Annual Report • Aug 31, 2010
Annual Report
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Annual Report for the year ended 31 August 2010
The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market with a market capitalisation at the time of investment of up to £50 million, which are believed to be at a "point of change". The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold. Its investment objective is to increase net asset value per share at a higher rate than other quoted smaller company trusts and the FTSE All-Share Index.
It is the Company's policy not to invest in any listed investment companies (including listed investment trusts).
| Investment objective | inside front cover |
|---|---|
| Company summary | 1 |
| Performance statistics | 1 |
| Chairman's statement | 2 |
| Investment Manager's overview | 3 |
| Portfolio review | 4 |
| Top twenty investments | 6 |
| Portfolio breakdown by sector and by index | 7 |
| Directors | 8 |
| Investment Manager, Secretary and Advisers | 9 |
| Report of the Directors | 10 |
| Statement on corporate governance | 17 |
| Directors' remuneration report | 23 |
| Statement of Directors' responsibilities | 25 |
| Independent Auditors' report | 26 |
| Income statement | 28 |
| Reconciliation of movements in | |
| shareholders' funds | 29 |
| Balance sheet | 30 |
| Statement of cash flows | 31 |
| Notes to the accounts | 32 |
| Shareholder information | 48 |
| Notice of Annual General Meeting | 49 |
| Appendix | 53 |
| Form of Proxy | 55 |
| Benchmark | FTSE All-Share Index |
|---|---|
| Investment Manager | Chelverton Asset Management Limited See page 9 for further details. |
| Total net assets | £3,630,000 as at 31 August 2010 |
| Market capitalisation | £2,539,000 as at 31 August 2010 |
| Capital structure | 14,864,827 Ordinary 1p shares carrying one vote each (including 145,000 shares held in Treasury), there are 14,719,827 voting rights in the Company. |
| PEP/ISA status | The Company's Ordinary shares are fully eligible for inclusion in ISAs. |
| Year ended | Year ended | ||
|---|---|---|---|
| 31 August 2010 | 31 August 2009 | % change | |
| Net assets | £3,630,000 | £2,895,000 | 25.39 |
| Net asset value per share | 24.66p | 19.47p | 26.66 |
| FTSE All-Share Index | 2,696.72 | 2,520.66 | 6.98 |
| Share price | 17.25p | 14.50p | 18.97 |
| Discount to net asset value | (30.05)% | (25.53)% | |
| Revenue loss after taxation | (£75,000) | (£59,000) | |
| Revenue loss per share | (0.50)p | (0.40)p | |
| Capital gain/(loss) per share | 5.62p | (13.33)p | |
An investment company as defined under Section 833 of the Companies Act 2006.
I am pleased to announce that the progress that we highlighted at the half-year stage has continued in the second half of the year and resulted in a strong positive performance.
The Company's net asset value per share has increased this year from 19.47p to 24.66p – an increase of 26.7%. In the same period the Company's benchmark index, the FTSE All-Share, rose by 7.0%; the FTSE 100, which makes up over 90% of the All-Share Index rose by 6.4%; and the AIM Index rose 15.8%. Since the year end the net asset value per share has increased to 26.04p as at 31 October 2010, an increase of a further 5.6%.
The year was again dominated by the world recovery from the banking crisis of 2008/09 and the attempts by Western governments to steer their economies through the consequences of the economic slow-down within the constraints of excessive personal and government debt. Despite mixed signals at the macro level, the corporate sector has proved to be extremely resilient and continues to generate cash and rebuild balance sheets at rates in excess of expectation.
In the UK, the election, and subsequent change of government, has dominated all aspects of business life, with the Coalition being obliged to find an appropriate balance between reducing the Public Sector, and sustaining levels of demand within the economy that will be adversely affected by tax rises and increasing unemployment.
Anecdotal evidence from the companies in our portfolio suggests that there is still an ongoing lack of liquidity in the banking system. The banks appear to be in an invidious position whereby they are reluctant to lend to the indebted companies that are most in need, whilst the companies they would like to lend to are in fact generating cash and reducing their debts. Until this is resolved the economy will struggle to make a full recovery.
On a case by case basis we are seeing improvements in the underlying businesses in the portfolio. However, these have largely been achieved by cost cutting and debt reduction rather than by steady sustainable growth. As turnover does eventually improve, we will benefit from the positive effects of operational gearing as the increases are put through lower cost bases. Whilst the immediate economic outlook remains uncertain, we expect the domestic economy to gradually improve over the next few years providing a favourable environment for UK small company performance.
The current intention of the Board is to make further tender offers ("Future Tender Offers") in each subsequent calendar year, of up to 10% of the Ordinary shares in issue at such times, on terms substantially similar to those applying to the Tender Offer to be issued to shareholders on 24 November 2010. It is envisaged that such Future Tender Offers will be implemented on or around the date of the Company's AGM in the relevant year, and each such Future Tender Offer will be subject or pursuant to the approval by shareholders at a general meeting. Although the above sets out the Board's current intentions, the Board will of course exercise its discretion as to whether any Future Tender Offer should be implemented and the terms thereof. In the event that a Future Tender Offer is made the terms attaching to this Tender Offer may also apply (but subject to such modifications as set out in the communication relating to the same) by incorporation.
George Stevens Chairman 19 November 2010
On basic fundamentals many small companies continue to be undervalued, notwithstanding the general rise in the small companies sector. As ever, these companies are overlooked on the Alternative Investment Market ("AIM") for the latest fashion in the market. Currently, the fashionable natural resource sector represents 42% of the total value of AIM. These resource companies, where the returns might be a manifold increase in value or more likely might be a total loss, are a major distraction.
Over the past two years the shareholders and directors of many solid, profitable and well run companies have become disillusioned with owning shares in these companies and also having their companies on a highly illiquid and dysfunctional market.
The patient process that was started last year in realising shareholdings at full value has continued in the current year. An example of this is the shareholding in Hartest where an offer was received and turned down at 25p, further offers were received from a private company at 50p, 55p and 59p, all turned down by the Board. Finally, a cash offer of 90p was accepted.
In the same vein, the offer by the management team for the business of Forest Support Services was supported and encouraged through a difficult funding process so that a full offer was made in cash.
The major success over the last year has been Alliance Pharma where we added to the holding earlier in the year at 12.5p. As a result of the very strong profits growth the shares have increased to 37p.
Whilst last year our portfolio companies were relieved to have come through the "credit crunch" in this last year they have been reducing debt and, where possible, continuing to cut costs and grow their businesses, although trading still remains very difficult.
The portfolio companies are looking much stronger than for some time and it is our objective over the next year to continue the realisation of fully valued holdings, reinvesting the proceeds in the large number of attractive companies which are currently significantly undervalued.
Chelverton Asset Management Limited 19 November 2010
as at 31 August 2010
The Company's portfolio as at 31 August 2010 is set out below.
| Investment | Sector | Valuation £'000 |
% of total |
|---|---|---|---|
| AIM traded AI Claims Solutions The provision of non-fault accident management services |
Travel & Leisure | 479 | 13.3 |
| Alliance Pharma | Pharmaceuticals & Biotechnology Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products |
345 | 9.6 |
| Belgravium Technologies Software systems for warehousing and distribution |
Technology Hardware & Equipment | 113 | 3.2 |
| CEPS | Support Services Production and supply of components for the footwear industry; personal protection equipment; production of printed lycra fabric; and services to the direct mail industry |
175 | 4.9 |
| Datong Electronics Develops, manages and supplies covert tracking and surveillance systems |
Electronic & Electrical Equipment | 76 | 2.1 |
| Hartest Holdings electron microscopes |
Industrial Engineering Manufacture and sale of specialist healthcare equipment and supplies to users of |
299 | 8.3 |
| IDOX information management |
Software & Computer Services Software company specialising in the development of products for document and |
596 | 16.6 |
| LPA Group Design, manufacture and marketing of industrial electrical accessories |
Electronic & Electrical Equipment | 73 | 2.0 |
| MTI Wireless Edge Developer and manufacturer of sophisticated antennas and antenna systems |
Technology Hardware & Equipment | 84 | 2.4 |
| Northbridge Industrial Services Consolidation vehicle for specialist industrial services in the UK |
Industrial Engineering | 85 | 2.4 |
| Pennant International Group Supplier of technology solutions to the defence and industrial sectors |
Software & Computer Services | 59 | 1.7 |
| Petards Group | Support Services Development, provision and maintenance of advanced security systems and related services |
27 | 0.8 |
| PSG Solutions Leading provider of Local Authority residential property searches; provision of packaging solutions |
Support Services | 44 | 1.2 |
| Richoux Group | Travel & Leisure | 33 | 0.9 |
Owner and operator of Richoux Restaurants
as at 31 August 2010
| Investment | Sector | Valuation £'000 |
% of total |
|---|---|---|---|
| AIM traded (continued) | |||
| Sanderson Group Provides software and IT services |
Software & Computer Services | 66 | 1.8 |
| Titan Europe | Industrial Engineering | 68 | 1.9 |
| Manufacture of big wheels for construction, mining and agricultural vehicles | |||
| Tristel Healthcare business specialising in infection control in hospitals |
Health Care Equipment & Services | 188 | 5.3 |
| Universe Group | Support Services | 17 | 0.5 |
| Provision of credit card fraud prevention system, loyalty systems and retail systems | |||
| Delisted | |||
| Forest Support Services (in members voluntary liquidation) Supply of traffic management services |
Industrial Transportation | 182 | 5.1 |
| Satcom Group Provider of mobile satellite communications equipment and airtime |
Mobile Telecommunications | 31 | 0.9 |
| Unquoted | |||
| Closed Loop Recycling | Support Services | ||
| Loanstock | 252 | 7.0 | |
| Ordinary B shares Operation of a plastic recycling plant |
0 | 0.0 | |
| Locker Group (in members voluntary liquidation) Cash Shell |
Industrial Engineering | 0 | 0.0 |
| Parmenion Capital Partners LLP Provides fund-based discretionary fund management services to Independent Financial Advisors |
Support Services | 291 | 8.1 |
| Portfolio valuation | 3,583 | 100.0 |
The following companies in which the Company is invested are in liquidation or administration and no value is applied to these holdings as no realisations are anticipated from the insolvency process.
