Annual Financial Report
SVM UK EMERGING FUND PLC
(the "Fund")
ANNUAL FINANCIAL RESULTS
FOR THE YEAR ENDED 31 MARCH 2013
The Board is pleased to announce the Annual Financial Report for the year ended
31 March 2013. The full Annual Report, Notice of Annual General Meeting and
Form of Proxy will be posted to shareholders and be available shortly on the
Manager's website at www.svmonline.co.uk
Copies of the Annual Report have been submitted to the National Storage
Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do
HIGHLIGHTS
Over the 12 months, net asset value decreased by 25% and share price by 22%
compared to a fall of 7% in the FTSE AIM Index.
New portfolio managers appointed; strong recovery in second six months.
Exposure to less liquid small companies reduced.
Re-alignment of portfolio focusing on more liquid, dividend-paying growth
businesses.
Proposed re-alignment of investment objective.
Since the year end, NAV has increased by 6.7% to 57.5p (31st May 2013)
Financial Highlights
31 March 31 March % Change
2013 2012
Net asset value (p) 53.90 71.47 -24.7
Share price (p) 43.00 55.00 -21.8
FTSE AIM Index 762.27 821.98 -7.3
FTSE All-Share Index 3,380.64 3,002.78 -12.6
Discount 20.2% 23.0%
Total expense ratio:
Investment management fees* - -
Other operating expenses 2.9% 1.4%
*In view of the size of the Fund, the Manager has waived its management fees
for the year to 31 March 2013 and 2012
Historical record NAV Share Total
Year to 31 March per share (p) price (p) Return (p)
2006 49.45 45.00 14.32
2007 63.57 62.50 14.12
2008 65.50 67.50 1.93
2009 44.73 31.00 (20.77)
2010 68.53 50.00 23.80
2011 87.36 63.00 18.83
2012 71.47 55.00 (15.89)
2013 53.90 43.00 (17.57)
Total Return to 1 3 5 Remit change Launch
31 March 2013 (%) Year Years Years 2004 (2000)
Net Asset Value -24.6 -21.3 -17.7 +67.5 -44.4
FTSE AIM Index -7.3 +6.4 -19.7 -13.5 -50.1
CHAIRMAN'S STATEMENT
It is disappointing to report that over the 12 months to 31 March 2013, the net
asset value decreased by 24.6% to 53.90p, compared to a fall of 7.3% in the
benchmark, FTSE AIM Index. The share price fell 21.8%. In part, this reflects
a tough environment for smaller companies, with many facing difficulty in
raising either bank or equity finance. This contrasts with much improved
financing for larger, global businesses. There appears to be little indication
that this difficult environment, particularly for the smallest businesses will
improve in the near term. Accordingly, the portfolio has been re-aligned to
emphasise smaller and medium sized businesses that have exposure to global
growth or the potential to progress by fundamental change and a degree of
innovation. This has achieved an improvement in underlying liquidity within
the portfolio. Encouragingly, since the end of the year under review, the net
asset value has risen to by 6.7% to 57.5 pence at 31 May 2013.
Despite this year's disappointing performance, your Fund remains ahead of its
benchmark since its remit change in September 2004. The net asset value and
share price have returned 68% and 69%, respectively, against a decline of 14%
in the benchmark.
Review of the year
In September, your Board announced that Colin McLean had assumed responsibility
within SVM Asset Management for the investment management of the Fund. He is
supported by deputy manager, Margaret Lawson. This change recognised that
performance had been very disappointing over the previous 12 months. Colin and
Margaret are also co-managers of SVM UK Growth Fund, an open ended investment
Fund. Since their appointment to that fund six years ago it has returned 56.7%,
compared to an FTSE All-Share Index return of 27.8%. (Lipper, 6 years to
31.3.2013)
Following this change in the investment management team, a thorough review of
the portfolio was made and a re-alignment implemented. Buyers were found for
two of the unquoted businesses in line with valuation and a number of less
liquid quoted equities were sold. The proportion of unquoteds within the Fund
is much reduced, and the Managers are continuing to work to release capital
from this area. The Fund is now focused on more liquid, relatively larger
capitalisation shares within the Fund's investment objective. The aim is to
significantly improve liquidity and prospects for performance. Strategy will
focus on businesses capable of growing without reliance on bank finance, and
which have an institutional share register.
