Annual Financial Report

SVM UK EMERGING FUND PLC (the "Fund") ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2014 The Board is pleased to announce the Annual Financial Results for the year ended 31 March 2014. 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 Strong outperformance against benchmark index over the year Net asset value total return was +37.2% for the year compared to +17.1% for the benchmark index Share price rise of +34.3% for the year New objective and benchmark index approved by shareholders during the year Re-alignment of portfolio focusing on more liquid, dividend-paying growth businesses Financial Highlights Year to Year to 31 March 31 March 2014 2013 Total Return performance: Net Asset Value total return +37.2% -24.6% Share Price total return +34.3% -21.8% Benchmark Index (IMA UK All Companies Sector +17.1% -7.3% Average Index since 1 October 2013*) 31 March 31 March % Change 2014 2013 Capital Return performance: Net asset value (p) 73.93 53.90 +37.2% Share price (p) 57.75 43.00 +34.3% FTSE All-Share Index 3,556 3,381 +5.2% Discount 21.9% 20.2% Ongoing Charges ratio: Investment management fees** - - Other operating expenses 1.6% 2.9% Total Return to 1 3 5 Remit Change Launch 31 March 2014 (%) Year Years Years 2004 (2000) Net Asset Value +37.2 -15.4 +65.3 +129.8 -23.8 Benchmark Index* +17.1 -3.5 +115.3 +1.3 -41.6 *The benchmark index for the Fund was changed to the IMA UK All Companies Sector Average Index from 1 October 2013 prior to which the FTSE AIM Index was used. **The Manager has waived its management fees for the year to 31 March 2014 and 2013. 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 IMA UK All Companies Sector Average Index on a total return basis. CHAIRMAN'S STATEMENT Over the 12 months to 31 March 2014, the net asset value per share increased by 37.2% to 73.93p, compared to a gain of 17.1% in the benchmark. The benchmark was changed with effect from 1 October 2013 to the IMA UK All Companies Sector Average Index, following a shareholder vote. For the year under review, the benchmark comparison is with the previous index to 30 September 2013, and the new benchmark subsequently. Over the 12 months, the share price gained 34.3%. Performance was helped by maintaining a fully invested position, in expectation of a strong recovery by the UK economy. Over the past year, the UK economy steadily strengthened, with notable recovery in housing that broadened into other consumer and services sectors, making it one of the fastest growing Western economies. In my Statement last year, I commented on the tough financing environment for smaller companies and I am pleased to report the position has markedly improved since. The emphasis of the portfolio on businesses in the UK consumer sector, and property and technology has also assisted performance. Review of the year Last year, the portfolio was re-aligned to emphasise businesses with an exposure to global growth or the potential to progress by a degree of innovation and self-help. Many of these businesses have performed well over the past year, as consumer confidence returned and credit conditions eased. Over the 12 month period, there were good contributions to performance from Ted Baker, Thomas Cook, Mar City, Sports Direct and ASOS. These businesses benefited from strengthening consumer confidence and effective management. Property businesses in the portfolio also contributed, including Grainger Trust, Workspace Group and Unite Group. Computer aided design business, Delcam, attracted a takeover bid which achieved a good profit for the Fund. As merger and acquisition activity recovers, some of the portfolio businesses could be attractive targets for international groups. The main disappointments during the year were defence group Manroy, and Hurricane Energy. Both of these investments were sold. Sales were also made of other unquoted investments, and the Hydrodec loan stock was repaid. This means that the portfolio now includes just one unquoted investment, Claremont Partners, representing 2.4% of the Fund's net asset value. Consumer services - including retailers, media, travel and pub groups - gained from a recovery in pay levels and house prices, boosting consumer confidence. The Fund continues to have relatively low exposure to sectors with weaker growth prospects, such as utilities, oil and mining. Despite some good performance in the banking sector, we anticipate returns to disappoint as capital is rebuilt, and our exposure to this sector remains low Despite the recovery in pay levels, there are still constraints on UK consumer spending. However, a number of retail and leisure businesses have re-focused and are being helped by lower competition. The