Last checked at 
17 Nov 2011 07:00
PRESS RELEASE17 November 2011 SVM UK EMERGING FUND plc Half Yearly Statement (for the six months to 30 September 2011) 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 declines but outperforms its benchmark index.
* Strong medium and long term absolute and relative outperformance with net
asset value more than doubling since remit changed in September 2004.
* The Fund remains defensively positioned, retaining cash while investing in
special situations. * Small companies lag large companies as investor risk appetite wanes.
For further information, please contact:
Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate Mainland 020 7726 6111
Chairman's Statement
After three years of strong markets, it is probably not surprising that marketshave paused for breath and indeed have been trading within an ever narrowingrange for more than a year. Of more interest to a smaller companies fund hasbeen the recent underperformance of smaller against larger companies. This canbe starkly demonstrated over the last six months where the FTSE AIM Index, theindex of small companies, declined by 22.0% compared to a fall of only 11.6% inlarge companies represented by the FTSE 100 Share Index. While the Fundcontinues to be defensively positioned, it did not stop it registering a fallof 16.5% in asset value over the six months. This represents a 6% relativeoutperformance which adds to the longer term position. Since the Fund changedit name and remit to invest in AIM companies in September 2004, the asset valuehas increased by 128% against a fall in the AIM Index of 18% and a rise of theFTSE 100 Share Index of 44%.Generally, investors have avoided seemingly risky assets and have preferred theperceived safety of higher yielding large companies and government bonds.Globally, this has led to emerging markets suffering greater falls than maturemarkets while domestically smaller companies have underperformed larger ones.This appears perverse given the superior growth prospects and debt dynamicswithin emerging markets and smaller companies.The Fund retains a concentrated portfolio of forty companies with 86% investedin AIM companies. Of the balance, 9% is in four unquoted investments and afurther 5% in three residual PLUS quoted companies. In terms of sectors, theFund continues to be fully exposed to resources, industrials and consumerservices with little in healthcare, financials and property.The Fund continues to be defensively positioned, generally out-performing inadverse markets while lagging in strong markets. Although managed on acomparatively low risk basis, the portfolio remains concentrated with a numberof comparatively large holdings. Many of the holdings are special situations orcompanies on the cusp of profitability and represent an attractive area forinvestment.The portfolio changes over the six months have been restricted to continuingsales in gold producer Archipelago Resources and the receipt of funds from thecash takeover of ToLuna. This has allowed for the introduction of a number offresh holdings and additions to a number of existing holdings. New holdings inthe portfolio include Beowulf Mining (iron ore exploitation) Chaarat Gold (goldexploration) and ILA Group (marketing) while additions have been made toSilvermere, Intellego and Nostra Terra Oil & Gas.With the economic background challenging, the Managers remain cautious butcontinue to see attractive opportunities particularly in smaller companies. TheBoard believes the Fund is well positioned to continue to deliver its long termout-performance.Peter DicksChairmanSummarised Income Statement (unaudited) Six months to 30 September Six months to 30 September 2011 2010 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gain/(loss) / on - 719 719 - (39) (39)sale of investments Movement in investment - (1,541) (1,541) - 97 97holding gains -------- -------- -------- -------- -------- -------- Net (losses) / gains - (822) (822) - 58 58on investments Income 15 - 15 8 - 8 Investment management - - - - - -fees Other expenses (29) - (29) (24) - (24) -------- -------- -------- -------- -------- -------- Return before (14) (822) (836) (16) 58 42interest and taxation Bank overdraft (2) - (2) (1) - (1)interest -------- -------- -------- -------- -------- --------
Return attributable (16) (822) (838) (17) 58 41 to shareholders
-------- -------- -------- -------- -------- -------- Return per ordinary (0.27p) (13.69p) (13.96p) (0.29p) 0.97p 0.68pshare -------- -------- -------- -------- -------- --------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 gainsand 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 2011 2011 2010 £'000 £'000 £'000 Investments at fair value through 4,016 4,973 3,771profit or loss Net current assets 392 273 385 --------- --------- --------- Equity shareholders' funds 4,408 5,246 4,156 --------- --------- --------- Net asset value per ordinary share 73.40p 87.36p 69.21p --------- --------- --------- Summarised Cash Flow Statement (unaudited) Six months Six months (unaudited) to to 30 September 30 September 2011 2010 £'000 £'000
Net cash flow from operating activities (32) (26)
Taxation (2) (1)
Capital expenditure and financial 169 23
investment Servicing of finance (2) (2) -------- -------- Movements in cash 133 (6) -------- -------- Summarised Reconciliation of Movement in Shareholders Funds (unaudited) For the period to 30 September 2011 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2011 300 314 5,144 27 (1) (538)
Return/(loss) - - - - (822) (16)attributable to shareholders ------ ------ ------ ------- ------- ------
As at 30 September 2011 300 314 5,144 27 (823) (554) ------ ------ ------ ------- ------- ------ 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)2010 Return/(loss) - - - - 58 (17)attributable to shareholders ------ ------ ------ ------- ------- ------
As at 30 Setember 2010 300 314 5,144 27 (1,116) (513)
------ ------ ------ ------- ------- ------Largest Investments as at 30 September 2011 Sector Analysis as at 30 September 2011 % %1 Kirkland Lake Gold 7.9 Basic Materials 48.12 Hydrodec 5.7 Industrials 17.13 Oracle Coalfields 5.4 Oil & Gas 21.34 Silvermere Energy 5.2 Consumer Goods 0.05 Manroy 4.7 Consumer Services 6.46 Symphony Environmental 4.7 Healthcare 0.07 Archipelago Resources 4.5 Telecoms 0.08 Sprue Aegis 4.2 Technology 0.09 Nostra Terra Oil & Gas 3.9 Financials 6.210 Nautical Petroleum 3.2 Utilities 0.9 -------- -------- Total 49.4 100.0 -------- --------Risks And UncertaintiesThe 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 2011 Annual Report.
Directors' Responsibility Statement
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).
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 (2010 - same)
ordinary shares in issue during the year.
Total return per share is based on the total loss for the period of £838,000
(2010 - gain of £41,000).
Capital return per share is based on net loss for the period of £822,000 (2010
- gain of £58,000).
Revenue return per share is based on the revenue loss after taxation for the
period of £16,000 (2010 - £17,000).
The number of shares in issue at 30 September 2011 was 6,005,000 (2010 -
6,005,000).
3. Due to the size of the Fund, the Investment Managers have waived their fees
for the periods to 30 September 2010 and 2011.
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 2011, 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 end of November 2011.
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.
ENDS
XLON