Additional investments researched by SVM UK Growth Fund manager, Margaret
Lawson, have been made, and have contributed to the recovery in net asset value
since early September. Some of the cash realised from disposals is being
aligned with SVM UK Growth Fund's best ideas.
The Fund has withdrawn from new investment in unquoted shares or those with
PLUS Market quotes, given the increased risks and lower liquidity in these
sectors. Amongst more liquid smaller companies and certain medium sized
businesses, including those on AIM, there are attractive lower risk
opportunities in growing businesses. New portfolio investments include 3D
printing software business, Delcam, which the Managers believe has strong
growth prospects. Investments in Spirit Pub Fund, and property group, Unite
Group, are already showing good portfolio gains.
Your Board is working to improve liquidity in the Fund's shares. We believe
that the improved underlying portfolio liquidity should help to achieve a lower
discount, and that the management change will lead to an improvement in the
performance of the Fund.
The UK economy is proving resilient, with many consumer businesses trading well
and regulatory pressures easing for banks. Well-managed businesses are seeing
relatively stable demand, and are able to gain market share, helped by cheap
finance. While there will be greater pressures on disposable income this year,
overall confidence in the economy is improving. The Managers expect further
quantitative easing around the world, and shares should benefit. Many
companies are able to lift earnings by self-help. The improvement in credit
conditions is also helping businesses that are restructuring, such as Spirit
Pubs and Thomas Cook.
The weak Pound is favourable for UK exporters, and the steady recovery in the
US economy has more than offset a weaker background in Europe. The Fund is
focused on growing small and mid-cap businesses, with an emphasis on the
technology, retail, property, gaming and oil exploration sectors. It has no
exposure to mining or banks.
A failure of austerity measures in Europe is likely to lead to full
quantitative easing in the Eurozone. That should provide a favourable
background for stockmarkets. We believe that the Pound may weaken further, but
this should be helpful to many of the businesses in the portfolio.
Change of Investment Objective
The re-alignment of the portfolio since September has not only improved
underlying liquidity, but also achieved markedly better performance. The Board
believes that it would be helpful to amend the investment objective of the Fund
to more clearly describe the current strategy. This will allow the Managers to
continue stockpicking within predominantly smaller and medium sized UK
companies, but remove the need for a particular focus on the Alternative
Investment Market. The aim will be to outperform the IMA UK All Companies
Sector Average on a total return basis.
Outlook
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, lower volatility and superior absolute and
relative returns. The Board and the Managers believe that it is well placed to
continue to deliver on these aims.
Peter Dicks
Chairman
3 July 2013
31-May-12 31-May-11 31-May-10 31-May-09 31-May-08
Percentage Performance to to to to to
31-May-13 31-May-12 31-May-11 31-May-10 31-May-09
SVM UK Emerging NAV -10.8 -24.7 25.6 21.5 -20.0
FTSE AIM Index 6.5 -21.8 30.8 33.3 -48.4
31-May-12 31-May-11 31-May-10 31-May-09 31-May-08
Percentage Performance to to to to to
31-May-13 31-May-12 31-May-11 31-May-10 31-May-09
SVM UK Growth Fund A 30.0 -1.9 25.7 20.3 -21.7
FTSE All-Share TR 30.1 -8.0 20.4 22.9 -23.7
INVESTMENT OBJECTIVE
The investment objective of the Fund is long term capital growth from
investments in smaller UK companies with a particular focus on the Alternative
Investment Market ("AIM"). Its aim is to outperform the FTSE AIM Index on a
total return basis.
INVESTMENT POLICY
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.
Although the benchmark is the FTSE AIM Index, the pursuit of the investment
objective may involve exposure to companies on other exchanges and to unlisted
investments. A high conviction investment approach is employed, which can
involve strong sector or thematic positions. No individual investment will
exceed 10% of the portfolio on acquisition. Total exposure to unlisted shares
is also limited to a maximum of 25% of the portfolio and has historically been
less.
The Fund has the ability to borrow money to enhance returns. This gearing can
enhance benefits to shareholders but if, the market falls, losses may be
greater. The level of gearing, including the use of derivatives, is closely
monitored and the Board has set an upper limit of 30% of net assets. Borrowing
is normally on a short term basis to ensure maximum flexibility but it may also
commit to longer term borrowing. It may also sell parts of the share portfolio
and hold cash or other securities when there may be a greater risk of falling
stockmarkets.
