Interim Results

Edinburgh Small Companies Trust plc 14 February 2007 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 2006. INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006 - Net asset value per share increased by 22.4% to 144.9 pence - Share price rose by 16.3% to 118.0 pence - The Trust's benchmark, the Extended Hoare Govett Smaller Companies Index (excluding Investment Companies) increased by 18.7% - Smaller companies markets continue to offer attractive investment opportunities in under-researched companies that are often over-looked by mainstream investors -END- For further information, please contact: Brian Simmons Press Manager, Standard Life Investments Tel. 0131 245 5935 Harry Nimmo Head of UK Smaller Companies, Standard Life Investments Tel. 0131 245 6811 Gordon Humphries Head of Investment Companies, Standard Life Investments Tel. 0131 245 2735 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 Extracts from Chairman's Statement I should like to take this opportunity to thank shareholders for their continued support of the Trust. As previously announced on 9 November 2006, the Trust's Tender Offer was successful and the positive result reflects confidence in the Manager, Standard Life Investments, and the improved investment performance of the Trust since their appointment in September 2003. Tender offer As a result of the Tender Offer to shareholders outlined in the Circular dated 11 October 2006, the Trust repurchased, at a cost of 115.9513 pence per ordinary share, 32.6m or 48.4% of the outstanding ordinary shares in issue to leave 34.8m ordinary shares in issue. Of the 3,028,972 warrants in issue prior to the tender offer, 117,791 were repurchased at a cost per warrant of 16.59 pence under the Warrant Offer. At the same time, £9.1m of the £18.7m of outstanding 7.75% 2023 debenture stock was redeemed early, pro-rata to the proportion of ordinary shares tendered, at a total cost of £137.047 per £100 nominal. Performance I am delighted to report that the Trust has continued to outperform against its benchmark over this latest reporting period for the six months ended 31 December 2006 despite the distraction of the recent corporate event. The net asset value per share (undiluted with debt at par value) of the Trust increased by 22.4% to 144.9 pence per share while the price per share rose by 16.3% to 118.0 pence. This compares to an 18.7% increase in the Trust's benchmark, the Extended Hoare Govett Smaller Companies Index (excluding Investment Trusts) over the period. The Manager has also delivered excellent investment returns over the three years ended 31 December 2006, with the net asset value having increased by 114.6% compared to a rise in the benchmark of 90.0%. The Trust continues to benefit from the Manager's disciplined investment process and positive stock selection. Interest in smaller companies increased over the period as investors became more confident on the back of stronger UK economic data, a reduction in the oil price, buoyant merger and acquisition activity and encouraging earnings announcements from smaller companies. 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 over the reporting period ranged from 0% to 12%. Actual gearing as at 31 December 2006 stood at 12% and reflects the Manager's positive outlook for the portfolio. Currently £9.6m of the 7.75% 2023 debenture stock is outstanding following the re-purchase of £9.1m as part of the Tender Offer. Discount Following the successful Tender Offer the Board has now implemented a discount management policy. As at 31 December 2006 the discount to net asset value was 10.5% with the debenture valued at its repayment price in calculating the net asset value. The Board intends to seek annual share buy back authorities to repurchase shares, subject to its discretion and under normal market conditions, with a view to limiting to 5% the discount to net asset value where the debenture stock is valued at its repayment price. Earnings and dividend The revenue loss per ordinary share was 0.22 pence for the period compared to a revenue return of 0.22 pence for the six months ended 31 December 2005. As in previous years no interim dividend is payable. Warrants A total of 2,261 warrants were exercised and an equivalent number of ordinary shares issued on 1 October 2006. Marketing As part of the