Half Yearly Report

RNS Number : 5979G

Standard Life Equity Income Tst PLC

16 May 2011

 



STANDARD LIFE EQUITY INCOME TRUST PLC

Investment Objective

The objective of Standard Life Equity Income Trust is to provide shareholders with an above average income from their equity investment while also providing real growth in capital and income.

Investment Policy

The Directors intend to achieve the investment objective by investing in a diversified portfolio consisting mainly of quoted UK equities. The portfolio will normally comprise between 50 and 70 individual equity holdings. In order to reduce risk in the Company without compromising flexibility:

-     no holding within the portfolio will exceed 10% of net assets; and

-     the top ten holdings within the portfolio will not in aggregate exceed 50% of net assets

The Company may invest in convertible preference shares, convertible loan stocks, gilts and corporate bonds.

The Directors have set parameters of between 95% and 115% for the level of gearing that can be employed. The maximum level of borrowings will therefore represent 15% of net assets and the maximum cash position will be equivalent to 5% of net assets. The Directors have delegated responsibility to the Manager for the operation of the gearing level within the above parameters.

The Manager's investment process combines asset allocation, stock selection, portfolio construction, risk management and dealing. The investment process is research-intensive and is driven by a distinctive focus on change which recognises that different factors drive individual stocks and markets at different times in the cycle. This flexible but disciplined investment process ensures that the Manager has the opportunity to perform in different market conditions.

HALF-YEARLY FINANCIAL REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2011

For further information, please contact:

Yvonne Savage

Press Manager, Standard Life Investments         Tel. [phone]

________________________________________________________________________________________________

FINANCIAL HIGHLIGHTS

Total Return	Six months ended 31 March 2011
Net asset value per ordinary share	10.2%
FTSE All-Share Index	8.5%

Performance for six months ended 31 March 2011

	31 March 2011	30 September 2010	% change
Net asset value per ordinary share (including net revenue)	316.9p	299.8p	5.7
Net asset value per ordinary share (excluding net revenue)	311.6p	291.9p	6.7
Ordinary share price (mid market)	303.0p	286.8p	5.6
Discount of share price to net asset value (including net revenue)	4.4%	4.3%	-
Discount of share price to net asset value (excluding net revenue)	2.8%	1.8%	-

	31 March 2011	30 September 2010	% change
FTSE All-Share Index	3,067.7	2,867.6	7.0
Total assets	£135.7m	£127.3m	6.6
Total shareholders' funds	£120.2m	£113.7m	5.7
Revenue return per ordinary share	5.29p1	5.33p2	(0.8)
Interim dividend	3.55p	3.15p2	12.7

¹           Includes 0.77p per ordinary share relating to a VAT refund.

²           For the six months ended 31 March 2010

________________________________________________________________________________________________

CHAIRMAN'S STATEMENT

Income and Dividends

Revenue return per ordinary share for the six months ended 31 March 2011 was 5.29p, compared with 5.33p for the same period in the previous year, representing a slight decline of 0.8%.  Income from investments in the current period was affected by the suspension of dividends from BP during the second half of 2010, but the revenue return benefited from a VAT refund of 0.77p per share.

The Board is declaring an interim dividend of 3.55p per share, an increase of 12.7% on the interim dividend compared with 2010.  This increase mainly reflects the Board's aim of rebalancing the interim and final dividends.  The interim dividend will be paid on 24 June 2011 to shareholders on the register on 3 June 2011.  The Board continues to target an increase in the dividend in real terms over the longer-term.  The Board intends at least to maintain the level of the final dividend.

VAT on Investment Management Fees

Following negotiations between HMRC and our former manager, Deutsche Asset Management, the Board is pleased to report that a further VAT repayment of £291,375 was received in March 2011, in respect of the period since the Company's inception in 1991 to 1996.  This VAT refund has been allocated to revenue, in accordance with the original charging of VAT in the respective financial years.  Subsequent to the period end the Company has been advised that it will receive interest of £193,000 in respect of the period between 1991 and 1996. 

Performance

For the six months ended 31 March 2011, your Company's net asset value total return was 10.2% compared with an 8.5% total return on the FTSE All-Share Index and 8.3% for the FTSE 350 High Yield Index.

