Final Results

Shires Income PLC
22 May 2003


News Release


22 May 2003


Shires Income plc
Preliminary Results for the year ended 31 March 2003


Shires Income plc aims to provide for shareholders a high level of income
together with growth of both income and capital from a portfolio substantially
invested in UK Equities.
                                                            2003          2002
Total assets less current liabilities                      £75.4m       £148.1m
Ordinary shareholders' funds                               £51.2m       £108.9m

Net asset value per ordinary share                         172.7p        366.9p
Ordinary share price                                       141.5p        332.5p

Discount (ordinary share price to NAV)                      18.1%          9.4%

Revenue return per ordinary share                          19.72p        19.35p
Dividends per ordinary share                               19.25p        19.25p

Gearing                                                     50.3%         43.7%


   • Proposed final dividend of 6.05p per ordinary share bringing total
   dividends for the year to 19.25p, the same level as paid last year. The Board
   envisages that dividends for the year to 31 March 2004 will not be lower than
   this year.


   •The total return on net assets was -47.7%, which compared with the return
    of -29.8% on the FTSE All-Share Index, the Company's benchmark. The
    principal contribution to this underperformance came from the maintenance of
    equity gearing throughout the year as share prices fell.


   •The 3.4375% Index-Linked Debenture Stock 2017/19 was repaid, financed by
    sales of equities, and the 5% Index-Linked Debenture Stock 2008/10 remains
    in place.


   •The discount of share price to net asset value per share was 18.1% at 31
    March 2003. The Board is monitoring the discount movement and will consider
    whether there is any action which can helpfully be taken.


   • The dividend yield at 31 March 2003 was 13.6% which compared with 3.9%
   on the All-Share Index.


   • UK ordinary share prices are modestly rated, offering attractive
   yields and the prospect of capital appreciation to investors who look beyond
   short term uncertainties.


For further information please contact:


David Williams, Managing Director
Glasgow Investment Managers
0141 572 2700


Shires Income plc
Annual Report 31 March 2003
Chairman's Statement


It is a matter of regret to me that my first statement to you as Chairman should
be following an extremely disappointing year for shareholders. The factors
contributing to the poor performance of your Company are referred to below. I
assure you that your disappointment is mirrored by the concern of the Board and
that the relevant issues are being addressed. Since the year end the net asset
value per ordinary share has risen by 18.2%to 204.2p at 14 May 2003. This
compares with a rise of 11.0% in the FTSE All-Share Index over the same period.


Although the value of its capital stock has shrunk significantly over the last
year, the Company retains considerable flexibility in its revenue generating
capacity. Unless there is a marked increase in the incidence of dividend cuts by
the companies in which the portfolio invests, the Board envisages that the
dividends to be paid and declared in respect of the year to 31 March 2004 will
not be lower than distributions in respect of the year to 31 March 2003.


Background

The year to 31 March 2003 commenced with the UK stockmarket showing signs of
recovery after the adverse impact of the terrorist atrocities in the USA. At the
end of the period the FTSE All-Share Index had suffered the greatest fall since
1974, the result of a series of blows to investor confidence from accounting and
corporate malpractice, the deteriorating situation in the Middle East and forced
selling of equities by insurance companies and pension schemes endeavouring to
maintain compliance with solvency and funding requirements. This was the third
consecutive year of decline in equity prices, which last happened in the years
1947 to 1949 as economies struggled in the aftermath of the Second World War.


Investment Returns

The total return on net assets was -47.7%, compared with the return of -29.8% on
the Company's benchmark, the FTSE All-Share Index, over the same period.


The principal contributions to this underperformance came from the maintenance
of significant equity gearing throughout the year as share prices fell. There
was also a small underperformance of the benchmark by the portfolio of ordinary
shares. Other negative factors included:


   •falls in the prices of holdings of convertible and other fixed income
    securities;
   •the lower value attributed to the holding in Glasgow Investment Managers,
    due to the impact of a fall in the value of funds under management and the
    lower ratings applied to the earnings of investment management companies by
    the stockmarket;
   •the impact of high stockmarket volatility on the residual value of the
    hedging structure in the first half of the Company's year;
   •the premium incurred on repayment of the 3.4375% Index-linked Debenture
    Stock 2017/19 in January 2003.



Portfolio Profile

Total gearing was 50.3% of net assets at 31 March 2003, the aggregate of an
exposure to equity investments of 125.5% of net assets and investments
equivalent to 24.8% of net assets in the fixed income securities which
contribute towards achievement of the Company's income objective. A year earlier
exposure to equities was 125.2% of net assets and total gearing 43.7%.


Falls in the prices of securities held in the portfolio had the effect of
raising gearing and this was countered by net sales of £30.8 million of ordinary
shares over the course of the year. Part of the proceeds of these disposals was
used to repay the 3.4375% Index-Linked Debenture Stock 2017/19.


