Half-Yearly Financial Report

RNS Number : 9295X

Standard Life UK Small.Co's Tst PLC

23 February 2012

 



STANDARD LIFE UK SMALLER COMPANIES TRUST PLC

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Investment Objective

To achieve long term capital growth by investment in UK quoted smaller companies.

Investment Policy

The Company intends to achieve its investment objective by investing in a diversified portfolio consisting mainly of UK quoted smaller companies. The portfolio will normally comprise around 50 individual holdings representing the Investment 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 per cent. 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, transferring or eliminating the investment risks in its investments in order to protect the Company's portfolio). Within the Company's Articles of Association, the maximum level of gearing is 100 per cent of net assets. The Directors' policy is that gearing will be between -5 per cent. and 25 per cent. of net assets (at the time of drawdown) in normal market conditions. The Directors have delegated responsibility to the Investment Manager for the operation of the gearing level within the above parameters.

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

For further information, please contact:

Yvonne Soulsby

Press Manager, Standard Life Investments                                         Tel. [phone]

Gordon Humphries

Head of Investment Companies, Standard Life Investments                 Tel: [phone]

HALF-YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

Financial Highlights

Total Return	Six months ended 31 December 2011
Net asset value	-17.7%
Hoare Govett Smaller Companies Index (ex Investment Companies)	-14.0%

Capital Return	31 December 2011	30 June 2011	% change
Net asset value per Ordinary share	194.92p	240.65p	-19.0%
Ordinary share price (mid-market)	182.38p	237.00p	-23.0%
Discount of Ordinary share price to net asset value (including net revenue)	6.4%	1.5%	-
Hoare Govett Smaller Companies Index (ex Investment Companies)	3,928.40	4,637.03	-15.3%
Convertible Unsecured Loan Stock 2018 price	102.50p	109.00p	-6.0%
Total assets (£m) 1	149.71	178.37	-16.1%
Equity shareholders' funds (£m)	126.69	155.33	-18.4%
Revenue Return - for six months ended	31 December 2011	31 December 2010
Revenue return per Ordinary share	1.68p	1.82p 2	-7.7%
Interim dividend per Ordinary share	1.00p	1.00p	-
1 Calculated as Total Assets less Current Liabilities.
2 Includes 0.77p relating to a VAT refund.

INTERIM MANAGEMENT REPORT

FOR THE SIX MONTHS ENDED 31 DECEMBER 2011

CHAIRMAN'S STATEMENT

Performance

Persistent market turbulence was the defining theme of this six month reporting period, with Euro-zone sovereign debt issues and concerns over the future direction of growth fuelling investor discomfort.

Against this backdrop, the Company's net asset value total return was -17.7% for the six months ended 31 December 2011. This compared with a total return of -14.0% for the Company's benchmark, the Hoare Govett Smaller Companies Index (excluding Investment Companies). The Company's share price total return was -22.0%, with the discount to net asset value widening to 6.4% at the period end. The widening of discounts was felt across the whole UK Smaller Companies sector, reflecting the risk aversion in the market.

Despite the Company losing some ground over the past six months, the long-term performance record remains strong as illustrated in the table below:

	3 years	5 years
Net asset value total return	+112.3%	+47.4%
Share price total return	+136.2%	+66.1%
Benchmark total return	+87.7%	+1.8%
Peer group ranking	5/16	1/15

Additional information on the economic background, stock performance and portfolio changes during the period can be found in the Manager's Report.

Earnings and Dividend

The revenue return per share for the six months ended 31 December 2011 was 1.68p. This represents a 60% increase in the earnings per share for the same period last year, after removing the effect of a one-off VAT refund received last year. The Company continues to see strong dividend growth coming through from the underlying portfolio, although the increase in the Company's earnings for the first half of this financial year is partially attributable to the timing of special dividend receipts.

An unchanged interim dividend of 1.00p per share (2010: 1.00p per share) will be paid on 30 March 2012 to shareholders on the register at 9 March 2012, with an associated ex-dividend date of 7 March 2012.

