Final Results

CHELVERTON GROWTH TRUST PLC FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2009 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 telephone 01392 412122. 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 FTSE All-Share Index. It is the Company's policy not to invest in any listed investment companies (including listed investment trusts). Company summary Benchmark FTSE All-Share Index Investment Manager Chelverton Asset Management Limited. Total net assets £2,895,000 as at 31 August 2009 Market capitalisation £2,155,000 as at 31 August 2009 Capital structure 14,864,827 Ordinary 1p shares carrying one vote each PEP/ISA status The Company's Ordinary shares are fully eligible for inclusion in PEPs and ISAs. Performance statistics Year ended Year ended % change 31 August 31 August 2009 2008 Net assets £2,895,000 £4,933,000 (41.31) Net asset value per share 19.47p 33.18p (41.31) FTSE All-Share Index 2,520.66 2,868.69 (12.13) Share price 14.50p 21.50p (32.56) Discount to net asset value (25.53)% (35.20)% Revenue loss after taxation (£59,000) (£38,000) Revenue loss per share (0.40)p (0.25)p Capital loss per share (13.33)p (17.18)p Chairman's statement Unfortunately it has been a testing year; volatile prices and uncertain markets have had a negative impact on the asset value of our shares. Once again, in times of uncertainty and economic turmoil we see a "flight to size" rather than a "flight to quality or value". Chelverton's net asset value per share has decreased this year from 33.18p to 19.47p - a fall of 41.31%. In the same period the Company's benchmark index, the FTSE All-Share, fell by 12.13%; the FTSE 100, which makes up over 90% of the All-Share Index declined 12.91%; and the AIM Index decreased by 26.10%. However, since the year end the net asset value per share has increased to 20.99p, a rise of 7.81%. The deteriorating macro environment and the on-going effects of the banking crisis have been the dominant influences in the performance of equity markets over the past year. The lack of liquidity in the banking system and the belief that companies would go into receivership as they would be unable to roll over debt drove prices to a low point at the beginning of March. Smaller companies were particularly badly hit as `illiquid' assets were dumped as a safety first approach by investors prevailed. It was noticeable that directors' attitudes shifted from growth to cash generation as even those companies with relatively small overdrafts and long standing banking relationships were unsure as to whether credit would continue to be extended to fund short term working capital requirements. This situation was unsustainable, and as we moved into March there was a dramatic `relief' bounce in equity markets as the concerted effort by governments globally to avert a long drawn out financial crisis began to instil some confidence back into the system. Domestically the market was given a boost as investors gradually realised that corporate debt could be rolled over albeit at a significantly higher cost to shareholders than before. Smaller companies were the major beneficiary of this upturn as they had been the most oversold on the way down. The recovery continued through to our year end from a net asset value per share of 16.87p at the half year, an increase of 15.41%. The sheer scale of quantitative easing appeared to have turned macro indicators positive and the worst fears over the extent of the recession, or even depression, were avoided. One reassuring feature of the busy August reporting season was the better than forecast cash generation of `Corporate UK' which gave further momentum to share prices. On a more cautious note, anecdotal evidence suggests that whilst trading for our investee companies is not getting any worse there is, as yet, no real sign of an upturn. In the short term we believe that earnings now have to catch up with recent price moves and valuations are generally vulnerable to earnings shortfalls. The improvement in our Company since the lows of March is welcome and whilst our underlying valuations appear less stretched than those of the market as a whole there still appears to be reluctance on the part of investors to return fully to smaller companies. Over the period under review the Company has repaid its overdraft following the Bank's request to cancel the facility, as a result of the global financial banking crisis. Given the loss of our overdraft facility, and in light of the current economic vicissitudes and the position of the underlying investee companies in their cycle the Board feel that it is in the best interest of all shareholders not to proceed with the annual tender offer again this year. Fixed tender costs have also played a significant part in this decision. The Board remains committed to reviving the tender facility as soon as it feels able to do so. In the absence of a tender offer and depending on underlying market conditions the Company may be able to use resources to buy back shares. Shareholders interested in realising a part of their holdings should contact the Company Secretary in the first instance. George Stevens Chairman 16 November 2009 Investment Manager's overview An integral part of the strong cash generation by the corporate sector has been the severity and speed of cost reductions that companies have made in the downturn. The cost cutting has been deeper than expected and as companies have swapped financial gearing for operational gearing investors have begun to factor in the dramatic effect a small uplift in turnover will have on the bottom line. This has sustained the upward momentum in share prices over the past couple of months as investors have started to look forward to recovery. Smaller companies were oversold in the downturn to the beginning of March as investors sought liquidity at any cost. After the recent upturn there appears to be the first signs of a move back into equities but liquidity worries are still prevalent and we expect smaller companies to lag behind the general market whilst confidence is rebuilt. This is essentially a timing issue as we believe the smaller end of the market is now attractively valued on a longer term basis. Portfolio Review The focus of the Company for the first part of our year was to raise money to pay down the debt and reduce gearing. To this end we sold our holdings in Mount Engineering, Capcon, AssetCo and Newmark Security in their entirety. We made additional investments in Parmenion at the time of a fund raising and Alliance Pharma, after a fundraising to make an acquisition of brands from Reckitt Benckiser. Closed Loop Recycling, the only UK based recycler of polyethylene terephthalate ("PET"), used in soft drinks and water bottles, commenced production from its new facility in Dagenham. The operation has taken time to ramp up production and to achieve the necessary approvals for food grade plastic for the output however progress is being made. Chromogenex de-listed their shares citing the costs of being listed as the reason, and the shares in AT Communications were suspended due to a warranty claim regarding the sale of a subsidiary. Unfortunately EBTM and Smallbone went into administration. There was an offer from two parties for our holding in Hartest, one of which has now withdrawn. Northbridge, Minorplanet and Tristel all raised additional funds during the period, the latter to fund the acquisition of a complementary veterinary business. Whilst trading has of course been difficult for the majority of our companies in the last period, the consensus view is that we are now over the worst even if recovery is still someway off. Outlook After the