The Board has granted the Manager a limited authority to invest in Contracts
for Differences ("CFDs") (long positions) and similar instruments as an
alternative to holding actual stocks. This means that the gross cost of
investment is not incurred. The total effect of such gearing (bank borrowings
plus the gross exposure of long positions less any hedging) is limited to 30%
of the Fund's net asset value. Additional limits have also been set on
individual hedging to assist risk control. The use of CFD's can involve
counterparty credit risk.
The Fund may also make use of hedging as an additional investment tool. To
help reduce the potential for stockmarket weakness to adversely impact the
portfolio, the Board has granted the Manager limited authority to hedge risks,
within specified limits and to a maximum of 15% of the total portfolio. Such
hedging (short positions) may be conducted through CFD's or other index
instruments. Hedging can be used to facilitate adjustment of the portfolio at a
time of economic uncertainty or increased risk. It aids flexibility and can
allow exposure to a sector to be reduced with less disruption to the underlying
long term portfolio. However, in a rising stockmarket, this may impact
performance.
The Fund does not normally invest in fixed rate securities other than
securities that are convertible into equity. However, the Fund may invest in
short dated Government Securities as an alternative to holding cash.
MANAGER'S REVIEW
Summary
The period under review saw significant change in the portfolio, after Colin
McLean and Margaret Lawson assumed responsibility for the investment management
of the Fund in September 2012. Portfolio exposure to unquoted and less liquid
shares was reduced, reinvesting in businesses with superior growth prospects
and lower risk. The portfolio is now focused on businesses capable of growing
without reliance on bank finance, and which have an institutional share
register. The emphasis continues to be in AIM, smaller companies and medium
sized businesses, but microcap exposure has been reduced.
This reorganisation was largely effected in September and early October, and
since then, performance has sharply improved. This has been against a more
encouraging economic background for the UK, with the economy avoiding a triple
dip over the period, and with good performance from well-managed businesses
exposed to recovering sectors. Sectors emphasised in the portfolio include
retailers, technology, industrials, business services and property. It has
little exposure to mining and banks. The investment process involves
fundamental research via company meetings, combined with the identification of
a catalyst to achieve recognition of value.
Contributors to performance
A number of the new portfolio investments, made in the second half of the year
under review, contributed strongly to performance. 3D printing software group,
Delcam, rose strongly, and there were gains from Ted Baker and Tribal Group.
There was also steady performance from the property companies, where London
exposure benefitted from money printing and investors' search for yield.
During the year, North Sea oil & gas exploration and production group, Nautical
Petroleum received a bid. After the year end, Valiant Petroleum also attracted
a bid. Although these companies had been successful in exploration, and made
money for investors, their eventual takeover reflects the difficult funding
market for oil and gas field development.
A small number of holdings contributed disproportionately to losses during the
period. Mantle Diamonds, Digital Learning Machines and Oracle Coal Fields were
disappointing, as was China Pub Fund. The funding environment for very small
companies, or microcaps, continues to be challenging.
Strategy
Stocks are identified using a range of sources, from company meetings through
to broker recommendations. Most portfolio shares are selected because of the
sustainability of their business model; offering global exposure, strong top
line growth and margins. Each is a niche operator which is hard for competitors
to replicate; provided management can continue to deliver operationally,
investors will be rewarded. These quality stocks can look expensive on
traditional valuation measures; however they deserve this favourable rating.
The Fund also seeks to exploit price anomalies. These tend to be businesses
undergoing a fundamental change which we believe will lead to strong share
price appreciation.
Unquoteds
The portfolio now has just three unquoted investments. Hurricane Energy,
formerly Hurricane Exploration, is a substantial oil & gas exploration and
development business, focused on the UK continental shelf. It controls 450
million barrels of 2C contingent resources. The group specialises in fractured
basement reservoirs, and its team has expertise in this area. Hurricane is not
currently producing gas or oil. The Fund's investment is valued at a discount
of 20% to the price at which Hurricane last raised funds, in March 2012. The
shares are also held by a number of other institutional investors.
