TIDMEDIN
RNS Number : 2758H
Edinburgh Investment Trust PLC
23 November 2022
The Edinburgh Investment Trust plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS TO 30 SEPTEMBER 2022
23 November 2022 - The Directors of the Edinburgh Investment
Trust plc ("the Company") have today announced the interim results
for the period ended 30 September 2022.
Highlights
-- Total Return Net Asset Value (with debt at fair value) fell
by 8.2% compared with a fall of 8.3% for the FTSE All-Share
Index
-- The refinancing of the Company's debenture at end September
2022, and the resulting debt-driven boost of c.4% to NAV, has
offset underperformance at the portfolio level over the six-month
period
-- First interim dividend, declared on 26 October, up 6.7% from 2021 at 6.4p per share
-- Net gearing at 30 September 2022 of 4.4%
-- Share price discount to NAV widened from 7.7% to 10.6% in the
six months to September 2022 but has tightened to mid-single digits
since the end of the period
-- Since management of the trust moved in March 2020, the
cumulative NAV return of +41.2% and the share price return of
+44.1% have outperformed the FTSE All-Share return of +31.3% (all
in total return terms)
Elisabeth Stheeman, Chair, said: "This has been an active six
months for the Company. In addition to the normal day-to-day
business of managing the portfolio, there have been changes to the
debt structure, a first interim dividend announced and the welcome
return of our in-person events for shareholders.
Since the current Portfolio Manager began day-to-day management
of the Company's portfolio at the end of March 2020, the cumulative
NAV return has been +41.2% and the share price return +44.1%,
compared with the FTSE All-Share return of +31.3%. Delivering
returns above that of the index over all longer-term periods
remains a key priority.
There are many reasons to be positive and the Company is in a
strong position to take advantage of the attractive opportunities
that are now arising, as well as to continue with the important
business of working with existing holdings that underpin the income
and capital value of the portfolio. Things are in good health and
this should support attractive returns to shareholders in the years
ahead."
James de Uphaugh, Manager, said: "Equity markets gave up some
ground over this six-month period. Part of that is the general
weakness of global equity markets, part was self-made problems in
the UK owing to the political uncertainty. However, hopefully the
worst of it is behind us.
The good news is that inflationary pressures are easing as
commodity prices come off their highs. Supply problems are also
easing. The UK economy is slowing, but a deep recession is not a
certainty, especially if the job market can remain robust. In
recent years many consumers and businesses have become accustomed
to operating with an element of macroeconomic and political
uncertainty. As such, we think the most important thing is to
produce a diversified equity portfolio that has the ability to
thrive, as well as withstand any unanticipated shocks. On this
basis we believe the portfolio is well placed to underpin the
delivery of the Company's dual objectives in the years ahead."
S
Enquiries
Liontrust Fund Partners LLP
James Mowat +44 20 3908 8822
james.mowat@liontrust.co.uk
Montfort Communications
Gay Collins +44 7798 626282
Shireen Farhana +44 7757 299250
Ella Henderson +44 7762 245122
EIT@montfort.london
About The Edinburgh Investment Trust plc
Founded over 130 years ago, The Edinburgh Investment Trust plc
is listed on the London Stock Exchange and is included in the FTSE
250 index. It invests primarily in a portfolio of UK listed shares
and has net assets of approximately GBP1.1 billion. The Company's
twin investment objectives for the long term are to outperform the
FTSE All-Share Index on a Net Asset Value (NAV) basis and to
produce dividend growth in excess of the rate of UK inflation.
Liontrust Fund Partners LLP became the Company's AIFM with effect
from 1 April 2022.
