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16 Jun 2008 16:00
PRESS RELEASE16 June 2008 SVM UK EMERGING FUND PLC RESULTS FOR THE YEAR ENDED 31 MARCH 2008 Key Points * Net asset value increased by 3.0% compared to a decrease of 15.2% in the FTSE AIM Index * Share price rose by 8.0% * Since the Fund's change of investment objective in September 2004, net asset value has increased 103.6% compared to only a 7.7% increase in the benchmark * The Fund's shares have traded on a small premium for most of the year * The Fund retains a concentrated portfolio of approximately 40 stocks * The Fund has maintained a weighting in excess of 80% in companies listed on AIM, with slightly less than 6% in PLUS market companies.
Ends
For further information, please contact:
Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate 020 7726 6111
SVM UK EMERGING FUND PLC RESULTS FOR THE YEAR ENDED 31 MARCH 2008
Commenting on the results, Chairman, Peter Dicks, said:
"I am pleased to report another year of substantial relative and small absolute performance. This should be viewed in light of the challenging environment. For the year to 31 March 2008, the Fund's net asset value increased by 3.0% to 65.50 pence per share, compared to a decline of 15.2% in the FTSE AIM Index, the Fund's benchmark - an outperformance in excess of 18%. The share price rose by 8.0% in the year. Since the Fund's change of investment objective in September 2004, the net asset value has increased by 103.6% against a benchmark rise of only 7.7%.
I am in a happy position reporting that the Fund's shares have traded on a small premium for most of the year. This is an exceptional result given that the average discount for investment trusts as a whole widened from 7% to over 12% in the year. Indeed, small companies funds as a whole have fared much worse with a number having discounts of 20% and above. Although no shares were issued in the year, it is the intention to increase the size of the Fund through further new issues but only at the appropriate time and level which adds to current shareholder value.
Portfolio
The Fund retains a concentrated portfolio of approximately forty stocks, five of which are companies traded on the PLUS market, three unlisted and the balance being listed on AIM. Throughout the year, the Fund maintained a weighting of in excess of 80% in companies listed on AIM with slightly less than 6% in PLUS market companies, the Fund's previous principal focus.
The Fund is managed on a more absolute basis and many of the holdings could be categorised as special situations. By being benchmark aware rather than attempting to replicate sector weightings, the Fund has demonstrated substantially less volatility than both the AIM Index or indeed the broader market, represented by the FTSE All Share Index.
The Managers believe that this approach gives the potential of both relative out-performance and absolute gains. Although individual investment risk is higher, this can be mitigated through a diversified portfolio. There is always a trade off between holding a broadly diversified portfolio which will demonstrate benchmark type returns against holding relatively few large positions with the potential of strong performance. The Managers favour the latter approach.
Review of the year
The year under review proved to be a watershed for equity markets. Following more than four years of benign economic and favourable stockmarket conditions, this was brought to an abrupt halt by the uncovering of the problems principally associated with leverage and poor lending practices. Although initially the impact was seen as being a purely US problem, it was not long before the contagion spread to other markets.
At an operating level, UK small companies should have been relatively immune. Typically, they are less financially leveraged than their larger peers and rely to a greater extent on equity as a means of providing funds rather than borrowing. Unfortunately, small companies are perceived to be riskier and, as such, have been treated worse than larger companies. This is perverse but perhaps understandable as investors sought safe havens. The price falls in some cases appear overdone and has uncovered some interesting opportunities. The Managers, having freed up capacity in the summer of 2007, have been making some selective additions to the portfolio at attractive levels. While there continues to be no shortage of investment opportunities, one has to be careful as the market is currently extremely intolerant of failure or delay.
Despite the rather less than helpful environment, AIM continues to be the market of choice for small and increasingly larger companies globally. The new issue market, which had been vibrant over the last few years, is now more discerning. We believe this is positive and should in time improve the quality of the AIM market. Fortunately, the Fund has largely steered clear of new issues, preferring to concentrate on companies that have been listed for some time. This stance has allowed the Fund to avoid the high profile collapses.
Outlook
However unpleasant at the time, market corrections are healthy, inevitable and a pre-requisite for a vibrant on-going stockmarket. Following the recent correction, there is arguably currently less downside risk to equity markets than in the recent past.