AT Communication Group Chromogenex Conder Environmental Minorplanet Systems Smallbone
| 31 August 2010 | 31 August 2009 | |||
|---|---|---|---|---|
| Valuation | % of | Valuation | % of | |
| Investment | £'000 | total | £'000 | total |
| IDOX | 596 | 16.6 | 530 | 18.2 |
| AI Claims Solutions | 479 | 13.3 | 294 | 10.1 |
| Alliance Pharma | 345 | 9.6 | 157 | 5.4 |
| Hartest Holdings | 299 | 8.3 | 71 | 2.4 |
| Parmenion Capital Partners LLP | 291 | 8.1 | 115 | 4.0 |
| Closed Loop Recycling | 252 | 7.0 | 357 | 12.3 |
| Tristel | 188 | 5.3 | 216 | 7.4 |
| Forest Support Services | 182 | 5.1 | 139 | 4.8 |
| CEPS | 175 | 4.9 | 106 | 3.6 |
| Belgravium Technologies | 113 | 3.2 | 137 | 4.7 |
| Northbridge Industrial Services | 85 | 2.4 | 61 | 2.1 |
| MTI Wireless Edge | 84 | 2.4 | 115 | 4.0 |
| Datong Electronics | 76 | 2.1 | 64 | 2.2 |
| LPA Group | 73 | 2.0 | 83 | 2.9 |
| Titan Europe | 68 | 1.9 | 31 | 1.1 |
| Sanderson Group | 66 | 1.8 | 45 | 1.5 |
| Pennant International Group | 59 | 1.7 | 46 | 1.6 |
| PSG Solutions | 44 | 1.2 | 38 | 1.3 |
| Richoux Group | 33 | 0.9 | 50 | 1.7 |
| Satcom Group | 31 | 0.9 | 47 | 1.6 |
| Total | 3,539 | 98.7 | 2,702 | 92.9 |
Percentage of Portfolio by Index
George Stevens (Chairman) qualified as a member of the Institute of Taxation in 1969, and as a chartered accountant in 1970, but has spent most of his working career in the Insurance Industry. In 1978 he moved to Lloyd's and in a management buyout co-founded The Brockbank Group in 1985, for which he served as group managing director. Mr Stevens was also instrumental in establishing the motor underwriter Admiral Insurance Services and served as its first chairman. He retired from both these positions in 1995.
Kevin Allen is a chartered accountant. After qualifying with Coopers & Lybrand, he joined Overseas Containers (part of P&O Group) where he spent five years, latterly as chief accountant. In 1986 he joined Volvo Car UK as financial controller before joining Kellock Limited, the factoring and invoice discounting arm of Bank of Scotland Group, as finance and operations director. He became finance director of Brockbank Group PLC in 1993, serving on the boards of Brockbank Syndicate Management, Admiral Insurance Services and Brockbank Insurance Services Inc. He is currently a director of Forest Support Services PLC.
Bryan Lenygon is a chartered accountant and a barrister. After a number of years with T&N PLC and British Petroleum PLC, he joined Gartmore Investment Limited as a director in 1971, retiring as a director from Gartmore in 1988. He has considerable experience of the investment trust market and is currently a director of several other investment companies, including Small Companies Dividend Trust PLC.
David Horner is managing director of Chelverton Asset Management Limited and a director of CEPS PLC. He is a chartered accountant and has considerable experience of analysing and working with smaller companies.
Chelverton Asset Management Limited 11 George Street Bath BA1 2EH Tel: 01225 483 030
Chelverton Asset Management Limited was formed in 1997. The investment team consists of David Horner and David Taylor who have considerable experience of companies in the smaller quoted market sector.
The Company website is maintained by the Investment Manager and can be found at www.chelvertonam.com.
Capita Sinclair Henderson Limited Hazlewoods LLP (trading as Capita Financial Group – Windsor House Specialist Fund Services) Bayshill Road Beaufort House Cheltenham GL50 3AT 51 New North Road Exeter EX4 4EP Tel: 01392 412 122
Share Registrars Limited Lloyds TSB Bank PLC HSBC Investment Bank plc Suite E 25 Gresham Street Level 29 First Floor London EC2V 7HN 8 Canada Square 9 Lion and Lamb Yard London E14 5HQ Farnham Surrey GU9 7LL Tel: 01252 821 390 www.shareregistrars.uk.com
The Directors present their report, which incorporates the Business Review, and audited accounts for the year ended 31 August 2010. The registered company number for Chelverton Growth Trust PLC is 2989519.
The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs as an authorised investment trust under Section 842 of the Income and Corporation Taxes Act 1988 for the year ended 31 August 2009. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2010 so as to be able to continue to obtain approval as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010, which has replaced Section 842. The Company is an investment company as defined in Section 833 of the Companies Act 2006.
The Company's objective is to provide capital growth through investment in companies listed on the Official List and traded on the Alternative Investment Market with a market capitalisation at the time of investment of up to £50 million, which are believed to be at a "point of change". The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold. Its investment objective is also to increase net asset value per share at a higher rate than other quoted smaller company trusts and the FTSE All-Share Index.
The Company invests principally in securities of publicly quoted UK companies, though it may invest in unquoted securities. The concentrated UK portfolio comprises between 30 to 45 securities. The performance of the Company's investments is compared to the FTSE All-Share Index.
The Company will also invest in unquoted investments where it is believed that there is a likelihood of the shares becoming listed or traded on the Alternative Investment Market or the investee company being sold.
It is the Company's policy not to invest in any listed investment companies or listed investment trusts.
To comply with Listing Rules 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.
Investments are selected for the portfolio only after extensive research which the Investment Manager believes to be key. The whole process through which equity must pass in order to be included in the portfolio is very rigorous. Only a security where the Investment Manager believes that the price will be significantly higher in the future will pass the selection process. The Company's Investment Manager believes the key to successful stock selection is to identify the long-term value of a company's shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long term value involves detailed analysis of a company's earning prospects over a five year time horizon.
The Company's Investment Manager is Chelverton Asset Management Limited, an independent investment manager focusing exclusively on achieving returns for investors based on UK investment analysis of the highest quality. The founders and employee owners of Chelverton include experienced investment professionals with strong investment performance records who believe rigorous fundamental research allied to patience is the basis of long term investment success.
The Chairman's statement on page 2 and the Investment Manager's overview on page 3 give details of the Company's activities during the year under review.
At each Board meeting, the Directors consider a number of performance measures to assess the Company's success in achieving its objectives, for example: the NAV, the movement in the Company share price, the discount of the share price in relation to the NAV and the total expenses ratio.
The Company's income statement is set out on page 28.
The movement of the NAV is compared to the FTSE All-Share Index, the Company's benchmark. The NAV per Ordinary share at 31 August 2010 was 24.66p (2009: 19.47p).
The Company's share price at the year end was 17.25p (2009: 14.50p).
The Board considers the following as the principal risks facing the Company. Mitigation of these risks is sought and achieved in a number of ways:
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 on pages 18 and 19 of 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.
