SVM UK Emerging Fund plc · 3/31/2015 · accommodation throughout the UK. Londonmetric invests...

Annual Report31 March 2015

SVM UK Emerging Fund plc

The investment objective of SVM UK Emerging FundPLC (the “Fund” or the “Company”) is long term capitalgrowth from investments in smaller UK companies. Itsaim is to outperform the IMA UK All Companies SectorAverage Index on a total return basis.

Contents1 Highlights

2 Chairman’s Statement

6 Manager’s Review

9 Investment Portfolio

10 Strategic Report

14 Board of Directors

15 Report of the Directors

21 Directors’ Remuneration Report

24 Audit Committee Report

26 Statement of Directors’ Responsibilities

27 Independent Auditor’s Report

30 Income Statement

31 Balance Sheet

32 Reconciliation of Movements in

Shareholders’ Funds

33 Cash Flow Statement

34 Accounting Policies

35 Notes to the Financial Statements

41 Notice of Annual General Meeting

44 Shareholder Information

45 Corporate Information

31 March 31 March2015 2014 % Change

Capital Return performance:

Net asset value (p) 75.38 73.93 +2.0%

Share price (p) 59.00 57.75 +2.2%

FTSE All-Share Index 3,664 3,556 +3.0%

Discount 21.7% 21.9%

Ongoing Charges ratio:

Investment management fees** – –

Other operating expenses 0.9%*** 1.6%

Total Return to 1 3 5 10 Launch

31 March 2015 (%) Year Years Years Years (2000)

Net Asset Value +2.0 +5.5 +10.0 +103.6 –22.3

Benchmark Index* +5.6 +14.7 +31.6 –9.9 –38.3

*The benchmark index for the Fund was changed to the IMA UK All Companies Sector Average Index from 1 October 2013 priorto which the FTSE AIM Index was used.**The Manager has waived its management fees for the year to 31 March 2015 and 2014.***2015 figure reduced by an accrual in respect of a prior year; without this reduction, the ongoing charges ratio for 2015 wouldbe 1.4%.

Year to Year to31 March 31 March

2015 2014

Total Return performance:

Net Asset Value total return +2.0% +37.2%

Share Share Price total return +2.2% +34.3%

Benchmark Index (IMA UK All +5.6% +17.1%Companies Sector Average Index since1 October 2013*)

• Over the 12 months, net asset value increased by 2.0% and theshare price gained 2.2% compared to a return of 5.6% in thebenchmark.

• Since the current investment managers took on responsibility forthe portfolio in September 2012, net asset value has gained57.5% against a benchmark return of 28.6%.

• Portfolio emphasises exposed to growth in the UK economy, andimproving consumer confidence.

• The portfolio is focused on smaller growing businesses, wheremanagement can deliver growth via self-help, and some mediumsized companies.

Highlights

SVM UK EMERGING FUND plc 1Annual Report & Accounts 2015

Financial Highlights

Over the 12 months to 31 March 2015, theCompany’s net asset value increased by2.0% to 75.38p per share, compared to again of 5.6% in the benchmark, the IMAUK All Companies Sector Average Index.Over the 12 months, the share price gained2.2%. Since the current joint managerswere appointed in September 2012, netasset value has risen 57.5%, versus abenchmark return of 28.6%. Thebenchmark was changed on 30 September2013, following a shareholder vote. Sincethe period end, to 31 May 2015, net assetvalue per share has risen further, to 81.74p.

The Company entered the period underreview with a fully invested position, inexpectation of a strong performance by theUK economy. The position was maintainedover the year, emphasising businesses thatwould benefit from growth in the UKeconomy and wage growth. UK growthbeat most expectations, with stockmarketsmaking steady progress. At the end ofMay 2015 the FTSE All-Share Indexreached an all-time high. After the Election,the Pound recovered strongly. Thisfollowed the sharp fall in the oil price in late

2014, providing a stimulus to consumers vialower energy prices. Although the fall in oilprice helped stockmarkets overall, it causedweakness in shares of businesses in theenergy and resource sectors. There is noportfolio exposure to these sectors.

The UK background of improving consumerand business confidence proved afavourable environment for many portfolioholdings. There was strong performance inparticular from ITV, Whitbread, RestaurantGroup and Ted Baker. Property groups,Unite and Workspace, also gained. Inaddition to domestic UK businesses, anumber of portfolio investments withdivisions exposed to the recovery in Europeperformed well. Ryanair and HendersonGroup benefited from this trend.

Global indicators improved; economic datanow points to some inflation in Germany,and growth in Spain and Italy. Weaker USgrowth at the start of 2015 also nowappears to have been weather-related, withmore recent figures suggesting aresumption of good economic growth. That

Chairman’sstatement

2 SVM UK EMERGING FUND plc Annual Report & Accounts 2015

is encouraging for the global economy andUK exports. It should also help the portfolioholdings of global businesses with a highproportion of US Dollar earnings, includingShire Pharmaceuticals and HikmaPharmaceuticals.

Review of the year

The most significant contributions toperformance came from financials andconsumer sectors. The Company hasrelatively low exposure to sectors withweaker growth prospects, such as mining

and utilities. While demand forcommodities and oil is growing, thereremains ample supply, tending to keep a lidon prices. The main disappointments overthe period under review were Flybe andClaremont. Flybe was sold as it appearsthe challenges to its businesses areincreasing, and Claremont written-down asit put assets up for sale.

During the period, the Company made anew investment in Shire Pharmaceuticals.Although the bid approach for Shire fromUS group, AbbVie, was withdrawn, Shire


has since made acquisitions itself, and itsshares have moved to a new high. Newinvestments were made in SSP Group,Hutchison China Meditech and MicroFocus. SSP runs catering and concessionservices globally, with an emphasis onstations and airports. Hutchison ChinaMeditech has pharmaceutical research anda consumer pharmaceuticals business inChina. Its research licence in China gives itan advantage over the major global groupsin conducting cancer and inflammatorydisease research. Software business,Micro Focus, has made an acquisitionwhich offers good potential to improveprofit margins. To fund new investments,sales were made of some smallercompanies.

The portfolio also has above averageexposure to medium sized companieswhich are typically growing more rapidlythan the largest FTSE 100 groups. Over thelonger term, medium sized companieshave significantly outperformed large ones.The current environment of low cost

finance is encouraging businesses torestructure, facilitating acquisitions anddisposals. In contrast, the larger groupstend to be more exposed to maturemarkets and lower growth prospects.

Annual General Meeting

The Annual General Meeting will be held on11 September 2015 at SVM’s offices inEdinburgh. As prescribed by the Articles ofAssociation, an ordinary resolution will beproposed that the Fund should continue fora further five year period.

Outlook

The global economy is growing, with thehelp of stimulation in Europe, China andJapan. Around the world, interest ratesand inflation remain extremely low. Anyrenewal of strength in the US Dollar couldput further pressure on emergingeconomies. Recovery in the US, Eurozoneand UK continues to exceed mostforecasts. Central banks remain vigilantabout the risk of global deflation. Europehas followed the UK in taking measures to

4 SVM UK EMERGING FUND plcAnnual Report & Accounts 2015

reduce the risk of deflation via bond buyingand money printing. The Companyemphasises exposure to the UK, andbusinesses with operations in the US andEurope. Returns on cash deposits andbonds will remain very low, and so equitiesthat offer growth and attractive dividendyields are being sought by investors.

The Company remains fully invested,reflecting the potential for dividendgrowth, share re-ratings, and for self-helpin many portfolio companies. Overall, astrengthening UK economy and theprospect of growth in the global economyoffers a favourable background for UKequities.

Peter DicksChairman

3 July 2015


Summary

After a strong year, in both absolute andrelative performance in the twelve monthssince March 31, 2014, the Fund wasmarginally behind its benchmark. Absoluteand relative performance in the two monthsfollowing the period end have been good,however, taking performance comparisons toa very favourable position for the period sinceSeptember 2012, when the currentinvestment managers, Margaret Lawson andColin McLean, assumed portfolioresponsibility.

The period from March to August saw someunderperformance from smaller and mediumsized companies, but there was subsequentlya sharp recovery. In expectation of strong UKgrowth, and the potential for a boost toconsumer confidence ahead of the UKgeneral election, the Fund maintained a fullyinvested position. Additional investment wasmade in areas with more exposure to theeconomic cycle. The financing backgroundfor business remains favourable, withextremely low interest rates, and we expectmore restructuring and merger activity. TheFund emphasises smaller and medium sizedgrowth businesses that are typically less wellresearched, giving opportunity to identifyvalue through company meetings andfundamental analysis.

Contributors to performance

Against a background of low inflation, thebest performing businesses in the consumersector were those with strong brands, oroperating within a growth niche. Luxurygroup, Ted Baker, and Whitbread with itsCosta Coffee division, are good examples ofthis. Both are expanding their footprint andhave good management, offering someprotection against deflationary pressure. Thelargest portfolio investment, ITV, offersgrowth and improving earnings quality.Historically, returns have been difficult, drivenby advertising demand, but its investment inproduction facilities is generating a broadportfolio of content with consistent globalearnings streams. This will also make it amore attractive takeover target for globalmedia or cable groups. Other portfolioinvestments in consumer services includeDomino Pizza, Restaurant Group andCineworld. Consumer goods and servicesrepresent 51% of the total portfolio.

The gaming sector is undergoing restructuringinternationally, as regulations change. It is agrowing industry, and the portfolio includesinvestments in Betfair Group, GVC Holdingsand Playtech. There are also investments inmore disruptive business models where newentrants have an advantage in technology orbusiness strategy. Investments in this group

Manager’sreview


include clothing retailer, ASOS, and restaurantdelivery business, Just Eat. Both are growingstrongly. 4imprint supplies promotionalmerchandise via the internet. The lower oilcost and improving consumer confidenceshould benefit travel businesses, many ofwhich have also proved able to manage costsaggressively. This is an area of focus for theFund, and includes Ryanair, SSP, Tui Traveland Easyjet.

One-quarter of the portfolio is invested in thefinancial sector, with almost all of this in non-bank financials. The largest single groupwithin this are Real Estate Investment Trustsand other property companies. Theseinvestments – Helical Bar, St Modwen,Workspace, Londonmetric Property and Unite- focus on effective management teams,typically with a specialisation. Workspaceprovides tailored business premises for earlystage businesses in London, and Unitespecialises in student residentialaccommodation throughout the UK.Londonmetric invests across the UK, with anemphasis on logistics and distributionproperties.

Over the year, the Fund increased itsexposure to pharmaceuticals, withinvestments in Shire, Hikma, Dechra andBTG. A new investment was made inHutchison China Meditech which hasresearch and consumer divisions in China.

