CHELVERTON GROWTH TRUST PLC - Annual Financial Report

CHELVERTON GROWTH TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2012

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 MSCI Small Cap UK Index.

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

Company summary

Benchmark                  MSCI Small Cap UK Index                       
                                                                         
Investment Manager         Chelverton Asset Management Limited          
                                                                         
Total net assets           £4,212,000 as at 31 August 2012               
                                                                         
Market capitalisation      £3,209,000 as at 31 August 2012               
                                                                         
Capital structure          11,784,283 Ordinary 1p shares carrying one    
                           vote each. In addition there are 100,000      
                           Ordinary 1p shares held in Treasury.          

Performance statistics

                          Year ended    Year ended                         
                           31 August     31 August                
                                2012          2011         % change
                                                                   
Net assets                £4,212,000    £4,049,000            4.03     
                                                                   
Net asset value per share      35.74p        30.60p          16.80
("NAV")                                                            
                                                                   
MSCI Small Cap UK Index      230.262       201.584           14.23
                                                                   
Share price                    27.00p        22.00p          22.73
                                                                   
Discount to net asset          24.45%        28.10%              
value                                                              
                                                                   
Revenue loss after          £(21,000)     £(69,000)                
taxation                                                           
                                                                   
Revenue loss per share         (0.17)p       (0.50)p              
                                                                   
Capital gain per share          4.97p         6.42p               

Chairman's statement

I am pleased to announce another year of good progress in which Chelverton's net asset value per share has increased from 30.60p to 35.74p - an increase of 16.80%. The Board has recently switched to a new benchmark index, the MSCI Small Cap UK Index, and in the same period the MSCI Small Cap UK index rose by 14.23%.

Since the year end the net asset value per share has marginally declined from 35.74p to 34.94p, a reduction of 2.24%.

The year has been dominated by reports and newspaper reports on the state of the UK Economy. The phrase "doubledip" has moved firmly into mainstream language alongside "quantitative easing" and every minor change in employment levels and Gross Domestic Product ("GDP") is analysed and commented on with exaggerated fervour. When the impact of the Diamond Jubilee national holiday, by itself, was sufficient to determine whether the second quarter of 2012 was in recession or not, we may conclude that the economy is stable, neither growing nor declining by much.

However, analysts believe that the economy will show growth in the second half of the year and given the portfolio is almost totally based on UK focussed businesses this should be helpful to the underlying performances of our companies.

As inflation falls, and remains subdued, then individuals' real incomes will finally start to rise providing a welcome boost to the beleaguered High Street and a consequent positive effect on employment and GDP. In addition once the gradual cutting in government spending appears and some limited growth is finally evidenced then there may be scope for specific direct investment with the focus being on infrastructure development.

Within our investment portfolio the companies have generally made further progress over the past year either by growing profits, or continuing to reduce debt or by putting in place trading arrangements that will produce benefit in the future.

Given the continued increase in the net asset value and with no bank debt the Board again feels that it is in the best interest of all shareholders to proceed with a tender offer again this year. It remains our intention to repeat this process each year so long as circumstances warrant it.

George Stevens

Chairman

6 November 2012

Investment Manager's overview

As time passes, the "tin can" that is the Euro and the Euro sovereign debt crisis gets kicked further down the road. Whilst none of the fundamentals have changed significantly from last year people have learnt to live with the status quo. There is, we believe, a tacit acceptance that Greece will have to default at some point in the future and the European banking system continues to deleverage and to make provision against sovereign debt. The situation, whilst not getting better, is very gradually becoming more manageable.

It is to be hoped that the extensive rhetoric from this government about being "enterprise friendly" will actually manifest itself in actions to support and help UK companies. Whether by removing red-tape, cutting taxes on employment or ensuring that any one of the numerous government backed and led initiatives finally delivers its objectives. It is essential that confidence for UK companies, and small companies in particular, starts to increase such that they feel able to start investing.

For much of this year, we have been puzzled by the reports from almost all of the companies we are invested in, and the numerous companies that we meet incidental to this, that trading is gently improving as compared to the official statistics which seem to indicate that UK PLC is going backwards. This dichotomy, compounded by the steadily reducing level of unemployment, seems to indicate that the "green shoots" of economic growth whilst maybe not currently evident are about to appear.

To this end we have been investing in the portfolio and have introduced four new companies in the past six months and are looking at a number of other opportunities.

Portfolio review

The year has essentially been one of reducing our shareholding in the largest investment, IDOX, in order to make four new investments, and to fund the tender offer approved by shareholders in 2011.

The new investments made were: Transflex Vehicle Rental - a start-up van leasing business which was profitable as planned after four months of operation; Metalrax Group - an undervalued recovery story in specialist engineering; Lombard Risk Management - a company involved in industry-leading global risk management and regulatory compliance solutions; and finally Anaxsys Technology - a medical device company that develops and markets innovative respiratory devices that meet clinical needs. In addition, a further investment was made in CEPS to support the purchase of a profitable, cash generative business operating in a niche market.

