Strategic Equity Capital plc 
Half Yearly Report & Financial Statements 
for the six months to 31 December 2012 
The investment objective of the Company is to achieve absolute returns (i.e.
growth in the value of investments) rather than relative returns (i.e.
attempting to outperform selected indices) over a medium-term period,
principally through capital growth. 
The Company's investment policy can be found below. 
The Investment Manager, SVG Investment Managers Limited ("SVGIM"), employs a
strategy to invest in publicly quoted companies which will create value through
strategic, operational and management change. SVGIM follows a practice of
constructive corporate engagement and aims to work with management teams in
order to enhance shareholder value. 
A more detailed explanation can be found in the Investment Manager's report
Financial calendar 
Company's year-end         30 June                 
Annual results announced   September               
Annual General Meeting     November                
Company's half-year        31 December             
Half yearly results        February               
Share price 
The Company's Ordinary shares are listed on the London Stock Exchange. The
midmarket price is quoted daily in the Financial Times under `Investment
Share dealing 
Shares can be traded through your usual stockbroker. 
Share register enquires 
The register for the Ordinary shares is maintained by Computershare Investor
Services plc ("Registrar").In the event of queries regarding your holding,
please contact the Registrar on 0870 707 1285. Changes of name and/or address
must be notified in writing to the Registrar whose address is shown below. 
The Company's net asset value is announced weekly to the London Stock Exchange. 
Further information on the Company can be accessed via the Company's website 
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's on the Company's website (or any
other website) is incorporated into, or forms part of, this announcement. 

                                 At            At              At          %
                        31 December       30 June     31 December     Change

                           2012          2012            2011             
Total return*                                                           11.29%  
Capital return                                                                  
Net asset value per          111.97p       101.96p          93.55p       9.82% 
Ordinary share                                                                  
Ordinary share price          91.75p        82.00p          74.25p      11.89% 
Discount of Ordinary          18.06%        19.58%          20.63%           
share price to net                                                             
asset value                                                                     
Average discount of           18.51%        17.65%          17.57%           
Ordinary share price                                                           
to net asset value                                                             
for the period ended                                                            
Total assets (£'000)         72,599        69,074          65,770       5.10%  
Equity shareholders'         72,360        68,639          65,601       5.42% 
funds (£'000)                                                                   
Ongoing charges**               1.16%        1.15%           1.01%            
Revenue return per              0.68p        1.61p           0.76p            
Ordinary share                                                                  
Dividend yield                  1.62%        0.63%           0.63%            
Proposed final                   n/a         1.50p             n/a        n/a    
dividend for year                                                               
Ordinary shares in        64,624,655   67,317,324       70,122,203      (4.00%)
issue with voting                                                              
Interim period's Highs/               High           Low
Net asset value per                 115.17p       100.57p
Ordinary share                                           
Ordinary share price                 94.00p        81.25p 
* Total return is the increase per share in net asset value plus dividends
** The ongoing charges figure has been calculated using the Association of
Investment Companies' ("AIC's") recommended methodology and relates to the
ongoing costs of running the Company. Non-recurring fees are therefore excluded
from the calculation. 
*** The second semi-annual tender offer took place in November 2012. 2,692,669
shares were boughtback for cancellation at a cost of £2,748,000. Further
information on the tender offer process can be found in the Chairman's report
The Company invests primarily in equity and equity-linked securities quoted on
markets operated by the London Stock Exchange where the Investment Manager
believes the securities are undervalued and could benefit from strategic,
operational and management initiatives. The Company also has the flexibility to
invest up to 20% of the Company's gross assets at the time of investment in
securities quoted on other recognised exchanges. 
The Company may invest up to 20% of its gross assets at the time of investment
in unquoted securities, provided that, for the purpose of calculating this
limit, any undrawn commitment to Vintage 1 which may still be called shall be
deemed to be an unquoted security. 
The maximum investment in any single investee company will be no more than 15%
of the Company's investments at the time of investment. 
The Company will not invest more than 10%, in aggregate, of the value of its
total assets at the time the investment is made in other listed closed-end
investment funds provided that this restriction does not apply to investments
in any such funds which themselves have published investment policies to invest
no more than 15% of their total assets in other listed closed-end investment
Other than as set out above, there are no specific restrictions on
concentration and diversification. The Board does expect the portfolio to be
relatively concentrated, with the majority of the value of investments
typically concentrated in the securities of 10 to 15 issuers across a range of
industries. There is also no specific restriction on the market capitalisation
of issues into which the Company will invest, although it is expected that the
majority of the investments by value will be invested in companies with a
market capitalisation of less than £300 million. 
The Company's Articles of Association permit the Board to take on borrowings of
up to 25% of the net asset value at the time the borrowings are incurred for
investment purposes. 
The Company made sound progress in the six months to the end of December 2012,
delivering solid growth of 9.8% in net assets per share, albeit less than the
comparable Smaller Companies Index. 
The Manager's consistent focus on high quality smaller companies with strong
competitive positions in growing niche markets has delivered significant
progress over the last four years. It has also benefitted from its bias towards
companies with a high proportion of overseas earnings and the ability to
generate high levels of free cash flow through operations and the sale of
noncore assets. Given the uncertainties in the world today the arguments for
maintaining this strategy remain compelling. 
As at 31 December 2012 the Company had net assets of £72.4 million (112.0p per
share). This represented an increase of 9.8% over the period. Including
dividends the Company delivered a total return to shareholders of 11.3% over
the 6 months. The Company's performance was weaker than that of comparable
markets; it underperformed the FTSE Smaller Companies ex Investment Trust index
by 8.9%. 
The result was driven by the Company's holdings not participating in a year-end
rally of a very small number of large, highly leveraged members of the small
cap index, typically with considerable exposure to UK consumer discretionary
The Company's net asset value ("NAV") per share has cumulatively outperformed
the comparable index over 3 years by 37.3%, and over 5 years by 14.4%. 
The discount to NAV at which the Company's shares trade widened marginally to
an average of 18.5% over the period, ending the period at 18.1%. 
Periodic Tender Offer 
In May 2012, shareholders passed a resolution introducing periodic tender
offers in May and November each year, with each tender offer being for up to 4%
of the issued share capital at a price equivalent to a 10% discount to the net
asset value (including current period revenue and deducting the estimated
tender offer costs) per share. 
Accordingly, in November 2012, the Company's second semi-annual tender offer
took place. As a result 2,692,669 shares, representing 4% of the Company's
issued share capital, were bought back for cancellation at a price of 101.55p
per share. 
The Company expects to post a circular to shareholders in April 2013, regarding
a further tender offer for up to 4% of the issued share capital at a discount
of 10% to net asset value to take place in May 2013. 
Investment Manager 
The various improvements made to the investment process since the financial
crisis has led to a clear improvement in the Company's performance and
consistency of returns. I am confident that the Manager's approach to
investment can create value for shareholders over the long term. 
Banking Arrangements 
The Company continues to operate without a banking facility. 
The Directors continue to expect that returns for shareholders will derive
primarily from the capital appreciation of the shares rather than from
dividends. In line with previous years the Board does not intend to propose an
interim dividend. 
Marketing Activities 
The Manager and the Company's broker continue to work together to broaden the
shareholder base and are stepping up marketing activities to the regional
private client broker community. We were pleased to welcome a significant new
discretionary wealth manager to the register during the period. 
The Board shares the Manager's belief that the prospects for the Company remain
good. The valuation of the portfolio remains very attractive by historical
standards and the underlying companies are performing well. Recent months have
seen an increase in investor interest in smaller companies investing after many
years of consistent outflows of funds. 
John Hodson 
18 February 2013 
Investment Strategy 
Our strategy is to invest in publicly quoted companies which will create value
through strategic, operational or management change. We follow a practice of
constructive corporate engagement and aim to work with management teams in
order to enhance shareholder value. We aim to build a consensus with other
stakeholders, and prefer to work alongside like-minded co-investors as leaders,
followers or supporters. We try to avoid confrontation with investee companies
as we believe that there is strong evidence that overtly hostile activism
generally generates poor returns for investors. 
We are long-term investors; we typically aim to hold companies for the duration
of three year investment plans that include an entry and exit strategy and a
clearly identified route to value creation. The duration of these plans can be
shortened by transactional activity or lengthened by adverse economic
conditions. Before investing we undertake an extensive due diligence process,
assessing market conditions, management and stakeholders. Our investments are
underpinned by valuations, which we derive using private equity-based
techniques. These include a focus on cash flows, the potential value of the
company to trade or financial buyers and potentially beneficial changes in
capital structure over the investment period. 
Our typical investee company has a market capitalisation of under £150 million
at the time of initial investment. We believe that smaller companies provide
the greatest opportunity for our investment style as they are relatively
under-researched, often have more limited resources, and frequently can be more
attractively valued. 
We believe that this approach, if properly executed, will generate favourable
risk adjusted returns for shareholders over the long term. 
Market Background 
Stock markets were strong over the financial period as investors' appetite for
risk returned. The ever present macro concerns in Europe were brushed aside.
Other than on a few isolated days, markets were ambivalent to the Fiscal Cliff
negotiations in the USA. Even slowing growth in China was largely ignored. 
The period began with a broad rally, despite some overall weakening earnings
growth data. Highly indebted stocks, which had rallied strongly in the first
weeks of 2012, were subject to profit taking and in some cases, further bad
news leading to downgrades. During this period, the Company's NAV performed
well - typically in line or ahead of the market. 
After a mini-sell off at the start of November, UK equities staged an
aggressive rally in the last six weeks of the year. This was similar to the
rally in the first weeks of 2012, but more extreme. Highly risky assets
benefitted the most as investors decided to go "risk on". 
Very large relief rallies were experienced by a very small number of highly
indebted smaller companies, with ratios of debt to EBITDA well in excess of the
market average and extremely poor returns on capital. As an example, Thomas
Cook, a highly indebted, structurally challenged travel company, but one of the
largest constituents of the Small Cap Index, rallied 169% over the quarter. 
Over the six months, FTSE Smaller Companies Index ex Investment trusts
outperformed the FTSE 100 index by 11.5%, rising by 20.2%. Smaller Companies
also outperformed the FTSE 250 Index, which rose by 15.9%. 
Following a strong start to the year, M&A among small and mid cap companies was
more muted over the period. There were however notable transactions, including
the disposal by Invensys of its Rail Systems division for a significant premium
rating to where the whole company traded. This reminds us that many public
companies continued to trade at multiples significantly lower than precedent M&
A transactions in their relevant sectors. 
Performance Review 
Performance over the period in absolute terms was pleasing, and continued to be
driven by stock specific factors. Generally, the portfolio continues to trade
well, with the majority of companies meeting or exceeding consensus earnings
The tactic of investing in highly cash generative, niche market leaders, with a
high proportion of overseas earnings and avoiding companies with exposure to UK
public or consumer spending, which has served us well for the last three years,
was less successful in the latter part of 2012. The portfolio did not
participate in the year end "risk on rally", with the NAV falling marginally. 
Although the quantum of underperformance in the period was significant, it is
worth noting that the Company outperformed by similar equivalent amounts in
quarters during 2010 and 2011. It serves as a reminder of the unconstrained
nature of our portfolio, the differentiated strategy, and that comparison to
any one specific index over the short term should be regarded as a comparison,
not a benchmark. We also regard the performance of the FTSE Small Cap ex
Investment trusts index as anomalous during 2012 - with a handful of very
large, highly indebted UK consumer companies typically driving the index: the
median small cap stock rose "only" 15.7% during 2012, compared with the 36.2%
index return. 
Top 5 contributors to performance 
Company                    Valuation at          Period  

