Interim Results
The Edinburgh Investment Trust plc
Preliminary Announcement of Unaudited Interim Results for the six months ended
30 September 2006
(Past performance is not a guide to future returns. The value of investments
can go down as well as up.)
Chairman's Review
Highlights
NAV total return increase of 3.1% (debt marked to market) compared to an
increase in the FTSE All-Share Index (total return) of 1.7%
Share price increased by 1.4% compared to FTSE All-Share Index (capital only)
increase of 0.1%
Introduction of quarterly dividends
The UK Equity Market
The UK equity market moved sideways in the six month period ended 30 September
2006: the FTSE All-Share Index (`Index') rose by only 0.1%. This benign picture
obscures a sharp fall of virtually 10% in April/May, prompted primarily by
concerns of unexpected inflation, particularly in the US. As such fears abated,
the market recovered the ground lost in the previous six to eight weeks.
Performance
Against the neutral market background, your Company's performance was
satisfactory. On a capital only basis, the share price increased by 1.4%, and
Net Asset Value (`NAV') - debt marked to market - by 0.6%, both significantly
above the 0.1% Index return. Taking both capital and income (total return),
Index growth was 1.7%: the share price return was 4.3%, and NAV increased by
3.1%. Both stock selection and share buy-backs contributed to the relatively
strong NAV performance.
The half-year performance is a continuation of the steady trend seen over the
past few years. In the three years to 30 September 2006, NAV (capital only) has
increased by 51.9% and share price by 56.1% - both amounts greater than the
50.4% rise in the Index over the same period. The Company's first Investment
Objective - to achieve capital growth at a higher rate than the Index - has
thus been achieved both in the six months under review and for the longer three
year period.
Dividends
Shareholders will recall that following strong income performance, dividends,
which had been held static for the two previous years, were increased by 16% to
15.25 pence per share in respect of the year to 31 March 2006. The bulk of this
increase was applied to the final dividend, increasing the imbalance between
that and the interim payment which in 2005 was 4.4 pence per share. The Board
believes that the majority of shareholders would like to see dividends paid
more evenly over the year, and has decided to increase the number of payments
from two to four. Payments will henceforth be made in November, February and
May, with a fourth made in late July. For the current year, the first three
payments will be of 4.4 pence per share. The November 2006 ex-dividend date
will be 8 November and payment will be made on 24 November to shareholders on
the register on 10 November 2006. The July payment will be determined when the
final results are available. In the absence of unforeseen circumstances the
Board does not expect that this final payment will be less than the three
preceding ones. The total dividend paid in the current year will clearly be
substantially higher than last, and the Company will accordingly meet its
second Investment Objective to increase dividends at a rate above that of UK
inflation.
Repurchase of Shares
At the Annual General Meeting (`AGM') in July, shareholders renewed the Board's
powers to buy back, for cancellation, up to 14.99% of the outstanding equity.
Since then, the Company has used these powers to buy back about 15.3 million
shares, reducing the discount to NAV at which the Company's ordinary shares
trade, with the prime objective of enhancing NAV per share for remaining
shareholders. The Board will continue to buy back shares in the belief that it
is important that the Company's share price should move broadly in line with
underlying asset value
Gearing
The Board has continued carefully to monitor the position of the Company's two
Debenture stocks. Our position for the last few years has been that given the
relative rating of equities and bonds, it was not in shareholders' interests to
redeem debt at prevailing prices. Market trends have justified this stance,
which has been to the Company's advantage, and the Board continues to believe
that the fundamental argument for debt retention remains. As more equity is
repurchased, the Board recognises that another aspect of the Company's debt
position - the maximum potential gearing - becomes increasingly relevant and
may call for some debt repayment even at current prices to retain an
appropriate debt/equity balance.
Prospects
The Index recorded a five-year `high' shortly after the end of the period under
review. This reflects good growth in corporate earnings, expectations of
continuing merger and acquisition activity and belief in a benign global
economic environment. Given this background, and perceived fundamental value
relative both to its own historic levels and to global peers, the Board remains
optimistic about the outlook for the UK equity market.
Scott Dobbie
Chairman
30 October 2006
For further information, please contact:
Fidelity Investments International 01737 837844
Richard Miles 020 7961 4616
Charles Payne 020 7961 4477
Stephen Westwood
Issued by Fidelity Investments International. Authorised and regulated by the
Financial Services Authority.
