1

Citywire Absolute Returns Cabinet

March 2009

Colin McLean, Managing Director

SVM Asset Management

2

Credit bubble

Source: Ned Davis Research

3

Fannie Mae / Freddie Mac

Daily QFRE, QFNM 02/06/2006 - 05/03/2009 (GMT)

Line, QFRE, Last Trade(Last)04/03/2009, 0.4100Line, QFNM, Last Trade(Last)04/03/2009, 0.4100

PriceUSD

.1234

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35

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50

55

60

PriceUSD

.1234

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60

Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb MarQ2 06 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 [Delayed]

Fannie Mae

Freddie Mac

Source: Reuters

4

US subprime crisis: according to the experts

800

1000

1200

1400

1600

1800

2000

2200

Dec

-05

Feb

-06

Apr

-06

Jun-

06

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-06

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08

Pri

ce In

dex

15 May 2006: “The mortgage market is going to be a great market in this country for a long time” – Ken Thompson, Wachovia ex-CEO

9 Oct 2006: “I think the worst of this [housing market] may be over” – Alan Greenspan

16 March 2007 “The problems in the subprime market seem likely to be contained” –Ben Bernanke

10 July 2007: “As long as the music is playing, you’ve got to get up and dance. We’re still dancing” – Chuck Prince, Citigroup ex-CEO

16 Aug 2007: “Looking over periods of stress that I’ve seen, this is the strongest global economy we’ve had” –Hank Paulson, Treasury Sec

5 Dec 2007:”We believe the probability that [AIG] will sustain an economic loss is close to zero” – Martin Sullivan ex-CEO of AIG

10 Mar 2008: “Bear Stearns’ balance sheet, liquidity and capital remain strong” – Alan Schwartz, ex-CEO of BS

7 May 2008: “I do believe that the worst is likely to be behind us” – Hank Paulson

Source: Markit ABX Subprime

5Source: Reuters

Daily Q.FTAS 02/07/2007 - 31/10/2008 (GMT)

Line, Q.FTAS, Last Trade(Last)27/10/2008, 1,877.95

PriceGBP

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02 16 01 16 03 17 01 16 01 16 03 17 02 16 01 18 03 17 01 16 01 16 02 16 01 16 01 18 01 16 01 16Jul 07 Aug 07 Sep 07 Oct 07 Nov 07 Dec 07 Jan 08 Feb 08 Mar 08 Apr 08 May 08 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08

10.9.08 Bill Gross, Pimco, Lehmanhas positive equity, some good assets

9.5.08 Horlick “This guy has managed to return 1-1.2% per month after year after year”

July 08 Anatole Kaletsky “market prices are sometimes plain wrong”

14.5.08 Bolton says now is the time tobuy a package of bank shares

Sept 07 Bill Mott: shares in banks are now “dirt cheap”

Jan 08 Anatole Kaletsky “the credit crunch is now almost over”

FTSE All Share Index

Gordon Brown 2006 Budget: “no return to boom and bust”

Experts on the economy and markets

6

How big is Banks’ leverage?

  Leverage Ratio (total assets/equity)

  30-Jun-08 2007

UBS 46.9 63.9

ING Group 48.8 35.3

HSBC Holding 20.1 18.4

Barclays Bank 61.3 52.7

BBV Argentaria 20.1 18.6

Deutsche Bank   52.5

Fortis 33.3 26.4

KBC 24.4 20.5

Lloyd's TSB 34.1 31.0

RBS 18.8 21.8

Credit Agricole 40.5 34.8

BNP Paribas 36.1 31.5

Credit Suisse 33.4 31.5

Source: www.voxeu.org 20.09.08 Gros & Micossi calculations on data drawn from FT.com

7

Banks: market cap

Source: Bloomberg, 20.01.09, JP Morgan

Market Value as of Q2 2007, $Bn

Market Value as of January 20th 2009, $Bn

Deutsche Bank

Credit Agricole

Societe Generale Barclays

BNP Paribas

UnicreditUBS

Goldman Sachs

Santander

Citigroup

JP Morgan

HSBC

Credit Suisse

Morgan Stanley

RBS

49

120

76 67 80 91108 93

116

75100

116

255

165

215

16

4.6

10.3

17

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7.4

32.5

26

35

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35

64

19

85

97

8

Unwinding of banks and financials bubble

Source: SVM Data: Citibank

Banks & Financials as % of UK Market

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Banks

9

Calling markets is a futile exercise

Focusing on stocks is more rewarding.

