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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Svm Uk Emerging Fund Plc | LSE:SVM | London | Ordinary Share | GB0000684174 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 65.00 | 63.00 | 67.00 | 65.00 | 65.00 | 65.00 | 3,141 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Mgmt Invt Offices, Open-end | -961k | -1.17M | -0.1948 | -3.34 | 3.9M |
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TIDMSVM
SVM UK EMERGING FUND PLC
(the "Fund")
ANNUAL FINANCIAL RESULTS
FOR THE YEARED 31 MARCH 2020
The Board is pleased to announce the Annual Financial Results for the year
ended 31 March 2020. The full Annual Report and Financial Statements, Notice
of Annual General Meeting and Form of Proxy will be posted to shareholders and
be available shortly on the Manager's website at www.svmonline.co.uk
Copies of the Annual Report have been submitted to the National Storage
Mechanism and will shortly be available for inspection at www.morningstar.co.uk
/uk/nsm
HIGHLIGHTS
* Over the 12 months to 31 March 2020, net asset value fell by 25.6% to 81.9p
compared to a fall of 19.1% in the benchmark.
* Over the five years to 31 March 2020, net asset value has gained 8.6% and
the share price 18.6%, against a benchmark return of minus 1.4%.
* Portfolio emphasises exposure to scalable businesses with a competitive
edge that can protect margins and deliver growth.
* At 30 June 2020, net asset value per share had risen to 99.6p.
Financial Highlights Year to 31 March Year to 31
2020 March
2019
Total Return performance:
Net Asset Value total return -25.6% -1.8%
Share Price total return -16.7% -6.7%
Benchmark Index (IA UK All Companies -19.1% +2.8%
Sector Average Index since 1 October
2013*)
31 March 31 March % Change
2020 2019
Capital Return performance:
Net asset value (p) 81.88 110.6 -25.6%
Share price (p) 70.00 84.00 -16.7%
FTSE All-Share Index 3,107 3,978 -21.9%
Discount 14.5% 23.7%
Gearing** 16.5% 20.3%
Ongoing Charges ratio:
Investment management fees*** 0.90% 0.36%
Other operating expenses**** 2.08% 1.57%
Total Return to 1 3 5 10 Launch
31 March 2020 (%) Year Years Years Years (2000)
Net Asset Value -25.6 -13.1 +8.6 +19.5 -15.6
Benchmark Index* -19.1 -14.5 -1.4 +29.7 -39.2
*The benchmark index for the Fund was changed to the IA UK All Companies Sector
Average Index from 1 October 2013 prior to which the FTSE AIM Index was used.
**The gearing figure indicates the extra amount by which shareholders' funds
would change if total assets (including CFD position exposure and netting off
cash and cash equivalents) were to rise or fall. A figure of zero per cent
means that the Company has a nil geared position
***The Manager waived its management fees up to 30 September 2018. Management
fees have been reintroduced from 1 October 2018.
****Up to 30 September 2018 Directors waived their entitlement to half their
fees. From 1 October 2018 Directors have received their full fees.
INVESTMENT OBJECTIVE
The investment objective of 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.
CHAIRMAN'S STATEMENT
Over the 12 months to 31 March 2020, the Company's net asset value fell by
25.6% to 81.9p per share, compared to a fall of 19.1% in the benchmark, the IA
UK All Companies Sector Average Index. Over the 12 months, the share price fell
16.7%. Over the five years to 31 March 2020, net asset value has gained 8.6%
and the share price 18.6%, against a benchmark return of minus 1.4%. The
Company's net asset value progressed in the three months since the year end to
99.6p at 30 June 2020. (total return, Lipper data).
Review of the year
In late February and during March, the portfolio was impacted by the pandemic
and fears of a sharp setback for the global economy. Stockmarkets and the
portfolio had not fully recovered by 31 March 2020. Many businesses are now
faced with uncertainty over demand and the timescale in which that might
correct. For consumer services, in particular, prospects for this year and next
remain uncertain. But the portfolio emphasises growth and includes companies
with opportunity to benefit from current circumstances and potential longer
term changes to the economy. Some consumer businesses in the portfolio have an
online strategy or can use additional capital to build market share. The fund
also has exposure to growing sectors such as technology and the digital
economy. The Fund's longer term track record demonstrates the value of the
strategy and the Manager's process. Following the reporting year end, April and
May saw recovery in many share prices.
