Half Yearly Statement

PRESS RELEASE 15 November 2010 SVM UK EMERGING FUND plc Half Yearly Statement (for the six months to 30 September 2010) 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 slightly higher in the six months against a volatile stockmarket background. * The Fund remains cautiously positioned - out-performing in the first quarter and lagging in the second. * Net asset value more than doubles since remit changed in September 2004. * Small companies outperform large companies as investor risk appetite returns. Chairman's Statement The six months to 30 September 2010 was indeed a tale of two halves. Equity markets rallied strongly in the most recent quarter, more than erasing the losses suffered in the previous quarter. However these moves were accompanied by a material reduction of volumes, only part of which can be explained by the quiet holiday induced summer period. Of more interest has been the re-emergence of risk appetite among some investors. This manifests itself greatest in the continuing out-performance of smaller companies over their larger equivalents. The FTSE AIM Index, the index of smaller companies, increased by 12% over the last six months. This compares favourably with larger companies with the FTSE 100 Share Index which fell by 1% over the same period. The Fund continues to be defensively positioned and was up 1% in the six months after falling by less than the benchmark in the first quarter but lagging in the second. Since the Fund changed it name and remit allowing it to invest in AIM companies in September 2004, the asset value is up 115% against a fall in the AIM Index of 9% and a rise of the FTSE 100 Share Index of 51%. The Fund retains a concentrated portfolio of forty companies with 89% invested in AIM companies. Of the balance, 7% is in three unquoted investments and a further 4% 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. With the AIM Index heavily weighted towards resource companies, it is unsurprising that the Index has performed well this year. This increased investor interest is in marked contrast to recent years when investors, especially institutions, have shied away from these companies. With limited liquidity, many of these companies have seen share prices increase substantially as investors have scrambled to gain exposure. The Fund has benefited from a number of strong performances but is not a purely resources fund. While retaining a large weighting in resource companies, it maintains a balanced portfolio. The portfolio changes over the six months have been restricted to continuing sales in Norseman Resources and disposals of two of the smaller residual positions. This has allowed for the introduction of two fresh holdings, Oracle Coalfields and Nautical Petroleum. Both have seen positive contributions since their acquisition. Unfortunately the strong performances registered by a large number of the investments have been offset by disappointments. The Managers are confident that most of these setbacks are temporary and anticipates substantial recovery in these holdings. Although stockmarkets have largely recovered from the shocks of 2008, the economic background remains challenging. Although we continue to remain cautious, there continues to be opportunities to make money particularly in smaller companies. We believe that the Fund is well positioned to continue to deliver its long term out-performance. Peter Dicks Chairman Summarised Income Statement (unaudited) Six months to 30 September Six months to 30 September 2010 2009 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 (Loss) / gain on - (39) (39) - 204 204 sale of investments Movement in investment - 97 97 - 867 896 holding losses -------- -------- -------- -------- -------- -------- Gains on investments - 58 58 - 1,071 1,071 Income 8 - 8 6 - 6 Investment - - - - - - management fees Other expenses (24) - (24) (28) (2) (30) -------- -------- -------- -------- -------- -------- Return before (16) 58 42 (22) 1,069 1,047 interest and taxation Bank overdraft interest (1) - (1) (2) - (2) -------- -------- -------- -------- -------- -------- Transfer (17) 58 41 (24) 1,069 1,045 attributable to shareholders -------- -------- -------- -------- -------- -------- Return per ordinary (0.29p) 0.97p 0.68p (0.40p) 17.81p 17.41p 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 2010 2010 2009 £'000 £'000 £'000 Investments at fair value through 3,771 3,848 3,197 profit or loss Net current assets 385 267 534 --------- --------- --------- Equity shareholders' funds 4,156 4,115 3,731 --------- --------- --------- Net asset value per ordinary share 69.21p 68.53p 62.14p --------- --------- --------- Summarised Cash Flow Statement (unaudited) Six months Six months to to 30 September 30 September 2010 2009 £'000 £'000 Net cash flow from operating (26) (60) activities Taxation (1) (2) Capital expenditure and financial 23 340 investment Servicing of finance (2) (2) -------- -------- Movements in cash (6) 276 -------- -------- Summarised Reconciliation of Movement in Shareholders Funds (unaudited) For the period to 30 September 2010 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 2010 300 314 5,144 27 (1,174) (496) Return/(loss) - - - - 58 (17) attributable to shareholders ------- ------- ------- ------- -------- ------- As at 30 300 314 5,144 27 (1,116) (513) September 2010 ------- ------- ------- ------- -------- ------- 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 2009 300 314 5,144 27 (2,646) (453) Return/(loss) - - - - 1,069 (24) attributable to shareholders ------- ------- ------- ------- -------- ------- As at 30 300 314 5,144 27 (1,577) (477) September 2009 ------- ------- ------- ------- -------- ------- Largest Investments as at 30 September 2010 Sector Analysis as at 30 September 2010 % % 1 Archipelago Resources 7.2 Basic Materials 55.1 2 China Pub Company 7.2 Industrials 8.4 3 Symphony Environmental 7.1 Oil & Gas 10.6 4 Norseman Resources 7.0 Consumer Goods 0.0 5 Hydrodec 6.0 Consumer Services 15.8 6 ToLuna 4.3 Healthcare 1.9 7 Nautical Petroleum 4.3 Telecoms 0.0 8 Kirkland Lake Gold 4.2 Technology 0.0 9 Mantle Diamonds 4.0 Financials 6.8 10 Borders & Southern 3.6 Utilities 1.4 Petroleum -------- -------- Total 54.9 100.0 -------- -------- 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 2010 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 2010 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 2006. 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 (2009 - same) ordinary shares in issue during the year. Total return per share is based on the total gain for the period of £41,000 (2009 - £1,045,000). Capital return per share is based on net gain for the period of £58,000 (2009 - £1,069,000). Revenue return per share is based on the revenue loss after taxation for the period of £17,000 (2009 - £24,000). The number of shares in issue at 30 September 2010 was 6,005,000 (2009 - 6,005,000). 3. Due to the size of the Fund, the Investment Managers have waived their fees for the periods to 30 September 2009 and 2010. 4. The above figures do not constitute full accounts in terms of Section 435 of the Companies Act 2006. The accounts for the year to 31 March 2010, on which the auditors issued an unqualified report under Section 495 of the Companies Act 2006, have been lodged with the Registrar of Companies and did not contain a statement required under Section 498 of the Companies Act 2006. The half yearly report will be mailed to shareholders towards the middle of November 2010. 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. For further information, please contact: Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate Mainland 020 7726 6111

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