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Secs.Tst of Scot. (STS)

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Monday 18 April, 2005

Secs.Tst of Scot.

Response to PIGIT Offer

Securities Trust of Scotland PLC
18 April 2005


Securities Trust of Scotland plc

Response to the Revised PIGIT Offer announcement

The Board of Securities Trust of Scotland plc ('Securities Trust') announces
today that it intends to post to Shareholders a circular detailing its response
to the revised Offer announcement made by Perpetual Income and Growth Investment
Trust plc ('PIGIT') on 8 April 2005.

Chairman-designate, Neil Donaldson said

'We are committed to achieving the best possible result for our Shareholders and
for no one else. For Shareholders who value income, New Securities Trust will
seek to protect their income and give them the opportunity for income growth,
whereas the Revised PIGIT Offer would force them to accept up to a 35% cut in
income. Alternatively, Shareholders can choose Lowland, which has a better track
record than PIGIT. If Shareholders want cash, we are quite simply offering more.
Our Proposals are better for Shareholders and we therefore can do nothing other
than advise our Shareholders to reject the Revised PIGIT Offer.'


The Board initially wrote to Shareholders on 23 March 2005 to set out the
reasons why the Board was unanimously recommending to Shareholders that:

•        PIGIT's hostile Offer should be rejected; and

•        Shareholders should support the Board's Proposals, which offer better
value, more choice, the option of higher income and the option of a better
performing investment trust than PIGIT.

The Board of Securities Trust has considered carefully the terms of the Revised
PIGIT Offer and has concluded that the Revised PIGIT Offer is not in the best
interests of Shareholders as a whole. The Board remains strongly of the view
that its Proposals are superior and better for Shareholders.


Response to the Revised PIGIT Offer

The Board has concluded that the Revised PIGIT Offer:

  • Does not offer as much choice as the Board's Proposals.
  • Does not offer the choice of shares in a successor to Securities Trust,
    which aims to provide an increase in annual income for Shareholders and
    substantially more income than under the Revised PIGIT Offer.
  • Does not offer the choice of investing in shares in Lowland, the best
    performing trust in the UK Growth and Income sector over the previous three
    and five years with a better record of performance and dividend growth, and
    a better rating, than PIGIT over those periods.
  • Does not offer a full cash alternative at 100% of FAV, which the Board's
    Proposals do. The value of the cash alternative is greater under the Board's
    Proposals than under the Revised PIGIT Offer.

Furthermore, the Revised PIGIT Offer:

  • Would result in a reduction in income of up to 34.8% for Securities Trust
  • Introduces subscription securities ('warrants'), which risk diluting the
    future net asset value of PIGIT if exercised.
  • Uses, for calculation purposes, share prices and discount levels that have
    arisen as a result of short term market considerations in connection with
    the Offer rather than using average discounts taken over the longer term.
  • Introduces a degree of undue complexity and uncertainty for Securities
    Trust Shareholders both in terms of implementation and valuation.

The Board reiterates its unanimous recommendation to Shareholders to support the
Board's Proposals and to reject the Revised PIGIT Offer.

Rebuttal of the Revised PIGIT Offer

Regrettably PIGIT continues to make a number of incorrect and unsubstantiated

PIGIT claims that your Board                         The Board included all the relevant costs in the
                                                     figures that it presented to Shareholders in the
did not include all relevant costs                   Previous Circular.

PIGIT claims that the PIGIT Revised                  PIGIT illustrated the value of the Revised

Offer has greater value                              PIGIT Offer on the basis of share prices

                                                     which have been influenced by market

                                                     activity surrounding the Offer. The Board believes a
                                                     fairer basis for assessment would have been to use
                                                     average discounts taken over the longer term.

