Half-yearly Report
PRESS RELEASE
20 November 2009
SVM UK EMERGING FUND plc
Half Yearly Statement
(for the six months to 30 September 2009)
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")
Highlights
* Net asset value per share and share price rises by approx 39% and 71%
respectively in the six month.
* Net asset value up 93% against a fall of 26% in AIM Index since remit
changed in September 2004.
* Small companies outperform large companies as investor risk appetite
returns.
* Fund retains cash reserves following successful realisations.
For further information, please contact:
Donald Robertson SVM Asset Management 0131 226 6699
Roland Cross Broadgate 020 7726 6111
Chairman's Statement
The stockmarket rally which started in early March continued virtually unabated
for the six months to 30 September 2009. What is more relevant for the Fund and
shareholders is that small companies outperformed larger ones in this period
with the FTSE AIM Index rising 57.8% against the FTSE 100 share Index
increasing 33.7% in the six months to 30 September 2009. The Fund, being fairly
defensively positioned, struggled to keep pace with the rise in the index, but
still demonstrated good returns. Over the six months to 30 September 2009, the
net asset value per share and share price increased by 38.9% and 71.0%
respectively with the discount narrowing from a wide 31% to just over 12%. It
is now five years since the Fund changed it name and remit to specialise in the
AIM market. Since September 2004, the asset value is up 93% against a fall in
the AIM Index of 26%.
While stockmarkets were heavily oversold in early March, the subsequent rally
has more than eradicated this position. Indeed it could be argued that the
pendulum has swung too far in the other direction. With this in mind, the Fund
retains cash reserves together with a number of investments that are fairly
insensitive to the general index movements.
The Managers have resisted the temptation to make wholesale changes to the
portfolio either when the markets were adverse or recently as circumstances
have improved. While a number of the holdings have bounced aggressively from
the lows, the Managers believe that there is additional value still to be
extracted. However, profits have selectively been booked, principally in two of
the companies specialising in gold production - Norseman and Kirkland Lake. The
proceeds have been used to introduce a new holding in Ruralec, a small
independent power producer in Latin America and to make a commitment to a
secondary placing completed in October in a new southern African focused multi–
commodity resource play.
The Fund is concentrated on a relatively small number of special situations.
There are thirty five companies in the portfolio with approximately 90%
invested in AIM companies. Of the balance, 7% is in three unquoted investments
and 3% in three residual PLUS quoted companies. In terms of sectors, the Fund
continues to be exposed to resources, industrials and consumer services with
little in financials and property.
While markets have recovered their poise and the likelihood of re-testing the
March lows unlikely, the economic background remains challenging. It will take
time for economics to catch up with markets and as such we remain cautious. We
believe that the Fund is well positioned to take advantage of a sustained
stockmarket recovery while retaining cash to make selective additional
investments, where appropriate.
Peter Dicks
Chairman
Summarised Income Statement
(unaudited)
Six months to 30 September Six months to 30 September
2009 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on sale of - 204 204 - 132 132
investments
Movement in - 867 867 - (1,095) (1,095)
unrealised depreciation
-------- -------- -------- -------- -------- --------
Gains on investments - 1,071 1,071 - (963) (963)
Income 6 - 6 15 - 15
Investment - - - - - -
management fees
Other expenses (28) (2) (30) (21) (1) (22)
-------- -------- -------- -------- -------- --------
Return before (22) 1,069 1.047 (6) (964) (970)
interest and
taxation
Bank overdraft (2) - (2) (18) - (18)
interest
-------- -------- -------- -------- -------- --------
Transfer (from) / to (24) 1,069 1,045 (24) (964) (988)
reserves
-------- -------- -------- -------- -------- --------
Return per Ordinary (0.40p) 17.81p 17.41p (0.40p) (16.05p) (16.45p)
Share
-------- -------- -------- -------- -------- --------
The 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
(unaudited)
As at As at As at
30 September 31 March 30 September
2009 2009 2008
£'000 £'000 £'000
Investments at fair value through 3,197 2,521 2,570
profit or loss
Net current assets / (liabilities) 53 4 165 375
--------- --------- ---------
Equity shareholders' funds 3,731 2.686 2.945
--------- --------- ---------
Net asset value per Ordinary Share 62.14p 44.73p 49.05p
--------- --------- ---------
Summarised Cash Flow Statement
(unaudited) Six months Six months
to to
30 September 30 September
2009 2008
£'000 £'000
Net cash flow from operating (60) (22)
activities
Taxation (2) -
Capital expenditure and financial 340 88
investment
Servicing of finance (2) (18)
-------- --------
Movements in cash 276 48
-------- --------
Summarised Reconciliation of Movement in
Shareholders Funds (unaudited)
For the period to 30 September 2009
