CHELVERTON GROWTH TRUST PLC

LEI: 213800I86P8BAE6UVI83

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2022

The full Annual Report and Accounts can be accessed via the Company's website at www.chelvertonam.com or by contacting the Company Secretary on 01392 487056.

 

Investment objective

The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market ("AIM") with a market capitalisation at the time of investment of up to £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 AIM or the investee company being sold. Its investment objective is to increase net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap UK Index.

 

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

 

At the Annual General Meeting held on 12 December 2019, Shareholders voted to amend the Company's Investment Policy to state that the Company:

 

•           may participate in a CEPS plc placing (if it were to have one);

•           will liquidate its various other investments when it is felt appropriate to do so;

•           will repay the outstanding Jarvis Loan; and

•           will pay all outstanding liabilities.

 

Company summary

Benchmark	MSCI Small Cap UK Index
Investment Manager	Chelverton Asset Management Limited
Total net assets	£2,961,000 as at 31 August 2022
Market capitalisation	£1,693,000 as at 31 August 2022
Capital structure	5,460,301 Ordinary 1p shares carrying one vote each

 

Performance statistics

	Year ended	Year ended
	31 August 2022	31 August 2021	% Change
Net assets	£2,961,000	£3,146,000	(5.88)
Net asset value per share (NAV)	54.24p	57.62p	(5.87)
MSCI Small Cap UK Index	370.37	502.41	(26.28)
Share price	31.00p	59.50p	(47.90)
(Discount)/premium to net asset value	(42.85)%	3.26%
Revenue loss after taxation	£(111,000)	£(107,000)
Revenue loss per share	(2.04)p	(1.95)p
Capital (loss)/gain per share	(1.35)p	18.95p

 

Strategic Report

The Strategic Report section of the Annual Report has been prepared to help Shareholders understand the operations of the Company and assess its performance.

 

Chairman's Statement

I am not intending within this report to discuss in detail the litany of well documented issues and problems currently facing the economies of the United Kingdom and Europe. Through the almost daily turmoil seen in Government, our politicians have managed to cause further angst and uncertainty. The world looks a very different place today from that when I reported to you a year ago, and certainly not for the better as had been hoped.

 

Notwithstanding this economic climate, I am pleased to report that the Company's value has held up well on a relative value basis. Most of the portfolio companies have made progress in the past year at an operating level. However, in these febrile, risk averse times, the prices of the AIM traded shares have not advanced to reflect these improvements.

 

As a result, the past year has been one of consolidation with a decrease in the Company's net asset value per share from 57.62p to 54.24p - a reduction of 5.87%. In the same period the Company's benchmark index, the MSCI Small Cap UK Index decreased by 26.28%.

 

The Manager's Report sets out in more detail the developments in the portfolio over the past twelve months. I am pleased to say that there has been some continued positive progress, and I wish to recognise the considerable efforts by everyone working in our investee companies to achieve the best they can within highly challenging conditions.

 

The Future

The Board is aware that the current structure of the Company is not appropriate for enabling our objective of achieving the best long-term outcomes for Shareholders.

 

To date the Company's strategy has been to return cash to Shareholders via regular tender offers. Over a number of years £5.4 million has been returned and 71% of the equity retired. This has been a successful strategy and has been well received.

 

The Board feels that the reduced size of the Company and the small number of investments, dictates that a further tender offer is inappropriate at this stage. Consequently, we are now investigating other options to maximise the return of funds to Shareholders. Nothing has been concluded at this time, but as soon as this process is complete, the Board will formally report its intended strategy to Shareholders. It is hoped that such a report will be published within the next six months.

 

Recognising the need to minimise the ongoing cost base of the Company, Board members have continued to provide their services at reduced salaries. In addition, our Investment Manager, Chelverton Asset Management, has cut its fees to zero.

 

The Board considers that there remains significant unrecognised value in the portfolio and wishes to only sell investments once an appropriate value is reflected.

 

To provide adequate liquidity for such a strategy to be pursued, we have put in place a loan facility with David Horner who has provided a £215,000 loan to the Company. The loan is interest free and unsecured and can be repaid by the Company at any time or on 18 months notice from Mr Horner.

 

The Outlook

Despite the current market conditions in the UK, it is hoped that over the next twelve months we will start to see a return to more stable conditions which support a period of steady and sustainable growth. The market dislocation caused by Covid-19 and associated lockdowns should begin to reduce and the political and social fallout from the Ukrainian war will hopefully abate.

 

If the matters referred to above are resolved, then the improved certainty and clarity in the UK should encourage international investors back to invest in UK companies.

 

The companies in the portfolio have shown great resilience over the past three years, and it will be this strength that should enable them to prosper going forward.

 

Kevin Allen

Chairman

8 November 2022

 

Investment Manager's Overview

Having emerged from the pandemic and associated lockdowns it had been hoped that the UK economy would bounce back and recover to be ahead of its 2019 levels.

