Half Yearly Report
STANDARD LIFE UK SMALLER COMPANIES TRUST PLC
Investment Objective
To achieve long term capital growth by investment in UK quoted smaller companies.
Investment Policy
The Directors intend to achieve the investment objective by investing 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 date of acquisition.
The Directors expect that, in normal market conditions, gearing will be between -5% and 20% of net assets. The Directors have delegated responsibility to the Manager for the operation of the gearing level within the above range.
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 cycle. This flexible, but disciplined process ensures that the Manager has the opportunity to perform in different market conditions.
For further information, please contact:
Yvonne Savage
Press Manager, Standard Life Investments Tel. 0131 245 3610
Gordon Humphries
Head of Investment Companies, Standard Life Investments Tel: 0131 245 2735
-END-
HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
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Financial Highlights |
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Total Return |
Six months ended 31 December 2010 |
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Net asset value |
+36.3% |
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Hoare Govett Smaller Companies Index (ex Investment Trusts) |
+27.0% |
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Capital Return |
31 December |
30 June |
% |
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Net asset value per ordinary share |
207.89p |
154.04p |
+35.0% |
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Ordinary share price (mid-market) |
212.00p |
136.50p |
+55.3% |
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Premium/(discount) of share price to net asset value (including net revenue) |
2.0% |
(11.4%) |
- |
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Hoare Govett Smaller Companies Index (ex Investment Trusts) |
4,447.60 |
3,544.30 |
+25.5% |
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Total assets (£m) 1 |
146.47 |
99.30 |
+47.5% |
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Equity shareholders' funds (£m) |
132.47 |
97.30 |
+36.1% |
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Revenue return per ordinary share |
1.82p 2 |
1.13p 3 |
+61.1% |
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Interim dividend per ordinary share |
1.00p |
1.00p 3 |
- |
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1 Calculated as Total Assets less Current Liabilities, excluding short-term bank loan of £14.0m (30 June 2010 - £2.0m) |
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2 Includes 0.77p per ordinary share relating to a VAT refund |
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3 For the six months ended 31 December 2009 |
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INTERIM MANAGEMENT REPORT
FOR THE SIX MONTHS ENDED 31 DECEMBER 2010
CHAIRMAN'S STATEMENT
Performance
I am pleased to report that the Company's net asset value total return was 36.3% for the six months to 31 December 2010. This compared favourably with a rise of 27.0%, on a total return basis, in the Company's benchmark, the Hoare Govett Smaller Companies Index (excluding investment trusts). Over the same period, the total return for the FTSE All-Share Index was 22.0%.
The Company's Ordinary share price total return was 56.7% for the six months to 31 December 2010. The discount to net asset value narrowed substantially over that period and at the period end, the Ordinary shares were trading at a 2.0% premium to net asset value.
Additional information on the economic background and on the changes to the Company's investment portfolio may be found in the Manager's Report.
Earnings and Dividend
The revenue return was 1.82 pence per share for the six months ended 31 December 2010, of which 1.05 pence per share is from investment income and 0.77 pence per share relates to a VAT refund, as explained below. This compares to 1.13 pence per share for the same period in the prior year. An unchanged interim dividend of 1.00 pence per share (2009 - 1.0 pence) will be paid on 18 March 2011 to those shareholders on the register as at 4 March 2011 with an associated ex-dividend date of 2 March 2011.
VAT on management fees
Following continued negotiations with the Company's former manager, a further VAT refund of £561,000 was received during the period. The Company has now received a total refund of £934,000, representing the VAT charged to the Company for the periods from 1990 to 1996 and from 2001 to the date of transfer of the management contract in September 2003. The funds received in this six month period represent a 0.77p contribution to the revenue return per share.
Awards
The Company won the UK Smaller Companies category at the Investment Week Investment Trust of the Year awards, recognising the successful long term performance record of Standard Life Investments since appointment as Manager.
Gearing
The Manager has been given discretion by the Board to vary the level of the net gearing between -5% and 20% of net assets depending on the Manager's view of the outlook for smaller companies.
The Company renewed its bank loan facility in October 2010 and put in place a £15m one- year credit facility with an interest rate of 1.25% over LIBOR. With the Manager positive on the prospects for smaller companies, £14m of the facility was drawn down in December, resulting in a gearing level of 10.6% at the period end.