Manager's increased marketing activities at the time of the Tender Offer, a number of new shareholders bought shares in the Trust and a number of existing shareholders increased their investment. The Trust now has a more diversified and less concentrated shareholder base. The Board warmly welcomes all new shareholders and thanks all shareholders who increased their holdings. The high level of marketing activities will continue through 2007 with particular focus upon private client managers as well as institutional investors. The Board is encouraged that the Manager has now incentivised their sales force to sell investment trusts on a similar basis to their successful range of open ended investment companies. The Manager will also be increasing their efforts promoting their range of investment trusts to direct retail investors through their Share Plan and ISA/PEP plans. Further details about both of these products may be found online at www.sli.co.uk/its. Prospects The long term investment prospects for smaller companies remain attractive despite valuations being less compelling than they were a few years ago. The current valuation of smaller companies is fully justified by their superior growth prospects and the benign outlook for the economy. The Board is confident that shareholders will continue to benefit from the Manager's risk-controlled investment process that focuses on companies with proven business models Donald MacDonald Chairman 13 February 2007 INCOME STATEMENT Six months ended 31 December 2006 (unaudited) Revenue Capital Total £'000 £'000 £'000 Realised gains on investments - 15,588 15,588 Unrealised (losses)/gains on investments - (2,058) (2,058) Currency (losses)/gains - (3) (3) _________ _________ _________ Total capital gains on investments - 13,527 13,527 Income 1,027 - 1,027 Investment management fee (192) (192) (384) Tender Offer expenses (245) (245) (490) Other corporate expenses (328) - (328) Other administrative expenses (181) - (181) _________ _________ _________ Net return before finance costs and taxation 81 13,090 13,171 Premium on repayment of Debenture Stock - (3,355) (3,355) Finance costs (204) (198) (402) _________ _________ _________ Return on ordinary activities before taxation (123) 9,537 9,414 Taxation (3) - (3) _________ _________ _________ Return on ordinary activities after taxation (126) 9,537 9,411 _________ _________ _________ Return per Ordinary share (pence): (0.22) 16.39 16.17 _________ _________ _________ The total column of this statement represents the profit and loss account of the Company. The Company had no recognised gains or losses other than those recognised in the Income Statement. All revenue and capital items in the above statement derive from continuing operations. _______________________________________________________________________________________ Six months ended 31 December 20 (unaudited) Revenue Capital Total £'000 £'000 £'000 Realised gains on investments - 3,188 3,188 Unrealised (losses)/gains on investments - 8,189 8,189 Currency (losses)/gains - - - _________ _________ _________ Total capital gains on investments - 11,377 11,377 Income 806 - 806 Investment management fee (178) (178) (356) Tender Offer expenses - - - Other corporate expenses - - - Other administrative expenses (123) - (123) _________ _________ _________ Net return before finance costs and taxation 505 11,199 11,704 Premium on repayment of Debenture Stock - - - Finance costs (355) (355) (710) _________ _________ _________ Return on ordinary activities before taxation 150 10,844 10,994 Taxation - - - _________ _________ _________ Return on ordinary activities after taxation 150 10,844 10,994 _________ _________ _________ Return per Ordinary share (pence): 0.22 16.09 16.31 _________ _________ _________ _______________________________________________________________________________________ Year ended 30 June 2006 (audited) Revenue Capital Total £'000 £'000 £'000 Realised gains on investments - 7,885 7,885 Unrealised (losses)/gains on investments - 14,726 14,726 Currency (losses)/gains - 3 3 _________ _________ _________ Total capital gains on investments - 22,614 22,614 Income 1,808 - 1,808 Investment management fee (393) (393) (786) Tender Offer expenses - - - Other corporate expenses - - - Other administrative expenses (362) - (362) _________ _________ _________ Net return before finance costs and taxation 1,053 22,221 23,274 Premium on repayment of Debenture Stock - - - Finance costs (709) (709) (1,418) _________ _________ _________ Return on ordinary activities before taxation 344 21,512 21,856 Taxation (1) - (1) _________ _________ _________ Return on ordinary activities after taxation 343 21,512 21,855 _________ _________ _________ Return per Ordinary share (pence): 0.51 31.91 32.42 _________ _________ _________ _______________________________________________________________________________________ BALANCE SHEET As at As at As at 31 December 2006 31 December 2005 30 June 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Non-current assets Investments at fair value through profit or loss 55,795 78,817 82,393 _________ _________ _________ Current assets Debtors and prepayments 6,150 357 705 AAA Money Market funds 3,351 8,110 10,200 Cash and short term deposits 1,867 992 5,912 _________ _________ _________ 11,368 9,459 16,817 _________ _________ _________ Creditors: amounts falling due within one year Other creditors (7,127) (593) (681) _________ _________ _________ Net current assets 4,241 8,866 16,136 _________ _________ _________ Total assets less current liabilities 60,036 87,683 98,529 Creditors: amounts falling due after more than one year (9,908) (19,248) (19,233) _________ _________ _________ Net assets 50,128 68,435 79,296 _________ _________ _________ Capital and reserves Called-up share capital 8,694 16,851 16,851 Share premium account 58 56 56 Capital redemption reserve - 17,219 17,219 Warrant reserve 746 777 777 Special reserve 15,982 28,618 28,618 Capital reserve - realised 1,718 (14,009) (9,878) Capital reserve - unrealised 22,505 18,026 24,563 Revenue reserve 425 897 1,090 _________ _________ _________ Equity Shareholders' funds 50,128 68,435 79,296 _________ _________ _________ Net asset value per Ordinary share (pence): 144.89 102.34 118.43 _________ _________ _________ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Six months ended 31 December 2006 (unaudited) Share Capital Capital Capital Share premium redemption Warrant Special reserve reserve Revenue capital account reserve reserve reserve unrealised realised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 June 2006 16,851 56 17,219 777 28,618 24,563 (9,878) 1,090 79,296 Return on ordinary - - - - - (2,058) 11,595 (126) 9,411 activities after taxation Dividends paid - - - - - - - (539) (539) Exercise of Warrants 1 2 - (1) - - 1 - 3 Conversion of capital - - (17,219) - 17,219 - - - - redemption reserve Tender offer for purchase (8,158) - - (30) (29,855) - - - (38,043) of own shares (including Warrants) ______ ______ ______ ______ ______ ______ ______ ______ ______ Balance at 31 December 8,694 58 - 746 15,982 22,505 1,718 425 50,128 2006 ______ ______ ______ ______ ______ ______ ______ ______ ______ Six months ended 31 December 2005 (unaudited) Share Capital Capital Capital Share premium redemption Warrant Special reserve - reserve - Revenue capital account reserve reserve reserve unrealised realised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 June 2005 16,851 56 17,219 777 28,618 9,837 (16,664) 1,286 57,980 Return on ordinary - - - - - 8,189 2,655 150 10,994 activities after taxation Dividends paid - - - - - - - (539) (539) ______ ______ ______ ______ ______ ______ ______ ______ ______ Balance at 31 December 16,851 56 17,219 777 28,618 18,026 (14,009) 897 68,435 2005 ______ ______ ______ ______ ______ ______ ______ ______ ______ Year ended 30 June 2006 (audited) Share Capital Capital Capital Share premium redemption Warrant Special reserve - reserve - Revenue capital account reserve reserve reserve unrealised realised reserve Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Balance at 30 June 2005 16,851 56 17,219 777 28,618 9,837 (16,664) 1,286 57,980 Return on ordinary - - - - - 14,726 6,786 343 21,855 activities after taxation Dividends paid - - - - - - - (539) (539) ______ ______ ______ ______ ______ ______ ______ ______ ______ Balance at 30 June 2006 16,851 56 17,219 777 28,618 24,563 (9,878) 1,090 79,296 ______ ______ ______ ______ ______ ______ ______ ______ ______ CASHFLOW STATEMENT Six months ended Six months ended Year ended 31 December 31 December 30 June 2006 2005 2006 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net