Awards

The Company won two awards at the Investment Week Investment Trust of the Year Awards 2011. It was particularly pleasing to win the 'Best Shareholder Value' category across the whole investment company sector in terms of long-term share price performance. The Company also won the 'UK Smaller Companies' category for the third year out of the past four.

Gearing

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

The Company currently has £25 million 3.5% Convertible Unsecured Loan Stock 2018 (CULS) in issue and the Manager is able to vary net gearing by adjusting the level of cash held by the Company. With the prevailing market uncertainties and the Manager's concern over the short-term outlook, the net gearing level was reduced from 8.8% at the start of the period to 1.9% at 31 December 2011.

Discount

The discount at which the Company's shares trade relative to the underlying net asset value was 6.4% at 31 December 2011. Although the Company's shares traded at a small premium for much of the reporting period, with an average premium for the calendar year of 0.1%, the discount widened out during December, reflecting the continuing uncertainties and risk aversion in the market. The Company's discount level does, however, continue to compare favourably with the UK Smaller Companies peer group, which had an average discount of 19.4% at 31 December 2011.

Regular Tender Offer

The Board exercised its discretion and did not conduct a tender offer at either of the 30 June 2011 or 31 December 2011 tender dates, reflecting the fact the Ordinary shares had been trading, on average, at a small premium to net asset value in the six month periods prior to the Board making its decisions. The cost of the first two tenders, held in 2010, ranged from 6% to 6.5% of the net asset value of shares tendered.

It remains the Board's intention to maintain the regular 5% tender at six monthly intervals, and to offer shareholders the opportunity to tender their shares when it is in their interests to do so.

Outlook

Swings in macroeconomic sentiment continue to be the key driver of the UK equity market. Although 2012 started strongly, your Board and Manager are cautious over the near term outlook. Corporate balance sheets have proved resilient and there are positive economic indicators coming out of the US but uncertainties will remain until there is satisfactory resolution to the debt problems in Europe.

Despite the current economic uncertainties, the Board believes that investing in high quality UK smaller companies will continue to provide shareholders with attractive long term returns.

Donald MacDonald

Chairman

22 February 2012

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 set of 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 December 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, which 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 UK Smaller Companies Trust PLC

Donald MacDonald

Chairman

22 February 2012

MANAGER'S REPORT

Equity markets

The start of the period in question brought an immediate and substantial fall in markets in response to fears that the euro was about to disintegrate. The situation in Greece went from bad to worse while other southern European countries - which by this stage included Italy - were starting to lose the confidence of sovereign bond holders. The follow-through was a deterioration in economic confidence across the Euro-zone and beyond. Far East markets, notably China, were giving cause for concern; some commentators were even suggesting that a very dramatic slowdown might occur. Pessimism grew into a general fear that a number of European banks were in trouble and indeed the Belgian bank Fortis required a bailout. A number of frenetic European summit meetings took place. In Italy, Silvio Berlusconi stepped down as prime minister and was replaced by the technocrat Mario Monti. In Greece, meanwhile, an on-again, off-again referendum on continued membership of the euro and the departure of the country's Prime Minister, George Papandreou, gave a general impression of chaos.

Equity investors favoured low risk. This meant that large caps with safe yields outperformed, while recovery, cyclical and highly-rated growth stocks underperformed - as did smaller companies. The main damage was done in July; for the rest of the year there was a two-way pull between 'risk-on' and 'risk-off' investing, with the latter, more cautious approach, just about having the edge. In this environment, AIM stocks had a very rough time - and in particular the "blue sky" element of the index, where companies can be defined as concepts rather than operating businesses. Those stocks with heavy exposure to Far East markets went into a sharp reverse. They included electrical and electronic stocks as well as mass affluent and luxury-branded goods companies that had performed well over the previous year. Oil & gas and mining stocks in general drifted lower, as demand from China is seen as the bedrock of most commodity prices. UK-orientated retailers took a bath in the fourth quarter, partly because of unseasonably mild weather and partly due to the usual worries of a potentially poor run-up to Christmas.

