Annual report and Accounts an

RNS Number : 3290K

Edinburgh Worldwide Inv Trust PLC

17 December 2008

 

Regulatory Announcement

EDINBURGH WORLDWIDE INVESTMENT TRUST PLC ('the Company')

ANNUAL REPORT AND ACCOUNTS AND PROPOSED NEW ARTICLES OF ASSOCIATION

Copies of the Annual Report and Accounts for the year ended 31 October 2008 and the proposed new articles of association of the Company have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at:

Financial Services Authority
25 The North Colonnade
Canary Wharf
London
E14 5HS

Tel: [phone]

The Annual Report and Accounts for the year ended 31 October 2008 is also available on the Baillie Gifford website at:

http://www.bailliegifford.com/documents/68369_Edinburgh_Worldwide_Annual_Report_October_2008.pdf

At the annual general meeting to be held on 26 January 2009, it is proposed that new articles of association be adopted in order to update the Company's existing articles of association to take account of changes in UK company law brought about by the implementation of the Companies Act 2006. A summary of the proposed changes to the existing articles of association is set out in the Appendix to the Notice of Annual General Meeting within the Annual Report and Accounts for the year ended 31 October 2008. The new articles of association are available for inspection at the offices of Dickson Minto WS, Royal London House, 22-25 Finsbury Square, London EC2A 1DX and at the offices of Baillie Gifford & Co, Calton Square, 1 Greenside Row, Edinburgh EH1 3AN.

The unedited full text of those parts of the Annual Report and Accounts for the year ended 
31 October 2008 which require to be published by DTR 4.1 is set out on the following pages. 

Baillie Gifford & Co

Company Secretaries

17 December 2008

CHAIRMAN'S STATEMENT

Performance

The Board's strategy continues to be for the Managers to select shares globally, unconstrained by the requirement to match any benchmark, with a concentrated portfolio of approximately 40 equity holdings. Over the past financial year net asset value per share and the share price declined by 43.6% and 47.3% respectively, compared to a 29.0% fall in the MSCI All Countries World Index (in sterling terms). This reflects the extremely difficult conditions experienced in markets during this period especially in the closing months. Having undertaken a thorough review of the portfolio, the Managers and Board are of the opinion that the fundamental investment case for each holding remains valid and portfolio performance should improve once market conditions normalise.

If, however, performance is assessed over the longer period of five years, the net asset value per share has increased by 5.6% and the share price by 8.0% compared to 6.3% growth in the MSCI All Countries World Index (in sterling terms). Due to the portfolio's concentration, its gearing and its lack of resemblance to a benchmark there will, as pointed out in my statement last year, be periods when the portfolio underperforms the index. We are at such a point now and this has been exacerbated by the exceptional conditions experienced at the end of the financial year. Although this is very disappointing, the Board is still firmly convinced of the long term merits of the investment approach.  

During the year the borrowings were refinanced with a monthly revolving 364 day multi-currency loan facility, details of which are in the Managers' Overview.

Having narrowed during the year along with similar trusts, the discount widened towards the end of the period to close at 18.0%. The Managers have a clear brief to attract new buyers.

Performance Fee

The Managers have not earned a performance fee this year. In line with the agreement, underperformance will have to be recouped before any further performance fees are earned. Details of the fee arrangement are shown in the Related Party Transactions section.

Earnings and Dividend

Although shares are not chosen for the income that they may generate, the past year has seen dividend growth from the underlying holdings. This, combined with a rebate from HMRC for VAT suffered in previous years, means that the net revenue return per share has increased to 3.48p (2.63p last year). As long term capital growth remains your Company's objective, an unchanged final dividend of 1.50p is being proposed. In addition, a special dividend of 0.70p is being proposed, bringing the total for the year to 2.70p (2.00p last year), as the Board expects that the high level of current income may not recur.

The Company's registrars operate a Dividend Reinvestment Plan which can be used to buy additional shares. 

VAT

Since the European Court of Justice ruled that investment trust management fees should be exempt from VAT, the Company has recovered £257,000 from HMRC plus interest of £22,000. This represents the amount of irrecoverable VAT written off in the period since Baillie Gifford & Co became Managers in 2003. I believe that this is a fair outcome for shareholders. Further information is given in note 4.

