Interim Results
Edinburgh Worldwide Inv Trust PLC
14 June 2005
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Results for the six months to 30 April 2005
Over a period when markets were relatively flat, Edinburgh Worldwide's net asset
value rose per share rose by 1.8% while the share price increased by 2.2%. The
Company is optimistic about the outlook, especially over the longer term. The
investments held offer the prospect of continued growth in profits while current
equity market valuation levels are reasonable by historic standards.
• The approach taken in managing the investments is to concentrate on holding
a limited number of companies based on their individual merits rather than
paying attention to the composition of indices and benchmark weightings.
The portfolio is relatively concentrated (43 equity holdings) while the
turnover rate of equity holdings remained relatively low (10.7% in the
period). While short term performance against the Benchmark is not a
meaningful indicator, over this six months the MSCI All Countries World
Index rose by 0.8%.
• Amongst changes made to the portfolio were the sales of Vodafone, Tiffany
and three insurance companies Jardine Lloyd Thomson, TopDanmark and Mitsui
Sumitomo where the Managers had concerns about outlook and competitive
position. Purchases included: the Indian mortgage bank HDFC; Whole Foods
Market the world's largest organic food retailer (Texas based) and two
other US companies, VCA Antech, a provider of animal hospitals and
diagnostic systems and Amazon.com, the global internet retailer.
• The interim dividend per share of 0.50p is unchanged.
• Mark Urquhart, the Manager commented: 'whilst markets have been a little
disappointing given decent profit growth, I take the view that this
provides attractive valuations for our long-term horizon.'
• At 10 June 2005 the discount of the share price to net asset value stood at
13.1% as opposed to 18.2% at 30 April 2005.
Edinburgh Worldwide aims to achieve long term capital growth by investing in
stock markets throughout the world. The Trust has total assets of £111.5
million (before deduction of loans of £26.7 million).
Edinburgh Worldwide is managed by Baillie Gifford & Co., the Edinburgh based
fund management group with around £34 billion under management and advice.
- ends -
For further information please contact:
Mark Urquhart, Manager,
Edinburgh Worldwide Investment Trust plc 0131 275 2070
Robert O'Riordan, Marketing Manager,
Baillie Gifford & Co 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Interim Report
Global equity markets have not made much progress over the last six months with
a rally between October and February largely offset by declines in March and
April. The net asset value rose by 1.8% over the period which compares to a 0.8%
rise in the MSCI All Countries World Index over the same period. The share
price rose by 2.2% to 141.5p representing a discount of 18.2% to the net asset
value at 30 April 2005. At the beginning of the period the discount was standing
at 18.4%. +
The Directors have declared an interim dividend of 0.50p per share, unchanged
from last year. The interim dividend will be paid on 7 July 2005 to shareholders
on the register on 24 June 2005. The final dividend was partially paid out of
reserves last year and the Directors will consider this year's payment over the
remainder of the financial year.
Portfolio
The portfolio has been relatively stable since October 2004 with equity turnover
of 10.7% in the six months to April 2005 and our aim is to of keep annual
turnover below 20%. It remains concentrated with 43 equity holdings at the end
of the period. This is the same number of holdings as when Baillie Gifford
reorganised the portfolio in November 2003 and 30 holdings have been held
continuously since then. We have continued to make some occasional additions to
stocks when we feel that the market is affording us an opportunity - Canon and
SAP are examples in the period under consideration.
The portfolio is run without reference to any index with the Managers seeking
long-term growth opportunities regardless of where the company is listed. This
approach is reflected in the new purchases made over the last six months which
range from the world's largest organic food retailer - Whole Foods Market which
is headquartered in Texas - to an Indian mortgage bank - Mumbai-based HDFC. For
both of these companies we are optimistic about the long-term growth prospects
and confident that these will lead to good returns for shareholders. We have
also taken a holding in VCA Antech - a provider of animal hospitals and
diagnostics and Amazon.com - the internet retailer where we think the market is
mistakenly worrying about the short-term costs of building an attractive
long-term franchise.
These purchases were funded by sales of Vodafone where we are worried about
long-term commoditisation of mobile telephony; Tiffany & Co where we over-egged
the competitive advantages of their little blue boxes; and three insurance
companies - Jardine Lloyd Thomson where we fear broking is not as good a
business as we had thought and TopDanmark and Mitsui Sumitomo who are both
successful general insurers where we are worried about moves into life
insurance.