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%.
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 Combined Code on Corporate Governance and its statement of compliance appears on page 17. 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.
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.
The Board monitors the liquidity of the portfolio at each Board meeting and regularly reviews the investments with the Investment Manager.
A more detailed explanation of the investment management risks facing the Company are given in note 19 to the accounts on pages 42 to 47.
As part of its normal operations, the Company holds financial assets and financial liabilities. Full details of the role of financial instruments in the Company's operations are set out in note 19 to the accounts.
A review of the main features of the year is contained in the Chairman's statement and the Investment Manager's overview on pages 2 and 3.
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.
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.
The results for the year and the proposed transfer from revenue reserves are set out in the income statement on page 28.
The Directors do not recommend the payment of a dividend for the year.
The Directors in office during the year and at the date of this report, all of whom are non-executive, are shown below:
| Date of appointment | |
|---|---|
| K J Allen | 8 November 1994 |
| B N Lenygon | 2 August 2001 |
| D A Horner | 1 May 2006 |
| G E Stevens (Chairman) | 20 December 2006 |
Mr Horner will offer himself for re-election in accordance with the Listing Rules, which stipulate that a director who is also a director of the investment manager should be subject to annual re-election.
In accordance with the Combined Code, that non-executive directors who have served on a board for more than nine years should be subject to annual re-election, Mr Allen will retire at the Annual General Meeting and, being eligible, will offer himself for re-election.
Mr Lenygon will also offer himself for re-election, in accordance with the Listing Rules where he stands for annual re-election as he is also a director of another company with the same investment manager.
The Board as a whole believes that Messrs Horner, Allen and Lenygon, collectively and individually, make active and effective contributions in their roles as Directors of the Company and that shareholders should vote in favour of their re-election, respectively, for the following reasons:
Mr Horner is managing director of Chelverton Asset Management Limited, the Company's Investment Manager. He is a chartered accountant and has considerable experience of analysing and working with smaller companies.
Mr Allen is a founding Director of the Company. He is a chartered accountant and has held a number of financial management positions within varied sectors where he has gained a thorough knowledge of smaller companies' managerial issues. His financial experience enables him to contribute significantly on accounting and reporting matters. Mr Allen is deemed wholly independent by the other Board members notwithstanding his length of service.
Mr Lenygon has considerable experience in the investment trust market and his knowledge of the sector is considered by the other Directors to be extremely beneficial to the Company, along with his professional expertise as a chartered accountant and a barrister.
None of the Directors has a contract of service with the Company nor, save as disclosed below, has there been any other contract or arrangement between the Company and any Director at any time during the year. None of the Directors nor any persons connected with them had a material interest in any of the Company's transactions, arrangements or agreements during the year. Mr Allen is a director and employee of Forest Support Services PLC (in members' voluntary liquidation), in which the Company has an investment. Mr Horner is the managing director of Chelverton Asset Management Limited, the Company's Investment Manager and is also a director of CEPS PLC in which the Company has an investment, as well as being a Director of the Company.
The interests of the Directors and their families in the Ordinary shares of the Company are set out below:
| At | At | |
|---|---|---|
| 31 August 2010 | 31 August 2009 | |
| K J Allen | 221,762 | 221,762 |
| B N Lenygon | 62,411 | 62,411 |
| D A Horner | 698,163 | 698,163 |
| G E Stevens | 1,221,315 | 1,221,315 |
There have been no changes to any of the above holdings between 31 August 2010 and the date of this Report. None of the Directors has any non-beneficial interests to disclose.
The Company's investments are managed by Chelverton Asset Management Limited ("CAM") under an agreement dated 28 June 2001.
The Company pays CAM, in respect of its services as Investment Manager, a monthly fee (exclusive of VAT) payable in arrears as follows:
From 1 December 2006 the Investment Manager agreed to waive half its fee during the currency of this agreement.
The appointment of CAM as Investment Manager may be terminated by either party giving to the other not less than twelve months' notice of such termination. There are no specific provisions contained within the Investment Management Agreement relating to the compensation payable in the event of termination of the agreement other than entitlement to fees, which would be payable within any notice period.
Under an agreement dated 26 June 2001, company secretarial services and the general administration of the Company are undertaken by Capita Sinclair Henderson Limited for an annual fee of £45,625. This fee is subject to annual review based on the UK Retail Price Index. In the event that there is an increase in the issued share capital of the Company, the fee will be adjusted upwards by agreement between the Company and Capita Sinclair Henderson Limited. The agreement may be terminated by either party giving to the other not less than six months' notice at any time.
The Board continually reviews the performance of the Investment Manager. In the opinion of the independent Directors the continuing appointment of CAM, as Investment Manager, on the terms outlined in the Investment Management Agreement dated 28 June 2001 and amended on 1 December 2006, is in the best interests of the shareholders as a whole. The reason for this view is that the investment performance of the Company is satisfactory having regard to the exceptional circumstances of the past couple of year. Further, the Board is satisfied that CAM has the required skill and expertise to continue to manage the Company's portfolio and charges fees that are reasonable when compared with those of similar investment trusts.
The Company does not follow any code or standard on payment practice. However it is the Company's payment policy to obtain the best possible terms for all business and, therefore, there is no consistent policy as to the terms used. The Company agrees with its suppliers the terms on which business will be transacted, and it is the Company's policy to abide by those terms. At 31 August 2010 all suppliers' invoices received had been settled.
The Notice of Annual General Meeting is set out on pages 49 and 50. In addition to the ordinary business of the meeting, the Directors are putting forward resolutions to allot shares, which will allow the Company to issue new shares or sell shares out of treasury equivalent to 10% of its existing issued share capital.
The Directors are also seeking to renew the authority to allot Ordinary shares held in treasury at a discount to NAV.
It is also proposed that at the Annual General Meeting the Company be given renewed authority to buy back its own shares, which may either be cancelled or held in treasury. Any decision regarding placing into treasury, or issuing shares from treasury will only be taken if, in the opinion of the Directors, the decision would be in the interest of shareholders as a whole.
As at 18 November 2010, being the latest practicable date before the publication of this Annual Report, there are no outstanding warrants or options to subscribe for any Ordinary shares of the Company.
Resolution 10 if passed authorised the Company to purchase its Ordinary shares in accordance with the terms and conditions contained in a Tender Offer Circular dated 24 November 2010.
Resolution 11, as set out in the notice of meeting, if passed will adopt New Articles of Association. The changes in the new Articles primarily reflect the final implementation of the 2006 Companies Act. A summary of the principle differences brought about by the proposed adoption of the New Articles is set out in the Appendix on page 53 of this document. The proposed new Articles of Association are available for inspection at the offices of Capita Company Secretarial Services Ltd, 42-47 Minories, London EC3N 1DX and at the AGM for 15 minutes before and until the conclusion of the meeting.
The Directors who held office at the date of approval of the Report of Directors' confirm that so far as they are aware:
A resolution will be put to the shareholders at the Annual General Meeting proposing the re-appointment of Hazlewoods LLP as Auditors to the Company. Hazlewoods LLP have indicated their willingness to continue in office.
On behalf of the Board George Stevens Chairman 19 November 2010
The Board considers that throughout the year the Company has been in compliance with the principles of the Combined of Corporate Governance ("the Code"), insofar as they are relevant to the Company's business, except where stated. Additional procedures have been adopted to ensure the Company's current practices are consistent with the recommendations of the Code in all material respects. The Code can be viewed at www.frc.org.uk This Statement forms part of the Report of the Directors as set out on pages 10 to 16.
Mr Stevens, Mr Allen and Mr Lenygon are deemed by the Board to be independent of the Investment Manager. The continuing independence of Mr Allen has been fully considered in light of his having served for more than nine years on the Board since his first election. The Company experienced a significant change in structure and Board composition in August 2001 to the effect that Mr Allen is the only founding Board member, his knowledge of the Company and experience is considered extremely valuable by the other Directors. The Board also considers Mr Stevens is independent, notwithstanding that he is a significant shareholder in the Company. Mr Stevens is experienced in business and accountancy and provides a robust balanced view between the Investment Manager and the shareholders. Mr Lenygon has many years of experience in investment trusts, providing specific expertise of this sector which is of great benefit to the Board. Mr Lenygon is considered by the Board to be independent notwithstanding that he is also a director of another investment trust managed by CAM. Mr Horner as managing director of CAM the Investment Manager, is not independent. Given the size and nature of the Board, it is not considered appropriate to appoint a Senior Independent Director. This is a breach of code provision A.3.3. The Company does not have a chief executive officer, but by appointing a management company the roles of chairman and chief executive officer are effectively separated. Brief biographical details of the Directors can be found on page 8.
