Annual Financial Report

RNS Number : 6156I

Standard Life UK Small.Co's Tst PLC

01 September 2016

STANDARD LIFE UK SMALLER COMPANIES TRUST PLC

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2016

1. CHAIRMAN'S STATEMENT

Performance

For the year ended 30 June 2016, the Company's diluted net asset value total return was 4.1%, compared with a total return of -6.6% for the Company's benchmark. Despite recent market volatility, the Company's long-term performance remains strong. Indeed, since the appointment of Standard Life Investments on 1 September 2003, the Company has delivered a diluted net asset value total return of 506.5%, representing an annualised return of 15.1% and outperforming the Company's benchmark, the Numis Smaller Companies Index (excluding investment companies), by 4.0% per annum.

	1 Year	5 Years	10 Years	Since SLI Inception
Diluted net asset value total return	4.1%	54.6%	233.7%	506.5%
Share price total return	7.2%	44.3%	260.1%	697.8%
Benchmark total return	-6.6%	56.7%	122.6%	286.1%
Peer group ranking	1/13	8/11	1/10	1/9

Sources: Thomson Datastream and JP Morgan Cazenove

The Investment Manager's Report provides further information on stock performance and portfolio activity during the year, as well as the Investment Manager's outlook for smaller companies. The Board agrees with the Investment Manager's view that our emphasis on risk aversion, resilience, growth and momentum still feels right for the future but also that patient investors will be rewarded in the longer term.

Earnings and Dividend

The revenue return per share for the year ended 30 June 2016 was 6.76p (2015 - 6.76p). Despite a significant reduction in special dividends received this year, (£579,000 compared to £1,428,000 last year), underlying income from investments remained strong and increased by 13.5%. The Board is recommending a final dividend of 5.20p per share, an increase on last year's final dividend of 18.2%. If approved, the final dividend, together with the interim dividend of 1.40p paid in April, will give a total dividend for the year of 6.60p and will represent an increase of 13.8% on last year.

Subject to shareholder approval at the Annual General Meeting on 27 October 2016, the final dividend will be paid on 3 November 2016 to shareholders on the register as at 23 September 2016 with an associated ex-dividend date of 22 September 2016.

Investment Manager

The Board believes that the appointment of Standard Life Investments as Investment Manager continues to be in the long-term interests of shareholders. Harry Nimmo, Head of the Smaller Companies investment team at Standard Life Investments, has been the lead manager of the Company's investment portfolio since 2003 and his strong performance record gives the Board confidence in the ability of the Investment Manager to continue to deliver attractive long-term returns for shareholders. Harry has confirmed his current intention to manage the Company's assets on behalf of Standard Life Investments for at least the next six years.

With effect from 1 January 2016 a tiered management fee was introduced with 0.85% per annum applying to the first £250m of the Company's total assets and a reduced fee of 0.65% per annum applying above this

£250m threshold.

Gearing

The Board has given the Investment Manager discretion to vary the level of gearing between a net cash position of 5% and net gearing of 25% of net assets, depending on the Investment Manager's view of the outlook for smaller companies.

The Company currently has £16.3 million 3.5% Convertible Unsecured Loan Stock 2018 (CULS) in issue and the Investment Manager is able to vary net gearing by adjusting the level of cash held by the Company. At 30 June 2016, the net gearing or borrowing level was 3.6%.

As a reminder to holders of the CULS, these can be converted into Ordinary shares on 30 September and 31 March of each year up to March 2018, at a fixed price per Ordinary share of 237.2542p.

Issue of Shares

During the year the Company issued 1,473,384 Ordinary shares from treasury as a result of CULS conversions.

Discount

The discount at which the Company's shares trade relative to the diluted net asset value was 8.5% at 30 June 2016. The Company's shares have traded at an average discount of 4.3% over the year ended 30 June 2016. This compares with the average peer group discount of 9.1% for the same period.

Share Buy-Backs and Tender Offers

The Board aims to maintain a discount level of less than 8% to diluted net asset value under normal market conditions. In pursuit of this objective, the Board closely monitors the level of the discount and buys back shares in the market when it believes it is in the best interests of shareholders as a whole to do so. At each AGM, the Board seeks shareholder approval to buy-back up to 14.99% of the Company's share capital.

The Company also has a tender offer mechanism in place and the Board intends to continue to seek shareholder approval to enable it to carry out tender offers on a discretionary basis in circumstances where the Board believes that share buy-backs are not sufficient to maintain the discount at an appropriate level.

The Board last exercised its discretion and conducted a tender offer in July 2015. 3,470,930 shares were tendered on 28 July 2015 at a price of 322.66p per share and placed into treasury.

Board Succession Planning

Immediate past Chairman, Donald MacDonald retired from the Board in February 2016 and I acknowledged his contribution to the Company in my statement at the time of the interim results. At that time I also intimated Lynn Ruddick's intention to retire from the Board following the conclusion of the AGM in October. Lynn was a director of the

Gartmore Smaller Companies Trust and joined our Company when the two trusts merged in 2009. Lynn has been a thoughtful, hardworking Director whose contributions have always been of huge value. Additionally she chaired the Audit Committee for a period and was a powerful force for modernisation and positive change in the work of that Committee.

Mindful of the loss of these Directors during this year, the Nominations Committee implemented a search for two appropriate replacements and I am pleased to tell you that Caroline Ramsay was appointed to the Board on 22 August 2016 and will be proposed for election at the AGM. Caroline is a chartered accountant who has spent most of her executive career in the financial services industry with Aviva Plc and RSA Plc. I am confident that Caroline will make a large contribution to the work of your Board.

We hope to be able to update you on a second appointment later this year.

AGM and London Presentation

The Annual General Meeting of the Company will be held at the offices of the Investment Manager, Standard Life Investments, 30 St Mary Axe, London EC3A 8EP on Thursday, 27 October 2016. The meeting will start at 12.30pm and will include a presentation from the Investment Manager. The Notice of Annual General Meeting can be found in the Annual Report.

Outlook

Shareholders will be aware of the result of the recent referendum, in which the electorate expressed the wish that the UK should leave the European Union. Although the full impact of this decision will become clearer over the coming months, the Board remains confident in the outlook for the Company over the long term.

The Investment Manager's investment process has delivered excellent returns for shareholders. We expect the portfolio to continue to deliver strong earnings and dividend growth. The emphasis on risk aversion, quality and resilience, growth and momentum remains intact.

David Woods

Chairman

31 August 2016

2. INVESTMENT MANAGER'S REPORT

The UK smaller companies sector as represented by the Numis Smaller Companies Index (excluding Investment Companies) fell by 6.6% in total return terms over the year to 30 June 2016. This compares with a net asset value total return for the Company of 4.1% and a share price total return of 7.2%. Over the same period the FTSE100 Index of the largest UK listed companies rose by 3.8%. Standard Life Investments has managed the Company since 1 September 2003. The Company's share price at that time was 47.75p. The share price total return has been 697.8% from then to the current period end compared with our benchmark total return of 286.1%. The FTSE100 total return was 148.6% over the same period.

Equity markets

Equity markets commenced the year by drifting downwards as investors obsessed about the slow-down in the Chinese economy. A general theory took hold that this was due to the Chinese Authorities displaying naivety and ineptitude in stage-managing their economy. The oil and copper prices were barometers of pessimism surrounding the Chinese economic slowdown. As China develops they no longer require the ever increasing amounts of energy and industrial minerals to grow their economies as the pace of urbanisation and infrastructure projects wind down.

The oil price fell to a low of $28 in January 2016, nearly a 75% decline on the price at the middle of 2014 and bears close comparison with the 1986 collapse to which there are real parallels. The January low point however heralded a recovery by June 2016 to over $50. At last the fall in oil price had an impact on the rig count and production in the US where the new technique of "fracking" has had such an impact on US production capacity.

By contrast the UK performed well under the management of the "safe hands" of Chancellor George Osborne and Governor of the Bank of England Mark Carney. Clearly this was also helped by record low unemployment and the low oil price consumer spending dividend. The Autumn reporting season was a benign one for UK orientated businesses.

There was also general concern over the search for income in an era of very low inflation and the rise of high yield low grade debt. Banks internationally have been aggressive lenders again and at very fine terms. We saw the first interest rate rise in the US at the end of the year which concentrated the mind of investors on the prospect of a more normal interest rate environment and the probability of steadily rising rates.

By January 2016 worry about the Chinese economy had waned and been replaced by concern over opinion polls suggesting that the "leave" vote in the UK's European Union (EU) Referendum was closing in on the "remain" majority. Mineral prices started to rise at the same time as oil with modest gains for copper and iron ore. The gold price also moved ahead. This had more to do with fears over the UK leaving the EU.

