22 May 2012 14:30
SVM GLOBAL FUND PLC Half Yearly Statement for the six months to 31 March 2012 Investment ObjectiveThe objective of the Fund is to achieve long-term growth through a diversifiedinternational multi-strategy portfolio and unique access to specialist fundsincluding hedge and private equity. Its aim is to outperform the FTSE WorldIndex on a total return basis.
Highlights
* Over the 6 months to 31 March 2012, net asset value increased by 5.1%
against the benchmark, FTSE World Index rise of 15.9%.
* The Fund retains an overweight exposure to the more soundly financed and
stronger growing emerging markets and underweight the weaker developed
markets.
* The Fund has been a beneficiary of continuing corporate activity and trust
restructurings, many of which have still to be recognised by the market.
Capital was returned from five portfolio investments during the period. * Average discount within holdings standing around 26% against a sector average of 10%.
* The Fund bought back 800,000 shares and now held in treasury and a further
1,200,000 shares were cancelled.
For further information, please contact:
Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate Mainland 0207 726 6111
Chairman's Statement
For the first time in two years, it is disappointing to report that the Fundunderperformed its benchmark FTSE World Index over a six month period. Whilethe net asset value rose by 5.1% over the period to 31 March 2012, thebenchmark increased by 15.9%. This is not unusual and follows a familiarpattern in the Fund's history. There have often been short periods where thenet asset value has lagged the benchmark. Happily, these have typically beenfollowed, or preceded by, longer periods of outperformance.
The Fund tends to lag in strong markets as a consequence of its defensive stance and relatively outperform in weak conditions. Since the quarter end, the Fund has recovered some of the ground lost. At close of business on 18 May 2012, the net asset value stood at 319.52p, a fall of 5.2% against the benchmark's decline of 9.5%.
Portfolio Review
After the stockmarket collapse in the third quarter of 2011, markets recoveredstrongly as investors became confident that fears of a US recession, the Eurodebt crisis and a hard landing in China had been overstated. Quantitativeeasing continued in developed markets, with Europe leading the charge. Globalgrowth has resumed, albeit weakly in the West and arguably not at all inEurope. In a departure from the norm, emerging markets lagged developed marketsduring most of the rebound, before regaining ground in the most recent quarter.The Managers continue to favour emerging and frontier markets, seeing theirsuperior growth potential, relatively low net debt, manageable inflation andflexible interest rates as bull points. They do not see reasons for short-termoptimism about developed markets because of the lack of growth and heavy debtburden, especially in Europe and to a lesser extent in the US.The Fund remains overweight in emerging markets and underweight in the moresluggish western economies, principally Europe. In addition the Fund retains alow exposure to two major currencies - the Euro and the Yen - but has increasedits exposure to the dollar. Russia remains the Fund's largest overweightposition in mature emerging markets. The Managers increased exposure in lessmature frontier markets with the addition of a couple of new investments.The Fund still holds a number of investment trusts with unusually widediscounts. The average discount within these holdings is around 26% against asector average of 10%. During the last eighteen months, as corporate activityin the investment trust space has increased, funds showing unjustifiably widediscounts have benefited. The portfolio's concentration on this target area hasrewarded the Fund and the Managers expect discounts to narrow further asreconstructions in selected trusts gain pace. During the period, five fundsreturned capital at close to asset value.
Over the six month period most of the remaining portfolio changes occurred in the hedge section, where three funds were redeemed and replaced with three fresh investments.
Share buybacks and dividends
At the Annual General Meeting in December shareholders voted to continue theFund for a further three years. They also voted for buybacks both forcancellation and into treasury for later re-issue within well-definedparameters. Shares can only be re-issued out of treasury when the discount islower and the absolute price higher than the original buyback transaction. Overthe period the Fund bought back 1,200,000 shares for cancellation. A further800,000 shares were bought back at an average price of 286 pence and at anaverage discount of 14.2%. Unless re-issued, these shares will be cancelled onthe anniversary of their purchase.The board is constantly monitoring the discount rating and the volatility ofthe shares. We are ready to buy back stock at a discount when it is consideredto be in shareholders interests.As its primary objective is capital growth, the Fund normally opts for a smalldividend. This year a dividend of 2pence a share was paid in February and webelieve that a similar amount will be paid next year.Shane RossChairman
Financial Statements (unaudited)
Income Statement 6 months to 31 March 2012 6 months to 31 March 2011 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains / (losses) on - 8,608 8,608 - 21,413 21,413investments Income 994 - 994 1,098 - 1,098 Investment management fees (60) (540) (600) (64) (580) (644) Other expenses (88) (22) (110) (91) (38) (129) -------- -------- -------- -------- -------- -------- Return before interest 846 8,046 8,892 943 20,795 21,738and taxation Finance costs (20) (183) (203) (16) (142) (158) -------- -------- -------- -------- -------- -------- Net return after taxation 826 7,863 8,689 927 20,653 21,580 -------- -------- -------- -------- -------- -------- Return per ordinary share 1.57p 14.99p 16.56p 1.72p 38.31p 40.03p --------- -------- -------- --------- -------- -------- 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.A Statement of Total Recognised Gains and Losses is not required as all gainsand losses of the Fund have been reflected in the above statement.Cash Flow Statement 6 months to 6 months to 31 March 31 March 2012 2011 £'000 £'000 Net cash flow from operating activities 556 843
