries. Expected further recovery and growth in the share prices of a number of the AIM holdings will also contribute to the future increase in the asset value.
We expect to see further share price growth across the portfolio over the next twelve months and we believe we can expect to see another year of good progress in 2017 - 2018.
David Horner
Chelverton Asset Management Limited
8 November 2017
Portfolio Review
as at 31 August 2017
% of
Investment Sector Valuation total
GBP'000 portfolio
-------------------------------------------- ----------------------- --------- ----------
AIM traded
CEPS Support Services 1,292 30.7
Trading holding company for a number
of companies supplying services
and products
Software & Computer
Lombard Risk Management Services 323 7.7
Lombard Risk is one of the world's
leading providers of collateral
management, liquidity analysis and
regulatory compliance software to
financial organisations
Technology Hardware
MTI Wireless Edge & Equipment 210 5.0
Developer and manufacturer of sophisticated
antennas and antenna systems
Petards Group Support Services 434 10.3
Development, provision and maintenance
of advanced security systems and
related services
Plutus Powergen Flexible Energy
Supply 700 16.6
Providers of management infrastructure
and expertise to operate power plants
and provide flexible electricity
generation
Technology Hardware
Touchstar and Equipment 621 14.7
Software systems for warehousing
and distribution
Universe Group Support Services 61 1.4
Provision of credit fraud prevention,
loyalty and retail systems
Nasdaq Traded
One Horizon Group Support Services 22 0.5
Provider of mobile satellite communications
equipment and airtime
--------- ----------
3,663 86.9
Unquoted
Airways Engineering Support Services
Ordinary B Shares - -
Loan Stock - -
Commercial aviation maintenance
Anaxsys Technology Healthcare Equipment
& Services - -
A medical device company for patient
monitoring and screening
Chelverton Asset
Management Holdings Support Services 200 4.7
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 138 3.3
Loan stock - -
Operator of dental
surgeries
Pedalling Forth General Retailers 150 3.6
Internet retailer of cycling clothing
for women
Security Research
Group Support Services 62 1.5
Leading provider of Local Authority
residential property searches; provision
of packaging solutions
Portfolio Valuation 4,213 100.0
--------- ----------
Portfolio holdings
as at 31 August 2017
31 August 2017 31 August 2016
Valuation % of total Valuation % of total
Investment GBP'000 portfolio GBP'000 portfolio
------------------------ --------- ---------- --------- ----------
CEPS 1,292 30.7 614 15.6
Plutus Powergen 700 16.6 400 10.2
Touchstar 621 14.7 406 10.4
Petards Group 434 10.3 335 8.5
Lombard Risk Management 323 7.7 201 5.1
MTI Wireless Edge 210 5.0 165 4.2
Chelverton Asset
Management Holdings 200 4.7 141 3.6
Pedalling Forth 150 3.6 150 3.8
Main Dental Partners 138 3.3 175 4.5
Security Research
Group 62 1.5 52 1.3
Universe Group 61 1.4 73 1.9
One Horizon Group 22 0.5 84 2.1
Anaxsys Technology - - 23 0.6
La Salle Education - - - -
Airways Engineering - - - -
Transflex Vehicle
Rental* - - 902 23.0
LPA Group* - - 123 3.1
Alliance Pharma* - - 49 1.3
Northbridge Industrial
Services* - - 32 0.8
Total 4,213 100.0 3,925 100.0
--------- ---------- --------- ----------
* Sold during the year
Portfolio breakdown by sector and by index
Percentage of portfolio by sector
Support Services 52.4% Technology Hardware & Equipment 19.7% Flexible Energy Supply 16.6% Software & Computer Services 7.7% General Retailers 3.6%
Percentage of portfolio by index
AIM 86.4% Unquoted 13.1% Nasdaq 0.5%
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) and L.E.I. 213800I86P8BAE6UVI83.
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 ("AIM") 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 AIM 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.
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 AIM 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 focusing 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. An analysis of the portfolio on 31 August 2017 can be found above.
