Final Results

RNS Number : 6811D

Chelverton Growth Trust PLC

29 October 2020

 

CHELVERTON GROWTH TRUST PLC

LEI: 213800I86P8BAE6UVI83

FINAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2020

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

Benchmark	MSCI Small Cap UK Index
Investment Manager	Chelverton Asset Management Limited
Total net assets	£2,218,000 as at 31 August 2020
Market capitalisation	£1,638,000 as at 31 August 2020
Capital structure	5,460,301 Ordinary 1p shares carrying one vote each

Performance statistics

	Year ended	Year ended
	31 August 2020	31 August 2019	% Change
Net assets	£2,218,000	£2,446,000	(9.33)
Net asset value per share (NAV)	40.61p	44.79p	(9.33)
MSCI Small Cap UK Index	365.47	400.00	(8.63)
Share price	30.00p	40.50p	(25.93)
Discount to net asset value	(26.13)%	(9.58)%
Revenue loss after taxation	£(93,000)	£(125,000)
Revenue loss per share	(1.70)p	(2.29)p
Capital loss per share	(2.47)p	(13.41)p

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

I have to report that much of what I wrote in last year's statement remains apposite for today. Last year I highlighted that a resolution of the Brexit deal could lead to a re-rating in UK Equities, and in particular our smaller UK centric companies. No sooner had the first phase of the Brexit issue been resolved, namely leaving the EU, than the outbreak of Covid-19 caused the World Economy to effectively enter its own "furlough".

The asset value of our investments unsurprising fell reflecting the uncertainty and disruption that the pandemic brings to the world, both socially and economically. The past year has seen a decline in the Company's net asset value per share from 44.79p to 40.61p - a decrease of 9.33%.  In the same period, the Company's benchmark index, the MSCI Small Cap UK Index fell by 8.63%.

As a nation we are living through a very difficult and uncertain time.  Obviously, we all hope that in the next period (I hold back from defining the length of this period), we will be able to control Covid-19 or at least find a better balance between protecting lives while enabling the economy and business to prosper.

If the uncertainty of a global pandemic was not enough; over the coming months we have to navigate the final stages of leaving the European Union, and hopefully come to an agreement with our European friends as to how our trading relationship will work going forward.

The election process in the United States, while seemingly remote, will also further exacerbate world uncertainty for the next few weeks and possibly months. 

The Manager's Report sets out in more detail the developments in the portfolio over the past twelve months.  I am pleased to say that there have been some positive developments and I wish to recognise the considerable efforts by everyone working in our investee companies to achieve the best they can, given the exceptionally challenging conditions. 

During this difficult period, the Board has made every attempt to minimise expenses. Significant savings have been made as follows:

· The Directors made the decision to waive a substantial part of their remuneration at the time of the initial lockdown.

· We are very grateful to the Trust administrator, ISCA Administration Services who volunteered a significant reduction in their fees from 1 May 2020 through to 31 January 2021.

· Our Investment Manager, Chelverton Asset Management also reduced its fees from 1% to 0.5% of gross assets from 1 November 2019 to 31 August 2020 and has agreed to waive its fees for the period from 1 September 2020 to 28 February 2021 when the position will be reviewed.

The combination of these actions have saved the Company £21,350 in the financial year and serves to make the expense ratio more appropriate to the level of investments held.

Tender Offer

The eighth, and last tender offer, took place in September 2017.  Since then the Board has taken the view that it was not appropriate, with the depressed net asset value per share, to repeat the process. 

It is worth reminding Shareholders that the effect of the multiple tender offers and the occasional buy-back of shares has reduced the share capital from some 18.9 million shares to the current 5.5 million, a reduction of 71%. 

Whilst the Board remains committed to the tender process as a means of offering Shareholders the ability to realise some of their shareholding at a modest discount to the net asset value, it is not prepared to sanction a tender offer at the current net asset value per share, feeling that this valuation does not represent anything like the real underlying value of the assets.

The Future

As reported last year, the Board has looked at the strategic options available to the Company; the objective of this exercise is to maximise returns and provide an effective exit to all Shareholders. We have identified a number of promising avenues but unfortunately, the impact of Covid-19 on the economy and markets has caused us to put on hold, for the time being, the process of formally implementing our strategy for maximising the value for Shareholders from the remaining assets within the portfolio.  We believe that it would be value destructive to try and realise assets at this time and will therefore defer doing so until the market recovers and prices more accurately reflect underlying value.