 

Unfortunately, the impact of the lockdowns and the furlough scheme have proved to be far more disruptive than was ever considered likely. Supply chains have not yet recovered to their pre-Covid levels of consistency or speed of delivery. The increases in world demand, which have not been matched by production and supply, have resulted in the high levels of price inflation which we are now experiencing.

 

The portfolio is invested in small AIM traded or unquoted companies whose business is largely conducted in the UK. Therefore, the strength and growth of the UK economy is by far and away the most important determinant of our underlying companies' success.

 

The UK economy is dynamic and will adapt to the challenges it faces. There will always be opportunities for nimble businesses operating in niche markets and the issues our companies are facing are evolving almost on a weekly basis. The main problems currently faced are ones of supply of labour and input materials. In addition, the price and perhaps availability of energy, both gas and electricity, could be problematic over the winter period. However, successful businesses will always find solutions; a longer-term answer to these problems is to use less labour and energy by adopting new processes and procedures, thereby becoming competitive within the changing environment.

 

Those of us of a certain age will recall previous periods, not unlike the one we are now experiencing. We should take comfort that the UK economy came through those times in a stronger and more efficient state. I do believe that we will find a way through what now seems like an impenetrable fog of uncertainty.

 

Portfolio review

I am pleased to say that the recovery that we talked about last year in CEPS plc, the Company's largest holding (68.0% of the Company's portfolio), was demonstrated in the CEPS results for the year ended 2021.This positive trend continues with another solid performance reported in the latest interim accounts for the six months ended June 2022. The full year accounts will enjoy the benefits from a complete year's trading of several incremental acquisitions made during the prior year by CEPS businesses. Thus, we remain positive.

 

The Hickton Group, a subsidiary of CEPS plc, has deliberately increased its cost base by putting in additional controls to manage its rapid growth over the past two years and to provide the base to facilitate future growth.

 

The management team at Aford Awards acquired a large internet-based business to expand the range of its offering. The integration of this business into the Aford Awards operation near Maidstone is ongoing. It is hoped that further acquisitions will be made in the next year.

 

Friedmans has seen a very welcome return to sales and profits growth. The ongoing issues of the supply of lycra and currency volatility have however been problematical. Milano International, Friedmans subsidiary, manufacturing gymnastic sportswear, has struggled with a shortage of skilled labour. However, the management team are working hard to improve efficiency and therefore performance.

A cash offer was received for Universe at 12p per share which was a good price and accelerated the returns from the new management team mentioned last year. We stated at that time that we were expecting "to see significant progress in the business and the share price".

 

Touchstar, as expected and heralded last year, has continued to improve its performance. This was evidenced in its latest interim results with increases in sales, gross margins, order book, profits, and consequently cash reserves. It will be important for Touchstar to utilise its hard created balance sheet strength to create value.

 

Petards has transformed its business to manage the reduction in sales in the railway supply side. It has significantly increased gross margins which has helped to manage the decline in its sales. Its objective two years ago was to move to a higher value-added service with stronger recurring revenue. It is well on the way to achieving this objective. As a measure of its undervalue, some 50% of market capitalisation is represented by cash reserves.

 

La Salle Education continued to make progress and is developing its business model on several fronts. We believe that the hard work of the past five years will begin to be demonstrated in the next set of results.

 

SpaDental/Main Dental Partners (MDP) continues to be problematical. Having lost an appeal to a negative judgement against it, MDP is waiting for the legal process to conclude. I am reticent to put any timetable on when this will be resolved and to the exact level of cash the Company could finally receive.

 

Redecol had received an offer to invest significant sums into the company however, the principal investor, tragically died in an accident and matters are consequently now on hold.

 

Pedalling Forth (t/a Velovixen), like most internet retailers, struggled once the lockdown environment ended. Sales were significantly lower and eventually we decided to accept a modest cash offer for our shares, there being no better alternative.

 

Outlook

The economic environment, at the time of writing, is looking very uncertain and problematical. Things will improve, however, at this stage, it is impossible to say when. The anticipated decline in inflation over the course of 2023 should be a big help as will the normalisation of the energy supply side. Gradually, the imbalance between demand and supply will disappear, not least because the UK and Europe are forecast to enter a period of recession.

 

The resolution of these issues will happen slowly, and the financial performance of our investee companies should begin to reflect the underlying progress that they have made over the past three years. This progress will, in the end, be evidenced by increases in their value.

