CGW.L Regulatory News (CGW)

CHELVERTON GROWTH TRUST PLC

LEI: 213800I86P8BAE6UVI83

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2019

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

Investment objective

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

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

Shareholders will be asked to vote on an amendment to the Investment Policy at the forthcoming Annual General Meeting as detailed on page 11 of the Annual Report.

Company summary

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

Strategy

Over the last twelve months, the Board has looked at the strategic options available to the Company; the objective of this review is to maximise returns and provide an effective exit to all Shareholders.

Driven by the very successful policy of returning cash to Shareholders over recent years, via a succession of well subscribed share tender offers, the number of shares in issue has been reduced by 71% from 18.9 million to 5.5 million. This policy to reduce the size of the business has, as we anticipated, reached a point at which it is now in Shareholders' best interests to examine alternatives to continuing as an independent company.

The Board is now actively putting in place a roadmap to achieve the strategic objectives mentioned in my opening remarks. Once finalised, we will put this roadmap to Shareholders for consideration and approval.

The objective is to secure a tax efficient, low cost and simple method of returning value to Shareholders. To this end, we have entered into a discussion with a third party. These discussions are at an early stage and it is far from certain if they will reach a conclusion. This is currently our preferred route but we are also exploring other options open to us. Until we have reached a conclusion, we will be putting on hold further tender offers to Shareholders.

The current timescale we are working to is that by 2022 we will be in a position to present to Shareholders a clear, reasoned and certain exit strategy.

We will not rush to sell remaining assets unless it makes sense to our Shareholders, and it could be more appropriate that some investments are transferred to a new structure rather than realised at under value for cash.

Performance

The past year has been disappointing, with a decline in the fund's net asset value per share from 60.48p to 44.79p, a decrease of 25.94%. In the same period, the Company's benchmark index, the MSCI Small Cap UK Index fell by 9.57%.

The Company is now sub scale which means investments are concentrated in a small number of companies which results in a high volatility in investment returns compared to more balanced benchmarks.

We believe that a significant proportion of investee companies hold the potential for capital appreciation, with their value currently not adequately reflected by the stock market.

As a nation, we are living through a very unusual and difficult time. We all hope that in the future the macro political issues causing such paralysing uncertainty, will be cleared up and we can get on with addressing the multitude of matters relating to the economy. I hesitate to forecast the length of this period, as numerous deadlines have already come and gone.

As detailed in the Manager's Report, the underlying companies are, in the main, making progress, but within such an uncertain macroeconomic environment, the size of the investee companies renders them particularly vulnerable to the impact of illiquidity and consequent sharp price reductions on very modest selling.

The companies in the portfolio are highly UK-centric in their business dealings and therefore the prosperity and growth of the UK economy is the biggest single driver of their future success. If the UK does not itself head into recession, which most experts consider unlikely, the marketplace for our investee companies should remain favourable.

In the period under review, the economy has grown, albeit at a slightly lower rate than in the recent past. Continued growth in employment, and more importantly full-time employment, has finally been evidenced with real wage growth. Full employment and real wage growth have historically led to rising inflation, however, at this time, inflation is marginally reducing and this trend is expected to continue.

Outlook

Hopefully the political stalemate will finally be resolved, in the next three months. It is important to point out that "The negotiated Brexit Deal" is merely the first stage of a lengthy process that will take several years to complete. It is widely reported that UK and Overseas investors are "underweight" in UK equities and it is to be hoped, that once there is some certainty and clarity in the UK, investors will begin to realise how underrated UK companies actually are. In time, the Board believe this should lead to a meaningful increase in the net asset value per share.

Despite the continuing uncertain political background, the investee companies within the portfolio have generally continued to make progress over the past year. We hope, and expect, that the investment and development that has taken place during the past few years will begin to bear fruit over the future period.

Kevin Allen

Chairman

5 November 2019

Investment Manager's overview

In the past year the impact of the uncertainty resulting from the grinding "Brexit" process has finally begun to impact on our companies. The significant reduction in share prices, seen across the entire market, has been amplified in the small company "value" segment, the area of the market in which this Company is largely invested.

In the past year the UK economy has grown, albeit slowly, and employment has continued to rise. We have finally started to observe some real wage increases. The tortuous Brexit impasse has created a very negative, indeed toxic, atmosphere which has adversely affected both business and consumer confidence.

