SVM UK EMERGING FUND PLC
SVM UK EMERGING FUND PLC
(the "Fund")
HALF YEARLY REPORT
(FOR THE SIX MONTHS TO 30 SEPTEMBER 2015)
A copy of the Half Yearly Report will be available to download from the
Manager's website at http://www.svmonline.co.uk/ and a copy will shortly be
available for inspection at the National Storage Mechanism at
www.morningstar.co.uk/uk/nsm. Copies are also available at 7 Castle Street,
Edinburgh EH2 3AH, the registered office of the Fund.
HIGHLIGHTS
* Net asset value return of +6.0% compared to a -5.0% return in the IA UK All
Companies Sector Average Index and -5.0% return in the FTSE All-Share
Index.
* Positive contributions from Supergroup, Ted Baker and Hutchison China
Meditech.
* New investments made in Kainos, Fevertree Drinks and Palace Capital.
* Portfolio emphasises UK consumer and business services, property and
healthcare.
Total Return Performance to 30 September 6 months 3 years 5 Years
2015
Net Asset Value +6.0% +66.9% +15.4%
Share Price +2.5% +51.3% +23.5%
Benchmark Index (IA UK All Companies -5.0% +22.1% +11.9%
Sector Average Index)
Interim Management Report
CHAIRMAN'S STATEMENT
Stockmarkets fell during the six months under review. With concern about a
weakening outlook for emerging economies, global growth forecasts were revised
down. Over the six months to 30 September 2015, the Company's net asset value
increased by 6.0% to 79.9p per share, compared to a loss of 5.0% in the
benchmark index, the IA UK All Companies Sector Average Index. (Total return).
The Company proved resilient throughout this stockmarket volatility, supported
by good progress in most of the portfolio businesses. This was assisted by a
background of UK real wage growth helping consumer confidence. Although the UK
continued to grow more strongly than the Eurozone economies, growth has become
almost entirely dependent on services, with manufacturing and construction
weak. Disinflation has continued, although low energy and commodity prices
help consumer sectors. The Company has a balance between cyclical exposure and
investments in more defensive sectors. Many of the companies have business
strategies that should assist their growth via self-help.
Economic data points to a marked slowdown in the Chinese economy, and a growing
number of emerging economies are moving into recession. Against this
background, it was the major mining and oil groups that were hit hardest. The
largest FTSE 100 companies are more exposed to the weakness in emerging
economies and deflationary pressures. Your Company has low exposure to this
group.
There were positive contributions over the period from retailers, Supergroup
and Ted Baker. Marketing group, Four Imprint also gained, as did Hutchison
China Meditech (Chi-Med). Chi-Med is now one of the ten largest portfolio
investments, and is the 3rd largest capitalised company listed on the
Alternative Investment Market. Portfolio holding, Betfair gained as it
announced a merger with Paddy Power, which will create a £6bn betting business.
New investments were made in information technology firm, Kainos Group, and in
the beverage licensing company, Fevertree Drinks. There was an addition to
portfolio exposure to property, with a new investment in Palace Capital.
Despite the Bank of England talking of a UK rate rise, there is little sign
that inflation is progressing towards its 2% target. A rate rise may be 12
months away. The portfolio emphasises consumer sectors, healthcare, property
and business services. Many of these have a specialisation or business
strategy that affords some margin protection.
Your Company was fully invested over the six months, and remains so. This
reflects the potential in many portfolio companies for dividend growth and
share re-ratings.
At the Annual General Meeting of the Company on 11 September 2015, shareholders
voted to approve continuation of the Company for a further five years. I thank
shareholders for this support which follows good performance over the past
three years. This performance appears to be encouraging interest in our
shares, but the Board notes that liquidity in our shares is currently low. We
are considering measures to improve ease of dealing and will report to
shareholders on progress.
Peter Dicks
Chairman
24 November 2015
INVESTMENT OBJECTIVE and POLICY
The investment objective of SVM UK Emerging Fund PLC (the "Fund") is long term
capital growth from investments in smaller UK companies. Its aim is to
outperform the IA UK All Companies Sector Average Index on a total return basis
The Fund aims to achieve its objective and to diversify risk by investing in
shares and related instruments, controlled by a number of limits on exposures.
Appropriate guidelines for the management of the investments, gearing and
financial instruments have been established by the Board. This is an abridged
version of the Fund's investment policy. The full investment policy can be
found in the Strategic Report within the Fund's latest Annual Report &
Accounts.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half Yearly Report in
accordance with applicable law and regulations.