The Company ranks seventh out of 21 peers in the UK Growth & Income sector based on net asset value total return for the six months ended 31 March 2011 (source: J.P. Morgan Cazenove).

The long-term performance of your Company against its peers is shown in the table below:

UK Growth & Income Peer Group	Six Months Total Return	Three Year Total Return	Five year Total Return
SLEIT	7/21	7/21	5/21

The Company's share price total return for the reporting period was 8.7% and, although the discount widened slightly during the six months, it had reduced to 4.4% at the period end.

The Manager's Report provides further information on the UK economy and equity market as well as a review of the portfolio of investments and activity during the period.

Gearing

During the period under review, your Manager increased the Company's borrowings to £15m, resulting in a gearing level of 12% at the period end and reflecting your Manager's confidence in the long-term outlook for the UK equity market.

The Company renewed its bank loan facility in February 2011 and put in place a £20m three year credit facility at 125bps above LIBOR, terms which your Board regards as favourable. 

Marketing and Shareholder Communications

The Manager continues to engage with private client and wealth managers and the Board was pleased to welcome a number of private investors to the Company's AGM in December 2010, despite inclement weather conditions.

New Director

The Board is pleased to welcome Jo Dixon as an independent, non-executive Director to the Company.  Jo was appointed on 1 May 2011 and is a Chartered Accountant whose career included a variety of roles in the Nat West Group, Finance Director of Newcastle United plc and Commercial Director of Serco Group.  Jo is also a director of Worldwide Healthcare Trust plc and Baring Emerging Europe plc.

Bonus Issue of Subscription Shares

Following shareholder approval at the General Meeting held on 17 December 2010, the Company issued subscription shares to qualifying shareholders on the basis of one subscription share for every five ordinary shares held.  Each subscription share confers the right to subscribe for one ordinary share and may be exercised on the last business day of June and December, up to 2016, at a price of 320p per share.  A reminder notice will be sent out to subscription shareholders with the Half Yearly Report.

Outlook

In the first six months of your Company's year, especially in the last quarter, there have been ample fresh factors to confuse the overall outlook for global economic growth, and these are directly referred to in your Manager's Report. 

Against this background, the recovery of the UK stock market has been sustained by the notable downward adjustment in sterling and by high levels of liquidity.  One index of corporate strength is the default rate on global corporate bonds, which is running at one of the lowest levels.  Another indicator is the strength of UK earnings growth, underpinning the outlook for dividend growth.

Your Board continues to believe that equities are not expensive in relation to returns on fixed income, and that over the long-term your Company will deliver enhanced returns as set out in our Investment Objective.

Charles Wood OBE

Chairman

13 May 2011

________________________________________________________________________________________________

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge -

-     the condensed Financial Statements have been prepared in accordance with the Accounting Standards Board's statement "Half-Yearly Financial Reports"; and

-     the Interim Management Report includes a fair review of the general conditions required by 4.2.7R and 4.2.8R of the Financial Services Authority's Disclosure and Transparency Rules.

The Half-Yearly Financial Report, for the six months ended 31 March 2011, comprises an Interim Management Report in the form of the Chairman's Statement, the Directors' Responsibility Statement and a condensed set of Financial Statements, and has not been audited or reviewed by the auditors pursuant to the APB guidance on Review of Interim Financial Information.

For and on behalf of the Directors of Standard Life Equity Income Trust PLC

Charles Wood OBE

Chairman

13 May 2011

________________________________________________________________________________________________

MANAGER'S REPORT

Market Review

Against a backdrop of worries over the global economic recovery, the six month reporting period proved extremely volatile for UK equities. In particular, banking shares were vulnerable, especially in the final three months of 2010.

The first quarter of the Company's financial year started well for the UK market, with gains in October driven by broadly positive corporate results and only a muted reaction to the UK government's spending review. The market then trended lower in November as anxiety grew over debt problems in peripheral European countries, prompted by news the Irish government would accept an €85 billion bailout package from the IMF and EU.

UK equities experienced a powerful rally during December, resulting in strong gains over the fourth quarter and 2010 overall. Increasing confidence over global economic recovery saw the FTSE 100 Index break through 6,000 for the first time since June 2008, although it subsequently fell back below that level. This brought to an end a generally positive year for UK equities, which continued their recovery from the financial crisis and returned to their highest level since the collapse of Lehman Brothers over two years earlier.