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 300 314 5,144 27 (2,646) (453)
2009
Realised gain - - - - 204 -
on sale of
investments
Transaction - - - - (2) -
costs
Movement in - - - - 867 -
unrealised
appreciation on
investments
Return on - - - - - (24)
ordinary
activities after
taxation
------- ------- ------- ------- -------- -------
As at 30 300 314 5,144 27 (1,577) (477)
September 2009
------- ------- ------- ------- -------- -------
For the period to 30 September 2008
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 300 314 5,144 27 (1,449) (403)
2008
Realised gain - - - - 132 -
on sale of
investments
Transaction - - - - (1) -
costs
Movement in - - - - (1,095) -
unrealised
appreciation on
investments
Return on - - - - - (24)
ordinary
activities
after taxation
------- ------- ------- ------- -------- -------
As at 30 300 314 5,144 27 (2,413) (427)
September 2008
------- ------- ------- ------- -------- -------
Largest Investments as at 30 September 2009 Sector Analysis as at 30 September
2009
% %
1 Norseman Resources 16.9 Basic Materials 57.8
2 China Pub Company 8.0 Industrials 5.3
3 Symphony Environmental 7.2 Oil & Gas 8.9
Technologies
4 Hydrodec 6.7 Consumer Goods 0.0
5 Archipelago Resources 5.1 Consumer Services 17.1
6 Kirkland Lake Gold 4.9 Healthcare 1.1
7 Mantle Diamonds 4.5 Telecoms 0.0
8 ToLuna 4.2 Technology 0.4
9 Borders & Southern 3.2 Financials 6.8
Petroleum
10 Petrel Resources 2.8 Utilities 2.6
-------- --------
Total 63.5 100.0
-------- --------
Risks And Uncertainties
The principal risks inherent within the Fund are market related and have been
classified as valuation risk, liquidity risk, exchange rate risk, interest rate
risk and credit risk. Additional risks faced by the Fund can be categorised
under the following headings; investment strategy, share price discount,
regulatory and operational. The Fund has an established environment for the
management of these risks which are continually monitored by the Managers. The
Board regularly considers the risks associated with the Fund and 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 2009 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 2009 Annual Report.
Directors' Responsibility Statement
The Directors are responsible for preparing the financial statements in
accordance with applicable law and regulations. Company law requires the Board
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 (UK Standards and
applicable law).
The financial statements are required by law to give a true and fair view of
the state of affairs of the Fund at the end of the financial year and of the
net return of the Fund for that year. In preparing these financial statements,
the Directors are required to: (a) select suitable accounting policies and then
apply them consistently; (b) make judgments and estimates that are reasonable
and prudent; and (c) state whether applicable accounting standards have been
followed.
The Board is also responsible for the maintenance of proper accounting records
which disclose with reasonable accuracy, at any time, the financial position of
the Fund and to enable them to ensure that the financial statements comply with
the Companies Act 1985. They are also responsible for safeguarding the assets
of the Fund and for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors confirm that to the best of their knowledge:
(i) these financial statements have been prepared in accordance with the
Accounting Standards Board's statement `Half-Yearly Financial Reports';
(ii) the Half-Yearly Report includes a fair review of the information required
by Disclosure and Transparency Rules 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
(iii) the Half-Yearly Financial Report includes a fair review of the
information required by Disclosure and Transparency Rules 4.2.8R (disclosure of
related party transactions and changes therein).
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. Return per share is based on a weighted average of 6,005,000 (2008 - same)
ordinary shares in issue during the year.
Total return per share is based on the total gain for the period of £1,045,000
(2008 - loss of £988,000).
Capital return per share is based on net gain for the period of £1,069,000
(2008 - loss of £964,000).
Revenue return per share is based on the revenue loss after taxation for the
period of £24,000 (2008 - £24,000).
The number of shares in issue at 30 September 2009 was 6,005,000 (2008 -
6,005,000).
3. Due to the size of the Fund, the Investment Managers have waived their fees
for the periods to 30 September 2008 and 2009.
4. The above figures do not constitute full accounts in terms of Section 240 of
the Companies Act 1985. The accounts for the year to 31 March 2009, on which
the auditors issued an unqualified report under Section 235 of the Companies
Act 2005, have been lodged with the Registrar of Companies and did not contain
a statement required under Section 237(2) or (3) of the Companies Act 1985. The
half yearly report will be mailed to shareholders towards the end of November
2009. Copies will be available for inspection at 7 Castle Street, Edinburgh EH2
3AH, the registered office of the Fund and will be available on the Managers'
website: www.svmonline.co.uk.
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