 

David Horner

Chelverton Asset Management Limited

8 November 2022

 

Portfolio Review

as at 31 August 2022

Investment	Sector			Valuation £'000					% of  total portfolio
AIM Traded
CEPS	Support Services			2,075					68.0
Trading holding company for a number of companies supplying services and products
Petards Group	Support Services			180					5.9
Development, provision and maintenance of advanced security systems and related services
Touchstar	Technology Hardware and Equipment			595					19.5
Software systems for warehousing and distribution
Nasdaq Traded
Touchpoint Group Holdings	Support Services			-					-
Provider of mobile satellite communications equipment and airtime
Unquoted
La Salle Education	Support Services			182					5.9
A UK based company dedicated to providing on-line mathematics education
Redecol	Healthcare, Equipment & Services			21				0.7
A medical device company focussed on the development of asthma monitoring
Portfolio Valuation				3,053				100.0

 

Portfolio Holdings

as at 31 August 2022

	31 August 2022		31 August 2021
	Valuation	% of total	Valuation	% of total
Investment	£'000	portfolio	£'000	portfolio
CEPS	2,075	68.0	1,771	57.1
Touchstar	595	19.5	637	20.6
La Salle Education	182	5.9	182	5.9
Petards Group	180	5.9	190	6.1
Redecol	21	0.7	21	0.7
Touchpoint Group Holdings	-	-	-	-
Pedalling Forth *	-	-	240	7.7
Universe Group*	-	-	33	1.1
Zenith Energy *	-	-	24	0.8
Total	3,053	100.0	3,098	100.0

 

* Sold during the year.

 

Portfolio breakdown by sector and by index

Percentage of portfolio by sector

Support Services	79.8%
Technology Hardware & Equipment	19.5%
Healthcare, Equipment & Services	0.7%

 

Percentage of portfolio by index

AIM	93.4%
Unquoted	6.6%

 

All investments are in companies based in the United Kingdom.

 

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, the Company carries on business as an investment trust. Investment trusts are collective closed-ended public limited companies.

 

Chelverton Growth Trust plc is a public limited company incorporated in England and Wales (registration number 02989519) with its registered office being Suite 8, Bridge House, Courtenay Street, Newton Abbot TQ12 2QS.

 

The Company is an investment company under section 833 of the Companies Act.

 

The Company's shares are listed on the London Stock Exchange main market under the code CGW (sedol 0262134) and L.E.I. 213800I86P8BAE6UVI83.

 

Board

The Board of Directors is responsible for the overall stewardship of the Company, including investment and dividend policies, corporate and gearing strategy, corporate governance procedures and risk management.

 

Investment Objective

The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market ("AIM") with a market capitalisation at the time of investment of up to £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 AIM or the investee company being sold. Its investment objective is to increase net asset value per share at a higher rate than other quoted smaller company trusts and the MSCI Small Cap UK Index.

 

Investment Policy

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

 

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

 

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

 

At the Annual General Meeting held on 12 December 2019, Shareholders voted to amend the Investment Policy to state that the Company:

1.   may participate in another CEPS plc placing (if it were to have one);

2.   will liquidate its various other investments when it is felt appropriate to do so;

3.   will repay the outstanding Jarvis Loan; and

4.   will pay all outstanding liabilities.

 

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, 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. Although the Company's investment in CEPS represents 68.0% of the portfolio, it should be noted that CEPS is diversified across a number of underlying businesses.

 

Investment Strategy

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

 

The Company's Investment Manager is Chelverton Asset Management Limited ("CAM"), an investment manager focusing exclusively on achieving returns for investors based on UK investment analysis of the highest quality. The founder and employee owners of CAM 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.

 

Note 16 gives details of the Directors' interests in the Investment Manager.

 

The Chairman's Statement and the Investment Manager's Overview give details of the Company's activities during the year under review.

 

Investment of Assets

At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period. An analysis of the portfolio at 31 August 2022 can be found above.

 

Environment Emissions

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

 

Review of Performance and Outlook

Reviews of the Company's returns during the financial year, the position of the Company at the year end, and the outlook for the coming year are contained in the Chairman's Statement and the Investment Manager's Overview.

 

Principal risks and uncertainties and risk management

As stated within the Corporate Governance Statement on pages 19 to 26 of the Annual Report, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

 

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

 

Market risk

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

 

The Investment Manager actively monitors economic and company performance and reports regularly to the Board on a formal and informal basis. The Board formally meets with the Investment Manager quarterly when portfolio transactions and performance are reviewed. The Board acting as the Management Engagement Committee meets as required to review the performance of the Investment Manager. Further details regarding the Company's Committees and their duties are given on pages 21 to 23 of the Corporate Governance Statement in the Annual Report.

 

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 fluctuate significantly.

 

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

 

Regulatory risks

Relevant legislation and regulations which apply to the Company include the Companies Act 2006, the Corporation Tax Act 2010 ("CTA"), the Alternative Investment Fund Manager's Directive ("AIFMD") and the Listing Rules of the Financial Conduct Authority ("FCA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on pages 19 to 26 of the Annual Report. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

 

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

 

Financial risk

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

 

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

 

Liquidity risk

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

 

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

 

Financial instruments

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

 

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

 

Statement regarding annual report and accounts

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

 

Performance analysis using key performance indicators

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

 

The Company's Income Statement is set out below.