However, when meeting up with companies in the portfolio, or indeed other investee companies across the funds managed by Chelverton Asset Management, one does not get any sense of the doom and gloom that one sees in the media. Generally, people are getting on with making their businesses more efficient, more profitable and more resilient.

Hopefully, when we finally see a resolution of the Brexit process, the Country and the companies we are invested in can get on with managing within a much more certain and predictable environment. There is a feeling within the investment community that once Brexit is resolved, or more precisely the high profile and public aspect of the first phase is resolved, then there will be a release of pent-up demand that has been held up waiting for something to happen.

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

Across the larger funds managed by Chelverton, investing in companies outside of the FTSE 100, the "low point" was probably reached about three months ago. Since then, as the likelihood that "no-deal" receded and that a "deal" of some form is probable, there has been a strong rally in share prices and investor sentiment. As ever, it is the larger companies, valued in excess of say £1bn, that react first, then over time this ripples down the market.

One factor that endorses our view of value has been the very significant increase this year in the number of takeovers of UK companies by overseas businesses at healthy premiums. Whilst this is unlikely to impact the type of company in our portfolio, it is, on one level, encouraging confirmation of the deep value that we believe currently exists.

It is a well-documented view that UK and Overseas investors are very "underweight" in UK equities, all waiting for a resolution of the "Brexit" impasse. In addition, analysts say that the relative ratings between "Growth" companies and "Value" companies are as wide as they have ever been. History shows that these extremes of valuation do not last forever.

Portfolio review

CEPS owns majority shareholdings in five different stand-alone subsidiaries, which are all operating in unrelated niche markets. The minority shareholding in each company is largely owned by the "business drivers" who are, as a result, incentivised to increase profits, generate cash and pay down any acquisition debt; by achieving this, their personal holdings will increase significantly in value.

Whilst three of the subsidiaries are producing record profits, a further one has moved from a large loss-making position to breakeven. The fifth company, which acquired another business twice its size for an initial £1, is still significantly loss making. Considerable effort is being spent to get this business back on track.

The holding in CEPS is now the largest in the Company and is considered by the Board, because it is made up of five separate businesses, to be a diversified holding.

Following the sharp fall in the share price of Universe, it has now stabilised operationally and has made what looks to be a highly sensible strategic acquisition. We therefore expect to see share price progress in the next year to reflect its underlying progress.

Touchstar has continued to develop its focused and streamlined business. As reported in its recent interim results, sales were up an encouraging 16%, but with a comment, echoed by many businesses, that buyers are holding back from ordering until there is clarity on Brexit!

Petards, having geared up to meet anticipated demand for its sophisticated products to the rail industry, discovered that while orders were agreed, they were not being called off. This year will be one of retrenchment and it is expected that next year will be one of recovery.

Plutus Powergen share price has declined further from 0.95p at the beginning of the year to 0.18p today. The Company is focused on the development and operation of flexible energy generation projects in the UK. The last year has seen the impact of the removal of Capacity Mechanism (CM), the system that the Government uses to assist companies to provide standby power to the National Grid. However, in the last few days the EC has approved, under the EU State Aid Rules, the British CM scheme, which can now be reinstated.

Plutus Powergen raised further funds at 0.6p almost a year ago; this Company did not participate. The untimely death, over a year ago, of the CEO and the recent resignation of the Operations Director, has given rise to public concern about the management of the company. This, coupled with the serving of a notice to terminate the use of Plutus Powergen's services by Rockpool, causes further concern. The company has had no operational developments to report in the last period as it has been seeking the finance necessary to develop its projects.

The holding in Chelverton Asset Management Holdings, the Investment Manager of this fund, was again revalued upwards reflecting the continued success of its funds, which has led to an overall growth in its funds under management. The Employee Share Option Trust ("ESOT") of Chelverton Asset Management tendered last year for 5,500 shares, (5.5%) of the share capital, at a price of £160 per share, compared to a cost price of £1. The ESOT intends to tender for another 5% of the shares, but is waiting for a Brexit resolution, as any action taken now will almost certainly disadvantage either the Shareholders who tender or those that do not. The fund retains 1,000 shares revalued upwards to £220 per share.

La Salle Education has continued to show excellent progress and its sales have increased by 70% and gross profit by 80%. While it is still loss making, at the EBITDA level, this is a business that, once it reaches critical mass, should become very profitable.

Spa Dental Partners was sold on the 26 October 2018, for loan stock, which is payable once a conditional liability claim is resolved. Because of the conditionality of the consideration, the value at which the investment is held has not been increased.