The Fund has an unquoted investment in the unsecured loan stock of Hydrodec
Group, the ordinary shares of which are quoted on AIM. This pays an 8% coupon,
and is redeemable in October 2014, or earlier at the company's option.
Hydrodec has technology for cleaning and treating waste oil. To mitigate risk,
the Fund has hedged part of this investment via a short sale of ordinary
shares, effectively reducing credit exposure to Hydrodec.
Claremont Partners, formerly CR201, represents 3.3% of the Fund and is valued
at a 15% discount to cost. Claremont has gaming licence applications in Taiwan
and the US, with land ownership which would benefit if the licenses were
approved. It has a number of UK institutional investors.
During the year, a number of unquoted investments were sold or written-down.
Fotolec Technology, previously Glassguard, was sold in line with valuation.
China Pub Fund was fully written-down, reflecting the Manager's assessment that
re-financing is now unlikely.
Outlook
Many portfolio companies are able to lift earnings by self-help. The gradual
improvement in credit conditions is also helping businesses that are
restructuring, such as Spirit Pubs and Thomas Cook. The weak Pound is
favourable for UK exporters, and the steady recovery in the US economy has more
than offset a weaker background in Europe.
The UK economy is proving resilient, with many consumer businesses trading well
and regulatory pressures easing for banks. Well-managed businesses are seeing
relatively stable demand, and are able to gain market share, helped by cheap
finance. While there will be greater pressures on disposable income over the
next year, overall confidence in the economy is improving. We expect further
quantitative easing around the world, and shares should benefit. A failure of
austerity measures in Europe is likely to lead to full quantitative easing in
the Eurozone. That should provide a favourable background for stockmarkets.
Market Capitalisation*
Sector analysis* % Listing* % %
Basic Materials 2.0 AIM 76.8 Small 39.2
Industrials 24.9 PLUS 17.5 Mid 52.9
Oil & Gas 8.4 Unquoted 5.7 Large 8.0
Consumer 43.6
Financials 16.6
Technology 4.5
*Analysis is of net exposure after hedging
INVESTMENT PORTFOLIO
as at 31 March 2013
Stock Cost Valuation % of Valuation
2013 2013 Net Assets 2012
£000 £000 £000
1 Hydrodec 8% CULS 250 250 7.7 250
2 Unite Group PLC 131 163 5.0 -
3 Spirit Pub Co PLC 131 137 4.2 -
4 Ted Baker PLC 93 130 4.0 -
5 Manroy PLC 165 123 3.8 293
6 Delcam PLC 88 120 3.7 -
7 Claremont Partners Ltd * 125 106 3.3 -
8 Tribal Group PLC 65 98 3.0 -
9 Mitchells & Butlers PLC 93 97 3.0 -
10 Filtrona PLC 66 95 2.9 -
Ten largest investments 1,207 1,319 40.6
11 Hurricane Exploration * 50 90 2.8 101
12 Playtech LTD 59 88 2.7 -
13 Home Retail Group 63 88 2.7 -
14 Johnson Service Group PLC 70 87 2.7 -
15 Workspace Group PLC 66 83 2.6 -
16 Grainger PLC 82 81 2.5 -
17 Thomas Cook Group PLC 65 76 2.4 -
18 ITV PLC 60 75 2.3 -
19 SIG PLC 64 73 2.2 -
20 Lavendon Group PLC 59 71 2.2 -
Twenty largest investments 1,845 2,131 65.8
21 GVC Holdings PLC 66 69 2.1 -
22 Marstons PLC 61 68 2.1 -
23 Synthomer PLC 60 67 2.1 -
24 Inchcape PLC 57 65 2.0 -
25 Ophir Energy PLC 71 65 2.0 -
26 Sports Direct International 62 64 2.0 -
27 Quintain Estates & Dev PLC 62 63 2.0 -
28 Helical Bar PLC 45 56 1.7 -
29 Hays PLC 51 53 1.6 -
30 Enterprise Inns PLC 38 53 1.6 -
Thirty largest investments 2,418 2,754 85.0
Other investments (inc CFD margin) 1,272 494 15.3
Total investments 3,690 3,248 100.3
Net current assets (11) (0.3)
3,237 100.0
All investments are UK equity investments with the exception of Hydrodec. Those
marked with an asterisk are unlisted.
