Half Yearly Report

RNS Number : 1322F

Edinburgh Worldwide Inv Trust PLC

12 June 2012

 



Press Release

Edinburgh Worldwide Investment Trust plc

Results for the six months to 30 April 2012

Over the six month period the Company's net asset value (NAV) per share increased by 6.8% while the MSCI All Countries World Index (in sterling terms) increased by 5.2%. The share price increased by 6.7%.

Over the eight and a half years that Baillie Gifford has been managing the Company's assets, in total return terms NAV per share has increased by 118.0% and the share price by 138.3%. The index has risen by 82.5%.

¾ The bottom-up evidence of companies trading very strongly contrasts markedly with top-down concerns which remain centred on the Eurozone. Any Euro break-up will cause some dislocations but good companies should continue to prosper.

¾ China is far from collapsing and the US continues to show encouraging signs of recovery. For many of our holdings, the strong growth trends seen in the last couple of years have been accelerating, be it in e-commerce, luxury or healthcare.

¾ Five new holdings have been bought during the period: Aggreko; Burberry Group; Gree; Celltrion; and Sanrio. The purchases were funded in part by the complete sale of Teva Pharmaceuticals, Garanti Bankasi, MIPS Technologies and First Solar.

¾ Revenue earnings per share were 0.71p (six months to 30 April 2011: 0.83p) and the interim dividend is unchanged at 0.50p.

Past performance is not a guide to 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 £189.3 million (before deduction of loans of £29.4 million) as at 30 April 2012.

Edinburgh Worldwide is managed by Baillie Gifford & Co, the Edinburgh based fund management group with around £74 billion under management and advice as at 11 June 2012.

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 http://www.edinburghworldwide.co.uk

11 June 2012

For further information please contact:

Mark Urquhart, Manager, Edinburgh Worldwide Investment Trust plc

Tel: [phone]

Anzelm Cydzik, Baillie Gifford & Co

Tel: [phone]

Roland Cross, Director, Broadgate Mainland

Tel: [phone] or 07831 401309

The following is the unaudited Half-Yearly Financial Report for the six months to 30 April 2012.

Responsibility statement

We confirm that to the best of our knowledge:

A. the condensed set of financial statements has been prepared in accordance with the Accounting Standards Board's statement 'Half-Yearly Financial Reports';

B. the Half-Yearly Management Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.7R (indication of important events during the first six months, their impact on the financial statements and a description of principal risks and uncertainties for the remaining six months of the year); and

C. the Half-Yearly Financial Report includes a fair review of the information required by Disclosure and Transparency Rules 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

David HL Reid

Chairman

11 June 2012

Half-yearly management report

We think it is useful to restate our aim as managers of Edinburgh Worldwide Investment Trust which is to run a concentrated portfolio of companies with good growth prospects for the long-term. It is now eight and a half years since Baillie Gifford started to manage the trust and since then in total return terms, the net asset value has increased by 118.0% and the share price by 138.3% while the MSCI All Countries World index (in sterling terms) has risen by 82.5%. We would reiterate our strong belief that five years and more is a sensible timeframe over which to judge performance.

For the record, over the period from 31 October 2011 to 30 April 2012, Edinburgh Worldwide's net asset value per share rose by 6.8% which compares to a 5.2% increase in the Index over the same period. The share price over the six months rose by 6.7% to 281.75p representing a discount of 13.3% to the net asset value at 30 April 2012 which compares to a discount of 13.2% at the beginning of the period. The Directors have declared an interim dividend of 0.50p per share, unchanged from last year. The interim dividend will be paid on 19 July 2012 to shareholders on the register on 22 June 2012. The final dividend was 1.50p last year and the Directors will consider this year's payment over the remainder of the financial year.

There is a real danger in sounding like a stuck record in penning such comments but the bifurcation in markets remains very marked between the bottom-up evidence of companies trading very strongly and the top-down concerns which remain centred primarily on the Eurozone. Whilst not seeking to diminish the pain of austerity and the consequent political backlash, we think that on anything other than a very narrow timeframe it is far more important to focus on the growth which companies can achieve. Put simply, it is our strong belief that in five years' time no-one will be talking about Greece whether it is inside or outside the Euro. Any Euro break-up will undoubtedly cause some dislocations but good companies will continue to prosper regardless of political shenanigans. Such is the obsession with every small European development there is a grave danger of it drowning the news from elsewhere that China is far from collapsing and the US continues to show encouraging signs of recovery.