There will be winners and losers.Unsustainable business models will fail.Specific stocks may have bottomed.Policy responses will produce beneficiaries.Strong businesses will survive and prosper.

Last year within the FTSE All-Share there were 31 stocks up and 580 losers.

Source: Bloomberg

10

Sector rotation and bubbles : market weights

31.3.01

28.2.03

30.6.08

31.12.06 5.3.09

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3533.3%

TMT 14.1%

Resources 33.6%

11.2%

30.4%

Financials 16%

19.3%

Banks 7.8%

Source: SVM Data: Deutschebank, Citibank

Funds need pragmatic, flexible approach; full range of tools

11

Traditional tools are restricting

Long only fund managers did not have the tools to produce positive returns in 2008.

The average fund in the IMA UK All Companies returned -31.9%* To be effective in performance and risk you needed the ability to

short stocks. Shorting requires a different skill set : experience is key.

Source: SVM/Lipper - since launch figures 27.02.09*Source Lipper: 1 year to 31.12.08

% Growth 2008 2007 2006 2005 2004 Since launch

SVM Saltire Fund 19.7 26.5 16.2 5.8 12.6 84.9

FTSE All-Share -29.9 5.3 16.8 22.0 12.8 33.4

Cash (3 mth LIBOR) 5.8 6.1 4.9 4.8 4.7 35.9

12

Landscape changing for retail investors.

Growing and diverse IMA Absolute Return Sector. UCITS regulations open up long/short investment,

changing the landscape for retail investors.

-80.0%

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

Nov-02 Apr-03 Oct-03 Apr-04 Oct-04 Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 Oct-08

-120%

-90%

-60%

-30%

0%

30%

60%

90%

120%

SVM Saltire FTSE All Share Net Long/Short Position

Source: SVM/Lipper

Captured approx. 80% of the upside.

SVM Saltire v FTSE All-Share

13

Profiting long and short - example

C&C Group

Source: Bloomberg/SVM

Ability to go long and short enhances opportunity for profit

14

Short example

Uniq

Indebted Margins under pressure Pension Issues

15

Aviva plc : relative performance

Source: Reuters

16

Framing - words matter

Underperform 2 Achieve/achievement 85

Disappointed 0 Good/better/best 150

Bad/worse/worst 8 Excellent 15

Poor/poorly 1 Grow/growing/growth 207

Weaker/weakness 5 Improve/improvement 73

Challenge 7 Strong/stronger/strength 150

Success 55

Occurrences of:

Source: Aviva plc 2007 report SVM analysis

17

Next plc – earnings per share misleads

Source: Next plc, SVM graph

18

Next plc 10 years’ revenue, post tax profit, EPS and shareholders’ funds

Source Next plc, SVM graph, indexed to base 1

Shareholders funds

Revenue

Profits after tax

Earnings per share

19

3500

4000

4500

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7000

01/0

9/06

01/0

1/07

01/0

5/07

01/0

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01/0

5/08

01/0

9/08

Are there bargains in low P/Es?

Selected P/E ratios

Cattles 0.9X Punch 1.0X Yell 2.3X Anglo Irish Bank 1.2X

Source: SVM/Lipper

20

Long Top line growth. Improving margins. Trade value. Cash conversion.

Short Weak balance sheets. Pension issues. Refinancing. Acquisition led growth, weak business models.

21

Risk warning

Please remember that past performance should not be seen as an indication of future performance. Stockmarkets and currency movements may cause the value of an investment to fall as well as rise and investors may not get back the amount originally invested. The SVM Saltire Fund is a Professional Investor Fund and is available only to ‘qualifying investors’ as defined in the Prospectus. The Fund is domiciled offshore therefore some of the protections afforded to investors under the UK Financial Services & Markets Act 2000 may not apply. SVM Asset Management Ltd has holdings in this fund.

DisclaimerThe information provided in this presentation is for the sole use of those attending the presentation. It may not be reproduced in any form without the express permission of SVM Asset Management and to the extent that it is passed on, care must be taken to ensure that this is in a form which accurately reflects the information presented here.

Regulatory StatusSVM Asset Management is authorised and regulated by the Financial Services Authority.

22

Appendix

23

Defining hedge funds -look a lot like banks but less risky

Banks Hedge Funds

Leverage 18x upwards Most now under 1.5x

Systemic Risk Yes Largest potentially, others not.

Public Money Already $ Trillions No

Transparency Significant use of Level 3 valuations, not marked to market, annual audits

Nearly all give monthly marked to market valuations, some weekly

Rewards CEOs of 5 US inv. banks

Earned $3.1bn 2003/7

Rewards depend on success