Further information is given in note 5 on page 31 of the Accounts.
A full portfolio listing as at 31 March 2013 is detailed on the Manager's
website.
PRINCIPAL 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. An
explanation of these risks and how they are mitigated is explained in Note 9 to
the Accounts. Additional risks faced by the Fund are summarised below:
Investment strategy - The risk that an inappropriate investment strategy may
lead to the Fund underperforming its benchmark, for example in terms of stock
selection, asset allocation or gearing.
The Board have given the Manager a clearly defined investment mandate which
incorporates various risk limits regarding levels of borrowing and the use of
derivatives. The Manager invests in a diversified portfolio of holdings and
monitors performance with respect to the benchmark. The Board regularly review
the Fund's investment mandate and long term strategy.
Discount- The risk that a disproportionate widening of discount in comparison
to the Fund's peers may result in loss of value for shareholders.
The discount varies depending upon performance, market sentiment and investor
appetite. The Board regularly review the discount and the Fund operates a
vigorous share buy-back programme.
Accounting, Legal and Regulatory - Failure to comply with applicable legal and
regulatory requirements could lead to a suspension of the Fund's shares, fines
or a qualified audit report. In order to qualify as an investment trust the
Fund must comply with section 1158 of the Corporation Tax Act 2010 ("CTA").
Failure to do so may result in the Fund losing investment trust status and
being subject to Corporation Tax on realised gains within the Fund's
portfolio. The Manager monitors movements in investments, income and
expenditure to ensure compliance with the provisions contained in section 1158.
Breaches of other regulations, including the Companies Act 2006, the UKLA
Listing Rules or the UKLA Disclosure and Transparency Rules, could lead to
regulatory and reputational damage. The Board relies on the Manager and its
professional advisers to ensure compliance with section 1158 CTA, Companies Act
2006 and UKLA Rules.
Operational - The risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events.
Like most other Investment Trusts, the Fund has no employees and relies upon
the services provided by third parties. The Manager has comprehensive internal
controls and processes in place to mitigate operational risks. These are
regularly monitored and are reviewed to give assurance regarding the effective
operation of the controls.
Corporate Governance and Shareholder Relations- Details of the Fund's
compliance with corporate governance best practice, including information on
relations with shareholders, are set out in the Directors' Statement on
Corporate Governance on pages 22 of the Accounts.
Financial- The Fund's investment activities expose it to a variety of financial
risks including market, credit and interest rate risk. These risks are
explained in Note 9 on pages 32 to 34 of the Accounts.
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 Manager and third
party service providers addressing these risks.
The Board believes the Fund has a relatively low risk profile as it has a
simple capital structure; invests principally in UK quoted companies; does not
use derivatives other than CFDs and uses well established and creditworthy
counterparties.
The capital structure comprises only ordinary shares that rank equally. Each
share carries one vote at general meetings.
FUTURE DEVELOPMENTS
Management
SVM Asset Management Limited provides investment management and secretarial
services to the Fund. These services can be terminated without compensation at
any time by giving one year's notice or an immediate payment of a year's fees
in lieu of notice. The Manager is entitled to a fee for these services, payable
quarterly in arrears, equivalent to 0.825 per cent per annum of the total
assets of the Fund less current liabilities. In addition, SVM Asset Management
Limited is entitled to an incentive fee of 15 per cent of achieved
outperformance of the Fund's benchmark index, FTSE AIM Index, on a six monthly
basis in arrears when the net asset value of the Fund exceeds 100p. In view of
the size of the Fund, the Manager has waived its management fees for the years
to 31 March 2013 and 2012. No incentive fee was paid or due in respect of the
years to 31 March 2013 or 31 March 2012.
The Management and Nomination Committee assesses the Manager's performance on
an ongoing basis and meets each year to conduct a formal evaluation of the
Manager. It assesses the resources made available by the Manager, the results
and investment performance in relation to the Fund's objectives and also the
additional services provided by the Manager to the Fund.
The Committee has reviewed the Manager's contract. In carrying out its review,
it considered the past investment performance and the Manager's capability and
resources to deliver superior future performance. It also considered the length
of the notice period of the investment management contract and the fees payable
together with the standard of other services provided which include
secretarial, accounting, marketing and risk monitoring. Following this review,
it is the Directors' opinion that the continuing appointment of the Manager on
the terms agreed is in the best interests of the shareholders.