At the bottom-up level, if anything, the strong growth trends seen in the last couple of years have been accelerating. E-commerce continues to explode: Amazon is growing at its fastest pace in a decade as it widens the number of geographies and categories; PayPal is expanding rapidly as a payment mechanism online; Google's mobile business is soaring; Baidu continues to gain new advertising customers in China and Apple continues to shift more and more iPhones and iPads and hit record sales and profits. At the risk of hyperbole, we think we are living through a pretty seismic shift in how consumers and companies go about their daily business and this is creating some fantastic investment opportunities. Nowhere is this truer than in cloud computing where Salesforce continue to see very strong billings growth with much larger contract sizes becoming the norm.

Reassuringly, it is not just technology where growth is strong - in luxury Hermès had its strongest ever year since its foundation in 1841; in health care Intuitive Surgical's growth is underpinned by an increasing number of procedures and new areas where their robots can be used and in retail Whole Foods Market continues to display strong comparative store sales and steady physical expansion whilst Inditex's Zara brand is growing nicely in Asia. Also worthy of note are companies such as 3SBio, Belle and Hengdeli in China where share prices were weak in the second half of last year but the operational performance has remained strong and has started to be rewarded with a recovery in the price.

In terms of transactions, we have bought five new holdings over the last six months: Aggreko - the UK-based provider of temporary power generators; Burberry Group - the high-end luxury brand; Gree - an online Japanese gaming company; Celltrion - A Korean manufacturer of generic, biologic drugs and Sanrio - the owner of the Hello Kitty and Mr Men children's brands. We have sold holdings in Teva, Turkish bank Garanti, MIPS Technologies and First Solar.

Half-yearly management report (ctd)

We remain firmly of the belief that the coalescence of several large changes is creating some very interesting growth opportunities for companies in several different areas. The prevailing macro gloom means that many of the valuations on these equities appear low relatively to their growth opportunities. As such we are happy to be geared into current market levels and equity gearing at the end of April stood at 15.2% which compares to 13.9% six months earlier. We remain optimistic that the rewards for the patient, long-term investor look very attractive.

By order of the Board

Baillie Gifford & Co

11 June 2012

Past performance is not a guide to future performance.

Income statement (unaudited)

	For the six months ended 30 April 2012			For the six months ended 30 April 2011			For the year ended 31 October 2011
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
(Losses)/gains on sales of investments	-	(3,728)	(3,728)	-	8,140	8,140	-	13,826	13,826
Movements in investment holding gains	-	14,571	14,571	-	9,632	9,632	-	(14,681)	(14,681)
Currency gains/(losses)	-	594	594	-	(367)	(367)	-	(1,344)	(1,344)
Income from investments and interest receivable	923	-	923	993	-	993	2,412	-	2,412
Investment management fee (note 3)	(135)	(405)	(540)	(146)	(438)	(584)	(283)	(850)	(1,133)
Investment performance fee (note 3)	-	-	-	-	(42)	(42)	-	-	-
Other administrative expenses	(249)	-	(249)	(254)	-	(254)	(498)	-	(498)
Net return before finance costs and taxation	539	11,032	11,571	593	16,925	17,518	1,631	(3,049)	(1,418)
Finance costs of borrowings	(99)	(297)	(396)	(66)	(197)	(263)	(158)	(475)	(633)
Net return on ordinary activities before taxation	440	10,735	11,175	527	16,728	17,255	1,473	(3,524)	(2,051)
Tax on ordinary activities	(91)	-	(91)	(118)	-	(118)	(242)	-	(242)
Net return on ordinary activities after taxation	349	10,735	11,084	409	16,728	17,137	1,231	(3,524)	(2,293)
Net return per ordinary share (note 4)	0.71p	21.91p	22.62p	0.83p	34.14p	34.97p	2.51p	(7.19p)	(4.68p)
Dividends paid and proposed per ordinary share (note 5)	0.50p			0.50p			2.00p

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

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

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 (unaudited)

	At 30 April 2012 £'000	At 30 April 2011 £'000	At 31 October 2011 £'000
Fixed assets
Investments held at fair value through profit or loss	184,148	191,044	170,715
Current assets
Debtors	587	442	209
Cash and short term deposits	5,059	3,381	9,122
	5,646	3,823	9,331
Creditors
Amounts falling due within one year (note 6)	(445)	(25,552)	(425)
Net current assets/(liabilities)	5,201	(21,729)	8,906
Total assets less current liabilities	189,349	169,315	179,621
Creditors
Amounts falling due after more than one year (note 6)	(29,360)	-	(29,981)
Total net assets	159,989	169,315	149,640
Capital and reserves
Called up share capital	2,450	2,450	2,450
Share premium	82,180	82,180	82,180
Special reserve	35,220	35,220	35,220
Capital reserve	37,995	47,512	27,260
Revenue reserve	2,144	1,953	2,530
Shareholders' funds	159,989	169,315	149,640
Net asset value per ordinary share (after deducting borrowings at fair value) (note 6)	325.08p	345.51p	304.24p
Net asset value per ordinary share (after deducting borrowings at par)	326.48p	345.51p	305.36p
Ordinary shares in issue (note 7)	49,004,319	49,004,319	49,004,319

