Annual Financial Report

RNS Number : 0690F

Chelverton Growth Trust PLC

09 November 2015

 



CHELVERTON GROWTH TRUST PLC

 

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2015

 

The full Annual Report and Accounts can be accessed via the Company's website at www.chelvertonam.com or by contacting the Company Secretary on 01326 378 288

Investment objective

The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market with a market capitalisation at the time of investment of up to £50 million, which are believed to be at a "point of change". The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold. Its investment objective is to increase net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap UK Index.

It is the Company's policy not to invest in any listed investment companies (including listed investment trusts).

Company summary

Benchmark                                   MSCI Small Cap UK Index

Investment Manager             Chelverton Asset Management Limited

                                                        See page 16 for further details

Total net assets                       £ 4,672,000 as at 31 August 2015

Market capitalisation             £ 3,613,000 as at 31 August 2015

Capital structure                      8,501,650 Ordinary 1p shares carrying one vote each. 

Performance statistics

	Year ended	Year ended
	31 August 2015	31 August 2014	% Change
Net assets	£4,672,000	£4,854,000	(3.75)
Net asset value per share (NAV)	54.95p	51.38p	6.95
MSCI Small Cap UK Index	349.890	318.754	9.77
Share price	42.50p	43.75p	(2.86)
Discount to net asset value	22.6%	14.8%
Revenue loss after taxation	£(68,000)	£(75,000)
Revenue loss per share	(0.75)p	(0.76)p
Capital gain per share	3.97p	7.15p

Strategic Report

The Strategic Report has been prepared in accordance with section 414A of the Companies Act 2006 (the"Act"). Its purpose is to inform the Members of the Company and help them understand how the Directors have performed their duty under section 172 of the Act to promote the success of the Company.

 

Chairman's Statement

I am pleased to announce another year of steady progress in which the fund's net asset value per share has increased from 51.38p to 54.95p - an increase of 6.95%.  This compares to the Company's benchmark index, the MSCI Small Cap UK Index which rose by 9.77% in the period.

Since the end of the reporting period it has been announced that Parmenion, the Fund's largest investment (37% of the Fund), is to be acquired by Aberdeen Asset Management plc. The net asset value per share at the end of October increased to 58.24p, a rise of 5.98% from just two months earlier. Once the acquisition is completed the fund will benefit from a significant inflow of cash.

Particular thanks are due to David Horner our Investment Manager, as this outstanding investment has yielded in excess of 16 times since our early stage investment of just £115,000 seven years ago. In the last few years our investment in Parmenion has become a very large proportion of the Fund, but David's belief that we had a company of real value has been fully justified. The success demonstrates very much the ethos of Chelverton Growth Trust.

The return of a Conservative Government in the May UK general election gives a more stable political outlook. It is difficult to see beyond the view of most commentators that the UK economy is in for a period of steady, if unspectacular growth, with both inflation and interest rates forecast to remain at historically low levels.

UK economic growth statistics have been consistently revised upwards, this growth has been translated into solid job creation over the last few years. Until recently, there has been little pressure on employers to increase wages. However, we now seem to be at a turning point, as we are seeing the first signs of above average rises in salaries. This combined with the introduction of the "living wage" will mean labour costs for many businesses will begin to rise. Whether this rise in labour costs will lead to an increase in inflation or a decline in profitability, which remains at historically high levels, will provide a true guide to the health of the UK economy

The Government will continue to focus on deficit reduction. The Chancellor is expected to announce deep cuts in the Public Sector in his first Autumn Statement since the election. On balance, we would expect the strength in the domestic economy to absorb any reduction in demand.

This outlook of domestic stability is in stark contrast to that of many regions in the world. The political turmoil in the Middle East seems to be going from bad to worse. The mass migration of political and economic refugees will have massive economic, social and political repercussions, not only in the Middle East but also across Europe.  The slowdown in the growth of the Chinese Economy has lead to significant declines in commodity prices and dramatic devaluation of many currencies linked to the Chinese economy. These factors are clear headwinds to the forward momentum of world economic growth and have already lead to an increase in negative sentiment towards financial markets.

The companies in the portfolio have generally made further progress over the past year and it is hoped that the investment and development that has taken place in the past three years will, notwithstanding the comments above, begin to bear fruit in the near future.      

The Board continues to be committed to an annual tender process as a means of offering shareholders the ability to realise some of their shareholding at a modest discount to net asset value.  Given the strong performance of the unquoted portfolio, and in particular the liquid resources released by the recently announced takeover of Parmenion by Aberdeen Asset Management plc. The Board has decided to review the level of the annual tender and have decided to increase it to 24.99% this year from 10% in previous years.

As in previous years, the Board remains of the view that the investment strategy employed by the Investment Manager remains valid and that the continuation of the Company's investment objective and policy should afford shareholders the opportunity to benefit from the significant underlying potential value in the portfolio.  Going forward, the Board and Investment Manager believe that the portfolio characteristics may vary a little in respect of the percentages in quoted and unquoted shares and the number of holdings in the portfolio. This will not affect the portfolio risk profile or investment objective, which is to provide an attractive high income combined with the opportunity for capital growth, whilst outperforming the MSCI Small Cap UK Index over the long term.

The proposed tender offer will be the seventh return to shareholders. If the offer is fully taken up, Chelverton Growth Trust will over a period of eight years have repurchased a total of 12,506,808 shares representing 66.23% of the shares in issue at 31 August 2007.

The ability of the Company to be able to undertake share buybacks, including pursuant to the proposed tender offer, depends amongst other factors, on the Company having appropriate reserves which it can utilise in any manner as permitted by the Companies Act 2006.

It is possible for a company to reduce its capital, or as in this case, cancel its share premium account  in order to create distributable reserves which can be applied in any manner which the company's profits available for distribution (as determined in accordance with the Companies Act 2006) are able to be lawfully applied. The proposed cancellation of the Company's share premium account requires, under the Companies Act 2006, approval of the Company's shareholders and subsequent confirmation by the Court.

The Board is therefore proposing, subject to shareholder approval and confirmation by the Court, that the amount standing to the credit of the Company's share premium account (being £2.674 million as at the date of this statement) be cancelled.