During the 12 months under review, there were positive contributions to
performance from Learning Technologies Group, GB Group, Cranswick Foods, Hilton
Food, Kerry Group, Genus, Flutter and Knights Group. The more resilient
businesses tended to be in sectors of more stable demand such as food
producers, or in growth areas providing online services and support for working
from home.
Disappointments in the period included Burford, SSP, Workspace, Fevertree
Drinks and Blue Prism. Typically, companies most affected by the lockdown took
prompt action to cut costs and protect their balance sheets, in some cases
raising additional capital. The travel sector was particularly badly hit in
February and March. This affected portfolio holdings of Cineworld, On The
Beach, Hostelworld, WH Smith and airlines.
New or additional investment was made in AJ Bell, Ceres Power, LondonMetric,
Kerry Group and AB Dynamics. To fund the purchases, sales were made of
Fevertree Drinks, GVC, ITV, Ted Baker and Burford Capital. A factor in some of
these sales was reducing exposure to the economic cycle to reduce portfolio
risk.
The Fund's investment strategy recognises the pervasiveness of technology and
the economic change it drives. The impact of change in technology and
demographics is accelerating in a number of consumer and business sectors,
particularly retail and finance. The Fund aims to avoid structurally challenged
businesses.
Annual General Meeting
The Annual General Meeting will be held on 11 September 2020 at SVM's offices
in Edinburgh. At the last General Meeting, shareholders approved powers for the
Company to issue shares and to buy back for cancellation, or to hold in
treasury. Your Board has directed the Manager to implement this arrangement,
operating within Board guidelines and approvals. This aims to improve liquidity
in our shares, and your Board does not expect this overall to be dilutive to
shareholders. The Managers have reassessed prospects for each of the portfolio
investments. In some cases, balance sheets are being repaired by share
placings.
Board Changes
During the 12 months under review, two new Directors were appointed; Jeremy
Harris and Ian Gray. Jeremy is a solicitor and partner in Brian Harris & Co,
and brings financial services, legal and governance experience to the Board.
Ian is a chartered accountant with experience in strategic roles in a range of
public and private companies and government agencies. He is a director of DX
(Group) plc and a number or private companies. Ian brings commercial, financial
and governance experience to the Board. I welcome these two Directors. Two of
the founding Directors stood down during the year; Richard Bernstein and Tony
Puckridge. I would like to thank Richard and Tony for their valuable
contribution to the Company over a number of years.
Outlook
Lockdowns in response to the pandemic drove domestically-focused UK shares and
the Pound itself down to low levels, initially indiscriminately. The crisis and
response by the Government and Bank of England is disinflationary, putting a
premium on companies with growth strategies. The lack of inflation is typically
more of a challenge for global economically- sensitive businesses.
Additionally, global supply chains must change - moving from a lean but risky
model towards structures that are more resilient.
The portfolio emphasises exposure to scalable businesses with a competitive
edge and potential for self-help that can deliver above average growth. It has
low exposure to mining, oil and traditional banks. The Fund remains fully
invested, making use of its ability to apply gearing to increase market
exposure.
Peter Dicks
Chairman
10 July 2020
MANAGER'S REVIEW
Summary
The period under review captured the sharp stockmarket fall of late February
and March, but ended before the recovery of April and May. Portfolio strategy
has been modified to reduce exposure to the economic cycle, but increase
emphasis on businesses with a strong competitive edge or serving the digital
economy. The Fund focuses on growth; companies with better control over their
own destiny. In contrast, many large FTSE 100 businesses have been forced into
dividend cuts, with income having been a key reason for holding the shares
previously. Despite money printing, the background is disinflationary -
typically more of a challenge for global economically-sensitive businesses. In
addition, global supply chains must change - moving from a lean but risky model
towards structures that are more resilient. These trends support the portfolio
strategy.
