Svm Uk Emerg Regulatory News (SVM)

SVM UK EMERGING FUND PLC (the "Fund") ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2013 The Board is pleased to announce the Annual Financial Report for the year ended31 March 2013. The full Annual Report, Notice of Annual General Meeting andForm of Proxy will be posted to shareholders and be available shortly on theManager's website at www.svmonline.co.uk Copies of the Annual Report have been submitted to the National StorageMechanism and will shortly be available for inspection at www.hemscott.com/nsm.do HIGHLIGHTS Over the 12 months, net asset value decreased by 25% and share price by 22%compared to a fall of 7% in the FTSE AIM Index. New portfolio managers appointed; strong recovery in second six months. Exposure to less liquid small companies reduced. Re-alignment of portfolio focusing on more liquid, dividend-paying growthbusinesses. Proposed re-alignment of investment objective. Since the year end, NAV has increased by 6.7% to 57.5p (31st May 2013) Financial Highlights 31 March 31 March % Change 2013 2012 Net asset value (p) 53.90 71.47 -24.7 Share price (p) 43.00 55.00 -21.8 FTSE AIM Index 762.27 821.98 -7.3 FTSE All-Share Index 3,380.64 3,002.78 -12.6 Discount 20.2% 23.0% Total expense ratio: Investment management fees* - - Other operating expenses 2.9% 1.4% *In view of the size of the Fund, the Manager has waived its management feesfor the year to 31 March 2013 and 2012 Historical record NAV Share TotalYear to 31 March per share (p) price (p) Return (p) 2006 49.45 45.00 14.32 2007 63.57 62.50 14.12 2008 65.50 67.50 1.93 2009 44.73 31.00 (20.77) 2010 68.53 50.00 23.80 2011 87.36 63.00 18.83 2012 71.47 55.00 (15.89) 2013 53.90 43.00 (17.57) Total Return to 1 3 5 Remit change Launch31 March 2013 (%) Year Years Years 2004 (2000) Net Asset Value -24.6 -21.3 -17.7 +67.5 -44.4 FTSE AIM Index -7.3 +6.4 -19.7 -13.5 -50.1 CHAIRMAN'S STATEMENT It is disappointing to report that over the 12 months to 31 March 2013, the netasset value decreased by 24.6% to 53.90p, compared to a fall of 7.3% in thebenchmark, FTSE AIM Index. The share price fell 21.8%. In part, this reflectsa tough environment for smaller companies, with many facing difficulty inraising either bank or equity finance. This contrasts with much improvedfinancing for larger, global businesses. There appears to be little indicationthat this difficult environment, particularly for the smallest businesses willimprove in the near term. Accordingly, the portfolio has been re-aligned toemphasise smaller and medium sized businesses that have exposure to globalgrowth or the potential to progress by fundamental change and a degree ofinnovation. This has achieved an improvement in underlying liquidity withinthe portfolio. Encouragingly, since the end of the year under review, the netasset value has risen to by 6.7% to 57.5 pence at 31 May 2013. Despite this year's disappointing performance, your Fund remains ahead of itsbenchmark since its remit change in September 2004. The net asset value andshare price have returned 68% and 69%, respectively, against a decline of 14%in the benchmark. Review of the year In September, your Board announced that Colin McLean had assumed responsibilitywithin SVM Asset Management for the investment management of the Fund. He issupported by deputy manager, Margaret Lawson. This change recognised thatperformance had been very disappointing over the previous 12 months. Colin andMargaret are also co-managers of SVM UK Growth Fund, an open ended investmentFund. Since their appointment to that fund six years ago it has returned 56.7%,compared to an FTSE All-Share Index return of 27.8%. (Lipper, 6 years to31.3.2013) Following this change in the investment management team, a thorough review ofthe portfolio was made and a re-alignment implemented. Buyers were found fortwo of the unquoted businesses in line with valuation and a number of lessliquid quoted equities were sold. The proportion of unquoteds within the Fundis much reduced, and the Managers are continuing to work to release capitalfrom this area. The Fund is now focused on more liquid, relatively largercapitalisation shares within the Fund's investment objective. The aim is tosignificantly improve liquidity and prospects for performance. Strategy willfocus on businesses capable of growing without reliance on bank finance, andwhich have an institutional share register. Additional investments researched by SVM UK Growth Fund manager, MargaretLawson, have been made, and have contributed to the recovery in net asset valuesince early September. Some of the cash realised from disposals is beingaligned with SVM