Currently Titan Europe has "succumbed" to an all share offer from Titan Inc, its largest shareholder, at a price which we find very disappointing. In addition, in a similar style Petards Group is in discussions with Water Hall plc a 29.9% shareholder as to whether they will make a bid for the balance that they do not own.

Security Research Group (previously called PSG Solutions) announced another small tender offer at 225p, against a current share price of 112p. This company has some very interesting products which it is now looking to market beyond the UK.

We have maintained the valuations of our unquoted investments at the same level as last year but feel that there may be scope to revalue these in the near future as all of them are working hard to create bigger, stronger, more valuable businesses.

Outlook

As further value is created in IDOX we would expect to continue to trim the holding to a more balanced level and reinvest the proceeds in undervalued companies in the portfolio and new opportunities.

As ever we will continue to look to realise funds from holdings when their valuations are more reflective of medium term prospects and to reinvest into other stocks that remain substantially undervalued.

David Horner

Chelverton Asset Management Limited

6 November 2012

Portfolio review

as at 31 August 2012

Investment                  Sector                        Valuation       % of 
                                                              £'000      total    
AIM traded                                                                    
                                                                              
Alliance Pharma             Pharmaceuticals &                   223        5.7
                            Biotechnology                                     
                                                                              
Acquisition of the manufacturing, sales and distribution rights to            
pharmaceutical products                                                       

Belgravium Technologies     Technology Hardware &               350        9.0
                            Equipment                                         
                                                                              
Software systems for warehousing and distribution                             

CEPS                        Support Services                    227        5.8
                                                                              
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        1.6
                            Equipment                                         
                                                                              

Develops, manages and supplies covert tracking and surveillance systems


IDOX                        Software & Computer               1,057       27.3
                            Services                                          
                                                                              
Software company specialising in the development of products for document and 
information management                                                        

Lombard Risk Management     Software & Computer                 116        3.0
                            Services                                          
                                                                              

Lombard Risk is one of the world's leading providers of collateral management, liquidity analysis & regulatory compliance software to financial organisations


LPA Group                   Electronic & Electrical             214        5.5
                            Equipment                                         
                                                                              

Design, manufacture and marketing of industrial electrical accessories


Metalrax Group              Industrial Engineering              130        3.4
                                                                              
Specialist engineered products and consumer durables                          

MTI Wireless Edge           Technology Hardware &                37        1.0
                            Equipment                                         
                                                                              

Developer and manufacturer of sophisticated antennas and antenna systems


Northbridge Industrial      Industrial Engineering              131        3.4
Services                                                                      
                                                                              
Consolidation vehicle for specialist industrial services                      

Petards Group               Support Services                     14        0.4
                                                                              

Development, provision and maintenance of advanced security systems and related services

                                                              

Richoux Group               Travel & Leisure                     47        1.2
                                                                              
Owner and operator of Richoux Restaurants                                     

Sanderson Group             Software & Computer                 105        2.7
                            Services                                          
                                                                              
Provides software and IT services                                             

Security Research Group     Support Services                    149        3.8
                                                                              

Leading provider of Local Authority residential property searches; provision of packaging solutions and technical surveillance countermeasures components

  

Titan Europe                Industrial Engineering              118        3.0
                                                                              

Manufacture of big wheels for construction, mining and agricultural vehicles


Tristel                     Health Care Equipment &             124        3.2
                            Services                                          
                                                                              
Healthcare business specialising in infection control in hospitals            

Universe Group              Support Services                     14        0.4
                                                                              
Provision of credit card fraud prevention system, loyalty systems and retail  
systems                                                                       

Delisted                                                                      

One Horizon Group           Mobile Telecommunications            59        1.5
                                                                              
Provider of mobile satellite communications equipment and airtime             

Unquoted                                                                      
                                                                              
Closed Loop Recycling       Support Services                                  
                                                                              
Loanstock                                                         0        0.0
                                                                              
Ordinary B shares                                                 0        0.0
                                                                              
Operation of a plastic recycling plant                                        

Parmenion Capital Partners  Support Services                    398       10.3
LLP                                                                           
                                                                              
Provides fund-based discretionary fund management services to Independent     
Financial Advisors                                                            

Anaxsys Technology          Health Care Equipment &             200        5.2
                            Services                                          
                                                                              
A medical device company for patient monitoring and screening                 

Transflex Vehicle Rental    Support Services                    100        2.6
                                                                              
Light commercial vehicle rental business                                      

Portfolio valuation                                           3,877      100.0

Portfolio holdings

                                                31 August 2012      31 August 2011  
Investment                                   Valuation    % of   Valuation    % of
                                                 £'000   total       £'000   total
                                                                               
IDOX                                             1,057    27.3       1,153    28.4
                                                                               
Parmenion Capital Partners LLP                     398    10.3         436    10.8
                                                                               