Under the Articles, Chelverton Growth Trust is required to put a resolution to Shareholders for a continuation vote at the forthcoming Annual General Meeting ("AGM"). The last such resolution was approved in 2015 and a similar resolution for a further five years will be proposed. The Board, however, very much hope to be in a position to put to Shareholders a viable realisation plan well within this period. 

The Outlook

Over the course of the next twelve months it is hoped that much of the current uncertainty will be resolved or, at the very least, a clear path forward will emerge which provides the environment for investment levels to return and economic growth to begin.

It is being consistently reported and routinely discussed in the media that UK equities are cheaper than they have been for some 40 years. Improved certainty and clarity should therefore encourage investors back to UK companies.  In time, the Board believe this should lead to a significant increase in the Company's net asset value per share.

Most of the companies in the portfolio have shown great resilience over the past 12 months and it will be this strength that should enable them to survive and prosper, taking advantage of the opportunities created where some of their less well managed competitors fail to last the course.

Such an improved environment will allow us to move forward with our plans to realise value for Shareholders.

Unfortunately, due to the current Covid-19 restrictions, it is envisaged that the Shareholders will not be able to attend the Annual General Meeting on 10 December 2020. Full details are given on page 30 of the Annual Report.

Kevin Allen

Chairman

29 October 2020

Investment Manager's Overview

In the past year we have experienced several different investing environments.  In the first quarter of the Company's financial year, there was considerable optimism following the re-election of the Conservative Party on a manifesto of "Get Brexit Done" and a commitment to "levelling-up" the UK economy. It was anticipated that investors would be able to move on from the whole exhausting "Brexit" process which had dominated all areas of the UK's economic, political and social landscape. 

However, from early March, we were faced with the Covid-19 pandemic.  Initially there was investor panic and the stock market collapsed such that its decline in a two-week period was equivalent to the two-year bear market of the "Financial Crisis" in 2007 - 2009.  This period I have now called "The Great Panic".  The UK was faced with a nationwide lockdown, something we have never experienced before as a nation.  Companies immediately went into survival mode which meant taking advantage of all the Government schemes possible, furloughing as many employees as was considered sensible, cutting all discretionary expenditure and deferring all capital expenditure. 

However, after a little while, businesses began to work out new ways of operating and showed high degrees of innovation in what they did and how they did it.  Whilst some of our investee companies are dependent on people interacting and coming together, others have definitely benefited from the restrictions of the lockdown.

Across the companies within all Chelverton Asset Management's funds it is fair to say that universally, businesses reported that they were in a better position after four to six months of lockdown than they had anticipated at the outset in March.  Clearly of late, businesses involved in the hospitality industry have, through the recent tightening of regulations, unfortunately gone backwards. 

Another feature that has become evident over the past six months is that this period has been used by our investee companies to adopt new business practices and to drive through efficiency improvements that will make a difference now and particularly in the future as demand picks up.  The Furlough Scheme, and its subsequent gradual unwinding, has highlighted the productivity, or indeed lack of productivity of the marginal employee.  It might well be that the spike in unemployment that we expect to see in the next few months will result from a reduction in demand and from improved efficiency. 

Hopefully, if we finally see a Trade Agreement with Europe in the next few weeks or months, the Country and the companies we are invested in, can finally get on with managing within an environment of "known-knowns".  The energy, time and resources spent on the Brexit process should then be able to be applied much more productively.  There is a feeling that once a Trade Agreement is in place there will be a release of pent-up demand that has been held up waiting for the future trading environment to be resolved. 

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. 

It is a well-documented fact that UK and Overseas investors remain very "underweight" in UK equities, as it has been all too easy to sit on the side lines waiting for a resolution of the Brexit Debate and then the Trade Agreement impasse.  The trend we highlighted last year of the large differential in the relative ratings between "Growth" companies and "Value" companies has continued to widen in the year.  An example of this is the extraordinary rise in the value of Apple in the past year. The American technology company on its own is now worth more than the aggregate value of the components of FTSE 100.  Those of us who have been working in, and observing, markets for some time know that these extremes of valuation do not last forever. 

