CGW.L Regulatory News (CGW)

CHELVERTON GROWTH TRUST PLC

LEI: 213800I86P8BAE6UVI83

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2021

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

Investment objective

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

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

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

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

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

• will repay the outstanding Jarvis Loan; and

• will pay all outstanding liabilities.

Company summary

Performance statistics

Strategic Report

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

Chairman's Statement

As noted in my statement last year, we entered the financial year in a period of considerable uncertainty. Given this background, I am pleased to report that we have experienced a good portfolio recovery both in absolute return and relative to our benchmark. It is also pleasing to report that at the year end the shares were trading above the published Net Asset Value.

The past year has been very positive with an increase in the Company's Net Asset Value ("NAV") per share from 40.61p to 57.62p - an increase of 41.88% and an outperformance against the Company's benchmark index, the MSCI Small Cap UK Index which rose by 37.47%.

This trend continues and we have seen a further significant uplift in the NAV to 67.35p an increase since the year end of 16.89%.

The last two years have been an economic rollercoaster with great uncertainty and huge challenges for businesses just to survive. First there was the uncertainty surrounding Brexit and the need for a trade deal; as soon as a resolution was found to this issue, the world was hit by Covid-19, ensuing lockdowns and a massive economic downturn. Thankfully we appear to be in a position where the Country is learning to live with Covid-19 and the economy is gradually returning to prior levels of activity.

With this increase in economic activity, further clouds are appearing on the horizon in the form of inflationary and supply chain issues. Inflation will inevitably rise as labour shortages lead to higher salaries. Companies have begun to pass on the higher costs of raw materials, shipping, and labour to customers. To compound these pressures, the price of energy has risen significantly, which will inevitably feed into this upward surge in inflation and dampen consumers' ability to spend.

The trend over the past 30 years towards sourcing products from overseas based suppliers and the micro-managing of logistics and supply chains, in the chase for lower costs, has reduced resilience. "Just in Time" works well if everything else does. Buyers received a stark warning when the container vessel Ever-Given became stuck in the Suez Canal causing severe delays and additional costs. By running pipeline stocks to a minimum, UK buyers have been ignoring the real cost of manufacture in the Far East by failing to price-in the contingency expense of potential delays and logistical issues.

On the employment side, it was only 18 months ago when there was a real fear that the lockdown would lead to a massive rise in unemployment, possibly reaching historically high levels of more than three million people. The furlough scheme and the huge level of taxpayer support for corporate UK has, thankfully, averted this.

However, as the UK economy recovers, there are shortages of key workers. Many immigrant workers, particularly from Eastern Europe, returned home due to Covid-19. Post Brexit the ready supply of cheap foreign skilled labour has dried up. This has served to highlight the lack of investment in education and training by UK businesses over many years. Greater investment, in people and processes is going to be needed over a long period before the backlog of underinvestment and reliance on cheap immigrant labour is removed. More immediately, we now must navigate through the world shortages of materials and products. This is expected to persist over the next 12-24 months until production processes throughout the World return to a fully operational state.

The Manager's Report sets out in more detail the developments in the investment portfolio over the past twelve months. I am pleased to say that there have been some very positive developments, and I would like to put on record the Board's recognition of the considerable efforts of our investee companies to achieve the best they can, given the highly challenging conditions.

Costs

As the Company contracts in size, the Board has sought to minimise the costs associated with running a quoted investment trust. The Directors have decided to permanently reduce their fees, following the temporary reduction made during the period of the lockdowns. In addition, we are very grateful to our administrators ISCA Administration Services who have volunteered a significant reduction in their fees. They are joined by our Investment Manager, Chelverton Asset Management which has now reduced its fees to zero.

Outlook

Despite the current market conditions in the UK, we are optimistic that if the economy can successfully navigate the next 12 months, we can look forward to a period of sustainable growth.

Once the matters referred to above are resolved, we anticipate that the improved certainty and clarity in the UK will encourage further investment in UK businesses. In time the Board believes this will lead to a further increase in the NAV per share.

Investee companies in the portfolio have shown great resilience in facing the significant challenges posed over the past two years, and it will be this strength that should enable them to prosper going forward.