Convertible Unsecured Loan Stock
The Company and its advisers have been exploring the possibility of an issue of convertible unsecured loan stock to replace the Company's existing gearing facilities and enhance the Manager's ability to increase capital returns. The Company will shortly publish an announcement which sets out further details in relation to this matter.
Discount
The Company's discount to net asset value narrowed from 11.4% at 30 June 2010 to a premium of 2.0% at 31 December 2010. The size-weighted average discount for UK smaller companies was 15.1% at 31 December 2010, indicating that the Company's shares are on a significant premium rating to the average UK smaller companies trust.
Regular Tender Offer
The Company conducted its second periodic tender offer on 31 December 2010. On 12 January 2011, the Company announced that 512,076 ordinary shares, or 0.8% of the Company's issued share capital, were validly tendered and repurchased into treasury by the Company at a price of 193.4p per share. On 31 January 2011, the Company sold 512,076 ordinary shares from treasury at a price per share of 209.0p. As at 17 February 2011, the ordinary share price was 217.0p.
Marketing
Marketing activities have continued to focus on the broadening of the shareholder base. Further details about investing in the Manager's savings plans may be found online at www.standardlifeinvestments.co.uk/its
Outlook
We are positive on the prospects for UK smaller companies in 2011, although returns may not reach the levels of the last couple of years. There is potential for the strong performance seen in the second half of 2010 to continue over the first few months of the year, with investors preferring AIM-listed, 'blue sky' stocks. This may detract from the Company's relative performance in the short term given our preference for companies with solid earnings streams and sound business models.
However, investors should be mindful that problems arising from the credit crunch, such as sovereign debt issues, are still prevalent. In addition, as the consequences of quantitative easing take hold, this could mean an increase in interest rates and inflation in the second half of 2011. This should be beneficial for our investment style, as investors become more selective and seek companies that offer some resilience and momentum.
Donald MacDonald
Chairman
25 February 2011
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge -
- the condensed 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 2010, 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
25 February 2011
MANAGER'S REPORT
The UK smaller companies sector, as represented by the Hoare Govett Smaller Companies Index (excluding Investment Trusts), rose by 27.0%, in total return terms, over the six months. This compares with a net asset value total return for the Company of 36.3% and a share price total return of 56.7%. Over the same period the total return of the blue-chip FTSE 100 Index was 21.6%.
At 31 December 2010, the Company's share price was 212.00p, surpassing by 64% its previous high of 134p on 6 April 2007 since Standard Life Investments was appointed Manager in September 2003. This is in sharp contrast to the benchmark and the FTSE 100 Index, which remained approximately 8% and 11% below their respective high points at year end.
UK economy and equity markets
The UK market was quick to shake off worries about sovereign debt and government spending cuts soon after the start of the period under review. Upward progress has been remorseless ever since. The Alternative Investment Market (AIM) took up the running in September, ending the year strongly.
Reasons for this performance included some recovery in the UK economy, with little evidence of the widely predicted 'double-dip' recession following the poor weather at the end of 2010. Corporate results were resilient across a wide range of sectors, particularly capital goods sectors such as engineering, electricals and electronics. The emerging market or BRIC economies, led by China, were especially strong. The Chinese domestic market has begun to take up the running as a source of world demand. This, in turn, boosted a wide range of commodity prices including oil & gas and metals such as copper, as well as demand for capital equipment. In particular, the oil price enjoyed a spectacular run, rising from $73 to $99 during the period. This was the major driver for the AIM market, which is the natural home of high octane oil & gas exploration companies.
Bid activity was rampant, particularly in the smaller company space with a number of active bid situations including Northern Foods, Wellstream, Biocompatibles, Mouchel, Nestor and Clyde Process Solutions. In addition, equity issues started to return in size, reflecting market and corporate confidence over economic growth.
Meanwhile, base rates remained unchanged at remarkably low levels during 2010. This helped trade among retailers to remain surprisingly strong all year, even in the snow-impacted Christmas period.