In considering whether to confirm the cancellation of the Company's share premium account, the Court takes account of the interests of the Company's creditors at the time of the cancellation (including any contingent and prospective creditors). The Court will require to be satisfied that the interests of the Company's creditors will not be prejudiced as a result of the reduction. The Company understands that it is likely that no creditor will be able to show that there is any real likelihood that the reduction would result in the Company being unable to discharge that creditor's debt or claim when it fell due, which is the relevant test under the Companies Act 2006, and, accordingly, that no form of creditor protection is likely to be required.

It is, however, for the Court, ultimately, to determine the question of whether any protection is required for creditors, and if so, what form it should take. If any is required, it would likely to take the form of an undertaking to the Court that any reserve arising from the cancellation of the share premium account would remain undistributable until the Company's creditors at the time of the cancellation had either consented to the cancellation or their debts at that time had been discharged or otherwise satisfied.

The cancellation will take effect upon the registration with the Registrar of Companies of the order of the Court confirming the cancellation, which is expected to occur in the first quarter of 2016.

The Board is aware that the current policy of returning funds to shareholders through an annual tender offer will inevitably lead to an increase in the cost ratio. The Board is thus exploring strategic options that will enable all shareholders to realise full value efficiently in the medium term.

The Board believes that to achieve the best outcome for shareholders a change in the Company's investment objective and policy is required, and this will be put to shareholders as a Resolution at the forthcoming annual General Meeting.

These changes, if approved, will result of in the Company's assets being concentrated in fewer investments and higher levels of cash being maintained. In addition, any new investments will require a shorter timeline to realisation than has previously been required. Although the changes may affect short-term performance, they will provide an effective route to the realisation of value for shareholders, which can be achieved in the medium term.

Accordingly, four Resolutions will be put forward at the forthcoming Annual General Meeting as special resolutions: (1) that the Company adopts the revised investment objective and policy as described above and stated in the strategic report on page 10 and (2) that it continues to operate as an investment trust;  (3) that the Company be authorised to carry out the tender offer and (4) that the Company's share premium account be cancelled. The directors will vote in favour of these resolutions in respect of their own shareholdings.

Kevin Allen

Chairman

9^th November 2015

Investment Manager's overview

The UK economy continues to grow relatively strongly with a continuing trend of upward revisions to initial estimates of UK economic growth.  The economy is benefiting from low interest rates and benign inflation. We do however appear to be moving towards a point of full employment, which will inevitably lead to upward pressure on salary costs; this pressure will be increased by the political desire to bring in a "living wage" for employees. It is unclear whether companies will pass this cost on to customers, absorb it into their margins or try to improve productivity. Whatever the outcome, it is likely to take the edge off the rate of growth of corporate profitability.

The Eurozone appears to be slowly recovering; absorbing the damage to sentiment caused by the shocks of Greek political instability, disruption caused by the migration of people displaced by the fragmentation of the Middle East and the corporate scandal at Volkswagen. The United Kingdom by comparison, appears to be a place of calm and stability.

The result of the General Election in May was decisive leaving government policy clearly defined for the next five years. This should be supportive for business, although undoubtedly there will be a period of uncertainty ahead of the promised referendum on Europe. The Government will try to tackle the Government Deficit, which will inevitably lead to pressure on the Public Sector. However, the policy of supporting the introduction of the "Living Wage" in conjunction with a reduction in income tax and national insurance for lower earners should lead to a general increase in prosperity for all.   

Bank lending is increasing, which is a positive, although anecdotal evidence seems to indicate that lending against property is growing dramatically which, if left unchecked, could result in a return of the "boom/bust" economy. Lending to small companies is not getting any easier, although less traditional lenders such as "crowd funding" and "peer to peer" continue to fill the void. Although not yet regulated this form of funding may, in time, replace the more cumbersome bank lending.               

Portfolio review

The most important change to the portfolio has in fact taken place after the year-end with the sale of Parmenion to Aberdeen Asset Management plc. for a price for our shareholding of £1.84m at completion with a possible further payment after three years dependent on Parmenion's performance.

We originally invested £115,000 after start-up.  The business has grown extremely well and we are delighted that its management and employees will also be sharing in this success.  The total return from this investment is 16 times the original investment before any deferred performance payment. These accounts recognise the amount realised on sale, no account has been taken of any sum that might be due in the future. Over the next three years, the Board will consider whether some value should be ascribed to this contractual right.  The maximum payment under the earn-out would be an additional payment of £600,000.

The realisation from our investment in Parmenion has enabled the Board to increase the level of this year's tender offer from the 10% level which has become the norm in prior years to 24.99% of the outstanding share capital which, if there is sufficient interest from shareholders, will result in the repurchase of up to 2,125,413 shares.  In 2008, following a similarly large realisation on the takeover of Merrydown plc a successful tender was made for 2,624,973 shares.

This year we have continued the process of reducing the shareholding in IDOX plc, Alliance Pharmaceutical plc (following a sharp rise in its price) and Lombard Risk Management plc.  The entire holdings of A B Dynamics plc and Tristel plc were sold after strong growth in their share prices.  In the case of A B Dynamics this was from a flotation the year before and in the case of Tristel, a strong recovery in its share price. 

Additional investments have been made in Plutus Powergen plc, (which has since seen a dramatic increase in its share price post year end), CEPS plc, Belgravium plc (on a change of management) and Petards plc (as it becomes evident that the work of the past three years in restoring this business appears to be finally bearing fruit).   

No new unquoted investments were made in the year.  The holding in Chelverton Asset Management Holdings Limited the company used to finance the MBO of Chelverton Asset Management, the Investment Manager of this fund, was revalued upwards reflecting the growth in funds under management.  The investments in Transflex and Main Dental Partners were held at the same level as last year and the holdings in La Salle Education and Anaxsys were written down to reflect the disappointing take up of their product by the market place.     

Unfortunately our investment in Closed Loop Recycling has had to be written down to nil value, as the business was unable to survive the extraordinary reduction in the oil price and the consequent reduction in virgin PET and HDPE as compared to its recycled product.  The company went into administration in April 2015 with no prospect of any recovery.  

Outlook

The success of Parmenion, and its sale to Aberdeen Asset Management plc, means that the fund will, until the tender offer is completed have a higher than normal level of cash which may affect short term performance. In the first instance the inflow of cash will be used to pay off debt. Surplus funds will be invested selectively in current portfolio companies or additional investments if felt appropriate.  