The Fund has a concentrated portfolio of special situations and companies that exhibit higher than average growth potential but are still modestly valued. The Board and the Managers believe that the Fund should extend the recent out-performance and is well placed to deliver on its objective of long term capital growth with lower volatility."
Peter DicksChairmanSummarised Income Statement (unaudited) Year to 31 March 2008 Year to 31 March 2007 Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on - 222 222 - 866 866investments at fair value through profit or loss Income 19 - 19 5 - 5 Investment - - - - - -management fees Other expenses (69) (5) (74) (54) (8) (62) ------- ------- ------- ------- ------- ------- Return before (50) 217 167 (49) 858 809interest and taxation Bank overdraft (51) - (51) (33) - (33)interest ------- ------- ------- ------- ------- -------
Transfer (from) / (101) 217 116 (82) 858 776 to reserves
------ ------- ------- ------- -------- ------- Return per (1.68p) 3.61p 1.93p (1.49p) 15.61p 14.12pordinary share Summarised Balance Sheet As at As at(unaudited) 31 March 31 March 2008 2007 ‚£'000 ‚£'000 Investments at fair value through 3,692 3,712profit or loss ------- ------- Current assets 353 244 Creditors: amounts falling due (112) (139)within one year ------- ------- Net current assets 241 105 ------- ------- Total assets less current 3,933 3,817liabilities ------- ------- Equity shareholders' funds 3,933 3,817 ------- -------
Net asset value per ordinary share 65.50p 63.57p
Summarised Cash Flow Statement (unaudited) Year to Year to 31 March 31 March 2008 2007 ‚£'000 ‚£'000 Net cash outflow from operating (50) (54)activities Returns on investment and (51) (33)servicing of finance Capital expenditure and financial 448 (307)investment Financing - share issue - 341 ------- ------- Increase / (decrease) in cash 347 (53) ------- -------
Summarised Reconciliation of Movement in Shareholders Funds (unaudited)
For the year to 31 March 2008 Share Share Special Capital Capital Capital Revenue capital premium reserve redemption reserve reserve reserve reserve realised unrealised ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 As at 1 April 300 314 5,144 27 (896) (770) (302)2007 Realised gain on - - - - 567 - -sale of investments Transaction costs - - - - (5) - - Movement in - - - - - (345) -unrealised appreciation on investments Loss on ordinary - - - - - - (101)activities after taxation ------- ------- ------- ------- ------- ------- -------
As at 31 March 300 314 5,144 27 (334) (1,115) (403) 2008
------- ------- ------- ------- ------- ------- ------- For the year to 31 March 2007 Share Share Special Capital Capital Capital Revenue capital premium reserve redemption reserve reserve reserve reserve realised unrealised ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 As at 1 April 273 - 5,144 27 (1,345) (1,179) (220)2006 Realised gain on - - - - 457 - -sale of investments Transaction costs - - - - (8) - - Movement in - - - - - 409 -unrealised appreciation on investments Loss on ordinary - - - - - - (82)activities after taxation Share issue 27 314 - - - - - ------- ------- ------- ------- ------- ------- ------- As at 31 March 300 314 5,144 27 (896) (770) (302)2007 ------- ------- ------- ------- ------- ------- -------Notes
1. The results have been prepared in accordance with applicable accounting standards and the 2005 Statement of Recommended Practice (SORP) issued by the Association of Investment Companies and have been prepared in accordance with prior year accounting policies.
2. Return per share is based on a weighted average of 6,005,000 (2007 - 5,497,329) ordinary shares in issue during the year.
Total return per share is based on the total return for the year of ‚£116,000 (2007 - ‚£776,000).
Capital return per share is based on net gains during the year of ‚£217,000 (2007 - ‚£858,000).
Revenue return per share is based on the revenue loss after taxation for the year of ‚£101,000 (2007 - ‚£82,000).
The number of shares in issue at 31 March 2008 was 6,005,000 (2007 - 6,005,000).
3. Due to the size of the Company, the Investment Managers have waived their fees for the year to 31 March 2007 and 2008.
4. The above figures do not constitute full accounts in terms of Section 240 of the Companies Act 1985 and based on the accounts for the year to 31 March 2008, which are at present unaudited. The accounts for the year to 31 March 2007, 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 annual report and accounts will be mailed to shareholders and will be lodged with the Registrar of Companies towards the middle of June 2007. Copies will be available for inspection at 7 Castle Street, Edinburgh EH2 3AH, the registered office of the Company.
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