portfolio emphasises businesses with a specialisation or other competitive advantage that helps growth, and stable profit margins. With low financing costs, businesses such as Johnson Service Group, Thomas Cook, ITV and Trinity Mirror Group, can pay down debt, restructure or participate in merger and acquisition activity to enhance earnings. We expect continued stimulus for the UK economy, particularly in house building and small business lending, encouraging growth in the regions. Additional measures to address the risk of deflation are also likely. Equity valuations are attractive relative to other asset classes. Overall, the global economy continues to grow, offering a favourable background for equities. Central Bank policy in both the UK and Eurozone is now focused on maintaining low interest rates and assisting the bank sector. Returns on cash deposits and bonds will remain very low, and so equities that offer growth and attractive dividend yields are being sought by investors. Your Board continues to work to improve liquidity in the Fund's shares. We believe that the improved underlying portfolio liquidity should help to maintain a lower discount. This will be kept under review. Outlook The Fund's portfolio emphasises growing small and medium sized businesses. The Fund is positioned to benefit from continued recovery in the UK economy, focused on attractive equity valuations. Its aim remains to deliver long term capital growth, lower volatility and superior absolute and relative returns. The Board and the Manager believe that it is well placed to continue to deliver on these aims. Alternative Investment Fund Managers Directive The Board has considered the implications of the Alternative Investment Fund Managers Directive. Recognising the size of the Fund, and the relative simplicity of its structure and investment objective, the Board has concluded that the Fund should seek authorisation as an internally managed Alternative Investment Fund, where the Board act as a Small Registered UK Alternative Investment Fund Manager. This will involve registration with the Financial Conduct Authority. Risk management and portfolio management activities will be delegated to the current manager, SVM Asset Management, with appropriate Board oversight measures put in place. Peter Dicks Chairman 4 July 2014 MANAGER'S REVIEW Summary Following re-alignment of the portfolio in late 2012, the year under review saw the changes bear fruit. The re-investment into businesses with superior growth prospects, lower risk and greater liquidity, assisted performance. This was helped by a sharp recovery in the UK economy, beating expectations and helping consumer sectors in particular. The portfolio also had low exposure to areas such as mining that were adversely impacted by stresses in emerging markets that were a feature of 2013. Over the 12 months, the portfolio emphasised retailers, technology, industrials, business services and property. The relatively small size of the Fund affords portfolio flexibility, and allows investment to be made in growing businesses. The Fund includes companies in AIM, smaller companies and medium sized businesses, but has low exposure to the very smallest businesses. There is also no investment in the very largest FTSE 100 companies, which typically have lower growth, and are now more challenged by disinflation. The investment process involves fundamental research via company meetings, combined with the identification of a catalyst to achieve recognition of value. Within SVM Asset Management, Colin McLean and Margaret Lawson continue to have day-to-day responsibility for the investment management of the Fund. Contributors to performance The most significant contributions to performance came from the consumer sector, including travel and retail. Two businesses with strong brands and expanding footprint, Ted Baker and SuperGroup, performed well as the market recognised growth prospects. Strong brands offer some protection against deflationary pressure, and both these businesses have growth strategies with good management. Thomas Cook gained as new management continued to restructure the business, and succeeded in raising new capital, reducing risk. Sports Direct also rose as its UK competition was much reduced, and it made progress with its expansion plans in Europe. The property investments in the portfolio - Grainger, Quintain Estates, Workspace and Unite - focus on effective management teams, typically focusing on niches or other specialisation. These progressed as yields remained low, making returns from property attractive, and the bank sector resolved some legacy property problems. Grainger is a residential property company and