Half-yearly Report

CHELVERTON GROWTH TRUST PLC Half Yearly Report for the six months ended 28 February 2010 Investment objective The Company's objective is to provide capital growth through investment in companies 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 FTSE All-Share Index. Investment policy The Company invests principally in securities of publicly quoted UK companies, though it may invest in unquoted securities. The concentrated UK portfolio comprises between 20 to 35 securities. The performance of the Company's investments is compared to the FTSE All-Share Index. 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. It is the Company's policy not to invest in any listed investment companies or listed investment trusts. 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 Company's Investment Manager believes the key to successful stock selection is to identify the long term value of a company's shares and to have the patience to hold the shares until that value is appreciated by other investors. Identifying long term value involves detailed analysis of a company's earning prospects over a five year time horizon. The Company's Investment Manager is Chelverton Asset Management Limited, an independent investment manager focusing exclusively on achieving returns for investors based on UK investment analysis of the highest quality. The founders and employee owners of Chelverton 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. Interim management report The Company's net asset value per share has increased in the last six months from 19.47p to 22.70p, an increase of 16.6%. In the same period the Company's benchmark index, the FTSE All-Share, increased by 8.6%. The positive return in the past six months is a reflection of increasing investor confidence being driven by a combination of the effects of quantitative easing and improving corporate cash flows. In the UK market overseas earners have been in demand as our domestic economy has become the poor relation compared to most other major economies and Sterling has continued to be relatively weak. With our concentration on smallcaps we will remain more geared to the UK economy than the market as a whole, but we feel that the premium attributable to overseas earnings at this point in the cycle is now more than fully incorporated into relative valuations. Despite the worsening outlook for the UK economy, there now appears to be the first signs of a tangible divergence between the short term macro outlook and 'bottom up' anecdotal evidence from investee Companies. Throughout the last period, UK plc has continued to generate cash at rates in excess of forecasts and trading has held up relatively well across a broad range of sectors. There are obviously areas of the economy that will decline in 2010, and if we take construction and contracting as an example, market expectations and valuations arguably already reflect this. We are cautious with respect to consumer spending as the real affects of recent tax rises are yet to be felt. In the last period the fund has benefitted from a significant uplift in the valuation of a number of our holdings. Alliance Pharma performed particularly well after a series of strong trading statements and the acquisition of Cambridge Laboratories which was partially funded by a placing of new stock. Hartest was the subject of a potential offer at 69p per share, which whilst it did not complete did serve to highlight the investment attractions of the stock. AI Claims traded well as new clients were integrated and Sanderson shares were strong as the chairman made a substantial purchase of shares taking his holding to 29.9% of the company. We increased the valuation of one of our unquoted holdings, Parmenion Capital Partners LLP, as a result of a third party investment into the company. We have highlighted the issue of companies de-listing from AIM before, and Satcom announced that they received approval to de-list from the beginning of April. In this instance we will retain our holding as an unlisted investment. As we move into our second half the general election is imminent. The extent of cutbacks in public sector spending will only become clear towards the end of our financial year, whichever party is returned to power. This creates an uncertainty which, coupled with the prospect of a hung parliament will probably restrain progress in the domestic stockmarket. Whilst we believe that the valuations of our Companies are currently attractive on a medium term view, they remain vulnerable in the short term to any adverse shift in risk and sentiment associated with the election. Chelverton Asset Management Limited 20 April 2010 Responsibility statement The Directors confirm