Belgravium Technologies                            350     9.0         312     7.7
                                                                               
CEPS                                               227     5.8         260     6.4
                                                                               
Alliance Pharma                                    223     5.7         264     6.5
                                                                               
LPA Group                                          214     5.5          78     1.9
                                                                               
Anaxsys Technology                                 200     5.2           0     0.0
                                                                               
Security Research Group                            149     3.8         114     2.8
                                                                               
Northbridge Industrial Services                    131     3.4         132     3.3
                                                                               
Metalrax Group                                     130     3.4           0     0.0
                                                                               
Tristel                                            124     3.2         160     3.9
                                                                               
Titan Europe                                       118     3.0         124     3.1
                                                                               
Lombard Risk Management                            116     3.0           0     0.0
                                                                               
Sanderson Group                                    105     2.7          99     2.4
                                                                               
Transflex Vehicle Rental                           100     2.6           0     0.0
                                                                               
Datong Electronics                                  64     1.6          62     1.5
                                                                               
One Horizon Group                                   59     1.5          32     0.8
                                                                               
Richoux Group                                       47     1.2          49     1.2
                                                                               
MTI Wireless Edge                                   37     1.0          60     1.5
                                                                               
Petards Group                                       14     0.4          11     0.3
                                                                               
Universe Group                                      14     0.4          10     0.2
                                                                               
Total                                            3,877     100       3,356    82.7


Portfolio breakdown by sector and by index


Portfolio by Sector                Percentage
                                              
Software and Computer Services           33.0%
                                              
Support Services                         23.3%
                                              
Technology Hardware &                    10.0%
Equipment                                     
                                              
Industrial Engineering                    9.8%
                                              
Health Care Equipment &                   8.4%
Services                                      
                                              
Electronic & Electrical                   7.1%
Equipment                                     
                                              
Pharmaceutical & Biotechnology            5.7%
                                              
Mobile Telecommunications                 1.5%
                                              
Travel & Leisure                          1.2%



Portfolio by Index                Percentage
                                             
AIM                                     80.4%
                                             
Unquoted                                18.1%
                                             
Delisted                                 1.5%


Directors (all non-executive)

George Stevens (Chairman)*

Kevin Allen*

David Horner

* independent

Extracts from the Report of the Directors

Status, objective and review

The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs ('HMRC') as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010 for the year ended 31 August 2011. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2012 so as to be able to continue to obtain approval as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010. The Company is an investment company as defined in Section 833 of the Companies Act 2006.

New regulations for obtaining and retaining investment trust status have been published by HMRC and came into force on 1 January 2012. An application for approval as an investment trust must be made within 90 days after the end of the first accounting period of the Company following implementation of the new regime. The first accounting period affected by the new regulations is the year ending 31 August 2013 and therefore application must be made by 29 November 2013. If the application is accepted, the Company will be treated as an investment trust company for that period and for each subsequent accounting period, subject to there being no subsequent serious breaches of the regulations.

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 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 concentrated UK portfolio comprises between 20 to 35 securities. The performance of the Company's investments is compared to the MSCI Small Cap UK 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 the Company's investment policy is detailed above and should be read in conjunction with the subsequent sections entitled investment strategy and the performance analysis.

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

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 2012 was 35.74p (2011: 30.60p).

The Company's share price at the year end was 27.00p (2011: 22.00p).

Principal risks

The Board considers the following to be 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

Relevant legislation and regulations which apply to the Company include the Companies Act 2006, the Corporation Tax Act 2010 ("CTA") and the Listing Rules of the Financial Services Authority ("FSA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on page 17 of the 2012 Annual Report and Accounts. 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 FSA. 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 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 18 to the accounts.

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 18 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 above.

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.

Share Capital

On 28 December 2011 the Company announced the result of the tender offer and buyback offer issued to shareholders on 28 November 2011. Under the tender offer, 1,323,334 Ordinary shares were repurchased for cancellation on 23 January 2012. On the same date, under the buyback offer, 25,727 Ordinary shares were purchased for cancellation. On 31 May 2012 the Company purchased 100,000 Ordinary shares, representing 0.84% of the shares in issue at 26p each for placing in Treasury.

At the year end and as at the date of this report there were 11,784,283 Ordinary 1p shares in issue each carrying one vote in the event of a poll and 100,000 Ordinary 1p shares in Treasury representing 0.84% of the shares in issue.

Management and administration agreements

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

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

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

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

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

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 ("CSH") for an annual fee in 2012 of £49,565. Notice has been served on CSH and John Girdlestone is to be appointed with effect from 1 January 2013.

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

The Board, excluding Mr Horner, continually reviews the performance of the Investment Manager. In the opinion of the independent Directors the continuing appointment of CAM, as Investment Manager, on the terms outlined in the Investment Management Agreement dated 28 June 2001 and amended on 1 December 2006, is in the best interests of the shareholders as a whole. The reason for this view is that the investment performance of the Company is satisfactory having regard to the exceptional circumstances of the past couple of years. 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.

