Interim Results

Ivory & Sime UK Smlr.Co's Trust PLC 06 November 2002 IVORY + SIME UK SMALLER COMPANIES TRUST PLC Press Release Date: 6 November 2002 INTERIM RESULTS Investment Objective Ivory & Sime UK Smaller Companies Trust aims to achieve capital growth by investing primarily in a portfolio of smaller companies quoted on the London Stock Exchange. Interim results for the six months ended 30 September 2002 • Net asset value per share fell by 33.8% • Unchanged interim dividend of 1.0p per share Results Over the six months to 30 September 2002, the Company's net asset value fell by 33.8 per cent compared with a fall of 29.1 per cent in the benchmark index, the FTSE SmallCap (ex Investment Companies) Index. At the start of 2002 there was an expectation of a strong recovery in corporate profitability as the year progressed. Instead, renewed concerns over the health of the global economy unsettled stockmarkets. Such concerns proved justified as individual company trading news across the economic spectrum proved disappointing. A realistic assessment suggests an early sustained recovery is unlikely. Business investment has suffered from postponement or deferral as confidence over future prospects has remained low. The principal impact on the portfolio has been felt in the technology sector, exacerbating an already protracted downturn in the Information Technology cycle. A slowing economy and tougher overall trading conditions have shown up flaws in a number of business models and sadly the Company has not been immune to such situations. Earnings and Dividends Group earnings per Ordinary Share were 2.12 pence in respect of the six months ended 30 September 2002 (2001 - 2.75 pence). The Board has declared an unchanged interim dividend of 1.00 pence per Ordinary Share payable on 3 January 2003 to shareholders on the register on 6 December 2002. Investment Policy and Portfolio The Managers have maintained an investment proposition that focuses on the medium term growth potential of smaller companies. This emphasis has made it more difficult to be resilient in a period of falling equity values. It does not mean, however, that the portfolio is structurally flawed. In looking at where most pain has been felt, technology holdings continued to be a major source of disappointment with Anite, IndigoVision, and London Bridge failing to take advantage of business conditions which should have favoured their products. The most significant single loss was in Health Clinic, a stock whose Eye Clinic retail chain and city centre healthcare practices promised much. Regrettably, Health Clinic's profits were materially overstated. Management was unable to effect a re-financing of the business leading to the suspension of the shares and the subsequent liquidation of the company. Biotrace unwound most of its strong gains from last year as the momentum within the business tailed off and the Ministry of Defence reined back orders for its biological reagent. It is important to retain a balanced perspective and not allow bad news to overshadow positive developments in a number of stocks. Bovis Homes, Domino Printing, RPC, Thorntons, Parkman Group, Keller and Topps Tiles have all met or surpassed earnings forecasts and have business plans that appear to be on track. This has yet to be reflected in their share prices. It is symptomatic of the current market malaise that there is little reward for good news. Shareholder Value The discount at which the Company's shares trade widened during the period as stockmarket conditions deteriorated. The Board monitors the level of the discount and is continually evaluating means of enhancing shareholder value. Marketing activities continue to create demand for the Company's shares principally through the ZeroCharge TM Individual Savings Accounts (ISAs) and Investment Plans and the Managers continue to communicate their strategy to shareholders and stock market analysts. Gearing The Company maintained a high cash balance over most of the period, a reflection of the Managers' concerns over market instability and the lack of confidence in corporate earnings forecasts. At the end of the period, the capital element of the £7 million fixed rate loan was covered by a gilt, and there were additional cash and near cash instruments amounting to more than £3.5 million. Outlook The magnitude of the reduction in net asset value reported is clearly disappointing. However, equity investment is for the long-term. The current business environment is a difficult one but there are dangers in becoming so pessimistic that genuinely attractive investment opportunities are missed. Whilst the Managers believe it is unrealistic to attempt to pinpoint the timing of any stockmarket recovery, the market's fall has left a wide range of equities looking attractively priced. Hence, it is envisaged that the Managers will add a small number of new holdings to the Company's portfolio over the coming months. For further information contact: Stephen Grant/Gordon Hay Smith ISIS Asset Management plc : tel. 0131 465 1000 Group Balance Sheet (Unaudited) As at 30 As at 30 As at 31 September 2002 September 2001 March 2002 £'000 £'000 £'000 Fixed Assets Investments 32,230 42,420 49,958 Current Assets Debtors 1,266 598 212 Cash at bank and on deposit 3,043 4,201 1,838 _______ _______ _______ 4,309 4,799 2,050 Creditors Amounts falling due within one year (312) (329) (861) _______ _______ _______ Net Current Assets 3,997 4,470 1,189 _______ _______ _______ Total Assets less current