The UK market retreated during January 2011, with investor sentiment negatively affected by the surprise news that the UK economy had shrunk during the fourth quarter of 2010. Investor confidence remained fragile throughout the period, with domestic economic newsflow persistently downbeat. Investors were also subject to political shocks in the Middle East and North Africa and natural disasters in Japan.

The resource-related stocks (principally mining and oil companies) performed well on the back of the rising oil price, with several reporting higher profits. By contrast, the newsflow from more domestically oriented sectors, particularly those exposed to the consumer, was lacklustre. Several retailers, food producers and manufacturers of household goods reported difficult trading conditions.

Performance

For the six months ended 31 March 2011, the Company's net asset value total return was 10.2%, outperforming the FTSE All-Share Index total return of 8.5% and the FTSE 350 High Yield Index total return of 8.3%. Over the reporting period, the share price rose from 286.8p to 303.0p, an increase of 5.6% and the share price total return was 8.7%.

Our holding in DS Smith made the largest contribution towards performance as the paper and packaging company issued a good set of results. Auto parts manufacturer GKN was also positive following strong results and earnings upgrades. Meanwhile, an underweight position in Barclays proved beneficial as the stock fell due to capital concerns in the sector following Standard Chartered's rights issue.

Furthermore, the Company profited from exposure to mining companies Xstrata and Rio Tinto. Both were beneficiaries of higher commodity prices as well decreasing concerns over Chinese monetary tightening. In the financial sector, the Company's exposure to life companies such as Aviva and Legal & General added value. These stocks bounced following weakness at the end of 2010.

On the downside, transport services group Wincanton hindered performance after issuing disappointing results. Furthermore, an overweight position in Britvic was detrimental as the company was affected by rising commodity prices. Dixons Retail was also negative given slower consumer sales. A further disappointment was the Fund's overweight exposure to credit card issuer CPP Group, which fell on the announcement of an FSA investigation into its ID protection products. 

Activity

During the period, we started a position in Hays as there was evidence of improvement in the recruitment market. The firm also has strong international growth prospects, and the stock offers a 5% yield. Shares were purchased in Babcock International. The company's top-line growth looked robust, and it has started to win new overseas contracts.

In January, the Company added to its position in paper and packaging group Mondi. The firm has issued good results and its dividend is ahead of expectations. We also invested in publisher Reed Elsevier as the company was attractively priced following a period of underperformance. Finally, we bought shares in Close Brothers. The company is benefiting from a very strong competitive position in its niche banking business.

Sales during the period included building companies Barratt Developments and Bovis Homes, following increasingly negative news on the UK housing market. Soft drinks manufacturer Britvic was also sold after it experienced earnings downgrades that were largely a result of higher raw material costs. A further disposal was retailer Dixons. The company had suffered downgrades on the back of more muted consumer spending. Similarly, we sold Thomas Cook given concerns over the effect lower spending would have on the travel industry.

Outlook

Having seen earnings upgrades through the course of 2010, the UK equity market in aggregate has seen continuing earnings upgrades through the first quarter of 2011. The valuation that investors are placing on these earnings has remained low, reflecting scepticism over the sustainability of economic recovery. This is despite earnings estimates being driven by upgrades to top-line growth expectations, which should arguably command a higher rating than cost cutting-driven growth. While the UK equity market remains exposed to swings in macroeconomic sentiment, there is bottom-up support from continuing robust earnings momentum and balance sheet strength, neither of which appear to be priced in at current low valuations.  Overall, we remain positive on the prospects for UK equities for 2011.

Standard Life Investments Limited

Manager

13 May 2011

________________________________________________________________________________________________

PRINCIPAL RISKS AND UNCERTAINTIES

The Directors regularly review the principal risks which they have identified and the Directors have set out delegated controls designed to manage those risks. Key risks within investment and strategy, for example inappropriate stock selection or gearing, are managed through investment policy, guidelines and restrictions and by the process of oversight at each Board meeting.