The EU Referendum vote result was not widely predicted by financial markets and sent small and medium sized companies with exposure to the UK economic cycle into an instant tailspin and led to dramatic outperformance by the internationally orientated FTSE100 larger companies index over the UK heavy smaller companies indices, by as much as 10% in 2016. The political chaos that ensued was only stemmed by the announcement of the appointment of Theresa May as the new United Kingdom Prime Minister just after the year end.

Corporate profits from the UK Consumer sector were starting to run out of steam by the second quarter of calendar 2016 with warnings from leaders Next and Marks & Spencer.

Performance

The second half of calendar 2015 was a period of exceptional out-performance for the Company in terms of the net asset value but especially for the share price which rose 27.8% as the benchmark Numis Smaller companies Index (ex-investment trusts) actually fell by 2.4%. This glorious period of out-performance was magnified by a dramatic narrowing of the discount. By December the Company's shares regained the status of trading at a premium to net asset value albeit for a brief period. The key drivers were the Company's lack of exposure to Oil & Gas, Mining and Engineering stocks. Helpfully the Company was heavily exposed to the UK consumer, through Retailers, Leisure and Media, also growth sectors like Software and Healthcare and UK orientated sectors in general such as Real Estate and Financials.

Bid activity played a part. Our substantial holding in Quintain Estates and Development was acquired by Lone Star of Texas. Furthermore, the PaddyPower/Betfair combination was seen as a very powerful player in the on-line sports betting market going forward. Not owning retailer Darty and electronics distributor Premier Farnell hurt performance in June.

January however brought a change of fortune. What had been good in 2015 became bad in 2016 and vice versa. Our extreme underweight position in Resource stocks was very negative. Also of note was that selected Real Estate, Consumer Cyclical and Financial stocks held back performance. It is fair to say that our overweight position in Retailers, albeit high quality growth retailers, held back performance.

Our five leading performers in the year were:-

Fevertree Drinks managed to come out with at least three "profit warnings" where they stated that earnings would be significantly ahead of expectations as they continue to gain share as a result of the premium gin revolution around the world. Consumers have been impressed by the quality and provenance of Fevertree in comparison with erstwhile market leaders Schweppes and Britvic and the shares rose by 153% over the year.

Accesso Technologies, the world leader in "queuing technologies" through smart phones for visitor attractions, signed a breakthrough contract with the world's second biggest theme park operator Merlin. This deal promises to be transformational. The shares rose by 106% during the period in question.

NMC Healthcare, the Abu Dhabi based healthcare provider traded strongly as it started to benefit from changes in the law in Dubai which now obliges companies to provide health cover for all their foreign workers.

Abcam, the leading supplier of antibodies on-line to research scientists worldwide, performed very strongly. As a UK exporter of over 90% of their products, the weakness of Sterling is very beneficial. It may be of interest to shareholders that these shares were first purchased in 2007 at a price of around 65p compared with 770p on the 30 June 2016.

PaddyPower, has rocketed following the merger announcement with Betfair. Paddy's superlative marketing prowess combined with Betfair's unique betting exchange capabilities opens up intriguing "price rush" and margin enhancement possibilities. This share has returned in excess of 1100% since it was first bought in December 2004.

Other strong performers included GB Group, the identity verification company, JD Sports Fashion, the branded footwear led retailer who is expanding rapidly into Continental Europe, Mattioli Woods, the wealth manager, Sanne Group, the specialist fund administrator and First Derivatives, the financial regulation big data software provider.

Unusually for this Company it is Numis benchmark constituents that we didn't own that caused the problems. Not owning Al Noor, the other Abu Dhabi based healthcare group that was acquired by Mediclinic, was negative. This vast combined entity with a market capitalisation of over £8 billion performed strongly as it trades in non-Sterling jurisdictions. Not owning Evraz, the Russian integrated iron & steel company was negative as ore price rose in 2016. Centamin plc, which operates a single gold mine in Egypt, rose strongly alongside the gold price in 2016.

Restaurant Group announced a series of profit warnings as its lead format Frankie & Bennys started to run out of steam. Workspace, the London based managed work centre company, has been sold off as it is perceived to be exposed to the weakness in the secondary London property market.

Dealing and Activity

The five largest additions to the portfolio were as follows:-

Dart Group:- This founder run business (Philip Meeson) is the owner of Jet2 airlines and Jet2holidays.com. Their business is flights and holidays from seven northern UK airports mainly to the western Mediterranean. The shares have been hit by the weakness of Sterling since 23 June. However their results of 14th July stated that the new financial year had started strongly. 50% of the seats on their flights are filled by customers who take the hotel package through Jet2holidays.com. Jet2 focuses on service and value, having a higher net promoter score than its competitors. They hedge oil & currency 12 months ahead and will benefit when they take delivery of their soon to arrive newer, more efficient aircraft.

Headlam Group:- This company dominates the distribution of floor coverings in the UK focusing on service levels and stocks holding. Margins are still significantly below their peak in 2007. The company has started to pay special dividends with excess cash.

Next Fifteen Communications:- This is an IT led PR firm with the bulk of sales in North America. It has strong relationships with leading technology firms and is a beneficiary of a weaker Sterling.

JD Sports Fashion:- This branded footwear fashion led sports retailer is starting to gain traction in Continental Europe, which now accounts for 20% of sales. The UK business is performing strongly in contrast to others in this sector.

Hill & Smith:- The company manufactures and supplies a range of products, much of it related to safety that one might find in the construction and maintenance of road infrastructure. They also have a major regional galvanising business in north east USA. Plenty of growth is likely as infrastructure spend in the UK is seen as a priority.

The year in question was a big year for new issues in the Company. An unusually large number of high quality founder run businesses have been listing. Our view is that founders who have been able to build their businesses to the size when they can list on the stock market have very special and positive characteristics for the future development of these businesses. These companies normally have strong and stable corporate cultures. The businesses have generally grown organically without the need to resort to private equity. A feature of these businesses has been customer service, product provenance and long-term brand development. (It should be noted that Fevertree Drinks which was easily the best performer in the Company this year was a new issue from late 2014.)

The new issues the Company bought into include:- Motorpoint, the used car dealer, Midwich, the distributor of technology led, large scale audio-visual products and European market leader, Hotel Chocolat, the upscale chocolate products retailer, Joules Group, the British premium lifestyle brand, The Gym Group, in value for money gyms and Kainos, the Ulster based Government orientated digital services company.

Our key sales were:-

The largest sale in the period in question was PaddyPower/Betfair. Special mention is required for this on-line brand led sport betting pioneer. This holding has been in the portfolio since December 2004 and has made twelve times the money invested over the period. Our view is that they are a good example of the adage that the real money in smaller companies is made owning great companies for extended periods. Quintain Estates & Development was sold following a cash bid from the private equity firm Lone Star of Texas. Clinigen, the emerging pharmaceutical company was sold following a deteriorating matrix score. Likewise Clarkson the ship broker and Restaurant Group was sold as its restaurant formats ran out of steam.

Eight other holdings were sold completely. BTG, the research led pharmaceutical company, was sold as it no longer qualifies as a small company. Latchways was sold following the cash bid from MSA safety. Moss Bros was sold as the matrix score fell, likewise Staffline in recruitment, Amerisur Resources the Colombian oil producer, Gulf Marine Services, Cambian Group in psychiatric care and Skyepharma, the drug developer. Good profits were made selling our long-term holding in AG Barr, the owner of the Barr's Irn Bru brand.

Outlook

A future outside the EU and a tortuous process of disengagement does not, on the face of it, bode well for UK Listed Smaller Companies. Economists are working overtime trying to make sense of it all and many different answers are forthcoming although the overwhelming preponderance is towards the negative. The IMF has reduced its UK GDP growth forecast by 0.2% in 2016 followed by 1.3% growth in 2017. This hardly seems like the end of the world. None of them see it as a good thing except perhaps a small minority in the very long term. That said things will not grind to a halt, there will be winners and losers. Our hunch is that the strong will get stronger and the weak will get weaker.

Our prognosis on the oil price is that it will remain in a trading range of $30 to $60 for a number of years. A similar pattern may become apparent in industrial minerals although gold may remain firm in this rather uncertain period.

The most recent economic data is unsurprisingly weak both in terms of consumer and business confidence. Although on the positive side the political vacuum seems to have been filled there still remains the uncertainty of the disentanglement process.

Within Europe the economic outlook seems uncertain. An EU without the UK is a weaker entity. Many small European nations, particularly in Northern Europe were counting on the UK as a counterweight to the might of Germany. The Italian banking industry is in a mess. The Euro may yet have to face up to further crises if Greece and other peripheral economies can't mend their ways.

