SVM UK EMERGING FUND PLC
(the "Fund")
HALF YEARLY REPORT
(FOR THE SIX MONTHS TO 30 SEPTEMBER 2013)
A copy of the Half Yearly Report can be downloaded from the Manager's website
at www.svmonline.co.uk and a copy has also been submitted to the National
Storage Mechanism and will shortly be available for inspection at
www.hemscott.com/nsm.do
HIGHLIGHTS
Net asset value gained 18.4% compared to a 9.0% return in the FTSE AIM All
Share Index
Share price rose by 28.5%
Change in the benchmark for the Fund to the IMA UK All Companies Sector Average
Index
Interim Management Report
CHAIRMAN'S STATEMENT
Over the six months to 30 September 2013, your Fund's net asset value gained
18.4% to 63.84p, compared to a rise of 9.0% in the benchmark, the FTSE AIM All
Share Index. The share price gained 28.5% to 55.25p. As a result, the
discount at which the shares stand to net asset value reduced to 13.5%.
Further progress in the share price and net asset value have been achieved in
October.
Shareholders approved a change in the benchmark for the Fund, with effect from
30 September 2013, to the IMA UK All Companies Sector Average Index, which the
Managers believe will be a more challenging benchmark than AIM. This index
represents the performance of the average fund in the Investment Management
Association's largest sector. It represents funds which invest at least 80% of
their assets in UK equities and which have a primary objective of delivering
capital growth.
Equity markets were strong over the period, and the Fund was fully invested.
The portfolio emphasis on consumer sectors, property and technology was
helpful, as prospects improved for these sectors. The best performances during
the six months came from the consumer sector; ASOS, ITV, Ted Baker, SuperGroup
and Sports Direct. These gains were driven by good results; profitability
picking up as the UK economy recovered. Consumer pressures have eased, with
growth in private sector pay, and a stabilisation of real take-home pay. The
recovery in the Pound since mid year has lowered some import costs and cut
petrol prices, and the UK economy continues to perform better than the
Eurozone. The main portfolio disappointments were in Manroy and Ophir Energy,
which have both been sold. Portfolio investment in the UK consumer sector was
increased during the period under review.
The portfolio emphasises businesses with a specialisation or other competitive
advantage which helps to produce growth along with stable and growing margins.
With low financing costs, these businesses can pay down debt, restructure or
make acquisitions to enhance earnings. Investments with these characteristics
include Thomas Cook, ITV and Mitchells & Butlers.
Additional investment has been made in two technology businesses; Iomart Group
which is a cloud hosting business, and in WANdisco which provides wide area
networks. Both of these are growing, scalable businesses. Another technology
investment, Delcam, a CAD CAM software business, received a bid in November.
The outlook for the UK consumer is improving, and many portfolio companies will
also be helped by continuing growth in the global economy. We expect more
stimulus for the UK economy, particularly in housebuilding, encouraging growth
in the regions. The Fund retains a focused portfolio of growth businesses,
many of which are modestly valued in comparison to their larger equivalents.
Its aim remains to deliver long term capital growth, with lower volatility.
The Board and Managers believe the Fund is well placed to continue to deliver
on this aim.
Peter Dicks
Chairman
22 November 2013
INVESTMENT OBJECTIVE
The investment objective of the Fund is long term capital growth from
investments in smaller and medium sized UK companies. Its aim is to outperform
the IMA UK All Companies Sector Average Index on a total return basis.
The Fund aims to achieve its objective and to diversify risk by investing in
shares and related instruments, controlled by a number of limits on exposures.
Appropriate guidelines for the management of the investments, gearing and
financial instruments have been established by the Board. Limits are expressed
as percentages of shareholders' funds, measured at market value.
This is an abridged version of the Fund's investment policy and objective. The
full investment policy can be found on page 11 and 12 of the Annual Report &
Accounts for the year ended 31 March 2013.