The principal risks and uncertainties which give rise to specific risks which are associated with the Company, as identified by the Directors, are as follows:

-     Objective and Strategy Risk: the Company and its investment objective become unattractive to investors. The Directors review regularly the Company's investment objective and investment policy in the light of investor sentiment and monitor closely whether the Company should continue in its present form. The Directors, through the Manager, hold regular discussions with major shareholders. A resolution to continue the Company in its present form is put to shareholders at every fifth Annual General Meeting ("AGM") and will be next considered at the AGM in 2016.

-     Shareholder Profile Risk: activist shareholders, whose interests are not consistent with the long-term objectives of the Company, may be attracted onto the shareholder register. The Manager provides a shareholder analysis to the Directors at every meeting for their consideration of any action required in addition to regular reporting by the Company's stockbroker.

-     Resource Risk: in common with most investment trusts, the Company has no employees. The Company therefore relies upon services provided by third parties. This particularly includes the Manager, to whom responsibility for the management of the Company has been delegated under an investment management agreement. The Directors review the performance of the Manager on a regular basis.

-     Investment and Market Risk: The Company is exposed to the effect of variations in share prices due to the nature of its business. A fall in the value of its investment portfolio will have an adverse effect on the value of shareholders' funds.

-     Capital Structure and Gearing Risk: The Company's capital structure at 31 March 2011 consisted of equity share capital comprising ordinary shares and debt in the form of a revolving credit facility with The Royal Bank of Scotland plc for up to £20m. In rising markets, the effect of the borrowings would be beneficial but in falling markets the gearing effect would adversely affect returns to shareholders. The Manager is able to increase or decrease the gearing level by repaying or drawing down periodically from the bank facility subject to Directors' overall restrictions on gearing. The bank facility is subject to regular monitoring by The Royal Bank of Scotland plc and covenants are supplied monthly to the bank by the Company.

-     Income and Dividend Risk: In view of the Company's investment objective, to provide for shareholders an above average income from their equity investment, the Manager is required to strike a balance more in favour of income return over capital growth. The Directors have adopted an accounting policy which permits 70% of the aggregate of the finance costs and investment management fees to be charged to the capital account within the Income Statement as opposed to the revenue account. This policy is reviewed regularly by the Directors in light of the expected long term split of returns between income and capital. The Directors receive frequent updates as to the progress made by the Manager towards the achievement of the income requirements of the Company's investment objective.

-     Regulatory Risk: The Company operates in a complex regulatory environment and faces a number of regulatory risks. A breach of Section 1158 of the Corporation Tax Act 2010 (formerly Section 842 of the Income and Corporation Taxes Act 1988) would result in the Company being subject to capital gains tax on any portfolio investment gains. Breaches of other regulations, including the UKLA Listing Rules or the UKLA Disclosure and Transparency Rules, could lead to a number of detrimental outcomes and reputational damage. Breaches of controls by service providers such as the Manager and Company Secretary could also lead to reputational damage or loss.

-     The Directors have adopted a robust framework of controls which is designed to monitor the principal risks facing the Company and to provide a monitoring system to enable the Directors to mitigate these risks as far as possible.

Going Concern

The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In considering this, the Directors took into account the diversified portfolio of readily realisable securities which can be used to meet short-term funding commitments, and the ability of the Company to meet all of its liabilities and ongoing expenses. Accordingly it is reasonable for the Financial Statements to continue to be prepared on a going concern basis.

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INCOME STATEMENT

		Six months ended 31 March 2011 (unaudited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Net gains on investments at fair value		-	8,498	8,498
Income	2	2,058	-	2,058
Investment management fee		(131)	(305)	(436)
VAT recovered on investment management fees	11	291	-	291
Administrative expenses		(143)	(281)	(424)
		_________	_________	_________
Net return before finance costs and taxation		2,075	7,912	9,987
Finance costs		(62)	(144)	(206)
		_________	_________	_________
Return on ordinary activities before taxation		2,013	7,768	9,781
Taxation on ordinary activities	3	(8)	-	(8)
		_________	_________	_________
Return on ordinary activities after taxation		2,005	7,768	9,773
		_________	_________	_________
Return per ordinary share	5	5.29p	20.48p	25.77p
		_________	_________	_________

The total column of this statement represents the profit and loss account of the Company.