The Edinburgh Investment Trust plc
HALF-YEARLY FINANCIAL REPORT
SIX MONTHS TO 30 SEPTEMBER 2022
GBP1,003m
Net assets
553.00p
Share price
(10.6)%
Discount*
4.4%
Gearing (net)*
* Alternative Performance Measures
Investment Objective
The Edinburgh Investment Trust plc ('the Company') is an
investment trust whose investment objective is to invest primarily
in UK securities with the long-term objective of achieving:
1. an increase of the Net Asset Value per share in excess of the
growth in the FTSE All-Share Index; and
2. growth in dividends per share in excess of the rate of UK inflation
The Company will generally invest in companies quoted on a
recognised stock exchange in the UK. The Company may also invest up
to 20% of the portfolio in securities listed on stock exchanges
outside the UK. The portfolio is selected on the basis of
assessment of fundamental value of individual securities and is not
structured on the basis of industry weightings.
Nature of the Company
The Company is a publicly listed Investment Company whose shares
are traded on the London Stock Exchange. The business of the
Company consists of investing the pooled funds of its shareholders,
according to a specified investment objective and policy (set out
on page 14 of the Company's 2022 Annual Financial Report), with the
aim of spreading investment risk and generating a return for
shareholders.
The Company uses borrowing to enhance returns to shareholders.
This increases the risk to shareholders should the value of
investments fall.
In April 2022 Liontrust Fund Partners LLP became the Company's
AIFM (the Manager) following the acquisition of Majedie Asset
Management Limited (the Company's AIFM since its appointment in
March 2022) by Liontrust Asset Management PLC. The responsibility
for the day-to-day investment management activities of the Company
has been delegated to Liontrust Investment Partners LLP. The
Company's portfolio management team, with James de Uphaugh as the
portfolio manager and Chris Field as the deputy manager, has
remained unchanged. Other administrative functions are contracted
to other external service providers. The Company has a Board of
non-executive Directors who oversee and monitor the activities of
the Manager and other third party service providers on behalf of
shareholders and ensure that the investment objective and policy is
adhered to. The Company has no employees.
The Company's ordinary shares qualify to be considered as
mainstream investment products suitable for promotion to retail
investors. The Company's ordinary shares are eligible for
investment in an ISA.
Strategic Report
Financial Information and Performance Statistics
Six months
to
30 September
2022
Total Return(1)(2)(3) (all with dividends reinvested) % Change
------------------------------------------------------ ------------
Net asset value (NAV) - debt at fair value -8.2
Share price -11.0
FTSE All-Share Index -8.3
------------------------------------------------------ ------------
The Company's benchmark is the FTSE All-Share Index.
At 30 September At 31 March %
Capital Return 2022 2022 Change
Net asset value - debt at fair value(2) 618.85p 686.69p -9.9
Share price(1)(2) 553.00p 634.00p -12.8
FTSE All-Share Index(1) 3,763.48 4,187.78 -10.1
---------------------------------------- --------------- ----------- ------
Discount(2)(3) - debt at fair value (10.6)% (7.7)%
---------------------------------------- --------------- ----------- ------
Gearing (debt at fair value)(2)(3)
- gross gearing 7.3% 10.3%
- net gearing 4.4% 4.4%
---------------------------------------- --------------- ----------- ------
Consumer Price Index(1) - annual
change 10.1% 7.0%
---------------------------------------- --------------- ----------- ------
%
Six months to 30 September 2022 2021 Change
Revenue Return and Dividends
Revenue return per ordinary share 14.77p 13.77p +7.3
First interim dividend(4) 6.40p 6.00p +6.7
---------------------------------- ------ ------ ------
Notes:
(1) Source: Refinitiv.
(2) These terms are defined in the Alternative Performance
Measures section. NAV with debt at fair value is widely used by the
investment company sector for the reporting of performance, premium
or discount and gearing. NAV with debt at par is explained in the
Alternative Performance Measures
(3) Key Performance Indicator.
(4) Dividends declared in respect of the financial year.
Chair's Statement
ELISABETH STHEEMAN / CHAIR
DEAR SHAREHOLDER
This has been an active six months for your Company: in addition
to the normal day-to-day business of managing the portfolio, there
have been changes to the debt structure, a first interim dividend
announced and the welcome return of our in-person events for
shareholders.