recent rise in markets, valuations are, we believe, already factoring in a significant improvement in corporate profitability as we move into next year. Whilst in the short term the market has largely been discounting results for 2009 we believe that the beginning of next year will start to see a significant divergence between those companies that can deliver against expectations and those that cannot. We will need to see tangible evidence of earnings recovery and improving confidence in the banking sector before investors return to smaller companies, but in the meantime, the continued uncertainty over the strength of the recovery will produce a number of attractive investment opportunities. David Horner Chelverton Asset Management Ltd 16 November 2009 Portfolio review as at 31 August 2009 The Company's portfolio as at 31 August 2009 is set out below. Investment Sector Valuation % of £'000 total AIM traded AI Claims Solutions Travel & Leisure 294 10.1 The provision of non-fault accident management services Alliance Pharma Pharmaceuticals & Biotechnology 157 5.4 Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products AT Communications Group Software & Computer Services 23 0.8 Business to business systems intergrator Belgravium Technologies Technology Hardware & Equipment 137 4.7 Software systems for warehousing and distribution CEPS Support Services Ordinary shares 106 3.6 Warrants 0 0.0 Production and supply of components for the footwear industry; personal protection equipment; production of printed lycra fabric; and services to the direct mail industry Datong Electronics Electronic & Electrical 64 2.2 Equipment Develops, manages and supplies covert tracking and surveillance systems Forest Support Services Industrial Transportation 139 4.8 Supply of traffic management services Hartest Holdings Industrial Engineering 71 2.4 Manufacture and sale of specialist healthcare equipment and supplies to users of electron microscopes IDOX Software & Computer Services 530 18.2 Software company specialising in the development of products for document and information management LPA Group Electronic & Electrical 83 2.9 Equipment Design, manufacture and marketing of industrial electrical accessories Minorplanet Systems Electronic & Electrical 15 0.5 Equipment Vehicle informations system MTI Wireless Edge Technology Hardware & Equipment 115 4.0 Developer and manufacturer of sophisticated antennas and antenna systems Northbridge Industrial Industrial Engineering 61 2.1 Services Consolidation vehicle for specialist industrial services in the UK Pennant International Software & Computer Services 46 1.6 Group Supplier of technology solutions to the defence and industrial sectors Petards Group Support Services 125 4.3 Development, provision and maintenance of advanced security systems and related services PSG Solutions Support Services 38 1.3 Leading provider of Local Authority residential property searches; provision of packaging solutions Richoux Group Travel & Leisure 50 1.7 Owner and operator of Richoux Restaurants Sanderson Group Software & Computer Services 45 1.5 Provides software and IT services Satcom Group Mobile Telecommunications 47 1.6 Provider of mobile satellite communications equipment and airtime Titan Europe Industrial Engineering 31 1.1 Manufacture of big wheels for construction, mining and agricultural vehicles Tristel Health Care Equipment & Services 216 7.4 Healthcare business specialising in infection control in hospitals Universe Group Support Services 19 0.7 Provision of credit card fraud prevention system, loyalty systems and retail systems Delisted from AIM Chromogenex Health Care Equipment & Services 0 0.0 Design, manufacture and distribution of aesthetic and therapeutic laser and aesthetic light based technology devices Conder Environmental (in Industrial Engineering 0 0.0 liquidation) Supply of industrial pollution control equipment and provision of glass reinforced plastic oil/water separators EBTM (in administration) General Retailers 0 0.0 Internet retail of music inspired fashion Food & Drink Group (in Travel & Leisure 0 0.0 administration) Owner and operator of premium bars and restaurants in London General Capital Group General Financial 3 0.1 Provision of finance Smallbone (in Household Goods 0 0.0 administration) The design and manufacture of bespoke kitchens, bathrooms, bathroom furniture and suppliers of high quality flooring Unquoted Closed Loop Recycling Support Services Loanstock 252 8.7 Ordinary B shares 105 3.6 Operation of a plastic recycling plant Locker Group (in Industrial Engineering 21 0.7 liquidation) Cash Shell Parmenion Capital Support Services 115 4.0 Partners LLP Provides fund-based discretionary fund management services to Independent Financial Advisors Portfolio valuation 2,908 100.0 During the year the shareholdings in AssetCo, Axis Intermodal, Capcon, Clipper Ventures, Mount Engineering, Newmark, SPI Lasers and Wineworld have been sold. Top Twenty Investments Investment 31 August 31 August 2009 2008 Valuation % of Valuation % of £'000 total £'000 total IDOX 530 18.2 972 16.5 Closed Loop Recycling 357 12.3 336 5.7 AI Claims Solutions 294 10.1 517 8.8 Tristel 216 7.4 231 3.9 Alliance Pharma 157 5.4 55 0.9 Forest Support Services 139 4.8 118 2.0 Belgravium Technologies 137 4.7 250 4.2 Petards Group 125 4.3 77 1.3 MTI Wireless Edge 115 4.0 119 2.0 Parmenion Capital Partners LLP 115 4.0 100 1.7 CEPS 106 3.6 188 3.2 LPA Group 83 2.9 70 1.2 Hartest Holdings 71 2.4 153 2.6 Datong Electronics 64 2.2 200 3.4 Northbridge Industrial Services 61 2.1 312 5.3 Richoux Group 50 1.7 83 1.4 Satcom Group 47 1.6 120 2.0 Pennant International Group 46 1.6 65 1.1 Sanderson Group 45 1.5 84 1.4 PSG Solutions 38 1.3 130 2.2 Total 2,796 96.1 4,180 70.8 Portfolio breakdown by sector and by index Portfolio by Sector Percentage Support Services 26.2% Software and Computer 22.1% Services Travel & Leisure 11.8% Technology Hardware & 8.7% Equipment Health Care Equipment 7.4% & Services Industrial Engineering 6.3% Electronic & 5.6% Electrical Equipment Pharmaceutical & 5.4% Biotechnology Industrial 4.8% Transportation Mobile 1.6% Telecommunications General Financial 0.1% Percentage of Portfolio by Index Portfolio by Index Percentage AIM 82.9% Unquoted 17.0% Delisted 0.1% Report of the Directors The Directors present their report, which incorporates the Business Review, and audited accounts for the year ended 31 August 2009. 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 as an authorised investment trust under Section 842 of the Income and Corporation Taxes Act 1988 for the year ended 31 August 2008. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2009 so as to be able to continue to obtain approval as an authorised investment trust. The Company is an investment company as defined in Section 833 of the Companies Act 2006. 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 also to increase net asset value per share at a higher rate than other quoted smaller company trusts and the FTSE All-Share Index. Investment policy The Company invests principally in securities of publicly quoted UK companies, though it may invest in unquoted securities. The concentrated UK portfolio comprises between 30 to 45 securities. The performance of the Company's investments is compared to the FTSE All-Share Index. 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. It is the Company's policy not to invest in any listed investment companies or listed investment trusts. To comply with Listing Rules 15.2.7 and 15.6.2 the Company's investment policy is detailed above and should be read in conjunction with the subsequent sections entitled investment strategy and the portfolio analysis. It is intended from time to time, when deemed appropriate, that the Company will borrow for investment purposes. The Company, however, does not currently have any borrowing facilities. 