Portfolio review and investment strategy
A central theme to the portfolio strategy has been a focus on companies we view
as category champions. These businesses typically dominate their field and
would be viewed as best in class. That field may represent a niche or specific
service in which a company has specialised, creating a genuine competitive
edge. Portfolio investments in this class include Rentokil Initial, Experian,
Ocado and Kerry Group. Experian adds value to credit information and has a
strong position in the US.
Ocado is an ecommerce delivery platform supporting a growing number of major
retail groups around the world. Kerry Group specialises in food flavourings,
helping customers to develop unique, higher value- added products. Companies
in this group have a degree of pricing power conferred by their specialist
skills. Typically, they also operate in growth areas - important when the
global economy is challenged, and was growing slowly even before the pandemic.
While most businesses have been hit by the pandemic, some are well-adapted to
this changed economic background. Businesses that focus on business support in
the digital economy, or with strong mobile, data-driven customer offerings,
should emerge stronger from the disruption. Many of these businesses were
already disrupters in their categories and have proven their agility in
offering differentiated services in scalable ways. Portfolio investments in
this group include Codemasters, Team17 and Hilton Foods. For example, Team17 is
a leader in premium independent video games, and its low costs have also
allowed it to capitalise successfully in industry growth. It has seen demand
grow during the crisis.
Home
The lockdown and increased remote working have generated renewed interest in
the home. More time is being spent in the home and we expect some part of this
change in work/life balance to continue into the recovery. There has been
increased demand for online entertainment, e-commerce and home delivery.
Companies that should benefit from this include Games Workshop, JD Sports and
LondonMetric. LondonMetric supports delivery logistics, which may involve
shorter supply chains.
Office of the future
Following from this change in office/remote working balance, businesses are
likely to demand more enterprise support services; supporting cloud, data,
information technology and virtual operations. Many firms will move their
existing remote work onto more robust systems, and strengthen cyber security.
Businesses providing solutions for these changes include Softcat and Gamma
Communications. Some businesses in other areas are well placed to compete using
more flexible models, and we expect Keystone Law to benefit.
Sustainability, wellbeing and resilience
History shows that economic shocks often drive long term social change. While
the lockdown has damaged the economy, there have been identifiable benefits to
wellbeing and the environment. More emphasis is likely on sustainability and
health. At the same time, in many companies the governance model has failed to
deliver genuine resilience. Shareholders may encourage boards to do more for
resilience and sustainability. Government intervention in the economy will
create the potential for greater national influence on some businesses and
industries. This may reinforce the pace of change. Companies we expect to
benefit include Ceres Power, Genus and DiscoverIE Group.
Outlook
While the financial crisis was largely a credit problem, some businesses are
now faced with uncertainty over demand and the timescale in which that might
correct. For consumer services and hospitality - pub chains for example -
prospects this year and next are very uncertain. The Fund has low exposure to
this area, although it does include some travel businesses.
Despite all the money being pumped into economies by governments around the
world, even lower inflation and interest rates are now likely. Low inflation
and dividend cuts have a big impact on pension fund liabilities and the balance
sheets of many big companies. Younger growth businesses typically suffer less
from these legacy problems.
Where consumer businesses also have an online strategy, or can use additional
capital to take market share from weaker rivals, the outlook is more positive.
Many growth businesses have had to operate with lean capital-lite business
models. They may be in a position to acquire weaker rivals. We believe that
many portfolio businesses will emerge strongly from the current challenges.
Your Fund remains fully invested, focused on resilient growing businesses, with
low exposure to commodities, oil and banks.