The immediate aftermath of the EU Referendum vote displayed indiscriminate selling which impacted the Company as much as anyone else. Our view is that as companies report it will be "as the shepherd sorts the sheep from the goats". Our high quality growth companies should continue to report resilient progress as the lower grade businesses struggle. Our best period of relative performance was during the very challenging 2007 and 2008 period. That said, at the time of going to print, there has been a recovery in consumer and business confidence in the UK which suggests that the impact of the EU referendum vote may be muted in the near term.

It sometimes feels that capitalism is failing when one reviews the list of well documented scandals surrounding some of UK's largest companies. However I remain very positive on the outlook for UK Smaller Companies. This view has been strengthened over the last 20 months by an unusual succession of high quality companies newly listing on the London Stock Exchange leading me to the view that for smaller companies at least capitalism is alive and kicking and creating wealth and jobs within the United Kingdom and beyond where innovation and business development are being correctly rewarded. The Company has participated in nine high quality new issues in that period. Indeed 19 new holdings in the sub £250m (when purchased), have been added, representing very much the "new wave" of British smaller companies. They now make up around a third of the portfolio from the bottom 20% of the size band described by the Numis Smaller Companies Index (ex- Investment Companies). Fully twelve out of these nineteen companies are founder run. A preponderance of them are technology led. Out of the other seven the chief executive has been on the board for on average 11 years. A preponderance of them are technology, customer service and brand led. These are tomorrow's larger companies.

The process remains unchanged. The emphasis on risk aversion, resilience, growth and momentum still feels right for the future. Caution should be the watch-word however. The surprisingly good out-turn of smaller companies since the referendum on the EU may wilt if there is any sign of real weakness in the UK economy.

Smaller company investing should be viewed as a long-term investment and we have no doubt that patient investors will be rewarded in the longer term. Our stable process has been seasoned by fully four economic cycles. I remain very optimistic about the long-term performance of the Company.

Harry Nimmo

Standard Life Investments, Investment Manager

31 August 2016

3. BUSINESS REVIEW

The Strategic Report, which includes this Business Review, the Financial Highlights, the Chairman's Statement and the Investment Manager's Report, has been prepared by the Directors in accordance with Section 414 of the Companies Act 2006, as amended. The Company's Auditor is required to confirm that this report is consistent with the Financial Statements.

The Board

The Board is responsible for setting and monitoring the Company's strategy. As at 30 June 2016, the Board consisted of four non-executive Directors, two men and two women. Ms Caroline Ramsay was appointed to the Board on 22 August 2016. The names and biographies of the Directors, as set out in the section on the Board of Directors in the Annual Report, indicate their range of investment, commercial and professional experience.

Investment Objective

The Company aims to achieve long-term capital growth by investment in UK quoted smaller companies.

Business Model and Investment Policy

The Company is an investment trust which invests in accordance with the objective stated above. It has no employees and outsources its management function to its Investment Manager, Standard Life Investments (Corporate Funds) Limited ('the Manager').

To achieve its investment objective the Company invests in a diversified portfolio consisting mainly of UK quoted smaller companies. The portfolio will normally comprise around 60 individual holdings representing the Manager's highest conviction investment ideas. In order to reduce risk in the Company without compromising flexibility, no holding within the portfolio should exceed 5% of total assets at the time of acquisition.

The Company may use derivatives for portfolio hedging purposes (i.e. only for the purpose of reducing risk in its investments in order to protect the Company's portfolio).

The Company is adhering to its stated investment policy and is managing the risks arising from it. This is illustrated in various tables and charts throughout the Annual Report, and from the information provided in the Chairman's Statement and in the Investment Manager's Report.

Gearing Policy

Within the Company's Articles of Association, the maximum level of gearing is 100% of net assets. The Directors' policy is that gearing will be between 5% net cash and 25% net gearing (at the time of drawdown) in normal market conditions. The Directors have delegated responsibility to the Manager for the operation of the gearing level within the above parameters.

The Board regularly reviews gearing which was a net geared position of 3.6% as at 30 June 2016 (2015: 4.1%). Gearing is calculated as the liability component of the Convertible Unsecured Loan Stock 2018 (CULS) less cash balances and money market funds, as a proportion of net assets.

Manager's Investment Process

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 the Manager's distinctive "focus on change" which recognises that different factors drive individual stocks and markets at different times in the business cycle. This flexible, but disciplined, process ensures that the Manager has the opportunity to out-perform in different market conditions.

Results and Dividend

The Company's results and performance for the year are detailed in the Financial Highlights.

The total revenue return attributable to shareholders for the year ended 30 June 2016 amounted to £4,505,000

(2015: £4,784,000).

An interim dividend of 1.40 pence per share (2015: 1.40 pence) was paid on 7 April 2016 to shareholders on the register as at 11 March 2016. The ex-dividend date was 10 March 2016.

The Directors are recommending to shareholders that a final Ordinary dividend of 5.20 pence per share (2015: 4.40 pence) be paid on 3 November 2016 to shareholders on the share register as at the close of business on 23 September 2016. The ex-dividend date is 22 September 2016.

If approved, the final dividend together with the interim dividend paid in April will give a total dividend for the year of 6.60 pence per share (2015: 5.80 pence).

Details of the final Ordinary and Interim dividends paid during the year ended 30 June 2016 are disclosed in Note 7 to the Financial Statements.

Review of Performance

For the year ended 30 June 2016, the Company's diluted net asset value total return was 4.1%, compared to a total return of -6.6% for the Company's benchmark, the Numis Smaller Companies Index (excluding Investment Companies). For the five years to 30 June 2016, the Company's diluted net asset value total return was 54.6%, compared to 56.7% for the benchmark.

The Board considers performance with the Manager at every meeting. As well as carrying out the matters reserved to the Board as set out in the Statement of Corporate Governance in the Annual Report, the Board receives a detailed portfolio report for each meeting, sets the overall strategy for the Company and establishes the extent to which the Company is successful in achieving its objectives, as measured by key performance indicators.

Key Performance Indicators (KPIs)

The three KPIs by which performance is measured are as follows:

• diluted net asset value total return relative to the Company's benchmark with particular attention to long-term performance, which is considered by the Board to be over a period of five years;

• Ordinary share price (total return); and

• discount or premium of the Ordinary share price to underlying net asset value.

A record of these KPIs, for the year under review, is included in the financial highlights.

A review of the Company's performance, market background, investment activity and portfolio strategy during the year under review, as well as the Manager's investment outlook, is provided in the Investment Manager's Report.

Principal Risks and Uncertainties

The Board regularly reviews the principal risks and uncertainties facing the Company which the Board and the Manager have identified and the Board sets out delegated controls designed to manage those risks and uncertainties. Key risks within investment strategy, including inappropriate stock selection and gearing, are managed by the Board through a defined investment policy, with guidelines and restrictions, and by the process of oversight at each Board meeting. Operational disruption, accounting and legal risks are also covered at least annually and regulatory compliance is reviewed at each Board meeting.

The Directors have adopted a robust framework of internal controls which is designed to monitor the principal risks and uncertainties facing the Company and to provide a monitoring system to enable the Directors to mitigate these risks as far as possible. A description of the Directors' system of internal controls is set out in the Statement of Corporate Governance in the Annual Report.

The major risks associated with the Company are:

• 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.

Regular reports are received from the Manager on stock selection, sector allocation, gearing and market outlook. Investment performance is reviewed in detail and discussed with the Manager at each Board meeting.

• Capital structure and gearing risk: The Company's capital structure, as at 30 June 2016, consisted of equity share capital comprising 67,421,054 Ordinary shares and £16,276,812 nominal amount of CULS. The Company also held 4,206,121 Ordinary shares in treasury.

The effect of gearing should be beneficial in rising markets but could adversely affect returns to shareholders in falling markets. The Manager is able to increase or decrease the Company's level of net gearing by holding a lower or higher cash balance subject to the Company's investment policy which requires that gearing should remain between 5% net cash and 25% net gearing at the time of drawdown.

• Revenue and dividend risk: In view of the Company's investment objective, which is to generate long-term capital growth by investment in UK quoted smaller companies, the Manager aims to strike a balance more in favour of capital growth than revenue return. In normal circumstances, the Board intends to pay a dividend commensurate with the year's income. The Board receives regular updates as to the progress made by the Manager in generating a revenue return and the consequent level of the Company's anticipated dividend.

• 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 would result in the Company being subject to capital gains tax on portfolio investments. Breaches of other regulations, including the Companies Act 2006, 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 to the Company could also lead to reputational damage or loss.