return on ordinary activities before finance costs 13,171 11,704 23,274 and taxation Adjustment for: Gains on investments (13,530) (11,377) (22,611) Currency losses/(gains) 3 - (3) Increase in accrued income (82) (8) (345) Decrease in other debtors 9 13 - Increase/(decrease) in creditors 211 (2) 88 Overseas withholding tax suffered (3) - - _____________ _____________ _____________ Net cash (outflow)/inflow from operating activities (221) 330 403 Servicing of finance (849) (725) (1,449) Net cash inflow/(outflow) from financial investment 41,163 (6,787) 871 Equity dividends paid (539) (539) (539) _____________ _____________ _____________ Net cash inflow/(outflow) before management of liquid 39,554 (7,721) (714) resources and financing Net cash inflow from management of liquid resources 6,849 - (2,090) _____________ _____________ _____________ Net cash inflow/(outflow) before financing 46,403 (7,721) (2,804) Net cash outflow from financing (50,447) - - _____________ _____________ _____________ Decrease in cash (4,044) (7,721) (2,804) _____________ _____________ _____________ Reconciliation of net cash flow to movements in net debt Decrease in cash as above (4,044) (7,721) (2,804) Net change in liquid resources (6,849) - 2,090 Repayment of Debentures 9,052 - - Other non-cash movements 272 16 34 _____________ _____________ _____________ Movement in net debt in the period (1,569) (7,705) (680) Net debt at 1 July 2006 (3,121) (2,441) (2,441) _____________ _____________ _____________ Net debt at 31 December 2006 (4,690) (10,146) (3,121) _____________ _____________ _____________ Represented by: Cash and short term deposits 1,867 992 5,912 AAA Money Market funds 3,351 8,110 10,200 Debt falling due after more than one year (9,908) (19,248) (19,233) _____________ _____________ _____________ (4,690) (10,146) (3,121) _____________ _____________ _____________ NOTES: 1. Accounting policies (a) Basis of accounting The financial statements have been prepared under the historical cost convention, as modified to include the revaluation of investments and in accordance with applicable UK Accounting Standards and consistent with the Statement of Recommended Practice ('SORP') for 'Financial Statements of Investment Trust Companies' (December 2005). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements and the net asset value per share figures have been prepared in accordance with UK Generally Accepted Accounting Practice ('UK GAAP'). The interim accounts have been prepared using the same accounting policies as the preceding annual accounts. (b) Dividends payable Interim and final dividends are recognised in the period in which they are paid. 2. Tender Offer During the period there was a Tender Offer for the Ordinary shares and Warrants of the Company, resulting in 48.4% (32,629,217) of the Ordinary Shareholders and 3.9% (117,791) of the Warrantholders electing to receive cash. As a result, 48.4% of the assets of the Company were allocated to a 'Tender Pool' which was subsequently liquidated and distributed to Ordinary Shareholders and Warrantholders who had elected for the cash option, after repayment of 48.4% of the Debenture Stock and payment of the full scheme costs. Ordinary Shareholders received 115.9513p per share tendered and Warrantholders received 16.5938p per Warrant tendered. Advisory costs of £490,000 were wholly attributable to the Tender Offer. These costs have been split 50/50 between revenue and capital in line with the Company's treatment of management fees and finance costs. 3. Financial information The financial information in this report comprises non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 30 June 2006 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified under Section 235 of the Companies Act 1985. The interim accounts have been prepared using the same accounting policies as the preceding annual accounts. 4 Interim Report The Interim Report will be posted to shareholders in February 2007 and additional copies will be available from the Secretary and from the Manager, Standard Life Investments (www.sli.co.uk/its) or telephone 0845 60 24 247). For Edinburgh Small Companies Trust plc Edinburgh Fund Managers plc, Secretary END This information is provided by RNS The company news service from the London Stock Exchange

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