As we pay little attention to sector or country weightings in constructing the
portfolio, we continue to be comfortable having no holdings in traditional
pharmaceuticals although we do hold Teva - the Israeli generic drug
manufacturer. With the sale of Vodafone, we also have no telecoms holdings but
this is in no way a position of principle - if we found an attractive telecom
company we would buy it.
+ Past performance is no guarantee of future performance.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Interim Report (Continued)
Outlook
Profit growth has continued to be satisfactory over the last six months and we
have been pleased with the operational performance of most of the companies in
the portfolio. It is somewhat puzzling therefore that markets have been
essentially flat. In our view, this has stemmed from a combination of recent
worries on future earnings prospects including rising inflationary pressures
from oil and commodity input prices; a slowdown in economic growth in the US
with potential knock-on effects to other economies; and, for the really
pessimistic, a combination of rising inflation and slowing growth in the form of
the return of stagflation.
Our view is that some rises in inflation are manageable given low starting
levels and that there are still very strong disinflationary forces at work in
the world as more production moves to Asia - a process we are currently seeing
graphically illustrated in apparel after the lifting of quotas at the start of
the year. We think that as the market vacillates between the global growth glass
being half full or half empty, that in fact nothing much has changed in the last
six months and we are optimistic that companies which display good growth will
be rewarded in share price terms. Whilst markets have been a little
disappointing given decent profit growth, we take the view that this provides
more attractive valuations for our long-term investment horizon rather than
worry unduly about the vagaries of share prices over a six month period.
With prospects for continued profit growth for EWIT's stocks combined with
reasonable valuations, the Manager is optimistic about the prospects for share
price appreciation within the portfolio as reflected in the Company having 119%
of equity shareholders' funds invested in equities at 30 April 2005.
By order of the Board
Baillie Gifford & Co
13 June 2005
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
The following is the interim statement for the six months ended 30 April 2005
which has been neither reviewed nor audited by the auditors. This statement is
being printed and will be sent to all shareholders on 22 June 2005. Copies will
be available for inspection at the Registered Office of the Company or may be
obtained on request from the Managers and Secretaries after that date.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
STATEMENT OF TOTAL RETURN
(unaudited and incorporating the revenue account*)
for the six months ended for the six months ended for the year ended
30 April 2005 30 April 2004 31 October 2004
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised losses on - (327) (327) - (2,301) (2,301) - (3,087) (3,087)
investments
Unrealised gains on - 1,371 1,371 - 4,247 4,247 - 7,474 7,474
investments
Currency gains - 880 880 - 270 270 - 790 790
Income (note 4) 1,188 - 1,188 1,120 - 1,120 1,940 - 1,940
Investment management fee (80) (240) (320) (76) (229) (305) (145) (469) (614)
Other administrative (168) - (168) (211) - (211) (368) - (368)
expenses
Net return before finance
costs and taxation 940 1,684 2,624 833 1,987 2,820 1,427 4,708 6,135
Finance costs of (185) (556) (741) (190) (570) (760) (381) (1,149) (1,530)
borrowings
Return on ordinary
activities before
taxation 755 1,128 1,883 643 1,417 2,060 1,046 3,559 4,605
Tax on ordinary (173) 84 (89) (116) 72 (44) (177) 89 (88)
activities
Return on ordinary
activities after taxation 582 1,212 1,794 527 1,489 2,016 869 3,648 4,517
Dividends in respect of
equity shares (245) - (245) (245) - (245) (1,078) - (1,078)
Transfer to/(from) 337 1,212 1,549 282 1,489 1,771 (209) 3,648 3,439
reserves
Return per ordinary share
(note 5) 1.19p 2.47p 3.66p 1.07p 3.04p 4.11p 1.77p 7.45p 9.22p
Dividend per ordinary
share (note 6) 0.50p 0.50p 2.20p
