Annual Financial Report

SVM UK EMERGING FUND PLC
(the “Fund”)
ANNUAL FINANCIAL RESULTS
FOR THE YEAR ENDED 31 MARCH 2017

The Board is pleased to announce the Annual Financial Results for the year ended 31 March 2017. 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, net asset value increased to 94.25p and the share price gained 8.0% compared to a return of 18.3% in the benchmark.

• Since the current investment managers took on responsibility for the portfolio in September 2012, net asset value has gained 97.0%, against a benchmark return of 48.3%.

• Portfolio emphasises exposure to healthcare, technology and business services.

• The portfolio is focused on medium-sized and smaller businesses, with a competitive edge that can protect margins and deliver growth.

Financial Highlights	Year to 31 March 2017	Year to 31 March 2016
Total Return performance:
Net Asset Value total return	+15.7%	+8.1%
Share Price total return	+8.0%	+5.9%
Benchmark Index (IMA UK All Companies Sector Average Index since 1 October 2013*)	+18.3%	-2.5%

	31 March 2017	31 March 2016	% Change
Capital Return performance:
Net asset value (p)	94.25	81.47	+15.7%
Share price (p)	67.50	62.50	+8.0%
FTSE All-Share Index	3,990	3,395	+17.5%
Discount	28.4%	23.3%
Gearing***	23.8%	25.2%
Ongoing Charges ratio:
Investment management fees**	–	–
Other operating expenses	1.3%	1.2%

Total Return to 31 March 2017 (%)	1 Year	3 Years	5 Years	10      Years	Launch (2000)
Net Asset Value	+15.7	+47.6	+31.9	+37.5	-2.8
Benchmark  Index*	+18.3	+30.9	+32.3	+51.8	-28.8

*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 2017 and 2016.

***The gearing figure indicates the extra amount by which shareholders’ funds would change if total assets (including CFD 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 IMA UK All Companies Sector Average Index on a total return basis.

CHAIRMAN’S STATEMENT

Over the 12 months to 31 March 2017, the share price gained 8.0%.  Since the current joint managers were appointed in September 2012, net asset value has risen 97.0%, versus a benchmark return of 48.3% (total return).  The Company’s share price and net asset value continued to progress in the two months since the year end and were 74.50p and 103.52p, respectively at 31 May 2017.

Review of the year

Political and economic change created a challenging backdrop to the year under review.  In June 2016, the Brexit vote triggered a fall in the Pound and weakness in shares of many domestically-oriented businesses.  As the portfolio tends to be more exposed to UK earnings than the FTSE 100 or FTSE All-Share indices, this did not help performance.  Then, in the closing months of 2016, inflation began to pick-up, focusing investor interest in mining, oil and banks.  As your Company focuses on investing in growing medium sized and smaller companies, it has little exposure to these cyclical global businesses.  In more recent months, however, this market pattern has changed, with political and macro-economic headwinds easing.  Most companies in the portfolio are reporting good earnings progress, and investor interest has returned to recognise their inherent business strengths. 

The most significant contributions to performance came from Fevertree Drinks, Burford Capital, 4Imprint Group, ASOS and Hutchison China Meditech.  The Fund has above average investment in healthcare, technology, business services, travel and gaming.

During the year, new investments were made in specialist property developer, Watkin Jones, and in radiology group, Medica.  Additional investments were made in Clinigen, Melrose and Mattioli Woods.  To fund these, Shire Pharmaceuticals, Sage, Compass and Imperial Brands were sold. This cut in FTSE 100 exposure in favour of growing mid cap businesses recognises the opportunities a number of medium sized companies currently have, and follows encouraging recent meetings with management.

The Fund focuses on companies where there are self-help opportunities or potential for acquisition, such as Kerry Group, RPC, Micro Focus and DCC. The portfolio also includes businesses where there are good prospects for pricing improvement and volume recovery, such as Polypipe and construction engineering group, Severfield.

Annual General Meeting

The Annual General Meeting will be held on 15 September 2017 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 implement this arrangement, operating within Board guidelines and approvals.  This aims to improve liquidity in our shares, and your Board ensure that this overall is not dilutive to shareholders. 

Outlook

Although Brexit has created some uncertainty in the short term for the UK, the economy is proving resilient.  The fall in the Pound has assisted exporters and boosted tourism, with the Bank of England continuing to assist bank lending and housing.  There are signs that the Eurozone is returning to growth, which will help many portfolio companies. 

Despite the uptick in global growth, debt has been increasing in many nations.  This will bring disinflationary pressures in the medium term despite the current respite.  With technology maintaining pressure on margins, there remain longer term headwinds for some cyclical sectors.  The environment favours businesses with genuine organic growth and some pricing power.

