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SVM Svm Uk Emerging Fund Plc

61.50
0.00 (0.00%)
Last Updated: 00:00:00
Delayed by 15 minutes
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% 61.50 59.00 64.00 61.50 61.50 61.50 0.00 00:00:00
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Mgmt Invt Offices, Open-end -961k -1.17M -0.1948 -3.16 3.69M

SVM UK Emerg Fund Annual Financial Report

14/07/2021 3:22pm

UK Regulatory


 
TIDMSVM 
 
SVM UK EMERGING FUND PLC 
 
                                 (the "Fund") 
 
                           ANNUAL FINANCIAL RESULTS 
 
                       FOR THE YEARED 31 MARCH 2021 
 
The Board is pleased to announce the Annual Financial Results for the year 
ended 31 March 2021.  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 2021, net asset value gained 52.7% to 
    125.00p compared to a return of 37.8% in the chosen comparator, the IA UK 
    Companies Sector Average Index. 
 
  * Over the five years to 31 March 2021, net asset value has gained 53.5% and 
    the share price 59.2%, against the comparator index return of 39.3%. 
 
  * Portfolio emphasises exposure to scalable businesses with a competitive 
    edge that can protect margins and deliver growth. 
 
  * Growth businesses performed well in the first six month, but more recently 
    the better portfolio performances have been in economically sensitive 
    sectors. 
 
  * At 30 June 2021, net asset value per share had risen to 136.02p 
 
Financial Highlights                    Year to 31 March      Year to 31 
                                                    2021           March 
                                                                    2020 
 
Total Return performance*: 
 
Net Asset Value total return                       52.7%          -25.6% 
 
Share Price total return                           42.1%          -16.7% 
 
Comparator Index (IA UK All Companies              37.8%          -19.1% 
Sector Average Index since 1 October 
2013**) 
 
 
 
                                               31 March        31 March       % Change 
                                                   2021            2020 
 
Capital Return performance: 
 
Net asset value (p)                              125.00           81.88          52.7% 
 
Share price (p)                                   99.50           70.00          42.1% 
 
MSCI All-Share Index                              3,831           3,107          23.3% 
 
Discount                                          20.4%           14.5% 
 
Gearing***                                        14.6%           16.5% 
 
Ongoing Charges ratio: 
 
Investment management fees                        0.77%           0.90% 
 
Other operating expenses                          2.32%           2.08% 
 
 
 
Total Return to                           1          3          5         10     Launch 
31 March 2021 (%)                      Year      Years      Years      Years     (2000) 
 
Net Asset Value                       52.7%      11.6%      53.5%      43.1%      28.9% 
 
Comparator  Index*                    37.8%      14.6%      39.3%      38.4%     -16.1% 
 
*For a definition of terms see Glossary of Terms and Alternative Performance 
Measures in the AFS 
 
**The comparator 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 contracts for difference ("CFDs") 
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. 
 
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 2021, the Company's net asset value gained 52.7% 
to 125.00p per share, compared to a rise of 37.8% in the chosen comparator 
index, the IA UK All Companies Sector Average Index. Over the 12 months, the 
share price gained 42.1%. Over the five years to 31 March 2021, net asset value 
has gained 53.5% and the share price 59.2%, against the IA UK All Companies 
Sector Average return of 39.3%. The Company's net asset value progressed in the 
three months since the year end to 136.02p at 30 June 2021. (total return, 
Lipper data, IA UK All Companies Sector Average for comparison purposes). 
 
Review of the year 
 
Medium sized and smaller companies rebounded strongly from their low points of 
March 2020. These are areas where the Manager, SVM Asset Management Limited, 
finds more opportunity for the Fund. During the 12 months under review, there 
were positive contributions to performance from Ceres Power, Alpha FX, JD 
Sports, Draper Esprit and Codemasters Group. Beneficiaries in the first half of 
the 12 months under review tended to be in growth areas and those providing 
online services and support for working from home.  However, this was followed 
by a period in which investor focus was on recovery, and the best performances 
then came from the sectors that had lagged but which were expected to benefit 
from the easing of lockdowns. The portfolio overall has more emphasis on 
growth. 
 