UK Growth Fund's best ideas. The Fund has withdrawn from new investment in unquoted shares or those withPLUS Market quotes, given the increased risks and lower liquidity in thesesectors. Amongst more liquid smaller companies and certain medium sizedbusinesses, including those on AIM, there are attractive lower riskopportunities in growing businesses. New portfolio investments include 3Dprinting software business, Delcam, which the Managers believe has stronggrowth prospects. Investments in Spirit Pub Fund, and property group, UniteGroup, are already showing good portfolio gains. Your Board is working to improve liquidity in the Fund's shares. We believethat the improved underlying portfolio liquidity should help to achieve a lowerdiscount, and that the management change will lead to an improvement in theperformance of the Fund. The UK economy is proving resilient, with many consumer businesses trading welland regulatory pressures easing for banks. Well-managed businesses are seeingrelatively stable demand, and are able to gain market share, helped by cheapfinance. While there will be greater pressures on disposable income this year,overall confidence in the economy is improving. The Managers expect furtherquantitative easing around the world, and shares should benefit. Manycompanies are able to lift earnings by self-help. The improvement in creditconditions is also helping businesses that are restructuring, such as SpiritPubs and Thomas Cook. The weak Pound is favourable for UK exporters, and the steady recovery in theUS economy has more than offset a weaker background in Europe. The Fund isfocused on growing small and mid-cap businesses, with an emphasis on thetechnology, retail, property, gaming and oil exploration sectors. It has noexposure to mining or banks. A failure of austerity measures in Europe is likely to lead to fullquantitative easing in the Eurozone. That should provide a favourablebackground for stockmarkets. We believe that the Pound may weaken further, butthis should be helpful to many of the businesses in the portfolio. Change of Investment Objective The re-alignment of the portfolio since September has not only improvedunderlying liquidity, but also achieved markedly better performance. The Boardbelieves that it would be helpful to amend the investment objective of the Fundto more clearly describe the current strategy. This will allow the Managers tocontinue stockpicking within predominantly smaller and medium sized UKcompanies, but remove the need for a particular focus on the AlternativeInvestment Market. The aim will be to outperform the IMA UK All CompaniesSector Average on a total return basis. Outlook The Fund retains a focused portfolio of growth businesses, many of which aremodestly valued in comparison to their larger equivalents. Its aim remains todeliver long term capital growth, lower volatility and superior absolute andrelative returns. The Board and the Managers believe that it is well placed tocontinue to deliver on these aims. Peter DicksChairman3 July 2013 31-May-12 31-May-11 31-May-10 31-May-09 31-May-08Percentage Performance to to to to to 31-May-13 31-May-12 31-May-11 31-May-10 31-May-09 SVM UK Emerging NAV -10.8 -24.7 25.6 21.5 -20.0 FTSE AIM Index 6.5 -21.8 30.8 33.3 -48.4 31-May-12 31-May-11 31-May-10 31-May-09 31-May-08Percentage Performance to to to to to 31-May-13 31-May-12 31-May-11 31-May-10 31-May-09 SVM UK Growth Fund A 30.0 -1.9 25.7 20.3 -21.7 FTSE All-Share TR 30.1 -8.0 20.4 22.9 -23.7 INVESTMENT OBJECTIVE The investment objective of the Fund is long term capital growth frominvestments in smaller UK companies with a particular focus on the AlternativeInvestment Market ("AIM"). Its aim is to outperform the FTSE AIM Index on atotal return basis. INVESTMENT POLICY The Fund aims to achieve its objective and to diversify risk by investing inshares and related instruments, controlled by a number of limits on exposures.Appropriate guidelines for the management of the investments, gearing andfinancial instruments have been established by the Board. Limits are expressedas percentages of shareholders' funds, measured at market value. Although the benchmark is the FTSE AIM Index, the pursuit of the investmentobjective may involve exposure to companies on other exchanges and to unlistedinvestments. A high conviction investment approach is employed, which caninvolve strong sector or thematic positions. No individual investment willexceed 10% of the portfolio on acquisition. Total exposure to unlisted sharesis also limited to a maximum of 25% of the portfolio and has historically beenless. The Fund has the ability to borrow money to