There is also a further regulatory risk in ensuring compliance with the Alternative Investment Fund Managers Directive (AIFMD). In accordance with the requirements of the AIFMD, the Company appointed Standard Life Investments (Corporate Funds) Limited as its Alternative Investment Fund Manager (AIFM) and BNP Paribas Securities Services as its Depositary. The Board receives regular reporting from the AIFM and the Depositary to ensure both are meeting their regulatory responsibilities in relation to the Company.

On 3 July 2016 the EU's Market Abuse Regulation (MAR) came into force, replacing the Market Abuse Directive (MAD) in the UK, and is now applicable to all UK Listed and AIM quoted companies. The aim of MAR is to enhance market integrity and investor protection and, although on similar lines to MAD, its scope has been expanded to include financial instruments traded on multilateral trading facilities, organised trading facilities and certain 'over-the-counter' activities, and also introduced new rules on the disclosure of inside information, insider lists and share dealings by persons discharging managerial responsibilities. The Company anticipates that compliance with MAR will not have a significant impact but all relevant policies and procedures will be updated as appropriate.

• Supplier risk: In common with most investment trusts, the Company has no employees. The Company therefore relies upon services provided by third parties, including the Manager in particular, to whom responsibility for the management of the Company has been delegated under an Investment Management Agreement.

• Geopolitical risk: The Company is exposed to the effects of geopolitical instability or change, as this could have an adverse effect on stock markets. The Board and the Manager regularly review and discuss current geopolitical issues and seek appropriate expert advice, when necessary, in relation to managing any impacts on the Company.

The Board is mindful of the uncertainty following the UK's referendum decision to leave the EU and, along with the Manager, is closely monitoring any impact on the Company's share price, discount level and underlying investment performance.

Employee, Environmental and Human Rights Policy

As an investment trust, the Company has no direct employee or environmental responsibilities, nor is it responsible for the emission of greenhouse gases. Its principal responsibility to shareholders is to ensure that the investment portfolio is properly managed and invested. The Company has no employees and, accordingly, has no requirement to report separately on employment matters. The management of the portfolio is undertaken by the Manager. The Manager engages with the Company's underlying investee companies in relation to their corporate governance practices and in developing their policies on social, community and environmental matters and further information may be found in the Statement of Corporate Governance. The Manager's specific policies are outlined in their Governance and Stewardship Guidelines, which may be found on the Manager's website at http://www.standardlifeinvestments.com/CG_ Corporate_Governance_Booklet/getLatest.pdf In light of the nature of the Company's business, there are no relevant human rights issues and, therefore, the Company does not have a human rights policy.

Future Trends

The Company's smaller company portfolio features high quality growth stocks with visible, recurring revenue, which exhibit both earnings and price momentum. Given the availability of high quality companies at sustainable valuations, the Company continues to be positive about the long-term outlook for smaller companies.

Future Strategy

The Board and Manager intend to maintain the strategic policies set out above for the year ending 30 June 2017 as it is believed that these are in the best interests of shareholders.

Approval of the Strategic Report

The Strategic Report was approved by the Board of Directors on 31 August 2016 and signed on its behalf by:

David Woods

Chairman

31 August 2016

4. FINANCIAL HIGHLIGHTS

	Year to 30 June 2016
Diluted net asset value total return		4.1%
Share price total return		7.2%
Benchmark total return		-6.6%

	30 June 2016	30 June 2015	% change
Capital
Net asset value per Ordinary share (statutory)
- Basic	356.90p	349.73p	2.1%
- Diluted	345.43p	336.89p	2.5%
Share price	316.00p	300.00p	5.3%
Benchmark capital return	6,298.17	6,930.22	(9.1%)
Discount of Ordinary share price to net asset value	8.5%	10.9%
Total assets (£m)¹	256.59	261.94	(2.0%)
Shareholders' funds (£m)	240.63	242.78	(0.9%)
Ordinary shares in issue	67,421,054	69,418,600	(2.9%)

Gearing
Gearing²	3.6%	4.1%

CULS
CULS in issue	£16,276,812	£19,772,582	(17.7%)
CULS yield	2.7%	2.8%
CULS price	131.50p	125.00p	5.2%

Earnings and Dividends
Revenue return per Ordinary share	6.76p	6.76p	-
Interim dividend paid for the year	1.40p	1.40p	-
Proposed final Ordinary dividend for the year	5.20p	4.40p	18.2%
Total dividends for the year	6.60p	5.80p	13.8%
Dividend yield	2.1%	1.9%

Expenses
Ongoing charges³	1.13%	1.19%

¹Total assets less current liabilities, after excluding short-term debt of nil (2015 - nil).

² Net gearing ratio calculated as the total liability component of £16.0m (2015 - £19.2m) of the Convertible Unsecured Loan Stock less the cash invested in AAA money market funds and cash and short-term deposits, divided by net assets.

³ Ongoing charges ratio calculated in accordance with guidance issued by the AIC as the total of the investment management fee and administrative expenses divided by the average cum income net asset value throughout the year.

5. GOING CONCERN

The Company's assets consist of equity shares in companies listed on recognised stock exchanges and are considered by the Board to be realisable within a short timescale under normal market conditions. The Board has set overall limits for borrowing and regularly reviews the Company's level of gearing, cash flow projections and compliance with banking covenants, when applicable.

The Company had no bank borrowings at 30 June 2016 (2015: nil).

The Directors are mindful of the Principal Risks and Uncertainties disclosed in the Strategic Report and, having reviewed forecasts detailing revenue and liabilities, the Directors believe that the Company has adequate financial resources to continue its operational existence for a period of not less than 12 months from the date of approval of the Financial Statements. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements.

6. VIABILITY STATEMENT

In accordance with Provision C.2.2 of the UK Corporate Governance Code published in September 2014 and Principle 21 of the AIC Code of Corporate Governance published in February 2015, the Board has assessed the Company's prospects for a five year period. The Board considers five years to be an appropriate period for an Investment Trust company with a portfolio of equity investments and based on the financial position of the Company as detailed in the Chairman's Statement, the Investment Manager's Report and the Business Review of the Annual Report.

The Board has considered the Company's financial position and its ability to liquidate its portfolio and meet its liabilities and draws attention to the following points which the Board took into account in its assessment of the Board took into account in its assessment of the Company's future viability:-

a) The Company's investments are traded on the London Stock Exchange and there is a spread of investments held.

b) The Company is closed ended in nature and therefore does not require to sell investments when shareholders wish to sell their shares.

c) The Company's cash balance (including money market funds) at 30 June 2016 was £7m.

d) the Board has considered the principal risks faced by the Company, together with the steps taken to mitigate these risks, as detailed in the Business Review and in the Statement of Corporate Governance and referred to in Note 15 of the Financial Statements and has concluded that the Company would be able to take appropriate action to protect the value of the Company. The Company takes any potential risks to its ongoing success and ability to perform very seriously and works hard to ensure that risks are kept to a minimum at all times.

e) Due to the nature of the business of the Company and the nature of its investments and to the Company's long history, the Board are able to conclude that expenses are predictable and modest in relation to asset values.

f) There are no capital commitments currently foreseen that would alter the Board's view.

As detailed in the Financial Highlights, the Company has performed strongly over the past year and since the appointment of the current Investment Manager in 2003. The Directors consider the Company's future prospects to be positive, as highlighted in the Chairman's Statement.

In assessing the Company's future viability, the Board has assumed that investors will wish to continue to have exposure to the Company's activities, in the form of a closed ended entity, performance will continue to be satisfactory, and the Company will continue to have access to sufficient capital.

Therefore, after careful consideration of the Company's current position and future prospects and taking into account its risk-aware attitude, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of its assessment.

7. STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland". Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and estimates that are reasonable and prudent; and

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website hosted by the Investment Manager. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The work carried out by the auditor does not involve consideration of these matters and, accordingly, the auditor accepts no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

The Directors are also responsible for ensuring that the Annual Report and Financial Statements, taken as a whole is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.

Directors' Responsibilities Statement

Each Director confirms, to the best of their knowledge, that:

• the financial statements, prepared in accordance with UK Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 "The Financial Reporting Standard applicable in the UK and Republic of Ireland" and applicable law, give a true and fair view of the assets, liabilities, financial position and profit of the Company as at 30 June 2016 and for the year to date;

• the Strategic Report includes a fair review of the development and performance of the business and the financial position of the Company together with a description of the principal risks and uncertainties that the Company faces; and

• the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary to assess the Company's position and performance, business model and strategy.