Portfolio changes

During the year, new investments were madein Just Eat, Restaurant Group, HowdenJoinery, SSP Group, Micro Focus and AlliedMinds. Additional investment was also madein several pharmaceutical businesses.Themes in the purchases include exposure toglobal recovery, potential for restructuring orself-help, and US Dollar earnings. Each newinvestment has at least one of thesecharacteristics, and all have growth potential.Sales of some smaller and medium sizedcompanies were made, to fund these newinvestments.

Portfolio exposure to unquoted investmentshas been steadily reduced. The remainingunquoted investment, Claremont Partners,


represents 0.7% of the Fund. Claremont hasproperty in the US, secured against bankloans, and also owns land in Taiwan. TheManagers do not plan to make any newunquoted investments in the current year.

Outlook

Recovery in the US, Eurozone and UKcontinues to exceed most forecasts. ManyUK-listed international companies are alsobenefiting from the recovery in the globaleconomy. The Pound was strong during theyear. However, inflation remains extremelylow and is running below the Bank ofEngland’s 2% target.

Your Fund remains fully invested, reflectingthe potential for dividend growth and share re-ratings in many portfolio companies. Theportfolio emphasises consumer sectors,property, healthcare and business services.Overall, a strengthening UK economy and theprospect of growth in the global economyoffers a favourable background for UKequities.


Sector analysis* Listing* Market Capitalisation*

Consumer Services 39.6%Industrials 12.1%Financials 26.1%Consumer Goods 11.3%Technology 1.1%Health & Care 8.9%Basic materials 0.9%

AIM 10.2%Unquoted 0.5%Main Market 89.3%

Small 23.6%Mid 46.9%Large 29.5%

* Analysis is of gross exposure

Cost Valuation Valuation2015 2015 % of 2014

Stock £000 £000 Net Assets £000

1 ITV Television 60 248 5.5 163

2 Unite Group 120 240 5.3 178

3 Workspace Group 66 209 4.6 145

4 Johnson Service Group 81 166 3.7 127

5 4imprint Group 109 160 3.5 –

6 SSP Group 107 151 3.3 –

7 BCA Marketplace 147 147 3.2 –

8 Ted Baker 48 130 2.9 215

9 GVC Holdings 66 125 2.8 98

10 Hays 76 113 2.5 107

Ten largest investments 880 1,689 37.3

11 Shire Pharmaceuticals 84 112 2.5 –

12 St James Place 91 112 2.5 –

13 Just Eat 89 110 2.4 –

14 Playtech 59 109 2.4 95

15 Photo-Me International 109 109 2.4 100

16 Restaurant Group 91 101 2.2 –

17 Ryanair 70 98 2.2 77

18 Tui Travel 96 98 2.2 –

19 M&C Saatchi 66 93 2.1 77

20 SABMiller 83 88 1.9 –

Twenty largest investments 1,718 2,719 60.1

21 Hutchison China Meditech 87 87 1.9 –

22 Barclays Bank 94 85 1.9 –

23 ASOS 67 78 1.7 155

24 P2P C Shares 72 77 1.7 –

25 Bodycote 65 76 1.7 –

26 Cineworld Group 59 73 1.6 47

27 Londonmetric Property 66 70 1.5 –

28 Grainger Trust 45 68 1.5 145

29 Renew Holdings 48 67 1.5 59

30 Crest Nicholson 44 66 1.5 62

Thirty largest investments 2,365 3,466 76.6

Other investments (35 holdings) 1,136 1,105 24.4

Total Investments 3,501 4,571 101.0

Net current assets/(liabilities) (45) (1.0)

Net assets 4,526 100.0

Investment portfolioas at 31 March 2015


Investments are UKequity listedinvestments exceptthose marked with anasterisk which areunlisted. Furtherinformation is given innote 5 to the financialstatements. A fullportfolio listing as at31 March 2015 isdetailed on thewebsite.


Strategic Report

The Directors submit the Strategic Report forthe year to 31 March 2015. The informationset out on pages 2 to 13, including theChairman’s Statement and the Manager’sReview, forms part of the Strategic Report.

Investment objectiveThe investment objective of the Fund is longterm capital growth from investments insmaller UK companies. Its aim is tooutperform the IMA UK All Companies SectorAverage Index on a total return basis.

Investment policy and Gearing policyThe Fund aims to achieve its objective and todiversify risk by investing in shares andrelated instruments, controlled by a numberof limits on exposures. Appropriate guidelinesfor the management of the investments,gearing and financial instruments have beenestablished by the Board. Limits areexpressed as percentages of shareholders’funds, measured at market value.

Although the benchmark is the IMA UK AllCompanies Sector Average Index, the pursuitof the investment objective may involveexposure to companies on various exchangesand to unlisted investments. A high convictioninvestment approach is employed, which caninvolve strong sector or thematic positions.

No individual investment will exceed 10% ofthe portfolio on acquisition. Total exposure tounlisted shares is also limited to a maximumof 25% of the portfolio and has historicallybeen less.

The Fund has the ability to borrow money toenhance returns. This gearing can enhancebenefits to shareholders but, if the marketfalls, losses may be greater. The level ofgearing, including the use of derivatives, is

closely monitored and the Board has set anupper limit of 30% of net assets. Borrowingis normally on a short term basis to ensuremaximum flexibility but it may also committo longer term borrowing. It may also sellparts of the share portfolio and hold cash orother securities when there may be agreater risk of falling stock markets.

The Board has granted the Manager alimited authority to invest in Contracts forDifferences (‘‘CFDs’’) (long positions) andsimilar instruments as an alternative toholding actual stocks. This means that thegross cost of investment is not incurred.The total effect of such gearing (bankborrowings plus the gross exposure of longpositions less any hedging) is limited to 30%of the Fund’s net asset value. Additionallimits have also been set on individualhedging to assist risk control. The use ofCFDs can involve counterparty credit risk.

The Fund may also make use of hedging asan additional investment tool. To help reducethe potential for stock market weakness toadversely impact the portfolio, the Boardhas granted the Manager limited authority tohedge risks, within specified limits and to amaximum of 15% of the total portfolio. Suchhedging (short positions) may be conductedthrough CFDs or other index instruments.Hedging can be used to facilitate adjustmentof the portfolio at a time of economicuncertainty or increased risk. It aidsflexibility and can allow exposure to a sectorto be reduced with less disruption to theunderlying long term portfolio. However, in arising stockmarket, this may impactperformance.

The Fund does not normally invest in fixedrate securities other than securities that are

Historical record NAV Share TotalYear to 31 March per share Price Return Rating

(p) (p) (p) Discount/(premium)

2006 49.45 45.00 14.32 9.0%

2007 63.57 62.50 14.12 1.7%

2008 65.50 67.50 1.93 -3.1%

2009 44.73 31.00 (20.77) 30.7%

2010 68.53 50.00 23.80 27.0%

2011 87.36 63.00 18.83 27.9%

2012 71.47 55.00 (15.89) 23.0%

2013 53.90 43.00 (17.57) 20.2%

2014 73.93 57.75 20.03 21.9%

2015 75.38 59.00 1.45 21.7%


convertible into equity. However, the Fundmay invest in short dated GovernmentSecurities as an alternative to holding cash.

Strategy and Business ModelThe Fund is an investment trust which investsin accordance with its objective andinvestment policy as set out above. It has noemployees and outsources the managementof its investment portfolio to the Manager,SVM Asset Management Limited. The Boardof the Fund is ultimately responsible for thestewardship of the Company’s affairs andrisks, acting in the interests of shareholders.

The Fund is required to comply with theCompanies Act, the UK Listing Rules andapplicable accounting standards. In addition tothe formal annual financial statements,interim accounts and interim managementstatements, it publishes monthly asset valuesand quarterly factsheets.

Key Performance IndicatorsThe Directors consider a number of keyperformance indicators (“KPIs”) to measurethe Fund’s success in achieving itsobjectives. The KPIs used to measure theperformance and development of the Fundare the Net Asset Value (“NAV”) and shareprice performance and the rating. The Boardassesses these on a regular basis. Furtherinformation on these indicators is detailed inthe Highlights page, Chairman’s Statement,the Manager’s websitewww.svmonline.co.uk and quarterlyfactsheets. The Board also reviews theperformance of the Fund against its peers.


ResultsThe total gain for the year of £87,000 (2014:gain of £1,202,000) has been transferred toreserves. No dividend has been declared. Thenet asset value total return was 2.0% for theyear. At 31 March 2015, the net asset valueper share had increased to 75.38p and theshare price had increased to 59.00p. TheChairman’s statement and Manager’s reviewinclude a review of the main developmentsduring the year.

Portfolio AnalysisA detailed analysis of the Fund’s portfolio isprovided on the page entitled ‘InvestmentPortfolio’.

Principal Risks and UncertaintiesThe Directors review policies for identifyingand managing the principal risks faced by theFund.

Many of the Fund’s investments are in smallcompanies and may be seen as carrying ahigher degree of risk than their largercounterparts. These risks are mitigatedthrough portfolio diversification, in-depthanalysis, the experience of the Manager and arigorous internal control culture. Furtherinformation on the internal controls operatedfor the Fund is detailed in the Report of theDirectors.

The principal risks facing the Fund relate tothe investment in financial instruments andinclude market, liquidity, credit and interestrate risk. An explanation of these risks andhow they are mitigated is explained in note 9to the financial statements. Additional risksfaced by the Fund are summarised below:

Investment strategy – The risk that aninappropriate investment strategy may lead tothe Fund underperforming its benchmark, forexample in terms of stock selection, assetallocation or gearing. The Board have giventhe Manager a clearly defined investmentmandate which incorporates various risk

limits regarding levels of borrowing and theuse of derivatives. The Manager invests in adiversified portfolio of holdings and monitorsperformance with respect to thebenchmark. The Board regularly reviewsthe Fund’s investment mandate and longterm strategy.

Discount – The risk that a disproportionatewidening of discount in comparison to theFund’s peers may result in loss of value forshareholders. The discount varies dependingupon performance, market sentiment andinvestor appetite. The Board regularlyreviews the discount and the Fund operatesa share buy-back programme.

Accounting, Legal and Regulatory – Failureto comply with applicable legal andregulatory requirements could lead to asuspension of the Fund’s shares, fines or aqualified audit report. In order to qualify asan investment trust the Fund must complywith section 1158 of the Corporation Tax Act2010 (“CTA”). Failure to do so may result inthe Fund losing investment trust status andbeing subject to Corporation Tax on realisedgains within the Fund’s portfolio. TheManager monitors movements ininvestments, income and expenditure toensure compliance with the provisionscontained in section 1158. Breaches ofother regulations, including the CompaniesAct 2006, the Listing Rules of the UK ListingAuthority or the Disclosure andTransparency Rules of the UK ListingAuthority, could lead to regulatory andreputational damage. The Board relies onthe Manager and its professional advisers toensure compliance with section 1158 CTA,Companies Act 2006 and UKLA Rules.

