Final Results

Ivory & Sime UK Smlr.Co's Trust PLC 07 May 2004 Ivory & Sime UK Smaller Companies Trust plc To: RNS From: Ivory & Sime UK Smaller Companies Trust plc Date: 7 May 2004 UNAUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2004 Investment Objective To achieve capital growth by investing primarily in a portfolio of smaller companies quoted on the London Stock Exchange. Benchmark Index The benchmark index is the FTSE SmallCap (ex Investment Companies) Index. Financial Highlights • Net asset value per share increased by 63.9 per cent, outperforming the benchmark index by 2.0 percentage points. • Share price increased by 64.6 per cent. • Unchanged dividend for the year of 4.0p per share. Results After three years of declining smaller company markets, there was a significant increase in the Company's net asset value and relative outperformance for the year ended 31 March 2004. Over the year, the net asset value per share increased by 63.9 per cent, outperforming the FTSE SmallCap (ex Investment Companies) Index which increased by 61.9 per cent over the same period. By way of further comparison the increase in the FTSE All-Share Index over the comparable period was 26.6 per cent. In overall terms small companies benefited from their exposure to the UK economy and by having relatively little by way of US dollar exposure. The UK economy remains supportive for growing businesses. Monetary policy continues to be accommodating, albeit that some monetary tightening is anticipated later on this year. The portfolio contains companies that are considered to be sufficiently robust to weather slightly tougher market conditions. Performance was concentrated in specific sectors of the market, which were considered to be more economically sensitive. During the year, the Managers typically sought to withdraw funds in situations where valuations anticipated a rapid improvement in profitability. The Managers continue to favour a growth bias in the portfolio but in recognition of a changing stockmarket environment latterly have placed more emphasis on businesses with a more visible progression in earnings and dividends. It is the view of the Board and Managers that both profit and dividend growth will play a more important role in determining share price performance over the medium term. The characteristics of the Company's investment portfolio and the investment universe in which the Company may invest are now more similar to the characteristics of the Hoare Govett Smaller Companies (ex Investment Companies) Index than the FTSE SmallCap (ex Investment Companies) Index. The Board therefore believes that it is appropriate to change the Company's benchmark to the Hoare Govett Smaller Companies (ex Investment Companies) Index, with effect from 1 July 2004. Earnings and Dividends Group earnings per Ordinary Share increased from 3.57 pence to 3.92 pence. The Board is conscious of the value of dividend income to investors in the current environment and the Company has sufficient accumulated revenue reserves from previous years to enable it, from time to time, to pay dividends which are uncovered by current year earnings. The Board has therefore proposed a final dividend of 3.00 pence per share, making a total dividend of 4.00 pence, which is unchanged from the previous year. The final dividend is payable on 2 July 2004 to shareholders on the register on 4 June 2004. Shareholder Value The Board continues to monitor actively the discount of the Company's share price to its net asset value and remains committed to keeping this discount to a minimum. The Company's shares are promoted directly through the ZeroChargeTM investment plans and are available to the advisory market through IFA wrapper products. In addition to regular on-going communication with shareholders and brokers, the Board views the private client market as a key target audience. The Managers will undertake a series of marketing initiatives over the coming year aimed at stimulating new demand for the shares. To help with the marketing of the Company, and as a reflection of the recent change of the name of the Managers, it will be proposed at the Annual General Meeting that the Company's name be changed to 'ISIS Smaller Companies Trust plc'. The Board will seek to renew the Company's share buy-back facility at the forthcoming Annual General Meeting. Its principal aim is to enhance shareholder value and is operated within specific guidelines set by the Board and reviewed on a regular basis. Gearing The Board regularly reviews the Company's gearing level and bank facilities. The Board is encouraged that the Managers have been able to employ the available facilities for the benefit of shareholders during the second half of the financial year. The Company's £7 million term facility is due to expire in August 2004 and it is the present intention to replace the existing term loan with a more flexible form of borrowing. Board As stated in the Interim Report, Mr Bruce Graham was appointed as a Director and Chairman of the Audit Committee during the year. After 14 years as a Director and 12 years as Chairman, and, having reached the age of 70, Mr M G N Walker has decided to retire as a Director at the forthcoming Annual General Meeting. Mr A R Irvine will succeed him as Chairman. It is the intention of the Board to seek to appoint a new independent Director during the current financial year. Outlook The magnitude of last year's rise in smaller company share prices is unlikely to be repeated in the coming year. However, the fundamental outlook remains supportive of profit and dividend growth. The Board