Disappointments in the period included Workspace, Manolete Partners, Jet2, 
Beazley and Learning Technologies. 
 
New or additional investment was made in Games Workshop, Alpha FX, Aveva, Impax 
Asset Management, Restaurant Group and Seeing Machines.  To fund the purchases, 
sales were made of K3 Capital, Hotel Chocolat, Spirent, AJ Bell and Manolete 
Partners. 
 
Portfolio changes emphasised increasing exposure to inflation beneficiaries and 
taking some profits in growth businesses.  Applegreen and Arrow Global were 
taken over, highlighting the attractiveness of UK small and medium sized 
companies to private equity buyers.  Cheap money is readily available to listed 
companies and private equity, which could drive more takeovers.  UK listeds 
with global exposure could be a target. 
 
Significant global stimulus should boost company profits over the next two 
years. Inventory and capital spend hit lows in the second half of 2020, a 
position that often leads industrial recovery. The economic changes of 
resilience, productivity, capital investment and sustainability are likely to 
result in opportunities for growth businesses. But signs of overheating may 
emerge, linked to supply disruption in a range of sectors. The Fund focuses on 
businesses with pricing power which we believe will be able to absorb these and 
raise wages. 
 
The shift towards electric vehicles and renewables is likely to bring major 
change in energy use. The Fund has investments in clean energy, including Ceres 
Power and ITM Power. We expect long term opportunity for companies supporting 
resilience, sustainability and reduction in fossil fuels. 
 
Annual General Meeting 
 
The Annual General Meeting will be held on Friday 10 September 2021 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 repeat this arrangement, 
operating within Board guidelines and approvals. The aim is to improve 
liquidity in our shares, and your Board does not expect this to be dilutive to 
shareholders. 
 
Outlook 
 
This year may bring an interest rate rise by the Bank of England, ahead of the 
US Federal Reserve. In what might represent the first stage in an eventual 
tightening of monetary policy, the Bank has announced it will slow the pace of 
its asset purchase program. Brexit has triggered more bottlenecks in the UK 
economy and its successful vaccination programme has spurred a sharper bounce 
in the economy than in much of Europe. The key to whether inflation is 
transient or not will now be found in wage inflation. If the Bank acts, the 
Pound would likely strengthen - cooling the economy a little but favouring 
domestic businesses over international earnings. 
 
There is potential for much change in the global economy, but possibly in a 
different direction than that which occurred in the exceptional circumstances 
of the pandemic. The portfolio emphasises exposure to scalable businesses with 
a competitive edge and potential for self-help that can deliver. It also 
includes investments with recovery potential.  Your Fund remains fully invested 
with some additional gearing. 
 
Peter Dicks 
 
Chairman 
 
14 July 2021 
 
MANAGER'S REVIEW 
 
Summary 
 
The period under review began near the low point for the stockmarket, which 
reflected the height of investor fear about the pandemic. The bounce in many 
growth shares was sharp, as it was clear that many companies could quickly 
adapt their business model to benefit from the change in consumer behaviour. 
Goods and services that could be purchased online saw increased demand, with a 
greater interest in sustainability, resilience and the home evident.  The 
portfolio benefited from an emphasis on businesses with a strong competitive 
edge, or servicing the digital economy.  As the year progressed, investors 
began to look to the benefits from an easing of lockdowns, and there was a 
recovery in economically-sensitive sectors.  These are a smaller component of 
the portfolio, which remains focused on growth, but the opportunity was taken 
to take profits in some growth shares and re-invest in recovery. Contracts for 
difference ("CFDs") continued to be used within the Fund to assist efficient 
portfolio management and also allow some gearing. 
 
Portfolio review and investment strategy 
 
The investment approach of the Company favours disruptors and emerging winners, 
where they have already proven that they can build market share. The aim is to 
identify structural growth opportunities that can perform at different stages 
of the economic cycle. The Manager believes that their research is best focused 
on medium sized and smaller growing businesses, particularly where the business 
opportunity is not fully recognised but a company is starting to attract more 
investor interest. There is no standard business model, and the investment 
process involves meetings with management as well as analysing accounts. 
 