that to the best of their knowledge: ● the condensed set of financial statements for the six months to 28 February 2010 has been prepared in accordance with the Statement on Half Yearly Financial Reports issued by the UK Accounting Standards Board, give a true and fair view of the assets, liabilities, financial position and net return of the Company; and ● the interim management report together with the notes to the half yearly report includes a fair review of the information required by; a) DTR 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 b) DTR 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 20 April 2010 and the above responsibility statement was signed on its behalf by George Stevens, Chairman. Portfolio review as at 28 February 2010 The Company's portfolio as at 28 February 2010 is set out below. Investment Sector Valuation £'000 % of total AIM traded AI Claims Solutions Travel & Leisure 413 12.2 The provision of non-fault accident management services Alliance Pharma Pharmaceuticals & Biotechnology 273 8.1 Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products Belgravium Technologies Technology Hardware & Equipment 137 4.1 Software systems for warehousing and distribution CEPS Support Services Ordinary shares 138 4.1 Warrants 0 0.0 Production and supply of components for the footwear industry; personal protection equipment; production of printed lycra fabric; and services to the direct mail industry Datong Electronics Electronic & Electrical Equipment 98 2.9 Develops, manages and supplies covert tracking and surveillance systems Forest Support Services Industrial Transportation 139 4.1 Supply of traffic management services Hartest Holdings Industrial Engineering 160 4.7 Manufacture and sale of specialist healthcare equipment and supplies to users of electron microscopes IDOX Software & Computer Services 530 15.7 Software company specialising in the development of products for document and information management LPA Group Electronic & Electrical Equipment 68 2.0 Design, manufacture and marketing of industrial electrical accessories Minorplanet Systems Electronic & Electrical Equipment 7 0.2 Vehicle informations system MTI Wireless Edge Technology Hardware & Equipment 77 2.3 Developer and manufacturer of sophisticated antennas and antenna systems Northbridge Industrial Services Industrial Engineering 69 2.0 Consolidation vehicle for specialist industrial services in the UK Pennant International Group Software & Computer Services 65 1.9 Supplier of technology solutions to the defence and industrial sectors Petards Group Support Services 130 3.9 Development, provision and maintenance of advanced security systems and related services PSG Solutions Support Services 46 1.4 Leading provider of Local Authority residential property searches; provision of packaging solutions Richoux Group Travel & Leisure 33 1.0 Owner and operator of Richoux Restaurants Sanderson Group Software & Computer Services 60 1.8 Provides software and IT services Satcom Group* Mobile Telecommunications 68 2.0 Provider of mobile satellite communications equipment and airtime Titan Europe Industrial Engineering 22 0.6 Manufacture of big wheels for construction, mining and agricultural vehicles Tristel Health Care Equipment & Services 192 5.7 Healthcare business specialising in infection control in hospitals Universe Group Support Services 22 0.7 Provision of credit card fraud prevention system, loyalty systems and retail systems Delisted from AIM AT Communications Group Software & Computer Services 0 0.0 Business to business systems intergrator Chromogenex Health Care Equipment & Services 0 0.0 Design, manufacture and distribution of aesthetic and therapeutic laser and aesthetic light based technology devices Conder Environmental (in liquidation) Industrial Engineering 0 0.0 Supply of industrial pollution control equipment and provision of glass reinforced plastic oil/ water separators EBTM (in administration) General Retailers 0 0.0 Internet retail of music inspired fashion Food & Drink Group (in administration) Travel & Leisure 0 0.0 Owner and operator of premium bars and restaurants in London General Capital Group General Financial 0 0.0 Provision of finance Smallbone (in administration) Household Goods 0 0.0 The design and manufacture of bespoke kitchens, bathrooms, bathroom furniture and suppliers of high quality flooring Unquoted Closed Loop Recycling Support Services Loanstock 252 7.5 Ordinary B shares 84 2.5 Operation of a plastic recycling plant Locker Group (in liquidation) Industrial Engineering 0 0.0 Cash Shell Parmenion Capital Partners LLP Support Services 291 8.6 Provides fund-based discretionary fund management services to Independent Financial Advisors