The Future of Chelverton Growth Trust

Over many years, the Board has used a process of Tender Offers to return cash to those Shareholders wishing to realise value from their holdings. The eighth, and last tender offer, took place in September 2017. Since that time, the Board has taken the view that it was not appropriate, with the recent depressed NAV per share, to repeat the process.

It is worth reminding Shareholders that the effect of the multiple tenders and the occasional buy-back of shares has reduced the share capital from some 18.9 million shares to the current 5,460,301 a reduction of 71%.

The Company has now been reduced to a size that makes it unviable in the longer term to continue with the current structure and the Board is in the process of reviewing how to return funds to Shareholders in the most effective way. Once this review is concluded, it will formally outline the strategy for maximising value for Shareholders from the remaining assets within the portfolio. It is our intention to make an announcement to this effect in the early part of 2022.

Kevin Allen

Chairman

16 November 2021

Investment Manager's Overview

In the past year we have seen the Country move into a new lockdown, albeit less restrictive and therefore less damaging than the first lockdown of 18 months ago. The arrival of effective vaccines coupled with a successful programme of inoculation, appears to have broken the link between infection and serious illness. The Country appears to be learning to live with Covid-19 and, gradually, we are moving towards some form of normality.

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

The massive Government support of business has enabled all our investee companies to survive through this difficult period. The challenge now is to ensure they develop and prosper within the constraints of an inflationary environment and through the well documented supply chain issues.

The UK economy is dynamic and should adapt to the challenges it faces; there will always be opportunities for nimble businesses operating in niche markets. It is worth recalling that only two years ago the entire narrative surrounded the Brexit process and the necessity to secure a Free Trade Agreement; it is safe to say that this is no longer a subject of discussion.

Portfolio review

I am pleased to say that the recovery we expected in CEPS plc was evidenced in its interim accounts for the six months ended June 2021. This period was, however, affected by lockdowns of varying severity. It is expected that the second half will show further improvement. The underlying strength of the CEPS business model is now reflected in its accounts following three years of hard work, streamlining and restructuring the company.

CEPS is the Company's largest holding, representing 57.1% of the portfolio; it therefore has a material effect upon performance. During the past year its largest and most successful subsidiary, Hickton Group, acquired Millington Lord, a gas and electrical safety consultancy. The purchase price was £1.1 million and it was acquired from a parent company which was in administration. The new management team at Aford Awards acquired three very small businesses which will be relocated to Aford Awards' operation near Maidstone. It is hoped that further acquisitions will be made in the next year. Finally, following significant cost cutting, Davies Odell was merged with Vale Brothers and both businesses were acquired by a new holding company Vale Brothers Holdings. Having owned 100% of a consistently loss-making company CEPS now owns 33% of the larger business which has just declared a profit for the first six months.

Since the Chelverton Growth Trust (CGT) year-end, CEPS has announced substantial progress in strengthening its balance sheet. Short-term debt of £2 million was refinanced, with the interest rate on the loan being reduced from 10% to 7%. In addition, CEPS successfully completed a placing of four million shares, increasing its issued share capital to 21 million shares. CGT participated in the placing and invested a further £160,132 by taking up 400,301 shares, and now has a 26% holding of the enlarged share capital. The extra funding will be used to provide working capital and funding for several small "bolt-on" acquisitions.

The market reacted very positively to the progress of the business and the improved balance sheet. With the CEPS share price now at 45p this holding is profitable. This positive movement in the CEPS investment is primarily responsible for the uplift in CGT's NAV per share since the period end.

A new team have been installed at Universe and appear to be getting on top of the business. We expect to see significant progress in the business and the share price.

Touchstar continued to develop its focused and streamlined business. It reported an improving position in its recent interim results and has built up strength in its balance sheet. It is expected that the results for 2021 will show further progress and that 2022 will really start to reflect the strength and quality of the revitalised business.

Having last year incurred substantial restructuring costs, Petards has enjoyed a much better year to date, with the interim results showing a profit. Given that a large part of its business operates in the railway supply side, the market remains very slow; the order book, whilst healthy, is not as large as it has been in the past. The business is changing in nature and should be more profitable and produce better quality earnings going forward.