Going Concern
The Board, having made appropriate enquiries, has a reasonable expectation that
the Fund has adequate resources to continue in operational existence for the
foreseeable future. For this reason, they continue to adopt the going concern
basis for preparing the financial statements. At the Annual General Meeting to
be convened in 2015 and every five years thereafter, shareholders will be given
the opportunity to decide on the future of the Fund. In assessing whether it is
a going concern, the Board has reviewed the cash flow forecasts for the
foreseeable future. In addition, the Board has considered the current cash
position and the overall financial position of the Fund. For these reasons, the
Board considers that there is reasonable evidence to continue to adopt the
going concern basis in preparing the accounts.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Directors' Report and the
financial statements in accordance with applicable law and regulations. Company
law requires the Directors to prepare financial statements for each financial
year. Under that law, the Directors have elected to prepare the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law). 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 Fund and of its profit or loss for that period. In preparing these
financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Fund's transactions and disclose with
reasonable accuracy at any time the financial position of the Fund and enable
them to ensure that the financial statements comply with the Companies Act
2006.
They are also responsible for safeguarding its assets and hence for taking
reasonable steps for the prevention and detection of fraud and other
irregularities.
The Directors have delegated responsibility to the Manager for the maintenance
and integrity of the Fund's corporate and financial information included on the
Manager's website. The work carried out by the Auditor does not involve
consideration of these matters and, accordingly, the Auditor accepts no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website. Legislation in
the UK governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors each confirm to the best of their knowledge that:
the financial statements, prepared in accordance with the applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Fund and;
the Report of the Directors includes a fair review of the development and
performance of the business and the position of the Fund together with a
description of the principal risks and uncertainties that it faces.
By Order of the Board
Peter Dicks
Chairman
3 July 2013
INCOME STATEMENT
for the year to 31 March 2013
Notes Revenue Capital Total
£000 £000 £000
Net losses on investments at fair value through
profit or loss
5 - (991) (991)
Income 1 50 - 50
Investment management fees - - -
Other expenses 2 (96) (12) (108)
Loss before finance costs and taxation
(46) (1,003) (1,049)
Finance costs (6) - (6)
Loss on ordinary activities before taxation 5
(52) (1,003) (1,055)
Taxation 3 - - -
Loss attributable to ordinary shareholders (52) (1,003) (1,055)
Loss per Ordinary Share 4 (0.86p) (16.71p) (17.57p)
The Total column of this statement is the profit and loss account of the Fund.
All revenue and capital items in this statement derive from continuing operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Fund
have been reflected in the above statement.
INCOME STATEMENT
for the year to 31 March 2012
Notes Revenue Capital Total
£000 £000 £000
Net losses on investments at fair value
through profit or loss 5 - (922) (922)
Income 1 39 - 39
Investment management fees - - -
Other expenses 2 (67) (1) (68)
Loss before finance costs and taxation (28) (923) (951)
Finance costs (3) - (3)
Loss on ordinary activities before taxation (31) (923) (954)
Taxation 3 - - -
Loss attributable to ordinary shareholders (31) (923) (954)
Loss per Ordinary Share 4 (0.52p) (15.37p) (15.89p)
The Total column of this statement is the profit and loss account of the Fund.
All revenue and capital items are derived from continuing operations. No
operations were acquired or discontinued in the year. A Statement of Total
Recognised Gains and Losses is not required as all gains and losses of the Fund
have been reflected in the above statement.