While the UK economy is not growing as fast as the US or Eurozone, it is surprisingly robust and offers a good environment for many portfolio companies.  For most, the outlook is also helped by the strengthening global economy.  The portfolio emphasises scalable businesses operating in niches where they have an edge that can protect margins and deliver above average growth. Your Company remains fully invested.

Peter Dicks

Chairman

30 June 2017

MANAGER’S REVIEW

Summary

The Fund continued its strong recovery since 2012 in the 12 months to 31 March 2017.  Net asset value increased by 15.7%, versus 18.3% in the benchmark, the IA UK All Companies Sector Average.  Since the current investment managers, Margaret Lawson (lead manager) and Colin McLean, assumed portfolio responsibility, net asset value has risen 97.0%, versus a benchmark return of 48.3% (total return).  The Company’s share price and net asset value continued to progress in the two months since the year end.

Contributors to performance

Performance over the year was broadly based across a range of medium sized growth businesses.  Many of the successful portfolio companies operate scalable business models, making use of outsourcing and external capital.  Fevertree Drinks has emerged as a major provider of premium mixers in the UK, but focuses on branding and distribution, delegating manufacturing to others.  Fevertree is broadening its range beyond gin mixers, and its strategy is also to expand internationally.  Online retailer, ASOS, has built strengths in its website offering and delivery, and has potential to grow its market share at the expense of high street retailers.  Hutchison China Meditech (Chi-Med) has a research opportunity in China to develop cancer treatments, in association with major global pharmaceutical groups.  Chi-Med has used the profitability of its consumer pharmaceutical division to finance this to date, but it has added a US listing to its UK AIM listing, to expand its potential to raise finance for drug development in future.  These three companies are amongst the largest listed on London’s Alternative Investment Market, but have been able to grow significantly without a full listing. 

Another portfolio theme is the potential for self-help in companies – where management can restructure, acquire or cut costs to add shareholder value.  Johnson Service Group sold its dry cleaning division, allowing it to focus on restaurant, hotel and workwear services, which have attractive profit margins and growth potential.  GVC Holdings acquired competitor, Bwin, in 2016 and should be able to enhance growth as well as make some cost savings as the businesses are merged.  A number of other businesses in the portfolio, such as Rentokil and wealth manager, Mattioli Woods, have similar potential for adding to their organic growth via selective acquisitions.

There were relatively few disappointments during the year, but the higher oil price and terrorist attacks and terrorism in France adversely impacted Easyjet.  ITV and Restaurant Group fell after the Brexit vote raised concerns about UK consumer confidence. 

Watkin Jones develops and manages student accommodation.  However, it sells the developed properties on to institutional investors, allowing it to recover capital and separately to win attractive management contracts.  We believe its growth outlook is strong, and it has the potential to return some capital to investors.  Eve Sleep, which was bought in May 2017, serves consumer markets online, disrupting high street operators.  The portfolio also holds online businesses; Hostelworld, FreeAgent, Moneysupermarket, dotDigital Group and Learning Technologies Group. 

Portfolio changes

New investments were made in a number of smaller and medium sized businesses during the year, funded by sales of larger companies.  This recognised the resilience of the British economy, and potential for some companies to benefit from the lower level of the Pound. Sales included Reckitt & Benckiser, Glanbia, Imperial Brands, Sage Holdings, Compass and Travis Perkins.  New investments included litigation finance specialist, Burford Capital,  media consultant, Ascential, and Vectura Medical.  Additions were made to Hutchison China Meditech, radiology services provider, Medica Group, Melrose and Clinigen.  Although the portfolio is spread across a range of sectors, the emphasis is on healthcare, technology, business services, travel and gaming.  There are no portfolio investments in banks, oil & gas or mining.  Those sectors are dominated by large global businesses, more subject to competition and impact of the economic cycle. 

Outlook

Last year, investor attention focused on inflation prospects, and sectors that might benefit such as banks, oil and miners.  But in 2017, it is clearer that much of the global inflation boost came from the oil price alone, boosted by OPEC production cuts.  Inflation has not yet become embedded in wages and may not spiral to higher levels. Bond markets still reflect a belief that inflation will be subdued in the longer term.  Disinflationary forces of technology and low productivity growth continue to  constrain real wage growth globally. 

New business models are emerging that are disrupting some traditional sectors and large established companies.  Scale and brands may not be sufficient to protect some older businesses in sectors such as retailing, banking and finance.  The portfolio includes a number of the newer disruptive businesses with significant growth potential.  There is a spread of holdings to recognise risks that individual companies may face in creating these new strategies.  To date, this approach has been rewarding for the Company. 