                             period end     Attribution 
                                  £'000   (basis points)

Tyman*                            8,178             266  
Lavendon Group                    5,904             222  
4imprint Group                    6,698             195  
Wilmington Group                  2,195             148  
CVS Group                         3,991             137  
*Previously named Lupus Capital 
A number of holdings performed exceptionally well during the period. The most
significant contributors to performance were Tyman, Lavendon, 4imprint,
Wilmington and CVS which delivered market beating returns of 21.1%, 27.0%,
24.9%, 81.8% and 32.1% over the period, materially outperforming the 20.2% rise
in the Small Cap index. Tyman continued its strong run, with the shares
re-rating as trading conditions improved in its key end market - North American
residential construction. We continue to believe this market is in the
foothills of a multi year recovery, and that the operational gearing in its
business model has the potential to drive several years of exciting profit
growth. Lavendon has benefitted from a recovery in its highly profitable Middle
East markets. Self help is also improving returns in its UK and European
markets, where demand is less buoyant. There have been continued earnings
upgrades over the period, and the rating remains below mid cycle levels. 
4imprint's US division, which accounts for more than 90% of reported profits,
continued to generate organic revenue growth in the low teens. As a clear
market leader with less than 2% share of its addressable market, we believe
there are many years of high growth ahead. Its shares have re-rated over the
period, but the valuation does not look expensive given the growth profile and
the high continuing dividend yield of 4.2%. Wilmington staged a spectacular
recovery over the period. Its strong cash generation has paid down debt, as
well as maintaining a generous dividend. Earnings growth had disappointed over
the past two years with a long anticipated recovery not crystallising. Since
June, there has been evidence that earnings momentum is improving. The shares
have re-rated on this, and some excitement around the appointment of Tony Foye
as finance director. Foye was formerly the longstanding and highly regarded
finance director at Informa. He purchased c.£500k worth of shares, which was
taken extremely positively by the market. 
CVS Group's recent results have been well received by the market, showing both
a return to underlying sales growth across its practices, further growth of the
nascent online business, and inorganic growth funded by the company's strong
cash flows. The company also announced initiatives to materially enhance its
corporate governance practices, which were well received by shareholders. 
Another strong performer over the period was Brewin Dolphin. We had been in the
process of building a stake when the shares ran hard leaving us with a modest
position built at attractive prices. 
Bottom 5 contributors to performance 
Company                 Valuation at         Period  

                          period end    Attribution 
                               £'000  (basis points)