enhance returns. This gearing canenhance benefits to shareholders but if, the market falls, losses may begreater. The level of gearing, including the use of derivatives, is closelymonitored and the Board has set an upper limit of 30% of net assets. Borrowingis normally on a short term basis to ensure maximum flexibility but it may alsocommit to longer term borrowing. It may also sell parts of the share portfolioand hold cash or other securities when there may be a greater risk of fallingstockmarkets. The Board has granted the Manager a limited authority to invest in Contractsfor Differences ("CFDs") (long positions) and similar instruments as analternative to holding actual stocks. This means that the gross cost ofinvestment is not incurred. The total effect of such gearing (bank borrowingsplus the gross exposure of long positions less any hedging) is limited to 30%of the Fund's net asset value. Additional limits have also been set onindividual hedging to assist risk control. The use of CFD's can involvecounterparty credit risk. The Fund may also make use of hedging as an additional investment tool. Tohelp reduce the potential for stockmarket weakness to adversely impact theportfolio, the Board has granted the Manager limited authority to hedge risks,within specified limits and to a maximum of 15% of the total portfolio. Suchhedging (short positions) may be conducted through CFD's or other indexinstruments. Hedging can be used to facilitate adjustment of the portfolio at atime of economic uncertainty or increased risk. It aids flexibility and canallow exposure to a sector to be reduced with less disruption to the underlyinglong term portfolio. However, in a rising stockmarket, this may impactperformance. The Fund does not normally invest in fixed rate securities other thansecurities that are convertible into equity. However, the Fund may invest inshort dated Government Securities as an alternative to holding cash. MANAGER'S REVIEW Summary The period under review saw significant change in the portfolio, after ColinMcLean and Margaret Lawson assumed responsibility for the investment managementof the Fund in September 2012. Portfolio exposure to unquoted and less liquidshares was reduced, reinvesting in businesses with superior growth prospectsand lower risk. The portfolio is now focused on businesses capable of growingwithout reliance on bank finance, and which have an institutional shareregister. The emphasis continues to be in AIM, smaller companies and mediumsized businesses, but microcap exposure has been reduced. This reorganisation was largely effected in September and early October, andsince then, performance has sharply improved. This has been against a moreencouraging economic background for the UK, with the economy avoiding a tripledip over the period, and with good performance from well-managed businessesexposed to recovering sectors. Sectors emphasised in the portfolio includeretailers, technology, industrials, business services and property. It haslittle exposure to mining and banks. The investment process involvesfundamental research via company meetings, combined with the identification ofa catalyst to achieve recognition of value. Contributors to performance A number of the new portfolio investments, made in the second half of the yearunder review, contributed strongly to performance. 3D printing software group,Delcam, rose strongly, and there were gains from Ted Baker and Tribal Group.There was also steady performance from the property companies, where Londonexposure benefitted from money printing and investors' search for yield.During the year, North Sea oil & gas exploration and production group, NauticalPetroleum received a bid. After the year end, Valiant Petroleum also attracteda bid. Although these companies had been successful in exploration, and mademoney for investors, their eventual takeover reflects the difficult fundingmarket for oil and gas field development. A small number of holdings contributed disproportionately to losses during theperiod. Mantle Diamonds, Digital Learning Machines and Oracle Coal Fields weredisappointing, as was China Pub Fund. The funding environment for very smallcompanies, or microcaps, continues to be challenging. Strategy Stocks are identified using a range of sources, from company meetings throughto broker recommendations. Most portfolio shares are selected because of thesustainability of their business model; offering global exposure, strong topline growth and margins. Each is a niche operator which is hard for competitorsto replicate; provided management can continue to deliver operationally,investors will be rewarded. These