Quintain focuses on London commercial and residential real estate. Workspace provides tailored business premises for early stage businesses in London, and Unite specialises in student residential accommodation throughout the UK. We believe the sector offers further growth potential. The Fund also has above average exposure to technology, including businesses specialising in computer aided design, big data and cloud services. Computer aided design company, Delcam, accepted a bid in January 2014 from US software group, Autodesk. With high business taxation in the US, many American headquartered corporations are looking to make related acquisitions overseas, and we believe this will encourage more bids for UK technology companies. Unquoteds Portfolio exposure to unquoted investments has been steadily reduced. The year under review opened with three holdings representing more than 15% of the Fund. In October 2013, the unsecured loan stock of Hydrodec Group was repaid in full. It paid an 8% coupon, providing income to the Fund. However, dividends within the listed investments in the portfolio are growing. Hurricane Energy was sold after it listed early in 2014. The remaining unquoted investment, Claremont Partners, represents 2.4% of the Fund, and is valued at a 15% discount to cost. Claremont has gaming licence applications in the US, and also owns land in Taiwan. The Managers do not plan to make any new unquoted investments in the current year. Portfolio Changes The consumer and property investments reported earlier represent core portfolio holdings, along with a number of industrial and business services investments exposed to the recovering global economy. A number of changes have been made to the portfolio in 2014, to take profits in some smaller company holdings that had performed particularly strongly, and re-invest in a number of medium sized companies at attractive valuations. New investments include St James Place, Hargreaves Lansdown and Whitbread. Outlook Recovery in the US, Eurozone and UK continues to exceed most forecasts. The IMF growth forecast for the UK this year of 2.9% is the highest of any advanced economy. Many UK-listed international companies are also benefiting from the recovery in the global economy. The Pound was strong during the year, helped by economic recovery, with markets believing that further stimulation might be deferred. However, inflation remains extremely low and is running below the Bank of England's 2% target. If this persists, further stimulation is likely. A number of portfolio investments should gain from stimulation in Europe. There is also some indirect exposure to the US economy, which continues to recover. We believe there is also potential for recovery globally in capital investment, and a number of portfolio companies should benefit as business confidence grows. Your Fund remains fully invested, reflecting the potential for dividend growth, share re-ratings, and for self-help in many portfolio companies. The portfolio emphasises consumer sectors, property, technology and business services. Overall, a strengthening UK economy and the prospect of growth in the global economy offer a favourable background for UK equities. Market Capitalisation* Sector analysis* % Listing* % % Consumer Services AIM 30.1 Small 59.6 Industrials 36.1 Unquoted 2.1 Mid 32.8 Financials 21.4 Main Market 67.8 Large 7.6 Consumer Goods 17.4 Technology 14.5 Health Care 8.2 Oil & Gas 2.1 0.3 *Analysis is of net exposure after hedging INVESTMENT PORTFOLIO as at 31 March 2014 Stock Cost Valuation % of Valuation 2014 2014 Net Assets 2013 £000 £000 £000 1 Ted Baker 93 215 4.8 130 2 Unite Group 120 178 4.0 163 3 Thomas Cook 85 172 3.9 76 4 ITV Television 60 163 3.7 75 5 ASOS 90 155 3.5 - 6 Workspace 66 145 3.3 83 7 Grainger Trust 82 145 3.3 81 8 Sports Direct 62 128 2.9 64 9 Johnson Services 81 127 2.9 87 10 Telford Homes 88 120 2.7 - Ten largest investments 827 1,548 35.0 11 Benchmark Holdings 70 107 2.4 - 12 Hays 76 107 2.4 53 13 Claremont Partners Ltd* 125 106 2.4 106 14 RPS Group 103 103 2.3 - 15 Photo-Me International 109 100 2.3 - 16 GVC Holdings 66 98 2.2 69 17 Quintain Estates 62 97 2.2 63 18 Playtech 59 95 2.1 88 19 Convivality Retail 84 94 2.1 - 20 Mears Group 72 94 2.1 - Twenty largest investments 1,653 2,549 57.5 21 Mar City 49 88 2.0 - 22 XAAR 81 88 2.0 - 23 Fusionex International 81 81 1.8 - 24 Tribal Group 37 77 1.7 98 25 M&C Saatchi 66 77 1.7 - 26 Ryanair 70 77 1.7 - 27 DSG International 31 69 1.6 47 28 Iomart Group 71 64 1.4 - 29 Pace 36 63 1.4 - 30 Numis Corporation 53 62 1.4 - Thirty largest investments 2,228 3,295 74.2 Other investments (39 holdings) 1,297 1,126 25.4 Total investments 3,525 4,421 99.6 Net current assets 