Operational – The risk of loss resulting frominadequate or failed internal processes,people and systems or from externalevents. Like most other Investment Trusts,the Fund has no employees and relies uponthe services provided by third parties. The


Manager has comprehensive internal controlsand processes in place to mitigate operationalrisks. These are regularly monitored and arereviewed to give assurance regarding theeffective operation of the controls.

Corporate Governance and ShareholderRelations – Details of the Fund’s compliancewith corporate governance best practice,including information on relations withshareholders, are set out in the Directors’Statement on Corporate Governance.

Financial – The Fund’s investment activitiesexpose it to a variety of financial risksincluding market, credit and interest rate risk.These risks are explained in note 9 to thefinancial statements. The Board seeks tomitigate and manage these risks throughcontinuous review, policy setting andenforcement of contractual obligations. TheBoard receives both formal and informalreports from the Manager and third partyservice providers addressing these risks. TheBoard believes the Fund has a relatively lowrisk profile as it has a simple capital structure;invests principally in UK quoted companies;does not use derivatives other than CFDs anduses well established and creditworthycounterparties.

The capital structure comprises only ordinaryshares that rank equally. Each share carriesone vote at general meetings.

Directors and Employees and GenderRepresentationThe Directors of the Fund at 31 March 2015,all of whom held office throughout the year,are set out on the page entitled ‘Board ofDirectors’ which contains biographies. TheBoard consists of 3 male Directors. The Funddoes not have any employees.

Social, Community and Human RightsIssuesAs an investment trust, the Fund has nodirect responsibilities in respect of thesematters, however, the Directors recognisethat encouraging investee companies torecognise these responsibilities can havepositive implications for shareholder value.Further information on governanceresponsibilities, including environmental, isincluded in the Directors’ Statement onCorporate Governance contained in theDirectors’ Report.

Future ProspectsThe Board’s main focus is to achieve longterm capital growth. The future performanceof the Fund is dependent on the success ofthe investment strategy and theperformance of economic and financialmarkets. The current outlook for the Fund isreferred to in the Chairman’s Statement andManager’s Review. The Board’s intention isthat the Fund will continue to pursue itsinvestment objective and stated investmentpolicy.

By Order of the Board,

SVM Asset Management LimitedCompany Secretary

3 July 2015

Board of Directors


Richard Bernstein Anthony PuckridgePeter Dicks (Chairman)

Peter Dicks (Chairman)Peter Dicks was a founder and director ofAbingworth plc which, between 1973 and1992, specialised in making venture capitalinvestments in the USA and the UK. He iscurrently a director of Graphite EnterpriseTrust plc, Private Equity Investor plc, UnicornAIM VCT plc, Mears Group plc, Foresight VCTrange of funds and a number of other quotedand unquoted companies. Mr Dicks hasserved on the Board for over nine years andstands for annual re-election.

Richard BernsteinRichard Bernstein, a chartered accountant, isthe founder and Chief Executive ofEurovestech plc, an AIM listed investmentfund, investing in technology and internetrelated businesses, which he founded in2000. Between 1994 and 1996, he ran hisown specialist research house, AmberAnalysis, which provided a risk managementservice for UK institutions. From 1996 until1999, he was an equities analyst at SchroderSecurities Limited. He has considerableinvestment experience with listedinvestments. Since 2008, Richard has beenthe Investment Adviser to Crystal AmberFund. Richard has served on the Board forover nine years and stands for annual re-election.

Anthony PuckridgeAnthony Puckridge is a director of NWBrown and Company Limited, a broadlydiversified financial business where hefounded the investment managementdivision. Prior to joining NW Brown, he wasa director of Lazard Brothers & Co Limitedwhere at various times he managed andadvised pension funds, was in charge ofboth the US and smaller companiesinvestments and was responsible for aseries of funds involved in making venturecapital investments. He is an Associate ofUKSIP and a Member of the SecuritiesInstitute. Mr Puckridge has served on theBoard for over nine years and stands forannual re-election.


The Directors submit the Annual Report andFinancial Statements for the year to 31 March2015.

Principal Activity, Status and ReviewThe Fund is an Investment Company asdefined in Section 833 of the Companies Act2006 (company number: SC211841). It is nota close company for taxation purposes. It hasbeen approved by HM Revenue & Customsas an investment trust subject to the Fundcontinuing to meet the eligibility conditions insection 1158 of Corporation Tax Act 2010 andthe ongoing requirements for approvedcompanies. In the opinion of the Directors,the Fund has subsequently conducted itsaffairs so as to enable it to continue to obtainsuch approval. The Company is registered asa small UK Alternative Investment FundManager under the Alternative InvestmentFund Managers Regulations 2013.

Other than the information contained withinthe Directors’ Remuneration Report relatingto the Directors waiving part of their fees,there are no other instances where theCompany is required to make disclosures inrespect of Listing Rule 9.8.4R.

DirectorsThe Directors who held office during the yearand their beneficial interests in the ordinaryshares of the Fund were:

31 March 31 March2015 2014

P F Dicks 250,000 250,000

R P Bernstein 120,000 120,000

A Puckridge 40,000 40,000

There have been no changes in the Directors’interests between 31 March 2015 and 3 July2015.

Each Director has a letter of appointment,details of which are noted in the Directors’Remuneration Report.

Each Director, having served for more thannine years, will offer himself for re-election atthe Annual General Meeting. The Boardconsiders that each Director is independent,despite having served on the Board for morethan nine years and have demonstrated theirindependence through integrity and a robustcontribution. The Board is of the view thatlength of service does not necessarilycompromise the independence or contributionof directors of an investment trust, wherecontinuity and experience can addsignificantly to the strength of the Board. TheBoard considers the long service of theDirectors as an asset and recommends theirindividual re-election to shareholders.

ManagementSVM Asset Management Limited providesinvestment management and secretarialservices to the Fund. These services can beterminated without compensation at any timeby giving one year’s notice or an immediatepayment of a year’s fees in lieu of notice. TheManager is entitled to a fee for theseservices, payable quarterly in arrears,equivalent to 0.825 per cent per annum of thetotal assets of the Fund less current liabilities.In addition, SVM Asset Management Limitedis entitled to an incentive fee of 15 per cent ofachieved outperformance of the Fund’sbenchmark index, on a six monthly basis inarrears when the net asset value of the Fundexceeds 100p. In view of the size of the Fund,the Manager has waived its managementfees for the years to 31 March 2015 and2014. No incentive fee was paid or due inrespect of the years to 31 March 2015 or31 March 2014.

The Management and Nomination Committeeassess the Manager’s performance on anongoing basis and meet each year to conducta formal evaluation of the Manager. Itassesses the resources made available by theManager, the results and investmentperformance in relation to the Fund’sobjectives and also the additional servicesprovided by the Manager to the Fund.

Report of thedirectors


The Committee has reviewed the Manager’scontract. In carrying out its review, itconsidered the past investment performanceand the Manager’s capability and resources todeliver superior future performance. It alsoconsidered the length of the notice period ofthe investment management contract and thefees payable together with the standard ofother services provided which includesecretarial, accounting, marketing and riskmonitoring. Following this review, it is theDirectors’ opinion that the continuingappointment of the Manager on the termsagreed is in the best interests of theshareholders.

Substantial shareholdingsAs at 3 July 2015, the following interests inexcess of 3 per cent of the issued ordinaryshares of the Fund had been reported:

Number of PercentageShares held held

SVM Asset ManagementLimited and clientholdings* 1,769,000 29.5%

C W McLean* 370,000 6.2%

Alexander Moffat& Co WS 305,000 5.1%

Peter Dicks 250,000 4.2%

ArmstrongInvestmentsLimited 345,000 5.7%

Stephen JamesBlackford &Mrs Tracey MagdelineBlackford 310,000 5.2%

Charles Stanley && Co, Rock(Nominees) Ltd 240,000 4.0%

*The reported shareholding of C W McLean is alsoincluded in the reported shareholding of SVM AssetManagement Limited.

Financial instrumentsThe Fund’s financial instruments comprise theinvestment portfolio (including the use ofCFDs), cash at bank and on deposit, bankoverdrafts and debtors and creditors thatarise directly from operations. The main risksthat the Fund faces from its financialinstruments are disclosed in note 9 to thefinancial statements.

Share CapitalThe rights and obligations attaching to theFunds ordinary shares are set out in theFund’s Articles of Association. The ordinaryshares carry the right to receive any dividendsand have one voting right per share. There areno restrictions on voting rights of the sharesor the transfer of shares, and there are noshares that carry specific rights with respectto control of the Fund.

Directors’ authority to issue sharesThe Directors are currently authorised to allotordinary shares up to an aggregate nominalamount of £300,000 and renewal of thisauthority and the authority to sell shares heldin treasury is set out in Resolutions 8 and 9 ofthe Notice of the Annual General Meeting.

The Directors will only issue shares pursuantto this authority if they believe it isadvantageous to the Fund’s existingshareholders to do so.

Directors’ authority to buy back sharesThe current authority of the Fund to makemarket purchases of up to 15% of the issuedordinary shares expires on the conclusion ofthis year’s Annual General Meeting.Resolution 10, as set out in the Notice of theAnnual General Meeting, seeks renewal ofthis authority until the Annual GeneralMeeting in 2016. The price paid for shareswill not be less than the nominal value of 5pence per share nor more than 5% above the


average of the market values of these sharesfor the five business days before the sharesare purchased. This power will only beexercised if, in the opinion of the Directors, arepurchase would be in the best interests ofthe shareholders as a whole.

Any shares purchased under this authority willeither be cancelled or held in treasury forfuture re-sale in appropriate marketconditions.

Going concernThe Board, having made appropriateenquiries, has a reasonable expectation thatthe Fund has adequate resources to continuein operational existence for the foreseeablefuture. At the Annual General Meeting to beconvened in 2015 and every five yearsthereafter, shareholders will be given theopportunity to decide on the future of theFund. The Directors have consulted with across section of the larger shareholders andbelieve that the continuation resolution at thisyear’s Annual General Meeting will bepassed. In assessing whether it is a goingconcern, the Board has reviewed the cashflow forecasts for the foreseeable future. Inaddition, the Board has considered thecurrent cash position and the overall financialposition of the Fund. For these reasons, theBoard considers that there is reasonableevidence to continue to adopt the goingconcern basis in preparing the financialstatements.

Directors’ Statement on CorporateGovernanceThe Board of Directors considers that theFund has complied with therecommendations of the AIC’s Code ofCorporate Governance and the provisions ofthe Financial Reporting Council’s UKCorporate Governance Code (the “Code’’)

that are relevant to the Fund throughout theyear except as noted below:

• the role of the chief executive;

• executive directors’ remuneration; and

• the need for an internal audit function.

Therefore, those issues on which the Funddoes not report in detail are excluded becausethe Board deems them to be irrelevant to theFund as explained in the AIC’s Code ofCorporate Governance.

