Half-yearly Report

CHELVERTON GROWTH TRUST PLC Half Yearly Report for the six months ended 29 February 2012 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 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. It is intended from time to time, when deemed appropriate, that the Company will borrow for investment purposes. The Company, however, does not currently have any borrowing facilities. 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 30.60p to 33.53p, an increase of 9.6%. In the same period the Company's benchmark index, the FTSE All-Share, increased by some 8.7 %. In the last few months of 2011 UK investors took an increasingly risk averse attitude which was reflected in the strong relative performance of the "Mega-Capitalised" defensive companies and the consequent underperformance of smaller companies. At the macro level this was driven by the continued problems within the Eurozone and was not helped at home by the Chancellor's downbeat Autumn Statement. At the same time, the earnings forecasts for companies were being reduced as the combined effects of an economic slowdown and overly optimistic market expectations took their toll. The start of 2012 however, saw a reversal of this trend as small and middle sized companies outperformed when investors switched into a 'risk on' mode against a background of improving data from the US and hopes of a soft landing in China, although the Eurozone remained a cause of concern. The busy corporate reporting season has helped to underpin current valuations across the market and many companies have continued to generate cash and pay dividends in excess of forecasts. In our Company we have recently seen positive contract announcements from IDOX and Belgravium, and a good set of results from Titan Europe. PSG Solutions has also performed particularly well as the re-rating continued in the wake of its interim results. Elsewhere in the fund, the shares in Sanderson responded strongly to the announcement that it was to sell its subsidiary that provides EPOS solutions to high street retailers, representing 40% of the business, for £11.5m cash, the equivalent of the market capitalisation at the time. Quindell Portfolio acquired a 29.9% stake in AI Claims after a share swap with a number of major shareholders and has now made a cash offer for the balance. We have made a new investment in a start up company, Transflex, a van leasing business with a highly experienced management team, while Parmenion, another unquoted investment, continued to trade well. We raised funds in the period from the sale of part of our holdings in Alliance Pharma and IDOX and by the sale of all of the shareholding in Pennant International. In part, these monies were used to finance the successful tender offer. Looking through to the second half of the year the global macro outlook is improving, led by the US, and there is a growing feeling that we may be past the worst in respect of the domestic public finances. This has however already been reflected in an upturn in investor sentiment, but we need to see increasing corporate profitability to move the market forward. Realistically we are still looking to 2013 for an improvement in the domestic sectors such as contracting and retailing. Encouragingly, the ratio of company upgrades to downgrades has turned positive and we look to this to provide underlying momentum to share prices. Our short term fear is that this recent improvement translates into unrealistic expectations and it is hoped that realism will hold back some of the more bullish estimates. As a footnote, we are delighted to announce that your Company received the best performing fund award for 2011 at the recent PLC awards. Chelverton Asset Management Limited 20 April 2012 Principal risks and uncertainties The Board considers that the principal risks and uncertainties facing the Company for the remaining six months of the financial year remain the same as those disclosed in the Interim management report above and also on pages 11 and 12 of the Report of the Directors in the Annual Report for the year ended 31 August 2011. These risks include market risk, discount volatility, regulatory risks, financial risk and liquidity risks. Responsibility statement The Directors confirm that to the best of their knowledge: ● the condensed set of financial statements for the six months to 29 February 2012, prepared in accordance with the Statement on Half Yearly Financial Reports issued by the UK Accounting Standards Board, gives 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 include 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 2012 and the above responsibility statement was signed on its behalf by George Stevens, Chairman. Going Concern The Directors believe, 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. For this reason they continue to adopt the going concern basis in preparing the accounts. Portfolio review as at 29 February 2012 The Company's portfolio as at 29 February 2012 