Investment Background and Outlook

The past year has witnessed the stark reality of what can go wrong if the easy availability of credit is not controlled and government expenditure kept in check. Many developed economies are in, or are entering, a period of recession with governments supporting the reconstruction of financial and banking systems and also cutting interest rates. How long or deep the recession may be is a matter of opinion. Against this backdrop Middle and Far Eastern sovereign wealth funds and individuals have become the suppliers of capital and China and India continue to grow, albeit at a reduced rate. The scale of the financial crisis has been immense and the ultimate impact is still not yet known.  

While the downturn in all markets and the depreciation of sterling is severe it will not be a surprise if 2008 becomes viewed as the year the global economic balance shifted from the old world order to the new economic powers, notably China, but also India and Brazil. The long term consequences of government bail-outs on currencies and bond markets will be felt for many years. However, whilst many companies around the globe will struggle to survive, there will be those that emerge stronger, more profitable and with a greater market share than at present. Being able to identify the winners is the key focus of the Managers. An overview provided by the Managers follows this statement. 

AGM

The Annual General Meeting of the Company will be held at Baillie Gifford's offices in Edinburgh at 12 noon on Monday 26 January. The Company will once again be seeking to renew its share buyback and treasury share powers. Approval is also being sought to replace the existing Articles of Association with new articles which reflect the changes in law brought about by the implementation of the Companies Act 2006. Mark Urquhart, the partner at Baillie Gifford who manages your portfolio, will make a presentation and answer any questions.  

I hope that you will be able to attend.

David A Coltman

MANAGERS' OVERVIEW

Our aim in managing Edinburgh Worldwide has remained consistent in the five years in which Baillie Gifford has had the honour to manage this Trust, namely to run a concentrated portfolio of companies which have good growth prospects for the long term. As reported in the Chairman's Statement, the last year has proven to be by far the most difficult for the Trust in terms of performance as the fallout from the credit crunch has had large effects on equity markets globally. It is particularly disappointing to see the returns over five years fall back toward the benchmark in such a short space of time, but we think it is very important not to change strategy in a knee-jerk fashion in response to what has been one of the most extraordinary periods of equity returns on record. 

Indeed much of the Trust's underperformance during the last twelve months came in a very concentrated six week period from mid-September to the end of October. The market became very concerned after the demise of Lehman Brothers about many participants in the Western financial system to such an extent that most governments have had to either nationalise or bail-out the vast majority of their banks. That these weeks have seen some very unusual moves can be evidenced in several ways - the average move in the closing half hour on the Dow Jones index during October 2008 was in excess of 450 points (roughly 4-5% of the index value); there have been many anecdotal stories of forced selling as hedge funds and others face large redemptions; the VIX index of volatility has reached many new highs during the period. We do not think any sensible long term judgment on performance should be made at such periods of extreme asset price volatility. 

Undoubtedly, we have been surprised by the scale of the falls in equity markets and disappointed by the performance of some holdings which we thought would prove more resilient given their operational performance. What started as bad lending in Anglo-Saxon housing markets has become an endemic failure of the Western financial system with total write-offs fast approaching an incredible $1trn, requiring government intervention on an unprecedented scale. The virtual closure of credit markets for much of this period has exacerbated the problems by removing a vital source of funding for companies, although the recent evidence is that these markets are slowly reopening helped by the co-ordinated interest rate cuts which we have seen globally. Whilst we have had very little direct exposure to the Western consumer or banking system, the concomitant falls in commodity markets and anxiety over the severity and duration of the global slowdown has had a large effect on several of our larger holdings as shown in the performance table. 

It is our strong belief that the markets have hugely over-reacted to the short-run events of this autumn in terms of the long term outlook for these companies - Petrobras continues to find an abundance of oil in its pre-salt fields which is commercial well below $50 per barrel; Gazprom continues to increase supply to Western Europe and benefit from increasing domestic prices; ABB has seen no order cancellations for its power transmission equipment and the rhetoric of President-Elect Barack Obama suggests we should expect an acceleration of spending on alternative energy rather than a decrease. We are confident in the financial strength of our companies and do not believe that any face short term funding pressures. It is precisely at times of market stress that one can profit from a long term view as Warren Buffett often says: 'Be greedy when others are fearful and fearful when others are greedy' and we have been selectively adding to the companies referred to above in recent weeks. 