E2V Technologies               6,999            (99) 
Journey Group                    878            (56) 
Optos                           Sold            (16) 
Kewill                          Sold              0  
Psion                           Sold              0  
E2V disappointed over the period and acted as a drag on the Company's NAV per
share. Following a strong year to March 2012, trading in the six months that
followed was more challenging. This has been driven by some weakness in end
markets, as well as delays on some deliveries of products to its space
customers. Despite the lower sales, profit margins have been defended
effectively. This has been made possible by a recalibration of the company's
cost base since 2009 to switch fixed costs to variable costs. We believe the
market reaction has been too severe, to what we perceive to be short term
issues, and re-built some of the position at highly attractive price levels.
Significant medium term and long term growth opportunities exist, which is not
reflected in the company's rating. In addition, the rating is at a considerable
discount to precedent M&A, including the multiple achieved by the sale of the
company's own non-core assets in May 2012. With the balance sheet now largely
ungeared, the company has several options to enhance value. 
Journey Group shares fell by 31% over the period, despite limited and mostly
positive contract newsflow. The company now has significant net cash balances,
good growth prospects and a meagre rating. However, with a market cap of 
and a low free float, it is effectively a penny share and off the radar for
many investors. 
Optos was exited during the period, following the disappointments in Q2 2012,
our concerns around operating cashflow performance and an inability to complete
our due diligence. Psion and Kewill were also exited over the period, as they
were acquired by Motorola and Francisco Partners respectively. 
Dealing activity 
The level of portfolio activity picked up compared with previous periods, with
disposals of £6.6m (excluding distributions from unlisted investments) in the
period representing around 9.1% of the weighted average NAV. In addition £3.3m
of net distributions were received from unlisted investments. £8.1m of
purchases were made with four new investments made, including Brewin Dolphin
and XP Power. 
Proceeds came from top slicing of new investment and three full exits. Strong
performances from 4imprint, Lavendon, Tyman and RPC necessitated some top
slicing. In addition, the Company exited its positions in Kewill, Optos and
Statpro. Kewill was subject to a successful bid from Francisco Partners and the
Company exited with an acceptable return. The remaining Statpro shares were
sold. The large ongoing investment in its new Revolution product suite is
dampening earnings. Until this suite gains material traction, we do not believe
that the market will value the group properly and capital is better invested
elsewhere for now. Nevertheless, Statpro has been a highly successful
investment for the Company, returning c.2.0x cash and 24% IRR over the
ownership period. The Company had taken a small stake in Optos earlier in 2012,
being attracted to its leading technology and growth potential. However, we
were unable to complete due diligence to our satisfaction, and became concerned
about an unanticipated divergence between reported profits and cash generation. 
We deployed the proceeds into enlarging existing holdings and establishing
small to medium weights in four new investments. Existing positions in E2V and
Gooch & Housego were increased on the back of share price weakness and solid
results respectively. Following the failure of the take private at Goals
Soccer, led by Ontario Teachers Pension Plan, we increased the stake
significantly over the quarter, and now have a 5% holding in the company. The
background to these investments has been detailed in prior reporting periods. 
2.6m was deployed in new investments, mainly XP Power (£1.3m), and Brewin
Dolphin (£0.7m). All were made through market purchases, largely due to a
paucity of attractive secondary equity issuance during the period. 
XP Power is a leading designer, engineer and manufacturer of power supplies and
converters. It focuses on the low volume/ high value market segment, where the
end products tend to be business machines with multi year product life cycles,
in comparison to supplying high volume/low value consumer electronics
customers, typically operating on 9-12 month product life cycles. Over the past
decade, it has transformed from distributor to integrated designer and
manufacturer, and sells to a very broad global customer base. The company
suffered from a weak start to 2012, which led to earnings downgrades and a
significant de-rating. The company has a very high return on capital employed,
is strongly cash generative and has good growth prospects across the cycle.
Given the high operational gearing in the business, recovering end markets
through 2013 should drive substantial earnings growth. A strong balance sheet
and a shareholder friendly dividend policy also attracted. At our point of
entry, the company was priced for negligible growth. 
Brewin Dolphin is one of the largest UK private client brokers. Created from a
series of mergers over many years, the company has been operating with
suboptimal and expensive IT systems across its national branch network. The
company is in the process of harmonising and updating to a single IT system,
which should deliver returns which are much improved and closer to those of its
direct peers on a steady state basis. Given its business model, there is also
the prospect for additional earnings growth as equity markets recover. We
believe it has prepared well for the implementation of the Retail Distribution
Review, and does not deserve to trade at such a discount to its direct peers. 
As ever, we remain highly selective when making new investments. The shrinking
nature of the FTSE Smaller Companies Index is leading us to increasingly look
to the higher quality stocks quoted on AIM. Since 2000, the number of companies
making up the FTSE Small Cap ex Investment Trusts index has fallen from close
to 438 to 135 as at the end of 2012 - a fall of some 69%. 
Companies quoted on AIM now account for a similar proportion of the direct
portfolio as companies in the FTSE Small Cap index. AIM companies have a
reputation for poor returns and governance. In some cases, this is justified.
However, there are a good number of high quality companies, with good
governance on AIM which we find fit our investment criteria. Given our highly
selective investment criteria, we have the benefit of being able to pick and
choose what we perceive to be the best opportunities to generate an attractive
risk adjusted return for our clients. 
As in recent reporting periods, secondary fundraisings were very rare. 
Portfolio Review 
The portfolio remained highly focused, with a total of 18 direct holdings and
with the top 10 holdings accounting for 8 1.7% of the invested portfolio at the
end of the financial period. The portfolio remains predominantly invested in
quoted equities, however the percentage of the portfolio invested in unlisted
securities (including Strategic Recovery Fund ("SRFII")) changed from 19.3 to
12.3% at the end of the period due to distributions from these funds. 4.9% of
the portfolio was invested in cash at the period end. 
Portfolio as at 31 December 2012 - Largest Investments 
                                                               % of         
 % of 
                           Date of                     portfolio at  
portfolio at       % of 
                 Sector      first    Cost   Valuation  31 December       
30 June        net 
 Company Classification investment   £'000       £'000         2012        
2012      asset 
Strategic       Unquoted   Jul 2009     955*      8,431         12.3         
 17.2       11.7 

    Recovery     investment                                                     
     Fund II                                                                    

 Tyman**  Manufacturing   Apr 2007   4,716       8,178         11.9         
 12.2       11.3 


     E2V     Technology   Oct 2009   3,581       6,999         10.2         
 10.1        9.7


4imprint        Support   Feb 2006   4,759       6,698          9.7         
  8.4        9.3 

       Group       services                                                     

Lavendon        Support   Nov 2009   2,985       5,904          8.6         
  8.5        8.2 

       Group       services                                                     

  KCOM Group       Telecoms   May 2007   2,653       5,339          7.8         
  7.8        7.4 


Allocate     Technology   Dec 2009   3,157       4,127          6.0         
  5.7        5.7 


CVS Group         Retail   Oct 2010   2,513       3,991          5.8         
  4.3        5.5 
RPC Group  Manufacturing   Feb 2007   1,668       3,318          4.8         
  6.3        4.6 
Goals Soccer        Leisure   Mar 2012   2,992       3,140          4.6         
  0.1        4.3 