INTRODUCTION
Since your Company's last year end on 31 March 2022, global
equity markets have been weaker and more volatile. This reflects a
number of concerns, including geopolitical risks - such as the war
in Ukraine and the rising tensions over Taiwan in the Far East - or
economic ones, principally slower economic growth with higher
interest rates and bond yields, as central banks around the world
try to address rising inflation.
MARKET BACKDROP AND INVESTMENT RETURNS
The UK equity market has not been immune from these concerns. On
top of this we have had the added uncertainty of domestic
policymaking. This reached a peak at the Company's half year end in
September, with the policy U-turns of the then prime minister.
Financial markets - particularly the gilt market - sold off
sharply. This had an indirect - but in this case helpful - effect
on your Company, as I describe further below. Fortunately those
concerns have since receded with a change in leadership in Downing
Street. At the time of writing the gilt market has returned to
yields similar to those before the infamous 'mini' Budget at the
end of September. However, the outcome over your Company's first
half to 30 September was the backdrop of a UK equity market 8.2%
lower in total return terms. Your company's Net Asset Value ('NAV',
also in total return terms) fell by 8.3%.
Since the current Portfolio Manager began day-to-day management
of the Company's portfolio at the end of March 2020, the cumulative
NAV return has been +41.2% and the share price return +44.1%,
compared with the FTSE All-Share return of +31.3% (all in total
return terms). Furthermore, it is encouraging to see that over
three years the Company's returns are now ahead of the index.
However, the five year return remains behind the index. Delivering
returns above that of the index over all longer term periods
remains a key priority.
I would like to highlight that the NAV return I quote above is
calculated by deducting the value of the Company's borrowings at
fair value. It has been our longstanding approach to quote NAV
returns on this basis (the other option being to quote NAV after
deducting debt at par value, which is not typically market
practice). For the six month period covered in this report there
was an unanticipated boost of approximately 4% to NAV with debt at
fair value, which took effect as the new debt went onto the balance
sheet at the end of September. In short, when a bond yield rises,
the price of that debt correspondingly falls, resulting in a lower
fair value for the debt being deducted from our gross asset value.
The scale of the rises in bond market yields compared with the
rates we achieved a year ago on the new debt drove this. The reason
I flag this now is that this debt driven boost to NAV has offset
underperformance at the portfolio level. It is possible that some
or all of this boost may reverse if bond markets begin to recover -
as they have since the half year end.
The Portfolio Manager explores the factors behind the fall in
the NAV, and of its relative performance, in his report in the
pages that follow. Your Board regularly reviews performance with
the Portfolio Manager and also examines the investment approach of
him and his team. We remain comfortable with their approach, which
remains focused on delivering attractive total returns through a
combination of dividend income and capital growth. We expect
periodic periods of underperformance in the same way that we have
had periods of strong performance since their appointment. We note
that over this six month period a diverse range of the portfolio's
larger holdings, such as BAE Systems, TotalEnergies, Standard
Chartered and NatWest, made positive contributions to performance.
Offsetting this were some of the mining groups held in the
portfolio (Anglo American and Newmont), Tesco, and in the holding
in the data analytics group Ascential.
Several of the holdings I mention above are exposed to specific
Environmental, Social and Governance ('ESG') concerns. During the
period the Board reviewed the manager's approach to ESG, which
forms part of the investment process. The Portfolio Manager has
included extra detail on ESG in his own report, complete with a
detailed stock example, to illustrate the process in action - and
how specific ESG concerns are addressed. I encourage shareholders
to read it. ESG is an important topic for a portfolio such as
Edinburgh's and we will further enhance disclosures and reporting
in the months and years ahead.