liabilities 36,227 46,890 51,147 Creditors amounts falling due after more than one year (7,000) (7,000) (7,000) _______ _______ _______ Net Assets 29,227 39,890 44,147 _______ _______ _______ Equity Shareholders' funds 29,227 39,890 44,147 _______ _______ _______ Net asset value per Ordinary Share 133.64p 182.40p 201.86p Group Statement Of Total Return (Unaudited) (Incorporating the Revenue Account) For the Six Months Ended 30 September 2002 Six Months ended 30 September 2002 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (14,892) (14,892) Income 806 - 806 Investment management and secretarial fees (103) (143) (246) Other expenses (118) - (118) ______ ______ ______ Net return before finance costs and taxation 585 (15,035) (14,450) Interest payable (88) (163) (251) ______ ______ ______ Return on ordinary activities before taxation 497 (15,198) (14,701) Tax on ordinary activities (33) 33 - ______ ______ ______ Return attributable to equity shareholders 464 (15,165) (14,701) Dividends in respect of equity shares (219) - (219) ______ ______ ______ Transfer to/(from) reserves 245 (15,165) (14,920) ______ ______ ______ Return per Ordinary Share 2.12p (69.34)p (67.22)p Group Statement Of Total Return (Unaudited) (Incorporating the Revenue Account) For the Six Months Ended 30 September 2002 Six Months ended 30 September 2001 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (10,486) (10,486) Income 958 - 958 Investment management and secretarial fees (124) (177) (301) Other expenses (86) - (86) ______ ______ ______ Net return before finance costs and taxation 748 (10,663) (9,915) Interest payable (100) (187) (287) ______ ______ ______ Return on ordinary activities before taxation 648 (10,850) (10,202) Tax on ordinary activities (47) 47 - ______ ______ ______ Return attributable to equity shareholders 601 (10,803) (10,202) Dividends in respect of equity shares (219) - (219) ______ ______ ______ Transfer to/(from) reserves 382 (10,803) (10,421) ______ ______ ______ Return per Ordinary Share 2.75p (49.40)p (46.65)p Group Statement of Total Return (Incorporating the Revenue Account) For the Six Months Ended 30 September 2002 Year Ended 31 March 2002 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (5,632) (5,632) Income 1,639 - 1,639 Investment management and secretarial fees (230) (327) (557) Other expenses (199) - (199) ________ _______ ________ Net return before finance costs and taxation 1,210 (5,959) (4,749) Interest payable (189) (351) (540) ________ _______ _______ Return on ordinary activities before taxation 1,021 (6,310) (5,289) Tax on ordinary activities (109) 109 - ________ _______ _______ Return attributable to equity shareholders 912 (6,201) (5,289) Dividends in respect of equity shares (875) - (875) ________ _______ _______ Transfer to /(from) reserves 37 (6,201) (6,164) ________ _______ _______ Return per Ordinary Share 4.17p (28.35)p (24.18)p Summarised Unaudited Group Statement of Cash Flows Six months to Six months to Year to 30 September 30 September 31 March 2002 2001 2002 £'000 £'000 £'000 Net cash inflow from operating activities 385 434 824 Servicing of finance (251) (344) (596) Taxation - 7 7 Financial investments 1,727 (1,575) (3,857) Equity dividends paid (656) (656) (875) Net cash inflow / (outflow) before financing 1,205 (2,134) (4,497) Financing - (5,000) (5,000) Increase / (decrease) in cash 1,205 (7,134) (9,497) Reconciliation of net cash flow to movement in net debt Increase / (decrease) in cash 1,205 (7,134) (9,497) Loans repaid - 5,000 5,000 Movement in net debt 1,205 (2,134) (4,497) Net debt at 1 April (5,162) (665) (665) Net debt at 30 September/31 March (3,957) (2,799) (5,162) Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities Net return before finance costs and taxation 585 748 1,210 Investment management fee charged to capital (143) (177) (327) Changes in working capital and other non-cash items (57) (137) (59) Net cash inflow from operating activities 385 434 824 Notes 1. The unaudited interim results have been prepared on the basis of the accounting policies set out in the statutory accounts of the Group for the year ended 31 March 2002. 2. Earnings for the first six months should not be taken as a guide to the results for the full year. 3. Basic return per ordinary share is based on a weighted average of 21,870,260 Ordinary Shares in issue during the period (2001 - 21,870,260). 4. The interim dividend of 1.00 pence per Ordinary Share will be paid on 3 January 2003 to shareholders on the Register on 6 December 2002. 5. There were 21,870,260 Ordinary Shares in issue at 30 September 2002 (31 March 2002 and 30 September 2001 - 21,870,260). 6. The group results consolidate those of I&S UK Securities Limited, a wholly owned subsidiary which deals in securities. 7. These are not statutory accounts in terms of Section 240 of the Companies Act 1985 and are unaudited. Statutory accounts for the year to 31 March 2002, which received an unqualified audit report, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 31 March 2002 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 8. Copies of the Interim Report, which has been reviewed by the Company's auditors, will be mailed to shareholders and will be available for inspection at the Registered Office of the Company, One Charlotte Square, Edinburgh, EH2 4DZ Managed by ISIS Asset Management plc This information is provided by RNS The company news service from the London Stock Exchange IR QELFBLFBXFBL

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