Market
Sector analysis* % Listing* % Capitalisation %
*
Consumer Services 25.1 Main Market 62.9 Mid 43.6
Financials 21.2 AIM 32.0 Small 34.8
Industrials 19.9 Other 5.1 Large 21.6
Consumer Goods 15.0
Technology 13.1
Healthcare 2.7
Telecommunications 2.0
Oil & Gas 1.0
*Analysis is of gross exposure
INVESTMENT PORTFOLIO
as at 31 March 2020
Market Market
Exposure Exposure
2020 % of 2019
Stock GBP000 Net Assets GBP000
Kerry Group 5.2 178
254
Unite Group 5.2 261
254
Hilton Food Group 235 4.8 205
4Imprint Group 233 4.6 297
Rentokil Initial 174 3.5 159
Learning Technologies Group 174 3.5 154
Knights Group 160 3.3 127
JD Sports Fashion 145 3.0 160
Ocado Group 140 2.9 158
Dechra Pharmaceuticals 134 2.7 153
Ten largest investments 1,903 38.7
Beazley Group 122 2.5 161
FDM Group Holdings 122 2.5 148
Johnson Service Group 119 2.4 160
Workspace Group 117 2.4 227
Experian 113 2.3 -
Keystone Law Group 105 2.1 107
Manolete Partners 101 2.1 150
Gamma Communications 98 2.0 97
Tracsis 88 1.8 95
Codemasters 82 1.7 82
Twenty largest investments 2,970 60.5
Cranswick 81 1.7 60
Draper Esprit 75 1.5 108
Essensys 75 1.5 -
Renishaw 72 1.5 84
Pets at Home 71 1.4 -
K3 Capital Group 70 1.4 90
Alpha Financial Markets 67 1.4 107
AJ Bell 67 1.4 -
Whitbread 67 1.4 111
Trainline 66 1.3 -
Thirty largest investments 3,681 75.0
Other investments (29 holdings) 1,288 26.2
Total investments 4,969 101.2
CFD positions (514) (10.5)
CFD unrealised gains 8 0.2
Net current assets/(liabilities) 446 9.1
Net assets 4,909
100.0
Market exposure for equity investments held is the same as fair value and for
contracts of difference ("CFDs") held is the market value of the underlying
shares to which the portfolio is exposed via the contract. The investment
portfolio is grossed up to include CFDs and the net CFD position is then
deducted in arriving at the net asset total. Further information is given in
note 6 to the Financial Statements. A full portfolio listing as at 31 March
2020 is detailed on the website.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors review policies for identifying and managing the principal risks
faced by the Fund.
Many of the Fund's investments are in small companies and may be seen as
carrying a higher degree of risk than their larger counterparts. These risks
are mitigated through portfolio diversification, in-depth analysis, the
experience of the Manager and a rigorous internal control culture. Further
information on the internal controls operated for the Fund is detailed in the
Report of the Directors.
The principal risks facing the Fund relate to the investment in financial
instruments and include market, liquidity, credit and interest rate risk. An
explanation of these risks and how they are mitigated is explained in note 10
to the financial statements. Additional risks faced by the Fund are summarised
below:
Investment strategy - The risk that an inappropriate investment strategy may
lead to the Fund underperforming its benchmark, for example in terms of stock
selection, asset allocation or gearing. The Board has given the Manager a
clearly defined investment mandate which incorporates various risk limits
regarding levels of borrowing and the use of derivatives. The Manager invests
in a diversified portfolio of holdings and monitors performance with respect to
the benchmark. The Board regularly reviews the Fund's investment mandate and
long term strategy.
Discount - The risk that a disproportionate widening of discount in comparison
to the Fund's peers may result in loss of value for shareholders. The discount
varies depending upon performance, market sentiment and investor appetite. The
Board regularly reviews the discount and the Fund operates a share buy-back
programme.
Accounting, Legal and Regulatory - Failure to comply with applicable legal and
regulatory requirements could lead to a suspension of the Fund's shares, fines
or a qualified audit report. In order to qualify as an investment trust the
Fund must comply with section 1158 of the Corporation Tax Act 2010 ("CTA").
Failure to do so may result in the Fund losing investment trust status and
being subject to Corporation Tax on realised gains within the Fund's
portfolio. The Manager monitors movements in investments, income and
expenditure to ensure compliance with the provisions contained in section 1158.