DIVID
The historic dividend yield on the Company's shares (taking the
dividends paid in the 12m to end Sept) was 4.5%. Since then, the
Board has declared a first interim dividend of 6.4p per share,
which will be paid to shareholders on 25 November 2022. This first
interim dividend is 6.7% higher than the 6.0p per share declared at
the same time a year ago.
The current year's dividend payments to shareholders are set to
be well supported by the portfolio's underlying income. This
support continues to improve from the 2020 pandemic lows. As the
Manager notes, there has been a boost this year as a significant
proportion of income generated by the companies in the portfolio is
paid as dividends in non-Sterling currencies: Sterling weakness has
boosted dividend income. However, this currency effect could in
time reverse.
In the months ahead, the Board will consider the level of the
dividend per share to be paid in respect of the current financial
year. We are mindful of one of the Company's objectives, namely to
increase the dividend per share in excess of UK inflation. In
coming to our decision on future dividends per share we will
carefully monitor the portfolio's income after all costs have been
deducted, as well as the level of UK inflation.
BORROWINGS
The Board and Portfolio Manager are firmly of the view that a
well-managed, sensibly-diversified equity portfolio should generate
attractive absolute returns over the medium term. As such, low cost
long-term borrowings should boost shareholders' returns.
The last year or so has been a busy one in respect of the
Company's borrowings. An important project completed in September
2021 when the refinancing of the Company's long-term debt was
arranged. This was in anticipation of the maturing of the Company's
debenture (a listed, long-term debt instrument) on 30 September
2022. By prearranging the refinancing of this debenture, the
Company was able to take advantage of the low interest rates then
available. The Company has thus locked in fixed term debt
instruments of up to 35 years' maturity at a very attractive annual
interest rate of 2.44%. The rates we achieved last year should be a
source of competitive advantage in the years ahead. Had we been
refinancing today, we estimate that the annual interest rate would
be approximately 4.75% .
The end result has been the successful repayment and retirement
of the debenture, which no longer features on the Company's balance
sheet. It has been replaced by four privately issued loan notes -
hence the reference to debt at fair value , rather than at market
value as was the case for the (listed) Debenture. All borrowings
are fixed rate and long-term in nature: there was a revolving
credit facility with a bank, but this had not been used in over two
years and it expired in June. The manager expands on the level of
gearing in his report.
DISCOUNT
The Company's discount has ranged from 4.8% to 12.0%% over the
period. At the half year it was at 10.6%. As a Board we would like
to see a tighter discount, but we are mindful that it is a function
of many factors beyond the Company's own performance. These include
market sentiment towards UK equities, towards dividend-paying
stocks, and indeed sentiment towards the investment trust sector as
a whole. Regardless of the reasons for the discount, we have in
place a share buy-back programme that modestly enhances value for
existing shareholders by buying back shares at a discount from
those who wish to sell. Over the period 1.89 million shares were
bought back, representing 1.1% of the Company's equity capital.
SHAREHOLDER COMMUNICATIONS
After two years of difficulty in meeting with shareholders face
to face because of the pandemic, I was pleased to see the return of
shareholders at the Company's Annual General Meeting in Edinburgh
in July this year. We also hosted two events in London for
shareholders in September. Further events will be promoted on the
Company's website and the Portfolio Manager periodically speaks at
other industry events, again often with the content subsequently
made available on the website. A video of the Portfolio Manager
discussing the last six months and the portfolio outlook is now on
the website.
OUTLOOK
At present there seem to be a multitude of reasons to be
cautious. Global geopolitical tensions, slower growth, rising
inflation and the domestic political situation all play a role. As
the Portfolio Manager notes, the latter issue has even dented the
confidence of some corporate management teams. Nonetheless, at the
stock specific level there are many reasons to be positive. Indeed,
it is heartening to see markets recovering. At the last practical
date before signing this report, the share price is 627p. As such,
the Company is in a strong position to take advantage of the
attractive opportunities that are now arising, as well as to
continue with the important business of working with existing
holdings that underpin the income and capital value of the
portfolio. As the Portfolio Manager describes, on this front things
are in good health and this should support attractive returns to
shareholders in the years ahead.
