2 June 2004

The Scottish Investment Trust PLC
Results for the six months to 30 April 2004

The Scottish Investment Trust PLC

Results for the six months to 30 April 2004

The Scottish Investment Trust invests internationally and is independently managed. Its objectives are to achieve, over the long term, asset growth in excess of the trust's stated composite benchmark index and dividend growth ahead of inflation.

Commenting on the results, Chairman, Douglas McDougall said:-

"Over the six months to end April 2004, global equity markets continued the recovery from the lows of March 2003, albeit at a more modest pace than over the previous six months. Our net asset value per ordinary unit (NAV) rose 3.3% during the period. The benchmark index rose 4.1%. Our listed equity portfolio was modestly behind the index reflecting the continued strength in more speculative recovery stocks early in the period. However, since end January when the portfolio was reorganised following the change in manager, underlying investment performance has improved and has been ahead of benchmark.

"The recovery in stock markets over the last 15 months reflects the strong rebound in the US economy and corporate profits around the world.

"Boosted by cost cutting in recent years, profit margins of US companies have responded impressively to the improving economic background and appear likely to have reached cyclical highs. Globally, profitability has been recovering for around 18 months and is also high by the standards of past cycles.

"Against a background of subdued inflation, the US Federal Reserve has maintained an aggressive interest rate policy in order to give the US economy as much scope as possible for the recovery to become sustainable. Recent indications that the recovery has moved into a self-sustaining phase have been met with sharply higher interest rate expectations in the US. Fears that inflation is now about to reappear are being compounded by continued strength in oil prices which are in turn being driven by strong demand and tensions in the Middle East.

"Interest rates are being increased in the UK where growth remains steady despite economic imbalances, among which house prices and consumer debt levels feature large. Continental Europe remains a relative laggard and growth expectations for 2003 and 2004 have been revised down continually. While growth in Japan has been modest, it has at least exceeded expectations having benefited from Chinese demand. In the short term, there are risks that China may overheat and there have been recent policy measures there to temper growth. Longer term, this part of the world is likely to achieve above average growth.

"Over the period, we lowered our effective gearing from 116.0% to 113.6% reflecting the belief that, after the strong recovery since March 2003, value within world markets was becoming less apparent. Equity holdings in the UK were reduced by £22.9m and in the US by £15.4m, while additions were made in Continental Europe and Asia. Holdings in Europe ex-UK and Pacific ex-Japan outperformed local benchmarks and the US holdings, while underperforming, have picked up well following the portfolio restructuring. The UK holdings were slightly behind the local benchmark while the performance in Japan was poor reflecting a low exposure to domestic and financial companies.

"Our income is ahead of last year. During the period, income from our US holdings and the significant proportion of our UK holdings which now pay dividends in dollars came under pressure owing to the weakness of the dollar. However, dividend income from our portfolio was boosted by extremely strong dividend growth from US holdings where dividend payout ratios are being increased in response to tax changes. Expenses were lower than last year and earnings per ordinary unit increased 6.1% to 4.67p (2003 4.40p).

"In January, the company declared an interim dividend of 3.90p per ordinary unit (2003 2.60p) in respect of the current financial year to 31 October 2004. The interim dividend was paid in March in order to create a final opportunity for SIT PEP & ISA holders and charities to reclaim tax on that dividend prior to the abolition of this facility. The interim was increased to reduce the disparity with the final dividend and the board anticipates that the full year's dividend will be not less than the total of 7.80p paid last year.

"In March, we announced the appointment of Dresdner Kleinwort Wasserstein to act as joint broker to the company alongside Bell Lawrie White.

"At the AGM, stockholders voted to renew the board's authority to buy back up to 14.99% of outstanding ordinary units. Since the last year end, we have bought back 1.4m units at a discount to NAV and this has had a small positive effect on performance. The board will continue to use this authority from time to time for the benefit of stockholders.

"With borrowings on the balance sheet of £222.7m, our potential equity gearing stands at 131.1% of stockholders' funds. This is some way above our current effective gearing level of 112.5% and our strategic ceiling of 120.0%. The board is reviewing the level of potential gearing.

"After 30 years with the company, Ian McLeish retired as manager with effect from 31 December 2003 and has been replaced by John Kennedy. Two other senior members of the investment team also retired during the period and we are pleased to have secured the services of two experienced investment managers from outside the company.

"Along with these significant changes to the investment personnel, the board has formally reviewed the management and strategy of the company. A consequence of the review is that, with effect from the end of January 2004, the manager and his team have been running the reorganised investment portfolio as a co-ordinated single global portfolio, applying a consistent investment process across the regions."

Notes:

SIT's benchmark index is made up of 50% FTSE Actuaries UK All Share Index™ and 50% FTSE World ex UK Index Series™.

For further information, please contact:-

John Kennedy, Manager
0131-225 7781

NOTES:-

The interim statement has been prepared under accounting policies consistent with those used in the preparation of the annual report and accounts for the year to 31 October 2003.

The figures for 31 October 2003 have been extracted from the annual report and accounts for the year ended on that date which have been filed with the Registrar of Companies and which contain an unqualified report from the auditors.

The interim dividend absorbed £8,148,000 (2003 - £5,468,000) and was paid on 31 March 2004.

Equity stockholders' funds at 30 April 2004 exclude all revenue items for the current financial year.

Equity investments include the unlisted portfolio of £46.2m. Of this £7.2m is in listed funds which invest in unlisted securities.

The weighted average number of ordinary stock units during the half-year was 209,533,698 (2003 – 210,676,719) and this figure has been used to calculate the return per ordinary stock unit shown in the statement of total return. The net asset value per ordinary stock unit at 30 April 2004 has been calculated using the number of ordinary stock units outstanding on that date which was 208,910,518 (31 October 2003 – 210,304,399).

Unless otherwise stated, performance comparisons in the Chairman's Review are made with the FTSE Actuaries All Share Index™ for the UK and with the relevant currency adjusted constituents of the FTSE World ex UK Index Series™ for other geographical areas.