The Board has formal arrangements under which Directors, in the furtherance of their duties, may take independent professional advice. The Company has Directors' and Officers' liability insurance in place to cover legal defence costs. There are no qualifying third party indemnity provisions in place.
The Board also has direct access to the advice of the Company Secretary, which is responsible for ensuring that Board and Committee procedures are followed and that applicable regulations are complied with.
Directors are required to retire by rotation at least every three years, Mr Stevens retired in 2007 and will stand for re-election next year. Mr Allen stands for re-election annually having served on the Board for more than nine years, as does Mr Horner, as a director of the Investment Manager and Mr Lenygon as a director of another company with the same Investment Manager.
The Chairman, Mr Stevens, is deemed by his fellow independent Board members to be independent and have no conflicting relationships. He considers himself to have sufficient time to commit to the Company's affairs.
During the year the Directors' attendance at meetings has been recorded as follows:
| Board | Audit | |
|---|---|---|
| meetings | Committee | |
| K J Allen | 4 of 4 | 2 of 2 |
| B N Lenygon | 4 of 4 | 2 of 2 |
| D A Horner | 4 of 4 | n/a |
| G E Stevens | 4 of 4 | 2 of 2 |
The Directors review at each Board meeting the Company's investments and all other important issues to ensure that control is maintained over the Company's affairs. The Board is responsible for the investment policy and strategic and operational decisions of the Company. A formal schedule of matters specifically reserved for the Board's approval has been adopted. The management of the Company's assets is delegated to CAM, which has discretion to manage the assets of the Company in accordance with the Company's investment objectives and policies subject to the following:
To enable the Directors to fulfil their role, they have timely access to all relevant management and financial information. The full Board meets regularly and maintains contact with the Investment Manager between formal meetings.
The Company also uses a number of committees to control its operations. These committees comprise the full Board, except the Management Engagement and Audit Committees where Mr Horner is not a member by virtue of his association with the Investment Manager. Each committee's delegated responsibilities are clearly defined in written terms of reference, copies of which are available from the Company's Registered Office.
The Audit Committee provides a forum through which the Company's external Auditors report to the Board of Directors. The Committee meets at least twice a year. Mr Lenygon chairs the Audit Committee.
The primary responsibilities of the Audit Committee are: to review the effectiveness of the internal control environment of the Company and monitor adherence to best practice in corporate governance; to make recommendations to the Board in relation to the re-appointment of the Auditors and to approve their remuneration and terms of engagement; to review and monitor the Auditors' independence and objectivity and the effectiveness of the audit process and provide a forum through which the Company's Auditors report to the Board. The Audit Committee also has responsibility for monitoring the integrity of the financial statements and accounting policies of the Company and for reviewing the Company's financial reporting and internal control policies and procedures. Committee members consider that individually and collectively they are appropriately experienced to fulfil the role required.
The Audit Committee has direct access to the Company's Auditors, Hazlewoods LLP, whose representatives attend the year end Audit Committee meeting. On the basis of these meetings the Audit Committee has been able to assess the effectiveness of the external audit. A formal statement of independence is received from the external Auditors each year.
The Company does not have an internal audit function. All of the Company's management functions are delegated to independent third parties and, as a result, this function is not felt to be appropriate. However the need for one is reviewed annually.
The Management Engagement Committee is responsible for reviewing the terms of the Investment Manager's contract, and those of other service providers. The Committee meets as required and Mr Stevens chairs this committee. No meetings were held in the year.
The Nomination Committee considers the appointment and re-appointment of Directors and meets as and when required. Mr Stevens chairs this committee. No meetings were held during the year. The Committee meets for the purpose of considering appointments to, and removals from, the Board and determining the appointment process.
The Board as a whole fulfils the function of a Remuneration Committee. Remuneration details are given in the Directors' remuneration report on pages 23 and 24. At 31 August 2010 there were no Directors' service agreements and no Director had been granted any options to acquire shares in the Company.
On appointment to the Board, Directors are fully briefed as to their responsibilities by the Chairman and Investment Manager.
As an ongoing policy, Directors' skills and knowledge are updated regularly with information provided by the Company Secretary and various industry bodies.
In accordance with corporate governance best practice, formal performance evaluation of the Board, its committees and individual Directors was undertaken following the year end by verbal consultation. It was concluded that the Board represented an effective combination of skill and expertise and continued to operate successfully as a small, proficient unit. The performance of each Director continues to be effective and demonstrates commitment to the role.
The Directors had been notified of the following substantial interests in the voting shares of the Company at the date of this Report:
| Number | % of total | |
|---|---|---|
| of shares | voting rights | |
| M E Brockbank | 2,186,677 | 14.86 |
| Philip J Milton private clients | 1,507,135 | 10.24 |
| Rensburg Sheppard private clients | 1,412,967 | 9.60 |
| MAM Funds | 1,387,000 | 9.42 |
| G E Stevens | 1,221,315 | 8.30 |
| D A Horner | 698,163 | 4.74 |
| M M Brooks | 595,265 | 4.04 |
| Charles Stanley private clients | 556,295 | 3.78 |
The following information is disclosed in accordance with The Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008 and DTR 7.2.6.
The Board is seeking to renew its current powers to buy back and issue shares as detailed on page 15.
There are: no restrictions concerning the transfer of securities in the Company; no special rights with regard to the control attached to securities; no restrictions on voting rights; no agreements which the Company is party to that might affect its control following a successful takeover.
Communication with shareholders is given a high priority by both the Board and the Investment Manager and all Directors are available to enter into dialogue with shareholders. Major shareholders of the Company are offered the opportunity to meet with the independent non-executive Directors of the Board in an attempt to ensure that their views are understood. All shareholders are encouraged to attend and vote at the Annual General Meeting, during which the Board and the Investment Manager are available to discuss issues affecting the Company and shareholders have the opportunity to address questions to the Investment Manager, the Board and the Chairman of the Board's standing committees.
Any shareholder who would like to lodge questions in advance of the Annual General Meeting is invited to do so either on the reverse of the proxy card or in writing to the Company Secretary at the address given on page 9. The Company always responds to letters from individual shareholders.
The Annual and Half Yearly Reports of the Company are prepared by the Board and its advisers to present a full and readily understandable review of the Company's performance. Copies of the Annual Report are dispatched to shareholders by mail and are also available for downloading from the Company's website maintained by the Investment Manager at www.chelvertonam.com.
The Directors have reviewed the principle risks and uncertainties facing the Company (as stated in the Report of the Directors and Business Review on pages 10 to 12). The Company's business activities, together with factors likely to affect its future development, performance and position are described in the Chairman's statement on page 2 and in the Investment Manager's overview on page 3. In addition, note 19 to the Financial statements includes the Company's objectives, policies, and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk. The Company has adequate financial resources and no significant investment commitments and as a consequence, the Directors are of the opinion that the Company has adequate resources to meet all outstanding commitments and to continue in operational existence for the foreseeable future. For this reason, they consider it appropriate to continue to adopt the going concern basis in preparing the Annual Report.
The Directors acknowledge that they are responsible for the Company's systems of internal control and for reviewing their effectiveness.
An ongoing process in accordance with the guidance supplied by the Financial Reporting Council's Internal Control: Guidance for Directors on the Combined Code, has been established for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place throughout the year and up to the date the Annual Report and Accounts were approved and is regularly reviewed by the Board. Key procedures established with a view to providing effective financial control have been in place for the full financial year and up to the date of approval of this report.
The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Company's objectives. It should be recognised that such systems can only provide reasonable, not absolute, assurance against material misstatement or loss.
Risk assessment and the review of internal controls are undertaken by the Board in the context of the Company's overall investment objective. The review covers the key business, operational, compliance and financial risks facing the Company. In arriving at its judgement of what risks the Company faces, the Board has considered the Company's operations in the light of the following factors:
Against this background, the Board has split the review of risk and associated controls into four sections reflecting the nature of the risks being addressed. These sections are as follows:
Given the nature of the Company's activities and the fact that most functions are subcontracted, the Directors have obtained information from key third party suppliers regarding the controls operated. To enable the Board to make an appropriate risk and control assessment the information and assurances sought from third party suppliers include the following:
The key procedures which have been established to provide internal controls are as follows:
In accordance with guidance issued to directors of listed companies, the Directors have carried out a review of the effectiveness of the system of internal control as it has operated over the year.
On behalf of the Board George Stevens Chairman 19 November 2010
The Board has prepared this report, in accordance with Schedule 8 to The Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulations 2008. An ordinary resolution will be put to the members to approve the report at the forthcoming Annual General Meeting.
