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.




This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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