Breaches of other regulations, including the Companies Act 2006, the Listing
Rules of the UK Listing Authority or the Disclosure and Transparency Rules of
the UK Listing Authority, could lead to regulatory and reputational damage. The
Board relies on the Manager and its professional advisers to ensure compliance
with section 1158 CTA, Companies Act 2006 and UKLA Rules.
Operational - The risk of loss resulting from inadequate or failed internal
processes, people and systems or from external events. In common with most
other Investment Trusts, the Fund has no employees and relies upon the services
provided by third parties. The Manager has comprehensive internal controls and
processes in place to mitigate operational risks. These are regularly
monitored and are reviewed to give assurance regarding the effective operation
of the controls.
Corporate Governance and Shareholder Relations - Details of the Fund's
compliance with corporate governance best practice, including information on
relations with shareholders, are set out in the Directors' Statement on
Corporate Governance.
Financial - The Fund's investment activities expose it to a variety of
financial risks including market, credit and interest rate risk. These risks
are explained in Note 10 to the financial statements. 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 Manager and third party service providers addressing
these risks. The Board believes the Fund has a relatively low risk profile as
it has a simple capital structure; invests principally in UK quoted companies;
does not use derivatives other than CFDs and uses well established and
creditworthy counterparties.
The capital structure comprises only ordinary shares that rank equally. Each
share carries one vote at general meetings.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors consider that the Annual Report and Financial Statements, taken
as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Fund's performance, business model and
strategy.
The Directors each confirm to the best of their knowledge that:
* the financial statements, prepared in accordance with the applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and gain or loss of the Fund and;
* the Strategic Report includes a fair review of the development and
performance of the business and the position of the Fund together with a
description of the principal risks and uncertainties that it faces.
By Order of the Board
Peter Dicks
Chairman
10 July 2020
Income statement
for the year to 31 March 2020
Notes Revenue Capital Total
GBP000 GBP000 GBP000
Net loss on investments at fair value 6 - (1,633) (1,633)
Income 1 137 - 137
Investment management fees 2 - (52) (52)
Other expenses 3 (120) - (120)
Gain/(loss) before finance costs and 17 (1,685) (1,668)
taxation
Finance costs (24) - (24)
Loss on ordinary activities before taxation (7) (1,685) (1,692)
Taxation 4 - - -
Loss attributable to ordinary shareholders
(7) (1,685) (1,692)
Loss per Ordinary Share 5 (0.12)p (28.08)p (28.20)p
for the year to 31 March 2019
Notes Revenue Capital Total
GBP000 GBP000 GBP000
Net loss on investments at fair value 6 - (106) (106)
Income 1 143 - 143
Investment management fees 2 - (24) (24)
Other expenses 3 (104) - (104)
Gain/(loss) before finance costs and 39 (130) (91)
taxation
Finance costs (26) - (26)
Gain/(loss) on ordinary activities before 13 (130) (117)
taxation
Taxation 4 (3) - (3)
Gain/(loss) attributable to ordinary
shareholders 10 (130) (120)
Gain/(loss) per Ordinary Share 5 0.17p (2.17)p (2.00)p
The Total column of this statement is the profit and loss account of the Fund.
All revenue and capital items are derived from continuing operations. No
operations were acquired or discontinued in the year. A Statement of
Comprehensive Income is not required as all gains and losses of the Fund have
been reflected in the above statement.