Index-Linked Debenture Stocks

It was reported in the Interim Report for the half year to 30 September 2002
that the Board considered it would be appropriate to reduce gearing to ensure
that adequate asset cover for the Company's borrowings was maintained.
Accordingly £15.725 million, being the outstanding liability in respect of the
3.4375% Index-linked Debenture Stock 2017/19, was repaid on 30 January 2003
together with a premium of £1.2 million, inclusive of redemption expenses. The
5% Index-linked Debenture Stock 2008/10 remains in place.


In view of the small movements in the Retail Price Index relative to the coupons
of the Index-Linked Debenture Stocks in recent years, the Board has decided to
implement the provisions of the Statement of Recommended Practice ('SORP')
issued by the Association of Investment Trust Companies in January 2003 in
respect of the financing costs of the two stocks. Accordingly, the index-linked
adjustments to the redemption values of the Index-Linked Debenture Stocks, the
amortisation of the discounts, the expenses of issue and the interest payable
have been aggregated and the total charged half to capital reserves and half to
revenue. The impact of this change has been to increase the revenue return
attributable to equity shareholders by £519,000.


Earnings and Dividends

The Revenue Return per ordinary share was 19.72p, which compares with 19.35p
last year. Lower income from investments and lower finance costs reflect the
reduction in borrowings and the application of the SORP to the financing costs
of the Index-Linked Debenture Stocks.


The Board is recommending a final dividend of 6.05p per ordinary share, bringing
total dividends for the year to 19.25p, the same level as paid last year. If
approved, the final dividend will be paid on 31 July 2003 to shareholders on the
register at close of business on 4 July 2003.


Share Price Rating


The rating of the Company's shares was volatile during the year, moving in a
range from a premium of 8%, at the end of August 2002, to a discount of 18 % at
31 March 2003 when, at the closing price of 141.5p, the net yield was 13.6%. At
the time of writing, 14 May 2003, the discount stands at 21.9% and does not, in
my view, reflect an appropriate valuation of your company in the market place.


The Board is monitoring closely the discount movement and will consider whether
there is any action which can helpfully be taken to improve the position.



Outlook

The OECD has recently raised its forecast of aggregate output growth in all
regions but the Eurozone, as the end of the war in Iraq is likely to add the
stimulus of lower oil prices to the fiscal and monetary factors which are
expected to lead to an increase in business activity in the second half of this
year and in 2004. For stockmarkets to respond to the gradual improvement in
prospects, however, will require a recovery in investor confidence after the
setbacks of the last two years.


Meanwhile, UK ordinary share prices are modestly rated, offering attractive
yields and the prospect of capital appreciation to investors who are able and
willing to look beyond short term uncertainties. Accordingly, it is the Board's
intention to maintain equity gearing at around the current level, to take
advantage of the expected recovery in the general level of UK share prices. To
provide protection to the value of net assets in the event of renewed
stockmarket weakness, partial hedging of the equity portfolio has been
maintained.


Board

John Izat, having attained the age of seventy, stepped down as Chairman of the
Company at the end of 2002 and the Board invited me to succeed him. In
accordance with the Articles of Association John will retire from the Board
after the Annual General Meeting on Friday 27 June 2003. He was Chairman from
June 1996 and has served on the Board since March 1988. He has contributed to a
number of initiatives, including the issue of the RPI-Linked Debentures, the
investment in Glasgow Investment Managers and the launch of Shires Smaller
Companies plc. My fellow directors and I should like to take this opportunity to
thank him for his leadership and contribution to our deliberations and to wish
him well in his retirement.


Annual Report and Annual General Meeting

The Annual Report will be mailed to shareholders on 27 May 2003. Copies may be
obtained from the managers, Glasgow Investment Managers Limited, Sutherland
House, 149 St Vincent Street, Glasgow G2 5DR after that date.


The Annual General Meeting will be held at Trinity House, Tower Hill, London
EC3N 4DH on 27 June 2003 at 12 noon.





J Martin Haldane
(Chairman)








Shires Income plc
Consolidated Statement of Total Return
(incorporating the Revenue Account*)
for the year ended 31 March 2003
                                           2003                             2002
                  Revenue    Capital      Total    Revenue    Capital      Total
                     £000       £000       £000       £000       £000       £000

Losses on               -    (55,173)   (55,173)         -    (16,046)   (16,046)
investments
Income              7,542          -      7,542      8,246          -      8,246
Management and
administrative
expenses             (591)      (236)      (827)      (618)      (309)      (927)
                   --------   --------   --------     ------    -------    -------
NET RETURN
BEFORE FINANCE
COSTS AND           
TAXATION            6,951    (55,409)   (48,458)     7,628    (16,355)    (8,727)
Finance costs of   
borrowings         (1,202)    (2,367)    (3,569)    (1,975)      (937)    (2,912)
                   --------   --------   --------     ------    -------    -------
RETURN ON
ORDINARY
ACTIVITIES          
BEFORE
TAXATION            5,749    (55,776)   (52,027)     5,653    (17,292)   (11,639)
Taxation              106          -        106         88          -         88
                   --------   --------   --------     ------    -------    -------
RETURN ON
ORDINARY
ACTIVITIES AFTER
TAXATION
FOR THE
FINANCIAL YEAR      5,855    (55,776)   (51,291)     5,741    (17,292)   (11,551)
Preference             
dividend               (2)         -         (2)        (2)         -         (2)
                   --------   --------   --------     ------    -------    -------
RETURN
ATTRIBUTABLE
TO
EQUITY              
SHAREHOLDERS        5,853    (55,776)   (51,923)     5,739    (17,292)   (11,553)
Dividends on       
equity shares      (5,713)         -     (5,713)    (5,713)         -     (5,713)
                  --------   --------   --------     ------    -------    -------
TRANSFER TO/
(FROM)
RESERVES              140    (55,776)   (57,636)        26    (17,292)   (17,266)
                   --------   --------   --------     ------    -------    -------
Return per          
ordinary share      19.72p   (194.68)p  (174.96)p    19.35p    (58.29)p   (38.94)p
Dividends per       
ordinary share      19.25p                           19.25p