Bid activity fell to low levels. The private equity buyer remained on the sidelines because of the unwillingness of banks to lend. Also, trade buyers remained uncertain of the economic outlook and were thus unwilling to commit funds ahead of a potential recession. Base rates have remained unchanged at remarkably low levels all year and seem likely to remain low for some time to come.

Performance

The underperformance of the Company was down to three factors. First, ASOS, which had done so well in the first half of the calendar year, gave up a lot of ground in the second half. While trading remained good, many investors took the opportunity to take profits in what was arguably a highly rated stock. Second, the Company also had significant exposure to Far East orientated electrical and electronic stocks that suffered sharply, particularly in July and August. Third, two companies that have performed well in recent years, Homeserve and Immunodiagnostic Systems Holdings, surprised the market with profit warnings. As is often the case, if a high-quality stock disappoints in an unexpected way, adverse movements in its share price can be dramatic.

Fortunately, a number of shares performed extremely well over the period in question. Paddy Power, an Irish on-line sports betting company, traded strongly all year; Rightmove, an online property advertising company, went from strength to strength; Telecom Plus, a multi-utility vendor, markedly beat expectations; and IG, a world-leading spread-betting company, actually benefited from the chaos and increased volatility.

Dealing and Activity

The most significant new additions to the portfolio were: Genus, a specialist agricultural breeding products company; Cove Energy, an oil & gas explorer with assets in offshore Mozambique; Optos, a

specialist in optical healthcare products; NCC, an ethical hacking specialist; and one new issue, Waterlogic, a world leader in water purification.

On the sell side, the major changes included the sale of Homeserve following significant disappointment from the company. Cranswick, a supplier of pork products to supermarkets was also sold. Profits were taken with the sale of Intermediate Capital Group, a mezzanine finance provider; Cineworld, a cinema company; and Blinkx, an on-line video search company. Group NBT, an internet domain name company, was subject to a cash bid and sold.

Outlook

After a weak second half of calendar 2011, 2012 has started with a strong 'January effect' that has reversed the trends evident in the previous six months. The near-panic conditions that surrounded the tragi-comedy of the European debt crisis, featuring the drawn-out departure of Messrs Papandreou and Berlusconi, has given way to a sort of surreal optimism that has helped markets to become enthusiastic about riskier assets again. Emerging markets, smaller companies, and recovery and cyclical stocks have conspicuously led the way in January.

The extent of any follow-through remains to be seen. Some economic indicators have become supportive. The US economy is recovering and its housing market is showing early signs of life. Interest rate tightening cycles in Brazil, China and India seem to be at or past their peak. This in turn has engendered a glimmer of optimism in China and Germany. Equity markets have leapt on this optimism and caused lower risk, large-cap staples to underperform. Tesco has also recently demonstrated that some large-caps can actually be quite risky after all.

What does this all mean for the Company? Commentators like to talk of 'fat-tailed risks'. On the one hand, the future of the euro is in doubt; on the other, recovery and optimism could take hold. On balance, we favour the latter, more optimistic outcome. Given our risk-averse approach, this would mean strong positive returns but underperformance of our smaller-companies benchmark in the short term.

The recent European Central Bank (ECB) 500 billion Euro Long Term Refinancing Operations (LTRO) facility has brought some stability to the sovereign debt markets and the banking system. However, a significant residual risk remains. There is too much debt in the system. The Euro is still vulnerable and member states are living beyond their means. The ECB action gives much needed breathing space for these dislocations to be addressed.

Our firmly held view is that our risk averse focus on growth, resilience, momentum, quality and visibility is the correct path and will deliver strong performance in the medium and long term.

Harry Nimmo

Manager

Standard Life Investments

22 February 2012

PRINCIPAL RISKS AND UNCERTAINTIES

The Board regularly reviews the principal risks and uncertainties facing the Company which the Board and the Manager, Standard Life Investments, 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.

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.

-        Capital structure and gearing risk: The Company's capital structure, as at 31 December 2011, consisted of equity share capital comprising 64,994,559 Ordinary 25p shares and £24,947,766 nominal amount of Convertible Unsecured Loan Stock 2018. The Manager is able to increase or decrease the gearing level by holding less or more cash subject to Board restrictions which require gearing to remain between -5% and 25% of net assets, under normal market conditions.

