17 May 2011 10:49
SVM GLOBAL FUND PLC Half Yearly Statement for the six months to 31 March 2011 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 2011, net asset value increased by 12.4% against the benchmark, FTSE World Index rise of 11.0%. Over the longer term, the Fund continues to outperform the index. * Strong performances from the Resources and Specialist Fund themes and emerging markets - principally Russia and Brazil. Disappointments were restricted to a small number of funds in the Property and Hedge themes.
* The Fund remains well placed for global economic recovery through its core
themes and overweight selective emerging markets exposure.
* The Fund has been a beneficiary of continuing corporate activity and trust
restructurings, many of which have yet to be fully valued by the market.
These offer the opportunity for discounts to narrow materially irrespective
of the performance of stockmarkets.
* Average discount within holdings standing around of 25% against a sector
average of 10%. * The Fund bought back 300,000 shares into treasury and a further 835,000 shares were cancelled.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699 Roland Cross Broadgate Mainland 0207 726 6111
Chairman's Statement
I am pleased to report that, following the out-performance recorded for theyear to 30 September 2010, the Fund again beat its benchmark index in the sixmonths to 31 March 2011. The net asset value rose by 12.4% to end March 2011 at358.50 pence against a rise of 11.0% in the benchmark FTSE World Index. Thishas continued with a 0.5% rise in April against an unchanged benchmark.As I pointed out in my last statement, the Fund retains a proud record over along period - it celebrates its twentieth anniversary as an investment trust inJuly this year. Over that period, the asset value and share price haveincreased by 659% and 541% respectively, compared to a benchmark increase ofonly 191%.
There have been short periods when the asset value has lagged the benchmark, but they have been typically followed by phases of renewed strength. The Managers believe that we have now entered an out-performance phase and are confident that the portfolio will continue to benefit from recent trends.
Portfolio Review
The six months under review saw the continuation of the rally started two yearsago and was broadly based. In a rare departure, mature markets have outstrippedemerging markets in local currency terms, although this was lessened by therelative weakness in developed market currencies.The Fund remains overweight in emerging markets and underweight in the moreindebted western economies. In addition, the lower exposure to the majorcurrencies ( US dollar and Euro) remains constant, which has been profitableover the period and subsequently. Exposure to emerging markets is verytargeted; the managers prefer Russia to China and Brazil to India among themore mature emerging markets. There have been strong performances from theResources and Specialist Funds themes with disappointments restricted to asmall number of funds, principally those in the Property and Hedge section ofthe portfolio.The Fund continues to hold a number of investment trusts that trade atunusually wide discounts. The average discount within portfolio holdings isaround 25% against a sector average of 10%. This is superficiallydisappointing, but continued corporate activity within the trust sector - asshareholders identify unlocked value - gives hope that the Fund is poised tobenefit from these investments at an early date. There is a clear opportunityfor discounts in these stocks to narrow materially, irrespective of theperformance of stockmarkets. The Managers remain convinced that the underlyingportfolio discount will narrow as further catalysts and liquidity events occur.During the period under review there have been a small number of portfoliochanges. The realisations were the result of the funds achieving eitherabsolute price and/or discount targets. There was a single complete disposal -Castle Asia Alternative - after its wind-up announcement. The reductions weredue either to mandatory cash distributions or where there were short-termpricing anomalies. There were four new acquisitions; two in the resource sectorand two in European property funds.
Discount, dividend and share transactions
During the period, the Fund bought back 300,000 shares into treasury while835,000 shares that had been held in treasury were cancelled. The Fund retains2,525,000 shares in treasury which will be cancelled later in the yearfollowing the anniversary of their original re-purchase. The Fund is on trackto generate higher income this year, making an increased dividend a highprobability.The Board remains conscious of the modest rating of the shares and believe thatthey should be trading at a substantially lower discount. We are ready to buyback further shares at a discount or indeed to issue them at a premium when itis considered in shareholders' interests. The Board and Managers believe thatthe retention of these powers creates an active and efficient market forinvestors.
Outlook
The Managers are optimistic that the worst of the global recession is at an endand that, although recovery in mature markets is likely to be anaemic, asustained global recovery is on track. They have positioned the Fund, with itsmixture of relative and absolute return focused funds, ready to sustain its
recent recovery.Shane RossChairman16 May 2011
Financial Statements (unaudited)
Income Statement 6 months to 31 March 2011 6 months to 31 March 2010 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains / (losses) on - 21,413 21,413 - 17,267 17,267investments Income 1,098 - 1,098 401 - 401
Investment management fees (64) (580) (644) (61) (547)
(608) Other expenses (91) (38) (129) (61) (24) (85) -------- -------- -------- -------- -------- --------Return before interest 943 20,795 21,738 279 16,696 16,975and taxation Finance costs (16) (142) (158) (10) (90) (100) -------- -------- -------- -------- -------- --------Net return after taxation 927 20,653 21,580 269 16,606 16,875 -------- -------- -------- -------- -------- -------- Return per ordinary share 1.72p 38.31p 40.03p 0.47p 29.11p 29.58p
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 gains and losses of the Fund have been reflected in the above statement.
Cash Flow Statement 6 months to 6 months to 31 March 31 March 2011 2010 £'000 £'000 Net cash flow from operating activities 843 (160)
Returns on investment and servicing of finance (158) (100) Capital expenditure and net financial
408 3,434investment Financing (809) (2,145)Equity dividends paid (537) (1,142) ---------- ----------Decrease in cash (253) (113) ---------- ----------Balance Sheet as at as at as at 31 March 30 September 31 March 2011 2010 2010 £'000 £'000 £'000 Investments at fair value through 189,945 170,467 173,227profit or loss ---------- ---------- --------- Current assets 2,696 2,029 6,889
Creditors: amounts falling due within (5) (93)
(7)one year ---------- ---------- ---------Net current assets 2,691 1,936 6,882 ---------- ---------- ---------- Equity shareholders' funds 192,636 172,403 180,109 ---------- ---------- ---------- Net asset value per ordinary share 358.50p 319.06p
320.14p
Reconciliation of Movements in Shareholders Funds 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
580Return attributable - - - - 20,653 927to shareholders Ordinary dividends - - - - - (537)Share re-purchases (209) - (139) 209 (671) - --------- --------- --------- --------- ---------
---------
As at 31 March 2011 14,065 10,966 - 4,388 162,247
970 --------- --------- --------- --------- --------- ---------
For the period to 31 March 2010
Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 October 2009 14,274 10,966 8,251 4,179 127,564 1,287Return attributable - - - - 16,606 269to shareholders Ordinary dividends - - - - - (1,142)Share re-purchases - - (2,145) - - - --------- --------- --------- --------- ---------
---------
As at 31 March 2010 14,274 10,966 6,106 4,179 144,170
414 --------- --------- --------- --------- --------- ---------
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 2010 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 2010 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 53,908,519 (2010 -57,041,847) ordinary shares in issue during the period.Total return per share is based on the post tax total gain for the period of £21,580,000 (2010 - £16,875,000).Capital return per share is based on net capital return during the period of £20,653,000 (2010 - £16,606,000).Revenue return per share is based on the revenue after taxation for the periodof £927,000 (2010 - £269,000).The number of shares in issue at 31 March 2011 was 53,734,546 (2010 -56,259,546).
3. During the period, 300,000 ordinary shares were bought back through the market for a total consideration of £809,000 and held in treasury. 835,000 shares held in treasury were cancelled in the period.
4. Investment management fees and finance interest have been allocated 10% torevenue and 90% to capital (2010: 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 2010, 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 2011 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.
vendor