Performance
The Company performed well through the bulk of the period before running out of steam in the last couple of weeks of the year. Strong performance was mainly due to a number of specific stock selections which were somewhat offset by a lack of exposure to AIM-listed, highly-speculative oil & gas explorers.
In sector terms, the two main positives were exposure to strongly-performing 'growth' retailers Mulberry, Asos, Supergroup and Dunelm. In particular, Mulberry rose by a quite astonishing 273% over the six months, following some quite excellent trading performances. Asos, the online retailer, rose 85% as strong trading continued and the Danish retailer Bestsellers.com built a 17% stake. Supergroup, owner of the 'Superdry' brand, raced ahead as its international expansion plans took shape.
In addition, electrical and electronics stocks were particularly positive, helped by the constant upgrading of the Chinese manufacturing base. The two main beneficiaries within the Trust were XP Power and Renishaw, up 80% and 70% respectively.
Areas of weakness included a significant exposure to food manufacturers. Robert Wiseman Dairies was a notable negative.Although it is a well run business, it was obliged to cut prices to Tesco among others as competition remained fierce. AG Barr and Cranswick were also weak.
Dealing and Activity
The most significant new additions to the portfolio included IG Group, the fast-growing spread betting company. Spirax-Sarco Engineering was added given its significant exposure to emerging market economies. We also purchased Lamprell, the Dubai based oil platform designer and fabricator, and Gulfsand, who are an oil producer in Syria. XP Power, the designer and supplier of highly reliable small electric motors, was another addition. Finally, we purchased IQE, the specialist semiconductor manufacturer with exposure to smart-phones, and Xaar, the specialist print-head manufacturer.
Regarding sales, by far the largest was power systems firm Chloride Group, which was subject to a contested bid from Emerson and ABB. It is worth noting that the Company received proceeds of £3.58 million on a book cost of £0.79 million. Likewise, profits were taken in Asos to keep the holding to a manageable size. In this case, proceeds were £1.83 million on a book cost of £0.24 million. The stock remains the Company's largest holding. In addition, the longstanding holding in Chemring, the diversified defence company, was sold for a good profit, while we also took profits in our significant holding in Mulberry following very strong performance. Elsewhere, Robert Wiseman Dairies was sold as it looks like fierce competition may be a continuing feature of this industry. Restaurant company Carluccios was subject to a bid from Dubai based Landmark Group.
Outlook
2011 has started strongly, with some follow through from the euphoria of the second half of 2010. The strength of AIM and particularly the 'blue sky' component is very much in evidence. This trend may have some months to run, particularly if the oil price goes above the important $100 barrier. It is significant that investors are happy to back what are really more ideas than businesses. This is normally a period of strong markets and relative underperformance for our process, which prefers companies with earnings and dividend visibility. This type of market tends to last for less than a year, therefore a rotation away from 'blue sky' is likely to occur before the end of the Company's financial year.
The continued strength of emerging markets, particularly China, is of key importance for markets. Thus far there are ample signs that China will be the mainstay of world economic growth for years to come. Many UK smaller companies are able to tap into this, particularly in the engineering, electrical and electronic sectors.
The aftermath of the banking crisis is still lurking in the shadows. Sovereign debt and national budget stress will continue to hold back the more domestically-focused sectors of the UK economy, particularly those dependent on government spending. The side effects of quantitative easing may mean that inflation and interest rates will rise in the second half of the year. This would mean a return to leadership for our style of investing that emphasises risk aversion, resilience, growth and momentum.
We anticipate that 2011 will be a positive year but is unlikely to match 2009 and 2010, which were boosted by a strong and sustained recovery.
Harry Nimmo
Manager
Standard Life Investments
25 February 2011
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.
