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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