is set out below. Valuation % of Investment Sector £'000 total AIM traded AI Claims Solutions Non Life Insurance 475 11.9 The provision of non-fault accident management services Alliance Pharma Pharmaceuticals & Biotechnology 259 6.5 Acquisition of the manufacturing, sales and distribution rights to pharmaceutical products Belgravium Technologies Technology Hardware & Equipment 375 9.4 Software systems for warehousing and distribution CEPS Support Services 200 5.0 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 52 1.3 Develops, manages and supplies covert tracking and surveillance systems IDOX Software & Computer Services 1,174 29.4 Software company specialising in the development of products for document and information management LPA Group Electronic & Electrical Equipment 112 2.8 Design, manufacture and marketing of industrial electrical accessories MTI Wireless Edge Technology Hardware & Equipment 63 1.6 Developer and manufacturer of sophisticated antennas and antenna systems Northbridge Industrial Services Industrial Engineering 128 3.2 Consolidation vehicle for specialist industrial services in the UK Pennant International Group Support Services 13 0.3 Development, provision and maintenance of advanced security systems and related services PSG Solutions Support Services 144 3.6 Leading provider of Local Authority residential property searches; provision of packaging solutions and technical surveillance countermeasures components Richoux Group Travel & Leisure 39 1.0 Owner and operator of Richoux Restaurants Sanderson Group Software & Computer Services 111 2.8 Provides software and IT services Titan Europe Industrial Engineering 138 3.4 Manufacture of big wheels for construction, mining and agricultural vehicles Tristel Health Care Equipment & Services 144 3.6 Healthcare business specialising in infection control in hospitals Universe Group Support Services 10 0.2 Provision of credit card fraud prevention system, loyalty systems and retail systems Delisted One Horizon Group (formerly Satcom Group) Mobile Telecommunications 59 1.5 Provider of mobile satellite communications equipment and airtime Unquoted Closed Loop Recycling Support Services Loanstock 0 0.0 Ordinary B shares 0 0.0 Operation of a plastic recycling plant Parmenion Capital Partners LLP Support Services 398 10.0 Provides fund-based discretionary fund management services to Independent Financial Advisors Transflex Vehicle Rental Limited Support Services 100 2.5 Light commercial vehicle rental business Portfolio valuation 3,994 100.0 Portfolio of investments 29 February 2012 31 August 2011 Valuation % of Valuation % of Investment £'000 total £'000 total IDOX 1,174 29.4 1,153 28.4 AI Claims Solutions 475 11.9 570 14.1 Parmenion Capital Partners LLP 398 10.0 436 10.8 Belgravium Technologies 375 9.4 312 7.7 Alliance Pharma 259 6.5 264 6.5 CEPS 200 5.0 260 6.4 PSG Solutions 144 3.6 114 2.8 Tristel 144 3.6 160 3.9 Titan Europe 138 3.4 124 3.1 Northbridge Industrial Services 128 3.2 132 3.3 LPA Group 112 2.8 78 1.9 Sanderson Group 111 2.8 99 2.4 Transflex Vehicle Rental Limited 100 2.5 - - MTI Wireless Edge 63 1.6 60 1.5 One Horizon Group 59 1.5 32 0.8 Datong Electronics 52 1.3 62 1.5 Richoux Group 39 1.0 49 1.2 Pennant International Group 13 0.3 11 0.3 Universe Group 10 0.2 10 0.2 Total 3,994 100.0 3,926 96.8 The investment in Closed Loop Recycling shown within the portfolio review has not been shown above as it has no value. Portfolio breakdown by sector and by index as at 29 February 2012 Percentage of portfolio by sector Sector Percentage Software & Computer Services 32.2 Support Services 21.6 Non Life Insurance 11.9 Technology Hardware & Equipment 11.0 Industrial Engineering 6.6 Pharmaceuticals & Biotechnology 6.5 Electronic & Electrical Equipment 4.1 Health Care Equipment & Services 3.6 Mobile Telecommunications 1.5 Travel & Leisure 1.0 Percentage of portfolio by index Index Percentage AIM 86.0 Unquoted 12.5 Delisted 1.5 Income statement (unaudited) for the six months to 29 February 2012 Six months to Year to Six months to 29 February 2012 31 August 2011 28 February 2011 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Gains on investments at fair value - 352 352 - 913 913 - 798 798 Income 38 - 38 77 - 77 20 - 20 Investment management fee* (5) (15) (20) (10) (31) (41) (5) (15) (20) Other expenses (28) - (28) (136) - (136) (71) - (71) Net return on ordinary activities before taxation 5 337 342 (69) 882 813 (56) 783 727 Taxation on ordinary activities - - - - - - - - - Net return on ordinary activities after taxation 5 337 342 (69) 882 813 (56) 783 727 Revenue Capital Total Revenue Capital Total Revenue Capital Total pence pence pence pence pence pence pence pence pence Return per Ordinary share# 0.04 2.60 2.64 (0.50) 6.42 5.92 (0.39) 5.46 5.07 Notes * 75% of the management fee and finance costs have been charged to capital reserve. # The return per Ordinary share is based on 12,951,672 (31 August 2011: 13,742,414; 28 February 2011: 14,325,621) 