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 consisted of equity share capital comprising Ordinary 25p shares at 31 December 2010. There is a one-year revolving bank facility with BNP Paribas for up to £15m which has been in place since October 2010. In rising markets, the effect of the bank borrowings should be beneficial, but in falling markets the gearing effect could adversely affect returns to shareholders. The Manager is able to increase or decrease the gearing level by repaying or drawing down periodically from the bank facility subject to Board restrictions which require gearing to remain between -5% and 20% 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 (formerly Section 842 of Income and Corporation Taxes Act 1988) 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 2010. As at 31 December 2010, there have been no significant changes to these factors except that the borrowing facilities of £10m, which were previously committed to the Company, expired on 23 August 2010. A new borrowing facility of £15m was agreed with BNP Paribas which is committed to the Company until 13 October 2011. The Company will, at the appropriate time, open negotiations for a borrowing facility to follow on from the expiry of the present borrowing facility. 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
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Six months ended 31 December 2010 |
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(unaudited) |
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Revenue |
Capital |
Total |
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Notes |
£'000 |
£'000 |
£'000 |
|
Net gains on investments held at fair value |
|
- |
34,376 |
34,376 |
|
Currency gains/(losses) |
|
- |
1 |
1 |
|
Income |
2 |
951 |
- |
951 |
|
Investment management fee |
|
(105) |
(315) |
(420) |
|
Performance fee |
|
- |
(877) |
(877) |
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VAT recovered on investment management fees |
10 |
481 |
80 |
561 |
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Administrative expenses |
|
(185) |
- |
(185) |
|
|
|
__________ |
__________ |
__________ |
|
Net return before finance costs and |
|
. |
|
|
|
taxation |
|
1,142 |
33,265 |
34,407 |
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Finance costs |
|
(7) |
(20) |
(27) |
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|
|
__________ |
__________ |
__________ |
|
Return on ordinary activities before |
|
|
|
|
|
taxation |
|
1,135 |
33,245 |
34,380 |
|
Taxation |
|
(1) |
- |
(1) |
|
|
|
__________ |
__________ |
__________ |
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Return on ordinary activities after taxation |
|
1,134 |
33,245 |
34,379 |
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|
|
__________ |
__________ |
__________ |
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Return per ordinary share |
5 |
1.82p |
53.44p |
55.26p |
|
|
|
__________ |
__________ |
__________ |
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The total column of this statement represents the profit and loss account of the Company. |
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A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Income Statement. |
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No operations were acquired or discontinued in the year. |
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All revenue and capital items in the above statement derive from continuing operations. |
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The accompanying notes are an integral part of the financial statements. |
INCOME STATEMENT (cont'd)
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Six months ended 31 December 2009 |
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(unaudited) |
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Revenue |
Capital |
Total |
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Notes |
£'000 |
£'000 |
£'000 |
|
Net gains on investments held at fair value |
|
- |
17,570 |
17,570 |
|
Currency gains/(losses) |
|
- |
(3) |
(3) |
|
Income |
2 |
988 |
- |
988 |
|
Investment management fee |
|
(77) |
(231) |
(308) |
|