Review of Individual Holdings

CEPS plc (AIM - 46.5% of portfolio)

CEPS is the largest holding and represents 46.5% in value of the portfolio. The Company's performance is therefore very dependent upon it. Significant work has been undertaken to restructure both the operation and capital structure of CEPS. This over time should allow for the underlying value of CEPS to be better reflected and appreciated by the stock market. The arrival of Covid-19 and the subsequent lockdown, means that this expectation has now been put on hold until 2021.

However, in the past year and even in the lockdown period, the subsidiary companies within CEPS have developed and innovated to be more efficient and better businesses.  Friedmans, a producer of unique designs printed on lycra, acquired Milano International a producer of gymnastic clothing in a negotiation that effectively lasted for five years.  The loss making and cash absorbing CEM Press/Sampling International was removed.  Hickton Consultants, the supplier of clerk of works nearly doubled in size by acquiring Cooke Brown a supplier of building regulations services.  The ownership and management of Aford Awards was changed as a new team was brought in to replace the existing management with a clear brief to drive a consolidation exercise which should be helped by the severe impact of the lockdown on this sector. 

Finally, the team at Davies Odell has reduced the workforce significantly and has scaled back to make a demonstrably profitable business.  It appears that the difficulties faced have caused even greater problems amongst competitors, some of whom will go out of business. 

Touchstar plc (AIM - 19.2% of portfolio)

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.  In common with the companies above, it is to be hoped that 2021 will be a much better year and that 2022 will further show the strength and quality of the revitalised business. 

Chelverton Asset Management (Unquoted - 10.2 % of portfolio)

The holding in Chelverton Asset Management Holdings (CAM), the holding company of the Investment Manager of this fund, was again revalued upwards reflecting the continued success of its funds and a further growth in funds under management.  If, as we expect, the CAM Employee Share Option Trust makes an offer for shares in CAM via a tender, and at a value that we believe to be fair, it is probable we will reduce the Company's holding in this company. CAM has been a very successful investment for the Company over the years producing both a steady dividend flow and significant capital appreciation. 

Pedalling Forth (Unquoted - 10.0% of portfolio)

Pedalling Forth (trading as Velovixen) is proof of the old saying "it is an ill wind that blows nobody good". Positioned as an internet retailer of ladies cycling clothes it has experienced a significant and sustained increase in sales as the interest in cycling has developed. The company sold out of its own branded product on two occasions and it is to be hoped that the current level of sales can be sustained and built on going forward. 

Petards Group (AIM - 6.3% of portfolio)

Petards has spent the past year scaling its operation to the new market expectations.  Given that a large part of its business operates in the railway supply side, this year has been very difficult.  The business has changed in nature and should be more profitable and produce a better quality of earnings going forward.

La Salle Education (Unquoted - 5.4% of portfolio)

La Salle Education has continued to show excellent progress and is developing its business model on several fronts.  The Covid-19 pandemic is accelerating 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 now mandatory requirement for schools to make permanent provision for online learning.

Other Investments (less than 2.5% of portfolio)

The remaining 4 holdings in the portfolio represent less than 2.5% of the Company's portfolio. Universe, an AIM listed company, produced robust results and we anticipate that as we return to more normal operating conditions, we will see significant progress in the business and the share price. The remaining investments, Redecol, Zenith Energy and Touchpoint are held at negligible value.

The investment in Main Dental was sold during the previous period for a deferred consideration of £138,000 to SpaDental Limited. This sum is shown in the accounts within debtors and is subject to the legal judgement on a claim by James Main. A judgement in favour of Main would result in a potential deduction from any settlement payable by SpaDental Limited. Until settled, interest is receivable at base rate plus 3.5% on the sum due to the Company.

Outlook

In time, the macroeconomic outlook will become more settled and consequently more favourable.  We hope that the coming period will see a clean and simple result in the election of the President of the United States, the implementation of a Trade Agreement with the European Union, and, over time, the control and management of the Covid-19 virus.

The resolution of these three significant and uncertain issues will happen. When it does, we believe that the real value of our investee companies will begin to be evidenced by increases in their share prices thus contributing to a welcome increase in the asset value of the Company. We therefore anticipate being able to report a much better performance in a year's time.