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 Chairman's statement and 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 Board acting as 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 of the Annual Report. 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 2017 was 85.63p (2016: 62.53p), an increase of 36.94%. By comparison the benchmark rose by 13.68%.
The Company's share price at the year-end was 63.00p (2016: 82.00p).
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.
Tender offer
On 4 September 2017, the Company announced details of a Tender Offer to purchase up to 15% of the Company's share capital. On 21 September 2017, the Company announced the results of the Tender Offer. A total of 749,765 shares (representing 11.76% of the Company's issued share capital at that date) were purchased at a price of 76.73p per Ordinary share. These shares have now been cancelled.
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
8 November 2017
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 2017 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 2017 was GBP50,000. At the year-end GBP4,800 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
8 November 2017
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
8 November 2017
NON- STATUTORY ACCOUNTS
The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2017 and 2016 but is derived from those accounts. Statutory accounts for 2016 have been delivered to the Registrar of Companies, and those for 2017 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 2017
2017 2016
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 - 1,086 1,086 - 565 565
Income 2/9 5 574 579 27 100 127
Investment
management
fee 3 (12) (38) (50) (12) (35) (47)
Other expenses 4 (129) (13) (142) (155) (7) (162)
Net return
on ordinary
activities
before taxation (136) 1,609 1,473 (140) 623 483
Taxation on
ordinary activities 5 - - - - - -
Net return
on ordinary
activities
after taxation (136) 1,609 1,473 (140) 623 483
Revenue Capital Total Revenue Capital Total
Return per
Ordinary share 6 (2.13)p 25.23p 23.10p (1.86)p 8.26p 6.40p
------- ------- ------- ------- ------- -------
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 2017
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
2017
1 September
2016 64 - 1,506 1,536 125 756 3,987
Net return
after taxation
for the
year - - - 1,609 - (136) 1,473
31 August
2017 64 - 1,506 3,145 125 620 5,460
--------- -------- --------- -------- ----------- -------- -------
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
The notes form part of these accounts.
Statement of financial position
as at 31 August 2017
2017 2016
Notes GBP'000 GBP'000
Fixed assets
Investments at fair
value 7 4,213 3,925
Current assets
Debtors 9 683 6
Cash at bank 847 261
1,530 267
Creditors - amounts
falling due within
one year 10 (283) (305)
Net current assets/(liabilities) 1,247 (38)
Debtors -amounts
falling due after
one year 9 - 100
Net assets 5,460 3,987
------- -------
Share capital and
reserves
Called up share
capital 11 64 64
Special reserve 12 1,506 1,506
Capital reserve 12 3,145 1,536
Capital redemption
reserve 12 125 125
Revenue reserve 12 620 756
Equity shareholders'
funds 5,460 3,987
Net asset value
per Ordinary share 13 85.63p 62.53p
The notes form part of these accounts.
These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 8 November 2017. They were signed on its behalf by
Kevin Allen
Chairman
Statement of cash flows
For the year ended 31 August 2017
2017 2016
GBP'000 GBP'000
Cash flows from operating
activities
Net return on ordinary
activities 1,473 483
Adjustment for:
Net capital return (1,609) (623)
Income credited to capital 574 100
Expenses charged to capital (51) (42)
Interest paid 11 11
(Decrease)/increase in
creditors (22) 27
Increase in debtors (577) (97)
Cash used in operations (201) (141)
Cash flows from investing
activities
Purchase of investments (535) (420)
Proceeds from sales of
investments 1,333 2,082
Net cash from investing
activities 798 1,662
Cash flows used in financing
activities
Cost of shares purchased
for cancellation under
tender offer - (1,149)
Costs of cancelling share
premium account - (19)
New loan advanced - 300
Capital repayment of loans - (450)
Interest paid (11) (11)
Net cash used in financing
activities (11) (1,329)
Net increase in cash 586 192
Cash at the beginning
of the year 261 69
Cash at the end of the
year 847 261
------- -------
The notes form part of these accounts.
