Half Yearly Statement
PRESS RELEASE
15 November 2010
SVM UK EMERGING FUND plc
Half Yearly Statement
(for the six months to 30 September 2010)
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 slightly higher in the six months against a
volatile stockmarket background.
* The Fund remains cautiously positioned - out-performing in the first
quarter and lagging in the second.
* Net asset value more than doubles since remit changed in September 2004.
* Small companies outperform large companies as investor risk appetite
returns.
Chairman's Statement
The six months to 30 September 2010 was indeed a tale of two halves. Equity
markets rallied strongly in the most recent quarter, more than erasing the
losses suffered in the previous quarter. However these moves were accompanied
by a material reduction of volumes, only part of which can be explained by the
quiet holiday induced summer period. Of more interest has been the re-emergence
of risk appetite among some investors. This manifests itself greatest in the
continuing out-performance of smaller companies over their larger equivalents.
The FTSE AIM Index, the index of smaller companies, increased by 12% over the
last six months. This compares favourably with larger companies with the FTSE
100 Share Index which fell by 1% over the same period. The Fund continues to be
defensively positioned and was up 1% in the six months after falling by less
than the benchmark in the first quarter but lagging in the second. Since the
Fund changed it name and remit allowing it to invest in AIM companies in
September 2004, the asset value is up 115% against a fall in the AIM Index of
9% and a rise of the FTSE 100 Share Index of 51%.
The Fund retains a concentrated portfolio of forty companies with 89% invested
in AIM companies. Of the balance, 7% is in three unquoted investments and a
further 4% 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.
With the AIM Index heavily weighted towards resource companies, it is
unsurprising that the Index has performed well this year. This increased
investor interest is in marked contrast to recent years when investors,
especially institutions, have shied away from these companies. With limited
liquidity, many of these companies have seen share prices increase
substantially as investors have scrambled to gain exposure. The Fund has
benefited from a number of strong performances but is not a purely resources
fund. While retaining a large weighting in resource companies, it maintains a
balanced portfolio.
The portfolio changes over the six months have been restricted to continuing
sales in Norseman Resources and disposals of two of the smaller residual
positions. This has allowed for the introduction of two fresh holdings, Oracle
Coalfields and Nautical Petroleum. Both have seen positive contributions since
their acquisition. Unfortunately the strong performances registered by a large
number of the investments have been offset by disappointments. The Managers are
confident that most of these setbacks are temporary and anticipates substantial
recovery in these holdings.
Although stockmarkets have largely recovered from the shocks of 2008, the
economic background remains challenging. Although we continue to remain
cautious, there continues to be opportunities to make money particularly in
smaller companies. We believe that the Fund is well positioned to continue to
deliver its long term out-performance.
Peter Dicks
Chairman
Summarised Income Statement
(unaudited)
Six months to 30 September Six months to 30 September
2010 2009
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(Loss) / gain on - (39) (39) - 204 204
sale of investments
Movement in investment - 97 97 - 867 896
holding losses
-------- -------- -------- -------- -------- --------
Gains on investments - 58 58 - 1,071 1,071
Income 8 - 8 6 - 6
Investment - - - - - -
management fees
Other expenses (24) - (24) (28) (2) (30)
-------- -------- -------- -------- -------- --------
Return before (16) 58 42 (22) 1,069 1,047
interest and taxation
Bank overdraft interest (1) - (1) (2) - (2)
-------- -------- -------- -------- -------- --------
Transfer (17) 58 41 (24) 1,069 1,045
attributable to
shareholders
-------- -------- -------- -------- -------- --------
Return per ordinary (0.29p) 0.97p 0.68p (0.40p) 17.81p 17.41p
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
2010 2010 2009
£'000 £'000 £'000
Investments at fair value through 3,771 3,848 3,197
profit or loss
Net current assets 385 267 534
--------- --------- ---------
Equity shareholders' funds 4,156 4,115 3,731
--------- --------- ---------
Net asset value per ordinary share 69.21p 68.53p 62.14p
--------- --------- ---------
Summarised Cash Flow Statement
(unaudited)
Six months Six months
to to
30 September 30 September
2010 2009
£'000 £'000
Net cash flow from operating (26) (60)
activities
Taxation (1) (2)
Capital expenditure and financial 23 340
investment
Servicing of finance (2) (2)
-------- --------
Movements in cash (6) 276
-------- --------
Summarised Reconciliation of Movement in Shareholders Funds
(unaudited)
For the period to 30 September 2010
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2010 300 314 5,144 27 (1,174) (496)
Return/(loss) - - - - 58 (17)
attributable to
shareholders
------- ------- ------- ------- -------- -------
As at 30 300 314 5,144 27 (1,116) (513)
September 2010
------- ------- ------- ------- -------- -------
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 2009 300 314 5,144 27 (2,646) (453)
Return/(loss) - - - - 1,069 (24)
attributable to
shareholders
------- ------- ------- ------- -------- -------
As at 30 300 314 5,144 27 (1,577) (477)
September 2009
------- ------- ------- ------- -------- -------
Largest Investments as at 30 September 2010 Sector Analysis as at 30 September
2010
% %
1 Archipelago Resources 7.2 Basic Materials 55.1
2 China Pub Company 7.2 Industrials 8.4
3 Symphony Environmental 7.1 Oil & Gas 10.6
4 Norseman Resources 7.0 Consumer Goods 0.0
5 Hydrodec 6.0 Consumer Services 15.8
6 ToLuna 4.3 Healthcare 1.9
7 Nautical Petroleum 4.3 Telecoms 0.0
8 Kirkland Lake Gold 4.2 Technology 0.0
9 Mantle Diamonds 4.0 Financials 6.8
10 Borders & Southern 3.6 Utilities 1.4
Petroleum
-------- --------
Total 54.9 100.0
-------- --------
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 2010 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 2010 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 2006. 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 (2009 - same)
ordinary shares in issue during the year.
Total return per share is based on the total gain for the period of £41,000
(2009 - £1,045,000).
Capital return per share is based on net gain for the period of £58,000 (2009 -
£1,069,000).
Revenue return per share is based on the revenue loss after taxation for the
period of £17,000 (2009 - £24,000).
The number of shares in issue at 30 September 2010 was 6,005,000 (2009 -
6,005,000).
3. Due to the size of the Fund, the Investment Managers have waived their fees
for the periods to 30 September 2009 and 2010.
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 2010, 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 mailed to shareholders towards the middle of November
2010. 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.
For further information, please contact:
Donald Robertson SVM Asset Management 0131 226 6699
Roland Cross Broadgate Mainland 020 7726 6111
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