Over the last twelve months, the number of equity holdings has decreased slightly from 40 to 37. We aim to keep portfolio turnover close to 20% - this year's figure was higher at 39.9% as the very volatile market movements afforded more opportunities than normal. New holdings during the year were Banco Santander which we think is a winner in the financial turmoil - it has not suffered the same sub-prime write-offs as rivals and is deploying its balance sheet to make some interesting acquisitions at times of stress; Pinault-Printemps, where we think a very weak share price offers a good long term opportunity to gain exposure to brands such as Gucci and Bottega Veneta; Monsanto, which we feel is very well positioned in terms of its seed business and again where the share price had been weak; Apple, where we feel the iPhone can match and exceed the success of the iPod; and China Mobile, which is the world's largest telecom company and continues to add around 7m customers per month. 

We sold our shares in Pulte Homes and Wolseley early in the period as we were worried the housing markets in the US and the UK would deteriorate further; made sales of Infosys and Omnicom, on worries over the macro backdrop and their business models; Progressive Corp and Moody's, where we worry future rates of growth will be below those achieved in the past; Carnival, where the demand backdrop in both the US and Europe is deteriorating rapidly; and, latterly, some more defensive holdings such as Essilor and Genentech to fund some of the additions referred to above. 

Borrowings at the year end were substantially higher than twelve months ago at 25.6% versus 16.3% of shareholders' funds - the figure has risen as the markets have fallen, and is at a level we are comfortable with given where valuations now sit. However in absolute terms the amount the Trust has borrowed has declined. The loans were refinanced in July with borrowings of around £30m being drawn down from a monthly revolving 364 day multi-currency loan facility, which offered interest rates considerably below loans of longer duration at that juncture. The facility was drawn down equally in US dollars, Swiss francs and Yen. Shortly before the year end we repaid the US dollar borrowings and we continue to monitor closely the gearing level. 

The last twelve months have represented an unprecedented period for global equity markets such that it has felt, at times, that many participants have assumed the world will never grow again. Lest one get too depressed it is worth remembering that the reactions of the authorities have also been unprecedented both in terms of their size and also their alacrity. Whilst some of the long term effects on government finances and currencies will undoubtedly be large, there is no repeat of the lack of reaction seen both in the US in the 1930s or Japan in the 1990s. It is very important that China has joined in the policy stimulus measure given its importance to the global economy and we believe that recent events will hasten changes in the shape of the distribution of global GDP more in line with where the wealth and savings reside. Whilst chastened by the scale of some share price moves in recent months, we are trying hard not to react to the short term noise of markets other than to exploit opportunities. We are optimistic that the premium the market will afford for genuine growth in more difficult times will be reflected in our portfolio over future years which should lead to improved performance. 

