Preliminary Results

Aberforth Smaller Companies Tst PLC
23 January 2001

 
PRELIMINARY RESULTS 
 
For the Year to 31 December 2000 
 
 
FEATURES 
 
Fully Diluted Net Asset Value Total Return      +15.6%
 
Benchmark Index Total Return                     +1.2%
 
Increase in Dividends per Ordinary Share        +13.8%
 
 
Aberforth Smaller Companies Trust plc ('ASCoT') invests only in small UK
quoted companies and is managed by Aberforth Partners.
 

CHAIRMAN'S STATEMENT TO SHAREHOLDERS

REVIEW OF 2000 PERFORMANCE
 
The year to December 2000 has seen the lowest nominal returns from stock
markets for some years. Within this, small UK quoted companies, as an asset
class, have performed relatively well, with ASCoT's benchmark index - the
Hoare Govett Smaller Companies Index (excluding investment trusts) - showing
a total return of 1.2% compared with the equivalent figure for the FTSE
All-Share Index of -5.9%.
 
ASCoT has performed well against this background with the total return for
the year being 15.6% thereby significantly outperforming its benchmark index.
 
Your Board is pleased to recommend a final dividend of 5.65p, which produces
total dividends for the year of 8.65p, an increase of 13.8% on the total
dividends paid for the previous year. Subject to Shareholders' approval, the
final dividend of 5.65p per share will be paid on 2 March 2001 to
Shareholders on the register as at close of business on 9 February 2001.
Shareholders should be cautious of extrapolating this rate of dividend growth
into the future. Your Board, however, remains optimistic that the level of
dividend growth generated by the companies in the portfolio will continue at
a real rate, albeit somewhat lower than that recently enjoyed.
 
Over the two-year period from 1 January 1999 to 31 December 2000, ASCoT has
generated a total return of 72.7%, 14.7 percentage points in excess of its
benchmark index (geometrically, 9.3%). However, the value added did not
accrue evenly throughout the period.
 
I commented in my statement to you last year on the remarkable stockmarket
performance in the final quarter of 1999 of a small group of 'growth '
companies, particularly those with some relationship with the internet and in
the areas known as 'TMT' (Technology, Media and Telecommunications). The
strong performance of these types of companies continued until March 2000
since when a significant reassessment of the valuation and likely performance
of such businesses has taken place.
 
ASCoT performed well in the period up to September 1999 and has also done so
since the beginning of March 2000, outperforming its benchmark index by 24.1
percentage points. However the degree of underperformance in the six-month
period mentioned above was significant.
 
Your Managers have adopted a value investment style and the consistent
application of this style and process ensured that the portfolio was well
positioned to benefit from the recovery in stock market sentiment towards,
and the relative valuation of, businesses outwith the TMT sectors.
 
It is important to emphasise that for investment your Managers consider
companies in all sectors of the stock market and economy. The overriding
judgement is always to assess value against the considered risk of that
investment. Consequently ASCoT has at various periods in the past had a
significant exposure to the 'TMT' areas and, should appropriate valuations
prevail for these businesses and sectors in the future, investments will be
made once again.
 
GEARING

During the second half of 1999 your Managers began to take a more cautious
view of prospective absolute returns from stockmarkets generally. The
specific concern was based on the premise that if and when the share prices
of the rather narrow band of 'growth' companies that performed so
spectacularly in the latter part of 1999 suffered a setback it was hard to
imagine this not having some knock on effect to stock markets generally.
 
This caution led to ASCoT becoming ungeared by the end of February 2000 and
this position has prevailed since. This decision has proved prescient and
your Managers remain cautious at the time of writing. However, as has been
amply demonstrated in the past two years, stockmarkets adjust remarkably
quickly and your Managers remain alert to the opportunity to regear should
appropriate circumstances emerge.
 
The borrowing facilities used by ASCoT during 1998 and 1999 remain available.
No cost is incurred when any part of the facilities is not used and they are
available 'on demand'. These cost efficient and flexible borrowing
facilities, which total £80m, provide ASCoT with the ability to employ
gearing as a tactical addition to your Managers' investment armoury.
 
CORPORATE GOVERNANCE

Your Board has consistently considered and applied, where it believes
appropriate, the various codes and guidelines on corporate governance,
whether it be the Combined Code on Corporate Governance or the guidelines
issued by other interested parties such as Pensions & Investment Research
Consultants Limited.
 
The structure of your Board has evolved since the Company's formation.
Initially David Ross and Alistair Whyte, both Partners of Aberforth Partners,
your Managers, were Directors of the Company. They resigned in 1994 whereupon
David Shaw was appointed. Since then your Board has consisted entirely of
independent Directors each offering himself for re-election at the
appropriate time.
 