New business models are emerging that disrupt established businesses, often 
winning their customers through new services or innovative technology.  But 
because many young businesses fail it is important to be rigorous in selection 
and invest only when their business model is proven.  Although it is innovation 
that drives these businesses, they can appear in very traditional sectors: 
food, legal services and speciality chemicals.  They can also be in established 
businesses that pivot to change the way they do things, perhaps going from 
selling product as a one-time sale with some after-market support, on to a 
recurring annual software as a service model. What that achieves in quality and 
visibility of income streams can create dramatic growth in long term value. 
 
Keystone Law is an example of a disruptor with a changed business model driven 
to an extent by regulation.  It has emerged as an attractive alternative to 
legal partnerships for high calibre lawyers. It shows that a long-standing 
traditional business approach can be ripe for a revolution in business model. 
Keystone is an innovative platform utilising technology to reduce costs and 
increase profitability. The Manager sees Keystone as a scalable business model 
that can grow market share. 
 
The Manager looks for resilience in businesses, and good stewardship and 
culture. Companies that get it right are usually candid and straightforward in 
their accounting and reporting, and generally transparent in strategy. They 
have a good sense of their key value drivers and will share that in one-to-one 
meetings. Resilience in a business often comes from its strength within a niche 
- how important its product or service is to customers and how well it manages 
risks.  Good profit margins and cashflow can help to protect against 
challenges.  Key to the opportunity that the Manager sees in investment is an 
ability to generate returns greater than cost of capital and to ensure that 
stewardship of assets is focused on this. 
 
As a portfolio example, Games Workshop is the global leader for tabletop 
miniature gaming, now a fast-growing part of the games market. Since 2020 the 
appetite for hobbies has accelerated and the Manager sees this as a structural 
growth theme. The company has an opportunity to leverage the franchise 
-increasing royalties to reflect the greater appetite for computer games in 
graphic novels and TV series. 
 
Companies providing technology and solutions are proving significantly 
disruptive. The Manager favours businesses that have been domestic UK and then, 
sometimes through an acquisition, internationalise their business. A number of 
medium sized businesses have successfully moved beyond the UK into 
underpenetrated markets. New winners are emerging - for example fuel cell 
businesses and some other innovative but robust technologies. These 
developments span quite a wide range of sectors - digital data, cloud 
technology and mobile delivery can transform and disrupt many traditional 
sectors. Some of the transformation will be in older industries. 
 
Manufacturing, for example is moving to a business model where control can now 
mean remotely operated processes helped by many more sensors and intelligence 
in the system. Remotely they can know when a motor is going to break down or 
need service so they can schedule maintenance to minimise outages.  Technology 
offers two avenues; cutting costs for efficiency but also offering real time 
feedback from manufacturing operations or consumer markets.  Ideally companies 
should have a two-pronged approach; an opportunity to grow their market and, 
also, to achieve efficiency savings as they grow. 
 
Outlook 
 
The portfolio emphasises exposure to businesses with strong competitive 
positions and potential for organic growth. It also includes investments with 
recovery potential. 
 
Your Fund remains fully invested with some additional gearing. 
 
                                                        Market 
Sector analysis*      %        Listing*      %          Capitalisation % 
                                                        * 
 
Industrials            23.8    Main Market   54.7       Small               51.7 
Consumer               21.5    AIM           44.6       Mid                 28.5 
Discretionary          17.5    Other          0.7       Large               19.8 
Real Estate            13.1 
Communication           7.7 
Services                7.2 
Financials              5.8 
Healthcare              3.4 
Consumer Staples 
Information 
Technology 
 
*Analysis is of gross exposure 
 
INVESTMENT PORTFOLIO 
 
as at 31 March 2021 
 
                    Market               Market 
                  Exposure             Exposure 
                      2021        % of     2020 
Stock                 £000  Net Assets     £000 
 