Balance sheet
as at 31 March 2020
Notes 2020 2019
GBP000 GBP000
Fixed Assets
Investments at fair value through profit or loss 6 4463 6,437
Current Assets
Debtors 7 451 300
Cash at bank and on deposit 294 6
Total current assets 745 306
Creditors: amounts falling due within one year 8 (299) (134)
Net current (liabilities)/assets (446) 172
Total assets less current liabilities 4,909 6,609
Capital and Reserves
Share capital 9 300 300
Share premium 314 314
Special reserve 5,136 5,144
Capital redemption reserve 27 27
Capital reserve (492) 1,193
Revenue reserve (376) (369)
Equity shareholders' funds 4,909 6,609
Net asset value per Ordinary Share 5 81.88p 110.06p
Statement of Changes in Equity
for the year to 31 March 2020
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1 April 2019 300 314 5,144 27 1,193 (369) 6,609
Ordinary shares - - (8) - - - (8)
repurchased
Loss attributable
to shareholders - - - - (1,685) (7) (1,692)
As at 31 March 300 314 5,136 27 (492) (376) (4,909)
2020
for the year to 31 March 2019
Capital
Share Share Special redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1 April 2018 300 314 5,144 27 1,323 (379) 6,729
(Loss)/gain
attributable to - - - - (130) 10 (120)
shareholders
As at 31 March 300 314 5,144 27 1,193 (369) 6,609
2019
Accounting policies
Basis of preparation
The Financial Statements have been prepared on a going concern basis in
accordance with FRS 102, the "Financial Reporting Standard applicable in the UK
and Republic of Ireland" and under the AIC's Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
(SORP) issued in October 2019. The requirements have been met to qualify for
the exemptions to prepare a Cash Flow Statement, this therefore has been
removed.
Significant judgements and estimates
Preparation of financial statements can require management to make significant
judgements and estimates. There are no significant judgements or sources of
estimation uncertainty the Board considers need to be disclosed.
Income
Income is included in the Income Statement on an ex-dividend basis and includes
dividends on both direct equity investments and synthetic equity holdings via
Contracts for Differences.
Expenses and interest
Expenses and interest payable are dealt with on an accruals basis.
Investment management fees
Investment management fees are allocated 100 per cent to capital. The
allocation is in line with the Board's expected long-term return from the
investment portfolio. The terms of the investment management agreement are
detailed in the Report of the Directors.
Taxation
Current tax is provided at the amounts expected to be paid or received.
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more or a right to pay less tax in
the future have occurred at the balance sheet date measured on an undiscounted
basis and based on enacted or substantively enacted tax rates. This is subject
to deferred tax assets only being recognised if it is considered probable that
there will be suitable profits from which the future reversal of the underlying
timing differences can be deducted. Timing differences are differences arising
between the taxable profits and the results as stated in the financial
statements which are capable of reversal in one or more subsequent periods.
Investments
The investments have been categorised as "fair value through profit or loss".
All investments are held at fair value. For listed investments this is deemed
to be at bid prices. A Contract for Difference (CFD) is a synthetic equity
comprising of a future contract to either purchase or sell a specific asset at
a specified future date for a specified price. The Company can hold long and
short positions in CFDs which are held at fair value, based on the bid prices
of the underlying securities in respect of long positions, and the offer prices
of the underlying securities in respect of short positions. Profits and losses
on CFDs are recognised in the Income Statement. Amounts receivable from and
payable to brokers re CFDs are disclosed in Note 7 Debtors, being the margin
call account and Note 8 Creditors, being the fair value position of the
holdings respectively. Unlisted investments are valued at fair value based on
the latest available information and with reference to International Private
Equity and Venture Capital Valuation Guidelines.
All changes in fair value and transaction costs on the acquisition and disposal
of portfolio investments are included in the Income Statement as a capital
item. Purchases and sales of investments are accounted for on trade date.
Financial instruments
In addition to the investment transactions described above, basic financial
instruments are entered into that result in recognition of other financial
assets and liabilities, such as investment income due but not received, other
debtors and other creditors. These financial instruments are receivable and
payable within one year and are stated at cost less impairment.
Foreign currency translation
Transanctions involving foreign currencies are converted at the rate ruling as
at the date of the transaction. Foreign currency monetary assets and
liabilities are retranslated into Sterling at the rate ruling on the financial
reporting date.
Capital reserve
Gains and losses on realisations of fixed asset investments, and transactions
costs, together with appropriate exchange differences, are dealt with in this
reserve. All incentive fees and investment management fees, together with any
tax relief, is also taken to this reserve. Increases and decreases in the
valuation of fixed asset investments are dealt with in this reserve.
Special reserve
On 29 June 2001, the court approved the redesignation of the Share Premium
Account, at that date, as a fully distributable Special Reserve.