Meetings with company managements continue to be encouraging, and portfolio companies are making good progress.  We see considerable investment opportunity and accordingly the Fund is fully invested.

Sector analysis*	%		Listing*	%		Market Capitalisation*	%
Consumer Services Consumer Goods Financials Industrials Healthcare Technology	36.7 18.2 14.3 12.7 12.2 5.9		Main Market AIM Other	65.9 27.6 6.5		Small Mid Large	42.9 37.6 19.5
*Analysis is of gross exposure

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.  Further information is given in note 5 to the financial statements.  A full portfolio listing as at 31 March

INVESTMENT PORTFOLIO

as at 31 March 2017

Stock	Market  Exposure 2017 £000	% of Net Assets	Market Exposure 2016 £000
4Imprint Group	272	4.8	196
Fevertree Drinks	259	4.6	114
Johnson Service Group	244	4.3	223
GVC Holdings	197	3.5	135
Burford Capital	190	3.4	-
Paddy Power Betfair	166	2.9	251
ASOS	162	2.9	87
Hutchison China Meditech	158	2.8	139
Hikma Pharmaceuticals	152	2.7	200
Unite Group	149	2.6	193
Ten largest investments	1,949	34.5
Redrow	143	2.5	112
Supergroup	141	2.5	135
Beazley Group	134	2.4	113
Kerry Group	131	2.3	99
Workspace Group	130	2.3	130
JD Sports	122	2.2	71
ITV Television	122	2.2	275
Ryanair	120	2.1	66
FDM Group	118	2.0	95
UDG Healthcare	115	2.0	-
Twenty largest investments	3,225	57.0
Hill & Smith	114	2.0	-
Ted Baker	110	1.9	142
Dotdigital Group	103	1.8	-
Melrose	94	1.7	-
Restaurant Group	93	1.6	-
GB Group	91	1.6	-
Dechra Pharmaceuticals	90	1.6	-
Watkin Jones	90	1.6	-
Rentokil	89	1.6	-
Eco Animal Health Group	89	1.6	-
Thirty largest investments	4,188	74.0
Other investments (50 holdings)	2,626	46.4
Total investments	6,814	120.4
CFD positions exposure	(1,342)	(23.7)
CFD unrealised gains	111	2.0
Net current assets	77	1.3
Net assets	5,660	100.0

2017 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, 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

30 June 2017

Income statement

for the year to 31 March 2017

	Notes	Revenue £000	Capital £000	Total £000
Net gain on investments at fair value	5	-	717	717
Income	1	138	-	138
Investment management fees		-	-	-
Other expenses	2	(64)	(7)	(71)
Gain before finance costs and taxation		74	710	784
Finance costs		(17)	-	(17)
Gain on ordinary activities before taxation		57	710	767
Taxation	3	1	-	1
Gain attributable to ordinary shareholders		58	710	768
Gain per Ordinary Share	4	0.96p	11.82p	12.78p

for the year to 31 March 2016

	Notes	Revenue £000	Capital £000	Total £000
Net gain on investments at fair value	5	-	317	317
Income	1	137	-	137
Investment management fees		-	-	-
Other expenses	2	(59)	(9)	(68)
Gain before finance costs and taxation		78	308	386
Finance costs		(20)	-	(20)
Gain on ordinary activities before taxation		58	308	366
Taxation	3	-	-	-
Gain attributable to ordinary shareholders		58	308	366
Gain per Ordinary Share	4	0.97p	5.13p	6.09p

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 2017

	Notes	2017 £000	2016 £000
Fixed Assets
Investments at fair value through profit or loss	5	5,583	4,628
Current Assets
Debtors	6	238	299
Cash at bank and on deposit		16	102
Total current assets		254	401
Creditors: amounts falling due within one year	7	(177)	(137)
Net current assets		77	264
Total assets less current liabilities		5,660	4,892
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		311	(399)
Revenue reserve		(436)	(494)
Equity shareholders’ funds		5,660	4,892
Net asset value per Ordinary Share	4	94.25p	81.47p

Statement of Changes in Equity

for the year to 31 March 2017

	Share capital £000	Share premium £000	Special reserve £000	Capital redemption reserve £000	Capital reserve £000	Revenue reserve £000
As at 1 April 2016	300	314	5,144	27	(399)	(494)
Gain attributable to shareholders	-	-	-	-	710	58
As at 31 March 2017	300	314	5,144	27	311	(436)

for the year to 31 March 2016

	Share capital £000	Share premium £000	Special reserve £000	Capital redemption reserve £000	Capital reserve £000	Revenue reserve £000
As at 1 April 2015	300	314	5,144	27	(707)	(552)
Gain attributable to shareholders					308	58
As at 31 March 2016	300	314	5,144	27	(399)	(494)