The Directors confirm that to the best of their knowledge:
(i) the condensed set of financial statements have been prepared in
accordance with the Financial Reporting Council Statement 104 'Interim
Financial Reporting' on a going concern basis and give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Fund;
(ii) the Half Yearly Report includes a fair review of the information
required by the Disclosure and Transparency Rules DTR 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 DTR 4.2.8R
(disclosure of related party transactions and changes therein).
(iii) No related party transactions have taken place during the first six
months of the year that have materially affected the financial position of the
Fund during the period and there have been no changes in the related party
transactions described in the Annual Report & Accounts for the year end 31
March 2015 that could do so.
The Directors consider that the Half Year Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary for
shareholders to assess the Fund's performance and strategy,
The Half Yearly Report has not been audited or reviewed by the Fund's auditors.
By Order of the Board
Peter Dicks
Chairman
24 November 2015
FINANCIAL STATEMENTS
Income Statement
Six months to 30 September Six months to 30 September
2015 2014
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net gain/(loss) on investments - 234 234 - (547) (547)
at fair value through profit
or loss
Income 81 - 81 55 - 55
Investment management fees - - - - - -
Other expenses (29) (4) (33) (28) (5) (33)
Gain/(loss) before finance 52 230 282 27 (552) (525)
costs and taxation
Finance costs (11) - (11) (4) - (4)
Gain/(loss) on ordinary 41 230 271 (552) (529)
activities before taxation 23
Taxation - - - - - -
Gain/(loss) attributable to 41 230 271 23 (552) (529)
ordinary shareholders
Gain/(loss) per Ordinary Share 0.68p 3.82p 4.50p 0.38p (9.19p) (8.81p)
Year ended 31 March 2015
(audited)
Revenue Capital Total
The total of this
statement is the
£'000 £'000 £'000 Statement of Total
Comprehensive Income
of the Company
prepared in accordance
Net gain/(loss) on investments - 35 35 with Financial
at fair value through profit Reporting Standards
or loss ('FRS'). The
supplementary revenue
return and capital
Income 109 - 109 return columns are
prepared in accordance
with the Statement of
Investment management fees - - - Recommended Practice
issued by the
Association of
Other expenses (37) (9) (46) Investment Companies
('SORP').
Gain/(loss) before finance 72 26 98
costs and taxation All revenue and
capital items in this
statement derive from
Finance costs (11) - (11) continuing operations.
Gain/(loss) on ordinary 61 26 87
activities before taxation
Taxation - - -
Gain/(loss) attributable to 61 26 87
ordinary shareholders
Gain/(loss) per Ordinary Share 1.02p 0.43p 1.45p
Balance Sheet
As at As at As at
30 September 31 March 30 September
2015 2015 2014
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Fixed Assets
Investments at fair value through profit 4,517 4,571 3,690
or loss
Total Current Assets 321 151 283
Creditors: amounts falling due within (41) (196) (63)
one year
Net current assets/(liabilities) 280 (45) 220
Total assets less current liabilities 4,797 4,526 3,910
Capital and Reserves 4,797 4,526 3,910
Equity shareholders' funds 4,797 4,526 3,910
Net asset value per Ordinary Share 79.88p 75.38p 65.12p
Condensed Statement of Changes in Equity
For the period to 30 September 2015
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2015 300 314 5,144 27 (707) (552)
Gain/(loss) attributable to - - - - 230 41
shareholders
As at 30 September 2015 300 314 5,144 27 (477) (511)
For the year to 31 March 2015
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2014 300 314 5,144 27 (733) (613)
Gain/(loss) attributable to - - - - 26 61
shareholders
As at 31 March 2015 300 314 5,144 27 (707) (552)
For the period to 30 September 2014
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve
£'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2014 300 314 5,144 27 (733) (613)
Gain/(loss) attributable to - - - - (552) 23
shareholders
As at 30 September 2014 300 314 5,144 27 (1,285) (590)
Condensed Cash Flow Statement
Six months to Year to 31 Six months to
30 September March 30 September
2015 2015 2014
£'000 £'000 £'000
(unaudited) (audited) (unaudited)
Operating Activities
Net cash (outflow)/inflow from (191) 54 (7)
operating activities
Taxation - 7 7
Investing Activities
Purchases and sales of fixed asset 141 23 119
investments
Financing Activities
Finance costs (11) (11) (4)
Movement in cash in the period (61) 73 115
Cash at start of period 131 58 58
Cash at end of period 70 131 173
Investment Portfolio
Twenty largest investments Valuation % of Net Sector analysis as at % of Gross