For and on behalf of the Board of Standard Life UK Smaller Companies Trust plc

David Woods

Chairman

31 August 2016

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2016

		2016			2015
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Net gains on investments held at fair value	9	-	7,422	7,422	-	29,882	29,882
Currency gains		-	1	1	-	-	-
Income	2	5,865	-	5,865	6,123	-	6,123
Investment management fee	3	(566)	(1,699)	(2,265)	(521)	(1,563)	(2,084)
Other administrative expenses	4	(559)	-	(559)	(586)	-	(586)

NET RETURN BEFORE FINANCE COSTS AND TAXATION		4,740	5,724	10,464	5,016	28,319	33,335

Finance costs	5	(209)	(628)	(837)	(232)	(697)	(929)

RETURN ON ORDINARY ACTIVITIES BEFORE TAXATION		4,531	5,096	9,627	4,784	27,622	32,406

Taxation	6	(26)	-	(26)	-	-	-

RETURN ON ORDINARY ACTIVITIES AFTER TAXATION		4,505	5,096	9,601	4,784	27,622	32,406

RETURN PER ORDINARY SHARE:
BASIC	8	6.76p	7.66p	14.42p	6.76p	39.04p	45.80p
DILUTED	8	6.28p	7.51p	13.79p	6.25p	35.49p	41.74p

The total column of this statement represents the profit and loss account of the Company. The 'revenue' and 'capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.

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

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

STATEMENT OF FINANCIAL POSITION

as at 30 June 2016

NON-CURRENT ASSETS	Notes	£'000	2016 £'000	£'000	2015 £'000
Investments held at fair value through profit or loss	9		248,945		252,517
CURRENT ASSETS
Debtors	10	1,280		1,105
Investments in AAA Money Market funds		7,231		9,238
Cash and short-term deposits		6		27
		8,517		10,370
CURRENT LIABILITIES
Creditors: amounts falling due within one year	11	(874)		(947)
		(874)		(947)
NET CURRENT ASSETS			7,643		9,423
TOTAL ASSETS LESS CURRENT LIABILITIES			256,588		261,940
Creditors: amounts falling due after more than one year
3.5% Convertible Unsecured Loan Stock 2018	12	(15,959)		(19,164)
			(15,959)		(19,164)
NET ASSETS			240,629		242,776
CAPITAL AND RESERVES
Called-up share capital	13		17,907		17,907
Share premium account			19,805		19,805
Equity component of Convertible Unsecured Loan Stock 2018	12		1,470		1,470
Special reserve			32,645		40,558
Capital reserve			162,300		157,204
Revenue reserve			6,502		5,832
EQUITY SHAREHOLDERS' FUNDS			240,629		242,776
NET ASSET VALUE PER ORDINARY SHARE:
BASIC	14		356.90p		349.73p
DILUTED	14		345.43p		336.89p

The financial statements were approved by the Board of Directors on 31 August 2016 and were signed on its behalf by:

David Woods, Chairman

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

STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2016
		Share	Equity
	Share	premium	component	Special	Capital	Revenue
	capital	account	CULS 2018	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2015	17,907	19,805	1,470	40,558	157,204	5,832	242,776
Return on ordinary activities after taxation	-	-	-	-	5,096	4,505	9,601
Issue of Ordinary Shares from Treasury from conversion of 3.5% Convertible Unsecured Loan Stock 2018	-	-	-	3,408	-	-	3,408
Repurchase of Ordinary Shares into Treasury from Tender Offer	-	-	-	(11,321)	-	-	(11,321)
Dividends paid (see note 7)	-	-	-	-	-	(3,835)	(3,835)
BALANCE AT 30 JUNE 2016	17,907	19,805	1,470	32,645	162,300	6,502	240,629

For the year ended 30 June 2015
		Share	Equity
	Share	premium	component	Special	Capital	Revenue
	capital	account	CULS 2018	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2014	17,846	19,309	1,470	46,871	129,582	4,340	219,418
Return on ordinary activities after taxation	-	-	-	-	27,622	4,784	32,406
Share Buybacks	-	-	-	(6,539)	-	-	(6,539)
Issue of new Ordinary Shares and/or shares from Treasury from conversion of 3.5% Convertible Unsecured Loan Stock 2018	61	496	-	226	-	-	783
Dividends paid (see note 7)	-	-	-	-	-	(3,292)	(3,292)
BALANCE AT 30 JUNE 2015	17,907	19,805	1,470	40,558	157,204	5,832	242,776

The revenue and realised capital reserves represents the amount of the Company's retained reserves distributable by way of dividend. The accompanying notes are an integral part of the financial statements.

STATEMENT OF CASH FLOWS

For the Year ended 30 June 2016

	Year ended 30 June 2016 £'000	Year ended 30 June 2015 £'000
RETURN ON ORDINARY ACTIVITIES BEFORE FINANCE COSTS AND TAXATION	10,464	33,335
Adjustment for:
Net gains on investments	(7,422)	(29,882)
Dividend income	(5,806)	(6,030)
Interest income	(59)	(93)
Dividends received	5,363	5,726
Interest received	58	101
Decrease in other debtors	2	1
(Decrease)/increase in other creditors	(43)	80
Overseas withholding tax	(3)	-
NET CASH INFLOW FROM OPERATING ACTIVITIES	2,554	3,238

INVESTING ACTIVITIES
Purchases of investments	(52,800)	(73,049)
Sales of investments	64,038	59,813
Purchases of AAA Money Market funds	(56,938)	(45,040)
Sales of AAA Money Market funds	58,945	65,600
NET CASH INFLOW FROM INVESTING ACTIVITIES	13,245	7,324
FINANCING ACTIVITIES Bank and loan interest paid	(664)	(709)
Repurchase of Ordinary Shares Purchase of own shares to treasury	(11,321) -	- (6,539)
Dividends paid	(3,835)	(3,292)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES	(15,820)	(10,540)
(DECREASE)/INCREASE IN CASH	(21)	22
ANALYSIS OF CHANGES IN CASH DURING THE YEAR Opening balance	27	5
(Decrease)/increase in cash as above	(21)	22
CLOSING BALANCE	6	27

NOTES TO FINANCIAL STATEMENTS:

For the year ended 30 June 2016

1	Accounting policies
	(a)	Basis of accounting
		The financial statements have been prepared in accordance with Financial Reporting Standard 102 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. The Directors believe that this is appropriate for the reasons outlined in the Directors' Report in the Annual Report. These financial statements are the first time since FRS 102 (The Financial Reporting Standard applicable in the UK and Republic of Ireland) came into effect for accounting periods beginning on or after 1 January 2015. An assessment of the impact of adopting FRS 102 has been carried out and found that no restatement of balances as at the transition date, 1 July 2014, or comparative figures in the Statement of Financial Position or the Statement of Comprehensive Income is considered necessary. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016.

	(b)	Investments
		Investments have been designated upon initial recognition as fair value through profit or loss in accordance with IAS 39. As permitted by FRS 102, the Company has elected to apply the recognition and measurement provisions of IAS 39 Financial Instruments (as adopted for use in the EU). This is done because all investments are considered to form part of a group of financial assets which is evaluated on a fair value basis, in accordance with the Company's documented investment strategy, and information about the grouping is provided internally on that basis. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are measured initially at fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from the London Stock Exchange. SETS is the London Stock Exchange electronic trading service covering most of the market including all FTSE 100 constituents and most liquid FTSE 250 along with some other securities. Gains and losses arising from changes in fair value are included in net profit or loss for the period as a capital item in the Statement of Comprehensive Income and are ultimately recognised in the capital reserve.

	(c)	AAA money market funds
		The AAA money market funds are used by the Company to provide additional short-term liquidity. Due to their short-term nature, they are recognised in the financial statements as a current asset and are included at fair value through profit and loss.

	(d)	Income
		Income from equity investments (other than special dividends), including taxes deducted at source, is included in revenue by reference to the date on which the investment is quoted ex-dividend. Special dividends are credited to revenue or capital in the Statement of Comprehensive Income, according to the circumstances. Foreign income is converted at the exchange rate applicable at the time of receipt. Interest receivable on short-term deposits and money market funds is accounted for on an accruals basis.

	(e)	Expenses and interest payable
		Expenses are accounted for on an accruals basis. Expenses are charged to the capital column of the Statement of Comprehensive Income when they are incurred in connection with the maintenance or enhancement of the value of investments. In this respect, the investment management fee and relevant finance costs are allocated 25% to revenue and 75% to the capital columns of the Statement of Comprehensive Income in line with the Board's expectation of returns from the Company's investments over the long term in the form of revenue and capital respectively (see notes 3 and 5). Transaction costs incurred on the purchase and disposal of investments are recognised as a capital item in the Statement of Comprehensive Income.