The Directors confirm that the Fund hascomplied with the requirement to be headedby an effective Board to lead and control it.The Fund is an investment trust and not atrading company and, as such, there is norequirement for a Chief Executive Officer. TheBoard consists solely of non-executiveDirectors. Mr Peter Dicks is the Chairman andMr Anthony Puckridge is the SeniorIndependent Director. All Directors areconsidered by the Board to be independent ofthe Manager and free from all business orother relationships that could interfere with theexercise of their independent judgement.

Whilst the Directors are not appointed forspecific terms, as required by the Code, all theDirectors must submit themselves for re-election by the shareholders annually and arenot entitled to compensation if they are not re-elected to office.

Since all Directors are non-executive, the Fundis not required to comply with the principles ofthe Code in respect of executive Directors’remuneration. Directors may seek independentprofessional advice if necessary, at theexpense of the Fund.

The Directors conduct an annual self-assessment of their collective and individualperformances on a range of issues to reviewthe effectiveness of the Board, theCommittees and individual Directors in order to


ensure that they are acting in the bestinterests of the Fund and its shareholders. Inaddition, the performance of the Chairman isevaluated by the other Directors. Havingreviewed these assessments, it is the Board’sopinion that each Director’s performancecontinues to be effective and to demonstratecommitment to their role.

The table below sets out the number of Boardmeetings, Audit Committee and,Management and Nomination Committeemeetings held during the year and themeetings attended by each Director.

The Manager maintains regular contact withthe Fund’s shareholders, particularlyinstitutional shareholders, and reportsregularly to the Board on shareholderrelations. In addition, the Board uses theAnnual General Meeting as a forum forshareholders to meet and discuss issues withthe Board and the Manager.

A management agreement between the Fundand the Manager sets out the matters overwhich the Manager has authority and thelimits over which Board approval must besought. All other matters, including corporatestrategy, investment policy, corporategovernance procedures, risk managementand principal operating issues such ashedging, gearing, share issuance and buybacks are reserved for the approval of theBoard. Details of the limits set on the keyareas are set out in the Financial Instruments

disclosures in note 9 to the financialstatements.

The Fund usually exercises its voting powersat general meetings of investee companies. Itdoes not operate a fixed policy when votingbut treats each case on merit. The Managerhas adopted the statement of principles setout by the Institutional Shareholders’Committee on the Responsibilities ofInstitutional Shareholders and Agents.

The Board recognises that corporate, social,environmental and ethical responsibilityenables good sustainable business growthand can have positive implications forshareholder value. The Board believes thatencouraging companies to recognise theseresponsibilities is best achieved with dialogueand actively aiming to encourage bestpractice. The Board notes the Manager’sstatement of compliance with the UKStewardship Code issued by the FinancialReporting Council in July 2010, which can befound on the Manager’s websitewww.svmonline.co.uk

Each Director has a statutory duty to avoid asituation where they (and connected persons)have, or could have, a direct or indirectinterest which conflicts, or may conflict, withthe interests of the Fund. The Board has inplace procedures for identifying and dealingwith conflicts or potential conflicts. No actualor potential conflicts were identified duringthe year.

Audit Management andBoard Committee Nomination Committee

Number of meetingsheld in year 4 2 2

P F Dicks 4 2 2

R P Bernstein 4 2 2

A Puckridge 4 2 2


Amendment of the Fund’s Articles ofAssociation requires a special resolution to bepassed by shareholders.

CommitteesThe Board has adopted a formal schedule ofmatters specifically reserved to itself fordecision and, in relation to certain matters,two committees (the Audit Committee, andthe Management and Nomination Committee)have been established. Each of thecommittees comprises all of the Directors.The Board considers that it is appropriate forall Directors to be members of thesecommittees, given the size and compositionof the Board.

Both committees are chaired by the SeniorIndependent Director. The terms of referenceof both committees are available forinspection on request from the Managers.Further information on the role of the AuditCommittee is set out in the Audit CommitteeReport.

Management and Nomination committeeThe Management and NominationCommittee, which comprises all of theindependent Directors and for which aquorum is any two of the independentDirectors, meets at least once a year. Itsremit includes such matters as reviewing allcontracts for services delivered to the Fund,reviewing and recommending newappointments to the Board and fixing theremuneration of the Directors. In consideringappointments to the Board, the Managementand Nomination Committee takes intoaccount the ongoing requirements of theFund and the need to have a balance of skills,experience, diversity (including gender), andindependence and knowledge of the Fundand, where appropriate, actively searches forcandidates. All appointments are based onmerit and therefore no diversity targets havebeen set against which to report.

Disclosure of information to the AuditorAs required by section 418 of the CompaniesAct 2006 each Director of the Fund confirmsthat:

• so far as each Director is aware, there is noaudit information needed by the Fund’sAuditor in connection with preparing theirreport of which the Auditor is unaware; and

• the Director has taken all the steps that heought to have taken to make himself awareof any such audit information and toestablish that the Auditor is aware of thatinformation.

AuditorScott-Moncrieff has expressed theirwillingness to continue in office as the Fund’sAuditor and a resolution proposing their re-appointment and authorising the Directors todetermine their remuneration for the ensuingyear will be proposed at the forthcomingAnnual General Meeting.

Internal control and financial reportingThe Board is responsible for establishing andmaintaining the Fund’s system of internalcontrol and reviewing its effectiveness. TheUK Corporate Governance Code states thatthe review should cover all material controls,including financial, operational and compliancecontrols. The Board, in conjunction with theManager, has established a process foridentifying, evaluating and managing thesignificant risks faced by the Fund. Thisprocess is subject to regular review by theBoard and accords with the FinancialReporting Council guidance. The process hasbeen in place for the year under review andup to the date of these financial statements.Internal control systems are designed to meetthe particular needs of the Fund and the risksto which it is exposed and, by their nature,can provide reasonable but not absoluteassurance against material misstatement orloss.


The principal elements of the Fund’s systemof internal controls and the process applied bythe Board in reviewing its effectiveness are:

• Clearly documented contractualarrangements with service providers.

• Annual review by the Board of the internalcontrol reports of service providers.

• Consideration by the Board of the latestReview of Internal Controls documentation.

• Quarterly Board meetings to reviewperformance, investment policy, strategyand shareholder relations.

• Regular updating by the Manager on keyrisks and control developments.

The Board meets every quarter to review theoverall business of the Fund and to considerthe matters specifically reserved for it todecide upon. At these meetings, theDirectors review investment performance ofthe Fund compared to its benchmark indexand in relation to comparable investmenttrusts. The Directors also review its activitiesover the preceding quarter to ensure itadheres to its investment policy or, if it isconsidered appropriate, to authorise anychange to that policy. The Board is satisfiedthat it is supplied in a timely manner withinformation to enable it to discharge itsduties.

The Board has engaged external firms toundertake the investment management,administration, secretarial and custodialactivities of the Fund. There are clearlydocumented contractual arrangementsbetween the Fund and these organisationswhich define the areas where the Board hasdelegated authority to them.

The Board receives reports on at least anannual basis detailing the internal control

objectives and procedures adopted by eachorganisation. The Board’s review of thesereports allows it to assess the effectivenessof the internal systems of financial controlwhich affect the Fund.

Greenhouse Gas EmissionsAs the Board has engaged external firms toundertake the investment management,secretarial, accounting and custody activitiesof the Fund, the Fund has no greenhouse gasemissions to report from its operations, nordoes it have responsibility for any otheremissions producing sources under theCompanies Act 2006 (Strategic Report andDirectors’ Reports) Regulations 2013.

Directors’ IndemnityThe Company’s Articles of Associationprovide, subject to the provisions ofapplicable UK legislation, an indemnity forDirectors in respect of costs incurred in thedefence of any proceedings brought againstthem by third parties arising out of theirpositions as Directors, in which they areacquitted or judgement is given in theirfavour.

Compliance statementExcept as noted above, the Fund hascomplied with the applicable provisions of theCode during the year and up to the date ofthe approval of the financial statements.


SVM Asset Management Limited Company Secretary

3 July 2015


The Board has prepared this report inaccordance with the requirements of theCompanies Act 2006. It comprises theDirectors’ Remuneration Policy Report andthe Annual Report on Directors’Remuneration.

The Directors’ Remuneration Policy Reportwill be put to shareholders at the forthcomingAnnual General Meeting and, if passed, willapply until it is next put to shareholders forapproval, which must be at intervals of notless than three years. The Annual Report onDirectors’ Remuneration will be put toshareholders at the forthcoming AnnualGeneral Meeting and annually thereafter.

The law requires the Auditor to audit certainaspects of the disclosures provided. Wheredisclosures have been audited, they areindicated as such. The Auditor’s opinion isincluded in their report on the page entitled‘Independent auditor’s report’.

DIRECTORS’ REMUNERATION POLICYREPORT

Directors’ remuneration - Statement bythe ChairmanThe Board’s policy is that the remuneration ofnon-executive Directors should reflect theexperience of the Board as a whole, be fairand comparable to that of other investmenttrusts that are similar in size, have a similarcapital structure, and have similar investmentobjectives. In addition, a number of otherfactors are considered, including the timecommitment required, the level of skills andexperience required and any specificresponsibilities of Directors. There were nochanges to the policy during the year and it isthe intention that this policy will continue forthe three year period ending at the AnnualGeneral Meeting in 2018.

The fees for the non-executive Directors aredetermined within the limits set out in the

Fund’s Articles of Association. The currentlimit is £75,000 in aggregate per annum andshareholder approval in a general meetingwould be required to change this limit. Non-executive Directors are not eligible forbonuses, pension benefits, share options,long-term incentive schemes, compensationfor loss of office or other benefits.

Directors’ appointment and tenureAll Directors were originally appointed at theFund’s inception in 2000 and all Directorshave a letter of appointment. These lettersare kept and are available for inspection at theFund’s registered office. The terms of theirappointment provide that a Director shallretire and be subject to re-election at the firstAnnual General Meeting following theirappointment. Directors are thereafter obligedto retire by rotation, and, if they wish, to offerthemselves for re-election, at least everythree years thereafter. There is a 3 monthnotice period and the Fund reserves the rightto make a payment in lieu of notice on earlytermination of appointment. None of theDirectors has a service contract with theFund.

The Board’s policy of tenure is to reviewactively whether Directors with service ofnine years or more should be re-nominated,whilst ensuring that the process of refreshingthe Board does not compromise a balance ofexperience, age, length of service and skills.

The Management and Nomination Committeerecommends to the Board candidates fornomination as Directors. The Committeeseeks candidates with the aim of ensuringthat the Board comprises a broad spread ofexperience and knowledge and, whereappropriate, actively searches for candidates.New appointments will receive inductiontraining and spend time with representativesof the Manager. The Fund’s policy is toencourage Directors to keep up to date withindustry developments relevant to the Fund.