Ceres Power            329         4.4       50 
Holdings 
 
Alpha Financial        258         3.4       67 
Markets 
 
4Imprint Group         232         3.0      233 
 
Unite Group            214         2.9      254 
 
Ocado Group            208         2.8      140 
 
Dechra                 205         2.7      134 
Pharmaceuticals 
 
XP Power               187         2.5       65 
 
Watches of             185         2.5        - 
Switzerland 
Group* 
 
Gamma                  177         2.4       98 
Communications 
 
Draper Esprit          172         2.3       75 
 
Ten largest          2,167        28.9 
investments 
 
FDM Group              166         2.2      122 
Holdings 
 
Hilton Food            158         2.1      235 
Group 
 
JD Sports              155         2.1      145 
Fashion* 
 
Flutter                154         2.1       64 
Entertainment* 
 
Keystone Law           153         2.0      105 
Group 
 
Renishaw*              146         1.9       72 
 
Games Workshop         144         1.9       43 
Group 
 
Jet2                   144         1.9        - 
 
Catena Group           140         1.9        - 
 
Rentokil               135         1.7      174 
Initial 
 
Twenty largest       3,662        48.7 
investments 
 
Kainos Group           128         1.7        - 
 
ITM Power              126         1.7        - 
 
Restaurant             125         1.7        - 
Group 
 
Experian               125         1.7      113 
 
Reach                  119         1.5        - 
 
Kin and Carta*         114         1.5        - 
 
Kape                   113         1.5        - 
Technologies 
 
Beazley Group          110         1.5      122 
 
Essensys               109         1.5       75 
 
Impax Asset            109         1.5        - 
Management 
Group 
 
Thirty largest       4,840        64.5 
investments 
 
Other                3,636        48.5 
investments (47 
holdings) 
 
Total                8,476       113.0 
investments 
 
CFD positions      (1,172)      (15.6) 
 
CFD unrealised         294         3.9 
gains 
 
Net current          (104)       (1.3) 
liabilities 
 
Net assets           7,494 
                                 100.0 
 
*Includes CFDs. 
 
Market exposure for equity investments held is the same as fair value and for 
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 2021 is detailed on the website. 
 
PRINCIPAL RISKS AND UNCERTAINTIES 
 
The Directors carry out a robust assessment of the Company's emerging and 
principal risks including reviewing the policies implemented 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. 
 
The Board considers the COVID-19 pandemic and Brexit to be factors which 
exacerbate existing risk, rather than new emerging risks.  Their impact is 
considered within the relevant risks. 
 
Investment strategy - The risk that an inappropriate investment strategy may 
lead to the Fund underperforming its comparator, 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 comparator.   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 United Kingdom Listing Authority 
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. Risk controls are monitored 
by their assigned owner with oversight from the Manager's risk and compliance 
function as part of the Manager's risk & control framework, which is reviewed 
at least annually. 
 
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 
 
14 July 2021 
 
Income statement 
 
for the year to 31 March 2021 
 
                                                 Notes    Revenue    Capital      Total 
                                                             £000       £000       £000 
 
Net loss on investments at fair value                6          -      2,743      2,743 
 
Income                                               1         51          -         51 
 
Investment management fees                           2          -       (48)       (48) 
 
Other expenses                                       3      (144)          -      (144) 
 
(Loss)/gain before finance costs and                         (93)      2,695      2,602 
taxation 
 
Finance costs                                                (17)          -       (17) 
 
(Loss)/gain on ordinary activities before                   (110)      2,695      2,585 
taxation 
 
Taxation                                             4          -          -          - 
 
(Loss)/gain attributable to ordinary 
shareholders                                                (110)      2,695      2,585 
 
(Loss)/gain per Ordinary Share                       5    (1.83)p     44.95p     43.12p 
 
for the year to 31 March 2020 
 
                                                 Notes    Revenue    Capital      Total 
                                                             £000       £000       £000 
 
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 
 
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 2021 
 
                                                     Notes          2021          2020 
                                                                    £000          £000 
 
Fixed Assets 
 
Investments at fair value through profit or loss         6         7,598         4,463 
 
Current Assets 
 
Debtors                                                  7           107           451 
 
Cash at bank and on deposit                                            -           294 
 
Total current assets                                                 107           745 
 
Creditors: amounts falling due within one year           8         (211)         (299) 
 
Net current (liabilities)/assets                                   (104)           446 
 
Total assets less current liabilities                              7,494         4,909 
 
Capital and Reserves 
 
Share capital                                            9           300           300 
 
Share premium                                                        314           314 
 
Special reserve                                                    5,136         5,136 
 