	(f)	Dividends payable
		Dividends are recognised in the period in which they are paid.

	(g)	Capital reserve
		Gains and losses on realisation of investments and changes in fair values which are readily convertible to cash, without accepting adverse terms, are transferred to the capital reserve. This reserve also includes gains and losses from foreign currency exchange differences. Additionally, expenses, including finance costs, are charged to this reserve in accordance with (e) above. Revenue reserve This reserve reflects all income and costs which are recognised in the revenue column of the Statement of Comprehensive Income.

	(h)	Taxation
		Tax expense represents the sum of tax currently payable and deferred tax. Any tax payable is based on taxable profit for the period. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the year end date. Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the year end date where transactions or events that result in an obligation to pay more or a right to pay less tax in future have occurred at the year end date measured on an undiscounted basis and based on enacted tax rates. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying temporary differences can be deducted. Temporary differences are differences arising between the Company's taxable profits and its results as stated in the Financial Statements which are capable of reversal in one or more subsequent periods. Owing to the Company's status as an investment trust company, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments.

	(i)	Other reserves
		The special reserve arose following court approval for the cancellation of the share premium account balance at 24 June 1999 and on 13 October 2009, Court of Session approval was granted for the cancellation of the Company's entire share premium account and capital redemption reserve and subsequent creation of a special distributable capital reserve.
	(j)	Foreign currency
		Overseas monetary assets and liabilities are converted into Sterling at the rate of exchange ruling at the year end date. Transactions during the year involving foreign currencies are converted at the rate of exchange ruling at the transaction date. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Statement of Comprehensive Income.

	(k)	3.5% Convertible Unsecured Loan Stock 2018
		Convertible Unsecured Loan Stock ("CULS") issued by the Company is regarded as a compound instrument, comprising a liability component and an equity component. At the date of issue, the fair value of the liability component was estimated by assuming that an equivalent non-convertible obligation of the Company would have a coupon rate of 4.83%. The fair value of the equity component, representing the option to convert liability into equity, is derived from the difference between the issue proceeds of the CULS and the fair value assigned to the liability. The liability component is subsequently measured at amortised cost using the effective interest rate and the equity component remains unchanged. The interest expense on the CULS is calculated according to the effective interest rate method by applying the assumed rate of 4.83% at initial recognition to the liability component of the instrument. On conversion of CULS, equity is issued and the liability component is derecognised. The original equity component recognised at inception remains in equity. No gain or loss is recognised on conversion. When CULS is repurchased for cancellation, the fair value of the liability at the redemption date is compared to its carrying amount, giving rise to a gain or loss on redemption that is recognised through profit or loss. The amount of consideration allocated to equity is recognised in equity with no gain or loss being recognised. If, at any time after 30 June 2016, the middle market price of the Ordinary Shares is 30 per cent or more above the Conversion Price for at least 20 dealing days during a period of 30 consecutive dealing days, the Company will be able to require CULS Holders to redeem their CULS at par. In such event, CULS Holders would be given a final opportunity to convert their CULS into Ordinary Shares.

	(l)	Judgements and key sources of estimation uncertainty
		The preparation of the financial statements requires the Company to make judgements, estimates and assumptions that affect amounts reported for assets and liabilities as at reporting date and the amounts reported for revenues and expenses during the year. The nature of estimation means that the actual outcomes could differ from those estimates, possibly significantly. The judgements relate to the fair value of financial instruments.

	(m)	Cash and cash equivalents
		Cash comprises bank balances and cash held by the Company. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

		2016	2015
		£'000	£'000
2	Income from investments
	Franked investment income	4,405	3,538
	Overseas and unfranked investment income	822	1,064
	Special dividends	579	1,428
	Total investment income	5,806	6,030

	Other income
	Interest from AAA Money Market funds	59	93
	Total interest income	59	93

		_____	_____
	Total income	5,865	6,123

		2016	2015
3	Investment management fee	£'000	£'000

	Investment management fee	2,265	2,084
	Charged to capital reserve	(1,699)	(1,563)
		566	521


	The balance due to Standard Life Investments (Corporate Funds) Limited at the year end was £542,000 (2015 - £557,000). For further details see note 17 Transactions with the Manager.

		2016	2015
		£'000	£'000
4	Administrative expenses (inclusive of VAT)
	Secretarial fees Directors' fees	181	169
	Secretarial fees Directors' fees	106	109
	Auditor's remuneration
	- fees payable to the Company's auditor for the audit of the Company's annual accounts	22	22
	- fees payable to the Company's auditor and its associates for non audit services- iXBRL conversion	2	2

	Registrar's fees	17	21
	Professional fees	43	39
	Custody fees	15	17
	Depositary fees	52	44
	Other expenses	121	163
		559	586

The balance due to the Company Secretary at the year end was £40,432 (2015: - £43,248)

		2016	2015
		£'000	£'000
5	Finance costs
	Notional interest on 3.5% Convertible Unsecured Loan Stock 2018	634	703
	Effective Interest Rate adjustments	131	154
	Amortisation of 3.5% Convertible Unsecured Loan Stock 2018 issue expenses	72	72
		837	929
	Charged to capital reserve	(628)	(697)
	Charged to revenue reserve	209	232

			2016				2015
			Revenue		Capital	Total	Revenue	Capital	Total
6	Taxation		£'000		£'000	£'000	£'000	£'000	£'000
	(a) Analysis of charge for year
	Overseas taxation		26		-	26	-	-	-


	(b) Provision for deferred taxation
	At 30 June 2016, the company had unutilised management expenses and loan relationship losses of £48,480,000 (2015 - £45,105,000). No deferred asset has been recognised on the unutilised management expenses and loan relationship losses as it is unlikely there will be suitable taxable profits from which the future reversal of the deferred asset could be deducted.

	(c) Factors affecting current tax charge for year
	UK corporation tax at an effective rate of 20.00% (2015: 20.75%) The differences are explained below.

		2016					2015
		Revenue		Capital		Total	Revenue	Capital		Total
		£'000		£'000		£'000	£'000	£'000		£'000
	Net profit on ordinary activities before taxation	4,531		5,096		9,627	4,784	27,622		32,406

	Corporation tax at an effective rate of 20.00% (2015: 20.75%)	906		1,019		1,925	993	5,731		6,724

	Effects of:
	Non-taxable UK dividend income	(959)		-		(959)	(1,030)	-		(1,030)
	Non-taxable overseas dividends	(143)		-		(143)	(184)	-		(184)
	REIT Income	-		-		-	4	-		4
	Excess management expenses and loan relationship losses	199		465		664	217	469		686
	Other capital returns (e.g. gains on investments not subject to tax)	-		(1,484)		(1,484)	-	(6,200)		(6,200)
	Writing off prior year withholding tax	23		-		23	-	-		-
	Total tax charge	26		-		26	-	-		-

		2016	2015
7	Dividends	£'000	£'000
	Amounts recognised as distributions to equity holders in the period:
	2015 final dividend of 4.40p per share (2014 - 3.23p) paid on 29 October 2015	2,902	2,306
	2016 interim dividend of 1.40p per share (2015 - 1.40p) paid on 7 April 2016	933	986
		3,835	3,292

	The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. We set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of Section 1158 - 1159 of the Corporation Taxes Act 2010 are considered. The revenue available for distribution by way of dividend for the year is £4,505,000 (2015 - £4,784,000).
		2016	2015
		£'000	£'000
	2016 interim dividend of 1.40p per share (2015 - 1.40p) paid on 7 April 2016	933	986
	2016 final dividend of 5.20p per share (2015 - 4.40p) payable on 3 November 2016	3,504	2,902
		4,437	3,888

	The amount payable for the proposed final dividend is based on the Ordinary shares in issue as the date of approval of this report (31 August 2016) which satisfies the requirement of Section 1159 Corporation Tax Act 2010. Dividends have been paid out of revenue reserves.

					2016			2015
					p	£'000		p	£'000
	8			Return per ordinary share
				Basic
				Revenue return	6.76	4,505		6.76	4,784
				Capital return	7.66	5,096		39.04	27,622
				Total return	14.42	9,601		45.80	32,406

				Weighted average number of Ordinary shares in issue		66,603,376			70,748,133

				Diluted
				Revenue return	6.28	4,665		6.25	4,949
				Capital return	7.51	5,575		35.49	28,117
				Total return	13.79	10,240		41.74	33,066

				Weighted average number of Ordinary shares in issue		74,281,569			79,224,144


		The calculation of the diluted total, revenue and capital returns per ordinary share are carried out in accordance with IAS 33. For the purpose of calculating total, revenue and capital returns per Ordinary share, the number of Ordinary shares used is the weighted average number used in the basic calculation plus the number of Ordinary shares deemed to be issued for no consideration on exercise of all Convertible Unsecured Loan Stock 2018 (CULS). The calculations indicate that the exercise of CULS would result in an increase in the weighted average number of Ordinary shares of 7,678,193 (2015 - 8,476,011) to 74,281,569 (2015 - 79,224,144) Ordinary shares. Where dilution occurs, the net returns are adjusted for items relating to the Convertible Unsecured Loan Stock ("CULS"). Total earnings for the period are tested for dilution. Once dilution has been determined individual revenue and capital earnings are adjusted. CULS finance costs for the period £765,000 (2015 - £857,000) and unamortised issues expenses £126,000 (2015 - £197,000) are reversed.