We expect to see further development in the portfolio over the next twelve months and remain positive about prospects and expect continued progress.

David Horner

Chelverton Asset Management Limited

9^th November 2015

Portfolio Review

as at 31 August 2015

Investment	Sector			Valuation £'000	% of total
AIM traded
Alliance Pharma	Pharmaceuticals & Biotechnology			56	1.1%
Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products.
Belgravium Technologies	Technology Hardware and Equipment			337	6.7%
Software systems for warehousing and distribution
CEPS	Support Services			610	12.1%
Production and supply of components for the footwear industry; personal protection equipment; production of printed lycra fabric; services to the direct mail industry and trophies and awards.
IDOX	Software & Computer Services			164	3.3%
Software company specialising in the development of products for document and information management
Lombard Risk Management	Software & Computer Services			144	2.9%
Lombard Risk is one of the world's leading providers of collateral management, liquidity analysis and regulatory compliance software to financial organisations
LPA Group	Electronic & Electrical Equipment			118	2.3%
Design, manufacture and marketing of industrial electrical accessories
MTI Wireless Edge	Technology Hardware & Equipment			86	1.7%
Developer and manufacturer of sophisticated antennas and antenna systems
Northbridge Industrial Services	Industrial Engineering			60	1.2%
Specialist industrial hire and sale.
Petards Group	Support Services			169	3.4%
Development, provision and maintenance of advanced security systems and related services
Plutus Powergen	Flexible Energy Supply			290	5.8%
Provider of flexible electricity generation.
Universe Group	Support Services			65	1.3%
Provision of credit fraud prevention system, loyalty systems and retail systems
Nasdaq Traded
One Horizon Group	Support Services			134	2.7%
Mobile VOIP solution provider.

Unquoted
Airways Engineering	Support Services
Ordinary B Shares				-		-
Loan Stock				-		-
Commercial aviation maintenance
Anaxsys Technology	Healthcare Equipment & Services
Ordinary Shares				13		0.3%
A medical device company for patient monitoring and screening
Chelverton Asset Management      Holdings	Support Services
Ordinary Shares				120		2.4%
Investment management, including providing services to Chelverton Growth Trust plc
Closed Loop Recycling ⃰⃰	Support Services
Ordinary B Shares				-		-
Loan Stock				-		-
Operation of a plastic (PET and HDPE) recycling plant
La Salle Education Limited	Support Services
Ordinary Shares				25		0.5%
Provider of mathematics teaching programmes.
Main Dental Partners	Support Services
Ordinary Shares				175		3.5%
Loan stock				-		-
Operator of dental surgeries
Parmenion Capital Partners	Support Services
Ordinary Shares				1,839		36.6%
Provides fund-based discretionary fund management services to independent Financial Advisors
Security Research Group	Support Services			62		1.2%
Leading provider of Local Authority residential property searches; provision of packaging solutions and technical surveillance countermeasure components.
Transflex Vehicle Rental	Support Services			555		11.0%
Ordinary Shares
Light commercial vehicle rental
Portfolio Valuation				5,022		100.0%

⃰ In Administration

 

Portfolio holdings

	31 August 2015		31August 2014
	Valuation	% of total	Valuation	% of total
Investment	£'000		£'000
Parmenion Capital Partners LLP	1,839	36.6	1,105	22.0
CEPS	610	12.1	300	6.0
Transflex Vehicle Rental	555	11.0	480	9.5
Belgravium Technologies	337	6.7	315	6.3
Plutus Powergen	290	5.8	125	2.5
Main Dental	175	3.5	175	3.5
Petards Group	169	3.4	113	2.2
IDOX	164	3.3	325	6.5
Lombard Risk Management	144	2.9	255	5.1
One Horizon Group	134	2.7	191	3.8
Chelverton Asset Management Holdings	120	2.4	167	3.3
LPA Group	118	2.3	193	3.8
MTI Wireless Edge	86	1.7	75	1.5
Universe Group	65	1.3	34	0.7
Security Research Group	62	1.2	55	1.1
Northbridge Industrial Services	60	1.2	177	3.5
Alliance Pharma	56	1.1	195	3.9
La Salle Education Limited	25	0.5	100	2.0
Anaxsys Technology	13	0.3	52	1.0
Closed Loop Recycling Limited ⃰	-	-	252	5.0
Airways Engineering	-	-	-	-
Total	5,022	100	4,684	93.2

 

⃰ In Administration

 

Portfolio breakdown by sector and by Index

Percentage of portfolio by sector

 

Support Services                                                                                 74.7%

Technology Hardware & Equipment Distribution                            8.4%

Software & Computer Services                                                           6.2%

Financial Services                                                                                 5.8%

Electronic & Electrical Equipment                                                      2.3%

Industrial Engineering                                                                          1.2%

Pharmaceuticals & Biotechnology                                                     1.1%

Healthcare Equipment & Services                                                     0.3%

Percentage of portfolio by Index

AIM                                                                                                          55.5%

Unquoted                                                                                                 41.8%

Nasdaq                                                                                                      2.7%

Directors (all non-executive)

 

Kevin Allen (Chairman)⃰

David Horner

Ian Martin⃰

⃰Independent

 

 

Extracts from the Strategic Report

 

As explained within the Report of the Directors on page 25, the Company carries on business as an investment trust. Investment trusts are collective closed-ended public limited companies.

The Board of Directors is responsible for the overall stewardship of the Company, including investment and dividend policies, corporate and gearing strategy, corporate governance procedures and risk management. Biographical details of the three male Directors, can be found on page 15.

Investment objective

The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market with a market capitalisation at the time of investment of up to £50 million, which are believed to be at a "point of change". The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold. 

Investment policy

The Company invests principally in securities of publicly quoted UK companies, though it may invest in unquoted securities. The performance of the Company's investments is compared to the MSCI Small Cap UK Index.

The Company may also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold.

It is the Company's policy not to invest in any listed investment companies or listed investment trusts.

To comply with Listing Rules the Company's investment policy is detailed above and should be read in conjunction with the subsequent sections entitled investment strategy and the performance analysis.

It is intended from time to time, when deemed appropriate, that the Company will borrow for investment purposes.