Reconciliation of movements in shareholders' funds (unaudited)

For the six months ended 30 April 2012

	Called up share capital £'000	Share premium £'000	Special reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2011	2,450	82,180	35,220	27,260	2,530	149,640
Net return on ordinary activities after taxation	-	-	-	10,735	349	11,084
Dividends paid during the period (note 5)	-	-	-	-	(735)	(735)
Shareholders' funds at 30 April 2012	2,450	82,180	35,220	37,995	2,144	159,989

For the six months ended 30 April 2011

	Called up share capital £'000	Share premium £'000	Special reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2010	2,450	82,180	35,220	30,784	2,279	152,913
Net return on ordinary activities after taxation	-	-	-	16,728	409	17,137
Dividends paid during the period (note 5)	-	-	-	-	(735)	(735)
Shareholders' funds at 30 April 2011	2,450	82,180	35,220	47,512	1,953	169,315

For the year ended 31 October 2011

	Called up share capital £'000	Share premium £'000	Special reserve £'000	Capital reserve* £'000	Revenue reserve £'000	Shareholders' funds £'000
Shareholders' funds at 1 November 2010	2,450	82,180	35,220	30,784	2,279	152,913
Net return on ordinary activities after taxation	-	-	-	(3,524)	1,231	(2,293)
Dividends paid during the year (note 5)	-	-	-	-	(980)	(980)
Shareholders' funds at 31 October 2011	2,450	82,180	35,220	27,260	2,530	149,640

*      The Capital reserve as at 30 April 2012 includes investment holding gains of £63,855,000 (30 April 2011 - gains of £73,596,000 and 31 October 2011 - gains of £49,283,000).

Condensed cash flow statement (unaudited)

	Six months to 30 April 2012 £'000	Six months to  30 April 2011 £'000	Year to 31 October 2011 £'000
Net cash (outflow)/inflow from operating activities	(253)	3	864
Net cash outflow from servicing of finance	(398)	(241)	(589)
Total tax paid	(61)	(106)	(253)
Net cash (outflow)/inflow from financial investment	(2,616)	407	2,170
Equity dividends paid (note 5)	(735)	(735)	(980)
Net cash (outflow)/inflow before financing	(4,063)	(672)	1,212
Net cash inflow from bank loans	-	-	3,857
(Decrease)/increase in cash	(4,063)	(672)	5,069
Reconciliation of net cash (outflow)/inflow to movement in net debt
(Decrease)/increase in cash in the period	(4,063)	(672)	5,069
Net cash inflow from bank loans	-	-	(3,857)
Exchange movement on bank loans	621	(283)	(1,321)
Movement in net debt in the period	(3,442)	(955)	(109)
Net debt at start of the period	(20,859)	(20,750)	(20,750)
Net debt at end of the period	(24,301)	(21,705)	(20,859)
Reconciliation of net return before finance costs and taxation to net cash (outflow)/inflow from operating activities
Net return before finance costs and taxation	11,571	17,518	(1,418)
(Gains)/losses on investments	(10,843)	(17,772)	855
Currency (gains)/losses	(594)	367	1,344
Changes in debtors and creditors	(387)	(110)	83
Net cash (outflow)/inflow from operating activities	(253)	3	864

Portfolio and equity performance at 30 April 2012 (unaudited)