The Company has no recognised gains or losses other than those recognised in the Income Statement above.

All revenue and capital items in the above statement derive from continuing operations.

The accompanying notes are an integral part of the financial statements.

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INCOME STATEMENT (Cont'd)

	Six months ended 31 March 2010 (unaudited)			Year ended 30 September 2010 (audited)
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Net gains on investments at fair value	-	10,578	10,578	-	8,261	8,261
Income	2,320	-	2,320	4,715	-	4,715
Investment management fee	(119)	(277)	(396)	(234)	(545)	(779)
VAT recovered on investment management fees	-	-	-	-	-	-
Administrative expenses	(155)	-	(155)	(226)	-	(226)
	_________	________	________	________	________	________
Net return before finance costs and taxation	2,046	10,301	12,347	4,255	7,716	11,971
Finance costs	(26)	(61)	(87)	(55)	(127)	(182)
	_________	________	________	________	________	________
Return on ordinary activities before taxation	2,020	10,240	12,260	4,200	7,589	11,789
Taxation on ordinary activities	-	-	-	(11)	-	(11)
	_________	________	________	________	________	________
Return on ordinary activities after taxation	2,020	10,240	12,260	4,189	7,589	11,778
	_________	________	________	________	________	________
Return per ordinary share	5.33p	27.00p	32.33p	11.04p	20.01p	31.05p
	_________	________	________	________	________	________

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RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
Six months ended 31 March 2011 (unaudited)	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2010		9,935	20,373	12,615	64,829	5,949	113,701
Return on ordinary activities after taxation		-	-	-	7,768	2,005	9,773
Dividends paid	4	-	-	-	-	(3,281)	(3,281)
		_________	________	________	________	________	________
Balance at 31 March 2011		9,935	20,373	12,615	72,597	4,673	120,193
		_________	________	________	________	________	________
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
Six months ended 31 March 2010 (unaudited)		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009		9,935	20,373	12,615	57,240	6,139	106,302
Return on ordinary activities after taxation		-	-	-	10,240	2,020	12,260
Dividends paid	4	-	-	-	-	(4,379)	(4,379)
		_________	________	________	________	________	________
Balance at 31 March 2010		9,935	20,373	12,615	67,480	3,780	114,183
		_________	________	________	________	________	________
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
Year ended 30 September 2010 (audited)		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 September 2009		9,935	20,373	12,615	57,240	6,139	106,302
Return on ordinary activities after taxation		-	-	-	7,589	4,189	11,778
Dividends paid	4	-	-	-	-	(4,379)	(4,379)
		_________	________	________	________	________	________
Balance at 30 September 2010		9,935	20,373	12,615	64,829	5,949	113,701
		_________	________	________	________	________	________

_______________________________________________________________________________________________________

BALANCE SHEET

		As at	As at	As at
		31 March 2011	31 March 2010	30 September 2010
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Fixed assets
Investments at fair value through profit or loss		132,441	122,734	124,322
		_________	_________	_________
Current assets
Debtors		874	848	1,036
AAA money market funds		2,237	1,640	1,695
Cash at bank and in hand		106	74	226
		_________	_________	_________
		3,217	2,562	2,957
		_________	_________	_________
Creditors: amounts falling due within one year
Bank loan		(15,000)	(10,750)	(12,750)
Other creditors		(465)	(363)	(828)
		_________	_________	_________
		(15,465)	(11,113)	(13,578)
		_________	_________	_________
Net current liabilities		(12,248)	(8,551)	(10,621)
		_________	_________	_________
Net assets		120,193	114,183	113,701
		_________	_________	_________
Capital and reserves
Called-up share capital		9,935	9,935	9,935
Share premium account		20,373	20,373	20,373
Capital redemption reserve		12,615	12,615	12,615
Capital reserve	6	72,597	67,480	64,829
Revenue reserve		4,673	3,780	5,949
		_________	_________	_________
Equity shareholders' funds		120,193	114,183	113,701
		_________	_________	_________
Net asset value per ordinary share	7	316.88p	301.03p	299.76p
		_________	_________	_________