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 Company's 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. 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 founders 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. 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 total expenses ratio. The Company's income statement is set out below. The movement of the NAV is compared to the FTSE All-Share Index, the Company's benchmark. The NAV per Ordinary share at 31 August 2009 was 19.47p (2008: 33.18p). The Company's share price at the year end was 14.50p (2008: 21.50p). Principal risks The Board considers the following as the principal risks facing the Company. Mitigation of these risks is sought and achieved in a number of ways: 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. Further details regarding the Company's various Committees and their duties are given in the statement on corporate governance. 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 A breach of Companies Act regulations and FSA/London Stock Exchange rules may result in the Company being liable to fines or the suspension of the Company from the London Stock Exchange. The Board with its advisers monitor the Company's regulatory obligations both on an ongoing basis and at quarterly Board meetings. 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 accounts 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 are given in note 19 to the accounts. 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 its 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. Results and dividend The results for the year and the proposed transfer from revenue reserves are set out in the income statement. The Directors do not recommend the payment of a dividend for the year. Directors The Directors in office during the year and at the date of this report, all of whom are non-executive, are shown below: Date of appointment K J Allen 8 November 1994 B N Lenygon 2 August 2001 D A Horner 1 May 2006 G E Stevens (Chairman) 20 December 2006 Mr Horner will offer himself for re-election in accordance with Listing Rules 15.2.11 - 13, which stipulates that a director who is also a director of the investment manager should be subject to annual re-election. In accordance with Combined Code, provision A.7.2, that non-executive directors who have served on a board for more than nine years should be subject to annual re-election, Mr Allen will retire at the Annual General Meeting and, being eligible, will offer himself for re-election. Mr Lenygon will also offer himself for re-election, this in accordance with Listing Rule 15.2.12A where he stands for annual re-election as he is also a director of another company with the same investment manager. The Board as a whole believes that Messrs Horner, Allen and Lenygon, collectively and individually, make active and effective contributions in their roles as Directors of the Company and that shareholders should vote in favour of their re-election, respectively, for the following reasons: Mr Horner is managing director of Chelverton Asset Management Limited, the Company's Investment Manager. He is a chartered accountant and has considerable experience of analysing and working with smaller companies. Mr Allen is a founding Director of the Company. He is a chartered accountant and has held a number of financial management positions within varied sectors where he has gained a thorough knowledge of smaller companies managerial issues. His financial experience enables him to contribute significantly on accounting and reporting matters. Mr Allen is deemed wholly independent by the other Board members notwithstanding his length of service. Mr Lenygon has considerable experience in the investment trust market and his knowledge in the sector is considered by the other Directors to be extremely beneficial to the Company, along with his professional expertise as a chartered accountant and a barrister. None of the Directors has a contract of service with the Company nor, save as disclosed below, has there been any other contract or arrangement between the Company and any Director at any time during the year. None of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements during the year. Mr Allen is a director and employee of Forest Support Services PLC, in which the Company has an investment. Mr Horner is the managing director of Chelverton Asset Management Limited, the Company's Investment Manager and is also a director of CEPS PLC in which the Company has an investment, as well as being a Director of the Company. Directors' beneficial and family interests The interests of the Directors and their families in the Ordinary shares of the Company are set out below: At At 31 August 2009 31 August 2008 K J Allen 221,762 221,762 B N Lenygon 62,411 62,411 D A Horner 698,163 698,163 G E Stevens 1,221,315 1,221,315 There have been no changes to any of the above holdings between 31 August 2009 and the date of this Report. None of the Directors has any non-beneficial interests to disclose. Management and administration agreements The Company's investments are managed by Chelverton Asset Management Limited ("CAM") under an agreement dated 28 June 2001. The Company pays CAM, in respect of its services as Investment Manager, a monthly fee (exclusive of VAT) payable in arrears as follows: (i) for the first £15 million of funds under management at the rate of 1/6% per month of the gross value of funds under management ("the Value"); (ii) for the next £15 million of funds under management, at the rate of 1/8% per month of the amount by which the Value exceeds £15 million; and (iii) for funds under management above £30 million, at the rate of 1/12% per month. From 1 December 2006 the Investment Manager agreed to waive half its fee during the currency of this agreement. 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 26 June 2001, company secretarial services and the general administration of the Company are undertaken by Capita Sinclair Henderson Limited for an annual fee of £41,597. This fee is subject to annual review based on the UK Retail Price Index. In the event that there is an increase in the issued share capital of the Company, the fee will be adjusted upwards by agreement between the Company and Capita Sinclair Henderson Limited. The agreement may be terminated by either party giving to the other not less than six months' notice at any time. Appointment of Chelverton Asset Management ("CAM") as the Investment Manager The Board 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. The reason for this view is that the investment performance of the Company is satisfactory having regard to the exceptional circumstances of the past year. 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. Payment of suppliers The Company does not follow any code or standard on payment practice. However it is the Company's payment policy to obtain the best possible terms for all business and, therefore, there is no consistent policy as to the terms used. The Company agrees with its suppliers the terms on which business will be transacted, and it is the Company's policy to abide by those terms. At 31 August 2009 all suppliers' invoices received had been settled. 