Directors’remunerationreport


ANNUAL REPORT ON DIRECTORS’REMUNERATION

Remuneration committeeThe Fund has three non-executive Directorsas detailed on the ‘Board of Directors’ page,all of whom are independent. TheManagement and Nomination Committee,comprising of all the Directors, fulfils thefunction of a Remuneration Committee inaddition to its nominations functions. TheBoard has appointed SVM AssetManagement Limited as Company Secretaryto provide information when theManagement and Nomination Committeeconsider the level of Directors’ fees. TheDirectors are independent of SVM AssetManagement Limited and SVM AssetManagement Limited receives no additionalfees for the provision of this information. TheManagement and Nomination Committeecarries out a review of the level of Directors’fees on an annual basis. In addition, SVMAsset Management Limited providesinvestment management, administration andsecretarial services to the Fund.

Relative Importance of Spend onDirectors’ RemunerationThe table below shows the actualexpenditure during the year in relation toDirectors’ remuneration, operating expensesand shareholder distributions. Due to thesize of the Fund, the Manager has waived itsmanagement fee and the Directors havewaived their entitlement to half their feesuntil further notice.

2015 2014 Change£ £ %

Directors’ totalremuneration 17,500 17,500 –

OperatingExpenses 28,500 55,500 -48.6%

Dividends paid toshareholders Nil Nil –

Directors’ Shareholdings (audited)The Directors who held office during the yearand their beneficial interests in the ordinaryshares of the Fund were:

31 March 31 March2015 2014

£ £

P F Dicks 250,000 250,000

R P Bernstein 120,000 120,000


There have been no changes in the Directors’interests between 31 March 2015 and 3 July2015. The Board has not adopted a policywhereby Directors are required to own sharesin the Fund.

Fund performanceThe graph below compares the share pricetotal return (assuming all dividends arereinvested) to Ordinary Shareholders for thelast five years (to 31 March 2015) to the totalshareholder return on a notional investmentmade up of shares of the same kinds andnumber as those by reference to which theIMA UK All Companies Sector Average Index(prior to 1 October 2013 the FTSE AIM Index)is calculated. The Index has been chosen as itrepresents the Fund’s benchmark.

UK Emerging

Benchmark

2010 2011 2012 2014 20152013

50

75

100

125

150


Directors' emoluments for the year(audited)The Directors who served in the yearreceived the following emoluments in theform of fees:

Fees Fees2015 2014

£ £

P F Dicks 7,500 7,500

R P Bernstein 5,000 5,000


Total 17,500 17,500

Future Policy TableBased on the current level of fees, Directors’remuneration for the forthcoming financialyear would be as follows:

Fees Fees2016 2015

£ £

P F Dicks 7,500 7,500

R P Bernstein 5,000 5,000


Total 17,500 17,500

The Fund has not received any views fromits Shareholders in respect of the level ofDirectors’ remuneration.

Voting at Annual General MeetingAt the Fund’s last Annual General Meeting,held on 12 September 2014, shareholdersapproved the Directors’ Remuneration Reportin respect of the year ended 31 March 2014.100% of votes were in favour of theresolution and 0% were against.

Ordinary resolutions for the approval of thisreport and the Directors’ RemunerationPolicy Report will be put to the members atthe forthcoming Annual General Meeting.


SVM Asset Management LimitedCompany SecretaryEdinburgh

3 July 2015


Composition and RoleThe Audit Committee, which comprises all ofthe independent Directors, meets at leasttwice a year. All Directors have the requisitefinancial experience to sit on this committee.Terms of reference set out the role of theAudit Committee. Its role is to review theFund’s financial position, internal controls,scope and results of the audit, its costeffectiveness and the independence andobjectivity of the auditor.

The Audit Committee must also satisfy itselfthat the Annual Report and FinancialStatements are fair, balanced and reasonable.The auditor is invited to attend such meetingsand report on the results of the audit.

The Audit Committee considers annually theneed for an internal audit function. It believessuch a function is unnecessary as the Fundhas no employees and subcontracts itsbusiness to third parties, the principal one ofwhich is the Manager.

External AuditThe Audit Committee met on two occasionsduring the year. In the course of its duties, thecommittee had direct access to Scott-Moncrieff and senior members of theManager’s team. Amongst other things, theAudit Committee considered and reviewedthe following matters and reported thereon tothe Board:

• annual results announcements, and annualand half-yearly reports and financialstatements;

• accounting policies of the Fund;

• principal risks faced by the Fund and theeffectiveness of the Fund’s internal controlenvironment;

• internal controls operated by the Manager;

• effectiveness of the audit process andrelated non-audit services and theindependence and objectivity of Scott-Moncrieff, their re-appointment,remuneration and terms of engagement;

• policy on the engagement of Scott-Moncrieff to supply non-audit services; and

• implications of proposed new accountingstandards and regulatory changes.

As part of its review of the scope and resultsof the audit, the Audit Committee consideredScott-Moncrieff’s plan for the audit of thefinancial statements for the year ended 31March 2015. At the conclusion of the auditScott-Moncrieff did not highlight any issues tothe Audit Committee which would cause it toqualify its audit report nor did it highlight anyfundamental internal control weaknesses.Scott-Moncrieff issued an unqualified auditreport.

In evaluating the effectiveness of the externalaudit process, the Audit Committee has takeninto consideration the standing, skills andexperience of Scott-Moncrieff and the auditteam. Working closely with the Manager theAudit Committee considered and evaluatedScott-Moncrieff’s planning, scope andexecution of the audit.

Significant Issues considered by the AuditCommitteeIn relation to the 2015 Annual Report andFinancial Statements, the Audit Committeeconsidered a number of issues in relation tothe financial statements. The key risk areasidentified and how these were addressedwere as follows:

• The accuracy of the valuation of theinvestment portfolio.Listed investments are valued using stockexchange prices provided by a third party

AuditCommitteeReport


pricing vendor. CFDs are valued withreference to the investment’s underlyingbid prices using stock exchange pricesprovided by a third party pricing vendor.Unlisted investments are valued at fairvalue based on the latest informationavailable and recommendations from theFair Value pricing committee of theManager. The Board reviews portfoliovaluations and also relies on controlsoperated by the Manager in respect ofpricing.

•Misappropriation of the Company’sinvestments or other assets.The Audit Committee reviews reports fromservice providers on key controls over theassets of the Fund, including thereconciliation of the Fund’s records withthose of the custodian of the Fund’sassets.

• Revenue RecognitionThe Board reviews revenue forecasts andreceives explanations from the Managerregarding movements from previousforecasts.

• Statutory financial statementsdisclosure requirementsDisclosure requirements are reviewed bythe Manager and Auditor before thefinancial statements are approved by theBoard.

Auditor Appointment and TenureThe auditor appointment was last put out totender in 2013 and Scott-Moncrieff wasappointed as auditor in place of theincumbent auditor for the audit in respect ofthe year to 31 March 2014. Based on itsreview of the effectiveness of Scott-

Moncrieff, the Audit Committee hasrecommended the continuing appointment ofScott-Moncrieff to the Board. Scott-Moncrieff’s performance will continue to bereviewed annually taking into account allrelevant guidance and best practice.

Non-Audit ServicesThe auditor has not provided any non-auditservices to the Fund other than taxcompliance services, for which they are paid£1,000 per annum (2014: £2,000).Notwithstanding these, the Audit Committeehas concluded that the auditor is objectiveand independent. The Audit Committee willcontinue to monitor on an annual basis thelevel of non-audit work carried out by theauditor.

Mr Anthony PuckridgeChairman of Audit Committee

3 July 2015


The Directors are responsible for preparingthe Annual Report, the Directors’Remuneration Report and the FinancialStatements in accordance with applicable lawand regulations. Company law requires theDirectors to prepare financial statements foreach financial year. Under that law, theDirectors prepared the financial statements inaccordance with United Kingdom GenerallyAccepted Accounting Practice (UnitedKingdom Accounting Standards and applicablelaw). Under company law, the Directors mustnot approve the financial statements unlessthey are satisfied that they give a true and fairview of the state of affairs of the Fund and ofits gain or loss for that period. In preparingthese financial statements, the Directors arerequired to:

• select suitable accounting policies andthen apply them consistently;

• make judgments and accountingestimates that are reasonable andprudent;

• state whether applicable UK AccountingStandards have been followed, subject toany material departures disclosed andexplained in the financial statements; and

• prepare the financial statements on thegoing concern basis, unless it isinappropriate to presume the Fund willcontinue in business

The Directors are responsible for keepingadequate accounting records that aresufficient to show and explain the Fund’stransactions and disclose with reasonableaccuracy at any time the financial position ofthe Fund and enable them to ensure that thefinancial statements comply with theCompanies Act 2006. They are alsoresponsible for safeguarding the assets of theFund and hence for taking reasonable stepsfor the prevention and detection of fraud andother irregularities.

The Directors have delegated responsibility tothe Manager for the maintenance andintegrity of the Fund’s corporate and financialinformation included on the Manager’swebsite. The work carried out by the Auditordoes not involve consideration of thesematters and, accordingly, the Auditor acceptsno responsibility for any changes that mayhave occurred to the financial statementssince they were initially presented on thewebsite. Legislation in the UK governing thepreparation and dissemination of financialstatements may differ from legislation inother jurisdictions.

The Directors consider that the Annual Reportand Financial Statements, taken as a whole,are fair, balanced and understandable andprovide the information necessary forshareholders to assess the Fund’sperformance, business model and strategy.

The Directors each confirm to the best oftheir knowledge that:

• the financial statements, prepared inaccordance with the applicable accountingstandards, give a true and fair view of theassets, liabilities, financial position andgain or loss of the Fund and;

• the Strategic Report includes a fair reviewof the development and performance ofthe business and the position of the Fundtogether with a description of the principalrisks and uncertainties that it faces.

By Order of the Board

Peter DicksChairman

3 July 2015

Statement of directors’responsibilities inrespect of the financialstatements

We have audited the financial statements ofSVM UK Emerging Fund plc for the yearended 31 March 2015, which comprise theIncome Statement, the Balance Sheet, theReconciliation of Movements in Shareholders’Funds, the Cash Flow Statement and therelated notes. The financial reportingframework that has been applied in theirpreparation is applicable law and UnitedKingdom Accounting Standards (UnitedKingdom Generally Accepted AccountingPractice).

This report is made solely to the Company'smembers as a body, in accordance withChapter 3 of Part 16 of the Companies Act2006. Our audit work has been undertakenso that we might state to the Company'smembers those matters we are required tostate to them in an auditor's report and for noother purpose. To the fullest extent permittedby law, we do not accept or assumeresponsibility to anyone other than theCompany and the Company's members as abody, for our audit work, for this report, or forthe opinions we have formed.