In maintaining its commitment to corporate governance your Board will
continue to keep its composition under review. This process is constrained by
the availability of suitable individuals who have the skills and, just as
importantly, the time to devote to your Company. In this regard I am
fortunate to have such committed colleagues sitting with me on your Board.

SHARE BUY BACK AND WARRANT REPURCHASES
 
During the year the Company has purchased for cancellation 50,000 Warrants at
a price which enhanced Shareholder value.

At the Company's Annual General Meeting in February 2000, the authority to
purchase up to 14.99% of the Company's Ordinary Shares was renewed. Your
Board will be seeking a further renewal of this authority at the Annual
General Meeting to be held on 27 February 2001. Your Board has carefully
considered the circumstances under which such authority will be utilised and,
should such circumstances arise, will not hesitate to purchase Ordinary
Shares.
 
SUMMARY AND OUTLOOK
 
ASCoT performed well in the period under review. However, as I have
explained, the swings in sentiment and valuation between value and growth
investment styles have been particularly marked over the past two years.
 
The severity of the rerating and consequent flow of funds into the TMT area
and out of less fashionable sectors had the effect of creating attractive
opportunities in many businesses. Your Managers have been able to take
advantage of this and currently enjoy the opportunity to invest in high
quality companies at historically very attractive valuations.
 
While the obstacles to stockmarket performance are perhaps more obvious this
year than last, ASCoT's portfolio is well placed to benefit from any rerating
or corporate activity which may emerge.
 
William Y Hughes
Chairman 
23 January 2001
 

The Statement of Total Return, summary Balance Sheet and summary Cash Flow
Statement are set out below:-
 
STATEMENT OF TOTAL RETURN 
(Incorporating the Revenue Account*) 
 
For the Year ended 31 December 2000 
(unaudited) 
                                                                              
                           Year to                        Year to             
                       31 December 2000               31 December 1999        
                  Revenue   Capital   Total    Revenue    Capital     Total   
                   £'000     £'000    £'000     £'000      £'000      £'000   
  Realised             -    22,235    22,235        -     28,847     28,847   
  gains/(losses)                                                              
  on sales                                                                    
  Unrealised           -    12,019    12,019        -     57,838     57,838   
  gains/(losses)  ------    ------    ------   ------     ------     ------   
                                                           
  Gains/(losses)       -    34,254    34,254        -     86,685     86,685   
  on investments                                                              
                                                             
  Deemed cost                                                                 
  of Warrants                                                                 
  purchased for        -       (41)      (41)       -     (1,225)    (1,225)  
  cancellation                                                                
  Dividend         9,310         -     9,310    9,886          -      9,886   
  income                                                                      
  Interest           563         -       563      119          -        119   
  income                                                                      
  Other income        25         -        25        1          -          1   
  Investment        (945)   (1,576)   (2,521)    (813)    (1,354)    (2,167)  
  management fee                                                              
  Other expenses    (196)        -      (196)    (242)         -       (242)  
                  ------    ------    ------   ------     ------     ------   
  Net return                                                                  
  before                                                                      
  finance                                                                     
  costs and        8,757    32,637    41,394    8,951     84,106     93,057   
  taxation                                                                    
  Interest                                                                    
  payable and                                                                 
  similar                                                                     
  charges            (41)      (69)     (110)    (906)    (1,510)    (2,416)  
                  ------    ------    ------   ------     ------     ------ 
  Return on                                                                   
  ordinary                                                                    
  activities                                                                  
  before tax       8,716    32,568    41,284    8,045     82,596     90,641   
  Tax on               -         -         -        -          -          -   
  ordinary                                                                    
  activities                                                                  
                  ------    ------    ------   ------     ------     ------
  Return                                                                      
  attributable                                                                
  to                                                                          
  equity           8,716    32,568    41,284    8,045     82,596     90,641   
  shareholders                                                                
  Dividends in                                                                
  respect of                                                                  
  equity shares   (7,202)        -    (7,202)  (6,290)         -     (6,290)  
                  ------    ------    ------   ------     ------     ------
  Transfer to      1,514    32,568    34,082    1,755     82,596     84,351   
  reserves        ------    ------    ------   ------     ------     ------   
                                                                
  
  Returns per                                                                 
  Ordinary                                                                    
  Share                                                                       
  Basic -         10.48p    39.17p    49.65p    9.72p     99.81p    109.53p  
  Diluted -       10.25p    38.31p    48.56p    9.45p     96.98p    106.43p  
  Dividends per                                                               
  Ordinary                                                                    
  Share            8.65p         -     8.65p    7.60p          -      7.60p   
 
 
NOTES
 
The calculations of revenue return per Ordinary Share are based on net
revenue of £8,716,000 (1999 - £8,045,000) and on Ordinary Shares of
83,135,270 (1999 - 82,756,530) in the case of basic returns and 85,016,516
(1999 - 85,166,213) in the case of diluted returns.
 
