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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