CASHFLOW STATEMENT

	Six months	Six months	Year
	ended	ended	ended
	31 March	31 March	30 September
	2011	2010	2010
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net return on ordinary activities before finance costs and taxation	9,987	12,347	11,971
Adjustments for:
Gains on investments at fair value	(8,498)	(10,578)	(8,261)
Decrease/(increase) in accrued income	54	(336)	(200)
Increase in other debtors	(7)	(9)	(2)
(Decrease)/increase in other creditors	(23)	17	7
	_________	_________	_________
Net cash inflow from operating activities	1,513	1,441	3,515
Net cash outflow from servicing of finance	(205)	(80)	(177)
Net tax paid	(10)	-	(17)
Net cash inflow/(outflow) from financial investment	155	2,237	(1,516)
Equity dividends paid	(3,281)	(4,379)	(4,379)
Net cash outflow from management of liquid resources	(542)	(904)	(958)
	_________	_________	_________
Net cash outflow before financing	(2,370)	(1,685)	(3,532)
Net cash inflow from financing	2,250	1,750	3,750
	_________	_________	_________
(Decrease)/increase in cash	(120)	65	218
	_________	_________	_________
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash as above	(120)	65	218
Net change in liquid resources	542	904	958
Drawdown of loan	(2,250)	(1,750)	(3,750)
	_________	_________	_________
Movement in net debt in the period	(1,828)	(781)	(2,574)
Opening net debt	(10,829)	(8,255)	(8,255)
	_________	_________	_________
Closing net debt	(12,657)	(9,036)	(10,829)
	_________	_________	_________
Represented by:
Cash at bank and in hand	106	74	226
AAA money market funds	2,237	1,640	1,695
Bank loan	(15,000)	(10,750)	(12,750)
	_________	_________	_________
	(12,657)	(9,036)	(10,829)
	_________	_________	_________

______________________________________________________________________________________________________

NOTES TO THE FINANCIAL STATEMENTS

1.       Accounting policies

(a)   Basis of accounting

       The accounts have been prepared in accordance with applicable UK Accounting Standards, with pronouncements on half-yearly reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice for "Financial Statements of Investment Trust Companies and Venture Capital Trusts", issued in January 2009. They have also been prepared on the assumption that approval as an investment trust will continue to be granted.

       The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice (UK GAAP) and using the same accounting policies as the preceding annual accounts.

(b)   Dividends payable

       Dividends are recognised in the period in which they are paid.

		Six months	Six months	Year
		ended	ended	ended
		31 March	31 March	30 September
		2011	2010	2010
2.	Income	£'000	£'000	£'000
	Income from investments
	Franked investment income	1,941	2,230	4,398
	Overseas and unfranked investment income	97	69	151
		_________	_________	_________
		2,038	2,299	4,549
		_________	_________	_________
	Other income
	AAA money market interest	5	4	9
	Interest from HMRC	-	-	112
	Underwriting commission	15	17	45
		_________	_________	_________
		20	21	166
		_________	_________	_________
		2,058	2,320	4,715
		_________	_________	_________

3.       Taxation on ordinary activities

The taxation charge for the period represents withholding tax suffered on overseas dividend income.

		Six months	Six months	Year
		ended	ended	ended
		31 March	31 March	30 September
		2011	2010	2010
4.	Dividends	£'000	£'000	£'000
	Ordinary dividends on equity shares deducted from reserves:
	Final dividend for 2010 of 8.65p per share (2009 - 8.40p)	3,281	3,186	3,186
	Interim dividend for 2010 of 3.15p per share	-	1,195	1,195
	Refund of unclaimed dividends from previous periods	-	(2)	(2)
		_________	_________	_________
		3,281	4,379	4,379
		_________	_________	_________

		Six months	Six months	Year
		ended	ended	ended
		31 March	31 March	30 September
		2011	2010	2010
5.	Return per ordinary share	p	p	p
	Revenue return	5.29	5.33	11.04
	Capital return	20.48	27.00	20.01
		_________	_________	_________
	Total return	25.77	32.33	31.05
		_________	_________	_________
	The figures above are based on the following figures:
		£'000	£'000	£'000
	Revenue return	2,005	2,020	4,189
	Capital return	7,768	10,240	7,589
		_________	_________	_________
	Total return	9,773	12,260	11,778
		_________	_________	_________
	Weighted average number of ordinary shares*	37,930,579	37,930,579	37,930,579
		_________	_________	_________

* Calculated excluding shares held in treasury.