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 29 February 2012 Share Capital Share premium Capital redemption Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Six months to 29 February 2012 1 September 2011 132 2,674 (1,857) 57 3,043 4,049 Cost of shares purchased for cancellation under the tender offer and buyback offer (13) - - 13 (406) (406) Net return after taxation for the period - - 337 - 5 342 29 February 2012 119 2,674 (1,520) 70 2,642 3,985 Year to 31 August 2011 1 September 2010 149 2,674 (2,739) 40 3,506 3,630 Cost of shares purchased for cancellation under tender offer (15) - - 15 (394) (394) Shares cancelled from Treasury (2) - - 2 - - Net return after taxation for the year - - 882 - (69) 813 31 August 2011 132 2,674 (1,857) 57 3,043 4,049 Six months to 28 February 2011 1 September 2010 149 2,674 (2,739) 40 3,506 3,630 Cost of shares purchased for cancellation under tender offer (15) - - 15 (394) (394) Net return after taxation for the period - - 783 - (56) 727 28 February 2011 134 2,674 (1,956) 55 3,056 3,963 Balance sheet(unaudited) as at 29 February 2012 As at As at As at 29 February 2012 31 August 2011 28 February 2011 £'000 £'000 £'000 Fixed assets Investments at fair value 3,994 4,055 3,898 Current assets Debtors 7 9 5 Cash at bank 32 30 94 39 39 99 Creditors - amounts falling due within one year Creditors 48 45 34 48 45 34 Net current (liabilities)/ assets (9) (6) 65 Net assets 3,985 4,049 3,963 Share capital and reserves Share capital 119 132 134 Share premium account 2,674 2,674 2,674 Capital reserve (1,520) (1,857) (1,956) Capital redemption reserve 70 57 55 Revenue reserve 2,642 3,043 3,056 Equity shareholders' funds 3,985 4,049 3,963 Net asset value per Ordinary share (note 1) 33.53p 30.60p 29.95p Statement of cash flows(unaudited) for the six months to 29 February 2012 Six months to Year to Six months to 29 February 2012 31 August 2011 28 February 2011 £'000 £'000 £'000 Operating activities Investment income received 32 76 20 Interest income received 6 - - Investment management fees paid (20) (41) (20) Secretarial fees paid (20) (46) (23) Other cash payments (14) (92) (58) Net cash outflow from operating activities (note 3) (16) (103) (81) Investing activities Purchases of investments (100) (156) (21) Sales of investments 513 597 504 Net cash inflow from investing activities 413 441 483 Financing Cost of shares purchased for cancellation under tender offer and buyback offer (395) (394) (394) Net cash outflow from financing activities (395) (394) (394) Increase/(decrease) in cash 2 (56) 8 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 2011, 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 29 February 2012 and 28 February 2011 has 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 2011. 1 Net asset value The basic net asset value per Ordinary share is based on net assets of £ 3,985,000 (31 August 2011: £4,049,000; 28 February 2011: £3,963,000) and on 11,884,283 Ordinary shares (31 August 2011: 13,233,344; 28 February 2011: 13,233,344) being the number of Ordinary shares in issue at the period end. 2 Taxation The tax charge for the six months to 29 February 2012 is nil (year to 31 August 2011: nil; six months to 28 February 2011: nil). The Company has an effective tax rate of 0% for the year ending 31 August 2012. 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 from operating activities Six months to Year to Six months to 29 February 2012 31 August 2011 28 February 2011 £'000 £'000 £'000 Net return before finance costs and taxation 342 813 727 Net capital return before finance costs (337) (882) (783) Expenses charged to capital (15) (31) (15) Decrease in creditors and accruals (8) - (11) Decrease/(increase) in prepayments and accrued income 2 (3) 1 Net cash outflow from operating activities (16) (103) (81) 4 Called up share capital Pursuant to the Tender Offer, 1,323,334 Ordinary shares and to the buyback offer, 25,727 Ordinary shares were repurchased for cancellation on 23 January 2012. Following the Tender Offer and buyback offer there are 11,884,283 Ordinary shares in issue (31 August 2011:13,233,344: 28 February 2011: 13,233,344). 5 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 29 February 2012 there was £3,000 (31 August 2011: £3,000, 28 February 2011: £3,000) payable to the Investment Manager. 6 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 Sections 1158/1159 of the Corporation Tax Act 2010. Directors and advisers Directors George Stevens (Chairman) Kevin Allen David Horner Investment Manager Chelverton Asset Management Limited 12b 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 Surrey GU9 7LL Tel: 01252 821 390 www.shareregistrars.uk.com Auditors Hazlewoods LLP Windsor House Bayshill Road Cheltenham GL50 3AT Custodian and Banker HSBC Investment Bank plc Level 29 8 Canada Square London E14 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 END Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.

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