quality stocks can look expensive ontraditional valuation measures; however they deserve this favourable rating.The Fund also seeks to exploit price anomalies. These tend to be businessesundergoing a fundamental change which we believe will lead to strong shareprice appreciation. Unquoteds The portfolio now has just three unquoted investments. Hurricane Energy,formerly Hurricane Exploration, is a substantial oil & gas exploration anddevelopment business, focused on the UK continental shelf. It controls 450million barrels of 2C contingent resources. The group specialises in fracturedbasement reservoirs, and its team has expertise in this area. Hurricane is notcurrently producing gas or oil. The Fund's investment is valued at a discountof 20% to the price at which Hurricane last raised funds, in March 2012. Theshares are also held by a number of other institutional investors. The Fund has an unquoted investment in the unsecured loan stock of HydrodecGroup, the ordinary shares of which are quoted on AIM. This pays an 8% coupon,and is redeemable in October 2014, or earlier at the company's option.Hydrodec has technology for cleaning and treating waste oil. To mitigate risk,the Fund has hedged part of this investment via a short sale of ordinaryshares, effectively reducing credit exposure to Hydrodec. Claremont Partners, formerly CR201, represents 3.3% of the Fund and is valuedat a 15% discount to cost. Claremont has gaming licence applications in Taiwanand the US, with land ownership which would benefit if the licenses wereapproved. It has a number of UK institutional investors. During the year, a number of unquoted investments were sold or written-down.Fotolec Technology, previously Glassguard, was sold in line with valuation.China Pub Fund was fully written-down, reflecting the Manager's assessment thatre-financing is now unlikely. Outlook Many portfolio companies are able to lift earnings by self-help. The gradualimprovement in credit conditions is also helping businesses that arerestructuring, such as Spirit Pubs and Thomas Cook. The weak Pound isfavourable for UK exporters, and the steady recovery in the US economy has morethan offset a weaker background in Europe. The UK economy is proving resilient, with many consumer businesses trading welland regulatory pressures easing for banks. Well-managed businesses are seeingrelatively stable demand, and are able to gain market share, helped by cheapfinance. While there will be greater pressures on disposable income over thenext year, overall confidence in the economy is improving. We expect furtherquantitative easing around the world, and shares should benefit. A failure ofausterity measures in Europe is likely to lead to full quantitative easing inthe Eurozone. That should provide a favourable background for stockmarkets. Market Capitalisation* Sector analysis* % Listing* % % Basic Materials 2.0 AIM 76.8 Small 39.2 Industrials 24.9 PLUS 17.5 Mid 52.9 Oil & Gas 8.4 Unquoted 5.7 Large 8.0 Consumer 43.6 Financials 16.6 Technology 4.5 *Analysis is of net exposure after hedging INVESTMENT PORTFOLIOas at 31 March 2013 Stock Cost Valuation % of Valuation 2013 2013 Net Assets 2012 £000 £000 £000 1 Hydrodec 8% CULS 250 250 7.7 250 2 Unite Group PLC 131 163 5.0 - 3 Spirit Pub Co PLC 131 137 4.2 - 4 Ted Baker PLC 93 130 4.0 - 5 Manroy PLC 165 123 3.8 293 6 Delcam PLC 88 120 3.7 - 7 Claremont Partners Ltd * 125 106 3.3 - 8 Tribal Group PLC 65 98 3.0 - 9 Mitchells & Butlers PLC 93 97 3.0 - 10 Filtrona PLC 66 95 2.9 - Ten largest investments 1,207 1,319 40.6 11 Hurricane Exploration * 50 90 2.8 101 12 Playtech LTD 59 88 2.7 - 13 Home Retail Group 63 88 2.7 - 14 Johnson Service Group PLC 70 87 2.7 - 15 Workspace Group PLC 66 83 2.6 - 16 Grainger PLC 82 81 2.5 - 17 Thomas Cook Group PLC 65 76 2.4 - 18 ITV PLC 60 75 2.3 - 19 SIG PLC 64 73 2.2 - 20 Lavendon Group PLC 59 71 2.2 - Twenty largest investments 1,845 2,131 65.8 21 GVC Holdings PLC 66 69 2.1 - 22 Marstons PLC 61 68 2.1 - 23 Synthomer PLC 60 67 2.1 - 24 Inchcape PLC 57 65 2.0 - 25 Ophir Energy PLC 71 65 2.0 - 26 Sports Direct International 62 64 2.0 - 27 Quintain Estates & Dev PLC 62 63 2.0 - 28 Helical Bar PLC 45 56 1.7 - 29 Hays PLC 51 53 1.6 - 30 Enterprise Inns PLC 38 53 1.6 - Thirty largest investments 2,418 2,754 85.0 Other investments (inc CFD margin) 1,272 494 15.3 Total investments 3,690 3,248 100.3 Net current assets (11) (0.3) 3,237 100.0 All investments are UK equity investments with the exception of Hydrodec. Thosemarked with an asterisk are unlisted. Further information is given in note 5 on page 31 of the Accounts. A full portfolio listing as at 31 March 2013 is detailed