Outlook

In time, and once the macroeconomic outlook is more settled and more favourable, we believe that the real value of our companies will begin to be evidenced by increases in their share prices. Expected recovery and growth in the share prices of the AIM holdings will contribute to an increase in the asset value and, we believe, will enable us to report a much better performance in a year's time.

David Horner

Chelverton Asset Management Limited

5 November 2019

Portfolio Review

as at 31 August 2019

Portfolio holdings

as at 31 August 2019

 * Name changed to Touchpoint Group Holdings on 26 September 2019

Portfolio breakdown by sector and by index

Percentage of portfolio by sector

Percentage of portfolio by index

Directors (all non-executive)

Kevin Allen (Chairman)⃰

David Horner

Ian Martin⃰

⃰Independent

Extracts from the Strategic Report

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

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

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

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

Board

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

Investment Objective

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

Investment Policy

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

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

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

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.

Given the comments in the Chairman's statement the Directors feel it is appropriate to amend the Investment Policy to state the Company:

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

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

3. will repay the outstanding Jarvis Loan,

4. will pay all outstanding liabilities

Resolution 7 as shown in the Notice of Annual General Meeting in the Annual Report will give Shareholders the opportunity to vote on this amendment.

Investment Strategy

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

The Company's Investment Manager is Chelverton Asset Management Limited ("CAM"), an independent investment manager focusing exclusively on achieving returns for investors based on UK investment analysis of the highest quality. The founder and employee owners of CAM include experienced investment professionals with strong investment performance records who believe rigorous fundamental research allied to patience is the basis of long-term investment success.

Note 15 gives details of the Directors' interests in the Investment Manager.

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

Investment of Assets

At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period. An analysis of the portfolio at 31 August 2019 can be found above.

Environment Emissions

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

Review of Performance and Outlook

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

Principal risks and uncertainties and risk management

As stated within the Corporate Governance Statement on pages 17 to 24 of the Annual Report, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

The principal risks and uncertainties faced by the Company are described below and in note 14 which provides detailed explanations of the risks associated with the Company's financial instruments.

Market risk

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

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

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"), the Alternative Investment Fund Manager's Directive ("AIFMD") and the Listing Rules of the Financial Conduct Authority ("FCA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on pages17 to 24 of the Annual Report. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

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

Financial risk

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

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

Liquidity risk

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

A more detailed explanation of the investment management risks facing the Company is given in note 14 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 14 to the financial statements.

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

Statement regarding annual report and accounts

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

Performance analysis using key performance indicators

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

The Company's Income statement is set out below.

The movement of the NAV is compared to the MSCI Small Cap UK Index, the Company's benchmark.

The NAV per Ordinary share at 31 August 2019 was 44.79p (2018: 60.48p), a decrease of 25.94%. By comparison the benchmark fell by 9.57%.

The Company's share price at the year-end was 40.50p (2018: 56.50p).

Viability Statement

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

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

Current and future developments

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

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

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

Social, environmental and employee issues

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

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

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

By Order of the Board

Kevin Allen

Chairman

5 November 2019

Extract from the Report of the Directors

Status, objective and review

The principal activity of the Company is to carry on business as an investment trust. The Company has been granted approval from HM Revenue & Customs ('HMRC') as an authorised investment trust under Section 1158 of the Corporation Tax Act 2010. The Company will be treated as an investment trust company for each subsequent accounting period, subject to there being no serious breaches of the conditions. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 August 2019 so as to be able to continue to qualify as an authorised investment trust. The Company is an investment company as defined in Section 833 of the Companies Act 2006.

Management and administration agreements

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

The Company pays CAM, in respect of its services as Investment Manager, an annual fee of 1% of gross assets, payable monthly in arrears. With effect from 1 November 2019, the annual fee will be reduced to 0.5% per annum of gross assets.

The amount payable to CAM for the year ending 31 August 2019 was £35,000 (2018: £44,000). At the year-end £2,600 (2018: £3,300) was outstanding to CAM.

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

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

Appointment of 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 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 14 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

5 November 2019

Statement of Directors' responsibilities in respect of the financial statements

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

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

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

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

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

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

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

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

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

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

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

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

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

On behalf of the Board

Kevin Allen

Chairman

5 November 2019

NON- STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2019 and 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies, and those for 2019 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Investment Manager's website: www.chelvertonam.com.

Income statement

for the year ended 31 August 2019

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

No operations were acquired or discontinued during the year.