The law requires your Company's Auditors to audit certain disclosures provided. Where disclosures have been audited, they are indicated as such. The Auditors' opinion is included in their report on pages 26 and 27.
The Company has four non-executive directors. The Board as a whole fulfils the function of a Remuneration Committee.
The Board's policy is that the remuneration of non-executive Directors should reflect the experience of the Board as a whole and be fair and comparable to similar organisations and appointments. It is intended that this policy will continue for the year ending 31 August 2011.
The fees of the non-executive Directors are determined within the limits set out in the Company's Articles of Association, and they are not eligible for bonuses, pension benefits, share options, long-term incentive schemes or other benefits as the Board do not consider it to be appropriate at this time.
It is the Board's policy that none of the Directors has a service contract. The terms of their appointment provide that a Director may be removed without notice and that compensation will not be due on leaving office.
The graph below compares the return to Ordinary shareholders compared to the total shareholder return on a notional investment made up of shares of the same kinds and number as those by reference to which the FTSE All-Share Index is calculated. The index was chosen for comparison purposes, as it is the Company's benchmark used for investment performance measurement purposes.
Years ended 31 August
The Directors who served during the year received the following emoluments in the form of fees:
| 2010 | 2009 | |
|---|---|---|
| G E Stevens | 18,750 | 18,750 |
| K J Allen | 15,000 | 15,000 |
| B N Lenygon | 15,000 | 15,000 |
| 48,750 | 48,750 |
Mr Horner has waived his fees.
This Directors' remuneration report was approved by the Board of Directors on 19 November 2010.
Chairman
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:
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.
The Directors, to the best of their knowledge, state that:
The Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Company's Auditor is unaware; and each Director has taken all the steps that ought to have been taken as a Director to make himself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
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.
By order of the Board George Stevens Chairman 19 November 2010
To the members of Chelverton Growth Trust PLC
We have audited the financial statements of Chelverton Growth Trust Plc for the year ended 31 August 2010 which comprise the income statement, the reconciliation of movements in shareholders' funds, the balance sheet, the statement of cash flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
As explained more fully in the Statement of Directors' responsibilities (set out on page 25), the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.
In our opinion the financial statements:
To the members of Chelverton Growth Trust PLC
In our opinion:
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
Under the listing rules we are required to review:
For and on behalf of Hazlewoods LLP, Statutory Auditor 19 November 2010
for the year ended 31 August 2010
| 2010 | 2009 | ||||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Gains/(losses) on investments at fair value | 8 | – | 862 | 862 | – | (2,043) (2,043) | |
| Income | 2 | 79 | – | 79 | 65 | – | 65 |
| Investment management fee | 3 | (9) | (27) | (36) | (8) | (26) | (34) |
| Refund of VAT on investment | |||||||
| management fee | 3 | – | – | – | 33 | 99 | 132 |
| Other expenses | 4 | (145) | – | (145) | (144) | – | (144) |
| Net return before finance costs | |||||||
| and taxation | (75) | 835 | 760 | (54) | (1,970) (2,024) | ||
| Interest payable | 5 | – | – | – | (4) | (12) | (16) |
| Net return on ordinary activities | |||||||
| before taxation | (75) | 835 | 760 | (58) | (1,982) (2,040) | ||
| Taxation on ordinary activities | 6 | – | – | – | (1) | – | (1) |
| Net return on ordinary activities | |||||||
| after taxation | (75) | 835 | 760 | (59) | (1,982) (2,041) | ||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| pence | pence | pence | pence | pence | pence | ||
| Return per Ordinary share | 7 | (0.50) | 5.62 | 5.12 | (0.40) | (13.33) (13.73) |
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the year.
A separate statement of total recognised gains and losses has not been prepared as all such gains and losses are included in the income statement.
The notes on pages 32 to 47 form part of these accounts.
for the year ended 31 August 2010
| Called up | Share | Capital | ||||
|---|---|---|---|---|---|---|
| share | premium | Capital redemption | Revenue | |||
| capital | account | reserve | reserve | reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Year ended 31 August 2010 | ||||||
| 1 September 2009 | 149 | 2,674 | (3,574) | 40 | 3,606 | 2,895 |
| Cost of shares purchased for Treasury | – | – | – | – | (25) | (25) |
| Net return after taxation for the year | – | – | 835 | – | (75) | 760 |
| 31 August 2010 | 149 | 2,674 | (2,739) | 40 | 3,506 | 3,630 |
| Year ended 31 August 2009 | ||||||
| 1 September 2008 | 149 | 2,674 | (1,595) | 40 | 3,665 | 4,933 |
| Adjustment to provision for tender offer expenses | – | – | 3 | – | – | 3 |
| Net return after taxation for the year | – | – | (1,982) | – | (59) | (2,041) |
| 31 August 2009 | 149 | 2,674 | (3,574) | 40 | 3,606 | 2,895 |
The notes on pages 32 to 47 form part of these accounts.
as at 31 August 2010
| Note | 2010 £'000 |
2009 £'000 |
|
|---|---|---|---|
| Fixed assets | |||
| Investments at fair value | 8 | 3,583 | 2,908 |
| Current assets | |||
| Debtors | 10 | 6 | 6 |
| Cash at bank | 86 | 44 | |
| 92 | 50 | ||
| Creditors – amounts falling due within | |||
| one year | 11 | 45 | 63 |
| Net current assets/(liabilities) | 47 | (13) | |
| Net assets | 3,630 | 2,895 | |
| Share capital and reserves | |||
| Called up share capital | 12 | 149 | 149 |
| Share premium account | 13 | 2,674 | 2,674 |
| Capital reserve | 13 | (2,739) | (3,574) |
| Capital redemption reserve | 13 | 40 | 40 |
| Revenue reserve | 13 | 3,506 | 3,606 |
| Equity shareholders' funds | 3,630 | 2,895 | |
| Net asset value per Ordinary share | 17 | 24.66p | 19.47p |
The notes on pages 32 to 47 form part of these accounts.
These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 19 November 2010. They were signed on its behalf by
George Stevens Chairman
for the year ended 31 August 2010
| Note | 2010 £'000 |
2009 £'000 |
|
|---|---|---|---|
| Operating activities | |||
| Investment income received | 60 | 79 | |
| Deposit interest received | 19 | – | |
| Investment management fees paid | (35) | (37) | |
| VAT refund on investment management fees | – | 132 | |
| Secretarial fees paid | (49) | (39) | |
| Other cash payments | (115) | (83) | |
| Net cash (outflow)/inflow from | |||
| operating activities | 14 | (120) | 52 |
| Returns on investments and servicing of finance | |||
| Interest paid | – | (28) | |
| Investing activities | |||
| Purchases of investments | – | (71) | |
| Sales of investments | 187 | 1,028 | |
| Net cash inflow from investing activities | 187 | 957 | |
| Financing | |||
| Cost of shares purchased for Treasury | (25) | – | |
| (25) | – | ||
| Increase in cash | 16 | 42 | 981 |
The notes on pages 32 to 47 form part of these accounts.
as at 31 August 2010
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.
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.
All expenses are accounted for on an accruals basis and charged through the revenue account in the income statement except as follows:
All investments held by the Company are classified as 'fair value through profit or loss'. Investments are initially recognised at cost, being the fair value of the consideration given. After initial recognition investments are measured at fair value, with changes in the fair value of investments and impairment of investments recognised in the income statement and allocated to capital. Realised gains and losses on investments sold are calculated as the difference between sales proceeds and cost.
Investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.
For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset.
Where investments are unlisted or trading in the securities of an investee company is suspended, the investment is valued at the Directors' estimate of its net realisable value being their estimate of fair value. These have either been measured at cost or, where applicable, at the most recent transaction price.
as at 31 August 2010
The following are accounted for in this reserve:
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.
as at 31 August 2010
| 2 INCOME |
2010 | 2009 |
|---|---|---|
| £'000 | £'000 | |
| Income from investments | ||
| Dividends from UK companies | 60 | 59 |
| Dividends from overseas companies | – | 6 |
| 60 | 65 | |
| Other income | ||
| Interest on Investment Management fee VAT refund | 19 | – |
| Total income | 79 | 65 |
| Total income comprises: | ||
| Dividends | 60 | 65 |
| Interest | 19 | – |
| 79 | 65 |
| 3 | INVESTMENT MANAGEMENT FEE | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment management fee | 9 | 27 | 36 | 8 | 26 | 34 | |
| 9 | 27 | 36 | 8 | 26 | 34 |
The investment management fee is calculated at the rate of 1/ 6% per month of the gross value of funds under management and is payable monthly in arrears. At 31 August 2010 there was £3,000 outstanding (2009: £2,000). From 1 December 2006 the Investment Manager agreed to waive half its fee.