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'. 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
2017 2016
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 - 574 574 15 100 115
UK net dividend
income 5 - 5 12 - 12
Total income 5 574 579 27 100 127
------- ------- ------- ------- ------- -------
INVESTMENT MANAGEMENT
3 FEE
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
management
fee 12 38 50 12 35 47
------- ------- ------- ------- ------- -------
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 2017 there was GBP4,800 outstanding (2016: GBP3,500).
4 OTHER EXPENSES 2017 2016
GBP'000 GBP'000
Administrative and secretarial
services 40 59
Directors' remuneration 34 34
Audit fee 17 19
Other expenses 51 50
142 162
------- -------
5 TAXATION 2017 2016
Revenue Capital Total Revenue Capital Total
Analysis of GBP'000 GBP'000 GBP'000 '000 GBP'000 GBP'000
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 19.58%. The differences are explained below:
2017 2016
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net return on
ordinary activities
before taxation (136) 1,609 1,473 (140) 623 483
Theoretical tax
at UK corporation
tax rate of 19.58%
(2016: 20.00%)
Corporation tax (27) 315 288 (28) 125 97
Investment income
not taxable (1) (112) (113) (5) (20) (25)
Non-taxable investment
gains - (213) (213) - (113) (113)
Excess expenses
for the period 28 10 38 33 8 41
Current tax charge - - - - - -
for the period
------- ------- ------- ------- ------- -------
At 31 August 2017 the Company had surplus management expenses of GBP4,117,000 (2016: GBP3,925,000) 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
2017 2016
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic (2.13)p 25.23p 23.10p (1.86)p 8.26p 6.40p
------- ------- ------ ------- ------- -----
Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of GBP136,000 (2016: GBP140,000) and on 6,377,088 (2016: 7,538,051) 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 GBP1,609,000 (2016: GBP623,000) and on 6,377,088 (2016: 7,538,051) 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 GBP1,473,000 (2016: GBP483,000) and on 6,377,088 (2016: 7,538,051) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
INVESTMENTS 2017 2016
7
GBP'000 GBP'000
AIM 3,641 2,398
Unquoted 550 1,443
NASDAQ 22 84
4,213 3,925
--------- ------- -------
AIM Unquoted* NASDAQ Total
GBP'000 GBP'000 GBP'000 GBP'000
Opening book cost 3,155 1,612 166 4,933
Opening investment
holding losses (757) (169) (82) (1,008)
2,398 1,443 84 3,925
Movements in the
year:
Purchases at cost 535 - - 535
Sales - proceeds (403) (930) - (1,333)
Gains on sales 213 605 - 818
Movement in investment
holding gains/(losses) 898 (568) (62) 268
Closing valuation 3,641 550 22 4,213
Closing book cost 3,500 1,287 166 4,953
Closing investment
holding gains/(losses) 141 (737) (144) (740)
Closing valuation 3,641 550 22 4,213
2017 2016
GBP'000 GBP'000
Realised gains on sales 818 1,900
Movement in fair value of
investments 268 (1,335)
Net gains on investments 1,086 565
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 Cost Valuation
at at Valuation at
31 31 at 31 31
August August Realised Holding August August
2016 Additions Disposals 2017 gain gain/(loss) 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
Anaxys
Technology 292 - - 292 - (23) - 23
Airways
Engineering
Loan stock 45 - - 45 - - - -
Ordinary
B shares 30 - - 30 - - - -
Chelverton
Asset
Management
Holdings 2 - - 2 - 59 200 141
Closed
Loop Recycling
*
Loan stock 252 - - 252 - - - -
Ordinary
B shares 84 - - 84 - - - -
La Salle
Education 130 - - 130 - - - -
Main Dental
Loan stock 75 - - 75 - - - -
Ordinary
B shares 175 - - 175 - (37) 138 175
Pedalling
Forth 150 - - 150 - - 150 150
Security
Research
