Final Results

RNS Number : 6638J

Edinburgh Worldwide Inv Trust PLC

05 December 2008

 



EDINBURGH WORLDWIDE INVESTMENT TRUST plc

Results for the year to 31 October 2008

Over the year the Company's net asset value per share and the share price declined by 43.6% and 47.3% respectively. Over the same period the benchmark against which performance is measured, the MSCI All Countries World Index (in sterling terms) declined by 29.0%.

	The majority of underperformance was suffered in the closing months when stockmarkets were severely impacted by the banking and financial crises and their knock-on effects.
	Over the five years that Baillie Gifford has been managing the Company, net asset value per share has increased by 5.6% and the share price by 8.0% compared to 6.3% growth in the benchmark.
	Performance is assessed over a five year period and there will be periods when the portfolio underperforms the index. Although the current figures are disappointing, 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.
	Dividend growth from the underlying holdings combined with a rebate from HMRC means that the net revenue return per share has increased to 3.48p (2.63p last year). The emphasis on capital growth remains paramount and the Board is recommending an unchanged final dividend of 1.50p. However, in addition, a special dividend of 0.70p is being proposed bringing the total for the year to 2.70p (2.00p last year).
	Many companies will struggle in the current climate. The Board is satisfied that, although challenging, the Managers will be able to identify those companies that will emerge stronger, more profitable and with a greater market share once economic activity normalises.

Past performance is no guarantee of future performance.

Edinburgh Worldwide aims to achieve long term capital growth by investing in listed companies throughout the world. The Trust has total assets of £106 million (before deduction of loans of £22 million) as at 31 October 2008.  

Edinburgh Worldwide is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £39 billion under management and advice as at 5 December 2008.

The value of an investment and any income from it is not guaranteed and may go down as well as up and investors may not get back the amount invested. This is because the share price is determined by the changing conditions in the relevant stockmarkets in which the Company invests and by the supply and demand for the Company's shares. Investment in investment trusts should be regarded as medium to long-term. You can find up to date performance information about Edinburgh Worldwide on the Edinburgh Worldwide page of the Managers' website at www.edinburghworldwide.co.uk

 5 December 2008

- ends -

For further information please contact:

 

Mark Urquhart, Manager,                                                                                            

Edinburgh Worldwide Investment Trust plc                                           0131 275 2070

 

Anzelm Cydzik,

Baillie Gifford & Co                                                                              0131 275 3276

 

Roland Cross, Director,

Broadgate Marketing                                                                            020 7726 6111

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.

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.  

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.  

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

Chairman

EDINBURGH WORLDWIDE INVESTMENT TRUST plc

The following is the unaudited preliminary statement for the year to 31 October 2008 which was approved by the Board on 4 December 2008. The Board of Edinburgh Worldwide Investment Trust plc is recommending to the Annual General Meeting of the Company to be held on 26 January 2009 the payment of a final dividend of 1.50p and a special dividend of 0.70p, making a total of 2.70p per ordinary share (2.00p last year) for the year ended 31 October 2008. 

INCOME STATEMENT

	For the year ended 31 October 2008 (unaudited)				For the year ended 31 October 2007 (audited)
	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.

   EDINBURGH WORLDWIDE INVESTMENT TRUST plc

BALANCE SHEET

		At 31 October 2008 (unaudited)		At 31 October 2007 (audited)
		£'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 8)		(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		49,004,319		49,004,319

DISTRIBUTION OF ASSETS

(unaudited)

		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

  EDINBURGH WORLDWIDE INVESTMENT TRUST plc

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 October 2008 (unaudited)

	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 (audited)

	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

  EDINBURGH WORLDWIDE INVESTMENT TRUST plc

SUMMARISED CASH FLOW STATEMENT
	For the year ended 31 October 2008 (unaudited)			For the year ended 31 October 2007 (audited)
	£'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)

EDINBURGH WORLDWIDE INVESTMENT TRUST plc

PORTFOLIO AND EQUITY PERFORMANCE at 31 October 2008 (unaudited)
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

EDINBURGH WORLDWIDE INVESTMENT TRUST plc

PORTFOLIO AND EQUITY PERFORMANCE

at 31 October 2008 

(unaudited) (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 no guarantee of future performance.

EDINBURGH WORLDWIDE INVESTMENT TRUST plc

NOTES

(unaudited)

	The financial statements for the year to 31 October 2008 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).

EDINBURGH WORLDWIDE INVESTMENT TRUST plc

NOTES 

(unaudited)  (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.

EDINBURGH WORLDWIDE INVESTMENT TRUST plc

NOTES 

(unaudited)  (Ctd)

		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	34		64
	(Decrease)/increase in creditors	(834)		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 are unaudited and will be finalised on the basis of the financial information presented in this preliminary announcement and will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
11.	The Report and Accounts will be available on the Edinburgh Worldwide page of the Managers' website www.edinburghworldwide.co.uk on or around 17 December 2008.
12.	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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