PORTFOLIO AND EQUITY PERFORMANCE at 31 October 2008
Name	Business	Fair value £'000	% of total assets	Performance†		Fair value 2007 £'000
				Absolute %	Relative %
Equities
Petrobras*	Oil exploration and production	6,453	6.1	(26.8)	0.3	11,013
Atlas Copco*	Industrial compressors and    mining equipment	5,174	4.9	(35.5)	(11.6)	7,340
Canon*	Printers, copiers and cameras	4,448	4.2	(10.5)	22.6	5,082
Porsche*	Luxury automobiles	4,192	4.0	(56.8)	(40.8)	9,739
Amazon.com	Online retailer	4,179	3.9	(17.5)	13.1	5,060
Nintendo	Video consoles and games	4,121	3.9	(22.0)**	(2.7)**	-
Gazprom*	Gas exploration and production	4,037	3.8	(47.9)	(28.6)	6,707
Vale (or CVRD)	Mining	3,938	3.7	(50.8)	(32.6)	13,146
L'Oréal	Personal care	3,491	3.3	(24.8)	3.1	2,841
Google	Web-based search engine	3,461	3.3	(31.8)**	(9.4)**	-
SAP*	Business software	3,019	2.9	(15.8)	15.4	6,014
Teva Pharmaceuticals*	Generic drugs manufacturer	2,851	2.7	24.8	71.0	4,661
Deere	Farm and construction machinery	2,780	2.6	(36.0)	(12.3)	2,673
Sandvik	Tools and mining equipment	2,735	2.6	(55.0)	(38.4)	6,636
China Mobile	Cellular telecommunications and    related services	2,700	2.6	(29.3)**	(11.8)**	-
Banco Santander	Retail and commercial bank	2,680	2.5	(30.0)**	(23.7)**	-
Apple	Computing and media equipment	2,576	2.4	(24.2)**	(6.2)**	-
UBS	Investment bank	2,564	2.4	(46.8)**	(31.2)**	-
Iron Mountain	Information storage	2,507	2.4	(10.1)	23.2	2,785
ABB	Engineering conglomerate	2,445	2.3	(36.3)**	(24.8)**	-
Walgreen*	Pharmacy chain	2,376	2.2	(16.9)	13.9	1,989
Straumann	Dental implants	2,329	2.2	(21.9)	7.1	3,261
Lukoil*	Oil exploration and production	2,251	2.1	(45.1)	(24.7)	4,213
First Solar	Thin film solar modules	2,139	2.0	(9.8)**	8.9**	-
eBay	Internet auction	2,080	2.0	(45.5)	(25.3)	5,275
Monsanto	Agricultural biotechnology	2,046	1.9	(5.1)**	11.8**	-
VCA Antech	Animal hospitals and veterinary    diagnostics	2,021	1.9	(49.5)	(30.70)	3,993
Novozymes	Enzyme manufacturer	1,947	1.8	(16.2)	14.9	2,350
Q-cells	Solar cell production	1,872	1.8	(61.1)	(46.7)	2,239
Housing Development    Finance Corporation	Indian mortgage provider	1,832	1.7	(34.4)	(10.1)	5,092
Vestas Windsystems	Wind turbines	1,731	1.6	(41.4)	(19.7)	2,948
Zhejiang Expressway	Chinese toll-road operator	1,680	1.6	(56.2)	(40.0)	4,056
Whole Foods Market	Organic food chain	1,645	1.6	(71.9)	(61.5)	3,302
Pool	Swimming pool supplies	1,613	1.5	(3.2)	32.7	1,700
PPR	Luxury brand conglomerate	1,571	1.5	(34.8)**	(22.1)**	-
Hermès*	Luxury goods	1,544	1.5	26.7	73.6	2,970
Banco Itau	Brazilian bank	1,417	1.3	(36.0)	(12.3)	4,634
		102,445	96.7

PORTFOLIO AND EQUITY PERFORMANCE

at 31 October 2008 

 (Ctd)

Name	Business		Fair value £'000	% of total assets	Performance†		Fair value 2007 £'000
					Absolute %	Relative %
Fixed Interest
US$ denominated bond
Bay Haven CFRN 2009/10	Catastrophe bond		1,857	1.8			1,444
Total Investments			104,302	98.5
Net Liquid Assets			1,554	1.5
Total Assets at Fair Value (before deduction of loan)			105,856	100.0

† Absolute and relative performance has been calculated on a total return basis over the period 1 November 

  2007 to 31 October 2008.  

  Absolute performance is in sterling terms; relative performance is against MSCI All Countries World Index in  

  sterling terms.

* Held since November 2003 when Baillie Gifford & Co were appointed as Investment Managers and  

  Secretaries to the Company.

** Figures relate to part-period returns.

Source: Baillie Gifford & Co, StatPro

Past performance is not a guide to future performance.

DISTRIBUTION OF ASSETS

		At 31 October 2008   %					At 31 October 2007 %
Equities:	United Kingdom	-				1.1
	Continental Europe	35.3				30.2
	North America	27.7				26.2
	Japan	8.1				2.9
	Asia Pacific	4.2				6.0
	Emerging Markets	21.4				30.7
Total equities		96.7				97.1
US$ denominated bonds		1.8				0.8
Net current assets		1.5				2.1
Total assets (before deduction of loan)		100.0				100.0

RELATED PARTY TRANSACTIONS

The Directors' fees for the year are detailed in the Directors' Remuneration Report. No Director has a contract of service with the Company. During the year no Director was interested in any contract or other matter requiring disclosure under section 232 of the Companies Act 1985. Baillie Gifford & Co were employed as Managers and Secretaries with effect from 1 November 2003. The management agreement is terminable on not less than three months notice. The fee in respect of each quarter is 0.2% of the market value of the Company on each valuation date. In addition, Baillie Gifford are entitled to a performance fee, calculated annually in arrears. The performance fee is based on any out-performance of the net asset value per share by comparison to the MSCI All Countries World Index (in sterling terms) and is calculated as a percentage of the market value of the Company. The fee is 5% of the out-performance between zero and 2%, and 10% of the out-performance thereafter. A relative high water mark with neither cap nor collar will apply.