The investment objective and policy stated are intended to distinguish the Company from other investment vehicles which have relatively narrow investment objectives and which are constrained in their decision making and asset allocation. The investment objective and policy allow the Company to be constrained in its investment selection only by valuation and to be pragmatic in portfolio construction by only investing in securities which the Investment Manager considers to be undervalued on an absolute basis. Portfolio risk is managed by investing in a diversified spread of investments.

Investment strategy

Investments are selected for the portfolio only after extensive research which the Investment Manager believes to be key. The whole process through which equity must pass in order to be included in the portfolio is very rigorous. Only a security where the Investment Manager believes that the price will be significantly higher in the future will pass the selection process. The Investment Manager believes the key to successful stock selection is to identify the long-term value of a company's shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long-term value involves detailed analysis of a company's earning prospects over a five year time horizon.

Investment of Assets

At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period.

Environment Emissions

All of the Company's activities are outsourced to third parties. As such it does not have any physical assets, property, or operations of its own and does not generate any greenhouse gas or other emissions.

Review of Performance and Outlook

Reviews of the Company's returns during the financial year, the position of the Company at the year end, and the outlook for the coming year are contained in the Investment Managers Report.

Principal risks and uncertainties and risk management

As stated within the Corporate Governance Statement, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

The principal risks and uncertainties faced by the Company are described below and in note 15 which provides detailed explanations of the risks associated with the Company's financial instruments.

Market risk

The Company is exposed to market risk due to fluctuations in the market prices of its investments.

The Investment Manager actively monitors economic and company performance and reports regularly to the Board on a formal and informal basis. The Board formally meets with the Investment Manager quarterly when portfolio transactions and performance are reviewed. The Management Engagement Committee meets as required to review the performance of the Investment Manager. 

The Company is substantially dependent on the services of the Investment Manager's investment team for the implementation of its investment policy.

The Company may hold a proportion of the portfolio in cash or cash equivalent investments from time to time. Whilst during positive stock market movements the portfolio may forego notional gains, during negative market movements this may provide protection.

Discount volatility

As with many investment trust companies, discounts can significantly fluctuate.

The Board recognises that it is in the long-term interests of shareholders to reduce discount volatility and believes that the prime driver of discounts over the longer term is performance. The Board does not intend to adopt a precise discount target at which shares will be bought back. However, Ordinary shares will not be bought back for cancellation or into Treasury at a discount to NAV of less than 7.5%.

Regulatory risks

Relevant legislation and regulations which apply to the Company include the Companies Act 2006, the Corporation Tax Act 2010 ("CTA") and the Listing Rules of the Financial Conduct Authority ("FCA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on pages 17 to 24. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

The Board is not aware of any breaches of laws or regulations during the period under review and up to the date of this report.

Financial risk

The financial situation of the Company is reviewed in detail at each Board meeting. The content of the Company's annual report and financial statements is monitored and approved both by the Board and the Audit Committee.

Inappropriate accounting policies or failure to comply with current or new accounting standards may lead to a breach of regulations.

Liquidity risk

The Board monitors the liquidity of the portfolio at each Board meeting and regularly reviews the investments with the Investment Manager.

A more detailed explanation of the investment management risks facing the Company is given in note 15 to the financial statements.

Financial instruments

As part of its normal operations, the Company holds financial assets and financial liabilities. Full details of the role of financial instruments in the Company's operations are set out in note 15 to the financial statements.

The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's investment portfolio. Investment risk is spread through holding a wide range of securities in different industrial sectors.

Statement regarding annual report and accounts

Following a detailed review of the Annual Report and Accounts by the Audit Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Performance analysis using key performance indicators

At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives, for example: the NAV, the movement in the Company share price, the discount of the share price in relation to the NAV and the on going charges.

The movement of the NAV is compared to the MSCI Small Cap UK Index, the Company's benchmark. The NAV per Ordinary share at 31 August 2015 was 54.95p (2014: 51.38p).

The Company's share price at the year end was 42.50p (2014: 43.75p).

Current and future developments

A review of the main features of the year is contained in the Chairman's statement and the Investment Manager's overview.

The marketing and promotion of the Company will continue to involve the Board, led by the Investment Manager, with a proactive communications programme either directly or through its website, with existing and potential new shareholders and other external parties.

The Directors are seeking to renew the appropriate powers at the next Annual General Meeting to enable the issue and purchase of the company's own shares, when it is in the interests of shareholders as a whole.

Social, environmental and employee issues

The Company does not have any employees and the Board consists entirely of non-executive directors. As the Company is an investment trust, which invests in other companies, it has no direct impact on the community or the environment, and as such has no policies in this area.

Alternative Investment Fund Manager's Directive ("AIFMD")

The Board has registered itself as the AIFM with the FCA under the Directive and confirm that all required returns have been completed and filed.

By Order of the Board

K Allen

Chairman

9  November 2015

Extract from the Report of the Directors

Status, objective and review

The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs ('HMRC') as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010 for the year ended 31 August 2014. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2015 so as to be able to continue to obtain approval as an authorised investment trust, under Section 1158 of the Corporation Tax Act 2010. The Company is an investment company as defined in Section 833 of the Companies Act 2006.

Management and administration agreements

The Company's investments are managed by Chelverton Asset Management Limited ("CAM") under an agreement dated 28 June 2001. As previously stated above, Mr Horner is a director of CAM.

The Company pays CAM, in respect of its services as Investment Manager, a monthly fee (exclusive of VAT) payable in arrears as follows:

for the first £15 million of funds under management at the rate of 1/12% per month of the gross value of  funds under management ("the Value");

for the next £15 million of funds under management, at the rate of 1/16% per month of the amount by which the Value exceeds £15 million; and

for funds under management above £30 million, at the rate of 1/24% per month.

The amount payable to CAM for the year ending 31 August 2015 was £48,884.

The appointment of CAM as Investment Manager may be terminated by either party giving to the other not less than twelve months' notice of such termination. There are no specific provisions contained within the Investment Management Agreement relating to the compensation payable in the event of termination of the agreement other than entitlement to fees, which would be payable within any notice period.

Under an agreement dated 1 January 2013, company secretarial services and the general administration of the Company were undertaken by John Girdlestone for an annual fee of £30,000 plus VAT at the prevailing rate.