 

The movement of the NAV is compared to the MSCI Small Cap UK Index, the Company's benchmark. The NAV per Ordinary share at 31 August 2022 was 54.24p (2021: 57.62p), an increase of 5.87%. By comparison the benchmark fell by 26.28%.

 

The Company's share price at the year-end was 31.00p (2021: 59.50p).

 

Viability Statement

The Board reviews the performance and progress of the Company over various time periods and uses these assessments, regular investment performance updates from the Investment Manager and a continuing programme of monitoring risk, to assess the future viability of the Company. The Directors consider that a period of two years is the most appropriate time horizon to consider the Company's viability and after careful analysis and consideration of the future prospects as discussed in the Chairman's statement above, the Directors believe that the Company is viable over a two-year period. The Directors are of the opinion that the Company has sufficient liquidity in the portfolio in readily realisable smaller capitalised AIM traded securities.

 

In order to maintain viability, the Company has a robust risk control framework for the identification and mitigation of risk which is reviewed regularly by the Board. The Directors also seek reassurance from suppliers that their operations are well managed and they are taking appropriate action to monitor and mitigate risk. The Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of assessment.

 

Current and future developments

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

 

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

 

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

 

Social, environmental and employee issues

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

 

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

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

 

By Order of the Board

Kevin Allen

Chairman

8 November 2022

 

Extract from the Report of the Directors

 

Status, objective and review

The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs ('HMRC') as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010. The Company will be treated as an investment trust company for each subsequent accounting period, subject to there being no serious breaches of the conditions. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2022 so as to be able to continue to qualify as an authorised investment trust. The Company is an investment company as defined in Section 833 of the Companies Act 2006.

 

Management and administration agreements

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

 

The Company previously paid CAM, in respect of its services as Investment Manager, an annual fee of 0.5% of gross assets, payable monthly in arrears. With effect from 1 September 2020, the Investment Manager has agreed to waive its rights to receive an investment management fee. As a result, the amount payable to CAM for the year ending 31 August 2022 was £nil (2021: £nil).  At the year-end £nil (2021: £nil) was outstanding to CAM.

 

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

 

Under an agreement dated 21 December 2015, company secretarial services and the general administration of the Company are undertaken by ISCA Administration Services Limited for an annual fee of £40,000.

 

Appointment of 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.

 

Going concern

In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council. They have considered the current cash position of the Company, and forecast revenues for the current financial year. The Directors have also taken into account the Company's Investment Policy, which is subject to regular Board monitoring processes, and is designed to ensure the Company holds sufficient liquid securities to meet possible cash flow needs. The Board has also considered the risk to the Company of the ongoing Covid-19 pandemic and the conflict in Ukraine.

 

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

 

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

 

On behalf of the Board

Kevin Allen

Chairman

8 November 2022

 

Statement of Directors' Responsibilities in respect of the Financial Statements

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

 

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

 

- select suitable accounting policies and then apply them consistently;

 

- make judgements and estimates that are reasonable and prudent;

 

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

 

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

 

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

 

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

 

Under applicable law and regulations, the Directors are also responsible for preparing a Report of the Directors, Directors Remuneration Report and Corporate Governance Statement.

 

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

 

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

·    the Strategic Report incorporating the Chairman's Statement and Investment Manager's Overview together with the Report of the Directors include a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

 

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

 

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

 

On behalf of the Board

Kevin Allen

Chairman

8 November 2022

 

NON- STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2022 and 2021 but is derived from those accounts. Statutory accounts for 2021 have been delivered to the Registrar of Companies, and those for 2022 will be delivered in due course. The Auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Investment Manager's website: www.chelvertonam.com.

 

Income Statement

for the year ended 31 August 2022

			2022			2021
	Note	Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments at fair value	7	-	(72)	(72)	-	1,042	1,042
Income	2	9	-	9	10	-	10
Investment management fee	3	-	-	-	-	-	-
Other expenses	4	(120)	(2)	(122)	(117)	(7)	(124)
Net (loss)/gain on ordinary activities before taxation		(111)	(74)	(185)	(107)	1,035	928
Taxation on ordinary activities	5	-	-	-	-	-	-
Net (loss)/gain on ordinary activities after taxation		(111)	(74)	(185)	(107)	1,035	928
		Revenue	Capital	Total	Revenue	Capital	Total
(Loss)/gain per Ordinary share	6	(2.04)p	(1.35)p	(3.39)p	(1.95)p	18.95p	17.00p

 

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

 

No operations were acquired or discontinued during the year.

 

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with applicable Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice ("AIC SORP") issued in July 2022 by the Association of Investment Companies.

 

The notes form part of these accounts.