-        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 is required to strike a balance more in favour of capital growth than revenue return. In normal circumstances, the Board intends to pay dividends 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 Sections 1158 - 1159 of 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, such as the Manager and the Administrators, could also lead to reputational damage or loss. There is also a new regulatory risk in the form of the Alternative Investment Fund Managers Directive ("AIFMD") which was ratified in November 2010 by the European Commission. The AIFMD will introduce a new authorisation and supervisory regime for all investment trust fund managers in the European Union. This is expected to create some additional Regulatory costs for the Company.

-        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.

Going Concern

The factors which have an impact on Going Concern are set out in the Going Concern section of the Directors' Report in the Company's Annual Report and Accounts to 30 June 2011. As at 31 December 2011, there have been no significant changes to these factors. The Company had no bank borrowings at 31 December 2011. The Directors are mindful of the principal risks and uncertainties disclosed above, and, having reviewed forecasts detailing revenue and liabilities, they believe that the Company has adequate financial resources to continue its operational existence for the foreseeable future. Accordingly, the Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the interim accounts.

INCOME STATEMENT

		Six months ended 31 December 2011
		(unaudited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Net (losses)/gains on investments held at fair value		-	(28,107)	(28,107)
Currency gains		-	-	-
Income	2	1,523	-	1,523
Investment management fee		(112)	(338)	(450)
Performance fee		-	-	-
VAT recovered on investment management fees		-	-	-
Administrative expenses		(167)	-	(167)
		__________	__________	__________
Net return/(loss) before finance costs and taxation		1,244	(28,445)	(27,201)
Finance costs		(145)	(436)	(581)
		__________	__________	__________
Return/(loss) on ordinary activities before taxation		1,099	(28,881)	(27,782)
		__________	__________	__________
Taxation		(12)	-	(12)
		__________	__________	__________
Return/(loss) on ordinary activities after taxation		1,087	(28,881)	(27,794)
		__________	__________	__________
Return/(loss) per ordinary share	5	1.68p	(44.53p)	(42.85p)
		__________	__________	__________

The total column of this statement represents the profit and loss account of the Company. A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Income Statement. No operations were acquired or discontinued in the year. All revenue and capital items in the above statement derive from continuing operations. The accompanying notes are an integral part of the financial statements.

INCOME STATEMENT (cont'd)

		Six months ended 31 December 2010
		(unaudited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Net (losses)/gains on investments held at fair value		-	34,376	34,376
Currency gains		-	1	1
Income	2	951	-	951
Investment management fee		(104)	(316)	(420)
Performance fee		-	(877)	(877)
VAT recovered on investment management fees		480	81	561
Administrative expenses		(185)	-	(185)
		__________	__________	__________
Net return/(loss) before finance costs and taxation		1,142	33,265	34,407
Finance costs		(7)	(20)	(27)
		__________	__________	__________
Return/(loss) on ordinary activities before taxation		1,135	33,245	34,380
Taxation		(1)	-	(1)
		__________	__________	__________
Return/(loss) on ordinary activities after taxation		1,134	33,245	34,379
		__________	__________	__________
Return/(loss) per ordinary share	5	1.82p	53.44p	55.26p
		__________	__________	__________

The total column of this statement represents the profit and loss account of the Company. A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Income Statement. No operations were acquired or discontinued in the year. All revenue and capital items in the above statement derive from continuing operations. The accompanying notes are an integral part of the financial statements.

INCOME STATEMENT (cont'd)

		Year ended 30 June 2011
		(audited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Net (losses)/gains on investments held at fair value		-	53,665	53,665
Currency gains		-	1	1
Income	2	2,942	-	2,942
Investment management fee		(237)	(711)	(948)
Performance fee		-	(1,064)	(1,064)
VAT recovered on investment management fees		480	81	561
Administrative expenses		(329)	-	(329)
		__________	__________	__________
Net return/(loss) before finance costs and taxation		2,856	51,972	54,828
Finance costs		(105)	(313)	(418)
		__________	__________	__________
Return/(loss) on ordinary activities before taxation		2,751	51,659	54,410
Taxation		(7)	-	(7)
		__________	__________	__________
Return/(loss) on ordinary activities after taxation		2,744	51,659	54,403
		__________	__________	__________
Return/(loss) per ordinary share	5	4.35p	81.96p	86.31p
		__________	__________	__________

The total column of this statement represents the profit and loss account of the Company. A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Income Statement. No operations were acquired or discontinued in the year. All revenue and capital items in the above statement derive from continuing operations. The accompanying notes are an integral part of the financial statements.