David Horner

Chelverton Asset Management Limited

29 October 2020

Portfolio Review

as at 31 August 2020

Investment	Sector			Valuation £'000				% of  total portfolio
AIM Traded
CEPS	Support Services			1,113				46.5
Trading holding company for a number of companies supplying services and products
Petards Group	Support Services			150				6.3
Development, provision and maintenance of advanced security systems and related services
Touchstar	Technology Hardware and Equipment			459				19.2
Software systems for warehousing and distribution
Universe Group	Support Services			34				1.4
Provision of credit fraud prevention, loyalty and retail systems
Fully Listed
Zenith Energy	Oil & Gas Producers			12				0.5
International energy production and exploration company
Nasdaq Traded
Touchpoint Group Holdings	Support Services			-				-
Provider of mobile satellite communications equipment and airtime
				1,768				73.9
Chelverton Asset Management Holdings	Support Services			245				10.2
Investment management, including providing services to Chelverton Growth Trust Plc
La Salle Education	Support Services			130				5.4
A UK based company dedicated to providing on-line mathematics education
Pedalling Forth	General Retailers			240				10.0
Internet retailer of cycling clothing for women
Redecol*	Healthcare, Equipment & Services			12				0.5
A medical device company focussed on the development of asthma monitoring
Portfolio Valuation				2,395				100.0

* Shares received from the purchase of Anaxsys Technology by Redecol Limited.

Portfolio Holdings

as at 31 August 2020

	31 August 2020		31 August 2019
	Valuation	% of total	Valuation	% of total
Investment	£'000	portfolio	£'000	portfolio
CEPS	1,113	46.5	1,214	43.3
Touchstar	459	19.2	298	10.6
Chelverton Asset Management Holdings	245	10.2	220	7.9
Pedalling Forth	240	10.0	200	7.1
Petards Group	150	6.3	380	13.5
La Salle Education	130	5.4	130	4.6
Universe Group	34	1.4	34	1.2
Zenith Energy	12	0.5	63	2.2
Redecol*	12	0.5	-	-
Touchpoint Group Holdings	-	-	-	-
MTI Wireless Edge**	-	-	176	6.3
Plutus Powergen**	-	-	93	3.3
Total	2,395	100.0	2,808	100.0

* Shares received from the purchase of Anaxsys Technology by Redecol Limited.

** Sold during the year.

Portfolio breakdown by sector and by index

Percentage of portfolio by sector

Support Services	69.8%
Technology Hardware & Equipment	19.2%
General Retailers	10.0%
Healthcare, Equipment & Services	0.5%
Oil & Gas Producers	0.5%

Percentage of portfolio by index

AIM	73.4%
Unquoted	26.1%
Fully Listed	0.5%

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

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

Investment Strategy

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

The Company's Investment Manager is Chelverton Asset Management Limited ("CAM"), an independent 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 2020 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 2020 was 40.61p (2019: 44.79p), a decrease of 9.33%. By comparison the benchmark fell by 8.63%.

The Company's share price at the year-end was 30.00p (2019: 40.50p).

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

29 October 2020

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 2020 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 0.5% of gross assets, payable monthly in arrears. Prior to 1 November 2019, the annual fee 1.0% per annum of gross assets. With effect from 1 September 2020, the Investment Manager has agreed to waive its rights to receive an investment management fee until 28 February 2021 when the position will be reviewed.

The amount payable to CAM for the year ending 31 August 2020 was £18,000 (2019: £35,000).  At the year-end £2,200 (2019: £2,600) 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 has 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 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 impact of Covid-19 and it is currently the intention of the Company to hold the Annual General Meeting as planned on 10 December 2020. However, in light of the guidance issued by the UK government and the everchanging restrictions on travel and public gatherings, Shareholders will be prohibited from attending the Annual General Meeting in person. Instead, Shareholders are requested to return a proxy vote per the form of proxy on page 65 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: [e-mail]. In light of the potential for the Covid-19 situation in the United Kingdom to change rapidly, 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-trustplc/shareholder-information and where appropriate by RNS announcement.