In 2004 the Association of Investment Companies ('AIC') and JPMorgan Claverhouse ('Claverhouse') brought a case against HM Revenue & Customs to challenge the VAT charged on management fees paid by investment trusts. The case was referred to the European Court of Justice and in a ruling in June 2007 it upheld the AIC/Claverhouse claim.
Following this ruling the Company has not been charged VAT on its investment management fees from 1 November 2007.
In the year to 31 August 2009, the Company received a refund of VAT previously paid of £132,000. In the year to 31 August 2010, the Company received interest on this refund of VAT of £19,000. This has been allocated 100% to revenue.
as at 31 August 2010
| 4 OTHER EXPENSES |
2010 | 2009 |
|---|---|---|
| Revenue | Revenue | |
| £'000 | £'000 | |
| Administrative and secretarial services | 46 | 42 |
| Directors' remuneration | 49 | 49 |
| Auditors' remuneration: | ||
| audit services | 12 | 10 |
| Other expenses | 38 | 43 |
| 145 | 144 |
| 5 | INTEREST PAYABLE | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| On bank overdraft | – | – | – | 4 | 12 | 16 | |
| 6 | TAXATION | 2010 | 2009 | ||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Analysis of charge in period | |||||||
| Current tax: | |||||||
| Irrecoverable withholding tax | – | – | – | 1 | – | 1 | |
| – | – | – | 1 | – | 1 |
The tax assessed for the period is lower than the standard rate of corporation tax in the UK (28%). The differences are explained below:
| Revenue £'000 |
2010 Capital £'000 |
Total £'000 |
Revenue £'000 |
2009 Capital £'000 |
Total £'000 |
|
|---|---|---|---|---|---|---|
| (Loss)/profit on ordinary activities before taxation | (75) | 835 | 760 | (58) | (1,982) (2,040) | |
| Theoretical tax at UK corporation tax rate | ||||||
| of 28% (2009: 28%) | (21) | 234 | 213 | (16) | (555) | (571) |
| UK dividend income not taxable | (17) | – | (17) | (16) | – | (16) |
| Expenses not allowable for tax | – | – | – | 1 | – | 1 |
| Non-taxable investment (gains)/losses | – | (241) | (241) | – | 572 | 572 |
| Excess expenses for the period | 38 | 7 | 45 | 31 | – | 31 |
| Utilisation of brought forward expenses | – | – | – | – | (17) | (17) |
| Withholding tax suffered on foreign | ||||||
| income dividend | – | – | – | 1 | – | 1 |
| Current tax charge for the period | – | – | – | 1 | – | 1 |
as at 31 August 2010
At 31 August 2010 the Company had surplus management expenses of £3,135,000 (2009: £2,972,000) which have not been recognised as a deferred tax asset. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses.
| 7 | RETURN PER ORDINARY SHARE | 2010 | 2009 | ||||
|---|---|---|---|---|---|---|---|
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| pence | pence | pence | pence | pence | pence | ||
| Basic | (0.50) | 5.62 | 5.12 | (0.40) | (13.33) (13.73) |
Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £75,000 (2009: £59,000) and on 14,843,882 (2009: 14,864,827) 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 £835,000 (2009: net capital loss of £1,982,000) and on 14,843,882 (2009: 14,864,827) 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 £760,000 (2009: total loss £2,041,000) and on 14,843,882 (2009: 14,864,827) Ordinary shares, being the weighted average number of Ordinary shares in issue less treasury shares during the year.
as at 31 August 2010
| 8 INVESTMENTS |
2010 | 2009 |
|---|---|---|
| £'000 | £'000 | |
| Delisted | 213 | 3 |
| AIM | 2,827 | 2,412 |
| Unquoted | 543 | 493 |
| 3,583 | 2,908 |
| AIM £'000 |
Delisted £'000 |
Unquoted* £'000 |
Total £'000 |
|
|---|---|---|---|---|
| Opening book cost | 5,697 | 1,512 | 451 | 7,660 |
| Opening fair value adjustment | (3,285) | (1,509) | 42 | (4,752) |
| 2,412 | 3 | 493 | 2,908 | |
| Movements in the year: | ||||
| Purchases at cost | – | – | – | – |
| Sales: | ||||
| Proceeds | (166) | – | (21) | (187) |
| (Losses)/gains on sales | (48) | (195) | 21 | (222) |
| Investments delisted | (849) | 849 | – | – |
| Changes in fair value of investments (net of previous revaluation surpluses and |
||||
| deficits realised) | 1,478 | (444) | 50 | 1,084 |
| Closing valuation | 2,827 | 213 | 543 | 3,583 |
| Closing book cost | 4,634 | 2,166 | 451 | 7,251 |
| Closing fair value adjustment | (1,807) | (1,953) | 92 | (3,668) |
| Closing valuation | 2,827 | 213 | 543 | 3,583 |
| 2010 | 2009 | |||
| £'000 | £'000 | |||
| Realised losses on sales | (222) | (916) | ||
| Changes in fair value | 1,084 | (1,127) | ||
| Net gains/(losses) on investments at fair value | 862 | (2,043) |
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.
as at 31 August 2010
| Cost at Valuation at | Cost at Valuation at | |||||
|---|---|---|---|---|---|---|
| 31 August | 31 August | Realised Changes in | 31 August | 31 August | ||
| 2010 | 2010 | in year | fair value | 2009 | 2009 | |
| Investment | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Closed Loop Recycling* | ||||||
| Loan Stock | 252 | 252 | – | – | 252 | 252 |
| Ordinary B Shares | 84 | – | – | (105) | 84 | 105 |
| Locker Group | – | – | (21) | – | – | 21 |
| Parmenion Capital Partners LLP** | 115 | 291 | – | 176 | 115 | 115 |
| 451 | 543 | (21) | 71 | 451 | 493 |
The Company did not dispose of any unquoted investments in the year, but realised £21,000 in respect of its investment in Locker Group, being a distribution on liquidation.
During the year, the Company incurred transaction costs of £nil (2009: £nil) and £149 (2009: £4,388) on purchases and sales of investments, respectively. These amounts are included in 'Gains/(losses) on investments at fair value' as disclosed in the income statement.
as at 31 August 2010
Details of material holdings in unquoted investments
| Valuation | Cost | Valuation | Last | |||||
|---|---|---|---|---|---|---|---|---|
| Cost at | at | at | at | accounts | Net | Pre tax | ||
| 31 August 31 August 31 August 31 August | period (liabilities) | (loss) | ||||||
| 2010 | 2010 | 2009 | 2009 | end | /assets | Turnover | /profit | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment | ||||||||
| Closed Loop Recycling* | ||||||||
| – Loanstock | 252 | 252 | 252 | 252 30/06/2009 | ||||
| – Ordinary B shares | 84 | – | 84 | 105 30/06/2009 | (4,926) | 1,533 | (7,315) | |
| Parmenion Capital | ||||||||
| Partners LLP ** | 115 | 291 | 115 | 115 31/03/2010 | 648 | 907 | 45 |
* Closed Loop Recycling is the first food grade plastic recycler in the UK. The company produces food grade PET and HDPE from plastic bottle waste.
** Parmenion Capital Partners LLP offers fund based discretionary investment management services to the Independent Financial Adviser community.
At 31 August 2010 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 | ||
|---|---|---|---|
| Security | shares held | issued share capital | Issued share capital |
| Forest Support Services, Ord 5p | 2,140,000 | 11.440 | 18,706,961 |
| CEPS, Ord 5p | 625,856 | 7.527 | 8,314,310 |
| Belgravium Technologies, Ord 5p | 5,000,000 | 4.954 | 100,936,547 |
| Hartest Holdings, Ord 10p | 340,000 | 3.951 | 8,605,288 |
| AI Claims Solutions, Ord 10p | 2,175,000 | 3.541 | 61,416,189 |
In addition to the above, the Company has a 5.819% interest in the capital and profits of Parmenion Capital Partners LLP.
| 10 DEBTORS – amounts falling due within one year | 2010 | 2009 |
|---|---|---|
| £'000 | £'000 | |
| Prepayments and other debtors | 6 | 6 |
| 6 | 6 |
as at 31 August 2010
| 11 CREDITORS – amounts falling due within one year | 2010 | 2009 |
|---|---|---|
| £'000 | £'000 | |
| Other creditors | 45 | 63 |
| 45 | 63 | |
| 12 CALLED UP SHARE CAPITAL | 2010 | 2009 |
| £'000 | £'000 | |
| Allotted, called up and fully paid: | ||
| 14,864,827 (2009: 14,864,827) Ordinary shares of 1p each | 149 | 149 |
There were 145,000 (2009: nil) shares held in Treasury at the date of this report. The shares were purchased during the year for £25,000 and that amount has been deducted from distributable reserves.
