Final Results

PRESS RELEASE SVM UK EMERGING FUND PLC ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2009 INVESTMENT OBJECTIVE The objective of the Fund is to achieve long term capital growth from investments in smaller UK companies with a particular focus on the those listed on the Alternative Investment Market ("AIM"). HIGHLIGHTS * Net asset value decreased by 31.7% compared to a fall of 56.3% in the FTSE AIM Index * Discount widens as investors become risk averse * Since the Fund's change of investment objective in September 2004, net asset value has increased 39.0% compared to a decline of 53.0% in the benchmark * The Fund retains a concentrated portfolio targeted on absolute performance * VAT on investment management fees was recovered as intimated last year. CHAIRMAN'S STATEMENT Normally a fund reporting a near 25% benchmark outperformance would be a cause for celebration. Not this year, as both the net asset value and share price declined materially, albeit not as much as the Index. The net asset value per share decreased by 31.7% to 44.73 pence, with the FTSE AIM Index falling 56.3%. This outperformance is also replicated over the longer term. Since the remit change in September 2004 and notwithstanding recent declines, the Fund's asset value has increased by 39.0% against a benchmark fall of 53.0%. Following a flat first quarter of the financial year, both the second and third quarters saw benchmark index falls in excess of 35% with a small positive performance in the final quarter rounding off the year. The Fund performed in line with the benchmark in the first and fourth quarter and materially outperformed in the middle two quarters. The Fund's relatively defensive position through the year helped mitigate against the market falls. Since the year end, both the Index and the Fund's asset value has rallied, with the asset value ending May at 56.18 pence per share. After a long period of trading at a premium, the Fund's share price was caught up in the general stockmarket upheavals in the final two months of 2008 and was savagely marked down. In barely a few weeks, the share price virtually halved without any appreciable change in asset value and with little share selling pressure. The Fund was not alone, as this has been repeated across the investment trust sector with discounts widening markedly. This is symptomatic of a situation where sentiment and fear overshadows fundamentals. Since the year end, the situation has improved and discounts have started to narrow. Review of the year The year under review proved to be challenging for equity investors. Following more than four years of benign economic and favourable conditions, this was brought to an abrupt halt by concerns principally associated with poor lending practices and recessionary pressures. Although initially the impact was seen as being a purely US problem, it was not long before the contagion spread to other markets. UK smaller companies should have been less affected as they are typically less financially leveraged than their larger peers and rely to a greater extent on equity as a means of providing funds rather than borrowing. However, small companies are perceived to be riskier and, as such, have been treated worse than larger companies. Although perverse, this is perhaps understandable as investors sought safe havens. Of the few portfolio changes in the year, most were driven by corporate activity and reconstructions. The Fund retains cash, having realised some holdings in early 2008, which can be deployed as and when the economic environment improves and investment opportunities become compelling. Portfolio The Fund continues to be concentrated on a relatively small number of special situations. There are thirty five companies in the portfolio with more than 80% invested in AIM listed companies. The balance is spread between selective unquoted investments and a small number of residual positions quoted on the junior PLUS market. In terms of sectors, the Fund continues to retain an overweight exposure to resources, industrials and consumer services with little in financials and property. The Fund is managed on a more absolute basis and many of the holdings can be categorised as special situations. By being benchmark aware rather than attempting to replicate sector weightings, the Fund has demonstrated substantially less volatility than both the AIM Index or indeed the broader market, represented by the FTSE All Share Index. The Managers believe that this approach gives the potential of both relative out-performance and absolute gains. Although individual investment risk is higher, this can be mitigated through a diversified portfolio. There is always a trade off between holding a broadly diversified portfolio which will demonstrate benchmark type returns against holding relatively few large positions with the potential of strong performance. The Managers favour the latter approach. Outlook The Fund retains a concentrated portfolio of special situations and companies that exhibit higher than average growth potential but are considered to be modestly valued. These companies should benefit as the recessionary pressures moderate and economic growth resumes. In addition, a level of liquidity has been built up over the earlier part of the year which gives a cushion to weather the current storm. This liquidity and the Fund's gearing facilities will allow for further investments to be made as and when attractive opportunities are presented. The Board and the Managers believe that the Fund should extend the recent relative out-performance. In time as markets recover confidence, it is well placed to deliver on its objective of long term capital growth, lower volatility and absolute returns. Peter Dicks Chairman 12 June 2009 INCOME STATEMENT Year to 31 March 2009 Year to 31 March 2008 