ELISABETH STHEEMAN /
CHAIR /
23 NOVEMBER 2022
Portfolio Manager's Report
For the period ended 30 September 2022
JAMES DE UPHAUGH / PORTFOLIO MANAGER
CHRIS FIELD / PORTFOLIO MANAGER
A BRIEF REMINDER OF WHAT WE DO
Our overarching aim is to generate attractive medium term
investment results for shareholders by meeting the two formal
objectives set out at the front of this report. We do this by
managing a portfolio of equities and by ensuring the other aspects
of the Company - such as the debt structure and risk oversight -
are as strong and efficient as possible.
We take a team approach to researching investment opportunities.
We are 'bottom-up' in style, focusing on individual stock
opportunities - which is where we believe we have an edge. Our
emphasis is primarily on stocks that should provide an attractive
combination of income and capital growth: a total return approach.
The resulting portfolio is designed to be sensibly diversified by
stock and industry, and to be as 'all-weather' as possible by
reflecting the economic and market backdrop. We draw predominantly
from UK stocks and, for up to 20% of the portfolio, on our best
ideas from overseas too.
PERFORMANCE UPDATE
As the Chair has noted in her statement, equity markets gave up
some ground over this six month period. Part of that is the general
weakness of global equity markets, part was self-made problems in
the UK owing to the political uncertainty. The political
uncertainty undoubtedly hinders sentiment towards UK equities. It
is also unhelpful for company management teams. However, hopefully
the worst of it is behind us: a more credible set of leaders is in
Downing Street, and there is a dawning realisation in parliament
that economic nettles need to be grasped. The portfolio's
performance against the index over this period was a little weak.
Part of the underperformance was a function of weakness among
several of the midcap holdings in the portfolio. Given the weakness
in equity markets, and of the portfolio as a whole, the effect of
leverage slightly increased the underlying underperformance.
In terms of stock specifics, there was weakness among some of
the mining stocks, such as Newmont and Anglo American - we remain
happy with both, but have reduced Newmont a little (see profile in
box); and mid cap holdings such as Ascential, Marshalls and Dunelm.
The latter two have significant exposure to the UK and are seeing
trade slow but their market positions remain strong.
Positive contributors included BAE Systems - the dreadful events
in Ukraine are a prompt for investment in defence systems around
the world, NatWest - this bank should generate further improving
returns for shareholders even in the face of softer economic
growth; and TotalEnergies, which continues to drive its portfolio
into renewable energy in an impressive way.
TRADING ACTIVITY
Changes in the portfolio are typically modest over any six month
period. This is in keeping with our general approach of holding
stocks for three years or more on average. Nonetheless, we do
gently change the composition and this period has been no
exception. Notable purchases have included:
- CNHI: an agricultural equipment company, it manufactures under
the Case IH, New Holland and STEYR brands. It is the second largest
global manufacturer, behind Deere. The long-term outlook for
agricultural equipment is strong: food production efficiency needs
to improve. In the shorter term, high crop prices and low
inventories are supportive. The company also has attractive
financial characteristics: it should be net debt free next year and
pays a reasonable dividend yield. In our view there is scope for
shareholder returns to improve substantially.
- We added to our WPP holding post results. The fragmentation of
the digital and media landscape increases the value of a global
player that clients can use to optimise their marketing spend in a
fast evolving market. The sensible decision by management not to
set a margin target for next year at this stage created a sell off
that is, in our view, a valuation anomaly.
During the period we also added to a selection of other existing
positions including Tesco, GSK, Unilever, Centrica and Thales.
These additions were funded to a degree through reductions to
Newmont, TotalEnergies and Mondi, and by drawing on the funds
available from the Company's borrowing facilities.