                                    29,979      56,125         81.7         
 80.6       77.7 
* the cost reflects £3.3m of distributions during the period 
**previously named Lupus Capital 
Portfolio as at 31 December 2012 - Sector split 
Sector                            Percentage 
Technology                             20.9% 
Support services                       20.1% 
Manufacturing                          16.9% 
Unquoted Investments                   14.3% 
Telecoms                                7.4% 
Media                                   5.7% 
Retail                                  5.5% 
Leisure                                 4.3% 
Net cash                                4.9% 
Portfolio as at 31 December 2012 - Size split (by market capitalisation) 
Size                               Percentage 
£100m - £300m                           37.7% 
<£100m                                  29.8% 
Unquoted investments                    14.3% 
£300m - £500m                            7.4% 
>£500m                                   5.9% 
Net cash                                 4.9% 
Operationally the majority of the portfolio has continued to perform well,
although in many cases this has yet to be reflected in their ratings. We
believe that Allocate and E2V have suffered from temporary weak trading, but
remain fundamentally attractive business models. RPC has seen some patchy
trading, with significant year on year variances in monthly performance,
alongside some weak demand in a few end markets. As a result, it has decided to
instigate a further round of restructuring, called "Fitter for the Future". If
underlying demand is flat, this should underpin high single digit earnings
growth over the next three years. In addition, it has decided to reduce capex
back from historically high levels, which will improve the rate of debt pay
Mecom remains the one investment exposed to significant structural headwinds.
The outlook for print advertising revenue in its end markets remains poor.
However, the board has committed to break up the business and is well advanced
with its strategic review. 
Portfolio characteristics 
Consensus median portfolio        Strategic Equity                    
characteristics                            Capital   Smaller Companies 
Price/Earnings ratio (FY1)                    11.0                 9.1  
Dividend yield                                 3.5%                3.5% 
Price/ Book ratio                              2.2                 0.7  
Price/ Sales ratio                             1.0                 0.3  
Price/Cashflow ratio                           8.5%                n/a    
SVG cash flow yield                           14.6%                n/a    
Forecast earnings growth (FY1)                10.0%                9.8% 
Forecast net debt to EBITDA                    0.5                 1.8  
Source: Factset Portfolio Analysis System, Investec, Peel Hunt. 
The financial and valuation characteristics of the Company's portfolio compared
with the average FTSE Small er Company shows marginally higher earnings growth,
at a marginally higher p/e ratio, with a higher dividend yield and a much
stronger balance sheet. There are two key implications of this data set. 
Firstly, on a balance sheet adjusted basis (i.e. with similar levels of net
debt, achieved through a return of capital and share consolidation), the
Company's portfolio would trade at a significantly lower p/e multiple with
improved earnings growth. Secondly, in our opinion, properly utilised, the
strong balance sheets of the portfolio companies allow their boards many more
options to enhance shareholder value than the average small cap company. These
options include increasing the dividend pay out ratio, making earnings
enhancing acquisitions and returning capital to shareholders. In comparison,
the "risky" highly geared small cap recovery stocks tend to be reliant on
benign or improving end markets for earnings growth, rather than the actions of
their boards. 
Unlisted investments 
Over the period the Company received a total of £3.3m from SRFII and £35,000
from Vintage I. The SRFII investment period ended in June 2011 and the fund is
now a distributing vehicle. The outstanding commitments relating to Vintage is
£1.3m and its manager has communicated that it does not expect to make any
further net draw downs. 
The risks dominating the headlines over the first part of 2012 appear to have
been shrugged off, and global macro risks remain. The European banking system
remains broken. UK corporate lending continues to be restricted by the need to
shrink balance sheet exposures. Western governments remain grossly indebted and
have yet to grasp the nettle and drive through the necessary structural reforms
required to reduce expenditure and waste. 
Newsflow from North America continues to surprise on the upside. The housing
market is clearly recovering. There are reportedly shortages of construction
workers. US consumers have repaired their balance sheets. Corporates have
strong balance sheets. The fiscal cliff has been averted. Successful
negotiation of the debt ceiling is likely; the world's largest economy is
unlikely to self engineer a debt default. As in many previous recessions, we
anticipate the US to lead the global economy back to growth. 
UK growth remains sclerotic. However, there are mixed signals. Private sector
employment hit an all-time high at the end of October, more than compensating
for jobs being shed in the public sector. However, there is continued wage
constraint, with real wage increases running at in excess of -1%. European
growth remains challenged, but we believe that demand is bumping along the
Nevertheless, with governments, the UK included, unwilling to dispense the
bitter medicine of cost cutting, the reduction in the real debt burden is most
likely to be achieved by further quantitative easing and encouraging their own
currencies to depreciate. 
As well as public sector indebtedness, four key macro factors shape our
investment thinking over the medium to long term: 1) risk of inflation 2)
relative weakening of sterling, especially against the US Dollar 3) rising
interest rates 4) the low likelihood of significant real wage inflation across
the economy. 
In spite of these concerns, we continue to believe that the medium to long term
outlook for selected UK equities remains positive. Unlike governments, the vast
majority of quoted companies have very strong balance sheets. Corporates are
also spending less than they earn. 
The four key drivers of capital returns remain present for equities - earnings
growth, re-rating, corporate activity and de-gearing. We anticipate that
re-rating and corporate activity will drive an increasing proportion of capital
returns. Whilst markets have re-rated, valuations remain below long term
averages. After a tentative start during 2012, we anticipate increased M&A
activity in small and mid caps during 2013. Trading multiples still lag
precedent M&A multiples by some margin. 
Yield shrinkage and increasing capital risk on fixed income investments are
forcing asset owners and institutions to consider reversing the trend of two
decades of selling equities to buy bonds. There is increasing recognition that
bond holders may suffer capital losses and are not risk free. Fund statistics
are beginning to show net inflows to equity funds and outflows from fixed
income products. If this trickle gathers momentum, there could be a sharp and
substantial re-rating of equities. 
UK Smaller Companies was a top performing asset class during 2012, and is a top
five performing asset class over the past decade, according to the Investment
Management Association. This is despite continued redemptions and outflows from
both open and closed ended smaller companies funds since 2002. UK Smaller
Company equities remains an under owned asset class by institutions and pension
funds. Given the limited liquidity of the asset class, any significant inflows
is likely to drive a material re-rating. 
We continue to believe that UK Smaller Companies should disproportionately
benefit from a recovery in M&A. Their smaller size makes financing transactions
more straightforward, and there tend to be more suitors. 
The positioning of the portfolio remains unchanged, with a focus towards cash
generative, niche market leaders. These companies should be able to pass on
price increases in the event of inflation returning, protecting real returns to
shareholders. High levels of overseas earnings risks exposure to any one
geographic area, and provides protection against a weakening of sterling.
Modest financial gearing, or the capability to gear up is also an attraction,
provided there is negligible refinancing risk and protections against rising
interest rates. The lower financial gearing of the portfolio companies offers
them options to enhance shareholder value, regardless of the conditions of the
financial markets. They have significant financial capacity to fund
acquisitions, without requiring additional equity, which would be earnings
enhancing. Alternatively, they could return more capital to shareholders
through increasing their dividend payout ratios, instigating special dividends,
or where their shares are lowly rated, buybacks or tender offers. 
We remain wary of very highly geared recovery investments, particularly those
which are struggling to service their interest bills whilst simultaneously
paying down debt and are reliant on some external market improvement. These
companies do not have the balance sheet strength to return capital or increase
dividends, or make acquisitions. The recent re-rating many of these shares have
enjoyed, is driven by an anticipation of flawless recovery. 
The portfolio should disproportionately benefit from a recovery in M&A given
these characteristics, the absence of blocking shareholders from the
shareholder registers and a small number of holdings with defined benefit
pension deficits. The SVG free cash flow yield of the portfolio has increased
and the aggregate valuation looks highly attractive again on most metrics. 
To conclude; in our opinion there are far more reasons to expect investment in
public equities to deliver above average returns over the next decade than to
be fearful. We anticipate further progress in growing the Company's NAV. 
Top 10 Investee Company Review 
4imprint Group is the fourth largest distributor of promotional products in the
world with an international network of companies in the UK, USA, Hong Kong and
Europe. We have been involved with the company since a change of management in
2003. The company has benefitted recently from material upgrades to forecast
earnings. Following the disposal of Brand Addition, virtually all of the
profits of the group are generated by the fast growing US business. The company
has a significant net cash balance. Funds managed by SVGIM currently hold
approximately 11% of the company's equity. 
Allocate Software is the leading workforce optimisation software applications
provider for global organisations with large, multiskilled workforces. It is
the clear European market leader in the healthcare vertical market, where the
compelling return on investment for clients is driving significant growth. It
is also the clear lead provider of optimisation software for the global
offshore and defence markets. A strong management team is focused on delivering
continued profitable growth, maximising the commercial potential of the product
suite. SVG became a major shareholder as part of a placing to fund the
acquisition of its Nordic equivalent, Timecare AB, in December 2009. The