Notes to the financial statements
1. Income
2020 2019
GBP000 GBP000
Income from shares and securities
- dividends 139 143
- interest (2) -
137 143
2. Investment Management Fees
Investment Management Fees 52 24
3. Other expenses
Revenue
General expenses 71 68
Directors' fees 25 21
Auditor's remuneration 24 15
120 104
4. Taxation
Current taxation - 3
Deferred taxation - -
Total taxation charge for the year - 3
The tax assessed for the year is different from the standard small company rate
of corporation tax in the UK. The differences are noted below:
Loss on ordinary activities before taxation (1,692) (117)
Corporation tax (19%, 2019 - 19%) (321) (22)
Non taxable UK dividends (15) (13)
Non taxable property revenue from UK REIT - (3)
Irrecoverable overseas tax - 3
Non taxable investment losses in capital 310 20
Non taxable overseas dividends (3) (4)
Expenses not deductible for tax purposes 2 -
Movement in deferred tax rate on excess management (22) 2
charges
Movement in unutilised management expenses and NTLR 49 20
deficits
Total taxation charge for the year - 3
At 31 March 2020, the Fund had unutilised management expenses and non trade
loan relationship ("NTLR") deficits of GBP1,260,000 (2019 - GBP1,116,000).
A deferred tax asset of GBP239,000 (2019 - GBP190,000) has not been recognised on
unutilised management expenses as it is unlikely that there would be suitable
taxable profits from which the future reversal of the deferred tax asset could
be deducted.
5. Returns per share
Returns per share are based on a weighted average of 5,999,836 (2019 -
6,005,000) ordinary shares in issue during the year.
During the year 10,000 Ordinary Shares were bought back and placed in treasury.
Total return per share is based on the total loss for the year of GBP1,692,000
(2019 - loss of GBP120,000).
Capital return per share is based on the net capital loss for the year of GBP
1,685,000 (2019 - loss of GBP130,000).
Revenue return per share is based on the revenue loss after taxation for the
year of GBP7,000 (2019 - gain of GBP10,000).
The net asset value per share is based on the net assets of the Fund of GBP
4,909,000 (2019 - GBP6,609,000) divided by the number of shares in issue at the
year end as shown in note 9.
6. Investments at fair value through profit or loss
2019 2019
GBP000 GBP000
Listed investments 4,463 6,437
Unlisted investments - -
Valuation as at end of year 4,463 6,437
Listed Unlisted Total Total
GBP000 GBP000 GBP000 GBP000
Opening book cost 4,089 140 4,229 4,189
Opening investment holding gains/(losses) 2,348 (140) 2,208 2,291
Opening fair value 6,437 - 6,437 6,480
Analyis of transactions made during the
year
Purchase at cost 2,404 - 2,404 1,268
Sales proceeds received (2,910) - (2,910) (1,166)
(Losses) on non-CFD investments (1,468) - (1,468) (145)
Closing fair value 4,463 - 4,463 6,437
Closing book cost 3,901 140 4041 4,229
Closing investment holding gains/(losses) 562 (140) 422 2,208
Closing fair value 4,463 - 4,463 6,437
(Losses) on non-CFD investments (1,468) - (1,468) (145)
(Losses)/gains on CFD investments (165) - (165) 39
Net (losses) on investments at fair value (1,633) - (1,633) (106)
The transaction costs in acquiring investments during the year were GBP10,000
(2019: GBP2,000). For disposals, transaction costs were GBP3,000 (2019: GBP2,000).
The company received GBP2,910,000 (2019 GBP1,166,000) from investments sold in the
year. The book cost of these investments when they were purchased was GBP
2,592,000 (2019 GBP1,228,000). These investments have been revalued over time
and, until they were sold, any unrealised gains/losses were included in the
fair value of the investments.