We have sold the insurer Direct Line, as we are concerned about
the volatility earnings and cashflow of the business. We reinvested
the proceeds into its rival Admiral, which offers a higher growth,
higher margin and arguably higher quality and lower volatility of
earnings stream than Direct Line. In addition Direct Line is less
well capitalised with higher yielding corporate debt within the
capital structure. Admiral offers an attractive 6%+ dividend yield
that should grow.
HOW WE ASSESS ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) FACTORS
WITHIN THE INVESTMENT PROCESS
Our investment approach incorporates a materiality process to
integrate the consideration of key risks and opportunities,
including those that are ESG related, into the investment decision
making process for the EIT portfolio. As part of the fundamental
assessment of a holding, we undertake a materiality assessment on
the risks and opportunities faced by each holding over a time
horizon of one to three years.
To illustrate, EIT is invested in US gold miner, Newmont. The
following are an example of key issues we think face Newmont:
- The opportunity that the Group has to reduce its carbon
footprint and energy costs through automation and improved
efficiency;
- The risk that the Group's health and safety record deteriorates;
- The risk that the Group's relationships with the governments
and/or communities where it has operations deteriorate.
These key ESG issues are mapped on a materiality matrix
alongside other investment considerations (based on their
likelihood and impact) and are important for the following
reasons:
- All these issues lead the team's engagement with Newmont.
Through engagement, the team aims to understand how Newmont is
managing these issues. This information is central to the
resiliency score that the team assigns for Newmont.
- How Newmont is managing them may also impact the team's
conviction score for Newmont in the EIT portfolio.
The 'resiliency' score for Newmont is '3' (an average score on
our one 1 to 5 scale) due to: its track record of operating mines
safely; providing employment and tax revenue in remote and often
reasonably poor places, benefitting both the local government and
communities; and having science-based targets to reduce carbon
emissions by 30% by 2030 and reach net zero by 2050, helping to
reduce its carbon footprint. Newmont's resiliency score was
recently reduced (from 4 to 3) in light of the decreased efficiency
of operations: the company has been facing challenges due to rising
energy costs, supply chain issues, and labour shortages which led
Newmont to downgrade its production guidance.
Finally, we assign a 'conviction' score. The team downgraded
Newmont's score to an average '3' in September 2022 to reflect the
challenging operational performance of the mines. This corresponded
to a decrease in the weighting of Newmont in the EIT portfolio. The
score still takes account of the increased attractiveness of gold
(and gold miners) given the multiple uncertainties worldwide. An
economic slowdown now seems more likely given higher inflation,
which tends to favour gold. Use of sanctions by the US may also
encourage more central banks to hold more of their reserves in gold
and thus may drive additional demand for the commodity.
BORROWINGS
It is very good to have completed the refinancing of the
debenture which matured at the end of the period under review. The
new debt structure has a fixed annual cost of 2.44% and an average
term of 25 years. We are optimistic that over time the portfolio
should be able to generate a return comfortably in excess of the
cost of this debt. We ended the period with net gearing (i.e. after
adjusting for cash balances) of 4.4%. At the last practical date
before signing this report, net gearing is 5.7%. Were we to have a
fully invested portfolio (i.e. no cash balances and the debt fully
invested in the equity portfolio) at the end of September, the
gearing would have been 7.3%.
DIVID INCOME
The portfolio continues to benefit from a rising level of
underlying income and we will work with the Board to enable them to
decide on the most appropriate level of future payouts. We have had
a tailwind from dividends that are either based on overseas
profits, or are paid in overseas currencies - especially the US
dollar which has been particularly strong against Sterling.
Approximately 30% of dividends currently received are paid in US
dollars.
OUTLOOK
The UK still has the third lowest level of debt in the G7 behind
Germany and Canada, and its debt to maturity is around 14 years,
which is much longer than any other G7 country. A weak currency
means interest rates need to be higher to tackle inflation. The
good news is that inflationary pressures are easing too as
commodity prices come off their highs, including for oil and gas.