Appointment of Chelverton Asset Management ("CAM") as the Investment Manager

The Board, excluding Mr Horner, continually reviews the performance of the Investment Manager. In the opinion of the independent Directors the continuing appointment of CAM, as Investment Manager, on the terms outlined in the Investment Management Agreement dated 28 June 2001 and amended on 1 December 2006, is in the best interests of the shareholders as a whole. Further, the Board is satisfied that CAM has the required skill and expertise to continue to manage the Company's portfolio and charges fees that are reasonable when compared with those of similar investment trusts.

Going concern

In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. They have considered the current cash position of the Company, and forecast revenues for the current financial year. The Directors have also taken into account the Company's investment policy, which is described on page 11 and which is subject to regular Board monitoring processes, and is designed to ensure the Company holds sufficient liquid securities to meet possible cash flow needs.

The Company retains title to all assets held by its custodian. Note 15 to the financial statements sets out the financial risk profile of the Company and indicates the effect on its assets and liabilities of falls and rises in the value of securities, market rates of interest and changes in exchange rates.

The Directors believe, in the light of the controls and review processes noted above and bearing in mind the nature of the Company's business and assets, that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the accounts.

On behalf of the Board

Kevin Allen

Chairman

9  November 2015

Statement of Directors' responsibilities in respect of the financial statements

The Directors are responsible for preparing the Annual Report and the financial statements and have elected to prepare them in accordance with applicable United Kingdom law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.

In preparing the financial statements, the Directors are required to:

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

- present information, including accounting policies, in a manner that provides relevant, reliable,  comparable and    understandable information;

- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy, at any time, the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Report of Directors, Directors remuneration report and statement on corporate governance.

The Directors, to the best of their knowledge, state that:

the financial statements, prepared in accordance with UK Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and net return of the Company; and

the Chairman's statement, Investment Manager's overview and Report of the Directors include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

The Directors are responsible for the maintenance and integrity of the corporate and financial information related to the Company including on the website of the Investment Manager www.chelvertonam.com.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

On behalf of the Board

Kevin Allen

Chairman

9 November 2015

NON- STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2015 and 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the registrar of companies, and those for 2015 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Investment Manager's website: www.chelvertonam.com.

Income statement

for the year ended 31 August 2015

			2015				2014
	Note	Revenue	Capital	Total		Revenue	Capital	Total
		£'000	£'000	£'000		£'000	£'000	£'000
Gains on investments at fair value	7	-	406	406		-	752	752
Income	2	60	-	60		57	-	57
Investment management fee	3	(12)	(37)	(49)		(13)	(38)	(51)
Other expenses	4	(116)	(12)	(128)		(119)	(8)	(127)
Net return on ordinary activities before taxation		(68)	357	289		(75)	706	631
Taxation on ordinary activities	5	-	-	-		-	-	-
Net return on ordinary activities after taxation		(68)	357	289		(75)	706	631
		Revenue	Capital	Total		Revenue	Capital	Total
Return per Ordinary share	6	(0.75)p	3.96p	3.21p		(0.76)p	7.15p	6.39p

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the year.

A separate statement of total recognised gains and losses has not been prepared as all such gains and losses are included in the income statement.

The notes on pages 40 to 55 form part of these accounts.

Statement of changes in equity

for the year ended 31 August 2015

	Called up	Share		Capital
	Share	Premium	Capital	Redemption	Revenue
	Capital	Account	Reserve	Reserve	Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Year ended 31 August 2015
1 September 2014	96	2,674	556	93	1,435	4,854
Cost of shares purchased for cancellation under tender offer	(10)	-	-	10	(446)	(446)
Net return after taxation for the year	-	-	357	-	(93)	264
31 August 2015	86	2,674	913	103	896	4,672
Year ended 31 August 2014
1 September 2013	106	2,674	(150)	83	1,996	4,709
Cost of shares purchased for  cancellation under tender offer	(10)	-	-	10	(486)	(486)
Net return after taxation for the year	-	-	706	-	(75)	631
31 August 2014	96	2,674	556	93	1,435	4,854

Statement of financial position

as at 31 August 2015

			2015		2014
	Notes		£'000		£'000
Fixed assets
Investments at fair value	7		5,022		5,027
Current assets
Debtors	9		9		8
Cash at bank			69		40
			78		48
Creditors - amounts falling due within one year	10		(428)		(221)
Net current (liabilities)/ assets			(350)		(173)
Net assets			4,672		4,854
Share capital and reserves
Called up share capital	11		86		96
Share premium account	12		2,674		2,674
Capital reserve	12		913		556
Capital redemption reserve	12		103		93
Revenue reserve	12		896		1,435
Equity shareholders' funds			4,672		4,854
Net asset value per Ordinary share	13		54.95p		51.38p

These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 9 November 2015. They were signed on its behalf by

Kevin Allen

Chairman

Statement of cash flows

for the year ended 31 August 2015

		2015		2014
		£'000		£'000
Cash flows from operating activities
Net revenue return		289		631
Adjustment for:
Net capital return		(357)		(706)
Expenses charged to capital		(48)		(46)
Interest paid		15		11
Increase/(decrease) in creditors		7		(3)
Increase in prepayments and accrued income		1		-
Other		(2)		-
Cash from operations		(95)		(113)
Cash flows from investing activities
Purchase of investments		(549)		(560)
Proceeds from sales of investments		960		993
Net cash  from investing activities		411		433
Cash flows from financing activities
Cost of shares purchased for cancellation under tender offer		(472)		(486)
New loan advanced		200		400
Capital repayment of loan		-		(200)
Interest paid		(15)		(11)
Net cash used in financing activities		(287)		(297)
Net increase in cash		29		23
Cash at the beginning of the year		40		17
Cash at the end of the year		69		40

1    ACCOUNTING POLICIES

Accounting convention

The financial statements are prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS 102"), the Companies Act 2006 and with the AIC Statement of Recommended Practice ("SORP") issued in January 2014, regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts. All the Company's activities are continuing.

This is the first year in which the financial statements have been prepared under FRS 102. There have been no transitional adjustments needed to the financial statements.

Income recognition

Dividends receivable on quoted equity shares are included as revenue when the investments concerned are quoted 'ex-dividend'. UK dividends are disclosed excluding the associated tax credit. Dividends receivable on equity and non-equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. All other income is included on an accruals basis.