BALANCE SHEET

		As at	As at	As at
		31 December	31 December	30 June
		2011	2010	2011
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss		129,625	144,897	170,172
		__________	__________	__________
Current assets
Debtors and prepayments		133	215	635
AAA Money Market funds		20,651	2,716	9,296
Cash and short term deposits		1	-	3
		__________	__________	__________
		20,785	2,931	9,934
Creditors: amounts falling due within one year
Bank loans		-	(14,000)	-
Other creditors		(696)	(1,341)	(1,734)
Cash and short term deposits		-	(15)	-
		__________	__________	__________
Net current assets/(liabilities)		20,089	(12,425)	8,200
		__________	__________	__________
Total assets less current liabilities		149,714	132,472	178,372
Non-current liabilities
3.5% Convertible Unsecured Loan Stock 2018		(23,029)	-	(23,040)
		__________	__________	__________
Net assets		126,685	132,472	155,332
		__________	__________	__________
Capital and reserves
Called-up share capital		16,249	15,931	16,137
Share premium account		3,706	-	2,881
Equity component of Convertible Unsecured Loan Stock 2018		1,467	-	1,470
Special reserve		46,871	48,573	46,871
Capital reserve		56,133	65,982	85,014
Revenue reserve		2,259	1,986	2,959
		__________	__________	__________
Equity shareholders' funds		126,685	132,472	155,332
		__________	__________	__________
Net asset value per ordinary share	8	194.92p	207.89p	240.65p
		__________	__________	__________

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

		Share	Equity
	Share	premium	component	Special	Capital	Revenue
Six months ended	capital	account	CULS 2018	reserve	reserve	reserve	Total
31 December 2011 (unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2011	16,137	2,881	1,470	46,871	85,014	2,959	155,332
Return on ordinary activities after taxation	-	-	-	-	(28,881)	1,087	(27,794)
Issue of shares	106	790	-	-	-	-	896
Issue of new Ordinary shares from conversion of 3.5% Convertible Unsecured Loan Stock 2018	6	35	(3)	-	-	-	38
Dividends paid (see note 4)	-	-	-	-	-	(1,787)	(1,787)
	________	________	________	________	________	________	________
Balance at 31 December 2011	16,249	3,706	1,467	46,871	56,133	2,259	126,685
	________	________	________	________	________	________	________
		Share	Capital
	Share	premium	redemption	Special	Capital	Revenue
Six months ended	capital	account	reserve	reserve	reserve	reserve	Total
31 December 2010 (unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2010	15,931	-	-	46,871	32,737	1,759	97,298
Return on ordinary activities after taxation	-	-	-	-	33,245	1,134	34,379
Issue of shares	-	-	-	5,406	-	-	5,406
Buyback of shares	-	-	-	(3,645)	-	-	(3,645)
Tender offer costs	-	-	-	(59)	-	-	(59)
Dividends paid (see note 4)	-	-	-	-	-	(907)	(907)
	________	________	________	________	________	________	________
Balance at 31 December 2010	15,931	-	-	48,573	65,982	1,986	132,472
	________	________	________	________	________	________	________
		Share	Equity
	Share	premium	component	Special	Capital	Revenue
	capital	account	CULS 2018	reserve	reserve	reserve	Total
Year ended 30 June 2011 (audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 June 2010	15,931	-	-	46,871	32,737	1,759	97,298
Return on ordinary activities after taxation	-	-	-	-	51,659	2,744	54,403
Issue of shares	206	2,881	-	-	6,244	-	9,331
Issue of 3.5% Convertible Unsecured Loan Stock 2018	-	-	1,470	-	-	-	1,470
Tender Offer buybacks	-	-	-	-	(5,565)	-	(5,565)
Tender Offer costs	-	-	-	-	(61)	-	(61)
Dividends paid (see note 4)	-	-	-	-	-	(1,544)	(1,544)
	________	________	________	________	________	________	________
Balance at 30 June 2011	16,137	2,881	1,470	46,871	85,014	2,959	155,332
	________	________	________	________	________	________	________

