CHAM Chameleon Tst

RNS Number:4598R
Chameleon Trust PLC
02 April 2008


Chameleon Trust plc (the "Company")

Interim Management Statement (Unaudited)

For the three months ended 29 February 2008

The Company has prepared this interim management statement ("IMS") to meet the
requirements of the UK Listing Authority's Disclosure Rules and Transparency
Rules.  The IMS covers the three months ended 29 February 2008 and incorporates
any relevant information up to the date of publication.

Investment Objective

The Company is a special situations investment trust, which has the objective of
making capital profits from investments in ordinary shares of selected UK quoted
companies.  However, the Company works within a risk control framework that aims
to shift its focus from capital growth to capital preservation at particular
stages of the stock market cycle.
                        
Manager's Review

An array of well documented worries bore down on investors in the closing months
of 2007 which carried into 2008. In particular, there are two pressing issues
for investors to deal with. The first relates to the financial system -
confidence will only return when investors believe there is complete clarity
over the extent of banks' exposure to bad loans. Secondly, credit markets are
still not open for business. With banks pulling in their horns, reduced lending
levels must impact levels of economic activity. As few investors have experience
of a 'credit crunch', caution has to be the watchword until the Manager can
assess the impact of the credit crunch on the real economy. Stock market
analysts adopted a similarly cautious approach as they scaled back earnings
expectations across the spectrum of the equity market.

Performance

Over the three months ended 29 February 2008, the Company's net asset value ("
NAV") declined by 8% and the share price fell by 20%, ending the period with a
discount to NAV of 14%.  Performance was comparable to the broader stock market
indices, with the FTSE All-Share Index down by 8% and the FTSE 100 declining by
9%. Somewhat counter intuitively smaller companies only fell by 6% and AIM fell
by 3%.

Material Events

There have not been any material events during the period from 1 December 2007
to the date of publication of this statement.

There have not been any changes in the Company's share capital, which remains at
12,585,000 ordinary shares in issue.

Material Transactions

Following the half year end, the Company announced its interim results for the
year ended 30 November 2007 and no dividend payment was announced.

Otherwise, there have not been any material transactions during the period under
review.

Key Portfolio Changes

The restructuring of the portfolio is complete - over the quarter the Manager
exited 16 investments and introduced 4 new investments to the portfolio. The
portfolio is now much more concentrated, with greater exposure to larger, more
liquid companies and over 20% liquidity (as at 29 February 2008). The latter
endows us with the flexibility to take advantage of extreme price moves and
periods of negative investor sentiment.

Our oil company investments made positive contributions - in particular Premier
Oil and Bowleven.  BAE Systems finals were at the upper end of analyst forecasts
and caused most broking houses to upgrade 2008 and 2009 forecasts. Bloomsbury
Publishing issued a reassuring trading update which ensured there was no rerun
of December 2006's profit warning. The investment in Restaurant Group
demonstrated that there were profitable opportunities from negative share price
over -reactions. A recent addition to the portfolio, Coda, received a cash bid
of 205p per share from its Dutch competitor, Unit4Agresso. Mothercare, despite a
difficult outlook for the consumer, was a further source of positive returns.

In looking at where the portfolio lost value, there were situations where we
were prepared to accept (sometimes substantial) discounts to exit investments
where the Manager could only see additional downside - Gatekeeper Systems and
Triplarc. In the case of Vertu Motors the Manager was prepared to sell our
investment at a discount as the Manager believed its size would militate against
it. Parity was a significant detractor over the quarter as, in addition to other
declared sellers, the consensus view was that its business model would be
amongst the first to suffer in any downturn. However, its full year figures were
if anything better than hoped with a confident outlook statement. William Hill,
again in spite of good figures and a relatively robust outlook statement, failed
to attract any investment buying.

Top Ten Investments


BP                                 Oil & Gas                         6.5%
Kewill Systems                     Software & Comp Servs             5.9%
Bowleven                           Oil & Gas                         5.3%
Royal bank of Scotland             Banks                             4.9%
William Hill                       Leisure & Hotels                  4.8%
Premier Oil                        Oil & Gas                         4.6%
BAE Systems                        Aerospace & Defence               4.5%
Reckitt Benckiser                  Health                            4.4%
PV Crystalox Solar                 Chemicals                         4.2%
Lloyds TSB                         Banks                             4.1%
                                                               ----------
Total                                                                49.2%
                                                               ----------

Source: Revera Asset Management Limited

Traffic Lights

The traffic lights continue to indicate that the economy is in a fallow market.

Valuation metrics, especially post the reporting season, continue to be fully
supportive of equities. Not only have equity prices fallen, historic earnings
matched forecasts and dividend growth expectations little changed.  However,
given the prevailing economic uncertainty, analysts have cut earnings
expectations for 2008.  The Manager would expect to see further downward
pressure on earnings expectations given the lags before changes to monetary
policy kick in.

Outlook

Whilst the reporting season has been devoid of any ammunition to bolster the
bear case, much of the historic data relates to a very different looking world.
However, forward looking statements thus far have been more robust and are a
long way short of pointing to an imminent recession. Experience shows that
business conditions can change quickly but as at the date of publication the
outlook is one which will allow well run businesses to grow during 2008.

The opportunity lies in valuations which are at levels consistent with a
significant deterioration in economic conditions. On the basis of available
evidence the Manager does not believe this is the case. Hence, our intention is
to re-invest the cash balance - probably with a bias towards small and midcap
companies - over the coming quarter.

As reported in the Chairman's Statement in the Interim Report dated 30 November
2007, the Board decided to review the strategic options available to it to
enhance shareholder value and on 27 March 2008, the Board announced the results
of its strategic review and its decision to bring forward proposals to roll over
the current fund into a new open-ended investment company.  Documentation
regarding the strategic review will be posted to shareholders in due course but
the Board anticipates (subject to all necessary shareholder and other approvals
being obtained) that these proposals will be implemented by mid-summer of this
year.

On 27 March 2008, the Board also announced that it would be writing to
shareholders as soon as reasonably practicable to seek independent shareholders'
approval of a waiver to be granted by The Panel on Takeovers and Mergers under
Rule 9 of the City Code.  This waiver relates to certain purchases by the
Company of its own shares in 2006 and 2007 and is required because the Panel
considers that a concert party exists in relation to the Company comprising the
directors and major shareholders of Revera Asset Management Limited, the
Company's Manager.  In the event that the waiver resolution is not approved and
the Panel waiver is not granted, the Panel has indicated that it will require
the concert party to dispose of such number of shares in the Company as is
required to put the concert party back in the position it would have been in had
the share buy-backs never taken place.

Save as set out above, the Board is not aware of any significant events or
transactions which have occurred between 29 February 2008 and the date of
publication of this interim management statement which would have a material
impact on the financial position of the Company.

A copy of this report is available on the Manager's website at
www.reverafunds.com


For further information, please contact:

Glen Nimmo
Revera Asset Management Limited
Tel: 0131 524 6150

2 APRIL 2008

                      This information is provided by RNS
            The company news service from the London Stock Exchange
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