							2016		2015
							£'000		£'000
9			Investments
			Fair value through profit or loss
			Opening fair value				252,517		212,603
			Opening fair value gains on investments held				(96,282)		(78,185)
			Opening book cost				156,235		134,418
			Additions at cost				52,800		69,307
			Disposals - proceeds				(63,794)		(59,275)
			- realised gains on sales				16,437		11,785
			Closing book cost				161,678		156,235
			Current year fair value gains on investments held				87,267		96,282
			Closing fair value				248,945		252,517
			Gains on investments
			Realised gains on sales				16,437		11,785
			(Decrease)/increase in fair value gains on investments held				(9,015)		18,097
							7,422		29,882
			All investments are equity shares listed on the London Stock Exchange.

			Transaction costs
			During the year, 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 Statement of Comprehensive Income. The total costs were as follows:

							2016		2015
							£'000		£'000
			Purchases				178		308
			Sales				59		47
							237		355

		2016	2015
		£'000	£'000
10	Debtors
	Amounts due from brokers	-	244
	Dividends receivable	1,235	791
	Tax recoverable	31	54
	Other debtors	14	16
		1,280	1,105

		2016	2015
		£'000	£'000
11	Creditors: amounts falling due within one year
	Interest payable	142	172
	Investment management fee payable	542	557
	Sundry creditors	190	218
		874	947

12	Non-current liabilities
		Nominal	Liability	Equity
	3.5% Convertible Unsecured Loan Stock 2018	Amount £'000	Component £'000	Component £'000
	As at 30 June 2016
	Opening balance	19,773	19,164	1,470
	Conversion of 3.5% Convertible Unsecured Loan Stock 2018 into Ordinary Shares	(3,496)	(3,408)	-
	Notional Interest on 3.5% Convertible Unsecured Loan Stock 2018	-	131	-
	Amortisation	-	72	-
	Closing balance	16,277	15,959	1,470

	3.5% Convertible Unsecured Loan Stock 2018
	As at 30 June 2015
	Opening balance	20,584	19,719	1,470
	Conversion of 3.5% Convertible Unsecured Loan Stock 2018 into Ordinary Shares	(811)	(781)	-
	Notional Interest on 3.5% Convertible Unsecured Loan Stock 2018	-	154	-
	Amortisation	-	72	-
	Closing balance	19,773	19,164	1,470

	On 8 October 2015 the Company converted £1,588,511 (30 September 2014 £577,944) nominal amount of 3.5% Convertible Unsecured Loan Stock 2018 into 669,513 (2015 - 243,589) Ordinary Shares. Also on 14 April 2016 (31 March 2015) the Company converted £1,907,259 (2015 - £233,924) nominal amount of 3.5% Convertible Unsecured Loan Stock 2018 into 803,871 (2015 - 95,580) Ordinary Shares. As at 30 June 2016, there was £16,276,812 (2015 - £19,772,582) nominal amount of 3.5% Convertible Unsecured Loan Stock 2018 in issue. The loan stock can be converted at the election of holders into Ordinary shares during the months of March and September each year throughout their life up until 31 March 2018 at a fixed price per Ordinary share of 237.2542p. Interest is paid on the 3.5% Convertible Unsecured Loan Stock 2018 on 30 September and 31 March each year. In the event of a winding-up of the Company the rights and claims of the Trustee and CULS holders would be subordinate to the claims of all creditors in respect of the Company's secured and unsecured borrowings, under the terms of the Trust Deed.

		2016	2015
13	Called up share capital	£'000	£'000
	Authorised:
		37,500	37,500
	Issued and fully paid:
	67,421,054 (2015 - 69,418,600) Ordinary shares of 25p each - equity	16,855	17,355
	Held in treasury:
	4,206,121 (2015 - 2,208,575) Ordinary shares of 25p each - equity	1,052	552
		17,907	17,907


		2016	2015
		Ordinary shares	Ordinary shares
		Number	Number

	Opening Balance	69,418,600	71,383,586
	Conversion of CULS	1,473,384	342,169
	Share buybacks	-	(2,307,155)
	Tender Offer	(3,470,930)	-
	Closing balance	67,421,054	69,418,600
	During the year the Company issued 1,473,384 Ordinary shares from Treasury following the receipt of elections to convert by holders of the Company's 3.5% Convertible Unsecured Loan Stock 2018. The Company released a periodic Tender Offer document to shareholders in June 2015. The Company announced on 24 July 2015 that the Offer resulted in 3,470,930 Ordinary shares (representing approximately 8.38 per cent of the Company's issued share capital) being tendered into Treasury. The cost of the shares brought back was £11,199,000 excluding tender offer costs of £122,000 which have been charged against the special reserve during the year. Capital Management The investment objective of the Company is to achieve long-term capital growth by investment in UK quoted smaller companies. The Company manages its capital to ensure that it will be able to continue as a going concern while maximising the return to Shareholders through the optimisation of the debt and equity balance.

	The Company's capital compromises the following:
		2016		2015
		£'000		£'000
	Equity
	Equity share capital	17,907		17,907
	Reserves	222,722		224,869

	Liabilities
	CULS	15,959		19,164
		256,588		261,940


		2016 £'000		2015 £'000
	Investments at fair value through profit or loss	248,945		252,517
	Current assets excluding cash and AAA Money Market funds	1,280		1,105
	Current liabilities excluding bank loans	(874)		(947)
	Total assets	249,351		252,675
	Net assets	240,629		242,776
	Gearing (%)	3.6		4.1

	The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: - the planned level of gearing which takes account of the Investment Manager's views on the market; - the level of equity shares; - the extent to which revenue in excess of that which is required to be distributed should be retained. The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period. The Company does not have any externally imposed capital requirements.

14	Net asset value per share
	Total shareholders' funds have been calculated in accordance with the provisions of applicable accounting standards. The analysis of total shareholders' funds on the face of the Statement of Financial Position reflects the rights, under the Articles of Association, of the ordinary shareholders on a return of assets.
			2016		2015
	Basic net asset value per share
	Net assets attributable (£'000)		240,629		242,776
	Number of Ordinary shares in issue at year end (excluding shares held in treasury)		67,421,054		69,418,600

	Net asset value per share		356.90p		349.73p

	Diluted net asset value per share

	Net assets attributable (£'000)		256,588		261,940
	Potential number of Ordinary shares in issue at year end (excluding shares held in treasury)		74,281,549		77,752,523

	Net asset value per share		345.43p		336.89p

	The diluted net asset value per Ordinary share as at 30 June 2016 has been calculated on the assumption that £16,276,812 3.5% Convertible Unsecured Loan Stock 2018 are converted at 237.25p per share, giving a total of 74,281,549 Ordinary shares. Where dilution occurs, the net assets are adjusted for items relating to the convertible loan stock.

	Net asset value per share - debt converted
	In accordance with the Company's understanding of the current methodology adopted by the AIC, convertible financial instruments are deemed to be 'in the money' if the cum income (debt at fair value) net asset value ("NAV") exceeds the conversion price of 237.25p per share. In such circumstances a net asset value is produced and disclosed assuming the convertible debt is fully converted. At 30 June 2016 the cum income (debt at fair value) NAV was 356.90p and thus the CULS 2018 were 'in the money'.
15	Financial instruments
	The Company's financial instruments comprise securities and other investments, cash balances, loans and debtors and creditors that arise directly from its operations; for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company also has the ability to enter into derivative transactions for the purpose of managing currency and market risks arising from the Company's activities. No such transactions took place during the year. The main risks the Company faces from its financial instruments are (i) market price risk (comprising interest rate risk, currency risk and other price risk), (ii) liquidity risk and (iii) credit risk. The Board regularly reviews and agrees policies for managing each of these risks. The Manager's policies for managing these risks are summarised below and have been applied throughout the year. The numerical disclosures exclude short-term debtors and creditors, other than for currency disclosures due to materiality. (i) Market price risk The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, currency risk and other price risk. Interest rate risk Interest rate movements may affect: - the fair value of the investments in fixed interest rate securities; - the level of income receivable on cash deposits and money market funds; - interest payable on the Company's variable rate borrowings. The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. It is the Company's policy to increase its exposure to equity market price risk through the judicious use of borrowings. When borrowed funds are invested in equities, the effect is to magnify the impact on Shareholders' funds of changes - both positive and negative - in the value of the portfolio. During the year ended 30 June 2016, the Company's had no revolving credit facility in place. The Board regulates the overall level of gearing by raising or lowering the level of the credit facility. The 3.5% Convertible Unsecured Loan Stock 2018 was issued by the Company at a fixed cost until its conversion. It is carried in the Company's Statement of Financial Position at amortised cost rather than at fair value.