On behalf of the Board

Kevin Allen

Chairman

29 October 2020

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 loss 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 ww w .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

29 October 2020

NON- STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 August 2020 and 2019 but is derived from those accounts. Statutory accounts for 2019 have been delivered to the Registrar of Companies, and those for 2020 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 2020

			2020			2019
	Note	Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Losses on investments at fair value	7	-	(102)	(102)	-	(682)	(682)
Income	2	39	-	39	22	-	22
Investment management fee	3	(4)	(14)	(18)	(9)	(26)	(35)
Other expenses	4	(128)	(19)	(147)	(138)	(24)	(162)
Net loss on ordinary activities before taxation		(93)	(135)	(228)	(125)	(732)	(857)
Taxation on ordinary activities	5	-	-	-	-	-	-
Net loss on ordinary activities after taxation		(93)	(135)	(228)	(125)	(732)	(857)
		Revenue	Capital	Total	Revenue	Capital	Total
Loss per Ordinary share	6	(1.70)p	(2.47)p	(4.17)p	(2.29)p	(13.41)p	(15.70)p

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 2020

	Called up Share  Capital	Special Reserve*	Capital Reserve**	Capital Redemption Reserve	Revenue Reserve*	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Year ended 31 August 2020
1 September 2019	55	787	1,111	134	359	2,446
Net loss after taxation for the year	-	-	(135)	-	(93)	(228)
31 August 2020	55	787	976	134	266	2,218
Year ended 31 August 2019
1 September 2018	55	787	1,843	134	484	3,303
Net loss after taxation for the year	-	-	(732)	-	(125)	(857)
31 August 2019	55	787	1,111	134	359	2,446

* 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 2020

			2020		2019
	Notes		£'000		£'000
Fixed assets
Investments at fair value	7		2,395		2,808
Current assets
Debtors	9		150		145
Cash and cash equivalents			39		125
			189		270
Creditors - amounts falling due within one year	10		(366)		(632)
Net current liabilities			(177)		(362)
Net assets			2,218		2,446
Share capital and reserves
Called up share capital	12		55		55
Special reserve			787		787
Capital reserve			976		1,111
Capital redemption reserve			134		134
Revenue reserve			266		359
Equity Shareholders' funds			2,218		2,446
Net asset value per Ordinary share	13		40.61p		44.79p

These financial statements were approved and authorised for issue by the Board of Directors on 29 October 2020 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 2020

		2020		2019
	Note	£'000		£'000
Cash flows used in operating activities
Net loss on ordinary activities		(228)		(857)
Adjustment for:
Net capital loss		135		732
Expenses charged to capital		(33)		(50)
Interest paid		26		32
Increase in creditors		14		2
Increase in debtors		(5)		(136)
Cash used in operations		(91)		(277)
Cash flows from/(used in) investing activities
Purchase of investments		-		(146)
Proceeds from sales of investments		311		141
Net cash from/(used in) investing activities		311		(5)
Cash flows used in financing activities
Capital repayment of loan		(280)		-
Interest paid		(26)		(32)
Net cash used in financing activities		(306)		(32)
Net decrease in cash		(86)		(314)
Cash at the beginning of the year		125		439
Cash at the end of the year	11	39		125

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):

- 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 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.

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.

2	INCOME
			2020					2019
			Revenue		Capital		Total	Revenue	Capital	Total
			£'000		£'000		£'000	£'000	£'000	£'000
	Income from investments
	UK net dividend income		26		-		26	17	-	17
	Loan stock interest		13		-		13	5	-	5
	Total income		39		-		39	22	-	22
3		INVESTMENT MANAGEMENT FEE
				2020				2019
				Revenue		Capital	Total	Revenue	Capital	Total
				£'000		£'000	£'000	£'000	£'000	£'000
		Investment management fee		4		14	18	9	26	35

With effect from 1 November 2019, the investment management fee is calculated at the rate of 0.04167% per month, equating to 0.5% per annum, of the gross value of funds under management and is payable monthly in arrears. At 31 August 2020 there was £2,200 outstanding (2019: £2,600). 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 for a period of six months through to 28 February 2021 when the position will be reviewed.

4	OTHER EXPENSES	2020		2019
		£'000		£'000
	Administrative and secretarial services	37		40
	Directors' remuneration	28		34
	Auditors' remuneration
	-  audit services	18		17
	-  non-audit services; tax compliance	2		2
	Finance costs	26		32
	Other expenses	36		37
		147		162

5	TAXATION	2020			2019
		Revenue	Capital	Total	Revenue	Capital	Total
	Analysis of charge in year	£'000	£'000	'000	'000	£'000	'000
	Current tax	-	-	-	-	-	-

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:

	2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Theoretical tax at UK corporation tax rate of 19% (2019: 19%)
Corporation tax	(18)	(25)	(43)	(24)	(139)	(163)
Investment income not taxable	(5)	-	(5)	(3)	-	(3)
Non-taxable investment losses	-	19	19	-	130	130
Excess expenses for the year	23	6	29	27	9	36
Current tax charge for the year	-	-	-	-	-	-

At 31 August 2020 the Company had surplus management expenses of £4,682,000 (2019: £4,530,000) 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.

