ABERFORTH SMALLER COMPANIES TRUST plc
PRELIMINARY RESULTS
For the Year to 31 December 2003
FEATURES
Fully Diluted Net Asset Value Total Return +37.1%
Benchmark Index Total Return +43.0%
Increase in Dividends per Ordinary Share +6.3%
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 2003 PERFORMANCE
The year to December 2003 has seen most stockmarkets around the world
generate positive returns, a welcome relief after the negative returns
of the recent past. A fairly common characteristic was the
outperformance by smaller over larger companies. The UK shared this
characteristic with ASCoT's benchmark index - the Hoare Govett Smaller
Companies Index (Excluding Investment Companies) - producing a total
return of 43.0% while the FTSE All-Share Index (representative of
"larger companies") produced a total return of 20.9%.
ASCoT produced a total return of 37.1%, therefore underperforming its
benchmark index. While disappointing, it is clearly still pleasing to
report such good absolute returns and also to reflect on ASCoT's longer
term relative performance. For example, over three years, ASCoT's total
return is 33.6% compared to the benchmark index's total return of -4.6%,
a significant outperformance.
Your Board is pleased to recommend a final dividend of 6.6p, which
produces total dividends for the year of 10.1p, an increase of 6.3% on
the total dividends paid for the previous year. Subject to
Shareholders' approval, the final dividend of 6.6p per share will be
paid on 5 March 2004 to Shareholders on the register at the close of
business on 6 February 2004. Your Board is also pleased to introduce a
Dividend Re-investment Plan to allow shareholders to use their cash
dividends to buy shares easily and at a low cost via the Company's
registrars.
ABERFORTH SPLIT LEVEL TRUST plc ("ASLeT")
Shareholders voted in favour of offering ASCoT as a roll over option in
connection with the reconstruction of ASLeT in late October. Your Board
is delighted to welcome those ASLeT Shareholders who elected for ASCoT.
Proceeds of �61.9 million were received and 13,991,054 new Ordinary
Shares were issued on 10 November 2003. The proceeds were substantially
represented by an investment portfolio virtually identical to ASCoT's
and no costs were incurred by ASCoT. The net result was a highly
efficient, cost effective enlargement of ASCoT that should enhance its
attraction to both existing and potential Shareholders.
WARRANTS
There are no longer any Warrants in issue. The final exercise date was
31 March 2003 and, as a result, 963,311 new Ordinary Shares were issued.
Earlier in the year, 40,000 Warrants were bought in for cancellation at
a price that enhanced Shareholder value.
SHARE BUY BACK AUTHORITY AND TREASURY SHARES
At the Company's Annual General Meeting in February 2003 the authority
to purchase up to 14.99% of the Company's Ordinary Shares (then in
issue) was renewed. Your Board will be seeking a renewal of this
authority on the enlarged number of issued Ordinary Shares at the Annual
General Meeting to be held on 25 February 2004. Your Board has
established and keeps under careful review the circumstances under which
such authority will be utilised. Should these arise, the Company will
seek to purchase Ordinary Shares.
Any Ordinary Shares bought back by the Company would be cancelled. Your
Board does not currently consider it appropriate to seek Shareholders'
authority to hold such Ordinary Shares in treasury. We will, however,
keep that policy under review and revert to Shareholders if and when
deemed appropriate.
CANCELLATION OF SHARE PREMIUM ACCOUNT
At the Extraordinary General Meeting held on 29 October 2003 a special
resolution was approved to cancel the entire share premium account of
the Company, including that part arising on the issue of new ASCoT
Ordinary Shares in respect of ASLeT's reconstruction. This cancellation
also requires the approval of the Court and this is expected during the
first quarter of 2004. The special reserve arising on the cancellation
of the share premium account can be used by the Company for any purposes
for which distributable profits are available under the Companies Act
1985. These include the funding of share buy-backs (subject to any
restrictions which the Court may impose).
BOARD STRUCTURE
It is your Board's objective to be at the forefront of good corporate
governance and it has adopted the revised Combined Code and The AITC's
Code on Corporate Governance. It is your Board's wish to go beyond the
current minimum requirements of The Association of Investment Trust
Companies and The Combined Code by having all Directors seek re-election
each year, rather than every three years or after a specified term.
Keith Miller will not seek re-election at the forthcoming Annual General
Meeting having served Shareholders for thirteen years, since ASCoT's
inception. Your Board wishes to record its sincere appreciation for
Keith's valuable input over the years.
Hamish Buchan was appointed a Director on 11 November 2003 having been a
director of ASLeT. Your Board will doubtless benefit from Hamish's
considerable experience of the investment trust industry.
I have served Shareholders as Chairman since ASCoT's inception, which by
the time of the Annual General Meeting in 2005 will be fourteen years.
I will not seek re-election at that Annual General Meeting and it is
anticipated that David Shaw will then assume the role of Chairman.
During 2004 a further independent Director will be sought in order to
ensure the Board comprises no less than five and no more than six
members.
OUTLOOK
Small UK quoted companies have performed well in stockmarket terms
during 2003, not only by achieving strong absolute gains but also by
outperforming larger companies. However, they ended the year still
valued at a price/earnings discount to larger companies that is close to
the average since ASCoT's inception in 1990. In addition, dividend
cover is materially better for small companies compared to larger
companies suggesting, other things being equal, the potential for
superior dividend growth.