on the Manager'swebsite. PRINCIPAL RISKS AND UNCERTAINTIES The principal risks facing the Fund relate to the investment in financialinstruments and include market, liquidity, credit and interest rate risk. Anexplanation of these risks and how they are mitigated is explained in Note 9 tothe Accounts. Additional risks faced by the Fund are summarised below: Investment strategy - The risk that an inappropriate investment strategy maylead to the Fund underperforming its benchmark, for example in terms of stockselection, asset allocation or gearing. The Board have given the Manager a clearly defined investment mandate whichincorporates various risk limits regarding levels of borrowing and the use ofderivatives. The Manager invests in a diversified portfolio of holdings andmonitors performance with respect to the benchmark. The Board regularly reviewthe Fund's investment mandate and long term strategy. Discount- The risk that a disproportionate widening of discount in comparisonto the Fund's peers may result in loss of value for shareholders. The discount varies depending upon performance, market sentiment and investorappetite. The Board regularly review the discount and the Fund operates avigorous share buy-back programme. Accounting, Legal and Regulatory - Failure to comply with applicable legal andregulatory requirements could lead to a suspension of the Fund's shares, finesor a qualified audit report. In order to qualify as an investment trust theFund 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 andbeing subject to Corporation Tax on realised gains within the Fund'sportfolio. The Manager monitors movements in investments, income andexpenditure to ensure compliance with the provisions contained in section 1158.Breaches of other regulations, including the Companies Act 2006, the UKLAListing Rules or the UKLA Disclosure and Transparency Rules, could lead toregulatory and reputational damage. The Board relies on the Manager and itsprofessional advisers to ensure compliance with section 1158 CTA, Companies Act2006 and UKLA Rules. Operational - The risk of loss resulting from inadequate or failed internalprocesses, people and systems or from external events. Like most other Investment Trusts, the Fund has no employees and relies uponthe services provided by third parties. The Manager has comprehensive internalcontrols and processes in place to mitigate operational risks. These areregularly monitored and are reviewed to give assurance regarding the effectiveoperation of the controls. Corporate Governance and Shareholder Relations- Details of the Fund'scompliance with corporate governance best practice, including information onrelations with shareholders, are set out in the Directors' Statement onCorporate Governance on pages 22 of the Accounts. Financial- The Fund's investment activities expose it to a variety of financialrisks including market, credit and interest rate risk. These risks areexplained in Note 9 on pages 32 to 34 of the Accounts. 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 thirdparty service providers addressing these risks. The Board believes the Fund has a relatively low risk profile as it has asimple capital structure; invests principally in UK quoted companies; does notuse derivatives other than CFDs and uses well established and creditworthycounterparties. The capital structure comprises only ordinary shares that rank equally. Eachshare carries one vote at general meetings. FUTURE DEVELOPMENTS Management SVM Asset Management Limited provides investment management and secretarialservices to the Fund. These services can be terminated without compensation atany time by giving one year's notice or an immediate payment of a year's feesin lieu of notice. The Manager is entitled to a fee for these services, payablequarterly in arrears, equivalent to 0.825 per cent per annum of the totalassets of the Fund less current liabilities. In addition, SVM Asset ManagementLimited is entitled to an incentive fee of 15 per cent of achievedoutperformance of the Fund's benchmark index, FTSE AIM Index, on a six monthlybasis in arrears when the net asset value of the Fund exceeds 100p. In view ofthe size of the Fund, the Manager has waived its management fees for the yearsto 31 March 2013 and 2012. No incentive fee was paid or due in respect of theyears to 31 March 2013 or 31 March 2012. The Management and Nomination Committee assesses the Manager's performance onan ongoing basis and meets each year to conduct a formal evaluation of theManager. It assesses the resources made available by the Manager, the resultsand investment performance in relation to the Fund's