At the Annual General Meeting of the Company in 2011 the Directors shall ensure that a resolution is proposed to the effect that the duration of the Company shall continue for a further three years (a "Continuance Resolution"). In the event that a Continuance Resolution is passed, the Directors shall ensure that a further Continuance Resolution is proposed at a general meeting of the Company to be held no later than three years after the date on which the previous Continuance Resolution was passed.
In the event that any Continuance Resolution fails to be passed at any general meeting of the Company, the Directors shall conduct the Company's affairs so as to arrange an orderly wind up of the Company's affairs and shall ensure that a resolution to effect a voluntary wind up of the Company shall be proposed at a general meeting of the Company by no later than the third anniversary of the date on which the relevant Continuance Resolution failed to be passed.
At a general meeting called pursuant to the Articles those holders of Ordinary shares who (being individuals) are present in person or by proxy or (being corporations) are present by proxy or by a representative duly authorised (not being himself a member entitled to vote) and entitled to vote and who vote in favour of the resolution proposed to wind up the Company voluntarily shall on a poll collectively have such total number of votes as is one more than the number of votes which are required to be cast on such poll for the said resolution to be carried, and upon such resolution being passed then the Company shall be wound up accordingly.
as at 31 August 2010
| 13 RESERVES | Capital | |||
|---|---|---|---|---|
| Share | Capital redemption | Revenue | ||
| premium | reserve | reserve | reserve | |
| Year ended 31 August 2010 | £'000 | £'000 | £'000 | £'000 |
| At 1 September 2009 | 2,674 | (3,574) | 40 | 3,606 |
| Net losses on realisation of investments | – | (222) | – | – |
| Changes in fair value of investments | – | 1,084 | – | – |
| Costs of shares purchased for Treasury | – | – | – | (25) |
| Costs charged to capital | – | (27) | – | – |
| Retained net loss for the year | – | – | – | (75) |
| At 31 August 2010 | 2,674 | (2,739) | 40 | 3,506 |
| Capital | ||||
|---|---|---|---|---|
| Share | Capital redemption | Revenue | ||
| premium | reserve | reserve | reserve | |
| Year ended 31 August 2009 | £'000 | £'000 | £'000 | £'000 |
| At 1 September 2008 | 2,674 | (1,595) | 40 | 3,665 |
| Net losses on realisation of investments | – | (916) | – | – |
| VAT refund on investment management fees | – | 99 | – | – |
| Changes in fair value of investments | – | (1,127) | – | – |
| Adjustment to provision for tender offer expenses | – | 3 | – | – |
| Costs charged to capital | – | (38) | – | – |
| Retained net loss for the year | – | – | – | (59) |
| At 31 August 2009 | 2,674 | (3,574) | 40 | 3,606 |
| COSTS AND TAXATION TO NET CASH (OUTFLOW)/INFLOW | 2010 | 2009 |
|---|---|---|
| FROM OPERATING ACTIVITIES | £'000 | £'000 |
| Net return before finance costs and taxation | 760 | (2,024) |
| Net capital return before finance costs | (835) | 1,970 |
| Expenses charged to capital | (27) | (26) |
| VAT refund on investment management fees allocated to capital | – | 99 |
| (Decrease)/increase in creditors and accruals | (18) | 19 |
| Decrease in prepayments and accrued income | – | 14 |
| (120) | 52 |
as at 31 August 2010
| 15 RECONCILIATION OF NET CASH FLOW TO NET CASH | 2010 £'000 |
2009 £'000 |
|
|---|---|---|---|
| Net cash/(debt) at 1 September 2009 | 44 | (937) | |
| Net cash inflow | 42 | 981 | |
| Net cash at 31 August 2010 | 86 | 44 | |
| 16 ANALYSIS OF CHANGES IN NET CASH | At | At | |
| 31 August | Cash | 31 August | |
| 2009 | flows | 2010 | |
| £'000 | £'000 | £'000 | |
| Cash at bank | 44 | 42 | 86 |
| 44 | 42 | 86 |
The basic net asset value per Ordinary share is based on net assets of £3,630,000 (2009: £2,895,000) and on 14,719,827 (2009: 14,864,827) Ordinary shares, being the number of shares in issue at the year end, less treasury shares.
At 31 August 2010 there were no capital commitments or contingent liabilities (2009: £nil).
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:
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.
as at 31 August 2010
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:
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Fair value through profit or loss investments | 3,583 | 2,908 |
A 20% decrease in the market value of investments at 31 August 2010 would have decreased net assets attributable to shareholders by £717,000 (2009: £582,000). An increase of the same percentage would have an equal but opposite effect on net assets available to shareholders.
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.
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:
| 2010 | 2009 | |
|---|---|---|
| £'000 | £'000 | |
| Cash at bank | 86 | 44 |
| 86 | 44 |
as at 31 August 2010
The effect of an interest rate increase of 1% would increase net revenue before taxation on an annualised basis by £860. If there was a decrease in interest rates of 0.5% net revenue before taxation would decrease by £430. These calculations are based on balances as at 31 August 2010 and may not be representative of the year as a whole.
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.
The majority of the Company's assets are AIM listed securities, which under normal conditions can be sold to meet funding commitments if necessary. These may however be difficult to realise in adverse market conditions.
The Company's financial liabilities comprise of creditors as disclosed in note 11. All items are due within one year.
The Company's capital management objectives are to increase net asset value per share at a higher rate than other quoted smaller company trusts and the FTSE All-Share Index.
Primarily the Company finances its operations through its issued capital and existing reserves.
All of the financial assets and liabilities of the Company are held at fair value.
The financial instruments of the Company fall into the following categories.
| Assets at fair | ||||
|---|---|---|---|---|
| At | value | |||
| amortised | Loans and | through | ||
| cost | receivables profit or loss | Total | ||
| £'000 | £'000 | £'000 | £'000 | |
| Assets as per the Balance sheet | ||||
| Investments | – | 252 | 3,331 | 3,583 |
| Debtors | – | 6 | – | 6 |
| Total | – | 258 | 3,331 | 3,589 |
as at 31 August 2010
| Assets at fair | ||||
|---|---|---|---|---|
| At | value | |||
| amortised | Loans and | through | ||
| cost | receivables profit or loss | Total | ||
| £'000 | £'000 | £'000 | £'000 | |
| Liabilities as per the Balance sheet | ||||
| Creditors | 45 | – | – | 45 |
| 45 | – | – | 45 |
| Assets at fair | ||||
|---|---|---|---|---|
| At | value | |||
| amortised | Loans and | through | ||
| cost | receivables profit or loss | Total | ||
| £'000 | £'000 | £'000 | £'000 | |
| Assets as per the Balance sheet | ||||
| Investments | – | 252 | 2,656 | 2,908 |
| Debtors | – | 6 | – | 6 |
| Total | – | 258 | 2,656 | 2,914 |
| Liabilities as per the Balance sheet | ||||
| Creditors | 63 | – | – | 63 |
|---|---|---|---|---|
| 63 | – | – | 63 | |
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.
as at 31 August 2010
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:
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 unquoted holdings.
as at 31 August 2010
| At 31 August 2010 | ||||
|---|---|---|---|---|
| Level 1 | Level 2 | Level 3 | Total | |
| £'000 | £'000 | £'000 | £'000 | |
| Equity investments | 2,827 | – | 504 | 3,331 |
| Total | 2,827 | – | 504 | 3,331 |
The following table presents the movement in the level 3 investments for the period ended 31 August 2010:
| Equity investments £'000 |
|
|---|---|
| Opening balance | 241 |
| Sales proceeds: | (21) |
| Total gains included in gains on investments in the income statement | 71 |
| Transfers into level 3* | 213 |
| Closing balance | 504 |
| * Satcom Group and Forest Support Services were delisted in the year to 31 August 2010. |
Under the terms of the agreement dated 28 June 2001, the Company has appointed Chelverton Asset Management Limited to be the Investment Manager. The fee arrangements for these services and fees payable are set out in the Report of the Directors on page 14 and in note 3 to the accounts. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited and CEPS PLC, in which the Company has an investment. Mr Allen, a Director of the Company is a director and employee of Forest Support Services PLC, in which the Company has an investment (see note 9). Forest Support Services PLC is now in members voluntary liquidation.