Name	Business	Value £'000	% of total assets	Performance†
				Absolute %	Relative %
Apple	Computing and media equipment	13,882	7.3	43.5	34.4
Amazon	Online retailer	13,695	7.2	8.0	1.2
eBay	Internet auction and payments	9,413	5.0	28.2	20.1
Baidu	Chinese online search engine	8,940	4.7	(5.9)	(11.8)
Tencent	Chinese social network	8,012	4.2	32.5	24.1
Intuitive Surgical	Robotic surgery	7,828	4.1	32.5	24.1
PPR	Luxury brand conglomerate	7,621	4.0	5.6	(1.0)
Whole Foods Market	Organic food stores	6,737	3.6	14.9	7.6
Google	Online search engine	6,618	3.5	1.4	(4.9)
Hermès	Luxury goods	6,471	3.4	3.0	(3.5)
Salesforce.com	Software	6,412	3.4	16.0	8.7
Atlas Copco	Industrial compressors and mining equipment	5,880	3.1	10.3	3.4
Inditex	Fashion retail	5,672	3.0	(1.5)	(7.7)
Vale (or CVRD)	Mining	5,557	2.9	(6.8)	(12.7)
Novozymes	Enzyme manufacturer	5,435	2.9	(12.8)	(18.3)
Illumina	Biotechnology equipment	4,259	2.2	47.3	38.0
New Oriental Education and       Technology	English-language schools	4,009	2.1	(10.4)	(16.0)
Sandvik	Tools and mining equipment	3,736	2.0	12.9	5.8
Gazprom	Gas exploration and production	3,581	1.9	(1.7)	(7.9)
L'Oréal	Personal care	3,348	1.8	9.4	2.5
Deere	Farm and construction machinery	3,278	1.7	9.0	2.2
Housing Development       Finance Corporation	Indian mortgage provider	3,251	1.7	(10.2)	(15.8)
BMW	Premium car manufacturer	3,095	1.6	14.7	7.5
Burberry	Luxury fashion	3,050	1.6	15.3*	8.0*
Aggreko	Power equipment rental	2,936	1.6	30.0*	21.8*
ABB	Power systems and automation	2,717	1.4	(2.6)	(8.7)
Belle International	Footwear - China	2,552	1.4	(2.7)	(8.9)
CFAO	African distribution	2,530	1.3	9.7	2.8
FLIR Systems	Infrafred sensors	2,518	1.3	(14.7)	(20.1)
Straumann	Dental implants	2,299	1.2	(5.2)	(11.2)
Sanrio	Hello Kitty franchise owner	2,196	1.2	14.3*	7.1*
Hengdeli	Chinese watch retailer	2,168	1.2	(12.8)	(18.3)
iRobot	Military and domestic robots	2,039	1.1	(30.7)	(35.1)
Gree	Online gaming	1,833	1.0	(2.8)*	(9.0)*
3SBio	Chinese generic drugs	1,832	1.0	13.0	5.8
Seattle Genetics	Biotech cancer drugs	1,648	0.9	(10.7)	(16.3)
Celltrion	Biopharmaceuticals	1,623	0.9	(15.9)*	(21.2)*
ALL America Latina Logistica	Brazilian railways	1,588	0.8	(9.0)	(14.7)
Ctrip	Travel agent - China	1,567	0.8	(38.2)	(42.1)
Vanceinfo	Chinese IT outsourcing	1,190	0.6	10.9	3.9
Noah Holdings	Chinese wealth manager	1,132	0.6	(17.5)	(22.7)
Total equities		184,148	97.2
Net liquid assets		5,201	2.8
Total assets at fair value (before deduction of loans)		189,349	100.0

†      Absolute and relative performance has been calculated on a total return basis over the period 1 November 2011 to 30 April 2012. Absolute performance is in sterling terms; relative performance is against MSCI All Countries World Index (in sterling terms).

*      Figures relate to part-period returns where the equity has been purchased during the period.

Source: Baillie Gifford & Co, StatPro.

Distribution of assets (unaudited)

		30 April 2012 %		31 October 2011 %
Equities:	USA	41.3		39.7
	China	16.6		17.2
	France	10.5		10.0
	Sweden	5.1		5.3
	Brazil	3.7		4.4
	UK	3.2		-
	Spain	3.0		3.3
	Denmark	2.9		3.5
	Switzerland	2.6		3.4
	Japan	2.2		-
	Russia	1.9		2.0
	India	1.7		2.0
	Germany	1.6		1.5
	Korea	0.9		-
	Turkey	-		1.4
	Israel	-		1.3
Total Equities		97.2		95.0
Net liquid assets		2.8		5.0
Total assets (before deduction of bank loans)		100.0		100.0

Notes to the condensed financial statements (unaudited)

