TIDMSVM
SVM UK EMERGING FUND PLC
(the "Fund")
HALF YEARLY REPORT
(FOR THE SIX MONTHS TO 30 SEPTEMBER 2021)
A copy of the Half Yearly Report will be available to download from the
Manager's website at 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
* Over the six months to 30 September 2021, the Company's net asset value
gained 16.6% to 145.7p per share, compared to a return of 8.4% in the IA UK
All Companies Sector Average Index.
* Over the five years to 30 September 2021, net asset value gained 70.5% and
the share price 79.1%, against the IA UK All Companies Sector Average Index
return of 38.4%.
* Positive contributions from Watches of Switzerland, Alpha FX Group,
Dianomi, Reach and Dechra Pharmaceuticals.
* Portfolio emphasises exposure to scalable businesses with a competitive
edge that can protect margins and deliver growth.
"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"
Financial Highlights
Total Return 10 Years
Performance to 6 months 3 years 5 Years
30 September
2021
Net Asset Value 16.6% 13.5% 70.5% 98.5%
Share Price 16.1% -7.6% 79.1% 122.1%
Comparator Index 8.4% 15.1% 38.4% 92.3%
*
* 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.
CHAIRMAN'S STATEMENT
Over the six months to 30 September 2021, the Company's net asset value gained
16.6% to 145.7p per share, compared to a return of 8.4% in the IA UK All
Companies Sector Average Index. Over the six months, the share price gained
16.1%. In the five years to 30 September 2021, net asset value has gained
70.5% and the share price 79.1%, against the IA UK All Companies Sector Average
return of 38.4%. The Company's net asset value declined slightly since the
period under review to 145.45p at 29 October 2021 (total return, SVM and FE
fundinfo data).
During the period investor focus was on recovery and concerns over inflation,
with the best performances in the stockmarket typically from businesses that
were expected to benefit from the easing the lockdown. However, the summer saw
some interest return to growth businesses, as many traditional sectors were hit
by economic pressures, supply disruption and higher energy costs. This seems
likely to lead in the short term to higher UK interest rates, but higher energy
costs and shortages are likely in time to cool the economy. Nevertheless, the
UK economy looks set for strong growth in 2022, with capital expenditure for
investment at particularly high levels.
The strongest contributions to performance over the period were from Watches of
Switzerland, Alpha FX Group, Dianomi, Reach, Kin and Carta and Dechra
Pharmaceuticals. Laggards included Ceres Power, ASOS, Renishaw and AO World.
Additional investment was made in Entain, Kooth, Marlowe and Redde Northgate.
The Fund also participated in the new listings of Brickability Group, Dianomi,
Revolution Beauty and Microlise Group. These flotations brought into the
portfolio innovative strategies of a number of smaller and medium sized
businesses. To fund these purchases, Ocado, AO World, The Hut Group, Just Eat
Takeaway, Premier Foods and Moonpig were sold.
The sharp recovery in the UK economy is creating value in some disruptive
businesses. Many of these enter the stockmarket as small or mid-cap, but have
potential to be much bigger, growing organically and by acquisition. Some,
such as Dianomi, emphasise innovative digital strategies and online services,
but others are providing new services in traditional sectors. For example,
Microlise is a long-established business that provides logistics management
services to optimise operations for truck fleets. The portfolio is diversified
across a wide range of sectors, but a common characteristic of many portfolio
holdings is dominance within a niche.
The portfolio focuses on resilient growing businesses, with low exposure to
commodities, oil and banks. These are typically scalable businesses with a
competitive edge. The Fund remains fully invested with some additional gearing.