PIGIT claims that the Securities Trust               At all times the Board has acted solely in what it
                                                     considers to be the best interests of its
Board is not actively pursuing                       Shareholders. The Board has already explained why it
                                                     chose not to pursue the detailed discussions it had
the best possible outcome for its                    with PIGIT last summer. First, the PIGIT proposals,
                                                     then as now, would have resulted in a significant
Shareholders                                         reduction in income for Shareholders; second,
                                                     Securities Trust was, and is, a very different
                                                     investment proposition to PIGIT with a different
                                                     return profile; third, Securities Trust was in the
                                                     process of conducting a strategic review with the
                                                     aim of enhancing returns for Shareholders; and
                                                     fourth, and perhaps most importantly, if the
                                                     Securities Trust Board had wished to pursue such an
                                                     option as the one PIGIT was offering, then it would
                                                     not have been correct to engage only with PIGIT, but
                                                     instead to have considered the other options
                                                     available. Once PIGIT had made its hostile Offer
                                                     announcement, the Securities Trust Board was
                                                     approached by a large number of parties with
                                                     proposals. The Board reviewed all these options -
                                                     and other alternatives (including the PIGIT Offer) -
                                                     before concluding that it should include Lowland in
                                                     a reconstruction scheme, which gives Securities
                                                     Trust Shareholders a better range of options and
                                                     better value than under the PIGIT Offer.

Comparison of costs

PIGIT has revised its financial terms under the Offer, and may have confused
Securities Trust Shareholders in its comparison of the value of the Revised
PIGIT Offer with the value of the Board's Proposals.

For the avoidance of doubt:

Portfolio reorganisation costs                       If PIGIT's advisers had read page 22 of the Previous
                                                     Circular, they would have known that the Board's
                                                     Proposals specifically do not include estimates of
                                                     the cost of reorganising the investment portfolio.
                                                     This is because these costs are dependent upon the
                                                     outcome of Shareholder elections. However, given the
                                                     nature of the investment portfolio, these costs are
                                                     likely to be small, and will be minimised to the
                                                     extent that existing securities are transferred by
                                                     the Company to both New Securities Trust and Lowland
                                                     in accordance with elections. Such securities do not
                                                     need to be sold, and will be transferred at
                                                     mid-market prices. Any stamp duty which would arise
                                                     on securities being transferred to Lowland will be
                                                     payable by Lowland (as for any other investment made
                                                     by Lowland in the ordinary course of business).

Liquidators' retention                               The Board included a quotation provided
                                                     by potential liquidators for the liquidators'
                                                     retention within its estimate of the costs
                                                     associated with its Proposals.

Cost of Lowland's participation                      If PIGIT's advisers had read page 21 of the Previous
                                                     Circular, they would have known that the terms of
                                                     Lowland's participation in the Board's Proposals are
                                                     clear and definitive. Securities Trust will pay to
                                                     Lowland no more than £250,000 as a contribution to
                                                     Lowland's costs. No further Lowland costs are
                                                     anticipated, but
                                                     any other costs for Lowland resulting from their
                                                     participation will be met by Henderson.

All other costs                                      All the costs associated with the launch of New
                                                     Securities Trust (for example listing fees and legal
                                                     fees) were accounted for in the Previous Circular.

Value comparison

If the illustrative calculations of the value of the Revised PIGIT Offer are
made using average discounts taken over the last 12 months, which the Board
believes to be a fairer basis for comparison, it is clear that the Board's
Proposals offer better value. The entitlements of a Shareholder as at 6 April
2005 on a  per Share basis would have been as follows:

The Board's Proposals                                Attributable Net                       Attributable
                                                      Asset Value (p)                   Market Value (p)

New Securities Trust                                           109.90                                N/A

Lowland                                                        108.38                             108.61

Cash                                                           109.57                             109.57

The Revised PIGIT Offer                              Attributable Net                       Attributable
                                                      Asset Value (p)                   Market Value (p)

PIGIT Shares                                                   110.08                            105.46*

Warrants                                                          N/A                             1.63**

Partial cash option                                            107.67                             107.67

* Takes no account of potential erosion of future net asset value growth.