Portfolio valuation 3,374 100.0 * On 24 March 2010 Satcom Group announced that its ordinary shares would cease to trade on AIM at the close of business on 31 March 2010 and that the company would be delisted with effect from 1 April 2010. Top Twenty Investments 28 February 2010 31 August 2009 Valuation % of Valuation % of Investment £'000 total £'000 total IDOX 530 15.7 530 18.2 AI Claims Solutions 413 12.2 294 10.1 Closed Loop Recycling 336 10.0 357 12.3 ParmenionCapital Partners LLP 291 8.6 115 4.0 AlliancePharma 273 8.1 157 5.4 Tristel 192 5.7 216 7.4 HartestHoldings 160 4.7 71 2.4 ForestSupport Services 139 4.1 139 4.8 CEPS 138 4.1 106 3.6 BelgraviumTechnologies 137 4.1 137 4.7 Petards Group 130 3.9 125 4.3 DatongElectronics 98 2.9 64 2.2 MTI Wireless Edge 77 2.3 115 4.0 Northbridge Industrial Services 69 2.0 61 2.1 LPA Group 68 2.0 83 2.9 SatcomGroup 68 2.0 47 1.6 Pennant International Group 65 1.9 46 1.6 Sanderson Group 60 1.8 45 1.5 PSG Solutions 46 1.4 38 1.3 RichouxGroup 33 1.0 50 1.7 Total 3,323 98.5 2,796 96.1 Portfolio breakdown by Sector and by Index Percentage of Portfolio by Sector Sector Percentage Support Services 28.7 Software & Computer Services 19.4 Travel & Leisure 13.2 Pharmaceuticals & Biotechnology 8.1 Industrial Engineering 7.3 Technology Hardware & Equipment 6.4 Heath Care Equipment & Services 5.7 Electronic & Electrical Equipment 5.1 Industrial Transportation 4.1 Mobile Telecommunications 2.0 Percentage of Portfolio by Index Index Percentage AIM 81.4 Unquoted 18.6 Income statement (unaudited) for the six months to 28 February 2010 Six months to Year to Six months to 28 February 2010 31 August 2009 28 February 2009 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains/(losses) on investments at fair value - 516 516 - (2,043) (2,043) - (2,359) (2,359) Income 54 - 54 65 - 65 37 - 37 Investment management fee* (4) (13) (17) (8) (26) (34) (5) (14) (19) Refund of VAT on investment management fee - - - 33 99 132 - - - Other expenses* (74) - (74) (144) - (144) (74) - (74) Net return on ordinary activities before finance costs and taxation (24) 503 479 (54) (1,970) (2,024) (42) (2,373) (2,415) Interest payable and similar charges* - - - (4) (12) (16) (3) (10) (13) Net return on ordinary activities before taxation (24) 503 479 (58) (1,982) (2,040) (45) (2,383) (2,428) Taxation on ordinary activities - - - (1) - (1) - - - Net return on ordinary activities after taxation (24) 503 479 (59) (1,982) (2,041) (45) (2,383) (2,428) Revenue Capital Total Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence pence pence pence Return per Ordinary share# (0.16) 3.38 3.22 (0.40) (13.33) (13.73) (0.30) (16.03) (16.33) Notes * 75% of the management fee and finance costs have been charged to capital reserve. # The return per Ordinary share is based on 14,864,827 (31 August 2009: 14,864,827, 28 February 2009: 14,864,827) shares, being the weighted average number of shares in issue during the period. The total column of this statement is the profit and loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. A separate statement of total recognised gains and losses has not been prepared as all such gains and losses are included in the income statement. Reconciliation of movements in shareholders' funds (unaudited) for the six months to 28 February 2010 Share Capital Share premium Capital redemption Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Six months to 28 February 2010 1 September 2009 149 2,674 (3,574) 40 3,606 2,895 Net return after taxation for the period - - 503 - (24) 479 28 February 2010 149 2,674 (3,071) 40 3,582 3,374 Year to 31 August 2009 1 September 2008 149 2,674 (1,595) 40 3,665 4,933 Adjustment to provision for tender offer expenses - - 3 - - 3 Net return after taxation for the year - - (1,982) - (59) (2,041) 31 August 2009 149 2,674 (3,574) 40 3,606 2,895 Six months to 28 February 2009 1 September 2008 149 2,674 (1,595) 40 3,665 4,933 Adjustment to provision for tender offer expenses - - 3 - - 3 Net return after taxation for the period - - (2,383) - (45) (2,428) 28 February 2009 149 2,674 (3,975) 40 3,620 2,508 Balance sheet (unaudited) as at 28 February 2010 As at As at As at 28 February 2010 31 August 2009 28 February 2009 £'000 £'000 £'000 Fixed assets Investments at fair value 3,374 2,908 2,931 Current assets Debtors 14 6 79 Cash at bank 21 44 25 35 50 104 Creditors - amounts falling due within one year Bank overdraft - - 481 Creditors 35 63 46 35 63 527 Net current liabilities - (13) (423) Net assets 3,374 2,895 2,508 Share capital and reserves Share capital 149 149 149 Share premium account 2,674 2,674 2,674 Capital reserve (3,071) (3,574) (3,975) Capital redemption reserve 40 40 40 Revenue reserve 3,582 3,606 3,620 Equity