The details of the management fee are shown in note 3.

In addition to the investment management fee, the Company also pays a secretarial fee to Baillie Gifford which is adjusted annually in line with the Retail Price Index. The secretarial fee for the year was £69,000 (2007 - £66,000).

PRINCIPAL RISKS AND UNCERTAINTIES

The Company's assets consist mainly of listed securities and its principal risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk.

The Board monitors closely the Company's exposures to these risks but does so in order to reduce the likelihood of a permanent loss of capital rather than to minimise the short term volatility.

Further information on these risks and how they are managed is contained in the Annual Report.

Other risks faced by the Company include the following:

Regulatory risk - failure to comply with the applicable legal and regulatory requirements could lead to suspension of the Company's Stock Exchange Listing, financial penalties or a qualified audit report. Breach of section 842 of the Income and Corporation Taxes Act 1988 could lead to the Company being subject to tax on capital gains. Baillie Gifford's Heads of Business Risk & Internal Audit and Regulatory Risk provide regular reports to the Audit Committee on Baillie Gifford's monitoring programmes. The Managers monitor investment movements and the level of forecast income and expenditure to ensure the provisions of section 842 are not breached.

Operational/financial Risk - failure of the Managers' accounting systems or those of other third party service providers could lead to an inability to provide accurate reporting and monitoring or a misappropriation of assets. The Board reviews the Managers' Report on Internal Controls and the reports by other key third party providers are reviewed by the Manager on behalf of the Board.

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards (UK Generally Accepted Accounting Practice).

The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing those financial statements, the Directors are required to: 

• select suitable accounting policies and then apply them consistently; 

• make judgements and estimates that are reasonable and prudent; 

• state whether they comply with applicable UK accounting standards, subject to any material departures disclosed and explained in the financial statements; and 

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business in which case there should be supporting assumptions or qualifications as necessary. 

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

• the Annual Report includes a fair view of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

By order of the Board 
DAVID COLTMAN
9 December 2008

INCOME STATEMENT

	For the year ended 31 October 2008				For the year ended 31 October 2007
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on investments	-	(58,483)	(58,483)		-	25,424	25,424
Currency (losses)/gains	-	(6,389)	(6,389)		-	1,732	1,732
Income (note 2)	3,280	-	3,280		2,827	-	2,827
Investment management fee (note 3)	(215)	(645)	(860)		(252)	(1,479)	(1,731)
Recovered VAT (note 4)	75	182	257		-	-	-
Other administrative expenses	(429)	-	(429)		(415)	-	(415)
Net return before finance costs and taxation	2,711	(65,335)	(62,624)		2,160	25,677	27,837
Finance costs of borrowings	(316)	(954)	(1,270)		(352)	(1,057)	(1,409)
Net return on ordinary activities before taxation	2,395	(66,289)	(63,894)		1,808	24,620	26,428
Tax on ordinary activities	(690)	513	(177)		(521)	344	(177)
Net return on ordinary activities after taxation	1,705	(65,776)	(64,071)		1,287	24,964	26,251
Net return per ordinary share (note 6)	3.48p	(134.22p)	(130.74p)		2.63p	50.94p	53.57p

The total column of this statement is the profit and loss account of the Company.

All revenue and capital items in this statement derive from continuing operations. No operations were acquired or discontinued during the year.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above statement.