Respective responsibilities of directors andauditorAs explained more fully in the Statement ofDirectors’ Responsibilities on page 26, theDirectors are responsible for the preparationof the financial statements and for beingsatisfied that they give a true and fair view.Our responsibility is to audit the financialstatements in accordance with applicable lawand International Standards on Auditing (UKand Ireland). Those standards require us tocomply with the Auditing Practices Board’sEthical Standards for Auditors.

Scope of the audit of the financialstatementsA description of the scope of an audit offinancial statements is provided at theFinancial Reporting Council’s website atfrc.org.uk/auditscopeukprivate.

Our assessment of risks of materialmisstatementWe identified the following risks that webelieve have the greatest impact on the auditstrategy:

• investment portfolio valuation;

• revenue recognition; and

• misappropriation of company assets.

Our application of materialityWe apply the concept of materiality inplanning and performing our audit, and inevaluating the effect of misstatements on ouraudit and on the financial statements. For thepurposes of determining whether thefinancial statements are free from materialmisstatement we define materiality as thelevel of error that would change the opinionof the reader of the financial statements.

When establishing our overall audit strategy,we determined the level of uncorrectedmisstatement that would be material for thefinancial statements as a whole to be£45,000, which is 1% of net assets (netassets being a key performance indicator forinvestors in the Company).

Materiality for revenue transactions wasdetermined to be £11,000, as we believereaders of the financial statements will bemore sensitive to variances in the revenueaccount.

Independentauditor’s reportto the members of SVM UK Emerging Fund plc


We agreed with the Audit Committee thatwe would report to them individual andextrapolated errors in excess of a thresholdof £2,000, as well as differences below thatthreshold that we believe warrantedreporting on qualitative grounds.

An overview of the scope of our auditThe way in which we scoped our audit inorder to address the assessed risks ofmaterial misstatement was as follows:

• The holdings and valuations of allinvestments were reconciled to thecustodian report. A sample of year endvaluations were agreed to appropriateexternal sources.

• The income recorded for a sample ofsecurities was checked to appropriateexternal sources. We paid particularattention to special dividends and theiraccounting treatment. A sample ofinvestment disposals was agreed tocontract notes to ensure these wererecorded correctly.

• We reviewed the accounting records forany significant transactions that wereoutside the normal course of business.

• We reviewed the statutory disclosurerequirements applicable to the Companyto identifiy any omitted or inaccuratedisclosures.

The Audit Committee’s consideration ofthese risks is set out on pages 24 and 25.

Opinion on financial statementsIn our opinion the financial statements:

• give a true and fair view of the state ofthe Company's affairs as at 31 March2015 and of its return for the year thenended;

• have been properly prepared inaccordance with United KingdomGenerally Accepting Accounting Practice;and

• have been prepared in accordance withthe Companies Act 2006.

Opinion on other matters prescribed bythe Companies Act 2006In our opinion:• the part of the Directors’ Remuneration

Report to be audited has been properlyprepared in accordance with theCompanies Act 2006;

• the information given in the StrategicReport and Directors’ Report for thefinancial year for which the financialstatements are prepared is consistentwith the financial statements; and

• the information given in the CorporateGovernance Statement in compliance withrules 7.2.5 and 7.2.6 in the Disclosure andTransparency rules sourcebook issued bythe Financial Conduct Authority(information about internal control and riskmanagement systems in relation tofinancial reporting processes and sharecapital structure) is consistent with thefinancial statements.

Matters on which we are required toreport by exceptionWe have nothing to report in respect of thefollowing:

Under the International Standards in Auditing(UK and Ireland), we are required to report toyou if, in our opinion, information in theannual report is:• materially inconsistent with the

information in the audited financialstatements; or


• apparently materially incorrect based on,or materially inconsistent with, ourknowledge of the Company acquired inthe course of performing our audit; or

• is otherwise misleading.

In particular, we are required to considerwhether we have identified anyinconsistencies between our knowledgeacquired during the audit and the Directors’statement that they consider the annualreport is fair, balanced and understandableand whether the annual report appropriatelydiscloses those matters that wecommunicated to the Audit Committeewhich we consider should have beendisclosed.

Under the Companies Act 2006 we arerequired to report to you if, in our opinion:• adequate accounting records have not

been kept and returns adequate for ouraudit have not been received frombranches not visited by us; or

• the financial statements and the part ofthe Directors’ Remuneration Report to beaudited are not in agreement with theaccounting records and return; or

• certain disclosures of Directors’remuneration specified by law are notmade; or

• we have not received all the informationand explanations we require for our audit.

Under the Listing Rules we are required toreview:• the Directors’ statement on page 17 in

relation to going concern; and

• the part of the Corporate GovernanceStatement relating to the Company’scompliance with the nine provisions of theCorporate Governance Code specified forour review; and

• certain elements of the report to theshareholders by the Board on Directors’remuneration.

Gareth Magee(Senior Statutory Auditor)For and on behalf of Scott-Moncrieff, Statutory AuditorExchange Place 3Semple StEdinburghEH3 8BL3 July 2015


Revenue Capital TotalNotes £000 £000 £000

Net gain on investments at fair value

Profit or loss 5 – 35 35

Income 1 109 – 109

Investment management fees – – –

Other expenses 2 (37) (9) (46)

Gain before finance costs and taxation 72 26 98

Finance costs (11) – (11)

Gain on ordinary activities before taxation 61 26 87

Taxation 3 – – –

Gain attributable to ordinary shareholders 61 26 87

Gain per Ordinary Share 4 1.02p 0.43p 1.45p

The Total column ofthis statement is theprofit and lossaccount of the Fund.All revenue andcapital items arederived fromcontinuing operations.No operations wereacquired ordiscontinued in theyear. A Statement ofTotal RecognisedGains and Losses isnot required as allgains and losses ofthe Fund have beenreflected in the abovestatement.

The AccountingPolicies and theNotes on pages 34 to40 form part of theseFinancial Statements

Income statementfor the year to 31 March 2015

Revenue Capital TotalNotes £000 £000 £000

Net gain on investments at fair value

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 2014


2015 2014Notes £000 £000

Fixed Assets

Investments at fair value through profit or loss 5 4,571 4,421

Current Assets

Debtors 6 20 48

Cash at bank and on deposit 131 58

Total current assets 151 106

Creditors: amounts falling due within one year 7 (196) (88)

Net current (liabilities)/assets (45) 18

Total assets less current liabilities 4,526 4,439

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 (707) (733)

Revenue reserve (552) (613)

Equity shareholders’ funds 4,526 4,439

Net asset value per Ordinary Share 4 75.38p 73.93p

Approved and authorised for issue by the Board of Directors on 3 July 2015 and signed on its behalfby Peter Dicks, Chairman.

Company registered number: SC211841

Balance sheetas at 31 March 2015

The Accounting Policiesand the Notes onpages 34 to 40 formpart of these FinancialStatements


CapitalShare Share Special redemption Capital Revenuecapital premium reserve reserve reserve reserve£000 £000 £000 £000 £000 £000

As at 1 April 2014 300 314 5,144 27 (733) (613)

Gain attributable toshareholders – – - – 26 61

As at 31 March 2015 300 314 5,144 27 (707) (552)

For the year to 31 March 2014


Reconciliation ofmovements inshareholders’ fundsfor the year to 31 March 2015

CapitalShare Share Special redemption Capital Revenuecapital premium reserve reserve reserve reserve£000 £000 £000 £000 £000 £000

As at 1 April 2013 300 314 5,144 27 (1,927) (621)

Gain attributable toshareholders – – – – 1,194 8

As at 31 March 2014 300 314 5,144 27 (733) (613)


2015 2014£000 £000

Reconciliation of gain before finance costs andtaxation to net operating cash flows

Gains/(Losses) before finance costs and taxation 98 1,215

(Gains)/Losses on investments (35) (1,205)

Transaction costs 9 11

Movement in debtors 21 (34)

Movement in creditors (39) 13

Net cash inflow from operating activities 54 –

Taxation

Taxation recovered 7 –

Loss on investment and servicing of finance

Finance costs (11) (13)

Capital expenditure and financial investment

Purchases of fixed asset investments (2,686) (3,516)

Sales of fixed asset investments 2,709 3,401

23 (115)

Movement in cash 73 (128)

Reconciliation of net cash flow to movement in net cash

Movement in cash in the year 73 (128)

Net cash as at start of the year 58 186

Net cash as at end of the year 131 58


Cash flow statementfor the year to 31 March 2015


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 ofInvestment Trust Companies and Venture Capital Trusts’’ (‘‘SORP’’).

Income

Income is included in the Income Statement on an ex-dividend basis. Income on fixed interestsecurities is included on an effective interest rate basis. Deposit interest is included on an accrualsbasis.

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 linewith the Board’s expected long-term return from the investment portfolio. Due to the size of theFund, the Manager has waived its management fee. The terms of the investment managementagreement are detailed in the Report of the Directors.

Taxation

Deferred taxation is recognised in respect of all timing differences that have originated but notreversed at the balance sheet date where transactions or events that result in an obligation to paymore or a right to pay less tax in the future have occurred at the balance sheet date measured on anundiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only beingrecognised if it is considered more likely than not that there will be suitable profits from which thefuture reversal of the underlying timing differences can be deducted. Timing differences aredifferences arising between the taxable profits and the results as stated in the financial statementswhich 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 areheld at fair value. For listed investments this is deemed to be at bid prices. Contracts for Differencesare 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 withreference to International Private Equity and Venture Capital Valuation Guidelines.

All changes in fair value and transaction costs on the acquisition and disposal of portfolio investmentsare included in the Income Statement as a capital item. Purchases and sales of investments areaccounted for on trade date.

Capital reserve

Gains and losses on realisations of fixed asset investments, and transactions costs, together withappropriate exchange differences, are dealt with in this reserve. All incentive fees and investmentmanagement fees, together with any tax relief, is also taken to this reserve. Increases and decreasesin the valuation of fixed asset investments are dealt with in this reserve.

Accounting policies


2015 2014£000 £000

1. IncomeIncome from shares and securities– dividends 109 63– interest – 20

109 83

2. Other expensesRevenueGeneral expenses 6† 30Directors’ fees 18 18Auditor’s remuneration – audit services 12 12

– taxation services 1 237 62

† The figure for 2015 has been reduced by an accrual for Auditor’s fees in respect of a prior year of £20,000.

CapitalTransaction costs – acquisitions 4 5

– disposals 5 69 11

3. TaxationCurrent taxation – –Deferred taxation – –Total taxation for the year – –Gain/(Loss) on ordinary activities before taxation 87 1,202

The tax assessed for the year is different from the standard small company rate of corporation tax inthe UK. The differences are noted below:

Corporation tax (20%, 2014 – 20%) 17 240Non taxable UK dividends (18) (13)Non taxable investment (gains)/losses in capital (5) (239)Movement in unutilised management expenses and NTLR deficits 6 12Total taxation charge for the year – –

At 31 March 2015, the Fund had unutilised management expenses and non trade loan relationship (“NTLR”) deficits

of £910,000 (2014 – £900,000).