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with applicable Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice ("AIC SORP") issued in November 2014 and updated in February 2018 with consequential amendments by the Association of Investment Companies.

The notes form part of these accounts.

Statement of changes in equity

for the year ended 31 August 2019

The Special Reserve and Revenue Reserve are distributable and may be used for the repurchase of the Company's own shares.

The notes form part of these accounts.

Statement of financial position 

as at 31 August 2019

The notes form part of these accounts.

These accounts were approved by the Board of Directors of Chelverton Growth Trust PLC and authorised for issue on 5 November 2019. They were signed on its behalf by

Kevin Allen

Chairman

Statement of cash flows

For the year ended 31 August 2019

The notes form part of these accounts.

1 ACCOUNTING POLICIES

Accounting convention

The financial statements are prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS 102"), the Companies Act 2006 and with the AIC Statement of Recommended Practice ("SORP"), Financial Statements of Investment Trust Companies and Venture Capital Trusts issued in November 2014 and updated in February 2018 with consequential amendments. All the Company's activities are continuing.

Income recognition

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

Expenses

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

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

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

Investments

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

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

For investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset. For investments traded on other financial markets such as the 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 estimation uncertainty'.

Cash at bank and cash equivalents

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

Significant judgements and estimation uncertainty

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

Investments that are not actively traded in organised financial markets, are valued at the Directors' estimate of the investment's net realisable value being their estimate of fair value. Generally, fair value will be at 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, net asset value or funds under management, the valuation is adjusted to reflect the new evidence. This represents the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction.

Capital reserve

The following are accounted for in this reserve:

·; gains and losses on the realisation of investments;

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

·; realised exchange differences of a capital nature;

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

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

Special reserve

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

Taxation

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

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

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

Segmental reporting

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

The investment management fee is calculated at the rate of 0.0833% per month, equating to 1% per annum, of the gross value of funds under management and is payable monthly in arrears. At 31 August 2019 there was £2,600 outstanding (2018: £3,300). With effect from 1 November 2019, the investment management fee will be reduced to 0.5% per annum of gross assets.

Factors affecting current tax charge for the period

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

At 31 August 2019 the Company had surplus management expenses of £4,527,000 (2018: £4,337,000) which have not been recognised as a deferred tax asset. This is because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period and, accordingly, it is unlikely that the Company will be able to reduce future tax liabilities through the use of existing surplus expenses. Due to the Company's status as an investment trust and the intention to continue meeting the conditions required to obtain approval as an investment trust in the foreseeable future, the Company has not provided for deferred tax on any gains and losses arising on the revaluation or disposal of investments.

Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £125,000 (2018: £136,000) and on 5,460,301 (2018: 5,563,242) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

Capital return per Ordinary share is based on the net capital loss of £732,000 (2018: £1,302,000) and on 5,460,301 (2018: 5,563,242) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

Total return per Ordinary share is based on the total loss of £857,000 (2018: £1,438,000) and on 5,460,301 (2018: 5,563,242) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

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

Transaction costs

During the year, the Company incurred transaction costs of £nil (2018: £696) and £nil (2018: £887) on purchases and sales of investments, respectively. These amounts are included in 'Losses on investments at fair value' as disclosed in the Income statement.

Analysis of movements in unquoted investments

* Dissolved on 18 December 2018.

** Final liquidation proceeds received.

Details of material holdings in unquoted investments

* Consolidated figures

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

8 SIGNIFICANT INTERESTS

At 31 August 2019, 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:

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

The loan was drawn down on 4 June 2018 and at the year-end £600,000 was outstanding. The loan is secured on the assets of the Company and is repayable on demand.

Duration of Company

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

12 NET ASSET VALUE PER ORDINARY SHARE

The basic net asset value per Ordinary share of 44.79p (2018:60.48p) is based on net assets of £2,446,000 (2018: £3,303,000) and on 5,460,301 (2018: 5,460,301) Ordinary shares, being the number of shares in issue at the year end.

13 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At 31 August 2019, there were no capital commitments or contingent liabilities (2018: £nil).

14 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES

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

The Company primarily invests in companies traded on AIM with a market capitalisation at the time of investment of up to £50 million. The Company finances its operations through its issued capital, existing reserves and the loan from its custodian as detailed in note 10.