6	RETURN PER ORDINARY SHARE
		2020			2019
		Revenue	Capital	Total	Revenue	Capital	Total
		pence	pence	pence	pence	pence	pence
	Basic	(1.70)	(2.47)	(4.17)	(2.29)	(13.41)	(15.70)

Revenue return per Ordinary share is based on the net revenue loss on ordinary activities after taxation attributable of £93,000 (2019: £125,000) and on 5,460,301 (2019: 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 loss of £135,000 (2019: £732,000) and on 5,460,301 (2019: 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 loss of £228,000 (2019: £857,000) and on 5,460,301 (2019: 5,460,301) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

7	INVESTMENTS					2020			2019
						£'000			£'000
	Fully Listed					12			63
	Traded on AIM					1,756			2,195
	Unquoted					627			550
	NASDAQ					-			-
						2,395			2,808
			Fully	Traded on
			Listed	AIM	Unquoted*		NASDAQ		Total
			£'000	£'000	£'000		£'000		£'000
	Opening book cost		118	4,236	773		166		5,293
	Opening investment holding losses		(55)	(2,041)	(223)		(166)		(2,485)
			63	2,195	550		-		2,808
	Movements in the year:
	Sales - proceeds		-	(311)	-		-		(311)
	- losses on sales		-	(229)	-		-		(229)
	Movement in investment holding losses		(51)	101	77		-		127
	Closing valuation		12	1,756	627		-		2,395
	Closing book cost		118	3,696	773		166		4,753
	Closing investment holding losses		(106)	(1,940)	(146)		(166)		(2,358)
	Closing valuation		12	1,756	627		-		2,395

		2020	2019
		£'000	£'000
	Realised losses on sales	(229)	(184)
	Movement in fair value of investments	127	(498)
	Net losses on investments	(102)	(682)
	All quoted investments are made up of equity shares.

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

Transaction costs

During the year, the Company incurred transaction costs of £nil (2019: £nil) and £163 (2019: £nil) 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

	Cost at 31 August 2019	Additions	Disposals	Cost at 31 August 2020	Realised (loss)/gain	Movement in unrealised gain/(loss)	Valuation at 31 August 2019	Valuation at 31 August 2018
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Investment
Chelverton Asset Management Holdings	1	-	-	1	-	25	245	220
La Salle Education	180	-	-	180	-	-	130	130
Pedalling Forth	300	-	-	300	-	40	240	200
Redecol*	292	-	-	292	-	12	12	-
	773	-	-	773	-	77	627	550

* Shares received from the purchase of Anaxsys Technology by Redecol Limited.

Details of material holdings in unquoted investments

	Cost at 31 August 2020	Valuation at 31 August  2020	Cost at 31 August 2019	Valuation at 31 August  2019	Equity Held %	Last accounts period end	Net  assets	Turnover ***	Pre-tax  profit ***
Investment	£'000	£'000	£'000	£'000		£'000	£'000	£'000	£'000
Chelverton Asset Management Holdings *	1	245	1	220	1.0	31/03/20	5,710	8,782	3,482
La Salle Education	180	130	180	130	7.0	31/12/18	414	-	-
Pedalling Forth	300	240	300	200	19.9	31/12/19	91	-	-
Redecol**	292	12	292	-	1.0	31/01/20	343	-	-

* Consolidated figures

** Shares received from the purchase of Anaxsys Technology by Redecol Limited.

*** 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 2020, 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:

Security	Number of shares	Percentage of issued share capital	Issued share capital
CEPS	5,060,000	29.76	17,000,000
Pedalling Forth	40,000	19.94	200,560
Touchstar	850,000	10.03	8,475,077
La Salle Education	260,000	7.02	3,705,186
Petards	2,000,000	3.48	57,528,229

9	DEBTORS	2020	2019
		£'000	£'000
	Amounts falling due within one year
	Prepayments and other debtors	12	7
	Amounts due from investment proceeds *	138	138
		150	145
	* Represents the amount due from SpaDental Limited in the form of deferred consideration from a Share Purchase Agreement and an Assignment of Loan. From the date of completion, interest accrues on the balance outstanding of the purchase price at the rate of 3.5% above the base rate of Lloyds Bank, payable six monthly in arrears.
10	CREDITORS - amounts falling due within one year
		2020	2019
		£'000	£'000
	Accruals and other creditors	46	32
	Short term loan	320	600
		366	632

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 on 11 May 2020 £280,000 was repaid. At the year end £320,000 was outstanding. The loan is secured on the assets of the Company and is repayable on demand.