A deferred tax asset of £182,000 (2014 – £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.

Notes to the financialstatements


4. Returns per share

Returns per share are based on a weighted average of 6,005,000 (2014 – 6,005,000) ordinary sharesin issue during the year.

Total return per share is based on the total gain for the year of £87,000 (2014 – gain of £1,202,000).

Capital return per share is based on the net capital gain for the year of £26,000 (2014 – gain of£1,194,000).

Revenue return per share is based on the revenue gain after taxation for the year of £61,000 (2014 –gain of £8,000).

The net asset value per share is based on the net assets of the Fund of £4,526,000 (2014 –£4,439,000) divided by the number of shares in issue at the year end as shown in note 8.

2015 2014£000 £000

5. Investments at fair value through profit or lossListed investments 4,541 4,315Unlisted investments 30 106Valuation as at end of year 4,571 4,421

Listed Unlisted Total£000 £000 £000

Valuation as at start of year 4,315 106 4,421 3,248Investment holding (gains)/losses as at start of year (1,275) 379 (896) 607Cost as at start of year 3,040 485 3,525 3,855Purchases of investments at cost 2,816 – 2,816 3,366Proceeds from sale of investments (2,715) – (2,715) (3,406)Transfers 100 (100) – –Net gain/(loss) on sale of investments 75 (200) (125) (290)Cost as at end of year 3,316 185 3,501 3,525Investment holding gains/(losses) as atend of year 1,225 (155) 1,070 896Valuation as at end of year 4,541 30 4,571 4,421Net gain/(loss) on sale of investments 75 (200) (125) (290)Movement in investment holding gains 36 124 160 1,495Total gain/(loss) on investments 111 (76) 35 1,205

2015 2014£000 £000

6. DebtorsInvestment income due but not received 12 4Amounts receivable relating to CFDs 8 37Taxation – 7

20 48


2015 2014£000 £000

7. Creditors: amounts falling due within one yearAmounts due relating to CFDs 23 8Other creditors 173 80

196 88

8. Share capitalAuthorised100,000,000 ordinary 5p shares (2014 – same) 5,000 5,000

Allotted, issued and fully paid6,005,000 ordinary 5p shares (2014– same) 300 300

As at the date of publication of this document, there was no change in the issued share capital andeach ordinary share carries one vote.

9. Financial instruments

Risk ManagementThe Fund’s investment policy is to hold investments, CFDs and cash balances with gearing beingprovided by a bank overdraft. All financial instruments are denominated in Sterling and are carried atfair 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 inshort dated fixed rate securities other than where it has substantial cash resources. Fixed ratesecurities held at 31 March 2015 were valued at £nil (2014 – £nil). Investments, which compriseprincipally equity investments, are valued as detailed in the accounting policies.

The Fund only operates short term gearing, which is limited to 30 per cent of gross assets, and isundertaken through an unsecured variable rate bank overdraft and the use of CFDs. The benchmarkrate which determines the interest received on Sterling cash balances or paid on bank overdrafts isthe bank base rate which was 0.5% as at 31 March 2015 (2014 – 0.5%). There are no undrawncommitted borrowing facilities. Short-term debtors and creditors are excluded from disclosure.

The Fund does not have any foreign currency exposure and is consequently not currency hedged.Financial information on the investment portfolio is detailed in note 5.

Level 1 reflects financial instruments quoted in an active market.

Level 2 reflects financial instruments whose fair value is evidenced by comparison with otherobservable current market transactions in the same instrument or based on a valuation techniquewhose variables includes only data from observable markets. The CFD positions are the sole Level2 investments for 2015 and 2014.

Level 3 reflects financial instruments whose fair value is determined in whole or in part using avaluation technique based on assumptions that are not supported by prices from observable markettransactions in the same instrument and not based on available observable market data.

2015 2014£000 £000

Classification of financial instrumentsLevel 1 4,339 4,134Level 2 202 181Level 3 – 3 investments (2014 – 6) 30 106


2015 2014£000 £000

Balance as at start of year 106 356Purchases of investments at cost – –Proceeds from sale of investments – (250)Net losses on sale of investments (200) –Transfers – –Movement in investment holding gains 124 –Balance as at end of year 30 106

The Board has granted the Manager a limited authority to invest in CFDs to achieve some degree ofgearing and/or hedging without incurring the gross cost of investment. The Board requires theManager to operate within certain risk limits, as detailed in the Report of the Directors. The followingtable details the CFD positions:

Number of holdings (2015 – 16 ; 2014 – 10)Gross exposure 1,370 899Net exposure 1,370 899Unrealised gains 202 181Unrealised losses 23 8

The major risks inherent within the Fund are market risk, liquidity risk, credit risk and interest raterisk. It has an established environment for the management of these risks which are continuallymonitored by the Manager. Appropriate guidelines for the management of its financial instrumentsand gearing have been established by the Board of Directors. It has no foreign currency assets andtherefore does not use currency hedging. It does not use derivatives within the portfolio with theexception of CFDs.

Market risk The risk that the Fund may suffer a loss arising from adverse movements in the fair value or futurecash flows of an investment. Market risks include changes to market prices, interest rates andcurrency movements. The Fund invests in a diversified portfolio of holdings covering a range ofsectors. The Manager conducts continuing analysis of holdings and their market prices with anobjective of maximising returns to shareholders. Asset allocation, stock selection and marketmovements are reported to the Board on a regular basis.

Liquidity risk The risk that the Fund may encounter difficultly in meeting obligations associated with financialliabilities. The Fund is permitted to invest in shares traded on AIM or similar markets; these tend tobe in companies that are smaller in size and by their nature less liquid than larger companies. TheManager conducts continuing analysis of the liquidity profile of the portfolio and the Fund maintainsan overdraft facility to ensure that it is not a forced seller of investments.

9. Financial instruments (continued)

The movements within level 3 investments were as follows:


9. Financial instruments (continued)

Credit risk The risk that the counterparty to a transaction fails to discharge its obligation or commitment to thetransaction resulting in a loss to the Fund. Investment transactions are entered into using brokersthat are on the Manager’s approved list, the credit ratings of which are reviewed periodically inaddition to an annual review by the Manager’s board of directors. The Fund’s principal bankers areState Street Bank & Trust Company, the main broker for CFDs is UBS and other approved executionbroker 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 beincreased where an opportunity exists to substantially add to the net asset value performance.

Sensitivity analysisThe following table details the impact on net asset value and return per share of the Fund to changesin the two principal drivers of performance, namely investment returns and interest rates. Thecalculations are based on the balances at the respective balance sheet dates and are notrepresentative of the year as a whole.

2015 2014£000 £000

Investment portfolio5% increase +4.8p +4.3p5% decrease -4.8p -4.3p

Other assets/liabilitiesInterest rate 0.5% increase – –Interest rate 0.5% decrease – –

Maximum credit risk analysisAs at the year end, the Fund’s maximum credit risk exposure was as follows:Bank 131 58Amounts receivable relating to CFDs 8 37Investment income due but not received 12 4Taxation – 7

151 106


9. Financial instruments (continued)Contractual maturity analysis

Due not Due later than between 3 and 20151 month 12 months Total

£000 £000 £000

Bank 131 – 131Debtors 5 15 20Creditors (196) - (196)Net liquidity (60) 15 (45)

Due not Due later than between 3 and 20141 month 12 months Total

£000 £000 £000Bank 58 - 58Debtors 5 43 48Creditors (88) - (88)Net liquidity (25) 43 18

Cash flows payable under financial liabilities by remaining contractual liabilities are as stated above.

Capital management policies

The Fund’s management objectives are to provide shareholders with long term capital growth.

2015 2014£000 £000

Capital and reserves:Share capital 300 300Share premium 314 314Special reserve 5,144 5,144Capital redemption reserve 27 27Capital reserve (707) (733)Revenue reserve (552) (613)Total shareholders’ funds 4,526 4,439

The Fund’s objectives for managing capital are detailed in the Report of the Directors and have beencomplied with throughout the year. It normally restricts gearing to 30% of net assets, maintaining aminimum share capital of £50,000 (as a public company) and adheres to the capital restrictionsimposed by relevant company and tax legislation.

10. Related parties

The Management section of the Report of the Directors sets out the services provided by theManager to the Fund and fees earned. The share interests of the Manager in the Fund are set out inthe Substantial shareholdings section of the Report of the Directors. C W McLean is managingdirector of SVM Asset Management Limited.

There are no transactions with Directors other than aggregated remuneration for services asDirectors as disclosed in the Directors’ Remuneration Report and note 2. Shareholdings of Directorsare also set out in the Directors’ Remuneration Report.


Notice of AnnualGeneral Meeting

NOTICE IS HEREBY GIVEN that an AnnualGeneral Meeting of SVM UK Emerging Fundplc will be held at the offices of SVM AssetManagement, 7 Castle Street, Edinburgh,EH2 3AH on Friday, 11 September 2015 at9.30 am for the following purposes:

Ordinary Business – Ordinary Resolutions

1. That the financial statements for the yearto 31 March 2015, the Directors’ Reportand the Independent Auditor’s Report bereceived.

2. That the Directors’ Remuneration PolicyReport as contained in the Directors’Remuneration Report for the year to31 March 2015 be approved.

3. That the Annual Report on Directors’Remuneration as contained in theDirectors’ Remuneration Report for theyear to 31 March 2015 be approved.

4. That Mr P Dicks be re-appointed as aDirector.

5. That Mr R Bernstein be re-appointed as aDirector.

6. That Mr A Puckridge be re-appointed as aDirector.

7. That Scott-Moncrieff be re-appointed asAuditor of the Fund to hold office until theconclusion of the next AGM and that theirremuneration be determined by theDirectors.

8. That, in substitution for any existingauthority under the Companies Act 2006(the ‘‘Act’’) but without prejudice to theexercise of any such authority prior to thedate of this resolution, the Directors be

and are hereby generally andunconditionally authorised in accordancewith section 551 of the Act to exercise allthe powers of the Fund to allot shares inthe Fund and to grant rights to subscribefor shares up to an aggregate nominalamount of £300,000 representingapproximately 100% of the nominal valueof the initial share capital of the Fund. Thisauthority is to expire 15 months from thedate on which this resolution is passed or,if earlier, at the conclusion of the annualgeneral meeting of the Fund to be held in2016 unless previously revoked, varied orextended by the Fund in general meeting,save that the Fund may, at any time priorto the expiry of such authority, make anoffer or enter into an agreement whichwould or might require shares to beallotted after the expiry of such authorityand the Directors may allot shares inpursuance of such an offer or agreementas if such authority had not expired.