18 0.4 Net Assets 4,439 100.0 Investments are UK equity listed investments except those marked with an asterisk which are unlisted. Further information is given in note 5 to the financial statements. A full portfolio listing as at 31 March 2014 is detailed on the website. PRINCIPAL RISKS AND UNCERTAINTIES The Directors review policies for identifying and managing the principal risks faced by the Fund. Many of the Fund's investments are in small companies and may be seen as carrying a higher degree of risk than their larger counterparts. These risks are mitigated through portfolio diversification, in-depth analysis, the experience of the Manager and a rigorous internal control culture. Further information on the internal controls operated for the Fund is detailed in the Report of the Directors. The principal risks facing the Fund relate to the investment in financial instruments and include market, liquidity, credit and interest rate risk. An explanation of these risks and how they are mitigated is explained in note 9 to the financial statements. Additional risks faced by the Fund are summarised below: Investment strategy - The risk that an inappropriate investment strategy may lead to the Fund underperforming its benchmark, for example in terms of stock selection, asset allocation or gearing. The Board have given the Manager a clearly defined investment mandate which incorporates various risk limits regarding levels of borrowing and the use of derivatives. The Manager invests in a diversified portfolio of holdings and monitors performance with respect to the benchmark. The Board regularly reviews the Fund's investment mandate and long term strategy. Discount - The risk that a disproportionate widening of discount in comparison to the Fund's peers may result in loss of value for shareholders. The discount varies depending upon performance, market sentiment and investor appetite. The Board regularly reviews the discount and the Fund operates a share buy-back programme. Accounting, Legal and Regulatory - Failure to comply with applicable legal and regulatory requirements could lead to a suspension of the Fund's shares, fines or a qualified audit report. In order to qualify as an investment trust the Fund must comply with section 1158 of the Corporation Tax Act 2010 ("CTA"). Failure to do so may result in the Fund losing investment trust status and being subject to Corporation Tax on realised gains within the Fund's portfolio. The Manager monitors movements in investments, income and expenditure to ensure compliance with the provisions contained in section 1158. Breaches of other regulations, including the Companies Act 2006, the Listing Rules of the UK Listing Authority or the Disclosure and Transparency Rules of the UK Listing Authority, could lead to regulatory and reputational damage. The Board relies on the Manager and its professional advisers to ensure compliance with section 1158 CTA, Companies Act 2006 and UKLA Rules. Operational - The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. Like most other Investment Trusts, the Fund has no employees and relies upon the services provided by third parties. The Manager has comprehensive internal controls and processes in place to mitigate operational risks. These are regularly monitored and are reviewed to give assurance regarding the effective operation of the controls. Corporate Governance and Shareholder Relations - Details of the Fund's compliance with corporate governance best practice, including information on relations with shareholders, are set out in the Directors' Statement on Corporate Governance. Financial - The Fund's investment activities expose it to a variety of financial risks including market, credit and interest rate risk. These risks are explained in note 9 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, is fair, balanced and understandable and provides 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, on a going concern basis, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Fund and; • the Annual Report and Financial Statements 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. • the Annual Report and Financial Statements includes details of related party transactions, if any. By Order of the Board Peter Dicks Chairman 4 July 2014 Income statement for the year to 31 March 2014 Notes Revenue Capital Total £000 £000 £000 Net gain on investments at fair value through profit or loss 5 - 1,205 1,205 Income 1 83 - 83 Investment management fees - - - Other expenses 2 (62) (11) (73) Gain before finance costs and taxation 21 1,194 1,215 Finance costs (13) - (13) Gain on ordinary activities before taxation 8 1,194 1,202 Taxation 3 - - - Gain attributable to