Expenses

All expenses are accounted for on an accruals basis and charged through the revenue account in the income statement except as follows:

expenses which are incidental to the acquisition or disposal of an investment are treated as capital and separately identified and disclosed (see note 7):

management fees, bank interest and loan interest have been allocated 75% to capital reserve and 25% to revenue reserve in the income statement, being in line with the Board's expected long-term split of returns, in the form of capital gains and income respectively, from the investment portfolio of the Company.

Investments

All investments held by the Company are classified as 'fair value through profit or loss'. Investments are initially recognised at cost, being the fair value of the consideration given. After initial recognition investments are measured at fair value, with changes in the fair value of investments and impairment of investments recognised in the income statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost.

Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.

For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset. For investments traded on other financial markets such as the OTCQB, fair value is generally determined by reference to the share price at close of business on the balance sheet date, discounted to reflect the best estimate of the discount that may need to be applied for the shares to be sold as a single investment.

For investments that are not actively traded in organised financial markets, fair value is determined as set out below under the heading 'significant judgements and estimates'.

Significant judgements and estimates

Preparation of the financial statements requires the Investment Manager to make significant judgements. The items in the financial statements where these judgments have been made are:

Investments that are not actively traded in organised financial markets, are valued at the Directors' estimate of the investment's net realisable value being their estimate of fair value. Generally, fair value will be at cost or, where applicable, at the most recent transaction price. In the case of direct investments in unquoted companies the following valuation technique is applied. Initial valuation is based on the transaction price. Where better indications of fair value become available, such as through subsequent issues of capital or dealings between third parties, the valuation is adjusted to reflect the new evidence. This represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction.

Capital reserve

The following are accounted for in this reserve:

gains and losses on the realisation of investments;

net movement arising from changes in the fair value of investments that can be readily converted to cash without accepting adverse terms;

realised exchange differences of a capital nature;

expenses, together with related taxation effect, charged to this account in accordance with the above policies; and

net movement arising from the changes in the fair value of investments that cannot be readily converted to cash without accepting adverse terms, held at the year end.

Taxation

The charge for taxation, where relevant, is based on the revenue before taxation for the year. Tax deferred or accelerated can arise due to timing differences between the treatment of certain items for accounting and taxation purposes.

Full provision is made for deferred taxation under the liability method, on all timing differences not reversed by the balance sheet date, in accordance with FRS 102.

The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company's effective rate of tax for the accounting period.

2	INCOME	2015 £'000		2014 £'000
	Income from investments Income from LLP investments	35		23
	UK net dividend income	21		29
	Income from loan interest	4		5
	Total income	60		57

3	INVESTMENT MANAGEMENT FEE		2015				2014
		Revenue	Capital	Total		Revenue	Capital	Total
		£'000	£'000	£'000		£'000	£'000	£'000
	Investment management fee	12	37	49		13	38	51

The investment management fee is calculated at the rate of 1/12% per month of the gross value of funds under management and is payable monthly in arrears. At 31 August 2015 there was £4,000 outstanding (2014: £4,200).

4	OTHER EXPENSES	2015		2014
		Total		Total
		£'000		£'000
	Administrative and secretarial services	36		36
	Directors' remuneration	34		34
	Audit fee	15		14
	Other expenses	43		43
		128		127

5	TAXATION		2015				2014
		Revenue	Capital	Total		Revenue	Capital	Total
	Analysis of charge in period	£'000	£'000	£'000		£'000	£'000	£'000
	Current tax	-	-	-		-	-	-

Factors affecting current tax charge for the period

The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 21% to 31 March 2015 and 20% from 1 April 2015. The differences are explained below:

			2015				2014
	Revenue		Capital	Total		Revenue	Capital	Total
	£'000		£'000	£'000		£'000	£'000	£'000
Theoretical tax at UK corporation tax rate of 20.42% (2014:22.17%)
Corporation tax	(14)	73		59		(17)	156	139
Investment income not taxable	(12)	-		(12)		(13)	-	(13)
Non-taxable investment gains	-	(83)		(83)		-	(167)	(167)
Excess expenses for the period	26	10		36		30	11	41
Current tax charge for the period	-	-		-		-	-	-

At 31 August 2015 the Company had surplus management expenses of £3,720,000 (2014: £3,634,000) which have not been recognised as a deferred tax asset. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses. Due to the Company's status as an investment trust and the intention to continue meeting the conditions required to obtain approval as an investment trust in the foreseeable future, the Company has not provided for deferred tax on any gains and losses arising on the revaluation or disposal of investments.

6	RETURN PER ORDINARY SHARE			2015				2014
			Revenue	Capital	Total		Revenue	Capital	Total
			pence	pence	pence		pence	pence	pence
	Basic	(0.75)p		3.96p	3.21p		(0.76)p	7.15p	6.39p

Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £68,000 (2014: £75,000) and on 9,019,251 (2014: 9,871,859) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.

Capital return per Ordinary share is based on the net capital gain of £358,000 (2014: £706,000) and on 9,019,251 (2014: 9,871,859) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.

Total return per Ordinary share is based on the total gain of £290,000 (2014: £631,000) and on 9,019,251 (2014: 9,871,859) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.

7		INVESTMENTS			2015			2014
					£'000			£'000
		AIM			2,099			2,505
		Unquoted			2,789			2,331
		NASDAQ			134			191
					5,022			5,027
			AIM	Unquoted*		NASDAQ			Total
			£'000	£'000		£'000			£'000
	Opening book cost		2,917	1,512		166			4,595
	Opening investment holding  (losses)/gains		(412)	819		25			432
			2,505	2,331		191			5,027
	Movements in the year:
	Purchases at cost		474	75		-			549
	Sales		(349)	(100)		-			(449)
	Gains on sales		511	-		-			511
	Movement in investment holding losses		(1,042)	483		(57)			(616)
	Transfer from AIM to Unquoted		(52)	52		-			-
	Closing valuation		2,099	2,789		134			5,022
	Closing book cost		2,990	1,539		166			4,695
	Closing investment holding (losses)/gains		(891)	1250		(32)			327
	Closing valuation		2,099	2,789		134			5,022

		£'000		£'000
	Realised gains on sales	511		295
	Movement in fair value of investments	(105)		457
	Net gains on investments	406		752
	All quoted investments are made up of equity shares.

* Unquoted investments are valued at the Directors' estimate of their net realisable value, being their estimate of fair value.