Returns on investment and servicing of finance (203) (158) finance
Capital expenditure and net financial 8.309 408investment Financing (5,739) (809) Equity dividends paid (1,036) (537) --------- --------- Increase /(decrease) 1,887 (253) --------- ---------Balance Sheet as at as at as at 31 March 30 September 31 March 2012 2011 2011 £'000 £'000 £'000 Investments at fair value through 165,932 169,442 189,945profit or loss --------- --------- --------- Current assets 6,595 4,179 2,696 Creditors: amounts falling due within (531) (3,539) (5)one year --------- --------- --------- Net current assets 6,064 640 2,691 --------- --------- --------- Equity shareholders' funds 171,996 170,082 192,636 --------- --------- ---------- Net asset value per ordinary share 337.18p 320.85p 358.50p
Reconciliation of Movements in Shareholders Funds For the period to 31 March 2012
Share Share Capital Capital Revenue capital premium redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 As at 1 October 2011 13,252 10,966 5,201 139,370 1,293 Return attributable to - - - 7,863 826shareholders Ordinary dividends - - - - (1,036) Share re-purchases (299) - 299 (5,739) - -------- -------- -------- --------- -------- As at 31 March 2012 12,953 10,966 5,500 141,494 1,083 -------- -------- -------- --------- --------
For the period to 31 March 2011
Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 October 2010 14,274 10,966 139 4,179 142,265 580 Return attributable to - - - - 20,653 927shareholders Ordinary dividends - - - - - (537) Share re-purchases (209) - (139) 209 (671) - -------- -------- -------- -------- --------- -------- As at 31 March 2011 14,065 10,966 - 4,388 162,247 970 -------- -------- -------- -------- --------- --------
Directors' Responsibilities for the Financial Statements
The Directors are responsible for preparing the financial statements inaccordance with applicable law and regulations. Company law requires the Boardto prepare financial statements for each financial year. Under that law, theDirectors have elected to prepare the financial statements in accordance withUnited Kingdom Generally Accepted Accounting Practice (UK Standards andapplicable law).The financial statements are required by law to give a true and fair view ofthe state of affairs of the Fund at the end of the financial year and of thenet return of the Fund for that year. In preparing these financial statements,the Directors are required to: (a) select suitable accounting policies and thenapply them consistently; (b) make judgments and estimates that are reasonableand prudent; and (c) state whether applicable accounting standards have beenfollowed.The Board is also responsible for the maintenance of proper accounting recordswhich disclose with reasonable accuracy, at any time, the financial position ofthe Fund and to enable them to ensure that the financial statements comply withthe Companies Act 2006. They are also responsible for safeguarding the assetsof the Fund and for taking reasonable steps for the prevention and detection offraud 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).
Principal Risks & Uncertainties
The principal risks inherent within the Fund are market related and have beenclassified as valuation risk, liquidity risk, exchange rate risk, interest raterisk and credit risk. Additional risks faced by the Fund can be categorisedunder the following headings; investment strategy, share price discount,regulatory and operational. The Fund has an established environment for themanagement of these risks which are continually monitored by the Managers. TheBoard regularly considers the risks associated with the Fund and receives bothformal and informal reports from the Managers and third party service providersaddressing these risks. An explanation of these risks and how they aremitigated is explained in the 2011 Annual Report, which is available on theManager's website: www.svmonline.co.uk. These principal risks and uncertaintieshave not changed from those disclosed in the 2011 Annual Report.
Notes
1. The accounts have been prepared in accordance with applicable accounting standards and the 2009 Statement of Recommended Practice (SORP) issued by the Association of Investment Companies.
2. Returns per share are based on a weighted average of 52,471,053 (2011 - 53,908,519) ordinary shares in issue during the period.
Total return per share is based on the post tax total gain for the period of £ 8,689,000 (2011 - £21,580,000).
Capital return per share is based on net capital return during the period of £ 7,863,000 (2011 - £20,653,000).
Revenue return per share is based on the revenue after taxation for the period of £826,000 (2011 - £927,000).
3. The number in shares in issue at 31 March 2012 was 51,009,546 (2011 -53,734,546). In addition 800,000 (2011 - nil) ordinary shares were held intreasury. During the period, 1,200,000 ordinary shares were bought back throughthe market for a total consideration of £3,449,000 and cancelled. A further800,000 ordinary shares were bought back through the market for a totalconsideration of £2,290,000 and held in treasury.4. Investment management fees and finance interest have been allocated 10% torevenue and 90% to capital (2011: same). This allocation is in line with theBoard's expected long-term split of returns in the form of income and capitalgains respectively from the investment portfolio.5. The above unaudited figures do not constitute full accounts in terms ofSection 435 of the Companies Act 2006 ("the Act"). The accounts for the year to30 September 2011, on which the auditors issued an unqualified report underSection 495 of the Act, have been lodged with the Registrar of Companies anddid not contain a statement required under Section 498 of the Act.6. A copy of the half yearly report for the 6 months to 31 March 2012 will beavailable on the Managers' website: www.svmonline.co.uk towards the end of thisweek. Copies are also available for inspection at 7 Castle Street, EdinburghEH2 3AH, the registered office of the Fund.
XLON