ordinary shareholders 8 1,194 1,202 Gain per Ordinary Share 4 0.14p 19.89p 20.03p for the year to 31 March 2013 Notes Revenue Capital Total £000 £000 £000 Net losses on investments at fair value 5 - (991) (991) through profit or loss Income 1 50 - 50 Investment management fees - - - Other expenses 2 (96) (12) (108) Loss before finance costs and taxation (46) (1,003) (1,049) Finance costs (6) - (6) Loss on ordinary activities before taxation (52) (1,003) (1,055) Taxation 3 - - - Loss attributable to ordinary shareholders (52) (1,003) (1,055) Loss per Ordinary Share 4 (0.86p) (16.71p) (17.57p) 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 Total Recognised Gains and Losses is not required as all gains and losses of the Fund have been reflected in the above statement. Balance sheet as at 31 March 2014 Notes 2014 2013 £000 £000 Fixed Assets Investments at fair value through profit or loss 5 4,421 3,248 Current Assets Debtors 6 48 14 Cash at bank and on deposit 58 186 Total current assets 106 200 Creditors: amounts falling due within one year 7 (88) (211) Net current assets 18 (11) Total assets less current liabilities 4,439 3,237 Capital and Reserves Share capital 8 300 300 Share premium 314 314 Special reserve 5,144 5,144 Capital redemption reserve 27 27 Capital reserve (733) (1,927) Revenue reserve (613) (621) Equity shareholders' funds 4,439 3,237 Net asset value per Ordinary Share 4 73.93p 53.90p Reconciliation of movements in shareholders' funds for the year to 31 March 2014 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve £000 £000 £000 reserve £000 £000 £000 As at 1 April 2013 300 314 5,144 27 (1,927) (621) Gain attributable to shareholders - - - - 1,194 8 As at 31 March 2014 300 314 5,144 27 (733) (613) For the year to 31 March 2013 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve £000 £000 £000 reserve £000 £000 £000 As at 1 April 2012 300 314 5,144 27 (924) (569) Loss attributable to - - - - (1,003) (52) shareholders As at 31 March 2013 300 314 5,144 27 (1,927) (621) Cash flow statement for the year to 31 March 2014 2014 2013 £000 £000 Reconciliation of gain before finance costs and taxation to net operating cash flows Gain/(Loss) before finance costs and taxation 1,215 (1,049) (Gains)/Losses on investments (1,205) 991 Transaction costs 11 12 Movement in debtors (34) 1 Movement in creditors 13 (422) Net cash outflow from operating activities - (467) Taxation Taxation recovered - - Loss on investment and servicing of finance Finance costs (13) (6) Capital expenditure and financial investment Purchases of fixed asset investments (3,516) (3,198) Sales of fixed asset investments 3,401 3,011 (115) (187) Movement in cash (128) (660) Reconciliation of net cash flow to movement in net cash Movement in cash in the year (128) (660) Net cash as at start of the year 186 846 Net cash as at end of the year 58 186 Accounting policies Basis of preparation The financial statements are prepared in accordance with UK Generally Accepted Accounting Practice (''GAAP'') and with the 2009 Statement of Recommended Practice ''Financial Statements of Investment Trust Companies and Venture Capital Trusts'' (''SORP''). Income Income is included in the Income Statement on an ex-dividend basis. Income on fixed interest securities is included on an effective interest rate basis. Deposit interest is included on an accruals basis. Expenses and interest Expenses and interest payable are dealt with on an accruals basis. Investment management fees Investment management fees, if any, are allocated 100 per cent to capital. The allocation is in line with the Board's expected long-term return from the investment portfolio. Due to the size of the Fund, the Manager has waived its management fee. The terms of the investment management agreement are detailed in the Report of the Directors. Taxation 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 tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not 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 as at 31 March 2014. Contracts for Differences are synthetic equities and are valued with reference to the investment's underlying bid prices. 