Performance fee |
|
- |
- |
- |
|
VAT recovered on investment management fees |
10 |
- |
- |
- |
|
Administrative expenses |
|
(184) |
- |
(184) |
|
|
|
__________ |
__________ |
__________ |
|
Net return before finance costs and |
|
|
|
|
|
taxation |
|
727 |
17,336 |
18,063 |
|
Finance costs |
|
(8) |
(25) |
(33) |
|
|
|
__________ |
__________ |
__________ |
|
Return on ordinary activities before |
|
|
|
|
|
taxation |
|
719 |
17,311 |
18,030 |
|
Taxation |
|
(5) |
- |
(5) |
|
|
|
__________ |
__________ |
__________ |
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Return on ordinary activities after taxation |
|
714 |
17,311 |
18,025 |
|
|
|
__________ |
__________ |
__________ |
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Return per ordinary share |
5 |
1.13p |
27.41p |
28.54p |
|
|
|
__________ |
__________ |
__________ |
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The total column of this statement represents the profit and loss account of the Company. |
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A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Income Statement. |
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No operations were acquired or discontinued in the year. |
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All revenue and capital items in the above statement derive from continuing operations. |
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The accompanying notes are an integral part of the financial statements. |
INCOME STATEMENT (cont'd)
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Year ended 30 June 2010 |
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(audited) |
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Revenue |
Capital |
Total |
|
|
Notes |
£'000 |
£'000 |
£'000 |
|
Net gains on investments held at fair value |
|
- |
27,633 |
27,633 |
|
Currency gains/(losses) |
|
- |
(3) |
(3) |
|
Income |
2 |
2,202 |
- |
2,202 |
|
Investment management fee |
|
(157) |
(470) |
(627) |
|
Performance fee |
|
- |
(619) |
(619) |
|
VAT recovered on investment management fees |
10 |
187 |
187 |
374 |
|
Administrative expenses |
|
(398) |
- |
(398) |
|
|
|
__________ |
__________ |
__________ |
|
Net return before finance costs and |
|
|
|
|
|
taxation |
|
1,834 |
26,728 |
28,562 |
|
Finance costs |
|
(18) |
(54) |
(72) |
|
|
|
__________ |
__________ |
__________ |
|
Return on ordinary activities before |
|
|
|
|
|
taxation |
|
1,816 |
26,674 |
28,490 |
|
Taxation |
|
(7) |
- |
(7) |
|
|
|
__________ |
__________ |
__________ |
|
Return on ordinary activities after taxation |
|
1,809 |
26,674 |
28,483 |
|
|
|
__________ |
__________ |
__________ |
|
Return per ordinary share |
5 |
2.86p |
42.23p |
45.09p |
|
|
|
__________ |
__________ |
__________ |
|
The total column of this statement represents the profit and loss account of the Company. |
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A Statement of Total Recognised Gains and Losses has not been prepared as all gains or losses are recognised in the Income Statement. |
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No operations were acquired or discontinued in the year. |
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All revenue and capital items in the above statement derive from continuing operations. |
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The accompanying notes are an integral part of the financial statements. |
BALANCE SHEET
|
|
|
As at |
As at |
As at |
|
|
|
31 December |
31 December |
30 |
|
|
|
2010 |
2009 |
2010 |
|
|
|
(unaudited) |
(unaudited) |
(audited) |
|
|
Notes |
£'000 |
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
Investments held at fair value through profit or loss |
|
144,897 |
94,799 |
98,057 |
|
|
|
__________ |
__________ |
__________ |
|
Current assets |
|
|
|
|
|
Debtors and prepayments |
|
215 |
164 |
1,255 |
|
AAA Money Market funds |
|
2,716 |
2,231 |
1,001 |
|
Cash and short term deposits |
|
- |
8 |
2 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
2,931 |
2,403 |
2,258 |
|
Creditors: amounts falling due within one year |
|
|
|
|
|
Bank loans |
|
(14,000) |
(9,000) |
(2,000) |
|
Other creditors |
|
(1,341) |
(616) |