Peter Dicks
Chairman
5 November 2021
INVESTMENT OBJECTIVE and POLICY
The investment objective of SVM UK Emerging Fund plc (the "Fund" or the
"Company") is long term capital growth from investments in medium-sized and
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)UNAUDITED ACCOUNTS
Income Statement
Six months to 30 September Six months to 30 September
2021 2020
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net gain on investments at - 1,283 1,283 - 1,464 1,464
fair value
Income 56 - 56 20 - 20
Investment management fees - (32) (32) - (22) (22)
Other expenses (61) - (61) (73) - (73)
(Loss)/gain before finance (5) 1,251 1,246 (53) 1,442 1,389
costs and taxation
Finance costs (7) - (7) (5) - (5)
(Loss)/gain on ordinary (12) 1,251 1,239 (58) 1,442 1,384
activities before taxation
Taxation - - - - - -
(Loss)/gain attributable to (12) 1,251 1,239 (58) 1,442 1,384
ordinary shareholders
(Loss)/gain per Ordinary Share (0.20)p 20.87p 20.67p (0.96)p 24.05p 23.09p
Year ended 31 March 2021
(audited)
Revenue Capital Total
£'000 £'000 £'000
The Total column of
Net gain on investments at - 2,743 2,743 this statement is the
fair value profit and loss
account of the Fund.
Income 51 - 51 All revenue and
capital items are
Investment management fees - (48) (48) derived from
continuing
Other expenses (144) - (144) operations. No
operations were
(Loss)/gain before finance (93) 2,695 2,602 acquired or
costs and taxation discontinued in the
year. A Statement of
Finance costs (17) - (17) Comprehensive Income
is not required as all
(Loss)/gain on ordinary gains and losses of
activities before taxation (110) 2,695 2,585 the Fund have been
reflected in the above
Taxation - - - statement.
(Loss)/gain attributable to
ordinary shareholders (110) 2,695 2,585
(Loss)/gain
per Ordinary Share (1.83)p 44.95p 43.12p
UNAUDITED ACCOUNTS
Balance Sheet
As at As at As at
30 September 31 March 30 September
2021 2021 2020
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Fixed Assets
Investments at fair value through profit 8,416 7,598 6,278
or loss
Total current assets 433 107 227
Creditors: amounts falling due within (116) (211) (212)
one year
Net current assets/(liabilities) 317 (104) 15
Total assets less current liabilities 8,733 7,494 6,293
Capital and Reserves 8,733 7,494 6,293
Equity shareholders' funds 8,733 7,494 6,293
Net asset value per Ordinary Share 145.67p 125.00p 104.97p
UNAUDITED ACCOUNTS
Statement of Changes in Equity
For the period to 30 September 2021
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2021 300 314 5,136 27 2,203 7,494
(486)
Gain/(loss) - - - -
attributable to 1,251 (12) 1,239
shareholders
As at 30 September 300 314 5,136 27 3,454 (498) 8,733
2021
For the year to 31 March 2021
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 300 314 5,136 27 (492) (376) 4,909
Gain/(loss) - - - -
attributable to 2,695 (110) 2,585
shareholders
As at 31 March 2021 300 314 5,136 27 2,203 (486) 7,494
For the period to 30 September 2020
Share Share Special Capital Capital Revenue
capital premium reserve redemption reserve reserve
reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
As at 1 April 2020 300 314 5,136 27 (492) 4,909
(376)
Gain/(loss) - - - - 1,442 (58) 1,384
attributable to
shareholders
As at 30 September 300 314 5,136 27 950 (434) 6,293
2020
UNAUDITED ACCOUNTS
Investment Portfolio as at 30 September 2021
Market % of Net Sector analysis as at % of Gross
Exposure Assets 30 September 2021 Exposure
Stock 2021
£000 Sector
1 Alpha Financial Markets 399 4.6 Consumer Discretionary 28.7
2 Dechra Pharmaceuticals 290 3.3 Industrials 25.1
3 4Imprint Group 285 3.3 Technology 20.7
4 Ceres Power Holdings 281 3.2 Financials 9.1
5 Watches Of Switzerland 265 3.0 Healthcare 4.1
Group*
6 Unite Group 219 2.5 Energy 4.0
7 Draper Esprit 214 2.4 Consumer Staples 3.2
8 FDM Group Holdings 209 2.4 Real Estate 3.1
9 Keystone Law Group 205 2.3 Telecommunications 2.0
10 XP Power 204 2.3 Total 100.0
Ten largest investments 2,571 29.3
11 Gamma Communications 198 2.3
12 JD Sports Fashion* 197 2.3
13 Reach 193 2.2
14 Kin And Carta* 176 2.0
15 Hilton Food Group 172 2.0
16 Essensys 169 1.9
17 Kape Technologies 166 1.9
18 Impax Asset Management 162 1.9
Group
19 Rentokil Initial 162 1.9
20 Kainos Group 161 1.8
Twenty largest investments 4.327 49.5
21 Experian 155 1.8
22 Games Workshop Group 149 1.7
23 Jet2 146 1.7
24 Flutter Entertainment* 146 1.7
25 Dianomi 136 1.5
26 Entain* 134 1.5
27 Kooth 128 1.5
28 Instem 123 1.4 *Includes Contract for Difference
("CFDs")
29 Volex 120 1.4
30 Beazley Group 119 1.4 Market exposure for equity
investments held is the same as
Thirty largest investments 5,683 65.1 fair value and for CFDs held is
the market value of the
Other investments (49 holdings) 4,143 47.5 underlying shares to which the
portfolio is exposed via the
Total investments 9,826 112.6 contract. The investment
portfolio is grossed up to
CFD positions (1,437) (16.5) include CFDs and the net CFD
position is then deducted in
CFD unrealised gains 27 0.3 arriving at the net asset total.