Having been cautious about the inflationary outlook for the last
year, it is plausible to make a case for inflation having
peaked.
Supply problems are also easing, with China tip toeing towards
re-opening and freight rates falling substantially. The economy is
slowing, but a deep recession is not a certainty, especially if the
jobs market can remain robust. In recent years many consumers and
businesses have become accustomed to operating with an element of
macroeconomic and political uncertainty. The situation today is no
different. As such, we think the most important thing is to produce
an equity portfolio that has the ability to thrive, as well as
withstand any unanticipated shocks. To return to our opening
comments, a diversified portfolio is important. On this basis we
believe the portfolio is well placed to underpin the delivery of
the Company's dual objectives in the years ahead.
JAMES DE UPHAUGH /
PORTFOLIO MANAGER
CHRIS FIELD /
DEPUTY PORTFOLIO MANAGER
23 NOVEMBER 2022
Interim Management Report
The Directors are required to provide an Interim Management
Report in accordance with the Financial Conduct Authority ("FCA")
Disclosure Guidance and Transparency Rules ("DTR"). The Directors
consider that the Chair's Statement and the Portfolio Manager's
Report on previous pages of this Half-yearly Financial Report,
provide details of the important events which have occurred during
the six months ended 30 September 2022 ("Period") and their impact
on the financial statements.
The statement on related party transactions and the Directors'
Statement of Responsibility (below), the Chair's Statement and the
Portfolio Manager's Report together constitute the Interim
Management Report of the Company for the Period. The outlook for
the Company for the remaining six months of the year to 31 March
2023 is discussed in the Chair's Statement and the Portfolio
Manager's Report.
Principal Risks and Uncertainties
A detailed explanation of the principal risks and uncertainties
facing the Company can be found on pages 19 to 21 of the 2022
annual financial report, which is available on the Company's
website at www.edinburghinvestmenttrust.com.
Since the publication of the 2022 annual financial report, the
risks posed by the war in Ukraine, inflation and the secondary
effects of the COVID-19 pandemic continue to be a serious threat to
the global economy. The Board continues to monitor these situations
closely and has been in regular contact with the Manager and the
Company's other service providers to assess and mitigate the impact
on the Company's investment objectives, investment portfolio and
shareholders.
Otherwise, in the view of the Board, these principal risks and
uncertainties are substantially unchanged from the previous year
end and are as much applicable to the remaining six months of the
financial year, as they were to the six months under review.
The principal risk factors relating to the Company can be
summarised as follows:
- Market Risk - a fall in the stock market as a whole will
affect the performance of the portfolio as well as the performance
of individual portfolio investments; it also includes interest
rate, inflation and currency risks; market risk may be impacted by
increased volatility during the continuing period of uncertainty
arising from the war in Ukraine, energy costs, supply chain
disruption and potential further evolution of COVID-19;
- Investment Performance Risk - this is the stock specific risk
that the stock selection process may not achieve the Company's
published objectives;
- Borrowing Risk - the Company has fixed long term borrowings
through its recently arranged Unsecured Senior Loan Notes. If the
Company's investments fall in value, gearing will result in an
increased adverse impact on performance;
- Income/Dividend Risk - investment income may fail to reach the
level required to meet the Company's income objective;
- Share Price Risk - the Company's prospects and NAV may not be
fully reflected in the share price;
- Corporate Governance and Internal Controls Risk - the Board
has delegated to third-party service providers the management of
the investment portfolio, depositary and custody services,
registration services, accounting and company secretarial services
and therefore relies on these service providers to manage the
associated risks;
- Reliance on Manager and other Third-Party Service Providers
Risk - the Company has no employees, so is reliant upon the
performance of third-party service providers for it to function,
particularly the Manager, administrator, depositary, custodian and
registrar;
- Emerging Risks - the Company may be affected by unexpected
macro-economic changes in inflation, interest rates and energy
costs. It may also be affected by the changing regulatory landscape
around ESG issues, including climate change. Whilst these risks
currently exist, the extent of them is yet to fully emerge but they
are regularly assessed by the Manager and the Board.