objectives and also theadditional services provided by the Manager to the Fund. The Committee has reviewed the Manager's contract. In carrying out its review,it considered the past investment performance and the Manager's capability andresources to deliver superior future performance. It also considered the lengthof the notice period of the investment management contract and the fees payabletogether with the standard of other services provided which includesecretarial, accounting, marketing and risk monitoring. Following this review,it is the Directors' opinion that the continuing appointment of the Manager onthe terms agreed is in the best interests of the shareholders. Going Concern The Board, having made appropriate enquiries, has a reasonable expectation thatthe Fund has adequate resources to continue in operational existence for theforeseeable future. For this reason, they continue to adopt the going concernbasis for preparing the financial statements. At the Annual General Meeting tobe convened in 2015 and every five years thereafter, shareholders will be giventhe opportunity to decide on the future of the Fund. In assessing whether it isa going concern, the Board has reviewed the cash flow forecasts for theforeseeable future. In addition, the Board has considered the current cashposition and the overall financial position of the Fund. For these reasons, theBoard considers that there is reasonable evidence to continue to adopt thegoing concern basis in preparing the accounts. STATEMENT OF DIRECTORS' RESPONSIBILITIES The Directors are responsible for preparing the Directors' Report and thefinancial statements in accordance with applicable law and regulations. Companylaw requires the Directors to prepare financial statements for each financialyear. Under that law, the Directors have elected to prepare the financialstatements in accordance with United Kingdom Generally Accepted AccountingPractice (United Kingdom Accounting Standards and applicable law). Undercompany law, the Directors must not approve the financial statements unlessthey are satisfied that they give a true and fair view of the state of affairsof the Fund and of its profit or loss for that period. In preparing thesefinancial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgments and accounting estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject toany material departures disclosed and explained in the financial statements. The Directors are responsible for keeping adequate accounting records that aresufficient to show and explain the Fund's transactions and disclose withreasonable accuracy at any time the financial position of the Fund and enablethem to ensure that the financial statements comply with the Companies Act2006. They are also responsible for safeguarding its assets and hence for takingreasonable steps for the prevention and detection of fraud and otherirregularities. The Directors have delegated responsibility to the Manager for the maintenanceand integrity of the Fund's corporate and financial information included on theManager's website. The work carried out by the Auditor does not involveconsideration of these matters and, accordingly, the Auditor accepts noresponsibility for any changes that may have occurred to the financialstatements since they were initially presented on the website. Legislation inthe UK governing the preparation and dissemination of financial statements maydiffer from legislation in other jurisdictions. The Directors each confirm to the best of their knowledge that: the financial statements, prepared in accordance with the applicable accountingstandards, give a true and fair view of the assets, liabilities, financialposition and profit or loss of the Fund and; the Report of the Directors includes a fair review of the development andperformance of the business and the position of the Fund together with adescription of the principal risks and uncertainties that it faces. By Order of the Board Peter DicksChairman3 July 2013 INCOME STATEMENTfor the year to 31 March 2013 Notes Revenue Capital Total £000 £000 £000 Net losses on investments at fair value throughprofit or loss 5 - (991) (991) 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 5 (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 in this statement derive 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 Fundhave been reflected in the above statement. INCOME STATEMENTfor the year to 31 March 2012 Notes Revenue Capital Total £000 £000 £000 Net losses on investments at fair value through profit or loss 5 - (922) (922) Income 1 39 - 39 Investment management fees - - - Other expenses 2 (67) (1) (68) Loss