Analysis of movements in unquoted investments

	Cost at	Valuation at	Realised	Movement	Cost at	Valuation at
	31 August	31 August	in	in	31 August	31 August
	2015	2015	Year	Year	2014	2014
Investment	£'000	£'000	£'000	£'000	£'000	£'000
Anaxys Technology	284	13	-	(39)	284	52
Airways Engineering
Loan stock	45	-	-	-	45	-
Ordinary B shares	30	-	-	-	30	-
Chelverton Asset Management Holdings
Loan stock	-	-	100	(100)	100	100
Ordinary shares	2	120	-	53	2	67
Closed Loop Recycling
Loan stock	252	-	-	(252)	252	252
Ordinary B shares	84	-	-	-	84	-
La Salle Education Limited	100	25	-	(75)	100	100
Main Dental
Loan stock	75	-	-	-	75	-
Ordinary B shares	175	175	-	-	175	175
Parmenion Capital Partners LLP	115	1,839	-	734	115	1,105
Security Research Group	52	62	-	62	6	-
Transflex Vehicle Rental	325	555	-	75	250	480
	1,539	2,789	100	458	1,512	2,331

Transaction costs

During the year, the Company incurred transaction costs of £366 (2014: £601) and £2,309 (2014: £3,329) on purchases and sales of investments, respectively. These amounts are included in 'Gains on investments at fair value' as disclosed in the income statement.

        Details of material holdings in unquoted investments

		Valuation		Valuation	Last
	Cost at	at	Cost at	at	accounts			Pre tax
	31st August	31st August	31st  August	31st August	period	Net	Turnover	(loss)/
	2015	2015	2014	2014	end	assets		profit
Investment	£'000	£'000	£'000	£'000		£'000	£'000	£'000
Anaxsys Technology	284	13	284	52	31/01/15	492	-	-
Airways Engineering					31/10/14	(64)	-	-
Loan Stock	45	-	45	-
Ordinary B shares	30	-	30	-
Chelverton Asset Management Holdings					31/03/15	650	3,230	772
Loan Stock	-	-	100	100
Ordinary A Shares	2	120	2	67
Closed Loop Recycling					30/06/13	(10,534)	15,424	(5,666)
Loan stock	252	-	252	252
Ordinary B shares	84	-	84	-
La Salle Education     Limited	100	25	100	100	31/12/14	553	38	(435)
Main Dental
Loan stock	75	-	75	-
Ordinary B shares	175	175	175	175	31/03/15	891	1,656	(58)
Parmenion Capital Partners LLP	115	1,839	115	1,105	31/03/15	2,563*	7,371*	1,681*
Security Research Group	52	62	52	55	31/03/15	10,444*	9,446*	1,100*
Transflex Vehicle Rental	325	555	250	480	31/12/14	5,553	7,048	903

        * Consolidated figures                  

8              SIGNIFICANT INTERESTS

At 31 August 2015 the Company had a holding of 3% or more of the issued class of share that is material in the context of the accounts in the following investments:

Security	Number of shares held	Percentage of issued share capital	Issued share capital
Main Dental	23,000 23,	24.08	95,300
CEPS, Ord 5p	1,525,000	15.93	9,573,822
Belgravium Technologies, Ord 5p	9,000,000	8.92	100,936,547
Transflex Vehicle Rental	277,500	8.15	3,405,000
Plutus Powergen	33,333,334	5.83	571,428,935
Anaxsys Technology	26,000	4.16	624,917
La Salle Education Limited	100,000	3.57	2,658,179

In addition to the above, the Company has a 4.6% interest in the capital and profits of Parmenion Capital Partners LLP. On 4 September 2015 Aberdeen Asset Management Plc. purchased 100% of the Company's interest in Parmenion, subject to FCA approval.

9	DEBTORS - amounts falling due within one year	2015		2014
		£'000		£'000
	Prepayments and other debtors	9		8
10	CREDITORS - amounts falling due within one year	2015		2014
		£'000		£'000
	Accruals and other creditors	28		21
	Short term loan	400		200
		428		221

During the year the Company utilised a loan facility with Jarvis Investment Management Limited. An additional £200,000 was borrowed in February 2015 to help facilitate the Tender Offer. At the year end £400,000 is still outstanding. The loan was secured on the assets of the Company and is repayable on demand.

11      CALLED UP SHARE CAPITAL	2015	2014
	£'000	£'000
Allotted, called up and fully paid:	86	96
8,501,650 (2014: 9,466,274) Ordinary shares of 1p each

Pursuant to the Tender Offer, 944,624 ordinary shares being 10 per cent of the issued ordinary shares were  repurchased and cancelled with settlement on 20 March 2015. As a result, there are 8,501,650 ordinary shares of 1p each in issue and circulation.

Duration of Company

At the annual general meeting of the Company falling in the calendar year 2019 and, if the Company has not then been liquidated, unitised or reconstructed, at each fifth annual general meeting of the Company convened by the Board thereafter, the Board shall propose an ordinary resolution that the Company should continue as an investment trust for a further five year period.

Continuation Vote

On behalf of the Board and in accordance with the Company's Articles, we have consulted with major shareholders, representing an overall majority, from which they were all in favour of Company continuing as an investment trust and the Continuation Vote.

The Board remains of the view that the investment strategy employed by the Investment Manager remains essentially valid and that the continuation of the company's investment objective and policy should afford shareholders the opportunity to benefit from the very significant underlying potential value in the portfolio.

Accordingly, a Resolution will be put forward at the forthcoming AGM that the Company continues as an investment trust.

12	RESERVES			Capital
		Share premium	Capitalreserve	redemption reserve	Revenue reserve
	Year ended 31 August 2015	£'000	£'000	£'000	£'000
	At 1 September 2014	2,674	556	93	1,435
	Net gains on realisation of investments	-	511	-	-
	Movement in fair value of investments	-	(105)	-	-
	Cost of shares purchased for cancellation under tender offer	-	-	10	(471)
	Costs charged to capital	-	(49)	-	-
	Retained net loss for the year	-	-	-	(68)
	At 31 August 2015	2,674	913	103	896

				Capital
		Share premium	Capitalreserve	redemption reserve	Revenue reserve
	Year ended 31 August 2014	£'000	£'000	£'000	£'000
	At 1 September 2013	2,674	(150)	83	1,996
	Net gains on realisation of investments	-	295	-	-
	Movement in fair value of investments	-	457	-	-
	Cost of shares purchased for cancellation under tender offer and buyback offer	-	-	10	(486)
	Costs charged to capital	-	(46)	-	-
	Retained net loss for the year	-	-	-	(75)
	At 31 August 2014	2,674	556	93	1,435

 13          NET ASSET VALUE PER ORDINARY SHARE

The basic net asset value per Ordinary share is based on net assets of £4,672,000 (2014: £4,854,000) and on 8,501,650  (2014: 9,446,274) Ordinary shares, being the number of shares in issue at the year end, less Treasury shares.