 

Statement of Changes in Equity

for the year ended 31 August 2022

	Called up Share    Capital	Special Reserve*	Capital Reserve**	Capital Redemption Reserve	Revenue Reserve*	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Year ended 31 August 2022
1 September 2021	55	787	2,011	134	159	3,146
Net loss after taxation for the year	-	-	(74)	-	(111)	(185)
31 August 2022	55	787	1,937	134	48	2,961
Year ended 31 August 2021
1 September 2020	55	787	976	134	266	2,218
Net gain/(loss) after taxation for the year	-	-	1,035	-	(107)	928
31 August 2021	55	787	2,011	134	159	3,146

* Distributable reserves. The Special Reserve and Revenue Reserve may be used for the repurchase of the Company's own shares.

 

** The Capital Reserve has not been analysed between those amounts that are distributable and those that are not distributable.

 

The notes form part of these accounts.

 

 

Statement of Financial Position 

as at 31 August 2022

			2022		2021
	Notes		£'000		£'000
Fixed assets
Investments at fair value	7		3,053		3,098
Current assets
Debtors	9		146		146
Cash and cash equivalents			10		34
			156		180
Creditors - amounts falling due within one year	10		(248)		(132)
Net current (liabilities)/assets			(92)		48
Net assets			2,961		3,146
Share capital and reserves
Called up share capital	12		55		55
Special reserve			787		787
Capital reserve			1,937		2,011
Capital redemption reserve			134		134
Revenue reserve			48		159
Equity Shareholders' funds			2,961		3,146
Net asset value per Ordinary share	13		54.24p		57.62p

 

These financial statements were approved and authorised for issue by the Board of Directors on 8 November 2022 and signed on their behalf by

 

Kevin Allen

Chairman

 

The notes form part of these accounts.

 

Statement of Cash Flows

For the year ended 31 August 2022

		2022		2021
	Note	£'000		£'000
Cash flows used in operating activities
Net (loss)/gain on ordinary activities		(185)		928
Adjustment for:
Net capital loss/(gain)		74		(1,035)
Expenses charged to capital		(2)		(7)
Interest paid		3		10
Change in creditors		1		(14)
Change in debtors		-		4
Cash used in operations		(109)		(114)
Cash flows (used in)/from investing activities
Purchases of investments		(160)		-
Proceeds from sales of investments		133		339
Net cash (used in)/from investing activities		(27)		339
Cash flows from/(used in) financing activities
Loan advanced		215		-
Capital repayment of loan		(100)		(220)
Interest paid		(3)		(10)
Net cash from/(used in) financing activities		112		(230)
Net decrease in cash		(24)		(5)
Cash at the beginning of the year		34		39
Cash at the end of the year	11	10		34

 

The notes form part of these accounts.

 

1 ACCOUNTING POLICIES

Accounting convention

The financial statements are prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS 102"), the Companies Act 2006 and with the AIC Statement of Recommended Practice ("SORP"), Financial Statements of Investment Trust Companies and Venture Capital Trusts issued in July 2022. All the Company's activities are continuing.

 

Income recognition

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

 

Expenses

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

 

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

 

- 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 time-frame 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 NASDAQ, fair value is generally determined by reference to the share price at close of business on the balance sheet date, discounted to reflect the best estimate of the discount that may need to be applied for the shares to be sold as a single investment.

 

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

 

Cash and cash equivalents

Cash and cash equivalents includes funds held by the custodian on behalf of the Company.

 

Current assets

All current assets, except for those held at fair value through profit or loss, are subject to review for impairment at least at each reporting date.

 

• Current assets at amortised cost include debtors, prepayments and cash.

 

• Current assets held at fair value through profit or loss include the deferred consideration from the SpaDental Share Purchase Agreement and loan notes. Assets in this category are measured at fair value, with gains or losses recognised in profit or loss.

 

Current liabilities

All current liabilities, except for those held at fair value through profit or loss, are subject to review for impairment at least at each reporting date.

 

• Current liabilities at amortised cost include accruals and other creditors.

 

• Current liabilities held at fair value through profit or loss include short term loans. Liabilities in this category are measured at fair value, being equivalent to par value.

 

Significant judgements and estimation uncertainty

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

 

Investments that are not actively traded in organised financial markets, are valued at the Directors' estimate of the investment's net realisable value being their estimate of fair value. Generally, fair value will be at the most recent transaction price. In the case of direct investments in unquoted companies the 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, net asset value or funds under management, 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.

 

The recoverability of the Spa Dental debtor as shown in note 9 and the impairment of the interest has been considered by the Directors who believe that the amounts are stated at 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.

 

Special reserve

The Special Reserve was created by the cancellation of the Share Premium account by order of the High Court on 13 January 2016. It can be used for the repurchase of the Company's own shares.

 

Taxation

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

 

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

 

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

 

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business.