The holding of 1% in Chelverton Asset Management Holdings, the holding company of the Investment Manager of this Company, was sold following a tender offer by the Employee Share Option Trust to buy 7.25% of the company. The price received was £339 per share, against a valuation this time last year of £250 per share, and which compares to a cost price of £1 per share. Total proceeds were therefore £339,000 and £220,000 of the sum received was used to reduce CGT's loan from Jarvis to £100,000.

La Salle Education continued to make progress and is developing its business model on several fronts. The Covid-19 pandemic has accelerated the process of digitisation in education. Whilst the sector has previously been slow to implement digitisation, the need to learn and study online during lockdown has accelerated the adoption of digital and online technologies. We believe that these trends are here to stay, reinforced by the UK Government's requirement for schools to make permanent provision for online learning.

Spa Dental Partners continues to be deeply frustrating; the result of the appeal by James Main against the employment ruling of the previous year is still awaited. As a result of lockdowns there is a significant backlog of cases in the judicial system, and it may well be a further six months before the result of the appeal is known.

Pedalling Forth (t/a Velovixen), like several internet retailers, had a very good lockdown period but is now beginning to experience more competition and tougher pricing.

Outlook

The economy is returning to pre-Covid levels and the current, well documented problems in the supply chain will, it is believed, gradually reduce as the world economy slowly returns to full capacity and the spikes of pent-up demand reduce to a more even and normal level.

The resolution of these issues is likely to take time, but once this has happened, the performance of our investee companies should reflect the underlying progress which they have made over the past three years. This progress should then be reflected by increases in their share prices.

David Horner

Chelverton Asset Management Limited

16 November 2021

Portfolio Review

as at 31 August 2021

Portfolio Holdings

as at 31 August 2021

* Sold during the year.

Portfolio breakdown by sector and by index

Percentage of portfolio by sector

Percentage of portfolio by index

All investments are in companies based in the United Kingdom.

Directors (all non-executive)

Kevin Allen (Chairman)⃰

David Horner

Ian Martin⃰

⃰Independent

Extracts from the Strategic Report

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

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

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

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

Board

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

Investment Objective

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

Investment Policy

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

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

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

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

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

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

3. will repay the outstanding Jarvis Loan; and

4. will pay all outstanding liabilities.

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

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

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

Investment Strategy

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

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

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

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

Investment of Assets

At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period. An analysis of the portfolio at 31 August 2021 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 20 to 27 of the Annual Report, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

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

Market risk

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

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

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 pages 20 to 27 of the Annual Report. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

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

Financial risk

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

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

Liquidity risk

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

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

Financial instruments

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

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

Statement regarding annual report and accounts

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

Performance analysis using key performance indicators

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

The Company's Income Statement is set out below.

The movement of the NAV is compared to the MSCI Small Cap UK Index, the Company's benchmark. The NAV per Ordinary share at 31 August 2021 was 57.62p (2020: 40.61p), an increase of 41.88%. By comparison the benchmark rose by 37.47%.

The Company's share price at the year-end was 59.50p (2020: 30.00p).

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

16 November 2021

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 2021 so as to be able to continue to qualify as an authorised investment trust. The Company is an investment company as defined in Section 833 of the Companies Act 2006.

Management and administration agreements

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

The Company previously paid CAM, in respect of its services as Investment Manager, an annual fee of 0.5% of gross assets, payable monthly in arrears. With effect from 1 September 2020, the Investment Manager has agreed to waive its rights to receive an investment management fee.

The amount payable to CAM for the year ending 31 August 2021 was £nil (2020: £18,000). At the year-end £nil (2020: £2,200) 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. For the period 1 May 2020 to 31 January 2021 ISCA agreed to reduce its fee to £30,000 per annum.

Appointment of CAM as the Investment Manager

The Board, excluding Mr Horner, continually reviews the performance of the Investment Manager. In the opinion of the independent Directors the continuing appointment of CAM, as Investment Manager, on the terms outlined in the Investment Management Agreement dated 28 June 2001 and amended on 1 December 2006, is in the best interests of the Shareholders as a whole. Further, the Board is satisfied that CAM has the required skill and expertise to continue to manage the Company's portfolio 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 Board has also considered the risk to the Company of the ongoing Covid-19 pandemic as detailed on page 23 of the Annual Report.

