Repayment of debt and strategic update

22 September 2004
Embargoed until 0700

SECURITIES TRUST OF SCOTLAND PLC
Repayment of debt and strategic update

The Board wishes to reduce the amount of the Company's debt that cannot be
repaid flexibly and redrawn at its discretion. Accordingly:

(a) on 14 September 2004, the Company announced that it had purchased £10m
nominal of TrustCo Finance PLC 11.5% Debenture Stock 2016, and that it intended
to surrender this to TrustCo, which will have the effect of extinguishing all of
the Company's existing £10m loan from TrustCo;

(b) today, the Company announces that it is calling a meeting of the holders of
its 12% Debenture Stock 2013 to consider a proposal to repay this early at a
price that would give a yield of 0.30% over the reference gilt; and

(c) the Company has a £50m 7.43% term loan that falls due for repayment on 3
December 2004. It is the current intention of the Board that this loan will be
repaid on schedule and be replaced, in part, by a short-term revolving credit
facility of up to £25m.  This facility and the £50m 6.25% Debenture Stock 2031
(which will remain outstanding) will then represent all of the company's debt.

The overall effect of these proposed changes is that the Company's debt will
fall from £125m to a range of £50-75m, depending on the use of the short-term
facility. As a percentage of shareholders' funds of £319.2m (as at 31 August
2004) gearing will therefore fall from 39% to a range of 16-24%.

The Company currently adopts an accounting policy whereby 70% of finance costs
and investment management fees are charged to capital, and 30% to revenue. The
proposed repayment of debt, together with the associated removal of the
investment management fee on the debt repaid, represents, on an annualised
basis, savings of £2.1m to the revenue account and £4.9m to the capital account.
The latter figure is equivalent to 1.5% of shareholders' funds as at 31 August
2004. It is estimated that the early repayment of the two debentures will cost
approximately £11.5m, equivalent to 3.6% of shareholders' funds as at 31 August
2004.

Notwithstanding the ongoing savings from the change to the Company's capital
structure, the reduction in total assets will require a marginal increase in the
yield on the Company's equity portfolio in order to maintain the Company's
progressive dividend policy. It is anticipated that, assuming a full drawdown of
the £25m short-term facility, the Company will typically invest 85-90% of its
total assets in equities, at an average yield relative of 110-115% of that of
the FTSE All-Share index, and 10-15% in cash and fixed interest securities. The
Board has imposed a restriction on the investment managers that equity gearing
may not exceed 120%, nor be less than 80%.

These limits will be subject to regular review, with the manager having to take
into consideration the Company's absolute, and not just relative, return.
Following the increased polarisation of the UK market over recent years, the
Board has also agreed that the managers should have greater freedom to deviate
from the benchmark index, thereby allowing greater emphasis on stock picking.
The main focus will be on an above-average yielding portfolio with scope to
deliver superior dividend growth.

It is the Board's current intention, barring unforeseen circumstances, to pay
dividends in respect of the financial year to 31 March 2005 totalling no less
than the 4.55p per share paid in respect of the financial year to 31 March 2004;
on current estimates, this will be covered by earnings. With effect from the
start of the financial year to 31 March 2006, the Company intends to pay
dividends on a quarterly basis.

The Company is scheduled to release its interim results for the year to 31 March
2005 on 27 October 2004, at which time a further statement will be made on
progress in revising the Company's capital structure.

Further information:

Securities Trust of Scotland:
   Mike Woodward, 0131 479 5930
Cazenove:
   Christopher Smith/Francis Burkitt, 020 7155 8855

This announcement has been approved for the purposes of section 21 of the
Financial Services and Markets Act 2000 by Cazenove & Co. Ltd, which is
regulated by the Financial Services Authority.