 

2	INCOME
			2022					2021
			Revenue		Capital		Total	Revenue	Capital	Total
			£'000		£'000		£'000	£'000	£'000	£'000
	Income from investments
	UK net dividend income		-		-		-	14	-	14
	Loan stock interest		9		-		9	(4)	-	(4)
	Total income		9		-		9	10	-	10
3		INVESTMENT MANAGEMENT FEE
				2022				2021
				Revenue		Capital	Total	Revenue	Capital	Total
				£'000		£'000	£'000	£'000	£'000	£'000
		Investment management fee		-		-	-	-	-	-

 

With effect from 1 September 2020, the Investment Manager has agreed to waive the entitlement to a fee.

 

4	OTHER EXPENSES	2022		2021
		£'000		£'000
	Administrative and secretarial services	40		36
	Directors' remuneration	20		20
	Auditors' remuneration
	-     audit services	18		18
	-     non-audit services	-		-
	Finance costs	3		10
	Other expenses	41		40
		122		124

 

5	TAXATION	2022			2021
		Revenue	Capital	Total	Revenue	Capital	Total
	Analysis of charge in year	£'000	£'000	£'000	£'000	£'000	£'000
	Current tax	-	-	-	-	-	-

 

Factors affecting current tax charge for the year

The tax assessed for the year is lower than the standard rate of corporation tax in the UK of 19%. The differences are explained below:

	2022			2021
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Theoretical tax at UK corporation tax rate of 19% (2021: 19%)
Corporation tax	(21)	(14)	(35)	(20)	196	176
Investment income not taxable	-	-	-	(3)	-	(3)
Non-taxable investment losses/(gains)	-	14	14	-	(198)	(198)
Excess expenses for the year	21	-	21	23	2	25
Current tax charge for the year	-	-	-	-	-	-

 

At 31 August 2022, the Company had surplus management expenses and losses of £4,924,000 (2021: £4,813,000) 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
		2022			2021
		Revenue	Capital	Total	Revenue	Capital	Total
		pence	pence	pence	pence	pence	pence
	Basic	(2.04)	(1.35)	(3.39)	(1.95)	18.95	17.00

 

Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £111,000 (2021: £107,000) and on 5,460,301 (2021: 5,460,301) 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 £74,000 (2021: gain of £1,035,000) and on 5,460,301 (2021: 5,460,301) 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 £185,000 (2021: gain of £928,000) and on 5,460,301 (2021: 5,460,301) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

 

7	INVESTMENTS					2022			2021
						£'000			£'000
	Fully Listed					-			24
	Traded on AIM					2,850			2,631
	Unquoted					203			443
	NASDAQ					-			-
						3,053			3,098
			Fully	Traded on
			Listed	AIM	Unquoted*		NASDAQ		Total
			£'000	£'000	£'000		£'000		£'000
	Opening book cost		118	3,696	772		166		4,752
	Opening investment holding losses		(94)	(1,065)	(329)		(166)		(1,654)
			24	2,631	443		-		3,098
	Movements in the year:
	Purchases		-	160	-		-		160
	Sales - proceeds		(24)	(82)	(27)		-		(133)
	- losses on sales		(94)	(132)	(273)		-		(499)
	Movement in investment holding losses		94	273	60		-		427
	Closing valuation		-	2,850	203		-		3,053
	Closing book cost		-	3,642	472		166		4,280
	Closing investment holding losses		-	(792)	(269)		(166)		(1,227)
	Closing valuation		-	2,850	203		-		3,053

 

		2022	2021
		£'000	£'000
	Realised (losses)/gains on sales	(499)	338
	Movement in fair value of investments	427	704
	Net (losses)/gains on investments	(72)	1,042
	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.

 

Transaction costs

During the year, the Company incurred transaction costs of £nil (2021: £nil) and nil (2021: £nil) on purchases and sales of investments, respectively.

 

Analysis of movements in unquoted investments

 

	Cost at 31 August 2021	Additions	Disposals	Cost at 31 August 2022	Realised (loss)/gain	Movement in unrealised losses	Valuation at 31 August 2022	Valuation at 31 August 2021
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment
La Salle Education	180	-	-	180	-	-	182	182
Pedalling Forth	300	-	(300)	-	(291)	60	-	240
Parmenion	-	-	-	-	18	-	-	-
Redecol	292	-	-	292	-	-	21	21
	772	-	(300)	472	(273)	60	203	443

 

Details of material holdings in unquoted investments

 

	Cost at 31 August 2022	Valuation at 31 August   2022	Cost at 31 August 2021	Valuation at 31 August   2021	Equity Held %	Last accounts period end	Net  assets	Turnover *	Pre-tax  profit *
Investment	£'000	£'000	£'000	£'000			£'000	£'000	£'000
La Salle Education	180	182	180	182	5.2	31/12/21	198	-	-
Redecol	292	21	292	21	1.0	31/01/21	279	-	-

* Where turnover and pre-tax profit are not disclosed the investee companies are eligible to file filleted accounts at Companies House.