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 19 to the accounts. Section 992 Companies Act 2006 The following information is disclosed in accordance with Section 992 of the Companies Act 2006. • The Company's capital structure and voting rights are summarised below. • Details of the substantial shareholders in the Company are listed below. • The rules concerning the appointment and replacement of Directors are contained in the Company's Articles of Association. • Amendment of the Company's Articles of Association and the giving of powers to issue or buy back the Company's shares require a special resolution to be passed by shareholders. The Board's current powers to issue or buy back shares and proposals for their renewal are detailed below. • There are: no restrictions concerning the transfer of securities in the Company; no special rights with regard to control attached to securities; no restrictions on voting rights, no agreements between holders of securities regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control following a successful takeover bid. • There are no agreements between the Company and its Directors concerning compensation for loss of office. Annual General Meeting The Notice of Annual General Meeting is set out in the Annual Report. In addition to the ordinary business of the meeting, the Directors are putting forward resolutions to allot shares and disapply pre-emption rights, which will allow the Company to issue new shares or sell shares out of treasury equivalent to 10% of its existing issued share capital. The Directors are also seeking to renew the authority to allot Ordinary shares held in treasury at a discount to NAV. It is also proposed that at the Annual General Meeting the Company be given renewed authority to buy back its own shares, which may either be cancelled or held in treasury. Any decision regarding placing into treasury, or issuing shares from treasury will only be taken if, in the opinion of the Directors, the decision would be in the interest of shareholders as a whole. As at 16 November 2009, being the latest practicable date before the publication of this Annual Report, there are no outstanding warrants or options to subscribe for any Ordinary shares of the Company. Disclosure of information to Auditors As far as the Directors are aware: • there is no relevant audit information of which the Company's Auditors are unaware; and • they have taken all steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's Auditors are aware of that information. Re-appointment of Auditor A resolution will be put to the shareholders at the Annual General Meeting proposing the re-appointment of Hazlewoods LLP as Auditors to the Company. Hazlewoods LLP have indicated their willingness to continue in office. On behalf of the Board George Stevens Chairman 16 November 2009 Statement on corporate governance Corporate Governance - Statement of Compliance The Board considers that throughout the year the Company has been in compliance with the principles of the Combined Code ("Combined Code") which can be found at www.frc.org.uk, insofar as they are relevant to the Company's business, except where stated. Additional procedures have been adopted to ensure the Company's current practices are consistent with the recommendations of the Combined Code in all material respects. Board of Directors Mr Stevens, Mr Allen and Mr Lenygon are deemed by the Board to be independent of the Investment Manager. The continuing independence of Mr Allen has been fully considered in light of his having served for more than nine years on the Board since his first election. The Company experienced a significant change in structure and Board composition in August 2001 to the effect that Mr Allen is the only founding Board member, his knowledge of the Company and experience is considered extremely valuable by the other Directors. The Board considers Mr Stevens is independent notwithstanding that he is a significant shareholder in the Company. Mr Stevens is experienced in business and accountancy and provides a robust balanced view between the Investment Manager and the shareholders. Mr Lenygon has many years of experience in investment trusts, providing specific expertise of this sector which is of great benefit to the Board. Mr Lenygon is considered by the Board to be independent notwithstanding that he is also a director of another investment trust managed by CAM. Mr Horner as managing director of CAM the Investment Manager, is not independent. Given the size and nature of the Board, it is not considered appropriate to appoint a Senior Independent Director. This is a breach of code provision A.3.3. The Company does not have a chief executive officer, but by appointing a management company the roles of chairman and chief executive officer are effectively separated. Brief biographical details of the Directors can be found in the Annual Report. The Board has formal arrangements under which Directors, in the furtherance of their duties, may take independent professional advice. The Company has Directors' and Officers' liability insurance in place to cover legal defence costs. There are no qualifying third party indemnity provisions in place. The Board also has direct access to the advice of the Company Secretary, which is responsible for ensuring that Board and Committee procedures are followed and that applicable regulations are complied with. Directors are required to retire by rotation at least every three years, Mr Stevens retired in 2007 and will stand for re-election next year. Mr Allen stands for re-election annually having served on the Board for more than nine years, as does Mr Horner, as a director of the Investment Manager and Mr Lenygon as a director of another company with the same Investment Manager. The Chairman, Mr Stevens, is deemed by his fellow independent Board members to be independent and have no conflicting relationships. He considers himself to have sufficient time to commit to the Company's affairs. Directors' attendance During the year the Directors' attendance at meetings has been recorded as follows: Board Audit meetings Committee K J Allen 4 of 4 2 of 2 B N Lenygon 4 of 4 2 of 2 D A Horner 4 of 4 n/a G E Stevens 4 of 4 2 of 2 Board operation The Directors review at each Board meeting the Company's investments and all other important issues to ensure that control is maintained over the Company's affairs. The Board is responsible for the investment policy and strategic and operational decisions of the Company. A formal schedule of matters specifically reserved for the Board's approval was adopted in November 2001. The management of the Company's assets is delegated to CAM, which has discretion to manage the assets of the Company in accordance with the Company's investment objectives and policies subject to the following: • All proposed unquoted investments are put to the Board for approval; • Quoted investments of over £100,000 in any single situation are referred to the Board; • Opportunistic top-up investments of up to £50,000 are permitted in any investment on the basis that the Board is informed. To enable the Directors to fulfil their role, they have timely access to all relevant management and financial information. The full Board meets regularly and maintains contact with the Investment Manager between formal meetings. Committees The Company also uses a number of committees to control its operations. These committees comprise the full Board, except the Management Engagement Committee where Mr Horner is not a member by virtue of his association with the Investment Manager. Each committee's delegated responsibilities are clearly defined in written terms of reference, copies of which are available from the Company's Registered Office. The Audit Committee provides a forum through which the Company's external Auditors report to the Board of Directors. The Committee meets at least