** Uncertain value - the underwriting of the warrants is limited, and there may
be taxation implications. The figure is derived from the Revised PIGIT Offer

The figures shown are illustrative only, are calculated as at 6 April 2005
(being the date used in the Revised PIGIT Offer announcement), include the use
of average discounts over the last 12 months and do not constitute forecasts.
The figures resulting from the Proposals will depend on the net assets of the
Company at the time of implementation of the Proposals and the factors
identified in the assumptions in Part II of the circular to Shareholders dated
18 April 2005. These figures do not take into account an estimate of the costs
that may be incurred by the Company in reorganising its portfolio and realising


Undue complexity

PIGIT has tried to improve the terms of its revised Offer by offering Securities
Trust Shareholders PIGIT Shares together with a 'Subscription Security' - in
effect a warrant to be issued in the form of subscription shares ('Subscription
Shares' or 'warrants'). This adds undue complexity to the structure of the
Revised PIGIT Offer. Where such warrants are issued, the future net asset value
of PIGIT will be diluted as a result of any exercise of these warrants. Growth
of PIGIT's net asset value will therefore be held back by the exercise of these
warrants. PIGIT does not appear to have accounted for the negative effect of
this future dilution in its figures.

Shareholders should be aware that these 'Subscription Securities' will only be
in the form of Subscription Shares if the approval of PIGIT warrantholders is
obtained. If PIGIT warrantholder approval is not granted, the 'Subscription
Securities' will be issued as warrants. This means that there may be a tax
charge to recipients on the issue of the 'Subscription Securities', and that
they could not be held within an ISA and/or a PEP.


PIGIT is suggesting that the Revised PIGIT Offer can be implemented in advance
of your Board's Proposals. Shareholders should be in no doubt as to the Board's
determination to bring forward its Proposals as soon as possible. As the Board
has previously announced, it intends to publish its Proposals by 30 May 2005,
which would result in their implementation in late June. In any event, what
matters, in the Board's view, is the quality or otherwise of the Board's
Proposals compared with the Revised PIGIT Offer, not a difference of a few weeks
in implementation.


The Board, which has been so advised by JPMorgan Cazenove, remains convinced
that the best interests of Shareholders as a whole will be served by the
implementation of the Board's Proposals.  In providing advice to the Board,
JPMorgan Cazenove has taken into account the Board's commercial assessment of
the Revised PIGIT Offer and the Board's Proposals.

Accordingly, the Board continues to recommend unanimously to Shareholders that
they do not accept the Revised PIGIT Offer. The Directors intend not to accept
the Revised PIGIT Offer in respect of their own beneficial holdings of
Securities Trust Shares which, in aggregate, amount to 131,536 Securities Trust
Shares, representing approximately 0.043 per cent. of the existing share capital
of the Company.


Neil Donaldson / Anita Frew

Securities Trust of Scotland plc                        via 020 7353 4200

Angus Gordon Lennox
JPMorgan Cazenove Limited                               07768 503516

Kirstie Hamilton / Kate Inverarity

Tulchan Communications                                  020 7353 4200

JPMorgan Cazenove Limited is acting for Securities Trust in relation to the
matters referred to in this announcement and no one else and will not be
responsible to anyone other than Securities Trust for providing the protections
offered to clients of JPMorgan Cazenove Limited nor for providing advice in
relation to the matters referred to in this announcement.

JPMorgan Cazenove Limited of 20 Moorgate, London EC2R 6DA, which is authorised
and regulated in the United Kingdom by the Financial Services Authority, has
approved the contents of this announcement for the purposes of Section 21 of the
Financial Services and Markets Act 2000.



Board or Directors                       the directors of the Company from time to time

JPMorgan Cazenove                        JPMorgan Cazenove Limited

Lowland                                  Lowland Investment Company plc

Martin Currie                            Martin Currie Investment Management Limited

New Securities Trust                     a new investment trust to be managed by Martin Currie which will be established
                                         as a successor vehicle to the Company under the Proposals

PIGIT                                    Perpetual Income and Growth Investment Trust plc

PIGIT Offer or Offer                     the formal offer made by Intelli Corporate Finance Limited on behalf of PIGIT  
                                         on 10 March 2005 for the entire issued and to be issued share capital of the   

Previous Circular                        the circular to Shareholders dated 23 March 2005

Proposals                                the Board's proposals as described in the circular dispatched to Shareholders  
                                         dated 23 March 2005

Revised PIGIT Offer                      the revised PIGIT Offer announced on 8 April 2005

Securities Trust or Company              Securities Trust of Scotland plc

Shareholders                             holders of shares in Securities Trust

US or the United States                  the United States of America, its territories and possessions, any state of the
                                         United States of America and the District of Columbia and all other areas      
                                         subject to the jurisdiction of the United States of America


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