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. Capital reserve Gains and losses on realisations of fixed asset investments, and transactions costs, together with appropriate exchange differences, are dealt with in this reserve. All incentive fees and investment management fees, together with any tax relief, is also taken to this reserve. Increases and decreases in the valuation of fixed asset investments are dealt with in this reserve. Notes to the financial statements 1. Income Income from UK listed shares and securities  2014 2013 £000 £000 - dividends 63 34  - interest 20 16 83 50 2. Other expenses Revenue General expenses 30 39 Directors' fees† 18 22 Auditor's remuneration audit services 12 23  taxation services 2 12 62 96 † The Directors' fees in respect of the year ended 31 March 2013 were £18,000. The figure for 2013 includes an adjustment for an under accrual at 31 March 2012 of £4,000. Capital Transaction costs - acquisitions 5 6 - disposals 6 6 11 12 3. Taxation Current taxation - - Deferred taxation - - Total taxation for the year - - Gain/(Loss) on ordinary activities before taxation 1,202 (1,055) 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: Corporation tax (20%, 2013 - 20%) 240 (211) Non taxable UK dividends (13) (7) Non taxable investment gains/(losses) in capital (239) 201 Movement in unutilised management expenses and NTLR deficits 12 17 Total taxation charge for the year - - At 31 March 2014, the Fund had unutilised management expenses and non trade loan relationship ("NTLR") deficits of £900,000 (2013 - £850,000). A deferred tax asset of £180,000 has not been recognised on the 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. 4. Returns per share Returns per share are based on a weighted average of 6,005,000 (2013 - 6,005,000) ordinary shares in issue during the year. Total return per share is based on the total gain for the year of £1,202,000 (2013 - loss of £1,055,000). Capital return per share is based on the net capital gain for the year of £ 1,194,000 (2013 - loss of £1,003,000). Revenue return per share is based on the revenue gain after taxation for the year of £8,000 (2013 - loss of £52,000). The net asset value per share is based on the net assets of the Fund of £ 4,439,000 (2013 - £3,237,000) divided by the number of shares in issue at the year end as shown in note 8. 5. Investments at fair value through profit or loss 2014 2013 £000 £000 Listed investments 4,315 3,062 Unlisted investments 106 186 Valuation as at end of year 4,421 3,248 Listed Unlisted Total £000 £000 £000 Valuation as at start of year 3,052 196 3,248 4,064 Investment holding losses as at start of year (216) (391) (607) (1,175) Cost as at start of year 3,268 587 3,855 5,239 Purchases of investments at cost 3,366 - 3,366 3,192 Proceeds from sale of investments (3,372) (34) (3,406) (3,017) Transfers - - - - Net loss on sale of investments (222) (68) (290) (1,559) Cost as at end of year 3,040 485 3,525 3,855 Investment holding gains/(losses) as at end 1,275 (379) 896 (607) of year Valuation as at end of year 4,315 106 4,421 3,248 Net losson sale of investments (222) (68) (290) (1,559) Movement in investment holding gains 1,497 (2) 1,495 568 Total gain/(loss) on investments 1,275 (70) 1,205 (991) 6. Debtors 2014 2013 £000 £000 Investment income due but not received 4 6 Amounts receivable relating to CFDs 37 - Taxation 7 8 48 14 7. Creditors: amounts falling due within one year 2014 2013 £000 £000 Amounts due relating to CFDs 8 164 Other creditors 80 47 88 211 8. Share capital Authorised 100,000,000 ordinary 5p shares (2013 - same) 5,000 5,000 Allotted, issued and fully paid 6,005,000 ordinary 5p shares (2013 - same) 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. 9. Financial instruments Risk Management The Fund's investment policy is to hold investments, CFDs and cash balances with gearing being provided by a bank overdraft. All financial instruments are denominated in Sterling and are carried at fair value. The fair value is the same as the carrying value of all financial assets and liabilities. 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 2014 were valued at £nil (2013 - £250,000). 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 gearing, this has and will only be increased where an opportunity exists to substantially add to the net asset value performance. 10.   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 2014 and 2013 are an abridged version of the statutory accounts for those years. The Auditor has reported on the 2014 and 2013 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 2013 have been filed with the Registrar of Companies and those for 2014 will be delivered in due course. 11. The Annual Report and Accounts for the year ended 31 March 2014 will be mailed to shareholders shortly and copies will be available from the Manager's website www.svmonline.co.uk and the Fund's registered office at 7 Castle Street, Edinburgh, EH2 3AH. The Annual General Meeting of the Fund will be held at 9.30am on Friday 12 September 2014 at 7 Castle Street, Edinburgh, EH2 3AH. For further information, please contact: Colin McLean SVM Asset Management 0131 226 6699 Roland Cross Broadgate Mainland 0207 726 6111 4 July 2014

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