On behalf of the Board

George Stevens

Chairman

6 November 2012

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; and

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

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

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

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

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

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

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

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

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

On behalf of the Board

George Stevens

Chairman

6 November 2012

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2012 and 2011 but is derived from those accounts. Statutory accounts for 2011 have been delivered to the registrar of companies, and those for 2012 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (ii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Investment Manager's website: www.chelvertonam.com.

Income statement

for the year ended 31 August 2012


                                       2012                     2011          
                       Note  Revenue  Capital    Total  Revenue Capital  Total
                               £'000    £'000    £'000    £'000   £'000  £'000 
                                                                              
Gains on investments      7        -      647      647        -     913    913 
at fair value                                                                 
                                                                              
Income                    2       77        -       77       77       -     77 
                                                                              
Investment management     3      (10)     (31)     (41)     (10)    (31)   (41)
fee                                                                           
                                                                              
Refund of VAT on          4       40        -       40        -       -      - 
administration and                                                            
secretarial fees                                                              
                                                                              
Other expenses            4     (128)       -     (128)    (136)      -   (136)
                                                                              
Net return on                    (21)     616      595      (69)    882    813 
ordinary activities                                                           
before taxation                                                               
                                                                              
Taxation on ordinary      5        -        -        -        -       -      - 
activities                                                                    
                                                                              
Net return on                    (21)     616      595      (69)    882    813 
ordinary activities                                                           
after taxation                                                                
                                                                              
                             Revenue  Capital    Total  Revenue Capital  Total
                               pence    pence    pence    pence   pence  pence
                                                                              
Return per Ordinary       6    (0.17)    4.97     4.80    (0.50)   6.42   5.92 
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 2012


                            Called    Share             Capital  Revenue 
                          up share  premium  Capital redemption  Revenue    
                           capital  account  reserve    reserve  reserve   Total         
                             £'000    £'000    £'000      £'000    £'000   £'000             
Year ended 31 August 2012                                                      
                                                                               
1 September 2011               132    2,674   (1,857)        57    3,043   4,049 
                                                                               

Cost of shares purchased (13) - - 13 (406) (406) for cancellation under

                                                          
tender offer and buyback                                                       
offer                                                                          
                                                                               

Cost of shares purchased - - - - (26) (26) for Treasury

                                                                   
                                                                               
Net return after taxation        -        -      616          -      (21)    595 
for the year                                                                   
                                                                               
31 August 2012                 119    2,674   (1,241)        70    2,590   4,212 
    

                                                                           
Year ended 31 August 2011                                                      
                                                                               
1 September 2010               149    2,674   (2,739)        40    3,506   3,630 
                                                                               
Cost of shares purchased       (15)       -        -         15     (394)   (394)
for cancellation under                                                         
tender offer                                                                   
                                                                               
Shares cancelled from           (2)       -        -          2        -       - 
Treasury                                                                       
                                                                               

Net return after taxation - - 882 - (69) 813 for the year

                                                                   
                                                                               
31 August 2011                 132    2,674   (1,857)        57    3,043   4,049 

The notes below form part of these accounts.



Balance sheet

as at 31 August 2012

                                   Note       2012        2011 
                                             £'000       £'000 
Fixed assets                                                   
                                                               
Investments at fair value            7       3,877       4,055  
                                                               
Current assets                                                 
                                                               
Debtors                              9           9           9  
                                                               
Cash at bank                                   364          30  
                                                               
                                               373          39  
                                                               

Creditors - amounts falling due 10 (38) (45) within one year

                                                
                                                               
Net current assets/(liabilities)               335          (6) 
                                                               
Net assets                                   4,212       4,049  
                                                               
Share capital and reserves                                     
                                                               
Called up share capital             11         119         132  
                                                               
Share premium account               12       2,674       2,674  
                                                               
Capital reserve                     12      (1,241)     (1,857) 
                                                               
Capital redemption reserve          12          70          57  
                                                               
Revenue reserve                     12       2,590       3,043  
                                                               
Equity shareholders' funds                   4,212       4,049  
                                                               

Net asset value per Ordinary share 16 35.74p 30.60p

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 6 November 2012. They were signed on its behalf by


George Stevens

Chairman



Statement of cash flows

for the year ended 31 August 2012

                                         Note      2012         2011 
                                                  £'000        £'000 
Operating activities                                                 
                                                                     
Investment income received                           71           76 
                                                                     
Interest income received                              6            - 
                                                                     
Investment management fees paid                     (41)         (41)
                                                                     
Administration and secretarial fees paid            (49)         (46)
                                                                     
Refund of VAT paid on administration and             40            - 
secretarial fees                                                     
                                                                     
Other cash payments                                 (86)         (92)
                                                                     
Net cash outflow from operating           13        (59)        (103)
activities                                                           
                                                                     
Investing activities                                                 
                                                                     
Purchases of investments                           (714)        (156)
                                                                     
Sales of investments                              1,539          597 
                                                                     
Net cash inflow from investing                      825          441 
activities                                                           
                                                                     
Financing                                                            
                                                                     
Cost of shares purchased for Treasury               (26)           - 
                                                                     
Cost of shares purchased for                       (406)        (394)
cancellation under tender offer and                                  
buyback offer                                                        
                                                                     
Net cash outflow from financing                    (432)        (394)
activities                                                           
                                                                     
Increase/(decrease) in cash               15        334          (56)

The notes below form part of these accounts.