Financial Statements
Income Statement
Six months to 30 Six months to 30
September 2013 September 2012
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net gain/(loss) on investments at
fair value through profit or loss
- 590 590 - (1,403) (1,403)
Income 52 - 52 15 - 15
Investment management fees - - - - - -
Other expenses (36) (4) (40) (29) - (29)
Return/(loss) before finance costs
and taxation
16 586 602 (14) (1,403) (1,417)
Finance costs (5) - (5) (2) - (2)
Return/(loss) on ordinary
activities before taxation
11 586 597 (16) (1,403) (1,419)
Taxation
- - - -
Return/(loss) attributable to
ordinary shareholders
11 586 597 (16) (1,403) (1,419)
Return/(loss) per Ordinary Share 0.18p 9.76p 9.94p (0.27p) (23.35p) (23.62p)
Year ended 31 March 2013
(audited)
Revenue Capital Total
£'000 £'000 £'000
Net loss on investments at fair
value through profit or loss
- (991) (991)
Income 50 - 50
Investment management fees - - -
Other expenses (96) (12) (108)
Loss before finance costs and
taxation
(46) (1,003) (1,049)
Finance costs (6) - (6)
Loss on ordinary activities
before taxation
(52) (1,003) (1,055)
Taxation - - -
Loss attributable to ordinary
shareholders
(52) (1,003) (1,055)
Loss per Ordinary Share (0.86p) (16.71p) (17.57p)
Total column of this statement is the profit and loss account of the Company.
All revenue and capital items in this statement derive from continuing operations.
A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.
Balance Sheet
As at As at As at
30 31 30
September March September
2013 2013 2012
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Fixed Assets
Investments at fair value through profit or 3,732 3,248 1,905
loss
Total Current Assets 355 200 1,734
Creditors: amounts falling due within one (253) (211) (766)
year
Net current assets 102 (11) 968
Total assets less current liabilities 3,834 3,237 2,873
Capital and Reserves 3,834 3,237 2,873
Equity shareholders' funds 3,834 3,237 2,873
Net asset value per Ordinary Share 63.84p 53.90p 47.85p
Note
These are not full statutory accounts in terms of Section 435 of the Companies
Act 2006. Audited accounts for the year to 31 March 2013, which were
unqualified, have been lodged with the Registrar of Companies.
Summarised Cash Flow Statement
Six months Year to 31 Six months
to 30 March to 31 March
September
2013 2013
2013
£'000 £'000 £'000
(unaudited) (unaudited) (audited)
Net cash (out)/inflow from operating activities (53) (467) 373
Taxation 2 - (2)
Capital expenditure and financial investment 137 (187) 395
Servicing of finance (5) (6) (2)
Movement in cash in the period 81 (660) 764
Summarised Reconciliation of Movement in Shareholders' Funds
For the period to 30 September 2013
Capital
Share Share redemption
Special Capital Revenue
capital premium reserve reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 300 314 5,144 27 (1,927) (621)
2013
Return - - - - 586 11
attributable
to
shareholders
As at 30 300 314 5,144 27 (1,341) (610)
September 2013
For the year
to 31 March
2013
Capital
Share Share redemption
Special Capital Revenue
capital premium reserve reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 300 314 5,144 27 (924) (569)
2012
Loss - - - - (1,003) (52)
attributable
to
shareholders
As at 30 300 314 5,144 27 (1,927) (621)
September 2012
For the period to 30 September 2012
Capital
Share Share redemption
Special Capital Revenue
capital premium reserve reserve reserve reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 300 314 5,144 27 (924) (569)
2012
Loss - - - - (1,403) (16)
attributable
to
shareholders
As at 30 300 314 5,144 27 (2,327) (585)
September 2012
Investment Portfolio
% of Net Assets Sector analysis %
as at 30
Ten largest Valuation September 2013 Valuation of Net Assets
investments
as at 30 £000 £000
September
2013 Sector
Stock
Hydrodec 8% 250 6.5 Basic Materials 0 0.0
CULS
Ted Baker 191 5.0 Industrials 564 14.7
PLC
ASOS PLC 154 4.0 Oil and Gas 316 8.2
Thomas Cook 146 3.8 Consumer Goods 370 9.6
Group PLC
Tribal 132 3.4 Consumer 1,357 35.4
Group PLC Services
Delcam PLC 132 3.4 Healthcare 0 0.0
WANdisco 125 3.3 Telecoms 33 0.9
PLC - CFD
Unite Group 124 3.2 Technology 576 15.0
PLC
Mitchells 122 3.2 Financials 516 13.5
and Butlers
PLC - CFD
Workspace 111 2.9 Utilities 0 0.0
Group PLC
Ten largest 1,487 38.7 Total 3,732 97.3
investments
Other 2,245 58.6
investments
(inc CFD
margin)
Total 3,732 97.3
investments
Net current 3,834 100.0
assets
Risks And Uncertainties
The principal risks facing the Fund relate to the investment in financial
instruments and include market, liquidity, credit and interest rate risk.
