Interim Results

EDINBURGH SMALL COMPANIES TRUST PLC Edinburgh Small Companies Trust plc, the investment trust with an investment objective to achieve long term capital growth by investment in UK quoted smaller companies, announces its interim results for the six months ended 31 December 2004. INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2004 - Net asset value per share increased by 12.3% from 71.23p to 79.95p - Share price rose by 19.0% from 51.25p to 61.00p - The trust's benchmark, the Extended Hoare Govett Smaller Companies Index (excluding Investment Trusts) increased by 7% - Smaller companies markets continue to offer attractive investment opportunities in under-researched companies that are often over-looked by mainstream investors For further information, please contact: Donald MacDonald Edinburgh Small Companies Trust plc Tel. 0131 557 5065 George Walker Standard Life Investments Tel. 0131 245 6838 Brian Simmons Press Manager, Standard Life Investments Tel. 0131 245 5935 Nathan Brown CloseWINS, Corporate Adviser to Tel. 020 7621 5572 Edinburgh Small Companies Trust plc Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested. EDINBURGH SMALL COMPANIES TRUST CHAIRMAN'S STATEMENT During the six month period ended 31 December 2004, the net asset value per share of the trust increased by 12.3% from 71.23p to 79.95p while the share price rose by 19.0% from 51.25p to 61.00p. This compares with a 7.0% increase in the trust's benchmark, the Extended Hoare Govett Smaller Companies Index (excluding Investment Trusts) over the same period. The UK stock market began to move up again in August when it became clear that the top was in sight for UK base rates. By October, further momentum was provided by the fall in the price of crude oil. Oil prices fell fully 25% in the last quarter of the year after reaching an all time high of more than $55. Smaller quoted companies continued to report buoyant trading conditions across a wide range of sectors over the last six months of 2004. Towards the end of the year it became clear that the UK housing market was at last being affected by rising interest rates. Performance The trust comfortably outperformed its benchmark both in net asset value and share price terms over the period under review. Net assets rose by 12.3% over the period but the share price rose by 19.0% reflecting a narrowing in the "discount". This strong performance was driven by some positive individual contributions from our largest holdings. Of particular note was Topps Tiles, the UK's leading retailer of tiles for kitchens & bathrooms. The shares rose by 50% over the period as the company continued to announce sustained strong trading from this growth market. A number of other large holdings such as Victrex in speciality chemicals, Northgate in van rental and Majestic Wines exceeded their recent earnings expectations. In general the investment style being employed by the manager is currently being favoured by the market. The emphasis on investing in companies with robust business models helps during more challenging economic conditions. The trust benefited from participating in three initial public offerings that performed strongly after flotation. Public quotes are now being seen as attractive sources of finance by small and medium sized companies. This is in marked contrast to the bear market conditions of 2001 to 2003. Gearing The manager has been given discretion to vary the level of the net gearing between 0% and 20% depending on their view on the outlook for smaller companies. The level of gearing at 31 December 2004 was 13.7%. This reflects a cautiously optimistic view of the outlook for smaller companies over the next year. Indeed gearing was raised during the last quarter of 2004 to take advantage of what is normally a strong start to the year. Currently £18.7 million of the 7.75% 2023 debenture is outstanding with no re-purchases being made in the reporting period. Revenue Account Earnings per share have improved to 0.27p compared with 0.17p in the six months to 31 December 2003. This reflects higher levels of income from short term deposits and money market funds and non recurring expenses in the prior period. As in previous years, no interim dividend is payable. Outlook UK smaller companies have now risen strongly for nearly two years. The turning point for the market came in April 2003, which coincided with the end of the Gulf War and an improving macroeconomic background. Since then, the benchmark index has risen by 73.8%. The question now is whether smaller quoted company markets can make progress from here. The view of the manager is that unquestionably they can, however the level of returns is likely to be lower than in the two previous years. The economic backdrop is reasonably supportive, with GDP growth of in excess of 2% expected for the UK in 2005 and inflation remaining under control. Base rates are likely to stay at current levels for some time. The main cloud on the horizon is the weakening housing market and the collateral damage this may have on UK consumer spending. UK smaller companies are significantly exposed to these areas. Valuations for smaller companies are currently near long-term averages although looking forward they are still lower than for the market as a whole. Profits and dividend growth is likely to be healthy for smaller companies in 2005 and likely to be in excess of 10%. Smaller companies markets continue to offer attractive investment opportunities in under-researched companies that are often over-looked by mainstream investors. It is indeed possible to find under-valued smaller companies with robust business models operating in growth markets at reasonable valuations. The manager believes that the longer term outlook is encouraging for these businesses and hence the trust. Donald MacDonald Chairman 10 February 2005 STATEMENT OF TOTAL RETURN for the six months ended 31 December 2004 (unaudited) Revenue Capital Total £000 £000 £000 Realised net gains on - 1,307 1,307 investments Unrealised net gains on - 4,900 4,900 investments _______ ________ ________ Total capital gains on - 6,207 6,207 investments