* The revenue 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.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
SUMMARISED BALANCE SHEET
at 30 April 2005
(unaudited)
30 April 30 April 31 October
2005 2004 2004
£'000 £'000 £'000
FIXED ASSETS
Investments 111,147 109,309 111,356
CURRENT ASSETS
Debtors 1,328 657 1,094
Cash and short term deposits 617 627 547
1,945 1,284 1,641
CREDITORS
Amounts falling due within one year (1,635) (937) (2,201)
NET CURRENT ASSETS/(LIABILITIES) 310 347 (560)
TOTAL ASSETS (before deduction of loan) 111,457 109,656 110,796
Loan (note 2) (26,716) (28,132) (27,604)
84,741 81,524 83,192
CAPITAL AND RESERVES
Called-up share capital 2,450 2,450 2,450
Capital reserves 81,337 77,966 80,125
Revenue reserve 954 1,108 617
EQUITY SHAREHOLDERS' FUNDS 84,741 81,524 83,192
NET ASSET VALUE PER ORDINARY SHARE 172.9p 166.4p 169.8p
Ordinary shares in issue (note 3) 49,004,319 49,004,319 49,004,319
DISTRIBUTION OF ASSETS
at 30 April 2005
(unaudited)
30 April 30 April 31 October 2004
2005 2004 %
% %
Equities: United Kingdom 10.1 14.8 13.8
Continental Europe 19.3 20.5 21.0
North America 35.3 28.7 31.2
Japan 4.0 6.4 5.7
Asia Pacific 8.9 7.0 6.9
Other Emerging Markets 12.5 11.9 11.8
Total equities 90.1 89.3 90.4
Sterling denominated bonds 1.3 1.3 1.3
US$ denominated bonds 5.6 6.3 6.0
Yen denominated bonds 2.7 2.8 2.8
Net liquid assets/(liabilities) 0.3 0.3 (0.5)
Total assets (before deduction of loan) 100.0 100.0 100.0
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 April 30 April 31 October
2005 2004 2004
£'000 £'000 £'000
Net cash inflow from operating activities 610 348 1,092
Net cash outflow from servicing of finance (760) (785) (1,556)
Total tax paid (89) (47) (95)
Net cash inflow/(outflow) from financial 1,142 (22,105) (21,865)
investment
Equity dividends paid (833) (833) (1,078)
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID
RESOURCES 70 (23,422) (23,502)
Net cash inflow from use of liquid resources - 21,409 21,409
INCREASE/(DECREASE) IN CASH 70 (2,013) (2,093)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET
DEBT
Increase/(decrease) in cash in the period 70 (2,013) (2,093)
Decrease in short term investments - (21,409) (21,409)
Exchange movement 888 270 798
MOVEMENT IN NET DEBT IN THE PERIOD 958 (23,152) (22,704)
Net debt at start of the period (27,057) (4,353) (4,353)
NET DEBT AT END OF THE PERIOD (26,099) (27,505) (27,057)
RECONCILIATION OF NET REVENUE BEFORE FINANCE COSTS
AND TAXATION TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
Net revenue before finance costs and taxation 940 833 1,427
Management fees charged to capital (240) (229) (469)
Amortisation of fixed income book cost 88 - 156
Change in debtors and creditors (178) (256) (22)
NET CASH INFLOW FROM OPERATING ACTIVITIES 610 348 1,092
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE
at 30 April 2005
(unaudited)
Market % of Performance+
value total
Name Business £'000 assets Absolute Relative
Moody's Rating agency 4,590 4.1 1.4 (0.6)
Golden West Financial Savings and loans 4,463 4.0 2.5 0.4
Atlas Copco Engineering 3,488 3.1 8.1 5.9
Samsung Electronics Electronics manufacturer 3,361 3.0 11.9 9.7
Imperial Tobacco Tobacco 3,229 2.9 20.5 18.1
Canon Copiers and cameras 3,167 2.8 2.3 0.3
Lukoil Oil exploration and production 3,025 2.7 2.3 0.3
Teva Pharmaceuticals Generic drugs manufacturer 2,944 2.6 15.4 13.1
Porsche Luxury automobiles 2,897 2.6 (1.6) (3.5)
Gazprom Gas production 2,756 2.5 (13.4) (15.1)
CVRD Iron ore miner 2,697 2.4 24.3 21.8
Microsoft PC and server software 2,648 2.4 (5.1) (7.0)
Progressive Non-prime auto insurance 2,633 2.4 (6.3) (8.2)
CNOOC Oil and gas exploration 2,616 2.3 1.2 (0.8)
Petrobras Oil and gas exploration 2,518 2.2 14.7 12.4
SAP Business software 2,468 2.2 (11.2) (13.0)
Ericsson Telecommunications equipment 2,414 2.2 (1.7) (3.7)
M & T Bank Commercial and consumer bank 2,372 2.1 (3.0) (4.9)
Walgreen Pharmacy chain 2,349 2.1 15.1 12.8
Wolseley Housing materials 2,334 2.1 12.3 10.0
BMW Automobiles 2,300 2.1 (4.0) (5.9)
Whole Foods Market Organic food retailer 2,244 2.0 9.8* 7.7*
William Wrigley Chewing gum manufacturer 2,229 2.0 2.1 0.1
BHP Billiton Diversified resources 2,191 2.0 16.6 14.3
Wellpoint Managed care operator 2,097 1.9 18.2* 15.9*
Zhejiang Expressway Chinese toll-road operator 2,024 1.8 1.2 (0.8)
