Half Yearly Report

RNS Number : 4121Q

Aberdeen Smaller Co's High Inc Tst

29 August 2014

 



Aberdeen Smaller Companies High Income Trust PLC

Half Yearly Financial Report for the six months to 30 June 2014

Aberdeen Smaller Companies High Income Trust PLC aims to provide a high and growing dividend and capital growth from a portfolio invested principally in the ordinary shares of smaller UK companies and UK fixed income securities.

Highlights	30 June 2014	31 December 2013	% change
Equity shareholders' funds (£'000)	50,669	52,618	-3.7
Net asset value per share	229.17p	237.99p	-3.7
Share price (mid-market)	210.00p	223.00p	-5.8
Discount to adjusted net asset value{A}	7.7%	5.7%
Dividend yield	3.0%	2.8%
{A} Based on IFRS net asset value above reduced by dividend adjustment of 1.60p (31 December 2013 - 1.60p).

Performance (total return)	Six months ended	1 year ended	3 years ended	5 years ended
	30 June 2014	30 June 2014	30 June 2014	30 June 2014
Share price	- 4.5%	+ 16.3%	+ 77.1%	+ 253.7%
Net asset value per share	- 2.4%	+ 23.7%	+ 56.8%	+ 235.9%
FTSE SmallCap Index (ex IC's)	+ 0.4%	+ 25.3%	+ 62.6%	+ 143.7%
FTSE All-Share Index	+ 1.6%	+ 13.1%	+ 29.2%	+ 96.7%
Markit iBoxx Sterling Non-Gilts 1-15 Years Index{A}	+ 3.8%	+ 5.7%	+ 20.7%	+ 46.9%
{A} Source: Aberdeen Asset Management, Markit iBoxx, Morningstar & Factset.
All figures are for total return and assume re-investment of net dividends excluding transaction costs.

For further information, please contact:-

Kenneth Harper

Manager, Investment Trust Investor Relations

Aberdeen Asset Management Limited

Telephone [phone]

INTERIM BOARD REPORT

Performance

After a very strong 2013, the first half of 2014 has been quieter for small companies.  The Net Asset Value (NAV) fell by 2.4% in total return terms over the period, having risen by 45% in 2013.  In comparison, the FTSE Smaller Companies (ex IT) index rose by 0.4% in the six months to 30 June 2014. Over the same period the share price fell by 4.5%, reflecting a widening of the discount which had been extremely tight for the majority of the last year.  The Board has already announced first and second interim dividends of 1.6p per share, an increase from 1.55p last year.

Portfolio Commentary

Although we have seen a recovery in UK GDP, and some signs of recovery across Europe, the consequences for companies is less clear. Looking at the Trust's portfolio some two-thirds of revenues are exposed to UK & Europe. In theory this should provide a fillip to our holdings and, indeed, across the smaller company spectrum as a whole.  We do, however, need to be mindful that this will take time to feed through.

Since 2013 the emerging market economies have continued to slow.  The recent strength of Sterling has been sustained which reduces the competitiveness of UK companies exporting to emerging markets. 

These issues are fundamental to the overarching theme of valuations which the Manager have discussed consistently in their regular shareholder updates. With valuations remaining stretched there is little margin for error if companies miss guidance.

It's also noteworthy to mention that the first half of this year has seen a deluge of initial public offerings (IPOs). The Manager reviewed a number of what they felt were the higher quality companies being brought to the market but, in the end, chose to invest in only one, Manx Telecom. A buoyant IPO market usually coincides with a period of market exuberance and there were certainly occasions where it felt like there was a disregard for quality, or valuation. There was often very little detail around longer term corporate performance, in particular during the financial crisis. This gave very little comfort over the through-cycle performance of these businesses. It is easy to say this with the benefit of hindsight but, in the main, most IPOs went well at launch but the vast majority are now below their issue price.

The drag the fixed income portfolio has on the Trust's total return during strong equity markets has been mentioned previously. In this quieter period the reverse of this recent trend has been seen. The entirety of the underperformance has been due to the equity portfolio with the fixed income and preference share portfolios both in positive territory. Given the positioning of the fixed income portfolio the Board is happy to see this protection in a period of higher volatility in the Trust's equity portfolio.