(1,017) |
|
Cash and short term deposits |
|
(15) |
- |
- |
|
|
|
__________ |
__________ |
__________ |
|
Net current liabilities |
|
(12,425) |
(7,213) |
(759) |
|
|
|
__________ |
__________ |
__________ |
|
Net assets |
|
132,472 |
87,586 |
97,298 |
|
|
|
__________ |
__________ |
__________ |
|
Capital and reserves |
|
|
|
|
|
Called-up share capital |
|
15,931 |
15,931 |
15,931 |
|
Share premium account |
|
- |
25,073 |
- |
|
Capital redemption reserve |
|
- |
549 |
- |
|
Special reserve |
|
48,573 |
21,364 |
46,871 |
|
Capital reserve |
|
65,982 |
23,374 |
32,737 |
|
Revenue reserve |
|
1,986 |
1,295 |
1,759 |
|
|
|
__________ |
__________ |
__________ |
|
Equity shareholders' funds |
|
132,472 |
87,586 |
97,298 |
|
|
|
__________ |
__________ |
__________ |
|
Net asset value per ordinary share |
8 |
207.89p |
138.67p |
154.04p |
|
|
|
__________ |
__________ |
__________ |
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
|
|
|
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 |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Special |
Capital |
Revenue |
|
|
Six months ended |
capital |
account |
reserve |
reserve |
reserve |
reserve |
Total |
|
31 December 2009 (unaudited) |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 30 June 2009 |
15,931 |
25,073 |
549 |
21,364 |
6,063 |
1,276 |
70,256 |
|
Return on ordinary activities after taxation |
- |
- |
- |
- |
17,311 |
714 |
18,025 |
|
Dividends paid (see note 4) |
- |
- |
- |
- |
- |
(695) |
(695) |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 31 December 2009 |
15,931 |
25,073 |
549 |
21,364 |
23,374 |
1,295 |
87,586 |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
|
Share |
Capital |
|
|
|
|
|
|
Share |
premium |
redemption |
Special |
Capital |
Revenue |
|
|
|
capital |
account |
reserve |
reserve |
reserve |
reserve |
Total |
|
Year ended 30 June 2010 (audited) |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 30 June 2009 |
15,931 |
25,073 |
549 |
21,364 |
6,063 |
1,276 |
70,256 |
|
Return on ordinary activities after taxation |
- |
- |
- |
- |
26,674 |
1,809 |
28,483 |
|
Tender offer costs |
- |
- |
- |
(115) |
- |
- |
(115) |
|
Cancellation of reserves |
- |
(25,073) |
(549) |
25,622 |
- |
- |
- |
|
Dividends paid (see note 4) |
- |
- |
- |
- |
- |
(1,326) |
(1,326) |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
________ |
|
Balance at 30 June 2010 |
15,931 |
- |
- |
46,871 |
32,737 |
1,759 |
97,298 |
|
|
________ |
________ |
________ |
________ |
________ |
________ |
________ |
CASHFLOW STATEMENT
|
|
Six months |
Six months |
Year |
|
|
ended |
ended |
ended |
|
|
31 December |
31 December |
30 |
|
|
2010 |
2009 |
2010 |
|
|
(unaudited) |
(unaudited) |
(audited) |
|
|
£'000 |
£'000 |
£'000 |
|
Net return on ordinary activities before finance costs and taxation |
34,407 |
18,063 |
28,562 |
|
Adjustment for: |
|
|
|
|
Gains on investments |
(34,376) |
(17,570) |
(27,633) |
|
Currency (gains)/losses |
(1) |
3 |
3 |
|
|
__________ |
__________ |
__________ |
|
Revenue before finance costs and taxation |
30 |
496 |
932 |
|
Decrease/(increase) in accrued income |
75 |
13 |
(100) |
|
(Increase)/decrease in other debtors |
(1) |
15 |
9 |
|
Increase in other creditors |
349 |
135 |
778 |
|
|
__________ |
__________ |
__________ |
|
Net cash inflow from operating activities |
453 |
659 |
1,619 |
|
Net cash outflow from servicing of finance |
(2) |
(31) |
(74) |
|
Net overseas tax |
2 |
(4) |
(15) |
|
Net cash (outflow)/inflow from financial investment |
(11,500) |
(3,882) |
1,630 |
|
Equity dividends paid |
(907) |
(695) |
(1,326) |
|
|
__________ |
__________ |
__________ |
|
Net cash (outflow)/inflow before management of liquid resources and financing |
(11,954) |
(3,953) |
1,834 |
|
Net cash (outflow)/inflow from management of liquid resources |
(1,715) |
887 |
2,117 |
|
|
__________ |
__________ |
__________ |
|
Net cash outflow before financing |
(13,669) |
(3,066) |
3,951 |
|
Financing |
|
|
|
|
Issue of shares |
6,335 |
- |
- |
|
Buyback of shares |
(4,574) |
- |
- |
|
Tender offer costs |
(110) |
- |
(23) |
|
Drawdown of bank loan |
12,000 |
3,000 |
(4,000) |
|
|
__________ |
__________ |
__________ |
|