company has subsequently made four further acquisitions of complementary
businesses - Dynamic Change, Real Time Health and Zircadian in the UK and
RosterOn in Australia. The quality and visibility of earnings is set to improve
significantly as early contracts renew. Funds managed by SVGIM currently hold
approximately 8% of the company's equity. 
CVS Group is the UK's leading operator of veterinary practices, with a market
share of c.12%, several times the size of its nearest competitor. CVS has
followed a strategy of consolidating the market through the acquisition of
single and small chains of practices, largely funded by debt. Given the
economics of scale in vetinary drug and products purchasing, the roll up
economics are compelling. SVG became a shareholder following a period of
disappointing trading. The shares de-rated significantly as disappointed growth
investors exited and other investors concerned about the level of borrowings
reduced their holdings. With limited ongoing capex requirement, we believed
that the company could degear rapidly and still continue its roll up strategy.
The entry valuation was undemanding on a cash flow basis and demand for its
services is less discretionary than for many other retailers. Funds managed by
SVGIM currently hold approximately 4% of the company's equity. 
E2V Technologies is a global market leader in the design and manufacture of
specialist electronic components and low volume, high value, high reliability
semiconductors, predominately for the medical, aerospace, defence and
industrial markets. An ill-timed acquisition in September 2008 funded by debt
left the balance sheet of the business over-stretched as the economic downturn
began. A new finance director, well known to SVGIM, was appointed in May 2009.
The management team acted, raising new equity to pay down debt as well as
restructure the UK and French cost base, a process which is now largely
complete. The Company made its initial investment during October 2009 via a
placing and a deeply discounted rights issue to refinance the balance sheet.
The restructuring has been executed flawlessly. The final phase was disposal of
non-core assets in 2012, which has virtually eliminated debt. The group remains
materially undervalued compared to precedent M&A multiples in its sector. Funds
managed by SVGIM currently hold approximately 9% of the company's equity. 
Goals Soccer is a developer and operator of 5-a-side soccer centres in the UK,
trading from 42 centres. In early 2012, the company announced that it would
significantly reduce the speed of rolling out new sites for 12-18 months. Given
that the roll out of sites requires significant capital, the impact of this
change was to increase the free cash generation of the business and drive a
large degearing of its balance sheet. The entry valuation was a significant
discount to precedent M&A - specifically the acquisition of its only major
competitor, Powerleague, by Patron Capital in 2009. Funds managed by SVGIM
currently hold approximately 5% of the company's equity. 
Gooch & Housego is a global market leader in the design and manufacture of
specialist optical components and subsystems. SVGIM previously invested in the
company during 2010 and knows the business and management team well. The
company's shares de-rated significantly at the end of 2011 and early 2012,
driven by concerns over slowing activity in their industrial division. SVGIM
took advantage of this weakness in the share price to rebuild a stake at a
significantly lower level than its exit price in late 2010. We believe that
trading patterns will re turn to normal this year. The new product development
pipeline, and ramping up of volumes on existing contracts has the potential to
deliver significant growth over the medium term. A strong balance sheet will
enable the company to augment this organic growth with acquisitions. Funds
managed by SVGIM currently hold approximately 3% of the company's equity. 
KCOM Group is a provider of communications solutions to businesses and the
public sector in the UK. It also has a very strong regional consumer-based
business based around Hull in East Yorkshire. Following discussions instigated
by shareholders the company announced major changes to its management team in
November 2008. Following further consultation with shareholders the company has
implemented an innovative remuneration package that closely aligns shareholders
and management. Since then, the company has undergone a strategic review and
announced an important network sharing deal with BT Group. The positive impact
of these changes and the company's growth potential has taken time to be
translated into headline sales growth and many potential shareholders are
sceptical that the growth will emerge. However, the proportion of recurring
revenues, and therefore quality of earnings continue to increase, the cash and
dividend returns remain strong. Given the strong cash generation over the past
four years, we believe that the company could support significantly higher
levels of financial gearing. Funds managed by SVGIM currently hold
approximately 4% of the company's equity. 
Lavendon Group is the market leader in the rental of powered aerial work
platforms in both Western Europe and the Gulf States. The group entered the
current downturn having over-spent on equipment, and with an overstretched
balance sheet. The nature of powered access equipment is such that capital
expenditures can be reduced materially for a significant amount of time without
detriment to the fleet. We believed that the company would generate significant
surplus cash flow over the two years following investment which would be used
to pay down debt and thus create value for equity shareholders. We invested in
the company via a fundraising in late 2009 which brought the company's debt
down to high but manageable levels, and have been actively engaged with the
board to help drive improved returns. Since 2009, the company has met its debt
reduction targets, announced an operational and strategy review and executive
board changes. A new group CEO was appointed in Q4 2011. Trading has been
stronger in 2012 than many anticipated, with a notable recovery in the highly
profitable Middle Eastern business unit. Funds managed by SVGIM currently hold
approximately 8% of the company's equity 
Tyman is a leading international supplier of building products to the door and
window industry, and was the world's leading manufacturer of marine breakaway
couplings. The company has significant operations in nine separate countries
across Europe, the Americas, Asia and Australasia. The building products
division enjoys clear market leadership in a number of niches, with a highly
diversified customer base, serving both the new build and RMI (repair and
maintenance) markets. The building products division has been adversely
impacted by the significant fall in residential construction activity
experienced since 2007, which, combined with a geared balance sheet, led to a
material fall in the share price through 2008. We began building our stake in
the company in late 2009 following the appointment of a new chairman, who has
subsequently reconstituted the executive management and non-executive board.
Since then, strong cash flows and a disposal of the non-core marine couplings
business have reduced the debt burden substantially. We believe that there is
substantial upside from a medium term recovery in the end markets of the
building products division in North America. In addition, it has management
capability and balance sheet capacity to act as a consolidator which should
enhance returns further. Funds managed by SVGIM currently hold approximately 6%
of the company's equity. 
RPC Group is Europe's leading manufacturer of rigid plastic packaging.
Following lobbying from SVGIM and another shareholder acting in concert the
group has initiated a strategic and operational review and made substantial
changes to its board. The management team has performed well against RPC's new
objectives, leading to a significant reduction in group debt and ongoing focus
on improving return on invested capital. As the restructuring ended, RPC
acquired its smaller Scandinavian competitor, Superfos, funded by a mixture of
debt and new equity. It is clear that this acquisition has created value
through substantial cost synergies, although it is too early to judge whether
sales synergies will be delivered. Although the Company has been an investor
for some five years, we believe that good upside still exists as the market
continues to digest the improved focus on shareholder returns. Funds managed by
SVGIM currently hold approximately 2% of the company's equity. 
SVG Investment Managers Limited 
18 February 2013 
All statements of opinion and/or belief contained in this Investment Manager's
report and all views expressed and all projections, forecasts or statements
relating to expectations regarding future events or the possible future
performance of the Company represent SVG Investment Managers Limited's own
assessment and interpretation of information available to it at the date of
this report. As a result of various risks and uncertainties, actual events or
results may differ materially from such statements, views, projections or
forecasts. No representation is made or assurance given that such statements,
views, projections or forecasts are correct or that the objectives of the
Company will be achieved. 
The important events that have occurred during the period under review are set
out in the Chairman's report and Investment Manager's report, which also
include the key factors influencing the financial statements. 
The Directors do not consider that the principal risks and uncertainties have
changed since the publication of the annual report for the year ended 30 June
2012. The principal risks are set out in the annual report which is available
In summary these risks are: 
• General risk; 
• Market risk; 
• Regulatory risks; 
• Financial risks; and 
• Financial instruments. 
The Directors believe, bearing in mind the nature of the Company's business and
assets, that the Company has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt
the going concern basis in preparing the accounts. 
The Directors confirm that to the best of their knowledge: 
• the condensed set of financial statements has been prepared in accordance
with the Statement on Half Yearly Financial Reports issued by the International
Accounting Standards Board and gives a true and fair view of the assets,
liabilities, financial position and profit/(loss) of the Company. 
• the interim management report includes a fair review of the information
required by: 
(a) DTR 4.2.7 of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and 
(b) DTR 4.2.8 of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the Company during that period; and any changes in the related
party transactions described in the last annual report that could do so. 
This Half Yearly Report was approved by the Board of Directors on 18 February
2013 and the above responsibility statement was signed on its behalf by John
Hodson, Chairman. 
for the 6 month period ended 31 December 2012 
                 6 month period ended         Year ended         6 month 
period ended 
                   31 December 2012          30 June 2012          31 
December 2011 
                      unaudited                audited                
              Revenue   Capital           Revenue Capital         Revenue 
               return    return     Total  return  return   Total  return  
return   Total 
        Note    £'000     £'000     £'000   £'000   £'000   £'000   
£'000   £'000   £'000  