CASHFLOW STATEMENT

	Six months	Six months	Year
	ended	ended	ended
	31 December	31 December	30 June
	2011	2010	2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net (loss)/return on ordinary activities before finance costs and taxation	(27,201)	34,407	54,828
Adjustment for:
Losses/(gains) on investments	28,107	(34,376)	(53,665)
Currency gains	-	(1)	(1)
	__________	__________	__________
Revenue before finance costs and taxation	906	30	1,162
Decrease/(increase) in accrued income	308	75	(145)
Decrease/(increase) in other debtors	6	(1)	(10)
(Decrease)/increase in other creditors	(1,148)	349	532
	__________	__________	__________
Net cash inflow from operating activities	72	453	1,539
Net cash outflow from servicing of finance	(437)	(2)	(91)
Net overseas tax	(22)	2	6
Net cash inflow/(outflow) from financial investment	12,640	(11,500)	(17,688)
Equity dividends paid	(1,787)	(907)	(1,544)
	__________	__________	__________
Net cash inflow/(outflow) before management of liquid  resources and financing	10,466	(11,954)	(17,778)
Net cash outflow from management of liquid resources	(11,355)	(1,715)	(8,295)
	__________	__________	__________
Net cash outflow before financing	(889)	(13,669)	(26,073)
Financing
Issue of shares	896	6,335	9,331
Buyback of shares	-	(4,574)	(5,565)
Tender offer costs	-	(110)	(153)
3.5% Convertible Unsecured Loan Stock 2018	(9)	-	24,460
Drawdown/(repayment) of bank loan	-	12,000	(2,000)
	__________	__________	__________
Net cash inflow from financing	887	13,651	26,073
	__________	__________	__________
Decrease in cash	(2)	(18)	-
	__________	__________	__________
Reconciliation of net cash flow to movements in net debt
Decrease in cash as above	(2)	(18)	-
Net change in liquid resources	11,355	1,715	8,295
Net change in debt due within one year	-	(12,000)	2,000
3.5% Convertible Unsecured Loan Stock 2018	9	-	(24,460)
Other non-cash movements	2	1	1,421
	__________	__________	__________
Movement in net debt in the period	11,364	(10,302)	(12,744)
Opening net debt	(13,741)	(997)	(997)
	__________	__________	__________
Closing net debt	(2,377)	(11,299)	(13,741)
	__________	__________	__________
Represented by:
Cash and short term deposits	1	(15)	3
AAA Money Market funds	20,651	2,716	9,296
Debt due within one year	-	(14,000)	-
Debt due in more than one year	(23,029)	-	(23,040)
	__________	__________	__________
	(2,377)	(11,299)	(13,741)
	__________	__________	__________

NOTES:

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 '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').
		The half-year financial statements have been prepared 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 December	31 December	30 June
		2011	2010	2011
2.	Income	£'000	£'000	£'000
	Income from investments
	UK dividend income	1,249	826	2,178
	Overseas dividend income	203	62	272
	UK stock dividend income	-	54	4
	Overseas stock dividend income	-	-	14
	REIT income	-	-	53
		__________	__________	__________
		1,452	942	2,521
		__________	__________	__________
	Other income
	Interest from AAA Money Market funds	71	9	26
	Interest from HMRC	-	-	395
		__________	__________	__________
		71	9	421
		__________	__________	__________
	Total income	1,523	951	2,942
		__________	__________	__________

3.	Taxation
	The taxation expenses reflected in the Income Statement is based on management's best estimate of the weighted annual corporation tax rate expected for the full financial year.  The estimated annual tax rate used for the year to 30 June 2012 is 25.75%.

