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Chelverton Growth Trust PLC

LEI: 213800I86P8BAE6UVI83

Half Yearly Report

For the six months ended 28 February 2021

The Directors announce the unaudited Half Yearly Report for the period 1 September 2020 to 28 February 2021.

Investment Objective and Policy

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 the Manager believes to be at a "point of change". The Company will 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 the net asset value per share at a higher rate than other quoted smaller company trusts and the MCSI 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 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.

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 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.

Chairman's Report

Since my last Chairman's Report, in October last year, there has been a marked upturn in both the fortunes of our Company and, through the vaccine roll-out, in the health and welfare of the Nation.

At the start of the first wave of the Covid-19 pandemic, approximately a year ago, the stock market suffered a disastrous period of what can only be described as a "Great Panic". Since the summer, trading, performance and finally value have gradually returned to the larger UK companies and this recovery has started to "trickle down" the market capitalisation scale. As the Company's portfolio is made up of small AIM traded and unquoted companies this is the last area to see the signs of the improvement.

I previously stated that we would put forward plans in 2022 on how we proposed to return value to Shareholders. Although the last year has effectively been one of "furlough" for the economy, the Board still feels that it will be able to follow this timetable. Our problem has been that following the prolonged Referendum, Brexit Arguments and Free Trade Agreement period ("RBF"), UK Equities and in particular small, UK centric companies, fell deeply out of favour. The Board, aware of the significant improvement potential in the underlying investments, is not prepared to give up this opportunity for the convenience of resolving the immediate future of this Company.

I am grateful to Chelverton Asset Management, the Investment Manager of the Company, who is waiving its management fee in its entirety and to ISCA, the Company Secretary and Administrator of the Company, who has waived part of its fee and who has also assisted at times on the liquidity of the Company. Ian Martin and I have also waived part of our fees. The collective effect of these actions means that the expense ratio, whilst still high due to the very small size of the Company, is much smaller that it would have been.

Financial Performance

I am pleased to report that over the last six months, the Net Asset Value ("NAV") per share of the Company has increased by 22.14% from 40.61p to 49.60p. Whilst in general, the performance of the underlying investments has been encouraging, the sentiment towards UK publicly quoted equites, and in particular the small companies and micro-cap value companies, has by no means recovered to previous historic levels.

Over the same period, the AIM All-share index has risen by 22.74% whilst the Company's comparative index, the MSCI Small Cap UK index has risen by 19.65%. The share price has increased from 30p to 34p and the shares were therefore trading at a discount of 31.45% at the period end.

Since the period end the NAV per share has increased further and continues to confirm the Board's view that over the next period there is potential to see a significant increase in value.

Investments

CEPS is the largest investment in the Company, and is a diversified AIM traded holding company that owns majority shareholdings in three subsidiaries and a significant minority in a fourth. Our Investment Manager and fellow Board member, David Horner is chairman of the company and has a similar sized shareholding as the that of our Company. CEPS is being built up by the organic growth of the underlying companies and by strategic "bolt-on" acquisitions.

In the last period, there has been some significant positive developments. Aford Awards, a trophy, medal and engraving business, has been strengthened by the introduction of a new and ambitious management team. One of the strategic drivers of this business in the future will be the acquisition and consolidation of small businesses operating in the sector from people looking to retire.

The final loss-making subsidiary has been "rightsized" and has been merged with a complementary business approximately twice its size; CEPS has ended up with a 33% shareholding in the enlarged business. Hickton Group, a fast-growing property services group, has announced the acquisition of a complementary business, Millington Lord, from its parent company, which was in administration.

Whilst all of the CEPS' businesses have been affected by the various lockdown restrictions, they are all looking forward to building back over the next few months as things gradually ease and in so doing, to producing a very strong second six months of the year. This diversified holding group has proved resilient in the past 12 months and, with reduction of costs and improved processes, will drive higher profits once trading returns to normal.

Touchstar has made some positive announcements in the past six months following its period of reorganisation. Petards is some way behind, but should, in the course of the next 12 months, evidence the positive impact of the remedial work it has been undergoing. In both cases, once trading picks up, operational gearing should drive profits forward.