BALANCE SHEET
as at 31 March 2013
Notes 2013 2012
£000 £000
Fixed Assets
Investments at fair value through profit or loss 5 3,248 4,064
Current Assets
Debtors 6 14 15
Cash at bank and on deposit 186 846
Total current assets 200 861
Creditors: amounts falling due within one year 7 (633)
(211)
Net current assets (11) 228
Total assets less current liabilities 3,237 4,292
Capital and Reserves
Share capital 8 300 300
Share premium 314 314
Special reserve 5,144 5,144
Capital redemption reserve 27 27
Capital reserve (1,927) (924)
Revenue reserve (621) (569)
Equity shareholders' funds 3,237 4,292
Net asset value per Ordinary Share 4 53.90p 71.47p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year to 31 March 2013
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
£000 £000 £000 reserve £000 £000
£000
As at 1 April 2012 300 314 5,144 27 (924) (569)
Loss attributable to
shareholders
- - - - (1,003) (52)
As at 31 March 2013 300 314 5,144 27 (1,927) (621)
For the year to 31 March 2012
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
£000 £000 £000 reserve £000 £000
£000
As at 1 April 2011 300 314 5,144 27 (1) (538)
Loss attributable to
shareholders
- - - - (923) (31)
As at 31 March 2012 300 314 5,144 27 (924) (569)
CASH FLOW STATEMENT
for the year to 31 March 2013
2013 2012
£000 £000
Reconciliation of loss before finance costs and taxation to net
operating cash flows
(Loss) before finance costs and taxation (1,049) (951)
Losses on investments 991 922
Transaction costs 12 1
Movement in debtors 1 (2)
Movement in creditors (422) 2
Net cash outflow from operating activities (467) (28)
Taxation
Taxation paid - (4)
Loss on investment and servicing of finance
Finance costs (6) (3)
Capital expenditure and financial investment
Purchases of fixed asset investments (3,198) (1,165)
Sales of fixed asset investments 3,011 1,196
(187) 31
Movement in cash (660) (4)
Reconciliation of net cash flow to movement in net cash
Movement in cash in the year (660) (4)
Net cash as at start of the year 846 850
Net cash as at end of the year 186 846
ACCOUNTING POLICIES
Basis of preparation
The financial statements are prepared in accordance with UK Generally Accepted
Accounting Practice (''GAAP'') and with the 2009 Statement of Recommended
Practice ''Financial Statements of Investment Trust Companies and Venture
Capital Trusts'' (''SORP'').
Income
Income is included in the Income Statement on an ex-dividend basis. Income on
fixed interest
securities is included on an effective interest rate basis. Deposit interest is
included on an accruals basis.
Expenses and interest
Expenses and interest payable are dealt with on an accruals basis.
Investment management fees
Investment management fees, if any, are allocated 100 per cent to capital. The
allocation is in line with the Board's expected long-term return from the
investment portfolio. Due to the size of the Fund, the Manager has waived its
management fee. The terms of the investment management agreement are detailed
in the Report of the Directors on page 14 of the Accounts.
Taxation
Deferred taxation is recognised in respect of all timing differences that have
originated but not
reversed at the balance sheet date where transactions or events that result in
an obligation to pay
more or a right to pay less tax in the future have occurred at the balance
sheet date measured on an undiscounted basis and based on enacted tax rates.
This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits from which
the future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the taxable profits and the
results as stated in the accounts which are capable of reversal in one or more
subsequent periods.
Investments
The investments have been categorised as ''fair value through profit or loss''.
All investments are held at fair value. For listed investments this is deemed
to be at bid prices as at 31 March 2013. Contracts for Differences are
synthetic equities and are valued with reference to the investment's underlying
bid prices. Unlisted investments are valued at fair value based on the latest
available information and with reference to International Private Equity and
Venture Capital Valuation Guidelines.
All changes in fair value and transaction costs on the acquisition and disposal
of portfolio investments are included in the Income Statement as a capital
item. Purchases and sales of investments are accounted for on trade date.
Capital reserve
Gains and losses on realisations of fixed asset investments, and transactions
costs, together with
appropriate exchange differences, are dealt with in this reserve. All incentive
fees and investment management fees, together with any tax relief, is also
taken to this reserve. Increases and decreases in the valuation of fixed asset
investments are dealt with in this reserve.
NOTES TO THE ACCOUNTS
2013 2012
1. Income £000 £000
Income from UK listed shares and securities
- dividends 34 19
- interest 16 20
50 39
2. Other expenses
Revenue
General expenses 39 29
Directors' fees †22 18
Auditor's remuneration - audit services* 23 17
- taxation services* 12 3
96 67
†The Directors' fees in respect of the year ended 31 March 2013 were £18,000.
The figure above includes an adjustment for an underaccrual at 31 March 2012
of £4,000.