Gains/                        7,087     7,087       -  (1,818) (1,818)      -  
(7,091) (7,091)
(losses) on                                                                      
at fair                                                                          
profit or                                                                        


                          7,087     7,087       -  (1,818) (1,818)      -  
(7,091) (7,091) 


Dividends    2        858                                                 897    

    -     897 

Interest     2         15                                                   9    

    -       9 
                      873         -       873   1,921       -   1,921     906   
    -     906 



Investment   8       (249)        -      (249)   (442)      -    (442)   (212)   
-    (212)


Other        3       (171)      (61)     (232)   (305)   (129)   (434)   (138)   
-    (138)


Total                (420)      (61)     (481)   (747)   (129)   (876)   (350)   
-    (350)


Net return/           453     7,026     7,479   1,174  (1,947)   (773)    556  
(7,091) (6,535)
costs and                                                                        




Interest                -         -         -     (48)      -     (48)    (25)   
-     (25)


Total                   -         -         -     (48)      -     (48)    (25)   
-     (25)


Net return/           453     7,026     7,479   1,126  (1,947)   (821)    531  
(7,091) (6,560)


Taxation                -         -         -       -       -       -       -    

    -       - 

Net return/           453     7,026     7,479   1,126  (1,947)   (821)    531  
(7,091) (6,560)
(loss) after                                                                     
for the                                                                          


Returns per         pence     pence     pence   pence   pence   pence   pence   
pence   pence 


- Basic      5       0.68     10.56     11.24    1.61   (2.79)  (1.18)   0.76  
(10.12)  (9.36) 


The total column of this statement is the Statement of comprehensive income of
the Company. All items in the above statement derive from continuing
operations. These accounts are unaudited and have not been reviewed by the
Company's auditors. These are not the Company's statutory accounts. These
accounts have been prepared under International Financial Reporting Standards,
and in accordance with the accounting policies applied in the annual report
which is available at


for the 6 month period ended 31 December 2012
                                   Share                    Capital             
                               Share premium Special Capital redemption Revenue     

                         capital account reserve reserve    reserve reserve   
                Note   £'000   £'000   £'000   £'000      £'000   
£'000   £'000  

    For the 6 month                                                                 
    period ended 31                                                                 
    December 2012                                                                   

1 July 2012                6,731   5,246  51,734   2,170      1,250   1,508  
Net return and                 -       -       -   7,087          -     453   
total comprehensive                                                              

    income for the                                                                  

Dividend paid        4         -       -       -       -          -  (1,010) 
31 December 2012           6,462   5,246  48,986   9,196      1,519     951  

    For the year to 30                                                              
    June 2012                                                                       

1 July 2011                7,011   5,246  54,435   4,117        970     691  
Net (loss)/return              -       -       -  (1,818)         -   1,126    
and total                                                                        

    income for the year                                                             

Dividend paid        4         -       -       -       -          -    (309)   
Tender offer                   -       -       -    (129)         -       -    
Shares bought back          (280)      -  (2,701)      -        280       -  
for cancellation                                                                 
30 June 2012               6,731   5,246  51,734   2,170      1,250   1,508  

    For the 6 month                                                                 
    period ended 31                                                                 
    December 2011                                                                   

1 July 2011                7,011   5,246  54,435   4,117        970     691  
Comprehensive                  -       -       -  (7,091)         -     531  
income for the                                                                   


Dividend paid        4         -       -       -       -          -    (309)   
31 December 2011           7,011   5,246  54,435  (2,974)       970     913  

These accounts have been prepared under International Financial Reporting
Standards, and in accordance with the accounting policies. 
as at 31 December 2012 

                                              As at        As at        As at
                                        31 December      30 June  31 December
                                               2012         2012         2011
                                          unaudited      audited    Unaudited

                             Note         £'000        £'000        
Non-current assets                                                             
Investments held at fair value    6          68,804       66,648       63,989 
through profit or loss                                                         
Current assets                                                                 
Receivables                                      70          222          200  
Cash and cash equivalents                     3,725        2,204        1,581  

                                              3,795        2,426        1,781 

Total assets                                 72,599       69,074       65,770  
Current liabilities                                                            
Payables                                        239          435          169  
Net assets                                   72,360       68,639       65,601  
Capital and reserves:                                                          
Share capital                     7           6,462        6,731        7,011  
Share premium account                         5,246        5,246        5,246  
Special reserve                              48,986       51,734       54,435  
Capital reserve                               9,196        2,170       (2,974) 
Capital redemption reserve                    1,519        1,250          970  
Revenue reserve                                 951        1,508          913  
Total shareholders' equity                   72,360       68,639       65,601  
Net asset value per share                     pence        pence        pence  
Basic                                        111.97       101.96        93.55  
Shares in issue                              number       number       number  
Ordinary shares                   7      64,624,655   67,317,324   70,122,303  


These accounts have been prepared under International Financial Reporting
Standards and in accordance with the accounting policies.

for the 6 month period ended
31 December 2012
                                            6 month                   6 month
                                       period ended   Year ended period ended
                                        31 December      30 June  31 December
                                               2012         2012         2011
                                          unaudited      audited    unaudited