Notes to the accounts

as at 31 August 2012

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 7);

● 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.

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

Capital reserve

The following are accounted for in this reserve:

● gains and losses on the realisation of investments;

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

● realised exchange differences of a capital nature;

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

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

Taxation

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

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

                                           2012        2011 
                                          £'000       £'000 
 Income from investments                                     
                                                            
Income from LLP investments                  10           - 
                                                            
UK net dividend income                       61          77 
                                                            
                                             71          77 
                                                            
Other income                                                
                                                            
Interest on VAT refund (see note 4)           6           - 
                                                            
Total income                                 77          77 
                                                            
Total income comprises:                                     
                                                            
Other income                                 10           - 
                                                            
Dividends                                    61          77 
                                                            
Interest                                      6           - 
                                                            
                                             77          77 

3 INVESTMENT MANAGEMENT FEE

                                   2012                       2011           
                       Revenue  Capital    Total  Revenue  Capital    Total
                         £'000    £'000    £'000    £'000    £'000    £'000 
                                                                             
Investment management       10       31       41       10       31       41 
fee                                                                        
                                                                           
                            10       31       41       10       31       41 

The investment management fee is calculated at the rate of 1/12% per month of the gross value of funds under management and is payable monthly in arrears. At 31 August 2012 there was £3,000 outstanding (2011: £3,000).

4 OTHER EXPENSES

                                          2012     2011
                                       Revenue  Revenue
                                         £'000    £'000 
                                                        
Administrative and secretarial              49       47 
services                                                
                                                        
Directors' remuneration                     34       38 
                                                        
Auditors' remuneration:                                 
                                                        
audit services                              13       13 
                                                        
Other expenses                              32       38 
                                                        

Refund of VAT on secretarial fees (40) -

                                                        
                                            88      136 

J.P. Morgan Claverhouse ('Claverhouse') brought a case against HMRC to challenge the VAT charged on fund management services paid by investment companies.

In June 2007, the case was upheld but the European Court of Justice concluding that fund management services paid by investment companies be exempt from VAT.

In 2010, protective claims were submitted to HMRC by the Company to request a repayment of VAT charged to investment companies on administration and secretarial services and as a result, in March 2012, the Company received a repayment of VAT totalling £40,000 together with subsequent interest of £6,000 which have been included within the revenue column of the income statement and within 'Interest' in note 2 and `Other expenses' within note 4.

5 TAXATION

                                 2012                    2012         
                      Revenue Capital  Total  Revenue Capital Total
                        £'000   £'000  £'000    £'000   £'000  £'000
                                                                   
Analysis of charge                                                 
in period                                                          
                                                                   
Current tax                 -       -      -        -       -     - 

Factors affecting current tax charge for the period

The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 26% to 31 March 2012 and 24% from 1 April 2012. The differences are explained below:

                                 2012                     2011          
                      Revenue Capital  Total Revenue Capital  Total  
                        £'000   £'000  £'000   £'000   £'000  £'000   
                                                                     
(Loss)/profit on          (21)    616    595     (69)    882    813   
ordinary activities                                                  
before taxation                                                      
                                                                     
Theoretical tax at         (5)    155    150     (19)    240    221   
UK corporation tax                                                   
rate of 25.17%                                                       
(2011: 27.17%)                                                       
                                                                     
UK dividend income        (14)      -    (14)    (21)      -    (21)  
not taxable                                                          
                                                                     
Non-taxable                 -    (163)  (163)      -    (248)  (248)  
investment gains                                                     
                                                                     
Excess expenses for        19       8     27      40       8     48   
the period                                                           
                                                                     
Current tax charge          -       -      -       -       -      -   
for the period                                                       

At 31 August 2012 the Company had surplus management expenses of £3,419,000 (2011: £3,312,000) 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

                                 2012                    2011          
                      Revenue Capital  Total  Revenue Capital  Total
                        pence   pence  pence    pence   pence  pence
                                                                    
Basic                   (0.17)   4.97   4.80    (0.50)   6.42   5.92 

Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £21,000 (2011: £69,000) and on 12,389,652 (2010: 13,742,414) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.

Capital return per Ordinary share is based on the net capital gain of £616,000 (2011: £882,000) and on 12,389,652 (2011: 13,742,414) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.