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

i) Market risk - market price risk

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

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

The Directors are conscious of the fact that the nature of AIM investments is such that prices can be volatile. Investors should be aware that the Company is exposed to a higher rate of risk than exists within a 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 2019 on its investments is as follows:

A 20% decrease in the market value of investments at 31 August 2019 would have decreased net assets attributable to Shareholders by 10 pence per share (2018: 13 pence per share). An increase of the same percentage would have an equal but opposite effect on net assets available to Shareholders.

 (ii) Market risk - exchange rate risk

All of the Company's assets are in sterling and accordingly the only currency exposure the Company has is through the trading activities of its investee companies.

 (iii) Market risk - interest rate risk

Changes in interest rates may cause fluctuations in the income and expenses of the Company.

The majority of the Company's financial assets are non-interest bearing. As a result, the Company's financial assets are not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates.

The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions.

The exposure at 31 August of financial assets and financial liabilities to interest rate risk is as follows:

As the Company receives no interest on its bank balances and pays interest on its loan then the effect of an interest rate increase of 1% would decrease net revenue before taxation on an annualised basis by £6,000 (2018: £6,000). If there was a decrease in interest rates of 0.5% net revenue before taxation would increase by £3,000 (2018: £3,000). These calculations are based on balances as at 31 August 2019 and may not be representative of the year as a whole.

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held with the custodian to be delayed.

 (v) Liquidity risk

Eighty percent of the Company's portfolio is fully listed on the London Stock Exchange or AIM quoted securities which under normal conditions can be sold to meet funding commitments if necessary. These may however be difficult to realise in adverse market conditions. The Company's unquoted investments, representing the remaining twenty percent of the portfolio, could be more difficult to realise as they are not tradable instruments.

 (vi) Maturity Analysis of Financial Liabilities

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

 (vii) Managing Capital

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

Primarily the Company finances its operations through its issued capital and existing reserves. However, to help fund further investment the Company borrowed on a short-term loan £600,000 from Jarvis Securities plc. At the year-end an amount of £600,000 was outstanding. Further details are given in note 10.

(viii) Fair values of financial assets and financial liabilities

Other than the loan from Jarvis which is shown at amortised cost, all financial assets and liabilities of the Company are held at fair value.

(ix) Financial instruments by category

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

Fair value hierarchy

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

The fair value hierarchy consists of the following three classifications:

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

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

Level 2 - The price of a recent transaction for an identical asset, where quoted prices are unavailable.

The price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If it can be demonstrated that the last transaction price is not a good estimate of fair value (e.g. because it reflects the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that price is adjusted.

Level 3 - Inputs for the asset or liability that are based on observable market data and unobservable market data, to estimate what the transaction price would have been on the measurement data in an arm's length exchange motivated by normal business considerations.

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement by the Company. The Company considers observable data to be investments actively traded in organised financial markets, fair value is generally determined by reference to Stock Exchange quoted market bid prices or last traded in respect of SETS at the close of business on the balance sheet date, without adjustment for transaction costs necessary to realise the asset.

Investments, whose values are based on quoted market prices in active markets, and therefore classified within Level 1, include active listed equities. The Company does not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified as Level 2.

Investments classified within Level 3 have significant unobservable inputs. Level 3 instruments include unquoted holdings. As observable prices are not available for these securities, the Company has used valuation techniques to derive the fair value. The Company has no Level 2 investments, and Level 3 investments consist only of unquoted holdings.

The following table presents the movement in the Level 3 investments for the period ended 31 August 2019:

15 RELATED PARTY TRANSACTIONS

Under the terms of the agreement dated 28 June 2001, the Company has appointed Chelverton Asset Management Limited to be the Investment Manager. The fee arrangements for these services and fees payable are set out in the Report of the Directors on page 26 of the Annual Report and in note 3 to the accounts. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited and chairman of CEPS PLC in which the Company has a significant investment. Mr Martin is the chairman of Touchstar plc, in which the Company holds an investment.

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

16 CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The Company's capital management objectives are:

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

·; to provide an adequate return to Shareholders;

·; to support the Company's stability and growth;

·; to provide capital for the purpose of further investments.

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

ANNUAL REPORT AND AGM

The foregoing represents extracts from the full text of the Annual Report and Accounts for the year ended 31 August 2019. The full Report will shortly be available for download from the following website: www.chelvertonam.com

Copies will be posted to Shareholders shortly.

The AGM will be held at the offices of Chelverton Asset Management Limited, 11 Laura Place, Bath, BA2 4BL at 12.00 p.m. on Thursday 12 December 2019.

NATIONAL STORAGE MECHANISM

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