Capital redemption reserve                                            27            27 
 
Capital reserve                                                    2,203         (492) 
 
Revenue reserve                                                    (486)         (376) 
 
Equity shareholders' funds                                         7,494         4,909 
 
Net asset value per Ordinary Share                       5       125.00p        81.88p 
 
Statement of Changes in Equity 
 
for the year to 31 March 2021 
 
                                                    Capital 
                    Share      Share  Special    redemption  Capital   Revenue 
                  capital    premium  reserve       reserve  reserve   reserve   Total 
                     £000       £000     £000          £000     £000      £000    £000 
 
As at 1 April         300        314    5,136            27    (492)     (376)   4,909 
2020 
 
Gain/(loss) 
attributable to         -          -        -             -    2,695     (110)   2,585 
shareholders 
 
As at 31 March        300        314    5,136            27    2,203     (486)   7,494 
2021 
 
for the year to 31 March 2020 
 
                                                     Capital 
                     Share      Share  Special    redemption  Capital   Revenue 
                   capital    premium  reserve       reserve  reserve   reserve   Total 
                      £000       £000     £000          £000     £000      £000    £000 
 
As at 1 April          300        314    5,144            27    1,193     (369)   6,609 
2019 
 
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 
 
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 April 2021. The Directors have a reasonable expectation that 
the Company has adequate resources to continue in operational existence for at 
least twelve months from the date of approval of these Financial Statements. In 
making their assessment the Directors have reviewed income and expenditure 
projections, reviewed the liquidity of the investment portfolio and considered 
the Company's ability to meet liabilities as they fall due. This conclusion 
also takes in to account the Directors' assessment of the continuing risks 
arising from COVID-19. The Company is exempt from presenting a Cash Flow 
Statement as a Statement of Changes in Equity is presented and substantially 
all of the Company's investment are highly liquid and are carried at market 
value. 
 
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, special dividends and interest receivable on bank 
balances and CFDs. 
 
Expenses and interest 
 
Expenses and interest payable are dealt with on an accruals basis. All expenses 
other than investment management fees are charged to revenue. 
 
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 as capital gains or losses on 
investments at fair value.  Dividends and interest on CFDs are included in the 
revenue income. The year end fair value of CFD positions which are assets is 
included in fixed asset investments, whilst the year end fair value of CFD 
positions which are liabilities is included within current liabilities in Note 
8.  Balances with brokers in respect of margin calls are included within 
debtors in Note 7.  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 
 
Transactions involving foreign currencies are converted at the rate ruling as 
at the date of the transaction. Sterling is the functional currency of the Fund 
and all 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 investment management fees, together with any tax relief, are also 
taken to this reserve. Increases and decreases in the valuation of fixed asset 
investments are recognised 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 
 
                                                                 2021              2020 
                                                                 £000              £000 
 
Income from shares and securities 
 
  - dividends                                                      43               139 
 
 - interest                                                         8               (2) 
 
                                                                   51               137 
 
2. Investment Management Fees 
 
Investment Management Fees                                         48                52 
 
3. Other expenses 
 
Revenue 
 
General expenses                                                   82                71 
 
Directors' fees                                                    25                25 
 
Auditor's remuneration                                             37                24 
 
                                                                  144               120 
 
4. Taxation 
 
Current taxation                                                    -                 - 
 
Deferred taxation                                                   -                 - 
 
Total taxation charge for the year                                  -                 - 
 
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: 
 
Gain/(loss) on ordinary activities before taxation              2,585           (1,692) 
 
Corporation tax (19%, 2020 - 19%)                                 491             (321) 
 
Effects of: 
 
Non taxable UK dividends                                          (5)              (15) 
 
Losses on CFD                                                    (31)                 - 
 
Non taxable investment (losses)/gains in capital                (491)               310 
 
Non taxable overseas dividends                                      -               (3) 
 
Expenses not deductible for tax purposes                            -                 2 
 
Movement in deferred tax rate on excess management                  -              (22) 
charges 
 
Movement in unutilised management expenses and NTLR                36                49 
deficits 
 
Total taxation charge for the year                                  -                 - 
 
At 31 March 2021, the Fund had unutilised management expenses and non trade 
loan relationship ("NTLR") deficits of £1,439,000 (2020 - £1,260,000). 
 