Group 52 - - 52 - 10 62 52
Transflex
Vehicle
Rental 325 - (325) - 605 (577) - 902
1,612 - (325) 1,287 605 (568) 550 1,443
------- --------- --------- ------- -------- ------------ --------- ---------
*in administration
Transaction costs
During the year, the Company incurred transaction costs of GBPnil (2016: GBPnil) and GBP1,079 (2016: GBP667) 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 Valuation Last
at at 31 Cost at 31 accounts
31 August at 31 August year Pre-tax
August 2017 August 2016 end Net (loss)/
2017 2016 assets Turnover profit
Investment GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Anaxsys
Technology 292 - 292 23 31/01/16 59 - -
Airways
Engineering 31/10/16 (65) - -
Loan Stock 45 - 45 -
Ordinary
B shares 30 - 30 -
Chelverton
Asset Management
Holdings
* 2 200 2 141 31/03/17 2,509 4,203 1,116
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 - 130 - 31/12/16 580 - -
Main Dental 31/03/16 806 - -
Loan stock 75 - 75 -
Ordinary
B shares 175 138 175 175
Pedalling
Forth 150 150 150 150 31/12/15 (210) - -
Security
Research
Group 52 62 52 52 31/03/17 10,964 6,793 575
* Consolidated figures
** In administration
8 SIGNIFICANT INTERESTS
At 31 August 2017, 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 2,871,250 21.75 13,199,940
Pedalling Forth 18,000 12.00 150,000
Touchstar 640,000 10.14 6,308,750
La Salle Education 160,000 5.07 3,158,179
Plutus Powergen 33,333,334 4.69 711,428,935
Petards 1,550,000 4.24 36,570,762
Anaxsys Technology 39,525 3.95 1,000,000
9 DEBTORS 2017 2016
GBP'000 GBP'000
Amounts falling due within
one year
Prepayments and other debtors 683 6
Amounts falling due after one
year
Other debtors * - 100
------- -------
*The other debtor, in the previous year,
related to capital income due from Parmenion
Capital Partners LLP. This debtor as detailed
in the Investment Manager's overview has
increased to GBP674,000 and is now included
in amounts falling due within one year.
The proceeds were received on 23 October
2017.
10 CREDITORS - amounts falling
due within one year
2017 2016
GBP'000 GBP'000
Accruals and other creditors 33 55
Short term loan 250 250
283 305
------- -------
On 17 June 2016, the Company entered in to a GBP250,000 loan agreement with Jarvis Investment Management Limited. Interest was payable monthly in arrears at the rate of 4.5% plus the Bank of England base rate.
At 31 August 2017, GBP250,000 was outstanding of which GBP125,000 was drawn down on 17 June 2016 and GBP125,000 on 8 August 2016. The loan was secured on the assets of the Company and is repayable on demand.
The loan was repaid in full on 25 October 2017.
11 CALLED UP SHARE CAPITAL 2017 2016
GBP'000 GBP'000
Allotted, called up and fully
paid:
6,377,088 (2016: 6,377,088)
Ordinary shares of 1p each 64 64
------- -------
Details of the Tender Offer and share buy-back post year end are given in note 18.
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
reserve Capital redemption reserve
* reserve reserve *
GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
August 2017
At 1 September
2016 1,506 1,536 125 756
Net gains on
realisation of
investments - 818 - -
Movement in fair
value of investments - 268 - -
Income of a capital
nature - 574 - -
Costs charged
to capital - (51) - -
Retained net
loss for the
year - - - (136)
At 31 August
2017 1,506 3,145 125 620
-------- -------- ---------- --------
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 and Revenue reserve may be used for the repurchase of the Company's own shares.
13 NET ASSET VALUE PER ORDINARY SHARE
The basic net asset value per Ordinary share is based on net assets of GBP5,460,000 (2016: GBP3,987,000) and on 6,377,088 (2016: 6,377,088) Ordinary shares, being the number of shares in issue at the year end.