1.	The condensed financial statements have been prepared on the basis of the same accounting policies as set out in the Company's Annual Report and Financial Statements at 31 October 2011 and in accordance with the ASB's Statement 'Half-Yearly Financial Reports' and have not been audited or reviewed by the Auditors pursuant to the Auditing Practices Board Guidance on 'Review of Interim Financial Information'. The Company's assets, the majority of which are investments in quoted securities which are readily realisable, exceed its liabilities significantly. All borrowings require the prior approval of the Board. Gearing levels and compliance with borrowing covenants are reviewed by the Board on a regular basis. Accordingly the financial statements have been prepared on the going concern basis as it is the Directors' opinion that the Company will continue in operational existence for the foreseeable future.
2.	The financial information contained within this Half-Yearly Financial Report does not constitute statutory accounts as defined in sections 434 to 436 of the Companies Act 2006. The financial information for the year ended 31 October 2011 has been extracted from the statutory accounts which have been filed with the Registrar of Companies. The Auditors' Report on those accounts was not qualified and did not contain a statement under sections 498(2) or (3) of the Companies Act 2006.
3.	Related Party Transactions Baillie Gifford & Co are appointed as Managers and Secretaries. 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's shares 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's shares. The fee is 5% of the out-performance between zero and 2%, and 10% of the out-performance thereafter. A performance fee could be payable in periods when the net asset value falls by a lesser rate than the comparative index. 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 six months to 30 April 2012 was £39,000 (six months to 30 April 2011 - £37,000; year to 31 October 2011 - £74,000).
4.	Net return per ordinary share	Six months to 30 April 2012 £'000	Six months to 30 April 2011 £'000	Year to 31 October 2011 £'000
	Revenue return on ordinary activities after taxation	349	409	1,231
	Capital return on ordinary activities after taxation	10,735	16,728	(3,524)
	Total return	11,084	17,137	(2,293)
	Net 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. There are no dilutive or potentially dilutive shares in issue.

Notes to the condensed financial statements (unaudited) (ctd)

5.	Dividends Amounts recognised as distributions in the period:	Six months to 30 April 2012 £'000	Six months to 30 April 2011 £'000	Year to 31 October 2011 £'000
	Previous year's final dividend of 1.50p (2010 - 1.50p), paid 8 February 2012	735	735	735
	Interim dividend for the year ended 31 October 2011 paid 21 July 2011	-	-	245
		735	735	980
	Dividends Paid and proposed in respect of the financial period:
	Interim dividend for the year ending 31 October 2012 of 0.50p (2011 - 0.50p)	245	245	245
	Final dividend (31 October 2011 - 1.50p)	-	-	735
		245	245	980
	The interim dividend was declared after the period end date and has therefore not been included as a liability in the balance sheet. It is payable on 19 July 2012 to shareholders on the register at the close of business on 22 June 2012. The ex dividend date is 20 June 2012. The registrars offer a dividend reinvestment plan. The final date for the receipt of elections for the dividend reinvestment plan is 28 June 2012.
6.	Creditors include borrowings of £29,360,000 (30 April 2011 - £25,086,000 and 31 October 2011 - £29,981,000) drawn down with a three year fixed rate loan facility expiring on 30 September 2014 in loans of €11.4m, US$16.35m and £10.0m (30 April 2011 - monthly renewable loans of US$11.3m, ¥450m, CHF 10.5m and €8.7m; 31 October 2011 - fixed rate loans of €11.4m, US$16.35m and £10.0m). The fair value of the bank loans at 30 April 2012 was £30,046,000 (30 April 2011 - £25,086,000; 31 October 2011 - £30,531,000).
7.	The Company has authority to buy back its ordinary shares. In the six months to 30 April 2012 no ordinary shares were bought back therefore the Company's authority remains unchanged at 7,345,747 ordinary shares.
8.	During the period the Company incurred transaction costs on purchases of investments of £35,000 (30 April 2011 - £37,000; 31 October 2011 - £61,000) and transaction costs on sales of £7,000 (30 April 2011 - £20,000; 31 October 2011 - £43,000).
9.	None of the views expressed in this document should be construed as advice to buy or sell a particular investment.

Notes to the condensed financial statements (unaudited) (ctd)

10.

Principal Risks and Uncertainties The principal risks facing the Company relate to the Company's investment activities. These risks are market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. An explanation of these risks and how they are managed is contained in note 20 of the Company's Annual Report and Financial Statements for the year to 31 October 2011. The principal risks and uncertainties have not changed since the publication of the Annual Report which can be obtained free of charge from Baillie Gifford & Co: www.bailliegifford.com‡ and is available on the Edinburgh Worldwide page of the Managers' website: www.edinburghworldwide.co.uk‡. Other risks facing the Company include the following: gearing risk (the use of borrowing can magnify the impact of falling markets), the risk that the discount can widen, regulatory risk (that the loss of investment trust status or a breach of the UKLA Listing Rules could have adverse financial consequences and cause reputational damage) and operational/financial risk (failure of service providers' accounting systems could lead to inaccurate reporting or financial loss). Further information can be found on page 16 of the Annual Report.

11.

The Half-Yearly Financial Report is available at www.edinburghworldwide.co.uk‡ and will be posted to shareholders on or around 18 June 2012.

‡      Neither the contents of the Managers' website nor the contents of any website accessible from hyperlinks on the Managers' website (or any other website) is incorporated into, or forms part of, this announcement.

- Ends -

 

END

 

 

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