once a year. Mr Lenygon chairs the Audit Committee. The primary responsibilities of the Audit Committee are: to review the effectiveness of the internal control environment of the Company and monitor adherence to best practice in corporate governance; to make recommendations to the Board in relation to the re-appointment of the Auditors and to approve their remuneration and terms of engagement; to review and monitor the Auditors' independence and objectivity and the effectiveness of the audit process and provide a forum through which the Company's Auditors report to the Board. The Audit Committee also has responsibility for monitoring the integrity of the financial statements and accounting policies of the Company and for reviewing the Company's financial reporting and internal control policies and procedures. Committee members consider that individually and collectively they are appropriately experienced to fulfil the role required. The Audit Committee has direct access to the Company's Auditors, Hazlewoods LLP, whose representatives attend the year end Audit Committee meeting. On the basis of these meetings the Audit Committee has been able to assess the effectiveness of the external audit. A formal statement of independence is received from the external Auditors each year. The Company does not have an internal audit function. All of the Company's management functions are delegated to independent third parties and, as a result, this function is not felt to be appropriate. However the need for one is reviewed annually. The Management Engagement Committee is responsible for reviewing the terms of the Investment Manager's contract, and those of other service providers. This Committee meets as required and Mr Stevens chairs this Committee. The Nomination Committee considers the appointment and re-appointment of Directors and meets as and when required. Mr Stevens chairs this committee. No meetings were held during the year. The Committee meets for the purpose of considering appointments to, and removals from, the Board and determining the appointment process. The Board as a whole fulfils the function of a Remuneration Committee. Remuneration details are given in the Directors' remuneration report. At 31 August 2009 there were no Directors' service agreements and no Director had been granted any options to acquire shares in the Company. On appointment to the Board, Directors are fully briefed as to their responsibilities by the Chairman and Investment Manager. As an ongoing policy, Directors' skills and knowledge are updated regularly with information provided by the Company Secretary and various industry bodies. Performance evaluation In accordance with corporate governance best practice, formal performance evaluation of the Board, its committees and individual Directors was undertaken following the year end by verbal consultation. It was concluded that the Board represented an effective combination of skill and expertise and continued to operate successfully as a small, proficient unit. The performance of each Director continues to be effective and demonstrates commitment to the role. Substantial shareholdings The Directors had been notified of the following substantial interests in the voting shares of the Company at the date of this Report: Number % of total of shares voting rights M E Brockbank 2,186,677 14.71 Philip J Milton private clients 1,497,719 10.08 Midas Capital 1,387,000 9.33 G E Stevens 1,221,315 8.22 Charles Stanley private clients 908,281 6.11 Rensburg Sheppard 710,238 4.78 D A Horner 698,163 4.70 M M Brooks 595,265 4.00 Relations with Shareholders Communication with shareholders is given a high priority by both the Board and the Investment Manager and all Directors are available to enter into dialogue with shareholders. Major shareholders of the Company are offered the opportunity to meet with the independent non-executive Directors of the Board in an attempt to ensure that their views are understood. All shareholders are encouraged to attend and vote at the Annual General Meeting, during which the Board and the Investment Manager are available to discuss issues affecting the Company and shareholders have the opportunity to address questions to the Investment Manager, the Board and the Chairman of the Board's standing committees. Any shareholder who would like to lodge questions in advance of the Annual General Meeting is invited to do so either on the reverse of the proxy card or in writing to the Company Secretary. The Company always responds to letters from individual shareholders. The Annual and Half-Yearly Reports of the Company are prepared by the Board and its advisers to present a full and readily understandable review of the Company's performance. Copies of the Annual Report are dispatched to shareholders by mail and are also available for downloading from the Company's website maintained by the Investment Manager at www.chelvertonam.com. Going concern After due consideration, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. Internal controls The Directors acknowledge that they are responsible for the Company's systems of internal control and for reviewing their effectiveness. An ongoing process in accordance with the guidance supplied by the FRC's Internal Control: Guidance for Directors on the Combined Code, has been established for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place throughout the year and up to the date the Annual Report and Accounts were approved and is regularly reviewed by the Board. Key procedures established with a view to providing effective financial control have been in place for the full financial year and up to the date of approval of the report. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company's objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss. Internal control assessment process Risk assessment and the review of internal controls are undertaken by the Board in the context of the Company's overall investment objective. The review covers the key business, operational, compliance and financial risks facing the Company. In arriving at its judgement of what risks the Company faces, the Board has considered the Company's operations in the light of the following factors: ● The nature and extent of risks which it regards as acceptable for the Company to bear within its overall business objective; ● The threat of such risks becoming a reality; ● The Company's ability to reduce the incidence and impact of risk on its performance; and ● The cost and benefits to the Company of third parties operating the relevant controls. Against this background, the Board has split the review of risk and associated controls into four sections reflecting the nature of the risks being addressed. These sections are as follows: ● Corporate strategy; ● Published information, compliance with laws and regulations; ● Relationship with service providers; and ● Investment and business activities. Given the nature of the Company's activities and the fact that most functions are subcontracted, the Directors have obtained information from key third party suppliers regarding the controls operated. To enable the Board to make an appropriate risk and control assessment the information and assurances sought from third party suppliers include the following: ● Details of the control environment operated by the third party suppliers; ● Identification and evaluation of risks and control objectives by third party suppliers; ● Assessment of the communication procedures with third party suppliers; and ● Assessment of the control procedures operated by third party suppliers. The key procedures which have been established to provide