 

A full listing of portfolio holdings is included in the portfolio review above.

 

8  SIGNIFICANT INTERESTS

At 31 August 2022, 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	Percentage of issued share capital	Issued  share capital
CEPS	5,460,301	26.00	21,000,000
Touchstar	850,000	10.03	8,475,077
La Salle Education	260,000	5.19	5,012,014
Petards	2,000,000	3.48	57,528,229

 

9	DEBTORS	2022	2021
		£'000	£'000
	Amounts falling due within one year
	Prepayments and other debtors	8	8
	Amounts due from investment proceeds *	138	138
		146	146
	* Represents the amount due from SpaDental in the form of deferred consideration from a Share Purchase Agreement and an Assignment of Loan. From the date of completion, interest accrues on the balance outstanding of the purchase price at the rate of 3.5% above the base rate of Lloyds Bank, payable six monthly in arrears. At 31 August 2022, interest is past due and impaired and a total of £1,000 has been written off in the year under review.
10	CREDITORS - amounts falling due within one year
		2022	2021
		£'000	£'000
	Accruals and other creditors	33	32
	Short term loan	215	100
		248	132

 

On 4 June 2018, the Company entered in to a £600,000 loan agreement with Jarvis Securities plc. Interest was payable monthly in arrears at the rate of 4.5% plus the Bank of England base rate.

 

The loan was drawn down on 4 June 2018. Partial repayments were made of £280,000 on 11 May 2020, £220,000 on 2 March 2021, £50,000 on 7 February 2022 and £50,000 on 31 May 2022. The loan has therefore been fully repaid.

 

On 16 September 2021, the Company entered into an interest free loan agreement with Mr Horner. Drawdowns were made of £165,000 on 16 September 2021, £25,000 on 30 May 2022 and £25,000 on 31 May 2022. At the year end, £215,000 was outstanding. The loan is unsecured, interest free and can be repaid by the Company at any time or on 18 months' notice from Mr Horner.

 

11 ANALYSIS OF CHANGES IN NET DEBT
	At 1 September 2021	Cash  flows	At 31 August 2022
	£'000	£'000	£'000
Cash and cash equivalents
Cash	34	(24)	10
	34	(24)	10
Borrowings
Debt due within one year	(100)	(115)	(215)
Total	(66)	(139)	(205)

 

 

12 CALLED UP SHARE CAPITAL	2022	2021
	£'000	£'000
Allotted, called up and fully paid:
5,460,301 (2021: 5,460,301) Ordinary shares of 1p each	55	55

 

Duration of Company

At the Annual General Meeting of the Company on 10 December 2020 and, if the Company has not then been liquidated, unitised or reconstructed, at each fifth annual general meeting of the Company convened by the Board thereafter, the Board shall propose an ordinary resolution that the Company should continue as an investment trust for a further five-year period.

 

13 NET ASSET VALUE PER ORDINARY SHARE

The basic net asset value per Ordinary share of 54.24p (2021:57.62p) is based on net assets of £2,961,000 (2021: £3,146,000) and on 5,460,301 (2021: 5,460,301) Ordinary shares, being the number of shares in issue at the year end.

 

14 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At 31 August 2022, there were no capital commitments outstanding (2021: £160,132) and no contingent liabilities (2021: £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, existing reserves and the loan from David Horner as detailed in note 10.

 

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

 

i) Market risk - market price risk

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

 

The Company's investment portfolio is exposed to market price fluctuations which are monitored by the Investment Manager who gives timely reports of relevant information to the Directors. Investment performance is also reviewed at each Board meeting.

 

The Directors are conscious of the fact that the nature of AIM investments is such that prices can be volatile. Investors should be aware that the Company is exposed to a higher rate of risk than exists within a company 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 2022 on its investments is as follows:

 

		2022	2021
		£'000	£'000
Fair value through profit or loss investments		3,053	3,098

 

A 20% decrease in the market value of investments at 31 August 2022 would have decreased net assets attributable to Shareholders by 11 pence per share (2021: 11 pence per share). 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:

 

	2022	2021
	£'000	£'000
Amounts due from investment proceeds	138	138
Short term loan	-	(100)

 

The Company receives no interest on its bank balances currently receives no interest from SpaDental Limited as stated in note 9 and pays no interest on its loan so the effect of an interest rate increase of 1% would decrease net revenue before taxation on an annualised basis by £nil (2021: £1,000). If there was a decrease in interest rates of 0.1% (2021: 0.1%) net revenue before taxation would increase by £nil (2021: £100). These calculations are based on balances as at 31 August 2022 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.

 

(iv) Liquidity risk

Ninety three percent of the Company's portfolio is fully listed on the London Stock Exchange or AIM 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 seven percent of the portfolio, could be more difficult to realise as they are not tradable instruments.