Additional risks faced by the Fund are investment strategy, share price
discount, accounting, legal and regulatory risk, operational, corporate
governance and shareholder relations risk, and financial risk. The Board seeks
to mitigate and manage these risks through continuous review, policy setting
and enforcement of contractual obligations. The Board receives both formal and
informal reports from the Managers and third party service providers addressing
these risks. An explanation of these risks and how they are mitigated is
explained in the 2013 Annual Report, which is available on the Manager's
website: www.svmonline.co.uk. These principal risks and uncertainties have not
changed from those disclosed in the 2013 Annual Report.
Directors' Responsibility Statement
The Directors are responsible for preparing the Half Yearly Report in
accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
(i) the condensed set of financial statements, which have been prepared in accordance with the Accounting Standards Board's statement 'Half Yearly Financial gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Fund;
(ii) the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rules DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and DTR 4.2.8R (disclosure of related party transactions and changes therein).
(iii) No related party transactions have taken place during the first six months of the year that have materially affected the financial position of the Fund during the period and there have been no changes in the related party transactions described in the Annual Report & Accounts for the year end 31 March 2013 that could do so.
The Half Yearly Financial Report has not been audited or reviewed by the Fund's
auditors.
By Order of the Board
Peter Dicks
Chairman
22 November 2013
Notes
1. The results have been prepared in accordance with applicable
accounting standards and the 2009 Statement of Recommended Practice (SORP)
issued by the Association of Investment Companies. These accounts have been
prepared in accordance with prior year accounting policies.
2. Returns per share
Return per share is based on a weighted average of 6,005,000 (2012
- 6,005,000) ordinary shares in issue during the year.
Total return per share is based on the total profit for the period
of £597,000 (2012 - loss of £1,419,000).
Capital return per share is based on net profit for the period of £
586,000 (2012 - loss of £1,403,000).
Revenue return per share is based on the revenue profit after
taxation for the period of
£11,000 (2012 loss of £16,000).
The number of shares in issue at 30 September 2013 was 6,005,000
(2012 - 6,005,000).
3. Due to the size of the Fund, the Investment Managers have waived
their fees for the periods to 30 September 2014 and 2013.
4. The above figures do not constitute full accounts in terms of
Section 435 of the Companies Act 2006. The accounts for the year to 31 March
2013, on which the auditors issued an unqualified report under Section 495 of
the Companies Act 2006, have been lodged with the Registrar of Companies and
did not contain a statement required under Section 498 of the Companies Act
2006. The half yearly report will be available on the Managers' website:
www.svmonline.co.uk. Copies are also available for inspection at 7 Castle
Street, Edinburgh EH2 3AH, the registered office of the Fund.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699
Roland Cross Broadgate Mainland 020 7226 6111