EDINBURGH Small Companies Trust achieved spectacular growth during the year to June 30, helped by good stock selection and the use of borrowed funds to improve returns in a rising market.
Net asset value per share rose 34.7% to 131.25p, streaking ahead of a 19.6% gain in the trust's benchmark, the Hoare Govett Smaller Companies Index.
It also beat a 25.6% gain seen in the FTSE All-Share Index.
The trust celebrated by tripling the full-year dividend to 0.75p per share from 0.25p previously.
Edinburgh Fund Managers claims that Edinburgh Small Companies performed better than any of the other 33
UK smaller companies investment trusts over the 12-month period.
This was partly because
its returns were enhanced by investing borrowed money during a period of rapidly rising prices on the London Stock Exchange. Its gearing averaged 17% during the course of the year.
But the trust's strong exposure to fast-growing technology companies and buoyant media stocks also helped.
Its single largest holding, London Bridge Software, which accounts for just under 5% of the portfolio, was a star performer.
Other key investments
which did well were stockbroker Brewin Dolphin, shopping centre operator Freeport Leisure, and Electronic Boutique, a computer games developer, which returned to the black after a difficult period.
The trust has been hammered in recent weeks
by a downturn in the stock market.
The discount on its share price has widened to 18% of net asset value from 15.7% at the end of June.
But fund manager Alex Gowans said that Edinburgh Smaller Companies planned
to retain a high level of gearing, even though this
would exaggerate investment losses inflicted by the falling
market.
''We think it's a short
term sell-off and, with
nothing fundamentally
wrong with the UK economy, we see prices moving ahead over the medium to long term,'' he said.
Edinburgh Small Companies raised #14m
from the sale of debenture stock on June 30 to increase its borrowings, but gearing
of the investment portfolio
is capped at 20% of shareholder funds.
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