CB28868
The Edinburgh Investment Trust plc
Income Statement for the six months ended 30 September
for the six months for the six months for the six months
ended ended ended
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
revenue capital total revenue capital total revenue capital total
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on - 5,683 5,683 - 124,156 124,156 - 246,317 246,317
investments
Income 2 25,143 - 25,143 21,679 - 21,679 44,057 - 44,057
Investment (615) (1,434) (2,049) (526) (1,226) (1,752) (1,099) (2,564) (3,663)
management
fee
Other (377) - (377) (339) - (339) (762) - (762)
expenses
Exchange 1 (41) (40) - 20 20 2 3 5
gains/
(losses)
Net return 24,152 4,208 28,360 20,814 122,950 143,764 42,198 243,756 285,954
before
finance
costs and
taxation
Interest (2,944) (6,870) (9,814) (2,944) (6,870) (9,814) (5,850) (13,651) (19,501)
payable
Net return/ 21,208 (2,662) 18,546 17,870 116,080 133,950 36,348 230,105 266,453
(loss) on
ordinary a
ctivities
before
taxation
Taxation on 3 (4) - (4) (65) - (65) (30) - (30)
ordinary
activities
Net return/ 21,204 (2,662) 18,542 17,805 116,080 133,885 36,318 230,105 266,423
(loss) on
ordinary
activities
after
taxation
for the
period
Return/ 5 9.19p (1.15p) 8.04p 7.46p 48.65p 56.11p 15.28p 96.80p 112.08p
(loss) per
ordinary s
hare
A Statement of Total Recognised Gains and Losses has not been prepared as there
are no gains and losses other than those reported in the Income Statement.
The total column on this statement is the profit and loss account of the
Company.
These financial statements have been prepared in accordance with the AIC
Statement of Recommended Practice ("SORP") issued in January 2003 and revised
in December 2005.
The Edinburgh Investment Trust plc
Reconciliation of Movements in Shareholders' Funds
called share capital capital capital revenue total
up premium redemption reserve reserve reserve equity
share account reserve realised unrealised
capital
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening 59,862 6,639 13,593 716,352 153,017 53,670 1,003,133
shareholders' funds
: 1 April 2005
Effect of changing - - - - (1,405) - (1,405)
prices from middle
market to bid
market at 1 April
2005
Net recognised - - - 152,451 93,869 - 246,320
gains for the year
Repurchase of (1,375) - 1,375 (21,758) - - (21,758)
shares
Management fee to - - - (2,564) - - (2,564)
capital
Debenture interest - - - (13,651) - - (13,651)
and amortised
expenses to capital
Revenue after - - - - - 36,318 36,318
taxation
Dividends paid - - - - - (31,789) (31,789)
Closing 58,487 6,639 14,968 830,830 245,481 58,199 1,214,604
shareholders'
funds: 31 March
2006
Net recognised - - - 54,567 (48,884) - 5,683
gains/(losses) for
the period
Exchange losses - - - - (41) - (41)
Repurchase of (2,877) - 2,877 (48,523) - - (48,523)
shares
Management fee to - - - (1,434) - - (1,434)
capital
Debenture interest - - - (6,870) - - (6,870)
and amortised
expenses to capital
Revenue after - - - - - 21,204 21,204
taxation
Dividend paid - - - - - (25,383) (25,383)
Closing 55,610 6,639 17,845 828,570 196,556 54,020 1,159,240
shareholders'
funds: 30 September
2006
Opening shareholders' 59,862 6,639 13,593 716,352 153,017 53,670 1,003,133
funds: 1 April 2005
Effect of changing - - - - (1,405) - (1,405)
prices from middle
market to bid market
at 1 April 2005
Net recognised gains - - - 33,953 91,628 - 125,581
for the period
Repurchase of shares (625) - 625 (8,840) - - (8,840)
Management fee to - - - (1,226) - - (1,226)
capital
Debenture interest and - - - (6,870) - - (6,870)
amortised expenses to
capital
Revenue after taxation - - - - - 17,805 17,805
Dividend paid - - - - - (21,363) (21,363)
Closing shareholders' 59,237 6,639 14,218 733,369 243,240 50,112 1,106,815
funds: 30 September
2005
The Edinburgh Investment Trust plc
Balance Sheet
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
Notes £'000 £'000 £'000
Fixed assets
Investments held at fair value 1,323,945 1,217,774 1,345,215
through profit or loss
Current assets
Debtors 11,350 7,043 22,348
Fidelity Institutional Cash Fund - 71,903 47,451
Amounts held at futures clearing 9 - 133 2,008
houses and brokers
Cash at bank 24,131 17,744 26,550
35,481 96,823 98,357
Creditors - amounts falling due (4,205) (12,052) (33,114)
within one year
Net current assets 31,276 84,771 65,243
Total assets less current liabilities 1,355,221 1,302,545 1,410,458
Creditors - amounts falling due after (195,981) (195,730) (195,854)
more than one year
Total net assets 1,159,240 1,106,815 1,214,604
Capital and reserves
Called up share capital 55,610 59,237 58,487
Other reserves 1,103,630 1,047,578 1,156,117
Total equity shareholders' funds 1,159,240 1,106,815 1,214,604
Net asset value per ordinary share 6 519.34p 465.31p 517.41p
The balance sheet as at 31 March 2006 has been extracted from the financial
statements for the year to 31 March 2006. These financial statements on which
the auditors gave an unqualified report have been delivered to the Registrar of
Companies.