* The revenue column of this statement is the consolidated profit and loss
account of the Group


All revenue and capital items in the above statement derive from continuing
operations.


No operations were acquired or discontinued during the year.


The financial information set out above and on the following pages does not
constitute the Company's statutory accounts for the years ended 31 March 2003
and 2002 but is derived from those accounts. Statutory accounts for 2002 have
been delivered to the Registrar of Companies and those for 2003 will be
delivered following the Company's Annual General Meeting. The auditors have
reported on those accounts; their reports were unqualified and did not contain
statements under Section 237(2) or (3) of the Companies Act 1985.



Shires Income plc
Group Balance Sheet
as at 31 March 2003
                                                           2003           2002
                                                           £000           £000
FIXED ASSETS
Ordinary shares                                          60,318        133,062
Convertibles                                              6,083         12,162
Preference shares                                         6,598          8,019
Hedge instruments                                           923         (3,448)
Unlisted investments                                      3,159          6,770
                                                    -------------  -------------
                                                         77,081        156,565
CURRENT ASSETS
Debtors                                                   2,063          3,692
Dealing investments held by subsidiary                      323            473
undertaking
Cash at bank and in hand                                     45          1,038
                                                    -------------  -------------
                                                          2,431          5,203
CREDITORS
Amounts falling due within one year                      (4,106)       (13,626)
                                                    -------------  -------------
NET CURRENT LIABILITIES                                  (1,675)        (8,423)
                                                    -------------  -------------
TOTAL ASSETS LESS CURRENT LIABILITIES                    75,406        148,142
Creditors
Amounts falling due after more than one year            (24,110)       (39,210)
                                                    -------------  -------------
NET ASSETS                                               51,296        108,932
                                                    -------------  -------------

CAPITAL AND RESERVES
Called up share capital                                  14,888         14,888
Share premium account                                    19,091         20,317
Other capital reserves
Realised                                                 35,368         71,895
Unrealised                                              (22,049)        (2,026)
Revenue reserves
Realised                                                  3,722          3,582
Unrealised                                                  276            276
                                                    -------------  -------------
SHAREHOLDERS' FUNDS                                      51,296        108,932
(including non-equity)                              -------------  -------------


Net asset value per ordinary share                        172.7p         366.9p






Shires Income plc
Consolidated Cash Flow Statement
for the year ended 31 March 2003


                                               2003     2003     2002     2002
                                               £000     £000     £000     £000
OPERATING ACTIVITIES
Dividends and interest received
from investments                                       7,434             7,569
Income tax recovered                                       -                50
Deposit interest received                                182                47
Dealing subsidiary receipts                              472               147
Other cash received                                       98               595
Other payments                                          (250)                -
Administrative expenses                                 (831)             (531)
Payments to and on behalf of Directors                   (73)              (59)
Dealing subsidiary payments                               (8)             (458)
                                                      --------          --------
NET CASH INFLOW FROM OPERATING ACTIVITIES              7,024             7,360


SERVICING OF FINANCE
Interest paid                                (1,802)           (2,211)

Payments of income tax                            -              (172)
Preference dividends paid                        (2)               (2)
                                              -------          --------

                                                      (1,804)           (2,385)


TAXATION
Consortium relief                                97               129
                                              -------          --------

                                                          97               129


INVESTING ACTIVITIES
Purchases of investments                     (49,537)          (58,289)
Sales of investments                          83,653            56,023
Hedge instrument payments                    (24,396)          (12,963)
Hedge instrument receipts                     15,826            12,740
NET CASH INFLOW/(OUTFLOW) FROM                        25,546            (2,489)
INVESTING ACTIVITIES

EQUITY DIVIDENDS PAID                                 (5,713)           (5,666)
                                                      --------          --------


NET CASH INFLOW/(OUTFLOW)                             25,150            (3,051)
BEFORE FINANCING



FINANCING
Issues of shares                                  -               117
Repayment of 3.4375% Index-Linked            
Debenture                                    (16,891)               -
Debt due within one year
- (decrease)/increase in short-term           (9,500)           5,500
borrowings                                    -------          --------

                                                      (26,391)           5,617
                                                      --------          --------

(DECREASE)/INCREASE IN CASH                           (1,241)            2,566
                                                      --------          --------









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