Equity Portfolio

Performance of the equity portfolio has been driven by a number of stock specific issues in some of the Trust's larger holdings. As a reminder the equity portfolio is comprised of 43 companies so, with an average weighting of around 2.5%, one may see periods where the performance can lag the index. There were three names in particular which hurt performance over the period: Fenner, Euromoney and Wilmington. Over the long term these have all delivered strong returns but are currently experiencing either tougher markets or a derating. Wilmington is a perfect example of the latter having gone through a period of restructuring and repositioning that saw the share price perform exceptionally well. At the recent trading update group revenue was up 5% with "good progress in operating profits and margins across most divisions". Where possible the Manager has been proactive throughout the last year selling down companies where valuations were extended but in the case of this being market-wide there are few places to hide.

As a Board we monitor performance closely but place the small underperformance over the period in the context of strong recent returns. We continue to believe that the Aberdeen process is well suited to the current environment, particularly as the Manager seeks to look through short-term market difficulties and, through their fundamental bottom up research process, consider where weakness has created buying opportunities. The Manager's response to periods of corporate underperformance is rarely to exit and therefore permanently destroy capital. Companies do change and evolve over time but the business models tend to be much more evolution than revolution which the Manager can monitor at their six monthly management meetings they conduct with companies.

As mentioned above, the Manager introduced one new name into the equity portfolio over the period, Manx Telecom.  Its IPO provided a complete exit for its private equity owners. Manx is the incumbent Isle of Man telecom provider and is exposed to the attractions of an economy that has had 29 years of consecutive GDP growth. The business has dominant market positions in a duopolistic market. They are the only provider of fixed line services and have a strong broadband offering which will be bolstered by their upcoming investment in fibre. They have 75% market share in mobile and a higher share of the attractive premium customer spend. This will be further enhanced by the upcoming investment in 4G which should drive increased traffic and also help with customer retention. They also have a data centre business which is delivering decent growth as are their small off-island ventures. The business is well capitalised, has strong cash-flow and at IPO was paying an attractive 7% dividend yield.

Fixed income/Preference share Portfolio

The fixed income and preference share portfolio delivered good returns over the six months despite a lack of activity (albeit following an active 2013). In terms of the backdrop the second iteration of Forward Rate Guidance (FGR) yielded no major policy changes and the Bank of England are focussing on a more qualitative view rather than any single data point, although with recent GDP and unemployment data ahead of expectations this may lead to interest rate rises earlier than expected. From a portfolio perspective we believe that we are reasonably positioned to mitigate the impact, where possible, of the inevitable rate rises at some point in the future. The same can be said for the preference share portfolio, where we have seen some decent returns. The General Accident and Aviva holdings have both rallied in line with the performance of the underlying business. Ecclesiastical has also performed while Balfour Beatty has been broadly flat. We are monitoring Balfour Beatty due to current merger discussions between themselves and Carillion.

Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (the "Directive"), proposed by the EU to enhance shareholder protection, was fully implemented in the UK on 22 July 2014. This Directive required the Company to appoint an authorised Alternative Investment Fund Manager and a depositary, the latter overlaying the current custody arrangements.

The Company has now appointed Aberdeen Fund Managers Limited ("AFML"), following its authorisation by the FCA, to act as the Company's Alternative Investment Fund Manager, entering a new management agreement with AFML on 17 July 2014. Under this agreement the AFML delegates portfolio management services to Aberdeen Asset Managers Limited, which continues to act as the Company's Investment Manager. There is no change in the commercial arrangements from the previous investment management agreement.

In addition, the Company entered into a depositary agreement with AFML and BNP Paribas Securities Services, London Branch on 17 July 2014. The appointment of a depositary is a new requirement under the Directive and as previously reported this will increase costs over and above the previous custody arrangements.

Referendum on Scottish Independence

The Company is registered in Scotland and the Board notes the continuing uncertainty in relation to the forthcoming referendum on Scottish independence.  In the event of a "Yes" vote in favour of independence this uncertainty may be prolonged until the implications for the Company are clearer, especially relating to the economic, legislative and regulatory backdrop.