The calculations of capital return per Ordinary Share are based on net
capital gains of £32,568,000 (1999 - £82,596,000) and on Ordinary Shares of
83,135,270 (1999 - 82,756,530) in the case of basic returns and 85,016,516
(1999 - 85,166,213) in the case of diluted returns.
 
*    The revenue column of this statement is the profit and loss account of
the Company.

     All revenue and capital items in the above statement derive from  
continuing operations.
     
     No operations were acquired or discontinued in the period.



SUMMARY BALANCE SHEET 
 
As at 31 December 2000 
(unaudited) 
                                                   31 December    31 December 
                                                       2000           1999    
                                                      £'000          £'000    
  Securities officially listed on the London        286,067        279,325    
  Stock Exchange                                                              

  Debtors                                             5,430          5,278    
  Cash at bank                                       15,074              -    
  Bank overdraft                                          -        (14,205)   
  Creditors                                          (5,651)        (4,028)   
                                                    -------        -------    
  Net current assets/(liabilities)                   14,853        (12,955)   
                                                    -------        -------    
  Total assets less current liabilities             300,920        266,370    
                                                    -------        -------    
                                                                 
  Capital and Reserves: equity interests                                      
  Called up Share Capital:                                                    
  Ordinary Shares                                       833            828    
    
  Reserves:                                                                   
  Share premium account                                 500              2    
  Special reserve                                   133,525        133,525    
  Capital reserve - realised                        121,672        101,158    
  Capital reserve - unrealised                       35,977         23,958    
  Revenue reserve                                     8,413          6,899
                                                    -------        -------   
                                                    300,920        266,370    
                                                    -------        -------
  Net Asset Values:                                                           
  per Ordinary Share (basic)                         361.4p         321.9p    
  per Ordinary Share (fully diluted)                 352.7p         313.0p    
  per Ordinary Share (diluted - FRS 14)              353.5p         313.5p    
 
 
NOTES
 
As at 31 December 2000, the Company had 83,260,325 Ordinary Shares (1999 -
82,757,359) and 2,878,897 Warrants (1999 - 3,431,863) in issue.
 
On 31 March 2000, as a result of certain holders exercising the subscription
rights of their Warrants, 502,966 Ordinary Shares were issued at 100p per
share.
 
During the year to 31 December 2000, the Company bought in 50,000 Warrants
for cancellation at a total cost of £76,000. No Ordinary Shares were bought
in during the year.


SUMMARY CASH FLOW STATEMENT 
 
For the Year ended 31 December 2000 
(unaudited) 
                                                                              
                         Year to 31 December 2000    Year to 31 December 1999 
                             £'000         £'000         £'000         £'000  
  Net cash inflow from                                                        
  operating activities                     7,014                       7,303  
 
  Returns on                                                                  
  investment and                                                              
  servicing of finance                                                        
  Interest paid               (182)                     (2,418)               
                           -------                     -------               
  Net cash outflow from                                                       
  returns on                                                                  
  investment and                                                              
  servicing of finance                      (182)                     (2,418) 
  Capital expenditure                                                         
  and                                                                         
  financial investment                                                        
  Payments to acquire                                                         
  investments             (117,834)                   (178,969)               

  Receipts from sales                                                         
  of                                                                          
  investments              146,283                     190,499                
                           -------                     -------                
  Net cash inflow from                                                        
  capital                                                                     
  expenditure and                                                             
  financial                                                                   
  investment                              28,449                      11,530  
                                         -------                     ------- 
                                          35,281                      16,415  

  Equity dividends paid                   (6,429)                     (6,124) 
                                         -------                     -------
                                          28,852                      10,291  

  Financing                                                                   
  Issue of Ordinary            503                           3                
  Shares                                                                      
  Warrants purchased                                                          
  for                                                                         
  cancellation                 (76)                     (2,248)               
                           -------                     -------  
  Net cash                                                                    
  inflow/(outflow)                                                            
  from financing                             427                      (2,245) 
                                         -------                     -------
  Increase in cash                        29,279                       8,046  
                                         -------                     ------- 
 
NOTES
 
1.     The foregoing do not comprise statutory accounts (as defined in
section 240(5) of the Companies Act 1985) of the Company. The statutory
accounts for the year to 31 December 1999, which contained an unqualified
Report of the Auditors, have been lodged with the Registrar of Companies and
did not contain a statement required under section 237(2) or (3) of the
Companies Act 1985.
 
2.     The Annual Report is expected to be posted to shareholders on 26
January 2001. Members of the public may obtain copies from Aberforth
Partners, 14 Melville Street, Edinburgh EH3 7NS or from its website at
www.aberforth.co.uk.
 
CONTACT:     John Evans     Aberforth Partners      0131 220 0733