 

v) Credit risk

The Company does not have any significant exposure to credit risk arising from one individual party. Credit risk is spread across a number of counterparties, each having an immaterial effect on the Company's cash flows should a default happen. The Company assesses its debtors from time to time to ensure they are neither past due or impaired. During the year under review, it has identified the interest from SpaDental as being past due and impaired as detailed in note 9.

 

 (vi) Maturity analysis of financial liabilities

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

 

 (vii) Managing capital

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

 

Primarily the Company finances its operations through its issued capital and existing reserves. However, to help fund further investment the Company borrowed on a short-term loan £215,000 from Mr Horner. At the year-end an amount of £215,000 remained outstanding. Further details are given in note 10.

 

(viii) Fair values of financial assets and financial liabilities

All financial assets and liabilities of the Company are held at fair value or amortised cost which equates to fair value.

 

(ix) Financial instruments by category

The financial instruments of the Company fall into the following categories:

 

	At amortised	Loans and	Assets at fair value through
	cost	receivables	profit or loss	Total
31 August 2022	£'000	£'000	£'000	£'000
Assets as per the Statement of Financial Position
Investments	-	-	3,053	3,053
Debtors	8	138	-	146
Cash at bank and cash equivalents	10	-	-	10
Total	18	138	3,053	3,209

 

Liabilities as per the Statement of Financial Position
Creditors	33		215		-	248
Total	33		215		-	248
	At    amortised			Loans and	Assets at fair value through
	cost			receivables	profit or loss		Total
31 August 2021		£'000	£'000		£'000	£'000
Assets as per the Statement of Financial Position
Investments		-	-		3,098	3,098
Debtors		8	138		-	146
Cash at bank and cash equivalents		34	-		-	34
Total		42	138		3,098	3,278

 

Liabilities as per the Statement of Financial Position
Creditors	32	100	-	132
Total	32	100	-	132

Fair value hierarchy

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

 

The fair value hierarchy consists of the following three classifications:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Quoted in an active market in this context means quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm's length basis.

 

Level 2 - 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.

 

Level 3 - 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 Level 3 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 Level 1, 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 Level 2.

 

Investments classified within Level 3 have significant unobservable inputs. Level 3 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 Level 2 investments, and Level 3 investments consist only of unquoted holdings.

Financial assets at fair value through profit or loss
	Level 1	Level 2	Level 3			Total
At 31 August 2022	£'000	£'000	£'000			£'000
Investments	2,850	-	203			3,053
Total	2,850	-	203			3,053

 

	Level 1	Level 2	Level 3	Total
At 31 August 2021	£'000	£'000	£'000	£'000
Investments	2,655	-	443	3,098
Total	2,655	-	443	3,098

 

The following table presents the movement in the Level 3 investments for the year ended 31 August 2022:

	Investments
	£'000
Opening balance	443
Sale proceeds	(27)
Total losses on investments in the Income Statement	(213)
Closing balance	203

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 28 of the Annual Report and in note 3 to the accounts. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited a subsidiary of Chelverton Asset Management Holdings Limited, and chairman of CEPS PLC in which the Company has a significant investment.

 

Mr Martin is the chairman of Touchstar plc, in which the Company holds an investment.

 

The three Directors also have individual holdings in Chelverton Asset Management Holdings Limited, a company which has Mr Horner as a director and in which the Company had a direct holding until sold on 26 February 2021. The Directors' holdings are detailed below:

 

	Percentage of holding in shares	Ordinary shares held
	%	£'000
K J Allen	1	1
D A Horner*	55.25	55.25
I P Martin	2	2
* Directors and connected persons total holdings

 

As stated in note 10 the Company entered into a loan agreement with Mr Horner. At the year end £215,000 remained outstanding.

 

17 CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The Company's capital management objectives are:

 

·    to ensure the Company's ability to continue as a going concern;

·    to provide an adequate return to Shareholders;

·    to support the Company's stability and growth;

·    to provide capital for the purpose of further investments.

 

The Company actively and regularly reviews and manages its capital structure to ensure an optimal capital structure, taking into consideration the future capital requirements of the Company and capital efficiency, projected operating cash flows and projected strategic investments opportunities. The management regards capital as total equity and reserves, for capital management purposes.

 

ANNUAL REPORT AND AGM

The foregoing represents extracts from the full text of the Annual Report and Accounts for the year ended 31 August 2022. 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 at the offices of Chelverton Asset Management Limited, Ground Floor Office, Basildon House, 7 Moorgate, London EC2R 6AF at 11.30 a.m. on Thursday 15 December 2022. Shareholders should refer to page 29 of the Annual Report regarding the arrangements for the Meeting.

 

NATIONAL STORAGE MECHANISM

A copy of the 2022 Annual Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at:

 

https://data.fca.org.uk/#/nsm/nationalstoragemechanism