Outlook

As a Board we have been very active over the years in repositioning the Trust. The Manager believes that the equity portfolio is in good shape and the fixed income portfolio has been resized and positioned. We have also refinanced the debt to attractive levels whilst retaining flexibility through the combination of a fixed and variable stance, with overall debt of approx. 20% of gross assets. This is a level that as a Board we are comfortable with given where we are in the cycle.

Carolan Dobson

Chairman

29 August 2014

Principal Risks and Uncertainties

The principal risks facing the Company relate to the Company's investment activities and include market risk (comprising interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is provided within the 2013 Annual Report and Accounts.  The Board has adopted a matrix of the key risks that affect its business.

Investment Risk

The Directors are responsible for determining the investment policy and the investment objectives of the Company, while the day-to-day management of the Company's assets has been delegated to the Manager under investment guidelines determined by the Board.  The Board regularly reviews these guidelines to ensure they remain appropriate and Board approval is required before any exceptions are permitted.

The Manager invests in equities, bonds and preference shares, following their investment processes.

(i)  Equity Investment Process

The equity investment process is active and bottom-up, based on disciplined evaluation of companies through direct visits by fund managers. Stock selection is the major source of added value, concentrating on quality first, then value. Great emphasis is placed on understanding the business and understanding how it should be valued. New investments are not made without the Manager having first met management of the investee company, undertaken further analysis and written detailed notes to outline the underlying investment merits.  Top-down investment factors are secondary in the equity portfolio construction, with diversification rather than formal controls guiding stock and sector weights. However, the exposure to equities is limited by investment guidelines drawn up by the Board in conjunction with the Manager which include:

· Maximum equity gearing of 110% of Net Asset Value

· Maximum 5% of investee company's ordinary shares

· Maximum 5% of the Company's total assets invested in the securities of one company

· No unquoted investments

(ii)  Fixed Income Investment Process

The fixed income investment process is an active investment style which identifies value between individual securities. This is achieved by combining bottom-up security selection with a top-down investment approach. Investments in corporate bonds and preference shares are also managed by investment guidelines drawn up by the Board in conjunction with the Manager which include:

· No holding in a single fixed interest security to exceed 5% of the total bond issue of the investee company

· Maximum acquisition cost of an investment grade bond - £1 million

· Maximum acquisition cost of non-investment grade bond - £500,000

Gearing Risk

Gearing is used with the intention of enhancing income and long-term total returns. Gearing has the effect of accentuating market falls and market gains.  The Company's gearing currently in place is a two year facility comprising a £5 million fixed and £5 million floating rate. 

The risk of gearing is also managed by investing in corporate bonds, the vast majority of which are investment grade and preference shares of large financial institutions.

Scottish Independence

As a Scottish-registered Company, the Board is aware that there is uncertainty arising in relation to the referendum on Scottish independence due on 18 September 2014.  The Board has given consideration to the implications that this might have for the Company, however, considers that it is too early at this stage to prejudge the outcome of a vote, or of any subsequent negotiations as they may affect the Trust and its shareholders.

Going Concern

The Company's assets comprise mainly readily realisable securities which can be sold to meet funding commitments if necessary. The Company has a two year credit facility in place which is available until July 2015. The Board considers that the Group has adequate financial resources to continue in operational existence for the foreseeable future and therefore appropriate to prepare the financial statements on a going concern basis.

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 interim financial statements contained within the Half Yearly Financial Report has been prepared in accordance with IAS34; and

· the Interim Board Report (constituting the interim management statement) includes a fair review of the information required by rules 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks for the remaining six months of the financial year) and 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company and its subsidiary during that period; and any changes in the related party transactions described in the last annual report that could so do).

The Half Yearly Financial Report for the six months to 30 June 2014 comprises the Interim Board Report, the Directors' Responsibility Statement and a condensed set of financial statements.