On the unquoted side Chelverton Asset Management (CAM), the manager of this Company, had a strong recovery after the market collapse in March 2020 and has successfully grown funds under management and paid an increased dividend. CAM's Employee Share Option Trust made another tender offer to acquire shares in the company. This Company sold its remaining shareholding, and I am very pleased to report that it received £339,000 for the 1,000 shares owned which originally cost £1,000. On 2 March 2021, the proceeds were partly used to repay £220,000 of the £320,000 loan from Jarvis Securities plc. It is our intention to repay the remaining balance of the loan over the next year from realisations.

The saga at Main Dental Partners continues with a date for the appeal being brought by the previous managing director, now set for September of this year. It is hoped that the result of the original case is upheld and with all of the surgeries now reopened and operating under new protocols, the performance of the business will begin to improve, such that we can look forward to having the loan stock repaid.

On a continuing brighter note La Salle Education ("La Salle"), a business involved in supplying schools with the modern mathematics teaching via the internet has been deeply involved in providing services to many schools. La Salle raised £910,000 at 70p, having been initially aiming to raise £750,000. This means that it can accelerate its development to take advantage of the opportunities currently available. The share valuation has been moved up from 50p to the latest fundraising valuation of 70p.

Pedalling Forth (trading as Velovixen) an internet retailer of woman's cycling clothing has also enjoyed a continuing uplift in sales, and it is to be hoped that this will be sustained going forward.

Outlook

It is impossible to make any kind of forecast at this time other than to say that gradually the economy and society will move towards a settled outcome. This new situation will resemble what the position was before the arrival of Covid-19, however it will almost certainly not be the same.

The UK economy seems to be poised to "bounce back" once the Covid restrictions are progressively eased and all parts of the economy are able to operate without constraint.

In time, the Free Trade Agreement with the EU will be properly implemented and will be adjusted by agreement, to the benefit of all parties.

It remains the Board's intention to return funds to Shareholders. By the same token, the oft repeated annual tenders can only be carried out in a meaningful and cost-effective manner when the Company has significant cash resources. At this time, as explained above, the Company is fully invested and so the ninth tender offer will be delayed until we believe the share price better reflects the underlying value of the investments and significant sums have been realised from one or more investments.

Kevin Allen

Chairman

29 March 2021

Interim Management Report

The important events that have occurred during the period under review and the key factors influencing the Financial Statements are set out in the Chairman's Report. The Board considers that the principal risks and uncertainties facing the Company remain the same as those disclosed in the Annual Report for the year ended 31 August 2020 on pages 15 and 16 and pages 56 and 57. These risks include, but are not limited to, market risk, discount volatility risk, regulatory risk, financial risk and liquidity risk.

Responsibility Statement

The Directors are responsible for preparing the unaudited Half Yearly Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

The condensed set of Financial Statements for the six months to 28 February 2021, has been prepared in accordance with FRS 104 "Interim Financial Reporting", gives a fair view of the assets, liabilities, financial position and profit of the Company; and

this Half Yearly Report includes a fair review of the information required by;

rule 4.2.7R of the Disclosure and Transparency Rules being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

rule 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

This Half Yearly Report was approved by the Board of Directors on 29 March 2021 and the above Responsibility Statement was signed on its behalf by:

Kevin Allen

Chairman

Portfolio Review

as at 28 February 2021

The Company's portfolio is set out below.

 Portfolio Holdings

 as at 28 February 2021

* Sold during the period

Portfolio breakdown by sector and by index

as at 28 February 2021

Income Statement (unaudited)

for the six months to 28 February 2021

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). The supplementary revenue return and capital return columns are prepared in accordance with the Statement of Recommended Practice issued in October 2019 by the Association of Investment Companies ("AIC SORP").

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

The revenue column of the Income Statement includes all income and expenses. The capital column includes the realised and unrealised profit or loss on investments and 75% of the management fee and finance costs charged to capital.

* With effect from 1 November 2019, the Investment Management fee was reduced from 1.0% per annum of gross assets to 0.5% per annum of gross assets. With effect from 1 September 2020, the Investment Manager agreed to waive the entitlement to a fee for a period of six months through to 28 February 2021.