BALANCE SHEET

		At 31 October 2008		At 31 October 2007
		£'000		£'000
FIXED ASSETS Investments held at fair value through profit or loss		104,302		170,032
CURRENT ASSETS
Debtors		371		1,067
Cash and short term deposits		1,449		4,646
		1,820		5,713
CREDITORS
Amounts falling due within one year (note 7)		(21,866)		(26,438)
NET CURRENT LIABILITIES		(20,046)		(20,725)
TOTAL NET ASSETS		84,256		149,307
CAPITAL AND RESERVES
Called-up share capital		2,450		2,450
Share premium		82,180		82,180
Special reserve		35,220		35,220
Capital reserve - realised		(35,928)		(35,187)
Capital reserve - unrealised		(2,012)		63,023
Revenue reserve		2,346		1,621
EQUITY SHAREHOLDERS' FUNDS		84,256		149,307
NET ASSET VALUE PER ORDINARY SHARE		171.94p		304.68p
ORDINARY SHARES IN ISSUE (note 8)		49,004,319		49,004,319

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 October 2008

	Called-up share capital £'000	Share premium £'000	Special reserve £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 November 2007	2,450	82,180	35,220	(35,187)	63,023	1,621	149,307
Transfer between reserves*	-	-	-	58,697	(58,697)	-	-
Net return on ordinary activities after taxation	-	-	-	(59,438)	(6,338)	1,705	(64,071)
Dividends paid during the year (note 5)	-	-	-	-	-	(980)	(980)
Shareholders' funds at 31 October 2008	2,450	82,180	35,220	(35,928)	(2,012)	2,346	84,256

• With effect from 1 November 2007, changes in fair value of investments which are readily convertible to cash without accepting adverse terms at the balance sheet date are included in realised, rather than unrealised, capital reserves. The balances on both reserves at 1 November 2007 have been amended by a reserve transfer to reflect this change.

For the year ended 31 October 2007

	Called-up share capital £'000	Share premium £'000	Special reserve £'000	Capital reserve - realised £'000	Capital reserve - unrealised £'000	Revenue reserve £'000	Equity shareholders' funds £'000
Shareholders' funds at 1 November 2006	2,450	82,180	35,220	(34,132)	37,004	1,314	124,036
Net return on ordinary activities after taxation	-	-	-	(1,055)	26,019	1,287	26,251
Dividends paid during the year (note 5)	-	-	-	-	-	(980)	(980)
Shareholders' funds at 31 October 2007	2,450	82,180	35,220	(35,187)	63,023	1,621	149,307

CASH FLOW STATEMENT
	For the year ended 31 October 2008			For the year ended 31 October 2007
	£'000	£'000			£'000	£'000
NET CASH INFLOW FROM OPERATING ACTIVITIES (note 9)		1,359				1,319
SERVICING OF FINANCE
Interest paid	(1,669)				(1,439)
NET CASH OUTFLOW FROM SERVICING OF FINANCE		(1,669)				(1,439)
TAXATION
Overseas tax incurred	(169)				(175)
TOTAL TAX PAID		(169)				(175)
FINANCIAL INVESTMENT
Acquisitions of investments	(47,992)				(22,536)
Disposals of investments	55,369				24,527
Realised currency gain/(loss)	1,514				(4)
NET CASH INFLOW FROM FINANCIAL INVESTMENT		8,891				1,987
EQUITY DIVIDENDS PAID (note 5)		(980)				(980)
FINANCING
Bank loans repaid	(132,700)				-
Bank loans drawn down	122,071				-
NET CASH OUTFLOW FROM FINANCING		(10,629)				-
(DECREASE)/INCREASE IN CASH		(3,197)				712
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(Decrease)/increase in cash in the period		(3,197)				712
Net cash outflow from bank loans		10,629				-
Exchange movement on bank loans		(7,903)				1,736
MOVEMENT IN NET DEBT IN THE YEAR		(471)				2,448
NET DEBT AT 1 NOVEMBER		(19,680)				(22,128)
NET DEBT AT 31 OCTOBER		(20,151)				(19,680)

NOTES

 

 

