Final Results

Securities Trust of Scotland plc Annual results for the year ended 31 March 2003 Chairman's statement The company's net asset value has suffered badly during the year to 31 March 2003 in what has been a dismal period for the equity market in the UK. The reasons for the severity of the decline have been well aired in the media. Total return performance It is clearly disappointing to report a third consecutive year of declining net asset value per share, from 131.08p to 84.47p. At the share price level the total return, with dividends reinvested, was 3.9% lower than the benchmark, due primarily to the impact of gearing, but partly also due to a widening of the discount from 10.7% to 12.1%. At the net asset value total return level, a decline of 33.0% compares with the FTSE All-Share's fall of 29.8%. A disappointing result, and yet, within that figure, our underlying UK equity portfolio outperformed our benchmark for the third year in succession. But this was not enough to counter the impact of gearing and charges. Gearing As you may recall from my last interim statement, the board remains convinced of the long-term benefits to be gained from borrowing. However we did not anticipate the further fall in markets that led to the forced selling of equities by UK insurance companies. Despite this, the board does not consider it to be in the best interest of shareholders to de- gear the company in these conditions. The board instructed the managers to keep equity gearing below 20% throughout the year. Although the company's potential gearing is still high at 47.0%, the balance between equity gearing and potential gearing is held in bonds or cash, thus neutralising the market effect. Shareholders should be aware that the level of gearing is kept under constant review. Earnings and dividends The company's underlying earnings per share increased by 2.3% from 4.37p to 4.47p. Total earnings increased by only 1.6% due to the absence of a number of special receipts received last year. The directors are recommending an increased final dividend of 3.25p per share, payable on 4 July 2003. Together with the interim dividend of 1.27p, the total dividend for the year is 4.52p, an increase of 2.3% over last year, thus meeting the board's objective of achieving rising income. This is now the ninth consecutive year of dividend increases. The yield on the company's shares at the year-end, on the recommended dividend, was 6.1% (net), while the yield on the market was only 3.9%. Although the proposed dividend was not covered fully by earnings, we still have reserves of revenue, built up over previous years, equivalent to 56% of this year's proposed dividend. This high yield on the shares is attributable partly to the company's long-term policy of charging some 70% of our management fee and interest costs to capital. Our website Your company has its own website at www.securitiestrust.com, which gives shareholders access to presentations made by the manager throughout the year. On the site, you will also find details of a number of saving plans, which allow shareholders to invest in the company without incurring any initial, annual or exit charges. Outlook Although the outlook for markets remains uncertain in the short term, with limited scope for further cuts in interest rates both here and overseas, the board believes that, over the longer term, UK equities, after the sharp market correction, will represent good value compared to bonds for those seeking growth in income as well as capital. David Whitaker For further information, please contact: Tom Maxwell or Michael Woodward Martin Currie Investment Management Ltd 0131 229 5252 tmaxwell@martincurrie.com/mwoodward@martincurrie.com Securities Trust of Scotland plc Audited statement of total return (incorporating revenue account) for the year ended 31 March 2003 Revenue Capital Total £000 £000 £000 Losses on - realised - (26,003) (26,003) investments - unrealised - (110,737) (110,737) Income - franked 16,864 - 16,864 - unfranked 1,371 - 1,371 Investment management fee (692) (1,615) (2,307) Other expenses (661) (46) (707) ======== ========= ========= Net return before finance costs 16,882 (138,401) (121,519) and taxation Interest payable and similar (2,937) (6,853) (9,790) charges ======== ========= ========= Return on ordinary activities 13,945 (145,254) (131,309) before taxation Taxation on ordinary activities - - - ======== ========= ========= Return attributable to equity 13,945 (145,254) (131,309) shares Dividends in respect of equity (14,103) - (14,103) shares (4.52p per share) ======== ========= ========= Transfer from reserves (158) (145,254) (145,412) ======== ========= ========= Return per ordinary share 4.47p (46.55p) (42.08p) 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 