shareholders' funds 3,374 2,895 2,508 Net Asset Value per Ordinary share (note 1) 22.70p 19.47p 16.87p Statement of cash flows (unaudited) for the six months to 28 February 2010 Six months to Year to Six months to 28 February 2010 31 August 2009 28 February 2009 £'000 £'000 £'000 Operating activities Investment income received 25 79 52 Interest received on VAT refund 19 - - Investment management fees paid (17) (37) (21) VAT refund on investment management fee - 132 - Secretarial fees paid (26) (39) (18) Other cash payments (74) (83) (61) Net cash (outflow)/inflow from operating activities (note 3) (73) 52 (48) Returns on investment and servicing of finance Interest paid - (28) (20) Investing activities Purchases of investments - (71) - Sales of investments 50 1,028 545 Net cash inflow from investing activities 50 957 545 Financing Cost of Tender Offer - - 4 Net cash inflow from financing - - 4 (Decrease)/increase in cash (23) 981 481 Notes to the half yearly report The unaudited interim financial information does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The statutory accounts for the year to 31 August 2009, which contained an unqualified auditors' report, have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 (2) or (3) of the Companies Act 2006. The financial information for the period ended 28 February 2010 and 28 February 2009 have not been audited or reviewed by the Company's Auditor pursuant to the Auditing Practices Board guidance on such reviews. This information has been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year to 31 August 2009. 1 Net Asset Value The basic net asset value per Ordinary share is based on net assets of £ 3,374,000 (31 August 2009: £2,895,000, 28 February 2009: £2,508,000) and on 14,864,827 Ordinary shares (31 August 2009: 14,864,827, 28 February 2009: 14,864,827) being the number of Ordinary shares in issue at the period end. 2 Taxation The tax charge for the six months to 28 February 2010 is nil (year to 31 August 2009: £1,000, six months to 28 February 2009: nil). The Company has an effective tax rate of 0% for the year ending 31 August 2010. 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. 3 Reconciliation of net return before finance costs and taxation to net cash (outflow)/inflow from operating activities Six months to Year to Six months to 28 February 2010 31 August 2009 28 February 2009 £'000 £'000 £'000 Net return before finance costs and taxation 479 (2,024) (2,415) Net capital return before finance costs (503) 1,970 2,373 Expenses charged to capital (13) (26) (14) VAT refund on investment management fees allocated to capital - 99 - (Decrease)/increase in creditors and accruals (28) 19 (7) (Increase)/decrease in prepayments and accrued income (8) 14 15 Net cash (outflow)/inflow from operating activities (73) 52 (48) 4 Related party transactions Chelverton Asset Management Limited acts as the Investment Manager. Mr Horner, a Director of the Company, is also a director of Chelverton Asset Management Limited. He is also a director of CEPS PLC, in which the Company has an investment. At 28 February 2010 there was £3,000 (31 August 2009: £2,000, 28 February 2009: £3,000) payable to the Investment Manager. Mr Allen, a Director of the Company, is a director and employee of Forest Support Services PLC in which the Company has an investment. 5 Status of Company It is the intention of the Directors to conduct the affairs of the Company so that they satisfy the conditions for approval as an investment trust company as set out in Section 842 of the Income and Corporation Taxes Act 1988. Directors and advisors Directors George Stevens (Chairman) Kevin Allen Bryan Lenygon David Horner Investment Manager Chelverton Asset Management Limited 11 George Street, Bath BA1 2EH Tel: 01225 483 030 Secretary and Registered Office Capita Sinclair Henderson Limited (trading as Capita Financial Group - Specialist Fund Services) Beaufort House 51 New North Road Exeter EX4 4EP Tel: 01392 412 122 Registrar and Transfer Office Share Registrars Limited Suite E First Floor 9 Lion and Lamb Yard Farnham SurreyGU9 7LL Tel: 01252 821 390 www.shareregistrars.uk.com Bankers Lloyds TSB Bank Plc 25 Gresham Street LondonEC2V 7HN Auditors HazlewoodsLLP WindsorHouse Barnett Way Barnwood Gloucester GL4 3RT Custodian HSBC Investment Bank plc Level 29 8 Canada Square London EC14 5HQ The Company's shares are quoted daily in the Financial Times under 'Investment Companies'. Information about the Company can be obtained at the Investment Manager's website at www.chelvertonam.com. An investment company as defined under Section 833 of the Companies Act 2006. REGISTERED IN ENGLAND No. 2989519

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