Cash flow statement

for the year to 31 March 2017

	2017 £000	2016 £000
Operating Activities
Gain before finance costs and taxation	784	386
Adjusted for:
(Gains) on investments	(717)	(317)
Transaction costs	7	9
Taxation recovered	1	-
Movement in debtors	61	(279)
Movement in creditors	1	(2)
Cash flow from operating activities	137	(203)
Financing activities
Finance costs	(17)	(20)
Cash flow from financing activities	(17)	(20)
Investment Activities
Purchases of fixed asset investments	(2,110)	(2,702)
Sales of fixed asset investments	1,881	2,896
Cash flow from investing activities	(229)	194
Movement in cash, cash equivalent and bank overdraft	(109)	(29)
Cash and cash equivalent as at start of the year	102	131
Cash, cash equivalent and bank overdraft as at end of the year	(7)	102

Accounting policies

Basis of preparation

The Financial Statements have been prepared on a going concern basis in accordance with FRS 102, the “Financial Reporting Standards 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 2014.  

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. 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

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 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. 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.

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. 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 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 shares and securities                 

	2017 £000	2016 £000
– dividends	138	137
– interest	-	-
	138	137

2. Other expenses

Revenue

General expenses	32	28
Directors’ fees	18	18
Auditor’s remuneration  - audit services	13	12
- taxation services	1	1
	64	59

Capital                                   

Transaction costs
– acquisitions	4	4
– disposals	3	5
	7	9

3. Taxation

Current taxation	(1)	–
Deferred taxation	–	–
Total taxation charge for the year	(1)	–

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 on ordinary activities before taxation	767	366
Corporation tax (20%, 2016 – 20%)	153	73
Non taxable UK dividends	(25)	(25)
Non taxable investment (gains)/losses in capital	(142)	(61)
Movement in unutilised management expenses and NTLR deficits	13	13
Total taxation charge for the year	(1)	–

At 31 March 2017, the Fund had unutilised management expenses and non trade loan relationship (“NTLR”) deficits of £957,000 (2016 – £927000).

A deferred tax asset of £191,000 (2016 - £185,000) 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 (2016 – 6,005,000) ordinary shares in issue during the year.

Total return per share is based on the total gain for the year of £768,000 (2016 – gain of £366,000).

Capital return per share is based on the net capital gain for the year of £710,000 (2016 – gain of £308,000).

Revenue return per share is based on the revenue gain after taxation for the year of £58,000 (2016 – gain of £58,000).

The net asset value per share is based on the net assets of the Fund of £5,660,000 (2016 – £4,892,000) 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

			2017 £000	2016 £000
Listed investments			5,583	4,628
Unlisted investments			-	-
Valuation as at end of year			5,583	4,628
	Listed £000	Unlisted £000	Total £000
Valuation as at start of year	4,628	-	4,628	4,571
Investment holding (gains)/losses as at start of year	1,121	(185)	936	(1,070)
Cost as at start of year	3,507	185	3,692	3,501
Purchases of investments at cost	2,106	-	2,106	2,547
Proceeds from sale of investments	(1,884)	-	(1,884)	(2,901)
Transfers	-	-	-	-
Net gain/(loss) on sale of investments	113	(50)	63	545
Cost as at end of year	3,842	135	3,977	3,692
Investment holding gains/(losses) as at end of year	1,741	(135)	1,606	936
Valuation as at end of year	5,583	-	5,583	4,628
Net gain/(loss) on sale of investments	113	(50)	63	545
Movement in investment holding gains	654		654	(228)
Total gain/(loss) on investments	767	(50)	717	317

6. Debtors

	2017 £000	2016 £000
Investment income due but not received	9	9
Amounts receivable relating to CFDs	229	290
Taxation	-	-
	238	299

7. Creditors: amounts falling due within one year

	2017 £000	2016 £000
Bank overdraft	23	-
Amounts due relating to CFDs	132	116
Other creditors	22	21
	177	137

8. Share capital

Allotted, issued and fully paid
6,005,000 ordinary 5p shares (2016 – 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 investments 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 2017 were valued at £nil (2016 – £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.

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 2017 and 2016 are an abridged version of the statutory accounts for those years. The Auditor has reported on the 2017 and 2016 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 2016 have been filed with the Registrar of Companies and those for 2017 will be delivered in due course.

11.       The Annual Report and Accounts for the year ended 31 March 2017 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 15 September 2017 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

30 June 2017