The basic net asset value per Ordinary share ("NAV") has increased from that announced on 14 September 2017 as a result of an increase in the expected earn-out from Parmenion Capital Partners LLP.
The expected earn-out has risen from GBP600,000 to GBP674,000 resulting in an increase in the NAV of 1.16p from 84.47p to 85.63p.
14 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES
At 31 August 2017 there were no capital commitments or contingent liabilities (2016: 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 2017 would have decreased net assets attributable to Shareholders by 13 pence per share (2016: 12 pence per share). An increase of the same percentage would have an equal but opposite effect on net assets available to Shareholders.
2017 2016
GBP'000 GBP'000
Fair value through profit or
loss investments 4,213 3,925
------- -------
(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:
2017 2016
GBP'000 GBP'000
Cash at bank 847 261
------- -------
Loan from custodian 250 250
------- -------
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 (2016: GBP2,500). If there was a decrease in interest rates of 0.5% net revenue before taxation would increase by GBP1,250 (2016: GBP1,250). These calculations are based on balances as at 31 August 2017 and may not be representative of the year as a whole.
The loan was repaid on 25 October 2017.
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
Over eight six percent of the Company's portfolio are AIM quoted securities and a half of one 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 thirteen 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. 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
Assets
at fair
Loans value
At amortised and through
profit
cost receivables or loss Total
31 August 2017 GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the
Statement of Financial
Position
Investments - - 4,213 4,213
Debtors - 683 - 683
Cash at bank 847 - - 847
Total 847 683 4,213 5,743
------------ ----------- -------- -------
Liabilities as per
the Statement of
Financial Position
Creditors 33 250 -283
Total 33 250 -283
--- ---
Assets
at fair
Loans value
At amortised and through
profit
cost receivables or loss Total
31 August 2016 GBP'000 GBP'000 GBP'000 GBP'000
Assets as per the
Statement of Financial
Position
Investments - - 3,925 3,925
Debtors - 106 - 106
Cash at bank 261 - - 261
Total 261 106 3,925 4,292
------------ ----------- -------- -------
Liabilities as per
the Statement of
Financial Position
Creditors 55 250 -305
Total 55 250 -305
--- ---
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
2017 GBP'000 GBP'000 GBP'000 GBP'000
Equity investments 3,663 - 550 4,213
Total 3,663 - 550 4,213
-------------- -------------- -------------- -------
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
-------------- -------------- -------------- -------
The following table presents the movement in the classification C investments for the period ended 31 August 2017:
Equity
Investments
GBP'000
Opening balance 1,443
Purchases -
Sales at cost (325)
Total losses on investments in the
Income statement (568)
Closing balance 550
------------
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 25 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 in 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.
18 POST BALANCE SHEET EVENTS
On 21 September 2017, the Company announced the result of the tender offer and buyback offer issued to Shareholders on 4 September 2017. Under the tender offer, 749,765 Ordinary shares, representing 11.76% of the issued share capital with a nominal value of GBP7,498, were repurchased for cancellation on 4 October 2017, at a price of 76.73p per share for a total consideration of GBP605,000 including the tender offer costs. Following this buyback there were 5,627,323 Ordinary 1p shares in issue.
On 23 October 2017, the Company received the proceeds of GBP674,000 from Parmenion Capital Partners shown as a debtor in note 9.
On 25 October 2017, the Company repaid the loan of GBP250,000 to Jarvis Investment Management as detailed in note 10.
On 26 October 2017, the Company bought back 73,969 shares at a price of 73.5 pence per share, representing 1.31% of the issued share capital for a total cost of GBP54,600.
At the date of this announcement there are now 5,553,354 shares in issue.
ANNUAL REPORT AND AGM
The foregoing represents extracts from the full text of the Annual Report and Accounts for the year ended 31 August 2017. 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 14 December 2017 at 12.00 pm at the offices of Chelverton Asset Management Limited, 11 Laura Place, Bath, BA2 4BL.
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
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November 08, 2017 11:45 ET (16:45 GMT)
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