Interest risk profile The interest rate risk profile of the portfolio of financial assets and liabilities at the Balance Sheet date was as follows:
	Weighted average period for which rate is fixed	Weighted average interest rate	Fixed rate	Floating rate
As at 30 June 2016	Years	%	£'000	£'000
Assets
AAA Money Market funds	-	0.60	-	7,231
Cash deposits	-	-	-	6
Total assets	-	-	-	7,237

Liabilities
3.5% Convertible Unsecured Loan Stock 2018	1.75	3.50	15,959	-
Total liabilities	-	-	15,959	-

	Weighted average period for which rate is fixed	Weighted average interest rate	Fixed rate	Floating rate


As at 30 June 2015	Years	%	£'000	£'000
Assets
AAA Money Market funds	-	0.54	-	9,238
Cash deposits	-	-	-	27
Total assets	-	-	-	9,265

Liabilities
3.5% Convertible Unsecured Loan Stock 2018	2.75	3.50	19,164	-
Total liabilities	-	-	19,164	-


The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The floating rate assets consist of AAA Money Market funds and cash deposits on call earning interest at prevailing market rates. All financial liabilities are measured at amortised cost.

Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates at the year end date and with the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's : - profit for the year ended 30 June 2016 and net assets would increase / decrease by £72,000 (2015 : increase / decrease by £93,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances and money market funds. Foreign currency risk A small proportion of the Company's investment portfolio was invested in overseas securities and the Statement of Financial Position can be affected by movements in foreign exchange rates. It is not the Company's policy to hedge this risk on a continuing basis. The Company only has borrowings denominated in sterling. The revenue account is subject to currency fluctuation arising on overseas income. The Company does not hedge this currency risk.
Foreign currency risk exposure by currency of denomination:
	30 June 2016				30 June 2015
	Overseas investments	Net monetary assets	Total currency exposure		Overseas investments		Net monetary assets		Total currency exposure


	£'000	£'000	£'000		£'000		£'000		£'000
Euro	-	-	-		3,940		-		3,940


The asset allocation between specific markets can vary from time to time based on the Investment Manager's opinion of the attractiveness of the individual markets. Foreign Currency sensitivity There is no sensitivity analysis included as the Company has no outstanding foreign currency denominated monetary items. Where the Company's equity investments (which are non-monetary items) are priced in a foreign currency, they have been included within the other price risk sensitivity analysis so as to show the overall level of exposure. Other price risk Other price risks (ie changes in market prices other than those arising from interest rate or currency risk) may affect the value of the quoted investments. It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The allocation of assets and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the company are mainly listed on the London Stock Exchange. Other price risk sensitivity If market prices at the year end date had been 10% higher or lower while all other variables remained constant, the return attributable to ordinary shareholders for the year ended 30 June 2016 would have increased / decreased by £24,895,000 (2015 - increase / decrease of £25,252,000). This is based on the Company's equity portfolio held at each year end.
(ii) Liquidity risk
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. The maturity of the Company's existing borrowings is set out in the credit risk profile section of this note.

				Expected cashflows		Due within 3 months		Due between 3 months and 1 year		Due after 1 year
As at 30 June 2016				£'000		£'000		£'000		£'000
3.5% Convertible Unsecured Loan Stock 2018				17,413		285		284		16,844
				17,413		285		284		16,844

				Expected cashflows		Due within 3 months		Due between 3 months and 1 year		Due after 1 year
				£'000		£'000		£'000		£'000
As at 30 June 2015
3.5% Convertible Unsecured Loan Stock 2018				21,845		346		346		21,153
				21,845		346		346		21,153

(iii) Credit risk This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. The risk is not significant, and is managed as follows: - where the investment manager makes an investment in a bond, corporate or otherwise, the credit rating of the issuer is taken into account so as to minimise the risk to the Company of default; - investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker; - the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, both stock and cash reconciliations to the Custodians' records are performed on a daily basis to ensure discrepancies are investigated on a timely basis. - cash is held only with reputable banks with high quality external credit enhancements. None of the Company's financial assets are secured by collateral or other credit enhancements.

	Credit risk exposure In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 30 June was as follows:
		2016			2015
		Statement of Financial Position	Maximum exposure		Statement of Financial Position	Maximum exposure

	Current assets	£'000	£'000		£'000	£'000
	Debtors	1,280	1,280		1,105	1,105
	AAA Money Markets funds	7,231	7,231		9,238	9,238
	Cash and short-term deposits	6	6		27	27
		8,517	8,517		10,370	10,370

	None of the Company's financial assets is past due or impaired.

	Maturity of financial liabilities
	The maturity profile of the Company's financial liabilities at 30 June was as follows:

			In less than 1 year	Between 1 year and 3 years		In more than 3 years
			£'000	£'000		£'000
	As at 30 June 2016
	3.5% Convertible Unsecured Loan Stock 2018		15,959	16,277		-

	All the other financial assets and liabilities do not have a maturity date. The full contractual liability for the CULS assuming no further conversions is £17,274,000 (2015 - £21,676,000)

16	Fair Value hierarchy FRS 102 requires an entity to classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The Company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. The fair value hierarchy shall have the following classifications. - Level 1: unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date. - Level 2: inputs other than quoted prices included within Level 1 that are observable (ie developed using market date) for the asset or liability, either directly or indirectly. - Level 3: inputs are unobservable (ie for which market data is unavailable) for the asset or liability. All of the Company's investments are in quoted equities (2015 - same) that are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments (2016 - £248,945,000; 2015 - £252,517,000) have therefore been deemed as Level 1. The Company's CULS are actively traded on a recognised stock exchange. The fair value of the CULS (2016 - £21,404,000; 2015 - £24,716,000) has therefore been deemed Level 1.

17.	Transactions with the Manager The Company has an agreement with Standard Life Investments (Corporate Funds) Limited ('SLI') for the provision of management services. During the 6 months ended 31 December 2015 the management fee paid to SLI was 0.85% per annum of the total assets of the Company after deducting current liabilities ('total assets'). The fee is chargeable 25% to revenue and 75% to capital. With effect from 1 January 2016, management fee has been charged applying the rate of 0.85% to the first £250m of total assets, reduced to 0.65% on total assets above this threshold. The contract is terminable by either party on six months (previously twelve months) notice.

18.	Related party transactions Standard Life Investments (Corporate Funds) Limited received fees for its services as investment manager and company secretary. Further details are provided in notes 3 & 4. The Directors of the Company received fees for their services. Further details are provided in the Directors' Remuneration Report.

19.	Post Balance Sheet events
	On 5 August 2016 the Company bought back 38,651 ordinary shares into treasury at a price of £3.3273 per share and on 26 August 2016 the Company bought back 12,353 Ordinary shares into treasury at a price of £3.5148 per share.

Additional notes

This Annual Financial Report is not the Company's statutory accounts. The statutory accounts for the year ended 30 June 2015 have been delivered to the Registrar of Companies. The statutory accounts for the years ended 30 June 2015 and 30 June 2016 received an audit report which was unqualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and did not include a statement under either section 498(2) or 498(3) of the Companies Act 2006.

The statutory accounts for the financial year ended 30 June 2016 have been approved and audited but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which will be held at 12.30pm on Thursday 27 October 2016 at the offices of Standard Life Investments, 30 St Mary Axe, London, EC3A 8EP.

The Annual Report will be posted to shareholders in September 2016 and copies will be available from the Manager or by download from the Company's webpage hosted by the Manager (www.standardlifeinvestments.com/its).

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

For Standard Life UK Smaller Companies Trust Plc

Maven Capital Partners UK LLP, Company Secretary

For further information please contact:

Hilda Stewart

Press Manager, Standard Life Investments Tel: 0131 245 3409

Evan Bruce-Gardyne

Head of Investment Companies, Standard Life Investments Tel. 0131 245 0571

Mark McKelvey

Investment Director, Standard Life Investments Tel: 020 7872 4584

END

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