Total return per Ordinary share is based on the total gain of £595,000
(2011: £813,000) and on 12,389,652 (2011: 13,742,414) Ordinary shares, being the
weighted average number of Ordinary shares in issue less treasury shares during
the year.

7 INVESTMENTS

                           2012     2011 
                          £'000    £'000 
                                         
Delisted                     59       43 
                                         
AIM                       3,120    3,576 
                                         
Unquoted                    698      436 
                                         
                          3,877    4,055 


                              AIM  Delisted  Unquoted*    Total 
                            £'000     £'000     £'000     £'000 

Opening book cost           4,063       556       451     5,070 
                                                                
Opening investment           (487)     (513)      (15)   (1,015)
holding losses                                                  
                                                                
                            3,576        43       436     4,055 
                                                                
Movements in the year:                                          
                                                                
Purchases at cost             414         -       300       714 
                                                                
Sales:                                                          
                                                                 
Proceeds                   (1,525)      (14)        -    (1,539)
                                                                 
Gains/(losses) on sales       564      (376)        -       188 
                                                                
Movement in investment         91       406       (38)      459 
holding losses                                                  
                                                                
Closing valuation           3,120        59       698     3,877 
                                                                
Closing book cost           3,516       166       751     4,433 
                                                                
Closing investment           (396)     (107)      (53)     (556)
holding losses                                                  
                                                                
Closing valuation           3,120        59       698     3,877 

                            

                                      2012       2011 
                                     £'000      £'000 
                                                      
Realised gains/(losses) on             188     (1,740)
sales                                                 
                                                      
Movement in fair value of              459      2,653 
investments                                           
                                                      
Net gains on investments               647        913 

All quoted investments are made up of equity shares

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

Analysis of movements in unquoted investments

                             Valuation                              Valuation
                     Cost at        at                      Cost at        at
                          31        31            Movement       31        31
                      August    August  Realised   in fair   August    August
                        2012      2012  in year      value     2011      2011
Investment             £'000     £'000    £'000      £'000    £'000     £'000 
                                                                           
Anaxsys Technology       200       200        -          -        -         - 
                                                                           
Closed Loop                                                                
Recycling                                                                  
                                                                           
Loan Stock               252         -        -          -      252         - 
                                                                           
Ordinary B shares         84         -        -          -       84         - 
                                                                           
Parmenion Capital        115       398        -        (38)     115       436 
Partners LLP                                                               
                                                                           
Transflex Vehicle        100       100        -          -        -         - 
Rental                                                                     
                                                                           
                         751       698        -        (38)     451       436 

Transaction costs

During the year, the Company incurred transaction costs of £2,034 (2011: £1,534) and £4,187 (2011: £301) on purchases and sales of investments, respectively. These amounts are included in `Gains on investments at fair value' as disclosed in the income statement.

Details of material holdings in unquoted investments


              Cost Valuation   Cost Valuation                                   
                at        at     at        at        Last                               
                31        31     31        31    accounts                   Pre tax
            August    August August    August      period      Net          (loss)/
              2012      2012   2011      2011         end   assets Turnover  profit
             £'000     £'000  £'000     £'000       £'000    £'000    £'000   £'000 
Investment                                                                      
                                                                                
Anaxsys        200       200      -         -  31/01/2012        9        8  (1,362)
Technology                                                                 
                                                                                
Parmenion      115       398    115       436  31/03/2012      777    2,249     251 
Capital                                                                     
Partners                                                                        
LLP **                                                                          
                                                                                
Transflex      100       100      -         -           *        -        -       - 
Vehicle                                                                         
Rental                                                                          

* Transflex Vehicle Rental is a new start up so no historical accounts exist. Its first year end will be 31 December 2012.

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

8 SIGNIFICANT INTERESTS


At 31 August 2012 the Company had a holding of 3% or more of the issued class
of share that is material in the context of the accounts in the following
investments:

                         Number of     Percentage of               
                            shares      issued share   Issued share
Security                      held           capital        capital

CEPS, Ord 5p             1,750,000            16.182     10,814,310
                                                               
Anaxsys Technology           5,000             9.371         53,358
                                                               
Transflex Vehicle          100,000             8.000      1,250,000
Rental                                                         
                                                               
Belgravium               5,000,000             4.954    100,936,547
Technologies, Ord 5p                                           

In addition to the above, the Company has a 5.526% interest in the capital and profits of Parmenion Capital Partners LLP.

9 DEBTORS - amounts falling due within one year

                              2012          2011
                             £'000         £'000
                                                
Prepayments and other            9             9
debtors                                         
                                                
                                 9             9

10 CREDITORS - amounts falling due within one year

                              2012          2011
                             £'000         £'000
                                                
Accruals and other              38            45
creditors                                       
                                                
                                38            45

11 CALLED UP SHARE CAPITAL

                                                   2012    2011
                                                  £'000   £'000
                                                               
Allotted, called up and fully paid:                            
                                                               

11,884,283 (2011: 13,233,344) Ordinary shares 119 132 of 1p each

There were 100,000 (2011: nil) shares held in Treasury at the date of this report. The shares were purchased on 31 May 2012 at a cost of £26,000 and that amount has been deducted from distributable reserves.