*The 2013 figures include VAT. The fees in respect of the year ended 31 March
2013 for audit services and taxation services, excluding VAT, were £17,000 and
£4,000 respectively.
Capital
Transaction costs - acquisitions 6 -
- disposals 6 1
12 1
3. Taxation
Current taxation - -
Deferred taxation - -
Total taxation for the year - -
Loss on ordinary activities before taxation (1,055)(954)
The tax assessed for the year is different from the standard small company
rate of corporation tax in the UK. The differences are noted below:
Corporation tax (20%, 2012 - 20%) (211) (191)
Non taxable UK dividends (7) (4)
Non taxable investment losses/(gains) in capital 201 185
Movement in unutilised management expenses 17 10
Total taxation charge for the year - -
At 31 March 2013, the Fund had unutilised management expenses of £850,000 (2012 - £767,000).
A deferred tax asset of £170,000 has not been recognised on the unutilised management
expenses as it is unlikely that there would be suitable taxable profits from which the future
reversal of the deferred tax asset could be deducted.
4. Returns per share
Returns per share are 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 loss for the year of £1,055,000
(2012 - loss of £954,000).
Capital return per share is based on net capital loss during the year of
£1,003,000 (2012 - loss of £923,000).
Revenue return per share is based on the revenue loss after taxation for the
year of £52,000 (2012 - £31,000).
The net asset values per share are based on the net assets of the Fund of
£3,237,000 (2012 -
£4,292,000) divided by the number of shares in issue at the year-end as shown
in Note 8 of the Accounts.
2013 2012
5. Investments at fair value through profit or £000 £000
loss
Listed investments 3,062 3,180
Unlisted investments 186 884
Valuation as at end of year 3,248 4,064
Listed Unlisted
£000 £000
Valuation as at start of year 3,180 884 4,064 4,973
Investment holding (losses)/gains as at (1,073) (102) (1,175) 501
start of year
Cost as at start of year 4,253 986 5,239 4,472
Purchases of investments at cost 3,192 - 3,192 1,210
Proceeds from sale of investments (2,732) (285) (3,017) (1,197)
Transfers 55 (55) - -
Net (loss)/gain on sale of investments (1,500) (59) (1,559) 754
Cost as at end of year 3,268 587 3,855 5,239
Investment holding (losses) as at end of (216) (391) (607) (1,175)
year
Valuation as at end of year 3,052 196 3,248 4,064
Net (loss)/gain on sale of investments (1,500) (59) (1,559) 754
Movement in investment holding gains 857 (289) (568) (1,676)
Total (loss) on investments (643) (348) (991) (922)
6. Debtors
2013 2012
£000 £000
Investment income due but not received 6 7
Taxation 8 8
14 15
7. Creditors: amounts falling due within one year
2013 2012
£000 £000
Amounts due under CFD's 164 609
Other creditors 47 24
211 633
8. Share capital
Authorised
100,000,000 ordinary 5p shares (2012 - same) 5,000 5,000
Allotted, issued and fully paid
6,005,000 ordinary 5p shares (2012 - same) 300 300
9. The financial information contained within this announcement does
not constitute statutory accounts as defined in sections 434 and 435 of the
Companies Act 2006. The results for the years ended 31 March 2013 and 2012 are
an abridged version of the statutory accounts for those years. The Auditor has
reported on the 2013 and 2012 accounts, their reports for both years were
unqualified and did not contain a statement under section 498 of the Companies
Act 2006. Statutory accounts for 2012 have been filed with the Registrar of
Companies and those for 2013 will be delivered in due course.
10. The Annual Report and Accounts for the year ended 31 March 2013 will
be mailed to shareholders shortly and copies will be available from the
Manager's website www.svmonline.co.uk and the Fund's registered office at
7 Castle Street, Edinburgh, EH2 3AH.
The Annual General Meeting of the Fund will be held at 9.30am on
Friday 13 September 2013 at 1-2 Marylebone High Street, London W1U 4LZ.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699
Roland Cross Broadgate Mainland 0207 726 6111
3-Jul-13
Latest directors dealings
- 2 days ago Origin Enterprises (CDI)
- 2 days ago Molten Ventures
- 2 days ago Paragon Banking Group
- 2 days ago North American Income Trust (The)
- 2 days ago Acg Acquisition Company Limited Cls A Npv (DI)