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Net gains / (losses) on - (1,202) (1,202) - 222 222 investments Income 40 - 40 19 - 19 Investment management fees - - - - - - VAT recovered on - 7 7 - - - management fees Other expenses (64) (2) (66) (69) (5) (74) -------- ------- -------- -------- ------- -------- Return before interest and (24) (1,197) (1,221) (50) 217 167 taxation Finance costs (26) - (26) (51) - (51) -------- -------- -------- -------- -------- -------- Transfer from reserves (50) (1,197) (1,247) (101) 217 116 -------- -------- -------- -------- -------- -------- Return per ordinary share (0.84p) (19.93p) (20.77p) (1.68p) 3.16p 1.93p The total column of this statement is the profit and loss account of the Fund. All revenue and capital items in this statement derive from continuing operations. A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Fund have been reflected in the above statement. BALANCE SHEET As at As at 31 March 31 March 2009 2008 £'000 £'000 Investments at fair value through profit 2,521 3,692 or loss --------- --------- Current assets 730 353 Creditors: amounts falling due within one (565) (112) year --------- --------- Net current assets 165 241 --------- --------- Total assets less current liabilities 2,686 3,933 --------- --------- Equity shareholders' funds 2,686 3,933 --------- --------- Net asset value per ordinary share 44.73p 65.50p CASH FLOW STATEMENT Year to Year to 31 March 31 March 2009 2008 £'000 £'000 Net cash outflow from operating activities (22) (50) Returns on investment and servicing finance (26) (51) Capital expenditure and financial 420 448 investment Taxation paid (4) - --------- --------- Increase in cash 368 347 --------- --------- RECONCILIATION OF MOVEMENT IN SHAREHOLDERS FUNDS For the year to 31 March 2009 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 2008 300 314 5,144 27 (1,449) (403) Net gain on sale of - - - - 47 - investments Transaction costs - - - - (2) - VAT on investment - - - - 7 - management fees Movement in investment - - - - (1,249) - holding gains Loss attributable to - - - - - (50) shareholders ------- ------- ------- ------- ------- ------- As at 31 March 2009 300 314 5,144 27 (2,646) (453) ------- ------- ------- ------- ------- ------- For the year to 31 March 2008 Share Share Special Capital Capital Revenue capital premium reserve redemption reserve reserve reserve £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 2007 300 314 5,144 27 (1,666) (302) Net gain on sale of - - - - 567 - investments Transaction costs - - - - (5) - Movement in investment - - - - (345) - holding gains Loss attributable to - - - - - (101) shareholders ------- ------- ------- ------- ------- ------- As at 31 March 2008 300 314 5,144 27 (1449) (403) ------- ------- ------- ------- ------- ------- DIRECTORS' RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS 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. To the best of the knowledge of the Board, the financial statements give a true and fair view of assets, liabilities, financial position and profit/loss and the Report of the Directors includes a fair review of the development and performance of the Fund and a description of the principal risks that it faces. PRINCIPAL RISKS & UNCERTAINTIES The Board believes that the Fund has a relatively low risk profile in the context of the investment trust industry. This belief arises from the fact that the Fund has a simple capital structure; invests primarily in UK quoted companies; has limited exposure to derivatives; and outsources all the main operational activities to recognised, well established firms The principal risks inherent within the Fund are market related and have been classified as valuation risk, liquidity risk, interest rate risk and credit risk. Additional risks faced by the Fund can be categorised under the following headings; investment policy and strategy, share price discount, regulatory and operational / financial risk. 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. Explanations of these risks and how they are mitigated are detailed in the Annual Report, which will be available on the Manager's website shortly. NOTES 1. The accounts have been prepared in accordance with applicable accounting standards and the 2005 Statement of Recommended Practice (SORP) issued by the Association of Investment Companies. 2. Returns per share are based on a weighted average of 6,005,000 (2008 - 6,005,000) ordinary shares in issue during the year. Total return per share is based on the total loss for the year of 1,247,000 (2008 - return of £116,000). Capital return per share is based on net capital loss during the year of £ 1,197,000 (2008 - return of £217,000). Revenue return per share is based on the revenue loss after taxation for the year of £50,000 (2008 - £101,000). The number of shares in issue at 31 March 2009 was 6,005,000 (2008 - 6,005,000) 3. Due to the size of the Company, the Investment Managers have waived their fees for the year to 31 March 2008 and 2009. 4. The above unaudited figures do not constitute full accounts in terms of Section 240 of the Companies Act 1985 and are based on the report and accounts for the year to 31 March 2009. The accounts for the year to 31 March 2008, 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. 5. The annual report and accounts will be available on the Managers website www.svmonline.co.uk from the middle of June 2009. These accounts can be mailed to shareholders on request to the Managers and will be lodged with the Registrar of Companies. Copies are also available for inspection at 7 Castle Street, Edinburgh EH2 3AH, the registered office of the Fund. For further information, please contact: Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate 020 7726 6111

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