Shareholders wishing to communicate directly with the Board should contact the Company Secretary who will pass on shareholder details to the relevant Board member.
| Contact details | ||
|---|---|---|
| Company Secretary: | Capita Sinclair Henderson Limited | Tel: 01392 412122 Fax: 01392 253282 |
| Registrar: | Share Registrars Limited | Tel: 01252 821390 www.shareregistrars.uk.com |
| Investment Manager: | Chelverton Asset Management Limited | Tel: 01225 483030 |
| Website: | www.chelvertonam.com |
Postal address details are shown on page 9.
The Company's share price is listed in the Financial Times under "Investment Companies".
| August | Company year end |
|---|---|
| November | Annual results |
| December | AGM |
| April | Half-year results |
The Company's net asset value is released to the Stock Exchange monthly and is posted on the Investment Manager's website: www.chelvertonam.com.
Notice is hereby given that the Annual General Meeting of Chelverton Growth Trust PLC will be held at the offices of Chelverton Asset Management Limited, 9 Dartmouth Street, London SW1H 9BP at 11.30 am on Thursday, 16 December 2010 for the following purposes:
To consider and if thought fit to pass the following resolutions as ordinary resolutions:
To consider and if thought fit to pass the following resolution as an ordinary resolution:
The following resolutions will be proposed as special resolutions.
i) up to an aggregate nominal amount of £14,865.
ii) the sale of shares which, immediately before such sale, were held by the Company as Treasury shares.
Save as expressly provided in this resolution, words defined in the Terms and Conditions shall bear the same meanings in this resolution.
Registered Office: By Order of the Board Beaufort House Capita Sinclair Henderson Limited 51 New North Road Secretary Exeter EX4 4EP 19 November 2010
NOTES:
1. To be entitled to attend and vote at the meeting (and for the purpose of the determination by the Company of the number of votes they may cast) members must be entered on the Company's register of members at 6 pm on 14 December 2010 (or, in the event of any adjournment, 6 pm on the date which is two days (excluding weekends and bank holidays) before the time of the adjourned meeting). Changes to the register of members after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting. A member entitled to attend, vote and speak at this meeting may appoint one or more persons as his/her proxy to attend, speak and vote on his/her behalf at the meeting. A proxy need not be a member of the Company. If multiple proxies are appointed they must not be appointed in respect of the same shares. To be effective, the enclosed form of proxy, together with any power of attorney or other authority under which it is signed or a certified copy thereof, should be lodged at the office of the Company's Registrar, Share Registrars Limited, Suite E, First Floor, 9 Lion and Lamb Yard, Farnham, Surrey GU9 7LL not later than 48 hours before the time of the meeting. The appointment of a proxy will not prevent a member from attending the meeting and voting and speaking in person if he/she so wishes. A member present in person or by proxy shall have one vote on a show of hands and on a poll shall have one vote for every Ordinary share of which he/she is the holder.
In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the vote or votes of the other joint holder or holders, and seniority shall be determined by the order in which the names of the holders stand in the register.
Any question relevant to the business of the Annual General Meeting may be asked at the meeting by anyone permitted to speak at the meeting. You may alternatively submit your question in advance by letter addressed to the Company Secretary at the registered office.
a) A copy of the current Articles of Association of the Company.
7. CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for this meeting by following the procedures described in the CREST Manual. CREST personal members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear's specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, in order to be valid, must be transmitted so as to be received by the Company's agent (ID 7RA36) by the latest time for receipt of proxy appointments specified in Note 1 above. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Applications Host) from which the Company's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
Explanatory notes of principal changes to the Company's Articles of Association
It is proposed to adopt new articles of association ("New Articles") in order to update the Company's existing Articles of Association, primarily to take account of changes in English company law brought about by the Companies Act 2006 ("CA 2006"). The principal changes introduced in the New Articles include the following:
Provisions relating to objects in the memorandum have been moved automatically under CA 2006 into the Articles of Association and provisions relating to the authorised share capital have been abolished; the Memorandum will be amended to reflect these changes.
Following the above changes to the Memorandum of Association, the Company will be abolishing the objects clause which has automatically transferred to the Articles of Association of the Company. Therefore, there will be no restrictions on the Company's objects included in the New Articles.
The requirement for a company's articles of association to state its authorised share capital and for this to serve as a limit on the maximum number of shares which may be issued by the company is being removed following the abolition of the concept of authorised share capital. Provisions regarding the allotment of shares will be adjusted to include a limitation on the number of shares which Directors may issue in the Company; this limitation will reflect the current authorised share capital.
Under the CA 2006 (and secondary legislation) a minimum of 21 clear days notice must be given for all general meetings and AGMs for public companies. However, it is possible for the Company to reduce this to 14 clear days notice for general meetings other than AGMs. The New Articles will include this provision and they will also provide for the notice of meeting to be made available on a website.
Under the New Articles, the Company may change its name by the members passing a special resolution or by such terms as are prescribed in the Articles of Association. The New Articles will provide that this can be undertaken by the Directors.
Provisions relating to a Chairman's casting vote at general meetings are no longer effective under CA 2006; these provisions will therefore be removed.
Provisions in the existing articles which replicate provisions contained in the CA 2006 or other existing legislation are, in the main, being amended to bring them into line with, or to cross refer to, the provisions of the relevant legislation.
Generally the opportunity will be taken to bring clearer language into the New Articles and in some areas to conform the language of the New Articles to the CA 2006. Other changes, which are of a minor, technical or clarifying nature and also some consequential changes which merely reflect other changes made by the CA 2006 have not been noted above.
Notes
| I/We (Block Capitals please) | ||||
|---|---|---|---|---|
| Meeting/ | . a member/members of Chelverton Growth Trust PLC ("the Company"), hereby appoint the Chairman of the |
|||
| . Number of Shares held | ||||
| as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at the | ||||
| offices of Chelverton Asset Management Limited, 9 Dartmouth Street, London, SW1H 9BP at 11.30 am on Thursday, | ||||
| 16 December 2010, and at any adjournment thereof. | ||||
| Signature | ||||
| Date 2010 | ||||
| Please mark this box to indicate that this proxy appointment is one of multiple appointments being made (see note 7). | ||||
| Please indicate with an X in the spaces below how you wish your votes to be cast. | FOR | AGAINST WITHHELD | ||
| RESOLUTION 1 | To adopt the financial statements for the year ended 31 August 2010, | |||
| together with the Reports of the Directors and Independent Auditors thereon. |
||||
| RESOLUTION 2 | To receive and accept the Directors' remuneration report. | |||
| RESOLUTION 3 | To re-elect Mr D Horner as a Director of the Company. | |||
| RESOLUTION 4 | To re-elect Mr K Allen as a Director of the Company. | |||
| RESOLUTION 5 | To re-elect Mr B Lenygon as a Director of the Company. | |||
| RESOLUTION 6 | To re-appoint Hazlewoods LLP as Auditors to the Company, and to authorise the Directors to determine their remuneration. |
|||
| RESOLUTION 7 | To authorise the Directors to allot shares other than in accordance with statutory pre-emption rights. |
|||
| RESOLUTION 8 | To authorise the Directors to issue shares previously held in treasury at a discount to net asset value. |
|||
| RESOLUTION 9 | To authorise the Company to renew its authority to make market |
For use at the Annual General Meeting of Chelverton Growth Trust PLC
Tender Offer. RESOLUTION 11 To amend the Articles of Association.
purchases of its Ordinary shares.
RESOLUTION 10 To authorise the Company to purchase its Ordinary shares under the
4. If this form is returned without any indication as to how the person appointed proxy shall vote, the proxy will exercise his/her discretion as to how he/she votes or whether he/ she abstains from voting.
5. To be valid, this form must be completed and deposited at the office of the Company's Registrars, Share Registrars Ltd., Suite E, 1st Floor, 9 Lion and Lamb Yard, Farnham GU9 7LL not less than 48 hours before the time fixed for holding the Meeting or adjourned Meeting. Only those shareholders registered in the register of members 48 hours prior to the meeting shall be entitled to attend and vote at the Meeting in respect of the number of shares registered in their name at that time. Changes to the register of members after that time shall be disregarded in determining the rights of any person to attend and vote at the Meeting
6. A "vote withheld" is not a vote in law and will not be counted in the calculation of the proportion of the votes for and against the resolution. The "vote withheld" option is provided to enable you to instruct the registered holder to abstain from voting.
7. You are entitled to appoint more than one proxy provided that each proxy is appointed to exercise rights attached to a different share or shares held by you. You may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, (an) additional Proxy Form(s) may be obtained by contacting the Registrars helpline or you may photocopy this form. Please indicate in the box next to the proxy holder's name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box provided, if the proxy instruction is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope.
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