For and on behalf of the Board of Aberdeen Smaller Companies High Income Trust PLC

Carolan Dobson

Chairman

29 August 2014

Distribution of Assets and Liabilities

	Valuation at		Movement during the period				Valuation at
	31 December					Gains/	30 June
	2013		Purchases	Sales	Other{A}	(losses)	2014
	£'000	%	£'000	£'000	£'000	£'000	£'000	%
Listed investments
Ordinary shares	53,679	102.0	4,125	(2,969)	-	(2,239)	52,596	103.8
Convertibles	1,034	2.0	-	-	-	9	1,043	2.0
Corporate Bonds	3,120	5.9	-	-	(18)	91	3,193	6.3
Other fixed interest	2,987	5.7	-	-	-	259	3,246	6.4
	_______	_______	_______	_______	_______	_______	_______	_______
	60,820	115.6	4,125	(2,969)	(18)	(1,880)	60,078	118.5
	_______	_______	_______	_______	_______	_______	_______	_______
Current assets	2,021	3.8					812	1.6
Long-term loan	(10,000)	(19.0)					(10,000)	(19.7)
Other current liabilities	(223)	(0.4)					(221)	(0.4)
	_______	_______					_______	_______
Net assets	52,618	100.0					50,669	100.0
	_______	_______					_______	_______
Net asset value per share	238.0p						229.2p
	_______						_______
{A} Represents amortisation costs on debt securities of £18,000.

Condensed Statement of Comprehensive Income  

for the six months ended 30 June 2013

		Six months ended
		30 June 2014
		(unaudited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Dividend income	2	1,008	-	1,008
Interest income from investments	2	131	(18)	113
(Losses)/gains on investments held at fair value		-	(1,880)	(1,880)
		_________	_________	_________
Total income		1,139	(1,898)	(759)
		_________	_________	_________
Expenses
Investment management fees		(70)	(164)	(234)
Other administrative expenses		(161)	-	(161)
Finance costs of borrowing		(26)	(62)	(88)
		_________	_________	_________
Profit/(loss) before taxation		882	(2,124)	(1,242)
		_________	_________	_________
Taxation	3	-	-	-
		_________	_________	_________
Profit/(loss) attributable to equity holders	4	882	(2,124)	(1,242)
		_________	_________	_________
Return per Ordinary share (pence)	5	3.99	(9.61)	(5.62)
		_________	_________	_________
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies.
The Company does not have any income or expense that is not included in profit for the period, and therefore the "Profit attributable to equity holders" is also the "Total comprehensive income attributable to equity holders" as defined in IAS 1 (revised).
All items in the above statement derive from continuing operations.

Condensed Statement of Comprehensive Income 

(Continued)

		Six months ended			Year ended
		30 June 2013			31 December 2013
		(unaudited)			(audited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Dividend income	2	972	-	972	1,829	-	1,829
Interest income from investments	2	166	(15)	151	300	(32)	268
(Losses)/gains on investments held at fair value		-	4,728	4,728	-	15,380	15,380
		_______	_______	_______	_______	_______	_______
Total income		1,138	4,713	5,851	2,129	15,348	17,477
		_______	_______	_______	_______	_______	_______
Expenses
Investment management fees		(97)	(97)	(194)	(207)	(207)	(414)
Other administrative expenses		(165)	-	(165)	(312)	-	(312)
Finance costs of borrowing		(66)	(66)	(132)	(114)	(114)	(228)
		_______	_______	_______	_______	_______	_______
Profit/(loss) before taxation		810	4,550	5,360	1,496	15,027	16,523
		_______	_______	_______	_______	_______	_______
Taxation	3	-	-	-	-	-	-
		_______	_______	_______	_______	_______	_______
Profit/(loss) attributable to equity holders	4	810	4,550	5,360	1,496	15,027	16,523
		_______	_______	_______	_______	_______	_______
Return per Ordinary share (pence)	5	3.66	20.58	24.24	6.77	67.96	74.73
		_______	_______	_______	_______	_______	_______
All items in the above statement derive from continuing operations.

