Half-yearly Report

PRESS RELEASE 17 November 2008 SVM UK EMERGING FUND plc Half Yearly Statement (for the six months to 30 September 2008) 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 outperforms benchmark index by approx 10% falling 25.3% compared to a fall of 35.1% in the FTSE AIM Index. * Net asset value up 52.5% against a fall of 29.7% in AIM Index since remit changed in September 2004. * Shares continue to trade at a premium to both asset value and peers. For further information, please contact: Donald Robertson SVM Asset Management 0131 226 6699 Roland Cross Broadgate 020 7726 6111 SVM UK EMERGING FUND PLC Chairman's Statement Although I am again able to report a relative outperformance against the FTSE AIM Index, the Fund's benchmark index, unfortunately this did not flow through to a positive absolute performance. After a flat April to June quarter, the AIM Index suffered its largest ever quarterly drop in value in the quarter to 30 September 2008 - down more than 35%. Against this background, it would have been very hard to generate a positive performance and so it proved. A relative outperformance of approximately 10% should have been a cause for celebration, however, the Fund's asset value fell 25.3% in absolute terms over the last six months. However, since the remit change in September 2004, the Fund's asset value has increased by 52.5% against a benchmark fall of 29.7%, even allowing for the recent market falls. The stockmarkets generally and small companies in particular suffered from extreme volatility and investor risk aversion. The market conditions are as challenging as the Managers have experienced in over of 25 years of investing. Although well financed smaller companies should be less impacted by the global financial concerns, this has not been sufficient for them to avoid being materially de-rated. In the current environment, there have been no places to hide and the Managers have resisted the temptation to tinker with the portfolio. Hence, there were relatively few changes over the period. A single new investment (Hydrodec) and a couple of small top ups of existing investments were made. Profits were taken by reducing two of the holdings while Alltracel Pharmaceuticals was successfully realised through a cash takeover. The Fund continues to be concentrated on a relatively small number of special situations. There are thirty five companies in the portfolio with approximately 80% invested in AIM companies. The balance is spread equally between unquoted investments and a small number of residual positions still quoted on the junior PLUS market. In terms of sectors, the Fund continues to be exposed to resources, industrials and consumer services with little in financials and property. With central banks aggressively reducing interest rates globally, bonds and equities are beginning to look attractive, notwithstanding the deteriorating economic background. While bear markets and economic slowdowns are unpleasant at the time, they are necessary as equity investment should be a combination of fear & greed and risk & reward. We believe that the Fund is well positioned to take advantage of a sustained stockmarket recovery as and when it comes. Peter Dicks Chairman Summarised Income Statement (unaudited) Six months to 30 September Six months to 30 September 2008 2007 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Gains on sale of - 132 132 - 321 321 investments Movement in - (1,095) (1,095) - 207 207 unrealised depreciation -------- -------- -------- -------- -------- -------- Gains on investments - (963) (963) - 528 528 Income 15 - 15 9 - 9 Investment - - - - - - management fees Other expenses (21) (1) (22) (35) (4) (39) -------- -------- -------- -------- -------- -------- Return before (6) (964) (970) (26) 524 498 interest and taxation Bank overdraft (18) - (18) (21) - (21) interest -------- -------- -------- -------- -------- -------- Transfer (from) / to (24) (964) (988) (47) 524 477 reserves -------- -------- -------- -------- -------- -------- Return per Ordinary (0.40p) (16.05p) (16.45p) (0.78p) 8.72p 7.94p 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 As at As at As at (unaudited) 30 September 31 March 30 September 2008 2008 2007 £'000 £'000 £'000 Investments at fair value through 2,570 3,692 4,383 profit or loss Net current assets / (liabilities) 375 241 (89) --------- --------- --------- Equity shareholders' funds 2,945 3,933 4,294 --------- --------- --------- Net asset value per Ordinary Share 49.05p 65.50p 71.51p --------- --------- --------- Summarised Cash Flow Statement Six months Six months (unaudited) to to 30 September 30 September 2008 2007 £'000 £'000 Net cash flow from operating (22) (86) activities Capital expenditure and financial 88 (22) investment Servicing of finance (18) (21) -------- -------- Movements in cash 48 (129) -------- -------- Summarised Reconciliation of Movement in Shareholders Funds (unaudited) For the period to 30 September 2008 Share Share Special Capital Capital Capital Revenue capital premium reserve redemption reserve reserve reserve reserve realised unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 300 314 5,144 27 (334) (1,116) (402) 2008 Realised gain on - - - - 132 - - sale of investments Transaction costs - - - - (1) - - Movement in - - - - - (1,095) - unrealised appreciation on investments Return on - - - - - - (24) ordinary activities after taxation ------- ------- ------- ------- ------- ------- ------- As at 30 300 314 5,144 27 (203) (2,211) (426) September 2008 ------- ------- ------- ------- ------- ------- ------- For the period to 30 September 2007 Share Share Special Capital Capital Capital Revenue capital premium reserve redemption reserve reserve reserve reserve realised unrealised £'000 £'000 £'000 £'000 £'000 £'000 £'000 As at 1 April 300 314 5,144 27 (896) (770) (302) 2007 Realised gain on - - - - 321 - - sale of investments Transaction costs - - - - (4) - - Movement in - - - - - 207 - unrealised appreciation on investments Return on - - - - - - (47) ordinary activities after taxation ------- ------- ------- ------- ------- ------- ------- As at 30 300 314 5,144 27 (579) (563) (349) September 2007 ------- ------- ------- ------- ------- ------- ------- Risks And Uncertainties A review of the half year and the outlook for the Company can be found in the Chairman's Statement. The Directors have established an ongoing process for identifying, evaluating and managing the key risks faced by the Company. The Board believes that the Company has a relatively low risk profile in the context of the investment trust industry. This belief arises from the fact that the Company has a simple capital structure; invests only in small UK quoted companies; has limited exposure to derivatives; and outsources all the main operational activities to recognised, well established firms. As the Company's investments consist of small UK quoted companies, the principal risks facing the Company are market related and include market price, interest rate and liquidity risk. Additional risks faced by the Company include investment objective, investment policy, share price discount, regulatory risk and operational/financial risk. An explanation of these risks and how they are managed can be found in the 2008 Annual Report. The report is available on the Managers website: www.svmonline.co.uk. These principal risks and uncertainties have not changed from those disclosed in the 2008 Annual Report. Directors' Responsibility Statement The Directors confirm that to the best of our knowledge: (i) the condensed set of financial statements has 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 2005 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 (2007 - same) ordinary shares in issue during the year. Total return per share is based on the total losses for the period of £988,000 (2007 - gains of £477,000). Capital return per share is based on net losses during the period of £964,000 (2007 - gains of £524,000). Revenue return per share is based on the revenue loss after taxation for the period of £24,000 (2007 - £47,000). The number of shares in issue at 30 September 2008 was 6,005,000 (2007 - 6,005,000). 3. Due to the size of the Fund, the Investment Managers have waived their fees for the periods to 30 September 2007 and 2008. 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 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. The half yearly report will be mailed to shareholders towards the end of November 2008. 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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