before finance costs and taxation (28) (923) (951) Finance costs (3) - (3) Loss on ordinary activities before taxation (31) (923) (954) Taxation 3 - - - Loss attributable to ordinary shareholders (31) (923) (954) Loss per Ordinary Share 4 (0.52p) (15.37p) (15.89p) 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. Nooperations were acquired or discontinued in the year. A Statement of TotalRecognised Gains and Losses is not required as all gains and losses of the Fundhave been reflected in the above statement. BALANCE SHEETas at 31 March 2013 Notes 2013 2012 £000 £000 Fixed Assets Investments at fair value through profit or loss 5 3,248 4,064 Current Assets Debtors 6 14 15 Cash at bank and on deposit 186 846 Total current assets 200 861 Creditors: amounts falling due within one year 7 (633) (211) Net current assets (11) 228 Total assets less current liabilities 3,237 4,292 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 (1,927) (924) Revenue reserve (621) (569) Equity shareholders' funds 3,237 4,292 Net asset value per Ordinary Share 4 53.90p 71.47p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDSfor 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 toshareholders - - - - (1,003) (52) As at 31 March 2013 300 314 5,144 27 (1,927) (621) For the year to 31 March 2012 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve £000 £000 £000 reserve £000 £000 £000 As at 1 April 2011 300 314 5,144 27 (1) (538) Loss attributable toshareholders - - - - (923) (31) As at 31 March 2012 300 314 5,144 27 (924) (569) CASH FLOW STATEMENTfor the year to 31 March 2013 2013 2012 £000 £000 Reconciliation of loss before finance costs and taxation to netoperating cash flows (Loss) before finance costs and taxation (1,049) (951) Losses on investments 991 922 Transaction costs 12 1 Movement in debtors 1 (2) Movement in creditors (422) 2 Net cash outflow from operating activities (467) (28) Taxation Taxation paid - (4) Loss on investment and servicing of finance Finance costs (6) (3) Capital expenditure and financial investment Purchases of fixed asset investments (3,198) (1,165) Sales of fixed asset investments 3,011 1,196 (187) 31 Movement in cash (660) (4) Reconciliation of net cash flow to movement in net cash Movement in cash in the year (660) (4) Net cash as at start of the year 846 850 Net cash as at end of the year 186 846 ACCOUNTING POLICIES Basis of preparation The financial statements are prepared in accordance with UK Generally AcceptedAccounting Practice (''GAAP'') and with the 2009 Statement of RecommendedPractice ''Financial Statements of Investment Trust Companies and VentureCapital Trusts'' (''SORP''). Income Income is included in the Income Statement on an ex-dividend basis. Income onfixed interest securities is included on an effective interest rate basis. Deposit interest isincluded 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. Theallocation is in line with the Board's expected long-term return from theinvestment portfolio. Due to the size of the Fund, the Manager has waived itsmanagement fee. The terms of the investment management agreement are detailedin the Report of the Directors on page 14 of the Accounts. Taxation Deferred taxation is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions or events that result inan obligation to pay more or a right to pay less tax in the future have occurred at the balancesheet date measured on an undiscounted basis and based on enacted tax rates.This is subject to deferred tax assets only being recognised if it isconsidered more likely than not that there will be suitable profits from whichthe future reversal of the underlying timing differences can be deducted.Timing differences are differences arising between the taxable profits and theresults as stated in the accounts which are capable of reversal in one or moresubsequent 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 deemedto be at bid prices as at 31 March 2013. Contracts for Differences aresynthetic equities and are valued with reference to the investment's underlyingbid prices. Unlisted investments are valued at fair value based on the latestavailable information and with reference to International Private Equity andVenture Capital Valuation Guidelines. All changes in fair value and transaction costs on the acquisition and disposalof portfolio investments are included in the Income Statement as a capitalitem. Purchases and sales of investments are accounted for on trade date. Capital reserve Gains and losses on realisations of fixed asset investments, and transactionscosts, together with appropriate exchange differences, are dealt with in this