ASCoT enjoyed good absolute returns in 2003 but underperformed its
benchmark. Periods of underperformance are an inevitable result of the
consistent application of your Managers' value investment style. These
have occurred in other periods of ASCoT's life. Managers, in general,
often lean on good longer term performance data when experiencing short
term underperformance. Mindful of this your Board is, however,
confident that ASCoT's portfolio is sound and that your Managers'
efforts, consistently applied, will produce outperformance in the
future.
William Y Hughes
Chairman
21 January 2004
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*)
(unaudited)
For the Year ended 31 December 2003
12 months to 12 months to
31 December 2003 31 December 2002
Revenue Capital Total Revenue Capital Total
� 000 � 000 � 000 � 000 � 000 � 000
Realised gains on
sales - 11,616 11,616 - 16,715 16,715
Unrealised
gains/(losses) - 82,561 82,561 - (54,626) (54,626)
------ ------ ------ ------ ------ ------
Gains/(losses) on
investments - 94,177 94,177 - (37,911) (37,911)
Deemed cost of
Warrants
purchased for
cancellation - (50) (50) - (651) (651)
Dividend income 10,927 - 10,927 9,700 254 9,954
Interest income 484 - 484 495 - 495
Other income 19 - 19 52 - 52
Investment management
fee (1,107) (1,844) (2,951) (1,124) (1,873) (2,997)
Other expenses (297) - (297) (268) - (268)
------ ------ ------ ------ ------ ------
Return on ordinary
activities before tax 10,026 92,283 102,309 8,855 (40,181) (31,326)
Tax on ordinary
activities - - - - - -
------ ------ ------ ------ ------ ------
Return attributable to
equity shareholders 10,026 92,283 102,309 8,855 (40,181) (31,326)
Dividends in respect
of equity shares (9,490) - (9,490) (7,966) - (7,966)
------ ------ ------ ------ ------ ------
Transfer to/(from)
reserves 536 92,283 92,819 889 (40,181) (39,292)
======= ======= ======= ======= ======= =======
Returns per Ordinary
Share
Basic 11.59p 106.65p 118.24p 10.57p (47.95p) (37.38p)
Diluted 11.59p 106.65p 118.24p 10.44p (47.38p) (36.94p)
Dividends per
Ordinary Share 10.10p - 10.10p 9.50p - 9.50p
NOTES
The calculations of revenue return per Ordinary Share are based on net
revenue of �10,026,000 (2002 - �8,855,000) and on Ordinary Shares
numbering 86,531,269 (2002 - 83,798,842) in the case of basic returns
and 86,531,269 (2002 - 84,808,012) in the case of diluted returns.
The calculations of capital return per Ordinary Share are based on net
capital gains of �92,283,000 (2002 - losses of �40,181,000) and on
Ordinary Shares numbering 86,531,269 (2002 - 83,798,842) in the case of
basic returns and 86,531,269 (2002 - 84,808,012) 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 2003
(unaudited)
31 December 31 December
2003 2002
� 000 � 000
Securities officially listed on the
London Stock Exchange 415,668 273,543
---------- ----------
Debtors 1,048 1,024
Cash at bank 22,682 6,555
Creditors (7,872) (5,227)
---------- ----------
Net current assets 15,858 2,352
---------- ----------
Total assets less liabilities 431,526 275,895
========== ==========
Capital and reserves: equity
interests
Called up share capital (Ordinary
Shares) 988 839
Reserves:
Share premium account 63,780 1,090
Special reserve 133,525 133,525
Capital reserve - realised 161,295 151,600
Capital reserve - unrealised 60,576 (21,985)
Revenue reserve 11,362 10,826
---------- ----------
431,526 275,895
========== ==========
Net Asset Values per Ordinary Share
Basic 436.7p 329.0p
Fully diluted 436.7p 326.3p
Diluted - FRS 14 436.7p 326.3p
NOTES
As at 31 December 2003, the Company had 98,809,788 Ordinary Shares (2002
- 83,855,423) and no Warrants (2002 - 1,003,311) in issue.
During April 2003, as a result of remaining holders exercising the
subscription rights of their Warrants, 963,311 Ordinary Shares were
issued at 100p per share. During the year to 31 December 2003, the
Company bought in 40,000 Warrants for cancellation at a total cost of
�77,000. No Ordinary Shares were bought in during the year.
SUMMARY CASH FLOW STATEMENT
For the Year ended 31 December 2003
(unaudited)
12 months to 12 months to
31 December 2003 31 December 2002
� 000 � 000 � 000 � 000
Net cash inflow from
operating activities 8,110 7,259
Returns on investment and
servicing of finance
Interest paid - -
-------- --------
Net cash outflow from
returns on investment
and servicing of finance - -
Capital expenditure and
financial investment
Payments to acquire
investments (91,487) (120,503)
Receipts from sales of
investments 106,412 114,016
-------- --------
Net cash inflow/(outflow)
from capitalexpenditure
And financial investment 14,925 (6,487)
-------- --------
23,035 772
Equity dividends paid (8,168) (7,701)
-------- --------
14,867 (6,929)
Financing
Issue of Ordinary Shares 1,337 225
Warrants purchased for
cancellation (77) (951)
-------- --------
Net cash inflow/(outflow)
from financing 1,260 (726)
-------- --------
Increase/ (decrease) in cash 16,127 (7,655)
======== ========
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 2002, 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 2004. 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
Aberforth Partners, Secretaries - 21 January 2004
ANNOUNCEMENT ENDS