Net cash inflow/(outflow) from financing |
13,651 |
3,000 |
(4,023) |
|
|
__________ |
__________ |
__________ |
|
Decrease in cash |
(18) |
(66) |
(72) |
|
|
__________ |
__________ |
__________ |
|
Reconciliation of net cash flow to movements in net debt |
|
|
|
|
Decrease in cash as above |
(18) |
(66) |
(72) |
|
Net change in liquid resources |
1,715 |
(887) |
(2,117) |
|
Net change in debt due within one year |
(12,000) |
(3,000) |
4,000 |
|
Other non-cash movements |
1 |
(3) |
(3) |
|
|
__________ |
__________ |
__________ |
|
Movement in net debt in the period |
(10,302) |
(3,956) |
1,808 |
|
Opening net debt |
(997) |
(2,805) |
(2,805) |
|
|
__________ |
__________ |
__________ |
|
Closing net debt |
(11,299) |
(6,761) |
(997) |
|
|
__________ |
__________ |
__________ |
|
Represented by: |
|
|
|
|
Cash and short term deposits |
(15) |
8 |
2 |
|
AAA Money Market funds |
2,716 |
2,231 |
1,001 |
|
Debt due within one year |
(14,000) |
(9,000) |
(2,000) |
|
|
__________ |
__________ |
__________ |
|
|
(11,299) |
(6,761) |
(997) |
|
|
__________ |
__________ |
__________ |
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. The adoption of the January 2009 SORP has no effect on the financial statements of the Company, other than the requirement separately to disclose capital reserves that relate to the revaluation of investments held at the reporting date. These are disclosed in note 6. 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 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 |
|
|
|
2010 |
2009 |
2010 |
|
2. |
Income |
£'000 |
£'000 |
£'000 |
|
|
Income from investments |
|
|
|
|
|
UK dividend income |
826 |
889 |
1,963 |
|
|
Overseas dividend income |
62 |
85 |
161 |
|
|
Scrip dividends |
54 |
- |
- |
|
|
REIT income |
- |
- |
57 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
942 |
974 |
2,181 |
|
|
|
__________ |
__________ |
__________ |
|
|
Other income |
|
|
|
|
|
Interest from AAA Money Market funds |
9 |
7 |
13 |
|
|
Underwriting commission |
- |
7 |
7 |
|
|
Other income |
- |
- |
1 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
9 |
14 |
21 |
|
|
|
__________ |
__________ |
__________ |
|
|
Total income |
951 |
988 |
2,202 |
|
|
|
__________ |
__________ |
__________ |
|
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 2011 is 27.75%. |
|
|
|
Six months |
Six months |
Year |
|
|
|
ended |
ended |
ended |
|
|
|
31 December |
31 December |
30 June |
|
|
|
2010 |
2009 |
2010 |
|
4. |
Dividends |
£'000 |
£'000 |
£'000 |
|
|
Ordinary dividend on equity shares deducted from reserves: |
|
|
|
|
|
2010 final dividend of 1.50p per share (2009 - 1.10p) |
907 |
695 |
695 |
|
|
2010 interim dividend of 1.00p per share |
- |
- |
631 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
907 |
695 |
1,326 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
Six months |
Six months |
Year |
|
|
|
ended |
ended |
ended |
|
|
|
31 December |
31 December |
30 June |
|
|
|
2010 |
2009 |
2010 |
|
5. |
Return per share |
p |
p |
p |
|
|
Basic |
|
|
|
|
|
Revenue return |
1.82 |
1.13 |
2.86 |
|
|
Capital return |
53.44 |
27.41 |
42.23 |
|
|
|
__________ |
__________ |
__________ |
|
|
Total return |
55.26 |
28.54 |
45.09 |
|
|
|
__________ |
__________ |
__________ |
|
|
Weighted average number of Ordinary shares |
62,208,888 |
63,163,381 |
63,163,381 |
|
|
|
_____________ |
_____________ |
_____________ |
|
|
|
|
|
|
|
|
The figures above are based on the following: |
|||
|
|
|
|
|
|
|
|
|
Six months |
Six months |
Year |
|
|
|
ended |
ended |
ended |
|
|
|
31 December |
31 December |
30 June |
|
|
|
2010 |
2009 |
2010 |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
Revenue return |
1,134 |
714 |
1,809 |
|
|
Capital return |
33,245 |
17,311 |
26,674 |
|
|
|
__________ |
__________ |
__________ |
|
|
Total return |
34,379 |
18,025 |
28,483 |
|
|
|
__________ |
__________ |
__________ |
|
6. |
Capital reserve |
|
|
The capital reserve reflected in the Balance Sheet at 31 December 2010 includes gains of £61,165,000 (31 December 2009 - £25,304,000; 30 June 2010 - £32,673,000) 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 |
|
|
|
2010 |
2009 |
2010 |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