Condensed Balance Sheet

		As at	As at	As at
		30 June 2014	30 June 2013	31 December 2013
		(unaudited)	(unaudited)	(audited)
	Notes	£'000	£'000	£'000
Non-current assets
Ordinary shares		52,596	43,458	53,679
Convertibles		1,043	1,035	1,034
Corporate bonds		3,193	2,902	3,120
Preference shares		3,246	2,714	2,987
		____________	____________	____________
Securities at fair value		60,078	50,109	60,820
		____________	____________	____________
Current assets
Cash and cash equivalents		386	1,763	1,683
Other receivables		426	563	338
		____________	____________	____________
Total current assets		812	2,326	2,021
		____________	____________	____________
Total assets		60,890	52,435	62,841
Current liabilities
Short-term loan		-	(10,000)	-
Trade and other payables		(221)	(294)	(223)
		____________	____________	____________
Total current liabilities		(221)	(10,294)	(223)
		____________	____________	____________
Non-current liabilities
Long-term loan		(10,000)	-	(10,000)
		____________	____________	____________
Total liabilities		(10,221)	(10,294)	(10,223)
		____________	____________	____________
Net assets		50,669	42,141	52,618
		____________	____________	____________
Issued capital and reserves attributable to equity holders
Called-up share capital		11,055	11,055	11,055
Share premium account		11,892	11,892	11,892
Capital redemption reserve		2,032	2,032	2,032
Capital reserve	6	23,463	15,110	25,587
Revenue reserve		2,227	2,052	2,052
		____________	____________	____________
Equity shareholders' funds		50,669	42,141	52,618
		____________	____________	____________
Net asset value per Ordinary share (pence)	5	229.17	190.60	237.99
		____________	____________	____________

Condensed Statement of Changes in Equity

Six months ended 30 June 2014 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2013		11,055	11,892	2,032	25,587	2,052	52,618
Revenue profit for the period		-	-	-	-	882	882
Capital loss for the period		-	-	-	(2,124)	-	(2,124)
Equity dividends	4	-	-	-	-	(707)	(707)
		______	______	______	______	______	______
Balance at 30 June 2014		11,055	11,892	2,032	23,463	2,227	50,669
		______	______	______	______	______	______
Six months ended 30 June 2013 (unaudited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2012		11,055	11,892	2,032	10,560	1,927	37,466
Revenue profit for the period		-	-	-	-	810	810
Capital profit for the period		-	-	-	4,550	-	4,550
Equity dividends	4	-	-	-	-	(685)	(685)
		______	______	______	______	______	______
Balance at 30 June 2013		11,055	11,892	2,032	15,110	2,052	42,141
		______	______	______	______	______	______
Year ended 31 December 2013 (audited)
			Share	Capital
		Share	premium	redemption	Capital	Revenue
		capital	account	reserve	reserve	reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2012		11,055	11,892	2,032	10,560	1,927	37,466
Revenue profit for the year		-	-	-	-	1,496	1,496
Capital profit for the year		-	-	-	15,027	-	15,027
Equity dividends	4	-	-	-	-	(1,371)	(1,371)
		______	______	______	______	______	______
Balance at 31 December 2013		11,055	11,892	2,032	25,587	2,052	52,618
		______	______	______	______	______	______

Condensed Cash Flow Statement

	Six months ended	Six months ended	Year ended
	30 June 2014	30 June 2013	31 December 2013
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Cash flows from operating activities
Investment income received	1,069	1,076	2,111
Investment management fees paid	(234)	(183)	(387)
Other cash expenses	(158)	(153)	(313)
	___________	___________	___________
Cash generated from operations	677	740	1,411
Interest paid	(89)	(152)	(228)
	___________	___________	___________
Net cash inflows from operating activities	588	588	1,183
	___________	___________	___________
Cash flows from investing activities
Purchases of investments	(4,077)	(6,775)	(9,734)
Sales of investments	2,899	7,033	10,003
	___________	___________	___________
Net cash (outflows)/ inflows from investing activities	(1,178)	258	269
	___________	___________	___________
Cash flows from financing activities
Loan repaid	-	-	(10,000)
Loan drawdown	-	-	10,000
Equity dividends paid	(707)	(685)	(1,371)
	___________	___________	___________
Net cash outflows from financing activities	(707)	(685)	(1,371)
	___________	___________	___________
Net (decrease)/increase in cash and cash equivalents	(1,297)	161	81
Cash and cash equivalents at the start of the period	1,683	1,602	1,602
	___________	___________	___________
Cash and cash equivalents at the end of the period	386	1,763	1,683
	___________	___________	___________
Cash and cash equivalents comprise:
Cash and cash equivalents	386	1,763	1,683
	___________	___________	___________

