12 May 2010 12:17
SVM GLOBAL FUND PLC Half Yearly Statement for the six months to 31 March 2010
Investment Objective
The objective of the Fund is to achieve long-term growth through a diversified international multi-strategy portfolio and unique access to specialist funds including hedge and private equity. Its aim is to outperform the FTSE World Index on a total return basis.
Highlights
* Over the 6 months to 31 March 2010, net asset value increased by 9.8% against the benchmark, FTSE World Index rise of 12.5%. Over the longer term, the Fund continues to outperform the index. * During the period, there were strong performances from the Resources and Specialist Fund themes and in particular those funds exposed to emerging markets. Disappointments were confined to a small number of funds, principally those in the Property and Hedge themes. * The Fund is well placed for global economic recovery though its core themes and overweight emerging markets exposure. * The Managers have been party to a number of trust restructurings, many of which are still work in progress. These offer the opportunity for discounts to narrow materially irrespective of the performance of stockmarkets * The Fund bought back 835,000 shares into treasury. * Substantial store of value within the Fund with the average discount on holdings standing in excess of 26% against a sector average of 11%.
For further information, please contact:
Colin McLean SVM Asset Management 0131 226 6699Roland Cross Broadgate 0207 726 6111
Chairman's Statement
Investor confidence grew over the six months to 31 March 2010 as signs of an economic recovery emerged. The FTSE World Index rose by 12.5% over the six months to 31 March 2010 with the Fund's asset value increasing by 9.8%. The Fund, having been ahead of the index for the first five months of the period under review, fell behind the sharp index gain experienced in the last two weeks in March. As at the close of business on 7 May 2010, the asset value was 315.38 pence, a fall of 2.0% against the benchmark index fall of 4.6% since the quarter end.
Although in the short term, the results have been disappointing, over the longer term, the Fund has outperformed its benchmark index over five, ten and fifteen years, as well as since its launch in 1991. Historically, where there have been periods of short term underperformance, these have been followed by phases of strong out-performance. The Managers believe that the portfolio is well placed to resume its performance.
PORTFOLIO REVIEW
During the period, there were strong performances from the Resources and Specialist Fund themes and in particular those funds exposed to emerging markets, specifically Russia and China. In addition, a number of funds announced reconstruction proposals which have and in some cases will crystallise value. Disappointing performances were confined to a small number of funds, principally those in the Property and Hedge section of the portfolio.
The Fund continues to hold a number of investment trusts that trade at extremely wide discounts. There is a substantial store of value within the Fund with the average discount on holdings standing in excess of 26% against a sector average of 11%. The Managers view this as extraordinary value.
Historically, there have been times where asset allocation has been key and other times where there have been opportunities to extract value from the narrowing of discounts. Rarely, in the Managers' experience have these periods existed concurrently and they believe such an opportunity exists at this point.
Following the initial relatively indiscriminate rises from the lower levels of a year ago, stockmarkets are now seen likely to become more discerning. The Managers believe that countries with higher growth and sounder finances merit a premium with the weaker economies being less attractive. In contrast with previous cycles, the emerging markets offer this dynamic and at relatively attractive valuations. The Fund retains its overweighting in emerging markets and underweighting in the more indebted western economies. In addition, the lower exposure to the major currencies (US Dollar and Euro) remains in place.
There is a continuing increase in corporate activity within the trust sector as shareholders identify value to be unlocked and press for change. This has happened many times in the past. The Managers on behalf of the Fund have been party to a number of trust restructurings, many of which are still work in progress. These offer the opportunity for discounts to narrow materially irrespective of the performance of stockmarkets.
During the period under review, there have been a number of portfolio changes. The most material was the full disposal of the holding in Horseman Global Fund following the retirement of its principal manager. The proceeds were reinvested in a specialist long / short equity fund, Camargue Equity Fund. Other changes include the sale of the holding in Advance UK Trust following its forced liquidation and LMS Capital on its entry into the All Share Index. Additions have been made in specialist fund Quorum Oil & Gas Technology Fund and hedge fund Credaris Credit Fund.
DISCOUNT AND SHARE TRANSACTIONS
During the period, the Fund bought back 835,000 shares into treasury. These shares may be re-issued at a price above the original purchase price and only at a narrower discount. After a year, any un issued shares will be cancelled. The Board remains vigilant over the rating of the shares and are ready to buy back further shares at a discount or issue them at a premium when it is considered to be in the interests of shareholders. We and the Managers believe that the retention of these powers creates an active and efficient market for shareholders.
OUTLOOK
The Managers are optimistic that the global economy will continue to recover and that emerging economies should lead this. The Fund, with its mixture of relative and absolute return focussed funds, has good prospects of resuming out-performance.
Senator Shane RossChairman12 May 2010
Financial Statements (unaudited)
IncomeStatement 6 months to 31 March 2010 6 months to 31 March 2009 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains / (losses) on - 17,267 17,267 - (41,309) (41,309)investments Income 401 - 401 866 1,210 2,076 Investment management (61) (547) (608) (62) (554) (616)fees Other expenses (61) (24) (85) (85) (15) (100) -------- -------- -------- -------- -------- -------- Return before interest 279 16,696 16,975 719 (40,668) (39,949)and taxation Finance costs (10) (90) (100) (62) (560) (622) -------- -------- -------- -------- -------- --------
Net return after taxation 269 16,606 16,875 657 (41,228) (40,571)
-------- -------- -------- -------- -------- -------- Return per ordinary 0.47p 29.11p 29.58p 1.15p (72.21p) (71.06p)share --------- -------- -------- -------- -------- --------
The total column of this statement is the profit and loss account of the Fund. All revenue and capital items in this statement derive from continuing operations. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Fund have been reflected in the above statement.