1.	The financial information within this announcement has been extracted from the audited financial statements for the year to 31 October 2008 which have been prepared on the basis of the accounting policies set out in the Company’s Annual Financial Statements at 31 October 2007.   The Directors consider the Company’s functional currency to be sterling as the Company’s shareholders are predominantly based in the UK and the Company is subject to the UK’s regulatory environment.
								2008						2007
								£’000						£’000
2.	Income
	Income from investments and interest receivable							3,260						2,827
	Other income							20						-
								3,280						2,827
			2008								2007
		Revenue		Capital			Total				Revenue			Capital				Total
		£’000		£’000			£’000				£’000			£’000				£’000
3.	Investment Management Fee
	Investment management fee	215		645			860				244			731				975
	Investment performance fee	-		-			-				-			723				723
	Unrecovered VAT thereon	-		-			-				8			25				33
		215		645			860				252			1,479				1,731
4.	VAT Recovered
	In 2007 the European Court of Justice ruled that investment trust management fees should be exempt from VAT. Since then HMRC has accepted the Managers’ repayment claims for the periods from 2003 to 2007. £257,000 of VAT together with £22,000 of interest was received by the Managers on behalf of the Company in respect of these periods. These amounts have been paid to the Company and recognised in the current year. The VAT recovered has been allocated to revenue and capital on the same basis as the VAT expense was originally charged. The related interest has been allocated to revenue in with guidance from the AIC.   Discussions are ongoing with Aberdeen Asset Management regarding the recovery of VAT suffered over the period to 2003. The amount and timing of any recovery remains uncertain and accordingly no amount has been provided for in the financial statements.
			2008			2007					2008 £’000						2007 £’000
5.	Ordinary dividends
	Amounts recognised as distributions in the period:
	Previous year’s final (paid 11 February 2008)		1.50p			1.50p					735						735
	Interim (paid 10 July 2008)		0.50p			0.50p					245						245
			2.00p			2.00p					980						980
	We also set out below the total dividends paid and proposed in respect of the financial year, which is the basis on which the requirements of section 842 of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £1,705,000 (2007 - £1,287,000).

NOTES

(Ctd)

 

		2008		2007			2008 £’000				2007 £’000
5.	Ordinary dividends (Ctd)
	Dividends paid and proposed in the period:
	Interim dividend per ordinary share (paid 10 July 2008)	0.50p		0.50p			245				245
	Proposed final dividend per ordinary share (payable 2 February 2009)	1.50p		1.50p			735				735
		2.00p		2.00p			980				980
	Proposed special dividend per ordinary share# (payable 2 February 2009)	0.70p		-			343				-
		2.70p		2.00p			1,323				980
	# The special dividend of 0.70p is proposed as the high level of income received during the year may not recur.   If approved the final and special dividends will be paid on 2 February 2009 to all shareholders on the register at the close of business on 9 January 2009. The ex-dividend date is 7 January 2009.
					2008				2007
					£’000				£’000
6.	Net return per ordinary share
	Revenue return				3.48p				2.63p
	Capital return				(134.22p)				50.94p
	Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of £1,705,000 (2007 - £1,287,000), and on 49,004,319 ordinary shares, being the number of ordinary shares in issue during each year.   Capital return per ordinary share is based on the net capital loss for the financial year of £65,776,000 (2007 – gain of £24,964,000), and on 49,004,319 ordinary shares, being the number of ordinary shares in issue during each year.   There are no dilutive or potentially dilutive shares in issue.
7.	Creditors include CHF18,200,000 and ¥1,900,000,000 drawn down under a multi-currency loan facility with The Royal Bank of Scotland plc (2007 – US$31,250,000, ¥1,313,200,000 and £3,800,000 with ING Bank N.V.).
8.	At the Annual General Meeting on 7 February 2008 the Company renewed its authority to purchase shares in the market, in respect of 7,345,747 ordinary shares (equivalent to 14.99% of its issued share capital at that date). No shares were bought back during the year to 31 October 2008 or 2007. At 31 October 2008 the Company had authority to buy back 7,345,747 ordinary shares.

		2008		2007
		£’000		£’000
9.	Reconciliation of net return before finance costs and taxation to net cash inflow from operating activities
	Net return on ordinary activities before finance costs and taxation	(62,624)		27,837
	Losses/(gains) on investments	58,483		(25,424)
	Currency losses/(gains)	6,389		(1,732)
	Amortisation of fixed income book cost	-		15
	Other non cash movements	(138)		-
	Decrease/(increase) in accrued income	49		(126)
	Decrease in debtors	35		64
	(Decrease)/increase in creditors	(835)		685
	Net cash inflow from operating activities	1,359		1,319
10.	The financial information set out above does not constitute the Company’s statutory accounts for the year ended 31 October 2008. The financial information for 2007 is derived from the statutory accounts for 2007 which have been delivered to the Registrar of Companies. The Auditors have reported on the 2007 accounts, their report was unqualified and did not contain a statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2008 will be delivered to the Registrar of Companies following the Company’s Annual General Meeting.
11.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

 

 

END

 

 

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