7. Debtors
2020 2019
GBP000 GBP000
Investment income due but not received 9 9
Amounts receivable relating to CFDs 432 291
Prepayments 7 -
Taxation 3 -
451 300
8. Creditors: amounts falling due within one year
2020 2019
GBP000 GBP000
Amounts due relating to CFDs 224 58
Due to SVM Asset Management Limited 44 12
Other creditors 31 64
299 134
9. Share capital
Allotted, issued and fully paid
5,995,000 ordinary 5p shares (2019 - 6,005,000) 300 300
As at the date of publication of this document, there was no change in the
issued share capital and each ordinary share carries one vote.
During the year 10,000 Ordinary Shares with a nominal value of GBP500 and
representing 0.17% of the issued share capital were bought back and placed in
treasury for an aggregate consideration of GBP8,650 (2019 - nil shares, GBPnil).
10. Financial instruments
Risk Management
The Fund's investment policy is to hold investments, CFDs and cash balances
with gearing being provided by the use of CFDs and a bank overdraft. Over 94.8%
of the Fund's net asset value is held in investments that are denominated in
Sterling and are carried at fair value. Where appropriate, gearing can be
utilised in order to enhance net asset value. It does not invest in short dated
fixed rate securities other than where it has substantial cash resources. Fixed
rate securities held at 31 March 2020 were valued at GBPnil (2019 - GBPnil).
Investments, which comprise principally equity investments, are valued as
detailed in the accounting policies.
The major risks inherent within the Fund are market risk, liquidity risk,
credit risk and interest rate risk. It has an established environment for the
management of these risks which are continually monitored by the Manager.
Appropriate guidelines for the management of its financial instruments and
gearing have been established by the Board of Directors. It has no foreign
currency assets and therefore does not use currency hedging. It does not use
derivatives within the portfolio with the exception of CFDs.
Market risk
The risk that the Fund may suffer a loss arising from adverse movements in the
fair value or future cash flows of an investment. Market risks include changes
to market prices, interest rates and currency movements. The Fund invests in a
diversified portfolio of holdings covering a range of sectors. The Manager
conducts continuing analysis of holdings and their market prices with an
objective of maximising returns to shareholders. Asset allocation, stock
selection and market movements are reported to the Board on a regular basis.
Liquidity risk
The risk that the Fund may encounter difficultly in meeting obligations
associated with financial liabilities. The Fund is permitted to invest in
shares traded on AIM or similar markets; these tend to be in companies that are
smaller in size and by their nature less liquid than larger companies. The
Manager conducts continuing analysis of the liquidity profile of the portfolio
and the Fund maintains an overdraft facility to ensure that it is not a forced
seller of investments.
Credit risk
The risk that the counterparty to a transaction fails to discharge its
obligation or commitment to the transaction resulting in a loss to the Fund.
Investment transactions are entered into using brokers that are on the
Manager's approved list, the credit ratings of which are reviewed periodically
in addition to an annual review by the Manager's board of directors. The
Fund's principal bankers are State Street Bank & Trust Company, the main broker
for CFDs is UBS and other approved execution broker organisations authorised by
the Financial Conduct Authority.
Interest rate risk
The risk that interest rate movements may affect the level of income receivable
on cash deposits. At most times the Fund operates with relatively low levels
of bank gearing, this has and will only be increased where an opportunity
exists to substantially add to the net asset value performance.
11. The financial information contained within this announcement does not
constitute statutory accounts as defined in sections 434 and 435 of the
Companies Act 2006. The results for the years ended 31 March 2020 and 2019 are
an abridged version of the statutory accounts for those years. The Auditor has
reported on the 2020 and 2019 accounts, their reports for both years were
unqualified and did not contain a statement under section 498 of the Companies
Act 2006. Statutory accounts for 2019 have been filed with the Registrar of
Companies and those for 2020 will be delivered in due course.
12. The Annual Report and Accounts for the year ended 31 March 2020 will
be mailed to shareholders shortly and copies will be available from the
Manager's website www.svmonline.co.uk and the Fund's registered office at 7
Castle Street, Edinburgh, EH2 3AH.
The Annual General Meeting of the Fund will be held at 9.30am on
Friday 11 September 2020 at 7 Castle Street, Edinburgh, EH2 3AH.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699
Roland Cross Four Broadgate 0207 726 6111
10 July 2020
END
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