reserve. All incentivefees and investment management fees, together with any tax relief, is alsotaken to this reserve. Increases and decreases in the valuation of fixed assetinvestments are dealt with in this reserve. NOTES TO THE ACCOUNTS 2013 2012 1. Income £000 £000 Income from UK listed shares and securities - dividends 34 19 - interest 16 20 50 39 2. Other expenses Revenue General expenses 39 29 Directors' fees † 22 18 Auditor's remuneration - audit services* 23 17 - taxation services* 12 3 96 67 † The Directors' fees in respect of the year ended 31 March 2013 were £18,000.The figure above includes an adjustment for an underaccrual at 31 March 2012of £4,000. \* The 2013 figures include VAT. The fees in respect of the year ended 31 March2013 for audit services and taxation services, excluding VAT, were £17,000 and£4,000 respectively. Capital Transaction costs - acquisitions 6 - - disposals 6 1 12 1 3. Taxation Current taxation - - Deferred taxation - - Total taxation for the year - - Loss on ordinary activities before taxation (1,055)(954) 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%, 2012 - 20%) (211) (191) Non taxable UK dividends (7) (4) Non taxable investment losses/(gains) in capital 201 185 Movement in unutilised management expenses 17 10 Total taxation charge for the year - - At 31 March 2013, the Fund had unutilised management expenses of £850,000 (2012 - £767,000). A deferred tax asset of £170,000 has not been recognised on the unutilised management expenses as it is unlikely that there would be suitable taxable profits from which the futurereversal 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 (2012 - 6,005,000)ordinary shares in issue during the year. Total return per share is based on the total loss for the year of £1,055,000(2012 - loss of £954,000). Capital return per share is based on net capital loss during the year of£1,003,000 (2012 - loss of £923,000). Revenue return per share is based on the revenue loss after taxation for theyear of £52,000 (2012 - £31,000). The net asset values per share are based on the net assets of the Fund of£3,237,000 (2012 - £4,292,000) divided by the number of shares in issue at the year-end as shownin Note 8 of the Accounts. 2013 2012 5. Investments at fair value through profit or £000 £000loss Listed investments 3,062 3,180 Unlisted investments 186 884 Valuation as at end of year 3,248 4,064 Listed Unlisted £000 £000 Valuation as at start of year 3,180 884 4,064 4,973 Investment holding (losses)/gains as at (1,073) (102) (1,175) 501start of year Cost as at start of year 4,253 986 5,239 4,472 Purchases of investments at cost 3,192 - 3,192 1,210 Proceeds from sale of investments (2,732) (285) (3,017) (1,197) Transfers 55 (55) - - Net (loss)/gain on sale of investments (1,500) (59) (1,559) 754 Cost as at end of year 3,268 587 3,855 5,239 Investment holding (losses) as at end of (216) (391) (607) (1,175)year Valuation as at end of year 3,052 196 3,248 4,064 Net (loss)/gain on sale of investments (1,500) (59) (1,559) 754 Movement in investment holding gains 857 (289) (568) (1,676) Total (loss) on investments (643) (348) (991) (922) 6. Debtors 2013 2012 £000 £000 Investment income due but not received 6 7 Taxation 8 8 14 15 7. Creditors: amounts falling due within one year 2013 2012 £000 £000 Amounts due under CFD's 164 609 Other creditors 47 24 211 633 8. Share capital Authorised 100,000,000 ordinary 5p shares (2012 - same) 5,000 5,000 Allotted, issued and fully paid 6,005,000 ordinary 5p shares (2012 - same) 300 300 9. The financial information contained within this announcement doesnot constitute statutory accounts as defined in sections 434 and 435 of theCompanies Act 2006. The results for the years ended 31 March 2013 and 2012 arean abridged version of the statutory accounts for those years. The Auditor hasreported on the 2013 and 2012 accounts, their reports for both years wereunqualified and did not contain a statement under section 498 of the CompaniesAct 2006. Statutory accounts for 2012 have been filed with the Registrar ofCompanies and those for 2013 will be delivered in due course. 10. The Annual Report and Accounts for the year ended 31 March 2013 willbe mailed to shareholders shortly and copies will be available from theManager's website www.svmonline.co.uk and the Fund's registered office at7 Castle Street, Edinburgh, EH2 3AH. The Annual General Meeting of the Fund will be held at 9.30am onFriday 13 September 2013 at 1-2 Marylebone High Street, London W1U 4LZ. For further information, please contact: Colin McLean SVM Asset Management 0131 226 6699 Roland Cross Broadgate Mainland 0207 726 6111

3-Jul-13