Ordinary Business – Special Resolutions

9. That, the Directors be given the generalpower to allot shares in the Fund for casheither pursuant to the authority conferredby Resolution 8 or by way of a sale oftreasury shares, as if section 561(1) of theAct did not apply to such allotmentprovided that the power shall be limited tothe allotment of shares up to an aggregatenominal amount of £300,000 representingapproximately 100% of the nominal valueof the issued share capital of the Fund.This power:

(a) expires at the conclusion of the nextAnnual General Meeting of the Fundafter the passing of this resolution oron the expiry of 15 months from the


passing of this resolution, whichever isthe earlier, save that the Fund may,before such expiry, make an offer oragreement which would or mightrequire shares to be allotted after suchexpiry and the Directors may allotshares in pursuance of any such offeror agreement as if the power conferredhereby had not expired; and

(b) revokes and replaces all unexercisedpowers previously granted to theDirectors to allot shares as if section561 of the Act did not apply butwithout prejudice to any allotment ofshares already made or agreed to bemade pursuant to such authorities.

10.That in substitution for any existingauthority but without prejudice to theexercise of any such authority prior to thedate hereof, the Fund be generally andunconditionally authorised in accordancewith section 701 of the Act to makemarket purchases (within the meaning ofsection 693 of the Act) of shares of theFund provided that:

(a) the maximum aggregate number ofshares hereby authorised to bepurchased is less than 15% of theissued share capital as at the date thisresolution is passed;

(b) the minimum price which may be paidfor a share shall be 5 pence;

(c) the maximum price (excludingexpenses) which may be paid for ashare shall be not more than the higherof:

(i) 5% above the average closing priceon the London Stock Exchange forthe shares over the five businessdays immediately preceding thedate of purchase;

(ii) the higher of the last independenttrade and the highest currentindependent bid on the LondonStock Exchange; and

(d) unless renewed, varied or revoked, theauthority hereby conferred shall expireat the conclusion of the next AnnualGeneral Meeting of the Fund, or 15months from the passing of thisResolution, whichever is the earlier,save that the Fund may, prior to suchexpiry, enter into a contract topurchase shares under such authoritywhich will or may be executed whollyor partly after the expiry of suchauthority and may make a purchase ofshares pursuant to any such contract.

Special Business – Ordinary Resolution

11.To approve the continuation of the Fundfor a further five years.

By order of the BoardSVM Asset Management LimitedCompany Secretary

3 July 2015


Notes:

1. Under Section 324 of the Companies Act 2006, amember of the Fund is entitled to appoint one or moreproxies to exercise all or any of the member’s rights toattend, speak and vote at a meeting of the Fund,provided that each proxy is appointed to exercise therights attached to a different share or shares held by themember.

2. A form of proxy for use by shareholders is enclosedwith this document. Proxies must be lodged with theFund’s registrars, Computershare Investor Services plcat the address noted on the form, not less than 48 hours(excluding non-working days) before the time appointedfor the meeting, together with any Power of Attorney orother authority under which the proxy is signed.Completion of the form of proxy will not preclude youfrom attending the meeting and voting in person.Attendance by non-shareholders will be at the discretionof the Fund.

3. Pursuant to Regulation 41 of the UncertificatedSecurities Regulations 2001, only those shareholdersentered on the Register of Members at close ofbusiness on 9 September 2015 are entitled to attendand/or vote at the meeting. If the meeting is adjourned,to be entitled to attend and vote at the adjournedmeeting, members must be entered on the Register ofMembers 48 hours (excluding non-working days) beforethe time fixed for the adjourned meeting.

4. The letters of appointment of the directors are availablefor inspection at the Fund’s registered office duringnormal business hours and at the AGM (for 15 minutesprior to the meeting and during the meeting).

5. To facilitate voting by corporate representatives at themeeting, arrangements will be put in place so that (i) if acorporate shareholder has appointed the Chairman ofthe meeting as its corporate representative withinstructions to vote on a poll in accordance with thedirections of all of the other corporate representativesfor that shareholder at the meeting, then on a poll thosecorporate representatives will give voting directions tothe Chairman and the Chairman will vote (or withhold avote) as corporate representative in accordance withthose directions; and (ii) if more than one corporaterepresentative for the same corporate shareholderattends the meeting but the corporate shareholder hasnot appointed the Chairman of the meeting as itscorporate representative, a designated corporaterepresentative will be nominated, from those corporaterepresentatives who attend, who will vote on a poll andthe other corporate representatives will give votingdirections to that designated corporate representative.

6. CREST members who wish to appoint a proxy orproxies through the CREST electronic proxyappointment service may do so by using the proceduresdescribed in the CREST Manual. CREST personalmembers or other CREST sponsored members, andthose CREST members who have appointed a votingservice provider(s), should refer to their CREST sponsoror voting service provider(s), who will be able to take theappropriate action on their behalf.

In order for a proxy appointment or instruction made bymeans of CREST to be valid, the appropriate CRESTmessage (a “CREST proxy instruction”) must beproperly authenticated in accordance with Euroclear UK& Ireland Limited’s specifications, and must contain theinformation required for such instruction, as described inthe CREST Manual. The message, regardless ofwhether it constitutes the appointment of a proxy or isan amendment to the instruction given to a previouslyappointed proxy, must, in order to be valid, betransmitted so as to be received by the Fund’s registrar(ID number 3RA50) no later than 48 hours (excludingnon-working days) before the time of the meeting or anyadjournment.

For this purpose, the time of receipt will be taken to bethe time (as determined by the timestamp applied to themessage by the CREST Application Host) from whichthe Fund’s registrar is able to retrieve the message byenquiry to CREST in the manner prescribed by CREST.

After this time any change of instructions to proxiesappointed through CREST should be communicated tothe appointee through other means.

CREST members and, where applicable, their CRESTsponsors, or voting service providers should note thatEuroclear UK & Ireland Limited does not make availablespecial procedures in CREST for any particularmessage. Normal system timings and limitations will,therefore, apply in relation to the input of CREST ProxyInstructions. It is the responsibility of the CRESTmember concerned to take (or, if the CREST member isa CREST personal member, or sponsored member, orhas appointed a voting service provider(s), to procurethat his CREST sponsor or voting service provider(s)take(s) such action as shall be necessary to ensure thata message is transmitted by means of the CRESTsystem by any particular time. In this connection,CREST members, and where applicable, their CRESTsponsors or voting service provider(s) are referred, inparticular, to those sections of the CREST Manualconcerning practical limitations of the CREST systemand timings.

The Fund may treat as invalid a CREST ProxyInstruction in the circumstances set out in Regulation35(5)(a) of the Uncertificated Securities Regulations2001.

7. The members of the Fund may require the Fund topublish, on its website, a statement setting out anymatter relating to the audit of its financial statements,including the auditor’s report and the conduct of theaudit. It will be required to do so once it has receivedsuch requests from either members representing atleast 5% of the total voting rights of the Fund or at least100 members who have a relevant right to vote andhold shares in the Fund on which there has been paidup an average sum per member of at least £100. Suchrequests should be made in writing and must state yourfull name and address and be sent to the Fund at 7Castle Street, Edinburgh EH2 3AH.

8. As at 3 July 2015, the latest practicable date prior to thepublication of this document, the Fund’s issued sharecapital was 6,005,000 Ordinary Shares of 5p each.Each ordinary share carries the right to one vote at ageneral meeting of the Fund and, therefore the totalnumber of voting rights in the Fund as at 3 July 2015 is6,005,000.

9. Any person holding 3% of the total voting rights in theFund who appoints a person other than the Chairmanas his proxy will need to ensure that both he and suchthird party complies with their respective disclosureobligations under the Disclosure and TransparencyRules.

10. A copy of this notice, which the Fund is required bySection 311A of the Act to publish on a website inadvance of the meeting is available on the Manager’swebsite on www.svmonline.co.uk

11. Under section 319A of the Companies Act 2006, theFund must answer any question relating to thebusiness being dealt with at the meeting put by amember attending the meeting unless:

(a) answering the question would interfere unduly withthe preparation for the meeting or involve thedisclosure of confidential information;

(b) the answer has already been given on a website inthe form of an answer to a question; or

(c) it is undesirable in the interests of the Fund or thegood order of the meeting that the question beanswered.


The SVM website remains the best source ofinformation about the Fund. Over recentyears, there have been a number of initiativeswhich have been added to improveshareholder access and the quality ofreporting and marketing. These initiativesattract new investors and keep existingshareholders informed.

The Fund’s webpage is easyto access within the Manager’swebsite www.svmonline.co.ukand provides detailedinformation on the Fund.

The Fund’s latest share price is updated dailyand gives access to historical share price datasince launch.

An interactive charting tool allows investors toview the performance record over fixed timeperiods or dates of their choice.

There is no longer any requirement to postthe Fund’s half yearly report to shareholders.It is made available on the website togetherwith all other information we publish for theFund.

Comprehensive quarterly factsheets areproduced with the Manager’s commentary,portfolio analysis, featured stock, fundperformance, sector breakdowns and currenthedging and gearing status.

The Fund distributes quarterly updates byemail to a number of intermediaries. It is alsopossible for shareholders and other interestedparties to subscribe to this. To do so, pleaseemail your request to [email protected]

At SVM, we aim to achieve superiorinvestment performance through carefulstock picking and analysis. Whether we areresearching for our long or long/short fundswe undertake proprietary, in-depth analysis inorder to identify the true value of a companyor fund. This strategy has ensured that wehave achieved superior investment returns fora broad range of clients – both institutionaland private investors. As pure equityspecialists, we focus our expertise oninvesting in UK and European companies aswell as global investment funds.

Investing in SVM UK Emerging Fund plc

Shares can be easily traded on the LondonStock Exchange.

Investors wishing to purchase shares in theFund or sell all or part of their existing holdingmay do so through a stockbroker or theirother financial adviser. Most banks also offerthis service. It is also possible to trade theCompany’s shares through many of the onlinedealing service providers.

For more information the Manager can becontacted on 0131 226 7660 or alternativelyinformation is available on the website:www.svmonline.co.uk. The Manager is notpermitted to give you financial or tax advice. Ifyou are in any doubt please consult yourfinancial adviser.

ShareholderInformation


Investment Manager, Secretary andRegistered OfficeSVM Asset Management Limited6th Floor7 Castle StreetEdinburgh EH2 3AHTelephone: +44 (0) 131 226 6699Facsimile: +44 (0) 131 226 7799Email: [email protected]: www.svmonline.co.uk

RegistrarsComputershare Investor Services plcLeven House, 10 Lochside PlaceEdinburgh ParkEdinburgh EH12 9RGTelephone: +44 (0) 870 702 0003

AuditorScott-MoncrieffExchange Place 3Semple StreetEdinburgh EH3 8BL

CustodiansState Street Bank & Trust Company

Registered NumberSC211841

Company Websitewww.svmonline.co.uk

Corporate information

SVM Asset Management Limited7 Castle StreetEdinburghEH2 3AH 0800 0199 440

www.svmonline.co.uk

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