Purchases |
172 |
106 |
162 |
|
|
Sales |
16 |
16 |
37 |
|
|
|
__________ |
__________ |
__________ |
|
|
|
188 |
122 |
199 |
|
|
|
__________ |
__________ |
__________ |
|
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 |
|
|
|
2010 |
2009 |
2010 |
|
|
Total shareholders' funds |
£132,472,000 |
£87,586,000 |
£97,298,000 |
|
|
Number of ordinary shares in issue at the period end (excluding shares held in treasury) |
63,722,556 |
63,163,381 |
63,163,381 |
|
|
Net asset value per share |
207.89p |
138.67p |
154.04p |
|
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 2010 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2), (3) or (4) of the Companies Act 2006. The interim accounts have been prepared using the same accounting policies as the preceding annual accounts. |
|
10. |
Contingent assets |
|
|
On 5 November 2007, the European Court of Justice ruled that management fees on investment trusts should be exempt from VAT. HMRC has announced its intention not to appeal against this ruling to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company will be processed by HMRC in due course. The Company has not been charged VAT on its investment management fees from 1 November 2007. |
|
|
|
|
|
During the period, the former Manager refunded £561,000 to the Company for VAT charged on investment management fees and this amount has been included in these financial statements. Of this amount £139,000 relates to the period 1 January 2001 to 31 December 2003, and £422,000 relates to the period 1 January 1990 to 3 December 1996. The refunds have been allocated to revenue and capital in line with the accounting policy of the Company for the periods in which the VAT was charged. |
|
|
|
|
|
The reclaim for the period January 1997 to December 2000, the associated interest thereon and the timescale for receipt are at present uncertain and the Company has taken no account in these financial statements of any such repayment. |
|
11. |
Post Balance Sheet events |
|
|
The Company released a Periodic Tender Offer document to shareholders in September 2010. The Company announced on 12 January 2011 that, in accordance with the terms of the Tender Offer, the total number of shares to be bought back into treasury under the Tender Offer was 512,076 ordinary shares, representing 0.80 per cent. of the ordinary shares in issue on the record date, at a price per share of 193.4p. The cost of the shares bought back was £995,000. This sum excludes tender offer costs of £59,000, which have been charged against the special reserve during the period. Following the implementation of the periodic Tender Offer, the Company had 63,210,480 ordinary shares in issue with a total number of voting rights of 63,210,480. |
|
|
|
|
|
On 31 January 2011, the Company sold 512,076 ordinary shares from treasury at a price per share of 209.0p which resulted in 63,722,556 ordinary shares in issue with voting rights of 63,722,556. |
|
|
|
|
12. |
This Half-Yearly Report was approved by the Board on 25 February 2011. |
|
|
|
|
13. |
Copies of the Company's Half Yearly Report for the 6 months ended 31 December 2010 will be posted to shareholders in February 2011 and will be available thereafter on the Company's website: www.standardlifeinvestments.co.uk/its or from the Secretary at the Registered Office, 7th Floor, 40 Princes Street, Edinburgh EH2 2BY. |
For Standard Life UK Smaller Companies Trust plc
Aberdeen Asset Management PLC, Secretary
TOP TWENTY INVESTMENTS
As at 31 December 2010
|
|
Value |
% of Portfolio |
|
ASOS |
7,414 |
5.1 |
|
Hargreaves Lansdown |
5,567 |
3.8 |
|
Abcam |
5,447 |
3.8 |
|
Domino's Pizza |
5,353 |
3.7 |
|
New Britain Palm Oil |
4,915 |
3.4 |
|
Paddy Power |
4,557 |
3.1 |
|
Mulberry Group |
4,061 |
2.8 |
|
First Quantum Minerals |
3,864 |
2.7 |
|
Renishaw |
3,839 |
2.6 |
|
ITE |
3,687 |
2.5 |
|
Victrex |
3,506 |
2.4 |
|
Telecom Plus |
3,335 |
2.3 |
|
Andor Technologies |
3,274 |
2.3 |
|
Rightmove |
3,272 |
2.3 |
|
Homeserve |
3,206 |
2.2 |
|
Aveva Group |
3,189 |
2.2 |
|
Dunelm |
3,152 |
2.2 |
|
Computacenter |
3,104 |
2.1 |
|
PZ Cussons |
3,024 |
2.1 |
|
IG Group |
2,958 |
2.0 |
|
|
80,724 |
55.6 |
END
This information is provided by RNS