Cash Flow Statement 6 months to 6 months to 31 March 31 March 2010 2009 £'000 £'000
Net cash flow from operating activities (160) 1,707
Returns on investment and servicing of (100) (622) finance
Capital expenditure and net financial 3,434 16,883investment Financing (2,145) - Equity dividends paid (1,142) (999) ---------- ---------- (Decrease) / increase in cash (113) 16,969 ---------- ----------Balance Sheet as at as at as at 31 March 30 September 31 March 2010 2009 2009 £'000 £'000 £'000 Investments at fair value through 173,227 162,751 147,930profit or loss ---------- ---------- --------- Current assets 6,889 3,810 991 Creditors: amounts falling due within (7) (40) (1,957)one year ---------- ---------- --------- Net current assets / (liabilities) 6,882 3,770 (966) ---------- ---------- ---------- Equity shareholders' funds 180,109 166,521 146,964 ---------- ---------- ---------- Net asset value per ordinary share 320.14p 291.66p 257.40p Reconciliation of Movements in Shareholders Funds For the period to 31 March 2010 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 October 14,274 10,966 8,251 4,179 127,564 1,2872009 Net gain on sale of - - - - 4,424 -investments Transaction costs - - - - (24) - Expenses charged to - - - - (637) -capital Exchange - - - - 122 -differences Movement in - - - - 12,721 -investment holding gains Share buybacks - - (2,145) - - - Revenue - - - - - 269attributable to shareholders Ordinary dividends - - - - - (1,142) --------- --------- --------- --------- --------- ---------
As at 31 March 2010 14,274 10,966 6,106 4,179 144,170 414
--------- --------- --------- --------- --------- --------- For the period to 31 March 2009 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 October 14,274 10,966 8,251 4,179 148,824 1,0412008 Net gain on sale of - - - - 6,670 -investments Transaction costs - - - - (15) - Expenses charged to - - - - (1,114) -capital Exchange - - - - (3,844) -differences Movement in - - - - (41,926) -investment holding gains Revenue - - - - - 657attributable to shareholders Ordinary dividends - - - - - (999) --------- --------- --------- --------- --------- ---------
As at 31 March 2009 14,274 10,966 8,251 4,179 108,595 699
--------- --------- --------- --------- --------- ---------
Directors' Responsibilities for the Financial Statements
The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations. Company law requires the Board to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Standards and applicable law).
The financial statements are required by law to give a true and fair view of the state of affairs of the Fund at the end of the financial year and of the net return of the Fund for that year. In preparing these financial statements, the Directors are required to: (a) select suitable accounting policies and then apply them consistently; (b) make judgments and estimates that are reasonable and prudent; and (c) state whether applicable accounting standards have been followed.
The Board is also responsible for the maintenance of proper accounting records which disclose with reasonable accuracy, at any time, the financial position of the Fund and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Fund and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that to the best of their knowledge:
(i) these financial statements have been prepared in accordance with the Accounting Standards Board's statement `Half-Yearly Financial Reports';
(ii) the Half-Yearly Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(iii) the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).
Principal Risks & Uncertainties
The principal risks inherent within the Fund are market related and have been classified as valuation risk, liquidity risk, exchange rate risk, interest rate risk and credit risk. Additional risks faced by the Fund can be categorised under the following headings; investment strategy, share price discount, regulatory and operational. The Fund has an established environment for the management of these risks which are continually monitored by the Managers. The Board regularly considers the risks associated with the Fund and receives both formal and informal reports from the Managers and third party service providers addressing these risks. An explanation of these risks and how they are mitigated is explained in the 2009 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 2009 Annual Report.
Notes
1. The accounts have been prepared in accordance with applicable accounting standards and the 2009 Statement of Recommended Practice (SORP) issued by the Association of Investment Companies.
2. Returns per share are based on a weighted average of 57,041,847 (2009 - 57,094,546) ordinary shares in issue during the period.
Total return per share is based on the post tax total gain for the period of £ 16,875,000 (2009 - loss of £40,571,000).
Capital return per share is based on net capital return during the period of £ 16,605,000 (2009 - loss of £41,228,000).
Revenue return per share is based on the revenue after taxation for the period of £269,000 (2009 - £657,000).
The number of shares in issue at 31 March 2010 was 56,259,546 (2009 - 57,094,546).
3. During the period, 835,000 ordinary shares were bought back through the market for a total consideration of £2,145,000 and held in treasury.
4. Investment management fees and finance interest have been allocated 10% to revenue and 90% to capital (2009: same). This allocation is in line with the Board's expected long-term split of returns in the form of income and capital gains respectively from the investment portfolio.
5. The above unaudited figures do not constitute full accounts in terms of Section 240 of the Companies Act 1985. The accounts for the year to 30 September 2009, on which the auditors issued an unqualified report under Section 235 of the Companies Act 2005, have been lodged with the Registrar of Companies and did not contain a statement required under Section 237(2) or (3) of the Companies Act 1985. A copy of the half yearly report for the 6 months to 31 March 2010 will be available on the Managers' website: www.svmonline.co.uk towards the end of this week. Copies are also available for inspection at 7 Castle Street, Edinburgh EH2 3AH, the registered office of the Fund.
vendor