internal controls are as follows: ● Investment management is provided by Chelverton Asset Management Limited. The Board is responsible for setting the overall investment policy and monitors the action of the Investment Manager at regular Board meetings; ● Administration and company secretarial duties for the Company are performed by Capita Sinclair Henderson Limited; ● Custody of assets is undertaken by HSBC Investment Bank plc; ● The duties of investment management, accounting and the custody of assets are segregated. The procedures of the individual parties are designed to complement one another; ● The Directors of the Company clearly define the duties and responsibilities of their agents and advisers. The appointment of agents and advisers is conducted by the Board after consideration of the quality of the parties involved; the Board monitors their ongoing performance and contractual arrangements; ● Mandates for authorisation of investment transactions and expense payments are set by the Board; and ● The Board reviews financial information produced by the Investment Manager and the Company Secretary in detail on a regular basis. In accordance with guidance issued to directors of listed companies, the Directors have carried out a review of the effectiveness of the system of internal control as it has operated over the year. On behalf of the Board George Stevens Chairman 16 November 2009 Directors' remuneration report The Board has prepared this report, in accordance with Schedule 8 to The Large and Medium - Sized Companies and Groups (Accounts and Reports) Regulations 2008. An ordinary resolution will be put to the members to approve the report at the forthcoming Annual General Meeting. The law requires your Company's Auditors to audit certain disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditors' opinion is included in their report in the Annual Report. Remuneration Committee The Company has four non-executive directors. The Board as a whole fulfils the function of a Remuneration Committee. Policy on Directors' fees The Board's policy is that the remuneration of non-executive Directors should reflect the experience of the Board as a whole and be fair and comparable to similar organisations and appointments. The fees of the non-executive Directors are determined within the limits set out in the Company's Articles of Association, and they are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits as the Board do not consider it to be appropriate at this time. Directors' service contracts It is the Board's policy that none of the Directors has a service contract. The terms of their appointment provide that a Director may be removed without notice and that compensation will not be due on leaving office. Directors' emoluments for the year (audited) The Directors who served during the year received the following emoluments in the form of fees: 2009 2008 G E Stevens 18,750 18,750 K J Allen 15,000 15,000 B N Lenygon 15,000 15,000 48,750 48,750 Mr Horner has waived his fees. Approval This Directors' remuneration report was approved by the Board of Directors on 16 November 2009. George Stevens Chairman 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). Company law requires the Directors to prepare financial statements for each financial year which present fairly the financial position of the Company and the financial performance and cash flows of the Company for that period. In preparing these 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; and • state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements. The Directors are responsible for keeping proper accounting records that 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. 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 confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware; and each Director has taken all the steps that ought to have been taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. By order of the Board George Stevens Chairman 16 November 2009 Independent Auditors' report To the members of the Chelverton Growth Trust PLC The Company's financial statements for the year ended 31 August 2009 have been audited by Hazlewoods LLP. The text of the Auditor's report can be found in the Company's Annual Report and Accounts at www.chelvertonam.com. Income statement for the year ended 31 August 2009 2009 2008 Note Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Losses on investments 8 - (2,043) (2,043) - (2,641) (2,641) at fair value Income 2 65 - 65 129 - 129 Investment management 3 (8) (26) (34) (19) (56) (75) fee Refund of VAT on 3 33 99 132 - - - investment management fee Other expenses 4 (144) - (144) (139) - (139) Net return before (54) (1,970) (2,024) (29) (2,697) (2,726) finance costs and taxation Interest payable 5 (4) (12) (16) (8) (25) (33) Net return on ordinary (58) (1,982) (2,040) (37) (2,722) (2,759) activities before taxation Taxation on ordinary 6 (1) - (1) (1) - (1) activities Net return on ordinary (59) (1,982) (2,041) (38) (2,722) (2,760) activities after taxation Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence Return per Ordinary 7 (0.40) (13.33) (13.73) (0.25) (17.18) (17.43) share 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 below form part of these accounts. Reconciliation of movements in shareholders' funds for the year ended 31 August 2009 Called Share Capital Capital Revenue Total up premium reserve redemption reserve share account reserve capital £'000 £'000 £'000 £'000 £'000 £'000 Year ended 31 August 2009 1 September 2008 149 2,674 (1,595) 40 3,665 4,933 Adjustment to provision for - - 3 - - 3 tender offer expenses Net return after taxation - - (1,982) - (59) (2,041) for the year 31 August 2009 149 2,674 (3,574) 40 3,606 2,895 Year ended 31 August 2008 1 September 2007 175 2,674 2,285 14 3,703 8,851 Cost of shares cancelled (26) - (1,158) 26 - (1,158) Net return after taxation - - (2,722) - (38) (2,760) for the year 31 August 2008 149 2,674 (1,595) 40 3,665 4,933 The notes below form part of these accounts. Balance sheet as at 31 August 2009 Note 2009 2008 Revenue Revenue £'000 £'000 Fixed assets Investments at fair value 8 2,908 5,900 Current assets Debtors 10 6 29 Cash at bank 44 - 50 29 Creditors - amounts falling due within 11 63 996 one year Net current liabilities (13) (967) Net assets 2,895 4,933 Share capital and reserves Called up share capital 12 149 149 Share premium account 13 2,674 2,674 Capital reserve 13 (3,574) (1,595) Capital redemption reserve 13 40 40 Revenue reserve 13 3,606 3,665 Equity shareholders' funds 2,895 4,933 Net asset value per Ordinary share 17 19.47p 33.18p The notes below form part of these accounts. These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 16 November 2009. They were signed on its behalf by Chairman George Stevens Statement of cash flows for the year ended 31 August 2009 Note 2009 2008 Revenue Revenue £'000 £'000 Operating activities Investment income received 79 118 Deposit interest received - 6 Investment management fees paid (37) (78) VAT refund on investment management fees 132 - Secretarial fees paid (39) (46) Other cash payments (83) (100) Net cash inflow/(outflow) from operating 14 52 (100) activities Returns on investments and servicing of finance Interest paid (28) (28) Investing activities Purchases of investments (71) (528) Sales of investments 1,028 493 Net cash inflow/(outflow) from investing 957 (35) activities Financing - (1,118) Share repurchase Cost of Tender Offer - (38) - (1,156) Increase/(decrease) in cash 16 981 (1,319) The notes below form part of these accounts. Notes to the accounts as at 31 August 2009 1 ACCOUNTING POLICIES Accounting convention The