14           CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At 31 August 2015 there were no capital commitments or contingent liabilities (2014: £nil).

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 £50 million. The Company finances its operations through its issued capital and existing reserves.

In following its investment objective, the Company is exposed to a variety of risks that could result in a reduction in the Company's net assets. These risks are market risk (comprising exchange rate risk, interest rate risk and other price risk), credit risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below:

(i)            Market risk - market price risk

Market price risk arises mainly from uncertainty about future prices of financial investments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions by way of price movements other than movements in exchange rates and interest rates.

The Company's investment portfolio is exposed to market price fluctuations which are monitored by the

Investment Manager who gives timely reports of relevant information to the Directors. Investment performance is also reviewed at each Board meeting.

The Directors are conscious of the fact that the nature of AIM investments is such that prices can be volatile. Investors should be aware that the Company is exposed to a higher rate of risk than exists within a fund which holds traditional blue chip securities.

Adherence to the investment objectives and the internal control limits on investments set by the Company mitigates the risk of excessive exposure to any one particular type of security or issuer.

The Company's exposure to other changes in market prices at 31 August on its investments is as follows:

A 20% decrease in the market value of investments at 31 August 2015 would have decreased net assets attributable to shareholders by 11 pence per share (2014: 6 pence per share). An increase of the same percentage would have an equal but opposite effect on net assets available to shareholders.

			2015		2014
			£'000		£'000
Fair value through profit or loss investments		4,672		4,854

(ii)           Market risk - exchange rate risk

All of the Company's assets are in sterling and accordingly the only currency exposure the Company has is through the trading activities of its investee companies.

(iii)          Market risk - interest rate risk

Changes in interest rates may cause fluctuations in the income and expenses of the Company.

The majority of the Company's financial assets are non-interest bearing. As a result, the Company's financial assets are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions.

The exposure at 31 August of financial assets and financial liabilities to interest rate risk is as follows:

	2015		2014
	£'000		£'000
Cash at bank	69		40

The effect of an interest rate increase of 1% would increase net revenue before taxation on an annualised basis by £690 (2014: £400). If there was a decrease in interest rates of 0.5% net revenue before taxation would decrease by £345 (2014: £200). These calculations are based on balances as at 31 August 2015 and may not be representative of the year as a whole.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held with the custodian to be delayed.

(v)       Liquidity risk

Forty two percent of the Company's assets are AIM quoted securities and three percent on NASDAQ quoted securities, which under normal conditions can be sold to meet funding commitments if necessary. These may however be difficult to realise in adverse market conditions. The Company's unquoted investments, representing the remaining fifty five percent of the portfolio, could be more difficult to realise as they are not tradable instruments.

(vi)      Maturity Analysis of Financial Liabilities

The Company's financial liabilities comprise of creditors as disclosed in note 10. All items are due within one year.

(vii)     Managing Capital

The Company's capital management objectives are to increase net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap UK Index.

Primarily the Company finances its operations through its issued capital and existing reserves. However to help fund the Tender Offer last year the Company borrowed on a short term loan £400,000 from its Custodians Jarvis Investment Management. At the year end an amount of £400,000 was outstanding.

(viii)     Fair values of financial assets and financial liabilities

All of the financial assets and liabilities of the Company are held at fair value.

(ix)     Financial instruments by category

           The financial instruments of the Company fall into the following categories

31 August 2015
	At amortised	Loans and	Assets at fair value through
	cost	receivables	profit or loss	Total
	£'000	£'000	£'000	£'000
Assets as per the Balance Sheet
Investments	-	-	5,022	5,022
Debtors	-	9	-	9
Cash at bank	69	-	-	69
Total	69	9	5,022	5,100

Liabilities as per the Balance Sheet
Creditors	28	400	-	428
Total	28	400	0	4,672

31 August 2014		At				Assets at fair
		amortised	Loans and			value through
		cost	receivables			profit or loss		Total
		£'000	£'000			£'000		£'000
Assets as per the Balance Sheet
Investments		-	-			5,027		5,027
Debtors		-	8			-		8
Cash at bank		40	-			-		40
Total		40		8	5,027		5,075

Liabilities as per the Balance Sheet
Creditors	21		200	-	221
Total	21		200	0	221

    Fair value hierarchy

In accordance with FRS 102, the Company must disclose the fair value hierarchy of financial instruments.

This classification has changed from previous disclosures under Financial Reporting Standard 29.

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 and 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 At  31 August 2015
	Classification A	Classification                          B	Classification                            C			Total
	£'000	£'000	£'000			£'000
Equity investments	2,233	-	2,789			5,022
Total	2,233	-	2,789			5,022

At 31 August 2014
	Classification  A	Classification                         B	Classification                            C	Total
	£'000	£'000	£'000	£'000
Equity investments	2,696	-	2,331	5,027
Total	2,696	-	2,331	5,027

       The following table presents the movement in the classification C investments for the period ended 31 August 2015:

	Equity Investments
	£'000
Opening balance	2,331
Purchases	75
Sales at cost	(100)
Total gains on investments in the income statement	483
Closing balance	2,789

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 and in note 3 to the accounts. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited and CEPS PLC, in which the Company holds an investment as set out on pages 7 and 8.

On 23 June 2015 Mr Martin was appointed as Chairman of Belgravium plc in which the Company holds an investment as set out on pages 7 and 8.

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 of holding in shares %	Ordinary shares held £'000	Percentage of Loan stock holding %	Loan stock held £'000
Mr K Allen	1%	1	-	-
Mr D Horner	56%	56	69	1,031
Mr I 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 and 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 2015. 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 2015 at 10.00am at the offices of

Chelverton Asset Management Suite 3A Third Floor-20 Ironmonger Lane London EC2V 8EP

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.

END

 

END

 

 

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