                             Note         £'000        £'000        
Operating activities                                                           
Net return/(loss) before                      7,479         (773)      (6,535)
finance costs and taxation                                                     
Adjustment for (gains)/losses                (7,087)       1,818        7,091 
on investments                                                                 
Tender offer expenses                            61          129            -  
Interest paid                                     -          (48)         (25) 
Operating cash flows before                     453        1,126          531 
movements in working capital                                                   
Decrease/(increase) in                          152           (5)          24 
Increase/(decrease) in                            8           (9)        (826)
Purchases of portfolio                       (8,299)      (6,932)      (4,123)
Sales of portfolio investments               13,026        9,612        3,960  
Net cash flow from operating                  5,340        3,792         (434)
Financing activities                                                           
Equity dividend paid              4          (1,010)        (309)        (309) 
Shares bought back in the                    (2,748)      (3,474)           - 
Tender offer expenses                           (61)        (129)           -  
Net cash flow from financing                 (3,819)      (3,912)        (309)
Increase/(decrease) in cash                   1,521         (120)        (743)
and cash equivalents for                                                      
Cash and cash equivalents at                  2,204        2,324        2,324 
start of period                                                                
Cash and cash equivalents at                  3,725        2,204        1,581    
31 December 2012                                                               


These accounts have been prepared under International Financial Reporting
Standards and in accordance with the accounting policies.


1.1 Corporate information

Strategic Equity Capital plc is a public limited company incorporated and
domiciled in the United Kingdom, registered in England and Wales whose shares
have a premium listing on the London Stock Exchange. The Company is registered
as a public limited company and is an investment company as defined by Section
833 of the Companies Act 2006.

The Company carries on business as an investment trust within the meaning of
Sections 1158/1159 of the Corporation Tax Act 2010.

1.2 Basis of preparation/statement of compliance

The condensed interim financial statements of the Company have been prepared on
a going concern basis and in accordance with International Accounting Standard
("IAS") 34, `Interim financial reporting' issued by the International
Accounting Standards Board ("IASB") (as adopted by the EU). They do not include
all the information required for a full report and financial statements and
should be read in conjunction with the report and financial statements of the
Company for the year ended 30 June 2012, which have been prepared in accordance
with International Financial Reporting Standards ("IFRS") as adopted by the EU.
Where presentational guidance set out in the Statement of Recommended Practice
("SORP") for investment trusts issued by the Association of Investment
Companies ("AIC") (as revised in 2009) is consistent with the requirements of
IFRS the Directors have sought to prepare financial statements on a basis
compliant with the recommendations of the SORP.

The condensed interim financial statements do not comprise Statutory Accounts
within the meaning of Section 434 of the Companies Act 2006. Statutory Accounts
for the year ended 30 June 2012 were approved by the Board of Directors on 26
September 2012 and delivered to the Registrar of Companies. The report of the
Auditors on those Financial Statements was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under Section
498 of the Companies Act 2006.


The financial statements are presented in Sterling, being the currency of the
primary environment in which the Company operates, rounded to the nearest

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single
segment of business, being investment business.

1.3 Accounting policies

The accounting policies, presentation and method of computation used in these
condensed financial statements are consistent with those used in the
preparation of the financial statements for the year ended 30 June 2011.

1.4 New standards and interpretations not applied

Implementation of changes and accounting standards in the financial period, as
outlined in the 30 June 2012 Statutory Accounts, had no significant effect on
the accounting or reporting of the Company.

2. Income
                                 6 month             Year           6 month 
                            Period ended            Ended      period ended 
                        31 December 2012     30 June 2012  31 December 2011 
                                   £'000            £'000             £'000 

Income from                                                                 
UK dividend income                   841             1905               897  
Overseas dividend                     17                -                 - 
Liquidity fund income                 15               11                 5  

                                     873            1,916               902 

Other income:                          -                5                 4  
Other interest income                  -                5                 4  

                                     873            1,921               906 

Total income comprises:                                                      
Dividends                            858            1,905               897  
Interest                              15               16                 9  

                                     873            1,921               906 

Income from                                                                 
Listed UK                            841            1,905               897  
Listed overseas                       32               11                 5  

                                     873            1,916               902 

3. Other expenses                                                               

             6 month period ended                           6 month period 

               31 December 2012     Year ended 30 June 2010    31 December 2011 
                     (unaudited)              (audited)             (unaudited)    
               Revenue Capital        Revenue Capital         Revenue Capital      

           return  return  Total  return  return   Total  return  return  
          £'000   £'000  £'000   £'000   £'000   £'000   £'000   
£'000  £'000  
Secretarial      38      -      38      50       -      50      10       -     
audit            14      -       14      26      -      26      14       -     
Directors'       52      -       52      95      -      95      49       -     
Other            67     61†    128     134    129†     263      65       -   
               171     61     232     305    129      434     138       -    
* included within this amount is a receipt of £Nil (30 June 2012: £27,000; 31
December 2011: £27,000) representing a refund from HMRC of 
VAT on administration fees. 
† Expenses incurred in relation to the tender offer process. 
4. Dividend 
For the year to 30 June 2012, the Company paid a final dividend of 1.50p (30
June 2011: 0.44p) per Ordinary share on, 67,317,324 shares, amounting to £
1,009,760 (30 June 2011: £308,538). The dividend was paid on 16 November 2012
to shareholders on the register at 19 October 2012. 
5. Return per Ordinary share 

            6 month period ended        Year ended        6 month period ended 
              31 December 2012         30 June 2012         31 December 2011   
           Revenue Capital        Revenue Capital        Revenue Capital       
            return  return  Total  return  return  Total  return  return  Total
             pence   pence  pence   pence   pence  pence   pence   pence  pence

Return per    0.68   10.56  11.24    1.61  (2.79) (1.18)    0.76 (10.12) (9.36)


Returns per Ordinary share are calculated based on 66,527,084 (30 June 2012:
69,723,696 and 31 December 2011: 70,122,203) being the weighted average number
of Ordinary shares, excluding shares held in treasury, in issue throughout the

6. Investments
                                                   31 December 2012

Investment portfolio summary:                                       
Listed investments at fair value through profit              58,460
or loss                                                             
Unlisted investments at fair value through                   10,344
profit or loss                                                      


                                       Listed     Unlisted   31 December 
                                        £'000        £'000              
Analysis of investment portfolio                                               
Opening book cost                          50,522        4,569             
Opening investment holding gains            2,822        8,705             
Opening valuation                          53,374       13,274             
Movements in the period:                                                        
Purchases at cost                           8,095            -              
Sales - proceeds                           (9,692)      (3,334)           
- realised gains on sales                   2,542           28              
Decrease in unrealised appreciation         4,141          376              
Closing valuation                          58,460       10,344             
Closing book cost                          51,497        1,263             
Closing investment holding gains            6,963        9,081             
                                       58,460       10,344             
Investments in unquoted investment funds are generally held at the valuations
provided by the managers of those funds. The valuations for SRF II and Vintage
1 are as at 31 December 2012 and 30 November 2012 respectively. 
A list of the top ten portfolio holdings by their aggregate market values is
given in the Investment manager's report. 

                                         31 December 2012 

Analysis of capital gains:                                 
Gains on sale of investments                        2,569  
Foreign exchange gains                                  1  
Movement in investment holding gains                4,517  


The Company is required to classify fair value measurements using a fair value
hierarchy that reflects the subjectivity of the inputs used in measuring the
fair value of each asset. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or
liabilities ("level 1").

• Inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) ("level 2").

• Inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs) ("level 3").

The level in the fair value hierarchy within which the fair value measurement
is categorised is determined on the basis of the lowest level input that is
significant to the fair value of the investment.

The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value at 31
December 2011.

Financial instruments at fair value through profit and loss
                              Level 1     Level 2     Level 3      Total
                                £'000       £'000       £'000      £'000

Equity investments and         58,460       8,431       1,913     68,804
limited partnership                                                     
Liquidity funds                     -       2,850           -      2,850 
Total                          58,460      11,281       1,913     71,654 
Investments whose values are based on quoted market prices in active markets
are classified within level 1, include active listed equities. The Company does
not adjust the quoted price for these instruments. 
Financial instruments that trade in markets that are not considered to be
active but are valued based on quoted market prices, dealer quotations or
alternative pricing sources supported by observable inputs are classified
within level 2. As level 2 investments include positions that are not traded in
active markets and/or are subject to transfer restrictions, valuations may be
adjusted to reflect illiquidity and/or non-transferability, which are generally
based on available market information. 
Level 3 instruments include private equity, as observable prices are not
available for these securities the Company has used valuation techniques to
derive the fair value. In respect of unquoted instruments, or where the market
for a financial instrument is not active, fair value is established by using
recognised valuation methodologies, in accordance with International Private
Equity and Venture Capital ("IPEVC") Valuation Guidelines. 
There were no transfers between levels for the period ended 31 December 2012. 
The following table presents the movement in level 3 instruments for the period
ended 31 December 2012 by class of financial instrument. 


Opening balance                                            1,827  
Disposals during the period                                   (6) 
Total gains for the period included in the                    92 
Statement of comprehensive income                                 
Closing balance                                            1,913  
7. Share capital 

                                                                   31 December 
                                                           Number        £'000 

Allotted, called up and fully paid Ordinary            64,624,655        6,462 
shares of 10p each:                                                             
During the period ended 31 December 2012 2,692,669 shares were repurchased by
the Company for cancellation. At 31 December 2012 the Company held Nil (30 June
2012: Nil; 31 December 2011: nil) shares in treasury. 
8. Investment Manager's fee 
A basic management fee is payable to the Investment Manager at the lower of the
annual rate of (i) the annual rate of 1% of the adjusted NAV of the Company or
(ii) 1% per annum of the market capitalisation of the Company. In order to
avoid double charging of basic management fees payable to the Investment
Manager by the Company, the NAV of the Company is reduced by the aggregate of
the value of the Company's Limited Partnership Interest in SRF II and the
amount of the Company's undrawn loan commitment to SRF II. The basic management
fee accrues weekly and is payable quarterly in arrears. 
The Investment Manager is also entitled to a performance fee, details of which
are set out below. No performance fee has been payable in the period. 
9. Investment Manager's performance fee 
The Investment Manager is entitled to a performance fee on the following terms: 
● the Company's performance is measured over rolling three year periods 
on 30 June in each year, with the first performance period having commenced on
1 July 2008 and ended on 30 June 2011 and the current Performance Period having
commenced on 1 July 2010 and ending on 30 June 2013; 
● the Company's performance is measured by comparing the NAV total return per
share over a performance period against the total return performance of the
FTSE SmallCap ex Investment Companies Index, being the index against which the
Board has historically compared the Company's investment performance; 
● if the NAV total return per share (calculated before any accrual for any
performance fee to be paid in respect of the relevant performance period) at
the end of the relevant performance period exceeds both: 
(i) the NAV per share at the beginning of the relevant performance period as
adjusted by the aggregate amount of (a) the total return on the FTSE SmallCap
ex. Investment Companies Index (expressed as a percentage) and (b) 2.0% per
annum over the relevant performance period (`Benchmark NAV'); and 
(ii) the high watermark (which is the highest NAV per share by reference to
which a performance fee was previously paid) . 
Currently the Investment Manager is entitled to 15% of any excess over the
higher of the Benchmark NAV per share and the high watermark. 
Payment of a performance fee that has been earned will be deferred to the
extent that the amount payable exceeds 1.75% per annum of the Company's NAV at
the end of the relevant performance period (amounts deferred will be payable
when, and to the extent that, following any later performance period(s) with
respect to which a performance fee is payable, it is possible to pay the
deferred amounts without causing that cap to be exceeded or the relevant NAV
total return per share to fall below the relevant Benchmark NAV per share and
the relevant High Watermark). 
10. Taxation 
The tax charge for the half year is £Nil (30 June 2012: £Nil and 31 December
2011: £Nil) based on an estimated effective tax rate of 0% for the year ended
30 June 2012. The estimated effective tax rate is 0% as investment gains are
exempt from tax owing to the Company's status as an Investment Company and
there is expected to be an excess of management expenses over taxable income. 
11. Capital commitments and contingent liabilities 
The Company has a commitment to invest €1,560,000 in Vintage 1 and an
outstanding commitment of £Nil in SRF II. The manager of Vintage 1 has
indicated it is unlikely to make any further net draw downs. 
12. Related party transactions 
SVGIM is regarded as a related party of the Company. The Investment Manager may
draw upon advice from the Industry Advisory Panel ("IAP") of which Sir Clive
Thompson, a Director of the Company, is a member. The IAP was established to
provide advice to SVGIM in relation to the strategy, operations and management
of potential investee companies. 
The amounts payable to SVGIM, in respect of management fees, during the period
to 31 December 2012 was £249,000 (30 June 2012: £442,000; 31 December 2011: 
212,000), of which £135,000 (30 June 2012: £115,000; 31 December 2011: £
101,000) was outstanding at 31 December 2012. 
SVGIM has entered into Commission Sharing Arrangements with a number of
executing brokers. Under this arrangement the amount of commission received by
SVGIM in relation to trading activities carried out on behalf of the Company
for the period to 31 December 2011 was £4,500 (30 June 2012: £4,000; 31
December 2011: £2,000) of which £3,000 (30 June 2012: £1,000; 31 December 
£Nil) was outstanding at 31 December 2012. 
Directors & advisors 
J Hodson*
J E Cornish*
I Dighé*
M C Phillips*
Sir Clive M Thompson
* Independent of the Investment Manager
Investment Manager 
SVG Investment Managers Limited
61 Aldwych
London WC2B 4AE
Tel: 020 7010 8900 
Secretary and registered office 
Capita Sinclair Henderson Limited
Beaufort House
51 New North Road
Exeter EX4 4EP
Enquiries: 01392 477513 
Registrar and transfer office 
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
Tel: 0870 707 1285
Canaccord Genuity Limited
88 Wood Street
London EC2V 7QR 
The Northern Trust Company
50 Bank Street
Canary Wharf
London E14 5NT 
Ernst & Young LLP
1 More London Place
London SE1 2AF 
Stephenson Harwood LLP
1 Finsbury Circus
London EC2M 7SH 
The Half Yearly Financial Report will be posted to shareholders shortly. The
Report will also be available for download from the following website: or on request from the Company Secretary. 
A copy of the Half Yearly Financial Report will be submitted shortly to the
National Storage Mechanism ("NSM") and will be available for inspection at the
NSM, which is situated at: 
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of this announcement. 
-0- Feb/18/2013 16:43 GMT
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