Income from investments 463 - 463 Interest from AAA money market 193 - 193 funds Interest from Treasury Bills - - - Interest receivable on short 154 - 154 term deposits Other income 1 - 1 Investment management fee (140) (140) (280) Administrative expenses (130) - (130) _______ ________ ________ Net return before finance costs 541 6,067 6,608 and taxation Interest payable and similar (356) (356) (712) charges _______ ________ ________ Return on ordinary activities 185 5,711 5,896 before taxation Taxation (2) - (2) _______ ________ ________ Return on ordinary activities 183 5,711 5,894 after taxation Dividend in respect of equity - - - shares _______ ________ ________ 183 5,711 5,894 _______ ________ ________ Return per ordinary share 0.27p 8.47p 8.74p _______ ________ ________ ______________________________________________________________________________________ for the six months ended 31 December 2003 (unaudited) Revenue Capital Total £000 £000 £000 Realised net losses on - (12,338) (12,338) investments Unrealised net gains on - 19,019 19,019 investments _______ ________ ________ Total capital gains on - 6,681 6,681 investments Income from investments 580 - 580 Interest from AAA money market 133 - 133 funds Interest from Treasury Bills 28 - 28 Interest receivable on short 69 - 69 term deposits Other income 2 - 2 Investment management fee (133) (133) (266) Administrative expenses (206) - (206) _______ ________ ________ Net return before finance costs 473 6,548 7,021 and taxation Interest payable and similar (358) (341) (699) charges _______ ________ ________ Return on ordinary activities 115 6,207 6,322 before taxation Taxation - - - _______ ________ ________ Return on ordinary activities 115 6,207 6,322 after taxation Dividend in respect of equity - - - shares _______ ________ ________ 115 6,207 6,322 _______ ________ ________ Return per ordinary share 0.17p 9.21p 9.38p _______ ________ ________ ______________________________________________________________________________________ for the year ended 30 June 2004 (audited) Revenue Capital Total £000 £000 £000 Realised losses on investments - (12,361) (12,361) Unrealised net gains on - 22,184 22,184 investments ________ ________ ________ Total capital losses on - 9,823 9,823 investments Income from investments 1,337 - 1,337 Interest from AAA money market 292 - 292 funds Interest from Treasury Bills 30 - 30 Interest receivable on short 179 - 179 term deposits Other income 6 - 6 Investment management fee (267) (267) (534) Administrative expenses (377) - (377) ________ ________ ________ Net return before finance costs 1,200 9,556 10,756 and taxation Interest payable and similar (712) (770) (1,482) charges ________ ________ ________ Return on ordinary activities 488 8,786 9,274 before taxation Taxation - - - ________ ________ ________ Return on ordinary activities 488 8,786 9,274 after taxation Dividend in respect of equity (506) - (506) shares ________ ________ ________ (18) 8,786 8,768 ________ ________ ________ Return per ordinary share 0.72p 13.03p 13.75p ________ ________ ________ ____________________________________________________________________________ BALANCE SHEET At 31 At 30 June At 31 December June December 2004 2004 2003 £000 £000 £000 (unaudited) (audited) (unaudited) Fixed assets Investments 60,623 53,551 51,253 ________ ________ ________ Current assets Debtors 164 916 209 AAA money market funds 8,110 8,110 8,110 Treasury Bills - - - Cash and short term deposits 4,254 5,386 5,387 ________ ________ ________ 12,528 14,412 13,706 Creditors: amounts falling due 562 1,252 753 within one year ________ ________ ________ Net current assets 11,966 13,160 12,953 ________ ________ ________ Total assets less current 72,589 66,711 64,206 liabilities Creditors: amounts falling due 19,279 19,295 19,311 after more than one year ________ ________ ________ 53,310 47,416 44,895 ________ ________ ________ Capital and reserves Called up share capital - equity 16,851 16,851 16,851 Other reserves 36,459 30,565 28,044 ________ ________ ________ Total equity shareholders' funds 53,310 47,416 44,895 ________ ________ ________ Adjusted net asset value per 79.95p 71.23p 67.51p ordinary share ________ ________ ________ ___________________________________________________________________________ CASHFLOW STATEMENT At 31 At 31 At 30 December December June 2004 2003 2004 £000 £000 £000 (unaudited) (unaudited) (audited) Revenue before finance 540 473 1,200 costs and taxation Decrease/(Increase) in 225 60 (110) accrued income Decrease in debtors 11 15 4 (Decrease)/Increase in (13) (6) 22 creditors Expenses charged to capital (140) (133) (267) ________ ________ ________ Net cash inflow from 623 409 849 operating activities Net cash outflow from (724) (741) (1,541) servicing of finance Total tax paid (2) - - Net cash outflow from (524) 1,348 1,633 financial investment Equity dividends paid (505) (505) (506) ________ ________ ________ Net cash outflow before (1,132) 511 435 financing Net cash outflow from - (574) (499) financing Management of liquid - 3,660 3,660 resources ________ ________ ________ (DECREASE)/INCREASE IN CASH (1,132) 3,597 3,596 ________ ________ ________ NOTES : 1. The accounts are prepared under the same accounting policies used for the year ended 30 June 2004. 2. The financial information for the year ended 30 June 2004 has been extracted from the Annual Report and Accounts of the Company which have been filed with the Registrar of Companies and contained an unqualified auditors' report. 3. The statement of total return (incorporating the revenue account), balance sheet and cashflow statement set out above do not represent full accounts in accordance with Section 240 of the Companies Act 1985. 4. No interim dividend has been declared in respect of the year ending 30 June 2005. 5. The Interim Report will be posted to shareholders at the end of February 2004 and copies will be available from the registered office of the Company. Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested. For Edinburgh Small Companies Trust plc Edinburgh Fund Managers plc, Secretary END

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