1.	Accounting policies
	(a)	Basis of accounting
		The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') 34 - 'Interim Financial Reporting', as adopted by the International Accounting Standards Board ('IASB'), and interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC') of the IASB. They have also been prepared using the same accounting policies applied for the year ended 31 December 2013 financial statements, which received an unqualified audit report, save for the allocation of the investment management fee and finance costs. From 1 January 2014 the allocation of such costs was amended to 70% to capital and 30% to revenue in order to reflect the Directors expected long-term view of the nature of the investment returns of the Company. Prior to 1 January 2014, the allocation was 50% to capital and 50% to revenue.
		At the date of authorisation of these financial statements, various Standards, amendments to Standards and Interpretations which have not been applied to these financial statements, were in issue but were not yet effective. The following are the Standards and amendments to existing Standards which may be relevant but not yet effective. Other Standards, Interpretations and amendments to Standards which are not yet effective and not relevant have not been included;
		IFRS 9 - Financial Instruments: Classification and Measurement (current proposed effective date for implementation 1 January 2018)
	(b)	Dividends payable
		Dividends are recognised in the period in which they are paid.

		Six months ended	Six months ended	Year ended
		30 June 2014	30 June 2013	31 December 2013
2.	Income	£'000	£'000	£'000
	Income from investments
	Dividend income from UK equity securities	847	829	1,613
	Dividend income from overseas equity securities	126	133	177
	Stock dividends	32	10	33
	Property income distribution	3	-	6
	Interest income from investments	131	166	300
		___________	___________	___________
		1,139	1,138	2,129
		___________	___________	___________
	The Company amortises the premium or discount on acquisition on debt securities against unrealised capital reserve. For the six months to 30 June 2014 this represented £18,000 (30 June 2013 - £15,000; 31 December 2013 - £32,000) which has been reflected in the capital column of the Statement of Comprehensive Income.

3.	Taxation
	The taxation expense reflected in the Condensed Statement of Comprehensive Income is based on management's best estimate of the weighted average annual corporation tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 31 December 2014 is 21.50%.

4.	Dividends
	The following table shows the revenue for each period less the dividends declared in respect of the financial period to which they relate.
		Six months ended	Six months ended	Year ended
		30 June 2014	30 June 2013	31 December 2013
		£'000	£'000	£'000
	Revenue	882	810	1,496
	Dividends declared	(707){A}	(685){B}	(1,382){C}
		___________	___________	___________
		175	125	114
		___________	___________	___________
	{A} Dividends declared relate to first two interim dividends (both 1.60p each) declared in respect of the financial year 2014.
	{B} Dividends declared relate to first two interim dividends (both 1.55p each) declared in respect of the financial year 2013.
	{C} Dividends declared relate to the four interim dividends declared in respect of the financial year 2013 totalling 6.25p.

		Six months ended	Six months ended	Year ended
		30 June 2014	30 June 2013	31 December 2013
5.	Return and net asset value per share	p	p	p
	Revenue return	3.99	3.66	6.77
	Capital return	(9.61)	20.58	67.96
		___________	___________	___________
	Total return	(5.62)	24.24	74.73
		___________	___________	___________
	The returns per share are based on the following figures:
		Six months ended	Six months ended	Year ended
		30 June 2014	30 June 2013	31 December 2013
		£'000	£'000	£'000
	Revenue return	882	810	1,496
	Capital return	(2,124)	4,550	15,027
		___________	___________	___________
	Total return	(1,242)	5,360	16,523
		___________	___________	___________
	Weighted average number of Ordinary shares in issue	22,109,765	22,109,765	22,109,765
		___________	___________	___________
	The net asset value per share is based on net assets attributable to shareholders of £50,669,000 (30 June 2013 - £42,141,000; 31 December 2013 - £52,618,000) and on 22,109,765 (30 June 2013 - 22,109,765; 31 December 2013 - 22,109,765) Ordinary shares in issue at each period end.