The income statement and the balance sheet do not represent full accounts in
accordance with Section 240 of the Companies Act 1985.
The Edinburgh Investment Trust plc
Cash Flow Statement
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
£'000 £'000 £'000
Net return before finance costs 24,152 20,814 42,198
and taxation
Decrease/(increase) in debtors 4,927 4,084 (1,012)
(Decrease)/increase in (1,002) 512 728
creditors
Expenses charged to capital (1,434) (1,226) (2,564)
Overseas taxation paid (4) (65) (30)
Net cash inflow from operating 26,639 24,119 39,320
activities
Net cash outflow from servicing (9,625) (9,625) (19,250)
of finance
Net cash inflow from financial 5,642 1,558 4,175
investment
Equity dividend paid (25,383) (21,363) (31,789)
Net cash outflow before use of (2,727) (5,311) (7,544)
liquid resources and financing
Net cash inflow from management 47,451 8,157 32,609
of liquid resources
Net cash outflow from financing (49,151) (8,840) (20,362)
(Decrease)/increase in cash (4,427) (5,994) 4,703
Notes to the Financial Statements
1. Accounting policies
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Company's annual report and financial
statements dated 31 March 2006.
2. Income
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
£'000 £'000 £'000
Income from 23,904 19,489 39,776
investments
Interest receivable on 568 347 890
short term deposits
Interest receivable on 671 1,843 3,391
other securities
25,143 21,679 44,057
3. Taxation on return on ordinary activities
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
£'000 £'000 £'000
Overseas taxation 4 65 30
suffered
4. Dividends
A first interim dividend of 4.40 pence per share for the year to 31 March 2007
will be paid on 24 November 2006 to shareholders on the register on 10 November
2006. The ex-dividend date is 8 November 2006.
5. Return/(loss) per ordinary share
Basic returns per ordinary share are based on (i) the revenue on ordinary
activities after taxation in the period; (ii) the capital return in the period;
and (iii) the weighted average number of shares in issue during the period.
30.09.06 30.09.06 30.09.05 30.09.05 31.03.06 31.03.06
unaudited return unaudited return audited return
per per per
ordinary ordinary ordinary
share share share
£'000 £'000 £'000
Revenue 21,204 9.19p 17,805 7.46p 36,318 15.28p
return
Capital (2,662) (1.15p) 116,080 48.65p 230,105 96.80p
(loss)/return
Weighted 230,611,823 238,607,916 237,710,961
average
number of
shares
6. Net Asset Value per Share
Total equity shareholders' funds have been calculated in accordance with the
provisions of FRS 26. The net asset values per ordinary shares have been
calculated on the basis of shareholders' rights to reserves adjusted to reflect
the redemption of debentures at par. A reconciliation of the two is as follows:
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
Shareholders' funds per ordinary 25p share 521.15p 467.11p 519.18p
Less: Unamortised discount and expenses arising (1.81p) (1.80p) (1.77p)
from debenture issue
Net asset value per ordinary 25p share 519.34p 465.31p 517.41p
7. Share repurchases
The following share repurchases were made in the period:
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
Number of shares repurchased 11,509,000 2,500,000 5,500,000
Average price per share 421.61p 353.60p 395.60p
Total cost including stamp £48,523,000 £8,840,000 £21,758,000
duty and commission
8. Costs of Investment Transactions
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
£'000 £'000 £'000
Included in the gains on investments are the
following costs of investment transactions:
Purchases expenses 1,455 1,293 3,930
Sales expenses 297 285 750
1,752 1,578 4,680
9. Futures
As at 30 September the Company held no futures contracts. At 30 September 2005
the Company held contracts to buy 63 lots of FTSE 100 Index Futures December
2005 with a market value equivalent to the stock reflected in the futures
contracts of £3,457,125. At 31 March 2006 the Company held contracts to buy 70
lots of the FTSE 100 Index Futures June 2006 with a market value equivalent to
the stock reflected in the futures contracts of £4,178,300.
30.09.06 30.09.05 31.03.06
unaudited unaudited audited
Unrealised profit on open futures - 65 44
commitments
Amounts held at futures houses and - 133 2,008
brokers
- 198 2,052
Copies of the interim report will be posted to shareholders as soon as
practicable. Copies will also be available to the public from the Company's
registered office, Beech Gate, Millfield Lane, Lower Kingswood, Tadworth,
Surrey KT20 6RP and on the Company's website www.itseit.co.uk
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