Wal-Mart Discount retailer 2,016 1.8 (15.7) (17.4)
Patterson Companies Dental, vetinary and rehabilitation 1,985 1.8 29.3 26.8
supplies
Housing Development Housing finance in India 1,971 1.8 (11.0)* (12.7)*
Finance Corporation
VCA Antech Pet hospitals and diagnostics 1,950 1.7 25.2* 22.8*
Omnicom Advertising agency 1,869 1.7 1.3 (0.7)
McCarthy & Stone Retirement home builder 1,838 1.6 (4.1) (6.0)
Banco Popular Espanol Commercial bank 1,742 1.6 7.3 5.2
Sandvik Engineering 1,713 1.5 0.3 (1.7)
Taylor Nelson Sofres Market research 1,640 1.5 (4.8) (6.6)
Hermes Luxury goods 1,576 1.4 (4.9) (6.8)
Amazon.com Internet retailer 1,521 1.4 (17.2)* (18.9)*
Mohawk Industries Carpet wholesaler 1,519 1.4 (12.3) (14.0)
L'Oreal Personal care products 1,473 1.3 1.3 (0.7)
Carnival Cruise ship operator 1,472 1.3 (6.7) (8.6)
ABB Power generation and automation 1,426 1.3 3.3 1.2
equipment
Iron Mountain Document and electronic storage 1,400 1.3 (13.8) (15.5)
Arisawa Manufacturing Electronic materials 1,316 1.2 (24.3) (25.8)
Total Equity Investments 100,481 90.1
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE (Continued)
at 30 April 2005
(unaudited)
Market % of total Performance+
value assets
Name Business £'000 Absolute Relative
Total Equity Investments (brought forward) 100,481 90.1
Fixed Interest
Sterling denominated bonds 1,431 1.3
US$ denominated bonds 6,194 5.6
Yen denominated bonds 3,041 2.7
Total Fixed Interest 10,666 9.6
Total Investments 111,147 99.7
Net Liquid Assets 310 0.3
Total Assets at Market Value (before deduction of loan) 111,457 100.0
+ Absolute and relative performance has been calculated over the period 29
October 2004 to 29 April 2005. Absolute performance is in sterling terms;
relative performance is against MSCI All Countries World Index in sterling
terms.
* Figures relate to part-period returns relating to the holding period of the
relevant stock.
Past performance is no guarantee of future performance.
(Source: Baillie Gifford & Co, StatPro)
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
NOTES
1. The financial statements for the six months to 30 April 2005 have been
prepared on the basis of the accounting policies set out in the Company's
Annual Financial Statements at 31 October 2004.
The Interim Report was approved by the Board on 13 June 2005.
None of the views expressed in this document should be construed as advice
to buy or sell a particular investment.
2. The loan includes US$31.25 million, Y1,313.2 million and £3.8 million drawn
down under a multi-currency loan facility with ING Bank N.V. (31 October
2004 and 30 April 2004 - US$31.25 million, Y1,313.2 million and £3.8
million). The loan is due for repayment in July 2008.
3. On 29 January 1999 authority was first granted to the Company to buy back
its ordinary shares (equivalent to 14.99% of its issued share capital at
that date). The authority has been renewed at each subsequent AGM and was
last renewed at the AGM on 31 January 2005 in respect of 7,345,747 ordinary
shares (equivalent to 14.99% of its issued share capital at that date). In
the six months to 30 April 2005 no ordinary shares were bought back
therefore the Company's authority remains unchanged at 7,345,747 ordinary
shares.
30 April 30 April 31 October
2005 2004 2004
£'000 £'000 £'000
4. Income
Income from investments and interest receivable 1,188 1,120 1,940
5. Return per ordinary share
Revenue return 582 527 869
Capital return 1,212 1,489 3,648
Return per ordinary share is based on the above totals of revenue and
capital and on 49,004,319 ordinary shares, being the number of ordinary
shares in issue during each period.
6. The interim dividend will be paid on 7 July 2005 to all shareholders on the
register at the close of business on 24 June 2005. The ex dividend date is
22 June 2005.
7. The financial information contained within this interim report does not
constitute statutory accounts as defined in section 240 of the Companies
Act 1985. The financial information for the year ended 31 October 2004 has
been extracted from the statutory accounts which have been filed with the
Registrar of Companies and which contain an unqualified Auditors' Report
and do not contain a statement under sections 237 (2) or (3) of the
Companies Act 1985.
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