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.

Covid-19 and Annual General Meeting

The Board is closely monitoring the continuing impact of Covid-19 and it is currently the intention of the Company to hold the Annual General Meeting as planned on 11 January 2022. However, with the constant review of advice and restrictions due to Covid-19 it is not possible to predict what restrictions, if any, will be in place when the Company holds its AGM on 11 January 2022. To ensure that the voting on resolutions is put to the meeting the Board have agreed that all resolutions will be decided by a poll based on the proxy votes submitted. Shareholders are requested to return a proxy vote per the form of proxy on page 65 of the Annual Report as early as possible. If you appoint the Chairman of the Meeting as your proxy, this will ensure your votes are cast in accordance with your wishes and avoids the need for another person to attend as a proxy in your place. If Shareholders have any questions that they would like to raise at the Meeting, these should be submitted in advance to the following email address: cgw@iscaadmin.co.uk.

The Board hope that the meeting will be open for Shareholder attendance, however, advice may change on this and you should continue to monitor and act in accordance with guidance issued by the UK government and relevant health authorities. You should also continue to monitor the Company's website and announcements for any updates in relation to the Meeting arrangements that may need to be provided. If the Board believes that it becomes necessary or appropriate to make alternative arrangements for the holding of the Meeting due to Covid-19, we will ensure that Shareholders are given as much notice as possible through the Company's website: https://www.chelvertonam.com/fund/chelverton-growth-trust-plc/shareholder-information/ and, where appropriate, by RNS announcement.

On behalf of the Board

Kevin Allen

Chairman

16 November 2021

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 gain 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

16 November 2021

NON- STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2021 and 2020 but is derived from those accounts. Statutory accounts for 2020 have been delivered to the Registrar of Companies, and those for 2021 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 2021

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 October 2019 by the Association of Investment Companies.

The notes form part of these accounts.

Statement of Changes in Equity

for the year ended 31 August 2021

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

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

The notes form part of these accounts.

 Statement of Financial Position 

as at 31 August 2021

These financial statements were approved and authorised for issue by the Board of Directors on 16 November 2021 and signed on their behalf by

Kevin Allen

Chairman

The notes form part of these accounts.

Statement of Cash Flows

For the year ended 31 August 2021

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 October 2019. All the Company's activities are continuing.

Income recognition

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

Expenses

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

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

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

Investments

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

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

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

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

Cash and cash equivalents

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

Current assets

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

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

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

Current liabilities

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

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

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

Significant judgements and estimation uncertainty

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

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

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

Capital reserve

The following are accounted for in this reserve:

· gains and losses on the realisation of investments;

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

· realised exchange differences of a capital nature;

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

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

Special reserve

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

Taxation

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

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

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

Segmental reporting

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

 With effect from 1 November 2019, the investment management fee was calculated at the rate of 0.04167% per month, equating to 0.5% per annum, of the gross value of funds under management and was payable monthly in arrears. At 31 August 2021 there was nil outstanding (2020: £2,200). Prior to 1 November 2019, the investment management fee was calculated at the rate of 1% per annum of gross assets. With effect from 1 September 2020, the Investment Manager has agreed to waive the entitlement to a fee.

Factors affecting current tax charge for the year

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

At 31 August 2021 the Company had surplus management expenses of £4,813,000 (2020: £4,681,000) 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 £107,000 (2020: £93,000) and on 5,460,301 (2020: 5,460,301) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

Capital return per Ordinary share is based on the net capital gain of £1,035,000 (2020: loss of £135,000) and on 5,460,301 (2020: 5,460,301) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

Total return per Ordinary share is based on the total gain of £928,000 (2020: loss of £228,000) and on 5,460,301 (2020: 5,460,301) 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 (2020: £nil) and nil (2020: £163) on purchases and sales of investments, respectively. These amounts are included in 'Gains/(losses) on investments at fair value' as disclosed in the Income Statement.

