CGW.L Regulatory News (CGW)

CHELVERTON GROWTH TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2015

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

Investment objective

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

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

Company summary

Benchmark MSCI Small Cap UK Index

Investment Manager Chelverton Asset Management Limited

See page 16 for further details

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

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

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

Performance statistics

Strategic Report

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

Chairman's Statement

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kevin Allen

Chairman

9th November 2015

Investment Manager's overview

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

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

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

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

Portfolio review

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

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

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

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

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

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

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

Outlook

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

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

David Horner

Chelverton Asset Management Limited

9th November 2015

Portfolio Review

as at 31 August 2015

⃰ In Administration

Portfolio holdings

⃰ In Administration

Portfolio breakdown by sector and by Index

Percentage of portfolio by sector

Support Services 74.7%

Technology Hardware & Equipment Distribution 8.4%

Software & Computer Services 6.2%

Financial Services 5.8%

Electronic & Electrical Equipment 2.3%

Industrial Engineering 1.2%

Pharmaceuticals & Biotechnology 1.1%

Healthcare Equipment & Services 0.3%

Percentage of portfolio by Index

AIM 55.5%

Unquoted 41.8%

Nasdaq 2.7%

Directors (all non-executive)

Kevin Allen (Chairman)⃰

David Horner

Ian Martin⃰

⃰Independent

Extracts from the Strategic Report

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

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

Investment objective

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

Investment policy

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

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

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

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

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

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

Investment strategy

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

Investment of Assets

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

Environment Emissions

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

Review of Performance and Outlook

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

Principal risks and uncertainties and risk management

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

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

Market risk

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

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

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

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

Discount volatility

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

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

Regulatory risks

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

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

Financial risk

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

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

Liquidity risk

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

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

Financial instruments

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

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

Statement regarding annual report and accounts

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

Performance analysis using key performance indicators

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

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

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

Current and future developments

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

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

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

Social, environmental and employee issues

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

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

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

By Order of the Board

K Allen

Chairman

9  November 2015

Extract from the Report of the Directors

Status, objective and review

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

Management and administration agreements

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

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

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

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

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

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

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

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

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

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

Going concern

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

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

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

On behalf of the Board

Kevin Allen

Chairman

9 November 2015

Statement of Directors' responsibilities in respect of the financial statements

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

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

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

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

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

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

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

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

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

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

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

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

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

On behalf of the Board

Kevin Allen

Chairman

9 November 2015

NON- STATUTORY ACCOUNTS

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

Income statement

for the year ended 31 August 2015

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

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

No operations were acquired or discontinued during the year.

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

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

Statement of changes in equity

for the year ended 31 August 2015

Statement of financial position

as at 31 August 2015

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

Kevin Allen

Chairman

Statement of cash flows

for the year ended 31 August 2015

1  ACCOUNTING POLICIES

Accounting convention

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

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

Income recognition

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

Expenses

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

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

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

Investments

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

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

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

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

Significant judgements and estimates

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

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

Capital reserve

The following are accounted for in this reserve:

gains and losses on the realisation of investments;

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

realised exchange differences of a capital nature;

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

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

Taxation

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

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

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

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