is encouraged by the level of dividend increases announced so far in 2004 and believes that this will be a year where share price performance is driven by actual operating performance rather than by the expectation of recovery. Hence, the Company is likely to continue to seek to invest in companies with strong business models, proven franchises and sound financial characteristics which should deliver attractive earnings and dividend growth. The Board remains optimistic that smaller companies will make further positive gains during 2004. Group Statement of Total Return (Incorporating the Revenue Account) For the Year Ended 31 March 2004 £'000 £'000 £'000 Revenue Capital Total Gains on investments - 19,734 19,734 Income 1,441 - 1,441 Investment management and secretarial fees (200) (275) (475) Other expenses (216) - (216) --------- --------- --------- Net return before finance costs and taxation 1,025 19,459 20,484 Interest payable (176) (328) (504) --------- --------- --------- Return on ordinary activities before taxation 849 19,131 19,980 Tax on ordinary activities - - - --------- --------- --------- Return attributable to shareholders 849 19,131 19,980 Dividends in respect of Ordinary Shares (865) - (865) --------- --------- --------- Transfer (from)/to reserves (16) 19,131 19,115 --------- --------- --------- Return per share: 3.92p 88.29p 92.21p Group Statement of Total Return (Incorporating the Revenue Account) For the Year Ended 31 March 2003 £'000 £'000 £'000 Revenue Capital Total Losses on investments - (13,306) (13,306) Income 1,381 - 1,381 Investment management and secretarial fees (189) (254) (443) Other expenses (236) - (236) --------- --------- --------- Net return before finance costs and taxation 956 (13,560) (12,604) Interest payable (176) (326) (502) --------- --------- --------- Return on ordinary activities before taxation 780 (13,886) (13,106) Tax on ordinary activities - - - --------- --------- --------- Return attributable to shareholders 780 (13,886) (13,106) Dividends in respect of Ordinary Shares (869) - (869) --------- --------- --------- Transfer from reserves (89) (13,886) (13,975) --------- --------- --------- Return per share: 3.57p (63.51)p (59.94)p Group Balance Sheet As at 31 March 2004 2004 2003 £'000 £'000 Fixed assets Investments 55,688 35,247 --------- --------- Current assets Debtors 237 1,681 Cash at bank and on deposit 1,070 1,181 --------- --------- 1,307 2,862 Creditors: Amounts falling due within one year (8,002) (1,144) --------- --------- Net current (liabilities)/assets (6,695) 1,718 --------- --------- Total assets less current liabilities 48,993 36,965 Creditors: Amounts falling due after more than one year - (7,000) --------- --------- Net assets 48,993 29,965 --------- --------- Capital and reserves Called-up share capital 10,811 10,836 Capital redemption reserve 125 100 Share premium account 3,935 3,935 Capital reserve - realised 26,010 31,062 - unrealised 7,173 (16,923) Revenue reserve 939 955 --------- --------- Equity shareholders' funds 48,993 29,965 --------- --------- Net asset value per share 226.61p 138.28p Group Cash Flow Statement For the Year Ended 31 March 2004 2004 2003 £'000 £'000 Operating activities Investment income received 1,327 1,342 Deposit interest received 117 127 Underwriting commission received 3 6 Investment management fees paid (423) (390) Secretarial fees paid (52) (53) Other cash payments (190) (249) --------- --------- Net cash inflow from operating activities 782 783 --------- --------- Servicing of finance Interest paid (504) (504) --------- --------- Net cash outflow from servicing of finance (504) (504) --------- --------- Capital expenditure and financial investment Purchases of investments (19,876) (19,084) Disposals of investments 20,544 19,126 --------- --------- Net cash inflow from capital expenditure and 668 42 Financial investment --------- --------- Equity dividends paid (866) (875) --------- --------- Net cash inflow/(outflow) before financing 80 (554) --------- --------- Financing Ordinary Shares purchased for cancellation (191) (103) --------- --------- Net cash outflow from financing (191) (103) --------- --------- Decrease in cash (111) (657) --------- --------- Reconciliation of net cash flow to movement in net debt Decrease in cash in the year (111) (657) --------- --------- Net debt at 1 April 2003 (5,819) (5,162) --------- --------- Net debt at 31 March 2004 (5,930) (5,819) --------- --------- Notes 1. Basic earnings per Ordinary Share are based on a weighted average of 21,668,347 Ordinary Shares in issue during the year (2003 - 21,864,796). 2. Final dividend of 3.00p (2003 - 3.00p) will be paid on 2 July 2004 to shareholders on the Register on 4 June 2004. 3. There were 21,620,260 Ordinary Shares in issue at 31 March 2004 (2003 - 21,670,260). During the year 50,000 Ordinary Shares of 50p each were repurchased for cancellation at an aggregate cost of £87,000. 4. These are not statutory accounts in terms of Section 240 of the Companies Act 1985. Statutory accounts for the year to 31 March 2003, which were unqualified, have been lodged with the Registrar of Companies. The statutory accounts for the year to 31 March 2004 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 5. The Annual General Meeting will be held at 80 George Street, Edinburgh on Tuesday 22 June 2004 at 12.30pm. For further information please contact: Stephen Grant Gordon Hay Smith ISIS Asset Management plc: Tel. 0131 465 1000 This information is provided by RNS The company news service from the London Stock Exchange

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