accounts are prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and with the AIC Statement of Recommended Practice ("SORP") issued in January 2009, regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts. All the Company's activities are continuing. Income recognition Dividends receivable on quoted equity shares are included as revenue when the investments concerned are quoted `ex-dividend'. UK dividends are disclosed excluding the associated tax credit. Dividends receivable on equity and non-equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. All other income is included on an accruals basis. Expenses All expenses are accounted for on an accruals basis and charged through the revenue account in the income statement except as follows: ● expenses which are incidental to the acquisition or disposal of an investment are treated as capital and separately identified and disclosed (see note 8); ● Management fees and bank 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. Where investments are unlisted or trading in the securities of an investee company is suspended, the investment is valued at the Directors' estimate of its net realisable value being their estimate of fair value. 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 19: Deferred tax. 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 2009 2008 Revenue Revenue £'000 £'000 Income from investments Dividends from UK companies 59 120 Dividends from overseas companies 6 6 65 126 Other income Bank interest receivable - 3 Total income - 129 Total income comprises: Dividends 65 126 Interest - 3 65 129 3 INVESTMENT MANAGEMENT FEE Analysis of charge in period 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Investment management fee 8 26 34 18 54 72 Irrecoverable VAT thereon - - - 1 2 3 8 26 34 19 56 75 The investment management fee is calculated at the rate of 1/6% per month of the gross value of funds under management and is payable monthly in arrears. At 31 August 2009 there was £2,000 outstanding (2008: £5,000). From 1 December 2006 the Investment Manager agreed to waive half its fee. In 2004 the Association of Investment Companies (`AIC') and JPMorgan Claverhouse (`Claverhouse') brought a case against HM Revenue & Customs to challenge the VAT charged on management fees paid by investment trusts. The case was referred to the European Court of Justice and in a ruling in June 2007 it upheld the AIC/Claverhouse claim. Following this ruling the Company has not been charged VAT on its investment management fees from 1 November 2007. In addition on 25 August 2009 the Company received a refund of VAT previously paid of £132,000. This has been allocated 75% to capital and 25% to revenue. 4 OTHER EXPENSES 2009 2008 Revenue Revenue £'000 £'000 Administrative and secretarial services 42 47 Directors' remuneration 49 49 Auditors' remuneration: 10 12 audit services Other expenses 43 31 144 139 5 INTEREST PAYABLE Analysis of charge in period 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 On bank overdraft 4 12 16 8 25 33 6 TAXATION Analysis of charge in period 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Current tax: 1 - 1 1 - 1 Irrecoverable withholding tax 1 - 1 1 - 1 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 (28%). The differences are explained below: 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Loss on ordinary activities (58) (1,982) (2,040) (37) (2,722) (2,759) before taxation Theoretical tax at UK (16) (555) (571) (11) (793) (804) corporation tax rate of 28% (2008: 29.17%) UK dividend income not taxable (16) - (16) (35) - (35) Expenses not allowable for tax 1 - 1 - - - Non-taxable investment losses - 572 572 - 770 770 Excess expenses for the period 31 - 31 46 23 69 Utilisation of brought forward - (17) (17) - - - expenses Withholding tax suffered on 1 - 1 1 - 1 foreign income dividend Current tax charge for the 1 - 1 1 - 1 period At 31 August 2009 the Company had surplus management expenses of £2,972,000 (2008: £2,919,000) 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. 7 RETURN PER ORDINARY SHARE 2009 2008 Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence Basic (0.40) (13.33) (13.73) (0.25) (17.18) (17.43) Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £59,000 (2008: £38,000) and on 14,864,827 (2008: 15,836,872) 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 loss of £ 1,982,000 (2008: net capital loss of £2,722,000) and on 14,864,827 (2008: 15,836,872) 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 loss of £2,041,000 (2008: total loss £2,760,000) and on 14,864,827 (2008: 15,836,872) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. 8 INVESTMENTS 2009 2008 £'000 £'000 Delisted 3 105 AIM 2,412 5,294 Unquoted 493 501 2,908 5,900 AIM Delisted Unquoted Total * £'000 £'000 £'000 £'000 Investment Opening book cost 7,893 942 690 9,525 Opening fair value adjustment (2,599) (837) (189) (3,625) 5,294 105 501 5,900 Movements in the year: Purchases at cost 56 - 15 71 Sales: Proceeds (945) - (75) (1,020) Realised losses on sales (737) - (179) (916) Transfer between categories - cost (570) 570 - - Transfer between categories - 215 (215) - - unrealised depreciation (Increase)/decrease in unrealised (901) (457) 231 (1,127) depreciation Closing valuation 2,412 3 493 2,908 Closing book cost 5,697 1,512 451 7,660 Closing fair value adjustment (3,285) (1,509) 42 (4,752) Closing valuation 2,412 3 493 2,908 2009 2008 £'000 £'000 Realised (losses)/gains on sales (916) 211 Increase in unrealised depreciation (1,127) (2,852) Net losses on investments at fair value (2,043) (2,641) * Unquoted investments are valued at the Directors' estimate of their net realisable value, being their estimate of fair value. Analysis of changes in fair value of unquoted investments Cost at Valuation at (Increase)/ Cost at Valuation at 31 August 31 August decrease in 31 August 31 August 2009 2009 unrealised 2008 2008 depreciation £'000 £'000 £'000 £'000 £'000 Investment Closed Loop Recycling 252 252 - 252 252 - Loanstock - Ordinary B shares 84 105 21 84 84 Locker Group - 21 (30) - 51 Parmenion Capital 115 115 - 100 100 Partners LLP Wineworld London - - 165 174 9 - Ordinary Shares - Preference Shares - - 75 80 5 451 493 231 690 501 Analysis of disposals of unquoted investments Investment Disposal Cost Gain/ Valuation (loss)on at proceeds disposal 31 August 2008 £'000 £'000 £'000 £'000 Locker Group 54 - 54 51 Wineworld London Ordinary Shares 17 174 (157) 9 Preference Shares 4 80 (76) 5 75 254 (179) 65 Transaction costs During the year, the Company incurred transaction costs of £nil (2008: £2,374) and £4,388 (2008: £2,484) on purchases and sales of investments, respectively. These amounts are included in `Losses on investments at fair value' as disclosed in the income statement. Details of material holdings in unquoted investments Cost Valuation Valuation Last Net Turnover Pre at at at accounts assets tax 31 August 31 August 31 August period loss 2008 2008 2008 end £'000 £'000 £'000 £'000 £'000 £'000 £'000 Investment Closed Loop 252 252 252 30/06/ 991 31 1,969 Recycling* 2008 - Loanstock - Ordinary B shares 84 105 84 30/06/ 991 31 1,969 2008 Parmenion Capital 115 115 100 31/03/ 212 152 522 Partners LLP ** 2009 * Closed Loop Recycling is the first food grade plastic recycler in the UK. The company produces food grade PET and HDPE from plastic bottle waste. ** Parmenion Capital Partners LLP offers fund based discretionary investment management services to the Independent Financial Adviser community. 