Analysis of movements in unquoted investments

Details of material holdings in unquoted investments

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

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

8 SIGNIFICANT INTERESTS

At 31 August 2021, 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:

Subsequent to the year end, the Company participated in a placing of 400,301 shares amounting to £160,132 in CEPS PLC. The holding at the date of this report is 5,460,301 shares representing 26.00% of the issued share capital of 21,000,000 Ordinary Shares.

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. Partial repayments were made on 11 May 2020 of £280,000 and on 2 March 2021 of £220,000. At the year-end £100,000 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 on 10 December 2020 and, if the Company has not then been liquidated, unitised or reconstructed, at each fifth annual general meeting of the Company convened by the Board thereafter, the Board shall propose an ordinary resolution that the Company should continue as an investment trust for a further five-year period.

13 NET ASSET VALUE PER ORDINARY SHARE

The basic net asset value per Ordinary share of 57.62p (2020:40.61p) is based on net assets of £3,146,000 (2020: £2,218,000) and on 5,460,301 (2020: 5,460,301) Ordinary shares, being the number of shares in issue at the year end.

14 CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

At 31 August 2021, there was a capital commitment of £160,132 as discussed in note 8 to invest in CEPS (2020: £nil) outstanding and no contingent liabilities (2020: £nil).

15 ANALYSIS OF FINANCIAL ASSETS AND LIABILITIES

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

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

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

i) Market risk - market price risk

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

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

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

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

The Company's exposure to other changes in market prices at 31 August 2021 on its investments is as follows:

A 20% decrease in the market value of investments at 31 August 2021 would have decreased net assets attributable to Shareholders by 11 pence per share (2020: 9 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:

The Company receives no interest on its bank balances but receives interest from SpaDental Limited as stated in note 9 and pays interest on its loan so the effect of an interest rate increase of 1% would decrease net revenue before taxation on an annualised basis by £1,000 (2020: £933). If there was a decrease in interest rates of 0.1% (2020: 0.1%) net revenue before taxation would increase by £100 (2020: £93). These calculations are based on balances as at 31 August 2021 and may not be representative of the year as a whole.

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

(iv) Liquidity risk

Eighty six 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 fourteen percent of the portfolio, could be more difficult to realise as they are not tradable instruments.

v) Credit risk

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

 (vi) Maturity analysis of financial liabilities

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

 (vii) Managing capital

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

Primarily the Company finances its operations through its issued capital and existing reserves. However, to help fund further investment the Company borrowed on a short-term loan £600,000 from Jarvis Securities plc. At the year-end an amount of £100,000 remained outstanding. Further details are given in note 10.

(viii) Fair values of financial assets and financial liabilities

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

(ix) Financial instruments by category

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

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 year ended 31 August 2021:

16 RELATED PARTY TRANSACTIONS

Under the terms of the agreement dated 28 June 2001, the Company has appointed Chelverton Asset Management Limited to be the Investment Manager. The fee arrangements for these services and fees payable are set out in the Report of the Directors on page 29 of the Annual Report and in note 3 to the accounts. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited a subsidiary of Chelverton Asset Management Holdings Limited, and chairman of CEPS PLC in which the Company has a significant investment. Mr Martin is the chairman of Touchstar plc, in which the Company holds an investment.

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

The Company sold its holding in Chelverton Asset Management Holdings during the year for £339,000 realising a gain of £338,000. As stated in notes 8 and 14, the Company made an investment of £160,132 in CEPS PLC after the year end. These transactions were conducted at arm's length.

17 CAPITAL MANAGEMENT POLICIES AND PROCEDURES

The Company's capital management objectives are:

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

· to provide an adequate return to Shareholders;

· to support the Company's stability and growth;

· to provide capital for the purpose of further investments.

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

ANNUAL REPORT AND AGM

The foregoing represents extracts from the full text of the Annual Report and Accounts for the year ended 31 August 2021. 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 Tuesday 11 January 2022. Shareholders should refer to page 30 of the Annual Report regarding the arrangements for the Meeting.

NATIONAL STORAGE MECHANISM

A copy of the 2021 Annual Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at:

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