On the basis set out in Financial Reporting Standard 22 "Earnings per Share", there is no dilutive effect on net revenue or net capital per share in the current year, arising from the exercise of the subscription shares as detailed in note 8. There were no dilutive potential ordinary shares in issue at 31 March 2010 and 30 September 2010.

6.	Capital reserve The capital reserve figure reflected in the Balance Sheet includes investment holdings gains at the period end of £18,985,000 (31 March 2010 - gains of £15,439,000; 30 September 2010 - gains of £11,672,000).

		Six months	Six months	Year
		ended	ended	ended
		31 March	31 March	30 September
7.	Net asset value per ordinary share	2011	2010	2010
	Attributable net assets (£'000)	120,193	114,183	113,701
	Number of ordinary shares in issue*	37,930,579	37,930,579	37,930,579
	NAV per ordinary share (p)	316.88	301.03	299.76

*Excludes shares in issue held in treasury.

At 31 March 2011 there is no dilutive effect on net asset value per ordinary share, arising from the exercise of the subscription shares as detailed in note 8. There was no dilution to the net asset values at 31 March 2010 and 30 September 2010 as there were no dilutive potential ordinary shares in issue at those dates.

8.       Called-up share capital

On 17 December 2010 the Company issued 7,585,860 subscription shares by way of a bonus issue to the ordinary shareholders on the basis of one subscription share for every five ordinary shares.  Each subscription share confers the right, but not the obligation, to subscribe for one ordinary share on any subscription date, being the last business day of June and December in each year commencing June 2011 and finishing on the last business day of December in 2016, after which the rights under the subscription shares will lapse.  The conversion price has been determined as being 320p.

The expenses incurred in connection with the issue of the subscription shares amounted to £281,000 and these costs are shown in the capital column of the Income Statement.

9.	Transaction costs
	During the period expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
		Six months	Six months	Year
		ended	ended	ended
		31 March	31 March	30 September
		2011	2010	2010
		£'000	£'000	£'000
	Purchases	63	72	175
	Sales	16	19	36
		_________	_________	_________
		79	91	211
		_________	_________	_________

10.

Half-Yearly Financial Report

The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434-436 of the Companies Act 2006. The financial information for the six months ended 31 March 2011 and 31 March 2010 has not been audited. The information for the year ended 30 September 2010 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006.

11.

VAT recoverable on investment management fees

On 5 November 2007, the European Court of Justice ruled that management fees should be exempt from VAT. HMRC announced its intention not to appeal against this case to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company have now been processed by HMRC. The VAT charged on the investment management fees has been refunded by Deutsche Asset Management (UK) Limited, the former Investment Manager, in stages.  An amount of £609,000 (excluding simple interest) relating to the period 2001 to 2005 (date of termination) was recognised in the financial statements for the year ended 30 September 2009.  A further amount of £291,000 (excluding simple interest) has been recognised in these financial statements which represents the VAT charged on investment management fees for the period 1990 to 1996.  These repayments were allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged. A refund of £204,000 of VAT relating to the period 2006 to 2007 was made to the Company by Standard Life (Corporate Funds) Limited in the year to 30 September 2008. This repayment was allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged. Interest of £21,000 and £112,000 on the repaid VAT was recognised in the financial statements for the years ended 30 September 2009 and 30 September 2010, respectively. Subsequent to the period end HMRC advised that the Company was due an amount of £193,000 relating to interest calculated on a simple basis on VAT reclaimed on investment management fees. At the date of signing this report receipt of the monies due remains outstanding and this amount has not been recognised within these financial statements.

12.  This Half-Yearly Financial Report was approved by the Board on 13 May 2011 and the Half Yearly Report will be posted to shareholders at the beginning of June 2011 and will be available from the Secretary and the Manager, Standard Life Investments (www.standardlifeinvestments.co.uk/its).

For Aberdeen Asset Management PLC

SECRETARY

13 May 2011

Please note that past performance is not necessarily a guide to the future and the value of investments and the income from them may fall as well as rise.  Investors may not get back the amount they originally invested.

 

END

 

 

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