6.	Capital reserves
	The capital reserve reflected in the Balance Sheet at 30 June 2014 includes gains of £17,497,000 (30 June 2013 - gains of £11,635,000; 31 December 2013 - gains of £21,011,000) 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 though profit or loss. These have been expensed through capital and are included within gains on investments held at fair value in the Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		30 June 2014	30 June 2013	31 December 2013
		£'000	£'000	£'000
	Purchases	17	29	47
	Sales	3	5	7
		___________	___________	___________
		20	34	54
		___________	___________	___________

8.	Fair value hierarchy
	IFRS 13 'Fair Value Measurement' requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making measurements. The fair value hierarchy has the following levels:
	Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
	Level 2: inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly (ie as prices) or indirectly (ie derived from prices); and
	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	The financial assets and liabilities measured at fair value in the Balance Sheet are grouped into the fair value hierarchy as follows:
			Level 1	Level 2	Level 3	Total
	At 30 June 2014 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	55,842	-	-	55,842
	Quoted bonds	b)	4,236	-	-	4,236
			______	______	______	______
			60,078	-	-	60,078
			______	______	______	______
	Financial liabilities at fair value through profit or loss
	Financial liabilities at amortised cost	c)	-	(10,000)	-	(10,000)
			______	______	______	______
	Net fair value		60,078	(10,000)	-	50,078
			______	______	______	______
			Level 1	Level 2	Level 3	Total
	At 30 June 2013 (unaudited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	46,172	-	-	46,172
	Quoted bonds	b)	3,937	-	-	3,937
			______	______	______	______
			50,109	-	-	50,109
			______	______	______	______
	Financial liabilities at fair value through profit or loss
	Financial liabilities at amortised cost	c)	-	(10,000)	-	(10,000)
			______	______	______	______
	Net fair value		50,109	(10,000)	-	40,109
			______	______	______	______
			Level 1	Level 2	Level 3	Total
	At 31 December 2013 (audited)	Note	£'000	£'000	£'000	£'000
	Financial assets at fair value through profit or loss
	Quoted equities	a)	56,666	-	-	56,666
	Quoted bonds	b)	4,154	-	-	4,154
			______	______	______	______
			60,820	-	-	60,820
			______	______	______	______
	Financial liabilities at fair value through profit or loss
	Financial liabilities at amortised cost	c)	-	(10,000)	-	(10,000)
			______	______	______	______
	Net fair value		60,820	(10,000)	-	50,820
			______	______	______	______
	a) Quoted equities
	The fair value of the Company's investments in quoted equities has been determined by reference to their quoted bid prices at the reporting date. Quoted equities included in Fair Value Level 1 are actively traded on recognised stock exchanges.
	b) Quoted bonds
	The fair value of the Company's investments in corporate quoted bonds has been determined by reference to their quoted bid prices at the reporting date.
	c) Financial liabilities at amortised cost
	Financial liabilities in the form of short-term and long-term borrowings are held at amortised cost. The fair value is considered to approximate the carrying value.
	There have been no transfers of assets or liabilities between levels of the fair value hierarchy during any of the above periods.

9.	Publication of non-statutory accounts
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 June 2014 and 30 June 2013 has not been audited.
	The information for the year ended 31 December 2013 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.

10.	This Half-Yearly Financial Report was approved by the Board on 29 August 2014.

11.   The Half Yearly Financial Report is available on the Company's website, www.aberdeensmallercompanies.co.uk.  The Half Yearly Report will be posted to shareholders in September 2014 and copies will be available from the investment manager.

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.  Investors may not get back the amount they originally invested