as at 30 September 2015 £000 Assets 30 September 2015 Exposure
Stock Sector
1 Unite Group 268 5.6 Basic Materials 0.9
2 Workspace Group 230 4.8 Industrials 13.3
3 Johnson Service Group 213 4.4 Oil and Gas 0.0
4 4imprint Group 191 4.0 Consumer Goods 14.8
5 Ted Baker 167 3.5 Consumer Services 33.0
6 SSP Group 155 3.2 Healthcare 10.5
7 ITV Television 143 3.0 Telecoms 0.0
8 Ryanair 118 2.5 Technology 2.8
9 Playtech 116 2.4 Financials 24.7
10 St James Place 102 2.1 Utilities 0.0
Ten largest investments 1,703 35.5 Total 100.0
11 Restaurant Group 101 2.1
12 Hutchison China 101 2.1
Meditech
13 Tui Travel 100 2.1
14 P2P Global Investments 94 2.0
15 St Modwen Properties 93 1.9
16 Shire Pharmaceuticals 90 1.9
17 Crest Nicholson 89 1.9
18 Betfair Group 89 1.9
19 M&C Saatchi 89 1.9
20 Greggs 87 1.8
Twenty largest investments 2,636 55.1
Other investments (56 1,881 39.1
holdings)
Total investments 4,517 94.2
Net current assets/ 280 5.8
(liabilities)
Net Assets 4,797 100.0
Risks and Uncertainties
The principal risks facing the Fund relate to the investment in financial
instruments and include market, liquidity, credit and interest rate risk.
Additional risks faced by the Fund are investment strategy, share price
discount, accounting, legal and regulatory, operational, corporate governance
and shareholder relations, and financial. The Board seeks to mitigate and
manage these risks through continuous review, policy setting and enforcement of
contractual obligations. The Board 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 2015
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 2015 Annual Report.
Going Concern
The Board, having made appropriate enquiries, has a reasonable expectation that
the Fund has adequate resources to continue in operational existence for the
foreseeable future, a period of not less than 12 months from the date of this
report. Accordingly, it continues to adopt the going concern basis in preparing
the financial statements.
Notes
1.The financial statements have been prepared on a going concern basis and in
accordance withthe Financial Reporting Standards 102 and 104 ('FRS 104') and
the 2014 Statement of Recommended Practice ('SORP') issued by the Association
of Investment Companies. FRS 104 applies to interim periods commencing on or
after 1 January 2015. The transition to FRS 104 has had no impact on the
previous reported financial position and presentation formats have been amended
where required. These financial statements have been prepared in accordance
with the accounting policies used for the year ended 31 March 2015. The last
financial statements prepared under the previous UK GAAP were for the year
ended 31 March 2015. All investments are held at fair value. At 30 September
2015 one unlisted investment was held with value attributed of £19,000 (31
March 2015: £30,000, 30 September 2014: £106,000)
2.Return per share is based on a weighted average of 6,005,000 (2014 -
6,005,000) ordinary shares in issue during the period.
Total return per share is based on the total gain for the period of £271,000
(2014 - loss of £529,000). Capital return per share is based on the capital
gain for the period of £230,000 (2014 - loss of £552,000). Revenue return per
share is based on the revenue gain after taxation for the period of £41,000
(2014 gain of £23,000).
The number of shares in issue at 30 September 2015 was 6,005,000 (2014 -
6,005,000).
3.The Board has granted the Manager a limited authority to invest in CFDs to
achieve some degree of gearing and/or hedging without incurring the gross cost
of the investment. The Board requires the Manager to operate within certain
risk limits, as detailed in the Annual Report.
The following table details the CFD positions:
Number of CFD holdings at 30 September 2015: 18 (31 March 2015: 16)
CFD positions As at 30 September 2015 As at 31 March 2015
£000 £000
Gross exposure 1,427 1,370
Net exposure 1,427 1,370
Unrealised gains 10 202
Unrealised losses 33 23
4.The Investment Managers have waived their fees for the periods to 30
September 2015 and 2014.
5.The above figures do not constitute full or statutory accounts in terms of
Sections 434 and 435 of the Companies Act 2006. All information shown for the
six months to 30 September 2015 is unaudited. The accounts for the year to 31
March 2015, on which the auditors issued an unqualified report, have been
lodged with the Registrar of Companies and did not contain a statement required
under Section 498 of the Companies Act 2006.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699
Roland Cross Broadgate Mainland 0207
726 6111
SVM UK EMERGING FUND : Half-yearly Report
November 30, 2015 at 10:11 am EST
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