** The return per Ordinary share is based on 5,460,301 (31 August 2020: 5,460,301; 29 February 2020: 5,460,301) shares, being the weighted average number of shares in issue during the period.

Statement of Changes in Equity (unaudited) 

for the six months to 28 February 2021

Statement of Financial Position (unaudited)

as at 28 February 2021

Statement of Cash Flows (unaudited)

for the six months to 28 February 2021

1 Accounting Policies

a) Statement of compliance

The Company's Financial Statements for the period ended 28 February 2021 have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2019 ('the SORP') by the Association of Investment Companies.

The Financial Statements have been prepared in accordance with the accounting policies set out in the statutory accounts for the year ended 31 August 2020.

b) Financial information

The financial information contained in this report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information for the period ended 28 February 2021 and 29 February 2020 have not been audited or reviewed by the Company's Auditor pursuant to the Auditing Practices Board guidance on such reviews. The information for the year to 31 August 2020 has been extracted from the latest published Annual Report and Financial Statements, which have been lodged with the Registrar of Companies, contained an unqualified auditors' report and did not contain a statement required under Section 498 (2) or (3) of the Companies Act 2006.

c) Going concern

The Company's assets consist mainly of equity shares in companies which, in most circumstances are realisable within a short timescale. The Directors believe 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. In assessing the Company's ability to continue as a going concern, the Board has fully considered the impact of the current Covid-19 pandemic.

2 Income

3 Taxation

The tax charge for the six months to 28 February 2021 is nil (year to 31 August 2020: nil; six months to 29 February 2020: nil).

The Company has an effective tax rate of 0% for the year ending 31 August 2021. The estimated effective tax rate is 0% as investment gains are exempt from tax owing to the Company's status as an Investment Trust and there is expected to be an excess of management expenses over taxable income.

4 Investments

Fair value hierarchy

In accordance with FRS 102 and FRS 104 the Company must disclose the fair value hierarchy of financial instruments.

The fair value hierarchy consists of the following three classifications:

Level 1 - Valued using quoted prices in active markets for identical assets or liabilities. This is usually the bid price.

Level 2 - Valued by reference to valuation techniques using observable inputs other than quoted prices which are included within Level 1.

Level 3 - Valued by reference to valuation techniques using inputs that are not based on observable market data.

Details of the Company's financial instruments are shown in the Portfolio Review including financial instruments which fall into Level 3 shown under the section heading "Unquoted". A summary reconciliation of the fair value movements of Level 3 investments is shown in the table above.

Financial assets at fair value through profit or loss;

5 Short term loans

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% above the Bank of England base rate.

On 11 May 2020, following the disposal of MTI Wireless Edge, the Company repaid £280,000 of its £600,000 loan from Jarvis Securities plc leaving a balance of £320,000 outstanding at the period end. As disclosed in note 8 a further £220,000 was repaid on 2 March 2021.

6 Net asset value

The basic net asset value per Ordinary share is based on net assets of £2,708,000 (31 August 2020: £2,218,000; 29 February 2020: £2,535,000) and on 5,460,301 Ordinary shares (31 August 2020: 5,460,301; 29 February 2020: 5,460,301) being the number of Ordinary shares in issue at the period end. No shares are held in Treasury.

7 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. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited and chairman of CEPS in which the Company holds an investment as set out above. Mr Martin is the chairman of Touchstar in which the Company holds an investment as set out above.

At 28 February 2021, there was £nil (31 August 2020: £2,200; 29 February 2020: £1,300) payable to the Investment Manager.

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 26 February 2021. The Directors' holdings are detailed below.

 8 Post balance sheet events

On 2 March 2021, following the disposal of its holding in Chelverton Asset Management Holdings, the Company repaid £220,000 of its loan from Jarvis Securities plc leaving a balance of £100,000 outstanding.

Information about the Company can be obtained at the Investment Manager's website at www.chelvertonam.com. Neither the contents of the manager's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website incorporated into, or forms part of this announcement.

An investment company as defined under Section 833 of the Companies Act 2006.

REGISTERED IN ENGLAND No 02989519