A deferred tax asset of £275,000 (2020 - £239,000) 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 5,995,000 (2020 - 
5,999,836) ordinary shares in issue during the year. 
 
Total return per share is based on the total gain for the year of £2,585,000 
(2020 - loss of £1,692,000). 
 
Capital return per share is based on the net capital gain for the year of £ 
2,695,000 (2020 - loss of £1,685,000). 
 
Revenue return per share is based on the revenue loss after taxation for the 
year of £110,000 (2020 - loss of £7,000). 
 
The net asset value per share is based on the net assets of the Fund of £ 
7,494,000 (2020 - £4,909,000) 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 
 
                                                                     2021         2020 
                                                                     £000         £000 
 
Listed investments and CFDs                                         7,598        4,463 
 
Unlisted investments                                                    -            - 
 
Valuation as at end of year                                         7,598        4,463 
 
                                              Listed   Unlisted     Total        Total 
                                                £000       £000      £000         £000 
 
Opening book cost                              3,901        140     4,041        4,229 
 
Opening investment holding gains/(losses)        562      (140)       422        2,208 
 
Opening fair value                             4,463          -     4,463        6,437 
 
Analyis of transactions made during the 
year 
 
Purchase at cost                               3,271          -     3,271        2,404 
 
Sales proceeds received                      (2,716)          -   (2,716)      (2,910) 
 
Gains/(losses) on investments                  2,580          -     2,580      (1,468) 
 
Closing fair value                             7,598          -     7,598        4,463 
 
Closing book cost                              4,928        140     5,068        4,041 
 
Closing investment holding gains/(losses)      2,670      (140)     2,530          422 
 
Closing fair value                             7,598          -     7,598        4,463 
 
Gains/(losses) on investments                  2,580          -     2,580      (1,468) 
 
Movement in CFD current liability                163          -       163        (165) 
 
Net gains/(losses) on investments at fair      2,743          -     2,743      (1,633) 
value* 
 
The transaction costs in acquiring investments during the year were £8,000 
(2020: £10,000).  For disposals, transaction costs were £3,000 (2020: £3,000). 
 
The company received £2,716,000 (2020 £2,910,000) from investments sold in the 
year.  The book cost of these investments when they were purchased was £ 
2,244,000 (2020 £2,592,000). 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. 
 
*Net gains/losses on investments includes gains of £430,000 (2020: losses of £ 
220,000) in relation to CFDs. 
 
7. Debtors 
 
                                                                  2021             2020 
                                                                  £000             £000 
 
Investment income due but not received                               8                9 
 
Amounts receivable relating to CFDs                                  1              432 
 
Prepayments                                                         11                7 
 
Taxation                                                             5                3 
 
Other debtors                                                       82                - 
 
                                                                   107              451 
 
8. Creditors: amounts falling due within one year 
 
                                                                  2021             2020 
                                                                  £000             £000 
 
Cash balances                                                       79                - 
 
Amounts due relating to CFDs                                        61              224 
 
Due to SVM Asset Management Limited                                 14               44 
 
Other creditors                                                     57               31 
 
                                                                   211              299 
 
9. Share capital 
 
Allotted, issued and fully paid 
 
6,005,000 ordinary 5p shares (2020 - 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, other than 
10,000 shares held in treasury which carry no voting rights. 
 
During the year no Ordinary Shares were brought back (2020: 10,000 Ordinary 
Shares with a nominal value of £500 and representing 0.17% of the issued share 
capital were bought back during the year and placed in treasury for an 
aggregate consideration of £8,650).  The 10,000 shares bought back during 2020 
remain in treasury. 
 
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 99.2% 
(2020: 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 2021 were valued at £nil 
(2020 - £nil). 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 2021 and 2020 are 
an abridged version of the statutory accounts for those years. The Auditor has 
reported on the 2021 and 2020 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 2020 have been filed with the Registrar of 
Companies and those for 2021 will be delivered in due course. 
 
12.       The Annual Report and Accounts for the year ended 31 March 2021 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 12 noon on 
Friday 10 September 2021 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 
 
14 July 2021 
 
 
 
END 
 
 

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