A tender offer to purchase up to 10 per cent of the Company's issued share capital and a subsequent invitation to certain minority shareholder to offer their shares for buyback to the Company was announced on 28 November 2011. Pursuant to the tender offer and buyback offer 1,323,334 and 25,727 Ordinary shares were repurchased for cancellation on 23 January 2012.

Duration of Company

At the annual general meeting of the Company falling in the calendar year 2014 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.

If any such ordinary resolution is not passed, the Board shall draw up proposals for the voluntary liquidation, unitisation or other reorganisation of the Company for submission to the Members of the Company at a general meeting to be convened by the Board for a date not more than three months after the date of the meeting at which such ordinary resolution was not passed.


The Board shall ensure that such proposals for the liquidation, unitisation or
reconstruction of the Company as are approved by special resolution are
implemented as soon as is reasonably practicable after the passing of such
resolution.

12 RESERVES

                                                   Capital        
                                  Share Capital redemption Revenue
                                premium reserve    reserve reserve
Year ended 31 August 2012         £'000   £'000      £'000   £'000 
                                                                  
At 1 September 2011               2,674  (1,857)        57   3,043 
                                                                  
Net gains on realisation of           -     188          -       - 
investments                                                       
                                                                  
Movement in fair value of             -     459          -       - 
investments                                                       
                                                                  
Cost of shares purchased for          -       -          -    (406)
cancellation under tender                                         
offer and buyback offer                                           
                                                                  
Shares cancelled                      -       -         13       - 
                                                                  
Cost of shares purchased for          -       -          -     (26)
Treasury                                                          
                                                                  
Costs charged to capital              -     (31)         -       - 
                                                                  
Retained net loss for the             -       -          -     (21)
year                                                              
                                                                  
At 31 August 2012                 2,674  (1,241)        70   2,590 
                                                                  
                                                   Capital        
                                  Share Capital redemption Revenue
                                premium reserve    reserve reserve
Year ended 31 August 2011         £'000   £'000      £'000   £'000 
                                                                  
At 1 September 2010               2,674  (2,739)        40   3,506 
                                                                  
Net losses on realisation of          -  (1,740)         -       - 
investments                                                       
                                                                  
Movement in fair value of                               -       - 
investments                                                       
                                                                  
Cost of share purchased for           -       -          -    (394)
cancellation under tender                                         
offer                                                             
                                                                  
Shares cancelled                      -       -         17       - 
                                                                  
Costs charged to capital              -     (31)         -       - 
                                                                  
Retained net loss for the             -       -          -     (69)
year                                                              
                                                                  
At 31 August 2011                 2,674  (1,857)        57   3,043 

13 RECONCILIATION OF NET return BEFORE FINANCECOSTS AND TAXATION TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES


                                                  2012       2011 
                                                 £'000      £'000 
                                                                  
Net return before finance costs and                595        813 
taxation                                                          
                                                                  
Net capital return before finance costs           (616)      (882)
                                                                  
Expenses charged to capital                        (31)       (31)
                                                                  
Decrease in creditors and accruals                  (7)         - 
                                                                  
Increase in prepayments and accrued income           -         (3)
                                                                  
                                                   (59)      (103)

14 RECONCILIATION OF NET CASH FLOW TO NET CASH

                                                  2012       2011 
                                                 £'000      £'000 
                                                                  
Net cash at 1 September                             30         86 
                                                                  
Net cash inflow/(outflow)                          334        (56)
                                                                  
Net cash at 31 August                              364         30 

15 ANALYSIS OF CHANGES IN NET CASH

                                               At               At
                                        31 August   Cash 31 August
                                             2011  flows      2012
                                            £'000  £'000     £'000
                                                                  
Cash at bank                                   30    334       364
                                                                  
                                               30    334       364

16 NET ASSET VALUE PER ORDINARY SHARE

The basic net asset value per Ordinary share is based on net assets of £4,212,000 (2011: £4,049,000 and on 11,784,283 (2011: 13,233,344) Ordinary shares, being the number of shares in issue at the year end, less Treasury shares.

17 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At 31 August 2012 there were no capital commitments or contingent liabilities (2011: £nil).

18 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES

The Company's financial instruments comprise securities and other investments, cash balances and debtors and creditors that arise from its operations, for example, in respect of sales and purchases awaiting settlement and debtors for accrued income.

The Company primarily invests in companies traded on AIM with a market capitalisation at the time of investment of up to £50 million. The Company finances its operations through its issued capital and existing reserves.