Investment Portfolio - Ordinary Shares

As at 30 June 2014

		Market	Total
		value	portfolio
Company	Sector	£'000	%
RPC Group		2,159	3.6
Europe's leading manufacturer of rigid plastic packaging which is benefitting from lightweighting, product innovation, and a pan-european footprint giving them the ability to target the large FMCG companies.	General Industrials
Wilmington		2,027	3.4
Provider of B2B digital services in niche areas of compliance, pensions, and Insurance. The model is predominantly subscription based with high level of recurring revenue.	Media
XP Power		1,851	3.1
XP Power designs and produces power control components. They sell critical high cost of failure low value equipment to healthcare, industrial and technology industries. Their investment into new facilities and R&D is driving future growth.	Electronic & Electrical Equipment
Fenner		1,772	2.9
A specialist provider of advanced polymer solutions with two strong operating divisions ACS and AEP. ACS sells and services conveyor belting equipment while AEP manufactures a wide array do specialist products that are critical to the end market customer whilst also representing a low percentage of the end products cost.	Industrial Engineering
Dechra Pharmaceuticals		1,729	2.9
Develops, manufactures and distributes veterinary pharmaceuticals with excellent opportunities to expand further into both Europe and the US.	Pharmaceuticals & Biotechnology
Euromoney Institutional Investor		1,709	2.8
Online media business aimed at servicing the financial sector through their market leading BCA business. High recurring subscription base provides a solid backdrop.	Media
TT Electronics		1,692	2.8
Manufactures electronic and electrical components for the automotive, telecommunication and industrial engineering sectors.	Electronic & Electrical Equipment
Helical Bar		1,629	2.7
Develops, invests and trades property in the United Kingdom, deriving rental income from retail, office and industrial properties.	Real Estate Investment & Services
Berendsen		1,615	2.7
European textile services business with high barriers to entry and strong customer relationships. Business has been focused around core growth opportunities which are gaining traction.	Support Services
Morgan Sindall		1,597	2.7
Operates a specialist construction group. Activities include office design, fitting out, refurbishment, building contracting, property investment and related specialist services.	Construction & Materials
Ten largest investments		17,780	29.6
Chesnara	Life Insurance	1,580	2.6
Rathbone Brothers	Financial Services	1,560	2.6
Elementis	Chemicals	1,537	2.6
Interserve	Support Services	1,518	2.5
Close Brothers	Financial Services	1,508	2.5
Bellway	Household Goods & Home Construction	1,425	2.4
Bloomsbury Publishing	Media	1,411	2.3
Devro	Food Producers	1,360	2.3
BBA Aviation	Industrial Transportation	1,355	2.3
Fisher James	Industrial Transportation	1,316	2.2
Twenty largest investments		32,350	53.9
Victrex	Chemicals	1,268	2.1
Anite	Software & Computer Services	1,121	1.9
Hiscox	Non Life Insurance	1,092	1.8
Fuller Smith & Turner 'A'	Travel & Leisure	1,085	1.8
Numis	Financial Services	1,082	1.8
Dignity	General Retailers	1,069	1.8
Robert Walters	Support Services	1,066	1.8
Hansteen	Real Estate Investment Trusts	1,022	1.7
Savills	Real Estate Investment & Services	969	1.6
Huntsworth	Media	896	1.5
Thirty largest investments		43,020	71.7
Acal	Support Services	893	1.5
Domino Printing	Electronic & Electrical Equipment	822	1.4
Intermediate Capital Group	Financial Services	773	1.3
Abcam	Pharmaceuticals & Biotechnology	760	1.3
Keller Group	Construction & Materials	751	1.3
Aveva Group	Software & Computer Services	729	1.2
Oxford Instruments	Electronic & Electrical Equipment	722	1.2
Greggs	Food & Drug Retailers	718	1.2
AG Barr	Beverages	684	1.1
McBride	Household Goods & Home Construction	678	1.1
Forty largest investments		50,550	84.3
The Restaurant Group	Travel & Leisure	665	1.1
Manx Telecom	Fixed Line Telecommunications	582	1.0
Mothercare	General Retailers	494	0.8
Majestic Wine	General Retailers	305	0.5
Total Ordinary shares		52,596	87.7

Investment Portfolio - Other Investments

As at 30 June 2014

	Market	Total
	value	portfolio
Company	£'000	%
Convertibles
Balfour Beatty Cum Conv 10.75%	1,043	1.7
Total Convertibles	1,043	1.7
Corporate Bonds
National Westminster 5.98%	943	1.6
Stagecoach Group 5.75% 2016	650	1.1
Wales & West Utilities Finance 6.75% 2036	569	0.9
Electricite de France 6%A	532	0.9
Anglian Water 4.5% 2026	499	0.8
Total Corporate Bonds	3,193	5.3
Preference shares
Aviva 8.75%	1,270	2.1
General Accident 8.875%	1,229	2.0
Ecclesiastical Insurance 8.625%	747	1.2
Total Preference shares	3,246	5.3
Total Other Investments	7,482	12.3
Total Investments	60,078	100.0
{A}        All investments are listed on the London Stock Exchange (sterling based), except those marked, which are listed on overseas exchanges based in sterling.

 

END

 

 

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