11 ANALYSIS OF CHANGES IN NET DEBT
	At  1 September 2019	Cash  flows	Non-cash change	At 31 August 2020
	£'000	£'000	£'000	£'000
Cash and cash equivalents
Cash	125	(86)	-	39
	125	(86)	-	39
Borrowings
Debt due within one year	(600)	280	-	(320)
	(600)	280	-	(320)
Total	(475)	194	-	(281)

12 CALLED UP SHARE CAPITAL	2020	2019
	£'000	£'000
Allotted, called up and fully paid:
5,460,301 (2019: 5,460,301) Ordinary shares of 1p each	55	55

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 40.61p (2019:44.79p) is based on net assets of £2,218,000 (2019: £2,446,000) and on 5,460,301 (2019: 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 2020, there were no capital commitments or contingent liabilities (2019: £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 2020 on its investments is as follows:

		2020	2019
		£'000	£'000
Fair value through profit or loss investments		2,395	2,808

A 20% decrease in the market value of investments at 31 August 2020 would have decreased net assets attributable to Shareholders by 9 pence per share (2019: 10 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:

	2020	2019
	£'000	£'000
Cash at bank and cash equivalents	39	125
Amounts due from investment proceeds	138	138
Short term loan	(320)	(600)

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 £933 (2019: £3,733). If there was a decrease in interest rates of 0.1% (2019: 0.5%) net revenue before taxation would increase by £93 (2019: £1,866). These calculations are based on balances as at 31 August 2020 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

Seventy-four 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-six 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 £320,000 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 amortised cost other than the loan from Jarvis and the SpaDental Purchase Agreement which are held at fair value.

(ix) Financial instruments by category

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

	At amortised	Loans and	Assets at fair value through
	cost	receivables	profit or loss	Total
31 August 2020	£'000	£'000	£'000	£'000
Assets as per the Statement of Financial Position
Investments	-	-	2,395	2,395
Debtors	-	150	-	150
Cash at bank and cash equivalents	39	-	-	39
Total	39	150	2,395	2,584

Liabilities as per the Statement of Financial Position
Creditors	46		320		-	366
Total	46		320		-	366
	At amortised			Loans and	Assets at fair value through
	cost			receivables	profit or loss		Total
31 August 2019		£'000	£'000		£'000	£'000
Assets as per the Statement of Financial Position
Investments		-	-		2,808	2,808
Debtors		-	145		-	145
Cash at bank and cash equivalents		125	-		-	125
Total		125	145		2,808	3,078

Liabilities as per the Statement of Financial Position
Creditors	32	600	-	632
Total	32	600	-	632

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.

Financial assets at fair value through profit or loss
	Level 1	Level 2	Level 3			Total
At 31 August 2020	£'000	£'000	£'000			£'000
Equity investments	1,768	-	627			2,395
Total	1,768	-	627			2,395

	Level 1	Level 2	Level 3	Total
At 31 August 2019	£'000	£'000	£'000	£'000
Equity investments	2,258	-	550	2,808
Total	2,258	-	550	2,808

The following table presents the movement in the Level 3 investments for the period ended 31 August 2020:

	Investments
	£'000
Opening balance	550
Purchases	-
Sales at cost	-
Total gains on investments in the Income Statement	77
Closing balance	627

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, 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:

	Percentage of holding in shares	Ordinary shares held
	%	£'000
K J Allen	1	1
D A Horner*	56	56
I P Martin	2	2
* Directors and connected persons total holdings

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 2020. 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 10 December 2020. Shareholders should refer to page 30 of the Annual Report regarding the arrangements for the Meeting.

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.hemscott.com/nsm.do.

 

END

 

 

FR FELFWUESSEES