Net current assets 317 3.6
Net assets 8,733 100.0
UNAUDITED ACCOUNTS
Risks and Uncertainties
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. An explanation of
these risks and how they are mitigated is explained in the 2021 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
2021 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. This conclusion takes in to account the Directors' assessment of the
continuing risks from the COVID-19 pandemic. 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
in accordance with FRS 102 "Financial Reporting Standard applicable in the UK
and Republic of Ireland", FRS 104 "Interim Financial Reporting" and under the
Association of Investment Companies Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued in April 2021 (the interim financial statements for the period
to 30 September 2020 were prepared under the SORP issued in October 2019). 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
investments are highly liquid and are carried at market value. These financial
statements have been prepared in accordance with the accounting policies used
for the financial year ended 31 March 2021.
2. During the period no shares were bought back (2020: no shares were
bought back during the period).
The number of shares in issue at 30 September 2021 was 6,005,000
(2020: 6,005,000).
Returns per share are based on a weighted average of 5,995,000
(2020: 5,995,000) ordinary shares, being the number of shares in issue during
the period excluding the 10,000 shares held in Treasury.
Total return per share is based on the total gain for the period of £1,239,000
(2020: gain of £1,384,000). Capital return per share is based on the capital
gain for the period of £1,251,000 (2020: gain of £1,442,000,000). Revenue
return per share is based on the revenue loss after taxation for the period of
£12,000 (2020: loss of £58,000).
UNAUDITED ACCOUNTS
3. All investments are held at fair value. At 30 September 2021 no
unlisted investments were held with value attributed (31 March 2021: same; 30
September 2020: same).
Investments have been classified using the fair value hierarchy:
September March
2021 2021
£000 £000
Classification of financial instruments
Level 1 8,389 7,304
Level 2 27 294
Level 3 - 2 investments (March 2021: 2) - -
Level 1 reflects financial instruments quoted in an active market.
Level 2 reflects financial instruments whose fair value is
evidenced by comparison with other observable current market transactions in
the same instrument or based on a valuation technique whose variables include
only data from observable markets. The CFD positions are the sole Level 2
investments at 30 September 2021 and 31 March 2021.
Level 3 reflects financial instruments whose fair value is
determined in whole or in part using a valuation technique based on assumptions
that are not supported by prices from observable market transactions in the
same instrument and not based on available observable market data.
4. 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 2021: 12 (31 September March
March 2021: 11)CFD positions 2021 2021
£000 £000
Gross exposure 1,437 1,172
Net exposure 1,437 1,172
Unrealised gains 27 294
Unrealised losses 68 61
The gearing ratio is 15.6% at 30 September 2021 (31 March 2021: 16.7%). The
gearing ratio indicates the extra amount by which the shareholders' funds would
change if total assets (including 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.
5. SVM Asset Management Limited provides investment management and
secretarial services to the Fund. The Manager is entitled to a fee for these
services, payable quarterly in arrears, equivalent to 0.75% per annum of the
total assets of the Fund, less current liabilities.
UNAUDITED ACCOUNTS
6. 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 2021 is unaudited. The accounts for the year
to 31 March 2021, 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
Sally Moore Four Communications 020 3697 4200
END
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