		Six months	Six months	Year
		ended	ended	ended
		31 December	31 December	30 June
		2011	2010	2011
4.	Dividends	£'000	£'000	£'000
	Ordinary dividend on equity shares deducted from reserves:
	2011 final dividend of 1.75p per share (2010 - 1.50p)	1,137	907	907
	2011 special dividend of 1.00p per share (2010 - nil)	650	-	-
	2011 interim dividend of 1.00p per share	-	-	637
		__________	__________	__________
		1,787	907	1,544
		__________	__________	__________

		Six months	Six months	Year
		ended	ended	ended
		31 December	31 December	30 June
		2011	2010	2011
5.	Return per share	p	p	p
	Revenue return	1.68	1.82	4.35
	Capital return	(44.53)	53.44	81.96
		__________	__________	__________
	Total return	(42.85)	55.26	86.31
		__________	__________	__________
	Weighted average number of Ordinary shares	64,857,519	62,208,888	63,029,147
		__________	__________	__________
	The figures above are based on the following:
		Six months	Six months	Year
		ended	ended	ended
		31 December	31 December	30 June
		2011	2010	2011
		£'000	£'000	£'000
	Revenue return	1,087	1,134	2,744
	Capital return	(28,881)	33,245	51,659
		__________	__________	__________
	Total return	(27,794)	34,379	54,403
		__________	__________	__________

6.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 December 2011 includes gains of £49,991,000 (31 December 2010 - £61,165,000; 30 June 2011 - £78,376,000) which relate to the revaluation of investments held at the reporting date.

7.	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 December	31 December	30 June
		2011	2010	2011
		£'000	£'000	£'000
	Purchases	42	172	264
	Sales	26	16	27
		__________	__________	__________
		68	188	291
		__________	__________	__________

8.	Net asset value
	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 Balance Sheet reflects the rights, under the Articles of Association of the ordinary shareholders on a return of assets.
	These rights are reflected in the net asset value and the net asset value per share attributable to ordinary shareholders at the period end.
		Six months	Six months	Year
		ended	ended	ended
		31 December	31 December	30 June
		2011	2010	2011
	Total shareholders' funds	£126,685,000	£132,472,000	£155,332,000
	Number of ordinary shares in issue at the period end (excluding shares held in treasury)	64,994,559	63,722,556	64,547,556
		__________	__________	__________
	Net asset value per share	194.92p	207.89p	240.65p
		__________	__________	__________
	During the period the Company issued 425,000 new Ordinary shares for a consideration received of £896,000.  In September 2011 £52,234 nominal amount of 3.5% Convertible Unsecured Loan Stock 2008 was converted into 22,003 new Ordinary shares. As at 31 December 2011 there were 64,994,559 Ordinary shares in issue (31 December 2010 - 63,722,556 and 30 June 2011 - 64,547,556).

9.

The financial information in this report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 June 2011 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. The interim accounts have been prepared using the same accounting policies as the preceding annual accounts.

10.	This Half-Yearly Financial Report was approved by the Board on 22 February 2012.

For Standard Life UK Smaller Companies Trust plc

Aberdeen Asset Management PLC, Secretary

TOP TWENTY INVESTMENTS

As at 31 December 2011

	Value £'000	% of Portfolio
Telecom Plus	6,594	5.1
Paddy Power	6,483	5.0
Abcam	6,212	4.8
Rightmove	5,225	4.0
ASOS	4,953	3.8
Andor Technology	4,477	3.5
Hargreaves Lansdown	4,305	3.3
Mulberry Group	4,133	3.2
New Britain Palm Oil	4,104	3.2
First Quantum Minerals	3,387	2.6
Kentz	3,182	2.5
Domino's Pizza	3,101	2.4
ITE Group	2,983	2.3
Computacenter	2,878	2.2
Telecity Group	2,823	2.2
IG Group	2,766	2.1
Rotork	2,702	2.1
Dunelm Group	2,678	2.1
Emis Group	2,666	2.1
SDL	2,607	2.0
	__________	__________
TOTAL	78,259	60.5
	__________	__________

END

 

END

 

 

IR PGUMAPUPPGAP