THE #98m Dunedin Smaller Companies Investment Trust yesterday became the latest fund in the Edinburgh Fund Managers stable to report much-improved results.

Dunedin Smaller has a fairly bleak long-term performance record and trailed its benchmark significantly in its last financial year.

But, in the six months to April 30, it finally showed the benefits of a radical restructuring which began two years ago under new manager Andy Bamford and involved more than half of the portfolio being turned over.

This entailed a general move towards more sizeable stocks within the smaller companies sector and an increase in service sector stocks at the expense of some of the industrials on which Dunedin Smaller had been focused.

The trust, which had shareholders' funds of #83.1m and gearing of #14.8m at the halfway point, achieved an 18.2% rise in net asset value to 493.54p during its first six months.

Its benchmark, the FTSE Small Cap Index (excluding investment trusts), was up only 13.8%.

Dunedin Smaller was adrift of the 21.6% rise in the UK's All-Share Index, reflecting the continued surge in larger capitalisation stocks.

The much better-than-benchmark results from Dunedin Smaller follow hard on the heels of index-beating annual figures last week from Edinburgh Fund Managers' flagship, the #1847m Edinburgh Investment Trust.

Dunedin Smaller's star stocks included information technology group Triad, holiday company First Choice, support services provider Amey, recruitment company PSD, and Britt Allcroft, which received a fillip by extending its merchandising and television rights to children's favourite Thomas The Tank Engine.

Takeover activity benefited holdings, including distributor Spandex, outdoor advertising group More, printer Watmoughs, and Siebe target Eurotherm.

But Bamford pointed out that Dunedin Smaller's advance had been broadly based and, referring to the bid activity, added: ''I wouldn't necessarily say that was the reason we were so far ahead of the benchmark. It was one of the factors that helped.''

Dunedin Smaller's gearing, which enhances performance in times of rising stock markets, was another.

The trust issued #15m of debenture stock last May and Bamford highlighted the possibility of it gearing up further.

Dunedin Smaller is raising its interim dividend by 17% to 3.5p.

Bamford said Dunedin Smaller's outperformance had continued this month.

Its net asset value had risen by 8.6%, compared with a 5.1% advance by its benchmark.

He highlighted the beneficial impact on smaller companies of sterling having weakened from its highs and added that small-caps were ''reasonably fairly valued''.

Although aware of the damage which could be done to smaller companies if the broader stock market encountered another downward correction, Bamford added: ''We are obviously pretty fully geared at the moment, so we are not anticipating it just at the present time.''

Shares in Dunedin Smaller added 5.5p to 457.5p yesterday and are trading at a discount of about 15% to underlying net asset value.