during the year. The directors have recommended a final dividend on the ordinary shares of the company for the year ending 31 March 2003 of 3.25p per share (2002: 3.17p) to be paid on 4 July 2003 to shareholders on the register on 13 June 2003. The annual results will be circulated to shareholders in the form of an annual report, copies of which will be available at the company's registered office, Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES. The financial information contained within this preliminary announcement does not constitute the company's statutory financial statements as defined in s240 of the Companies Act 1985 for the years ended 31 March 2003 or 2002, but is derived from those financial statements. Statutory financial statements for 2002 have been delivered to the Registrar of Companies and those for 2003 will be delivered following the company's annual general meeting which will be held at Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES on Wednesday 25 June 2003 at 12.30pm. The auditors have reported on those financial statements, their reports were unqualified and did not contain statements under s237(2) or (3) of the Companies Act (1985). The terms of the annual report and preliminary announcement were approved by the board on 7 May 2003. Securities Trust of Scotland plc Audited statement of total return (incorporating revenue account) for the year ended 31 March 2002 Revenue Capital Total £000 £000 £000 (Losses) / gains - realised - (24,808) (24,808) on investments - unrealised - 5,086 5,086 Currency losses - (13) (13) Income - franked 16,024 464 16,488 - unfranked 2,153 - 2,153 Investment management fee (735) (1,715) (2,450) Other expenses (766) (25) (791) ======== ========= ========= Net return before finance costs and 16,676 (21,011) (4,335) taxation Interest payable and similar (2,892) (6,749) (9,641) charges ======== ========= ========= Return on ordinary activities 13,784 (27,760) (13,976) before taxation Taxation on ordinary activities (65) 58 (7) ======== ========= ========= Return attributable to equity 13,719 (27,702) (13,983) shares Dividends in respect of equity (13,792) - (13,792) shares (4.42p per share) ======== ========= ========= Transfer from reserves (73) (27,702) (27,775) ======== ========= ========= Return per ordinary share 4.40p (8.88p) (4.48p) 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 during the year. Securities Trust of Scotland plc Balance sheet 31 March 2003 31 March 2002 Audited Audited £000 £000 £000 £000 Fixed assets Investment at market 364,551 516,315 value Current assets Debtors 6,492 10,144 Cash in bank 28,358 21,245 =========== ======== 34,850 31,389 Creditors Amounts falling due (11,943) (14,874) within one year =========== ======== Net current assets 22,907 16,515 =========== ========== Total assets less current 532,830 liabilities 387,458 Creditors Amounts falling due after (123,882) (123,842) one year =========== ========== Total assets attributable 263,576 408,988 to share capital =========== ========== Capital and reserves Called up ordinary 78,006 78,006 capital Capital redemption 2,074 2,074 reserve Capital reserve - 199,372 233,889 realised Capital reserve - (23,841) 86,896 unrealised Revenue reserve 7,965 8,123 =========== ========== Equity shareholders' 263,576 408,988 funds ========= ========== Net asset value per 84.47p 131.08p ordinary share Securities Trust of Scotland plc Statement of cashflow Year to 31 March Year to 31 March 2002 2003 Audited Audited £000 £000 £000 £000 Operating activities Net dividends and interest 18,351 18,630 received from investments Investment management fee (2,307) (2,450) Cash paid to and on behalf of (83) (68) directors Bank charges (30) (14) Other cash payments (575) (568) ======= ======= Net cash inflow from operating 15,356 15,530 activities Servicing of finance Interest paid (9,779) (8,357) ======= ====== == Net cash outflow from (9,779) (8,357) servicing of finance Taxation Foreign tax recovered 43 - Net taxation paid on debenture - (182) interest ======= ====== Net cash inflow / (outflow) 43 (182) from taxation Capital expenditure and financial investment Payments to acquire (44,225) (67,682) investments Receipts from disposal of 59,573 60,854 investments Exchange losses - (13) ======= ====== Net cash inflow / (outflow) 15,348 (6,841) from investing activities Equity dividends paid (13,855) (13,635) ====== ========= Net cash inflow / (outflow) 7,113 (13,485) before use of liquid resources and financing Financing Movement in short-term - (20,000) borrowings Movement in long term - 48,806 borrowings ====== ====== Cash inflow from financing - 28,806 ====== ========= Increase in cash for the year 7,113 15,321 ====== =========

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