Half-yearly Report

PRESS RELEASE 20 November 2009 SVM UK EMERGING FUND plc Half Yearly Statement (for the six months to 30 September 2009) Investment Objective The investment objective of the Fund is long term capital growth from investments in smaller UK companies with a particular focus on the Alternative Investment Market ("AIM") Highlights * Net asset value per share and share price rises by approx 39% and 71% respectively in the six month. * Net asset value up 93% against a fall of 26% in AIM Index since remit changed in September 2004. * Small companies outperform large companies as investor risk appetite returns. * Fund retains cash reserves following successful realisations. For further information, please contact: Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate 020 7726 6111 Chairman's Statement The stockmarket rally which started in early March continued virtually unabated for the six months to 30 September 2009. What is more relevant for the Fund and shareholders is that small companies outperformed larger ones in this period with the FTSE AIM Index rising 57.8% against the FTSE 100 share Index increasing 33.7% in the six months to 30 September 2009. The Fund, being fairly defensively positioned, struggled to keep pace with the rise in the index, but still demonstrated good returns. Over the six months to 30 September 2009, the net asset value per share and share price increased by 38.9% and 71.0% respectively with the discount narrowing from a wide 31% to just over 12%. It is now five years since the Fund changed it name and remit to specialise in the AIM market. Since September 2004, the asset value is up 93% against a fall in the AIM Index of 26%. While stockmarkets were heavily oversold in early March, the subsequent rally has more than eradicated this position. Indeed it could be argued that the pendulum has swung too far in the other direction. With this in mind, the Fund retains cash reserves together with a number of investments that are fairly insensitive to the general index movements. The Managers have resisted the temptation to make wholesale changes to the portfolio either when the markets were adverse or recently as circumstances have improved. While a number of the holdings have bounced aggressively from the lows, the Managers believe that there is additional value still to be extracted. However, profits have selectively been booked, principally in two of the companies specialising in gold production - Norseman and Kirkland Lake. The proceeds have been used to introduce a new holding in Ruralec, a small independent power producer in Latin America and to make a commitment to a secondary placing completed in October in a new southern African focused multi– commodity resource play. The Fund is concentrated on a relatively small number of special situations. There are thirty five companies in the portfolio with approximately 90% invested in AIM companies. Of the balance, 7% is in three unquoted investments and 3% in three residual PLUS quoted companies. In terms of sectors, the Fund continues to be exposed to resources, industrials and consumer services with little in financials and property. While markets have recovered their poise and the likelihood of re-testing the March lows unlikely, the economic background remains challenging. It will take time for economics to catch up with markets and as such we remain cautious. We believe that the Fund is well positioned to take advantage of a sustained stockmarket recovery while retaining cash to make selective additional investments, where appropriate. Peter Dicks Chairman Summarised Income Statement (unaudited) Six months to 30 September Six months to 30 September 2009 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains on sale of - 204 204 - 132 132 investments Movement in - 867 867 - (1,095) (1,095) unrealised depreciation -------- -------- -------- -------- -------- -------- Gains on investments - 1,071 1,071 - (963) (963) Income 6 - 6 15 - 15 Investment - - - - - - management fees Other expenses (28) (2) (30) (21) (1) (22) -------- -------- -------- -------- -------- -------- Return before (22) 1,069 1.047 (6) (964) (970) interest and taxation Bank overdraft (2) - (2) (18) - (18) interest -------- -------- -------- -------- -------- -------- Transfer (from) / to (24) 1,069 1,045 (24) (964) (988) reserves -------- -------- -------- -------- -------- -------- Return per Ordinary (0.40p) 17.81p 17.41p (0.40p) (16.05p) (16.45p) Share -------- -------- -------- -------- -------- -------- The total column of this statement is the profit and loss account of the Company. All revenue and capital items in this statement derive from continuing operations. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement. Balance Sheet (unaudited) As at As at As at 30 September 31 March 30 September 2009 2009 2008 £'000 £'000 £'000 Investments at fair value through 3,197 2,521 2,570 profit or loss Net current assets / (liabilities) 53 4 165 375 --------- --------- --------- Equity shareholders' funds 3,731 2.686 2.945 --------- --------- --------- Net asset value per Ordinary Share 62.14p 44.73p 49.05p --------- --------- --------- Summarised Cash Flow Statement (unaudited) Six months Six months to to 30 September 30 September 2009 2008 £'000 £'000 Net cash flow from operating (60) (22) activities Taxation (2) - Capital expenditure and financial 340 88 investment Servicing of finance (2) (18) -------- -------- Movements in cash 276 48 -------- -------- Summarised Reconciliation of Movement in Shareholders Funds (unaudited) For the period to 30 September 2009 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 300 314 5,144 27 (2,646) (453) 2009 Realised gain - - - - 204 - on sale of investments Transaction - - - - (2) - costs Movement in - - - - 867 - unrealised appreciation on investments Return on - - - - - (24) ordinary activities after taxation ------- ------- ------- ------- -------- ------- As at 30 300 314 5,144 27 (1,577) (477) September 2009 ------- ------- ------- ------- -------- ------- For the period to 30 September 2008 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 300 314 5,144 27 (1,449) (403) 2008 Realised gain - - - - 132 - on sale of investments Transaction - - - - (1) - costs Movement in - - - - (1,095) - unrealised appreciation on investments Return on - - - - - (24) ordinary activities after taxation ------- ------- ------- ------- -------- ------- As at 30 300 314 5,144 27 (2,413) (427) September 2008 ------- ------- ------- ------- -------- ------- Largest Investments as at 30 September 2009 Sector Analysis as at 30 September 2009 % % 1 Norseman Resources 16.9 Basic Materials 57.8 2 China Pub Company 8.0 Industrials 5.3 3 Symphony Environmental 7.2 Oil & Gas 8.9 Technologies 4 Hydrodec 6.7 Consumer Goods 0.0 5 Archipelago Resources 5.1 Consumer Services 17.1 6 Kirkland Lake Gold 4.9 Healthcare 1.1 7 Mantle Diamonds 4.5 Telecoms 0.0 8 ToLuna 4.2 Technology 0.4 9 Borders & Southern 3.2 Financials 6.8 Petroleum 10 Petrel Resources 2.8 Utilities 2.6 -------- -------- Total 63.5 100.0 -------- -------- Risks And Uncertainties The principal risks inherent within the Fund are market related and have been classified as valuation risk, liquidity risk, exchange rate risk, interest rate risk and credit risk. Additional risks faced by the Fund can be categorised under the following headings; investment strategy, share price discount, regulatory and operational. The Fund has an established environment for the management of these risks which are continually monitored by the Managers. The Board regularly considers the risks associated with the Fund and receives both formal and informal reports from the Managers and third party service providers addressing these risks. An explanation of these risks and how they are mitigated is explained in the 2009 Annual Report, which is available on the Manager's website: www.svmonline.co.uk. These principal risks and uncertainties have not changed from those disclosed in the 2009 Annual Report. Directors' Responsibility Statement The Directors are responsible for preparing the financial statements in accordance with applicable law and regulations. Company law requires the Board to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Standards and applicable law). The financial statements are required by law to give a true and fair view of the state of affairs of the Fund at the end of the financial year and of the net return of the Fund for that year. In preparing these financial statements, the Directors are required to: (a) select suitable accounting policies and then apply them consistently; (b) make judgments and estimates that are reasonable and prudent; and (c) state whether applicable accounting standards have been followed. The Board is also responsible for the maintenance of proper accounting records which disclose with reasonable accuracy, at any time, the financial position of the Fund and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Fund and for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors confirm that to the best of their knowledge: (i) these financial statements have been prepared in accordance with the Accounting Standards Board's statement `Half-Yearly Financial Reports'; (ii) the Half-Yearly Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and (iii) the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein). Notes 1. The results have been prepared in accordance with applicable accounting standards and the 2009 Statement of Recommended Practice (SORP) issued by the Association of Investment Companies. These accounts have been prepared in accordance with prior year accounting policies. 2. Return per share is based on a weighted average of 6,005,000 (2008 - same) ordinary shares in issue during the year. Total return per share is based on the total gain for the period of £1,045,000 (2008 - loss of £988,000). Capital return per share is based on net gain for the period of £1,069,000 (2008 - loss of £964,000). Revenue return per share is based on the revenue loss after taxation for the period of £24,000 (2008 - £24,000). The number of shares in issue at 30 September 2009 was 6,005,000 (2008 - 6,005,000). 3. Due to the size of the Fund, the Investment Managers have waived their fees for the periods to 30 September 2008 and 2009. 4. The above figures do not constitute full accounts in terms of Section 240 of the Companies Act 1985. The accounts for the year to 31 March 2009, on which the auditors issued an unqualified report under Section 235 of the Companies Act 2005, have been lodged with the Registrar of Companies and did not contain a statement required under Section 237(2) or (3) of the Companies Act 1985. The half yearly report will be mailed to shareholders towards the end of November 2009. Copies will be available for inspection at 7 Castle Street, Edinburgh EH2 3AH, the registered office of the Fund and will be available on the Managers' website: www.svmonline.co.uk.

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