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

(i) Market risk - market price risk

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

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

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

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


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

                                      2012       2011
                                     £'000      £'000
                                                     
Fair value through profit or         3,877      4,055
loss investments                                     

A 20% decrease in the market value of investments at 31 August 2012 would have decreased net assets attributable to shareholders by £775,000 (2011: £811,000). 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:

                       2012       2011
                      £'000      £'000
                                      
Cash at bank            364         30
                                      
                        364         30

The effect of an interest rate increase of 1% would increase net revenue before taxation on an annualised basis by £3,640 (2011: £300). If there was a decrease in interest rates of 0.5% net revenue before taxation would decrease by £1,820 (2011: £150). These calculations are based on balances as at 31 August 2012 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 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 18.1% of the portfolio, could be more difficult to realise as they are not a tradable instruments.

(vi) Maturity Analysis of Financial Liabilities

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

(vii) Managing Capital

The Company's capital management objectives are to increase net asset value per share at a higher rate rather 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. At 31 August 2012 the Company had no borrowings.

(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 2012

                                                           Assets   
                                                          at fair        
                                                            value 
                                        At                through
                                 amortised     Loans and   profit        
                                      cost   receivables  or loss   Total            
                                     £'000         £'000    £'000   £'000     
                                                                       
Assets as per the Balance sheet                                        
                                                                       
Investments                              -             -    3,877   3,877
                                                                       
Debtors                                  -             9        -       9
                                                                       
Total                                    -             9    3,877   3,886
                                                                       
Liabilities as per the Balance                                         
sheet                                                                  
                                                                       
Creditors                               38             -        -      38
                                                                         
                                        38             -        -      38
  

31 August 2011                                             Assets   
                                                          at fair        
                                                            value 
                                       At                 through
                                 amortised     Loans and   profit        
                                      cost   receivables  or loss   Total            
                                     £'000         £'000    £'000   £'000  
Assets as per the Balance sheet                                        
                                                                       
Investments                              -             -    4,055   4,055
                                                                       
Debtors                                  -             9        -       9
                                                                       
Total                                    -             9    4,055   4,064
                                                                       
Liabilities as per the Balance                                         
sheet                                                                  
                                                                       
Creditors                               45             -        -      45
                                                                       
                                        45             -        -      45

Fair value hierarchy

In accordance with Financial Reporting Standard No.29: 'Financial Instruments: Disclosures', the Company must disclose the fair value hierarchy of financial instruments.

The fair value hierarchy consists of the following three levels:

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

An active market is a market in which transactions for the asset or liability occur with sufficient frequency and volume on an ongoing basis such that quoted prices reflect prices at which an orderly transaction would take place between market participants at the measurement date. Quoted prices provided by external pricing services, brokers and vendors are included in level 1, if they reflect actual and regularly occurring market transactions on an arms length basis.

Level 2 - Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

Level 2 inputs include the following:

• quoted prices for similar (i.e. not identical) assets in active markets.

• quoted prices for identical or similar assets or liabilities in markets that are not active. Characteristics of an inactive market include a significant decline in the volume and level of trading activity, the available prices vary significantly over time or among market participants or the prices are not current.

• inputs other than quoted prices that are observable for the asset (for example, interest rates and yield curves observable at commonly quoted intervals).

• inputs that are derived principally from, or corroborated by, observable market data by correlation or other means (market-corroborated inputs).

Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs)

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 within 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 delisted/unquoted holdings.

Financial assets at fair value through profit or loss

At 31 August 2012

                               Level 1     Level 2    Level 3      Total
                                 £'000       £'000      £'000      £'000
                                                                        
Equity investments               3,120           -        757      3,877
                                                                        
Total                            3,120           -        757      3,877

At 31 August 2011

                               Level 1     Level 2    Level 3      Total
                                 £'000       £'000      £'000      £'000
                                                                        
Equity investments               3,576           -        479      4,055
                                                                        
Total                            3,576           -        479      4,055

The following table presents the movement in the level 3 investment for the period ended 31 August 2012:

                                                                 Equity
                                                            investments
                                                                  £'000 
                                                                       
Opening balance                                                     479 
                                                                       
Purchases                                                           300 
                                                                       
Sales proceeds:                                                     (14)
                                                                       
Total losses included in gains on investments in the                 (8)
income statement                                                       
                                                                       
Closing balance                                                     757 
 

19 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. During the year ended 31 August 2012 the Company added to its investment in CEPS PLC, acquiring a further 750,000 shares at a cost of £150,000.

ANNUAL REPORT AND AGM

The foregoing represents extracts from the full text of the Annual Report and Accounts for the year ended 31 August 2012. The full Report will shortly be available for download from the following website:

www.chelvertonam.com

Copies will be posted to shareholders shortly.

The AGM will be held on 13 December 2012 at 11.00am at the offices of Speechly Bircham LLP, 6 New Street Square, London, EC4A 3LX

NATIONAL STORAGE MECHANISM

A copy of the Annual Report and Financial Statements will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do.

END

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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