9 SIGNIFICANT INTERESTS At 31 August 2009 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 Percentage Issued share of capital shares held issued share capital Forest Support Services, Ord 5p 2,140,000 11.440 18,706,961 CEPS, Ord 5p 625,856 7.527 8,314,310 Belgravium Technologies, Ord 5p 5,000,000 4.954 100,936,547 CEPS, Wts To Sub For Ord 20/04/10 65,706 4.570 1,437,769 Hartest Holdings, Ord 10p 340,000 3.951 8,605,288 Petards Group Ord 1p 25,000,000 3.926 636,706,423 AI Claims Solutions, Ord 10p 2,175,000 3.541 61,416,189 Minorplanet Systems, Ord 1p 1,000,000 3.080 32,471,528 10 DEBTORS - amounts falling due within one year 2009 2008 £'000 £'000 Amounts due from brokers - 8 Prepayments and other debtors 6 6 Dividends receivable - 15 6 29 11 CREDITORS - amounts falling due within one year 2009 2008 £'000 £'000 Other creditors 63 59 Bank overdraft - 937 63 996 The bank overdraft was repaid in full on 28 August 2009. Further details are disclosed in note 19 (iii). 12 CALLED UP SHARE CAPITAL 2009 2008 £'000 £'000 Authorised: 270 270 27,000,000 Ordinary shares of 1p each Allotted, called up and fully paid: 149 149 14,864,827 (2008: 14,864,827) Ordinary shares of 1p each No shares were held in Treasury during the year nor up to the date of this report. Duration of Company At the Annual General Meeting of the Company in 2011 the Directors shall ensure that a special resolution is proposed to the effect that the duration of the Company shall continue for a further three years (a "Continuance Resolution"). In the event that a Continuance Resolution is passed, the Directors shall ensure that a further Continuance Resolution is proposed at a general meeting of the Company to be held no later than three years after the date on which the previous Continuance Resolution was passed. In the event that any Continuance Resolution fails to be passed at any general meeting of the Company, the Directors shall conduct the Company's affairs so as to arrange an orderly wind up of the Company's affairs and shall ensure that a resolution to effect a voluntary wind up of the Company shall be proposed at a general meeting of the Company by no later than the third anniversary of the date on which the relevant Continuance Resolution failed to be passed. At a general meeting called pursuant to the Articles those holders of ordinary shares who (being individuals) are present in person or by proxy or (being corporations) are present by proxy or by a representative duly authorised (not being himself a member entitled to vote) and entitled to vote and who vote in favour of the resolution proposed to wind up the Company voluntarily shall on a poll collectively have such total number of votes as is one more than the number of votes which are required to be cast on such poll for the said resolution to be carried, and upon such resolution being passed then the Company shall be wound up accordingly. 13 RESERVES Year ended 31 August 2009 Share Capital Capital Revenue premium reserve redemption reserve reserve £'000 £'000 £'000 £'000 At 1 September 2008 2,674 (1,595) 40 3,665 Net losses on realisation - (916) - - of investments VAT refund on investment - 99 - - management fees Changes in unrealised - (1,127) - - depreciation Adjustment to provision for - 3 - - tender offer expenses Costs charged to capital - (38) - - Retained net loss for the - - - (59) year At 31 August 2009 2,674 (3,574) 40 3,606 Yearended 31 August 2008 Share Capital Capital Revenue premium reserve redemption reserve reserve £'000 £'000 £'000 £'000 At 1 September 2007 2,674 2,285 14 3,703 Net gains on realisation of - 365 - - investments Changes in unrealised - (3,006) - - depreciation Cost of shares cancelled* - (1,158) 26 - Costs charged to capital - (81) - - Retained net loss for the - - - (38) year At 31 August 2008 2,674 (1,595) 40 3,665 * Cost of shares cancelled include costs of £42,000 relating to the tender offer. 14 RECONCILIATION OF NET RETURN BEFORE FINANCECOSTS AND TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2009 2008 £'000 £'000 Net return before finance costs and taxation (2,024) (2,726) Net capital return before finance costs 1,970 2,697 Expenses charged to capital (26) (56) VAT refund on investment management fees 99 - allocated to capital Increase/(decrease) in creditors and 19 (11) accruals Decrease/(increase) in prepayments and 14 (4) accrued income 52 (100) 15 RECONCILIATION OF NET CASH FLOW TO NET CASH 2009 2008 £'000 £'000 Net (debt)/cash at 1 September 2008 (937) 382 Net cash inflow/(outflow) 981 (1,319) Net cash/(debt) at 31 August 2009 44 (937) 16 ANALYSIS OF CHANGES IN NET DEBT At Cash At 31 Flows 31 August August 2008 2009 £'000 £'000 £'000 Cash at bank - 44 44 Bank overdraft (937) 937 - (937) 981 44 17 NET ASSET VALUE PER ORDINARY SHARE The basic net asset value per Ordinary share is based on net assets of £ 2,895,000 (2008: £4,933,000) and on 14,864,827 (2008: 14,864,827) Ordinary shares, being the number of shares in issue at the year end. 18 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES At 31 August 2009 there were no capital commitments or contingent liabilities (2008: £nil). 19 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 objectives, 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: 2009 2008 £'000 £'000 Fair value through profit or loss investments 2,908 5,900 A 20% decrease in the market value of investments at 31 August 2009 would have decreased net assets attributable to shareholders by £582,000 (2008: £ 1,180,000). An increase of the same percentage would have an equal but opposite effect on net assets available to shareholders. (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: 2009 2008 £'000 £'000 Cash at bank 44 - Bank overdraft - (937) 44 (937) The Company's overdraft with Lloyds TSB Bank PLC was repaid in full on 28 August 2009 and the overdraft relinquished. The effect of an interest rate increase of 1% would increase net revenue before taxation on an annualised basis by £440. If there was a decrease in interest rates of 0.5% net revenue before taxation would decrease by £220. These calculations are based on balances as at 31 August 2009 and may not be representative of the year as a whole. (iv) Credit risk Credit risk is the risk of financial loss to the Company if the contractual party to a financial instrument fails to meet its contractual obligations. 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 The majority of the Company's assets are AIM listed 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. (vi)Maturity Analysis of Financial Liabilities The Company's financial liabilities comprise of creditors as disclosed in note 11. 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 rather other quoted smaller company trusts and the FTSE All-Share Index. Primarily the Company finances its operations through its issued capital and existing reserves. (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 2009 At Loans and Assets Total amortised receivables at fair cost value through profit or loss £'000 £'000 £'000 £'000 Assets as per the Balance sheet Investments - - 2,908 2,908 Debtors - 6 - 6 Total - 6 2,908 2,914 Liabilities as per the Balance sheet Creditors 63 - - 63 63 - - 63 31 August 2008 At Loans and Assets Total amortised receivables at fair cost value through profit or loss £'000 £'000 £'000 £'000 Assets as per the Balance sheet Investments - - 5,900 5,900 Debtors - 29 - 29 Total - 29 5,900 5,929 Liabilities as per the Balance sheet Creditors 59 - - 59 Bank overdraft - 937 - 937 59 937 - 996 20 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 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 has an investment. Mr Allen, a Director of the Company is a director and employee of Forest Support Services PLC, in which the Company has an investment (see note 9).

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