Other risks such as business, cyber security, strategic, policy
and political risks, as well as regulatory risks (such as an
adverse change in the tax treatment of investment companies) and
the perceived impact of the Manager ceasing to be involved with the
Company, are all considered.
Investments in Order of Valuation
As at 30 September 2022
UK LISTED ORDINARY SHARES UNLESS STATED OTHERWISE
Value % of
Investment Sector GBP'000 Portfolio
------------------------------ ----------------------------------------- --------- -----------
Shell Oil, Gas and Coal 89,520 8.2
Personal Care, Drug and Grocery
Unilever Stores 68,244 6.3
BAE Systems Aerospace and Defence 58,374 5.4
AstraZeneca Pharmaceuticals and Biotechnology 52,437 4.8
NatWest Banks 49,528 4.5
Personal Care, Drug and Grocery
Tesco Stores 48,132 4.4
Anglo American Industrial Metals and Mining 42,886 3.9
Ashtead Industrial Transportation 36,533 3.4
RS Industrial Support Services 35,600 3.3
HSBC Banks 32,404 3.0
------------------------------ ----------------------------------------- --------- -----------
TEN TOP HOLDINGS 513,658 47.2
------------------------------------------------------------------------- --------- -----------
Weir Industrial Engineering 31,583 2.9
Standard Chartered Banks 30,038 2.7
Centrica Gas, Water and Multi-Utilities 29,476 2.7
Hays Industrial Support Services 26,215 2.4
WPP Media 25,017 2.3
Compass Consumer Services 24,777 2.3
KPN - Dutch Listed Telecommunications Service Providers 24,112 2.2
TotalEnergies - French Listed Oil, Gas and Coal 23,310 2.1
Smith & Nephew Medical Equipment and Services 22,684 2.1
Serco Industrial Support Services 22,580 2.1
------------------------------ ----------------------------------------- --------- -----------
TWENTY TOP HOLDINGS 773,450 71.0
------------------------------------------------------------------------- --------- -----------
Mondi General Industrials 21,454 2.0
GSK Pharmaceuticals and Biotechnology 20,747 1.9
Dunelm Retailers 20,628 1.9
Novartis - Swiss Listed Pharmaceuticals and Biotechnology 20,447 1.9
Newmont - US Listed Precious Metals and Mining 18,609 1.7
Personal Care, Drug and Grocery
Greggs Stores 17,005 1.6
ConvaTec Medical Equipment and Services 16,911 1.5
Personal Care, Drug and Grocery
Reckitt Stores 15,900 1.5
Haleon Pharmaceuticals and Biotechnology 13,315 1.2
Whitbread Travel and Leisure 13,234 1.2
------------------------------ ----------------------------------------- --------- -----------
THIRTY TOP HOLDINGS 951,700 87.4
------------------------------------------------------------------------- --------- -----------
Thales - French Listed Aerospace and Defence 13,061 1.2
Ascential Software and Computer Services 12,349 1.1
CNH Industrial Industrial Engineering 11,361 1.1
Admiral Non-Life Insurance 11,196 1.0
Marks & Spencer Retailers 10,798 1.0
Roche - Swiss Listed Pharmaceuticals and Biotechnology 10,586 1.0
Redrow Household Goods and Home Construction 10,267 1.0
QinetiQ Aerospace and Defence 10,219 0.9
Bellway Household Goods and Home Construction 10,087 0.9
Genuit Construction and Materials 7,650 0.7
------------------------------ ----------------------------------------- --------- -----------
FORTY TOP HOLDINGS 1,059,274 97.3
------------------------------------------------------------------------- --------- -----------
Marshalls Construction and Materials 6,867 0.6
easyJet Travel and Leisure 6,761 0.6
Howden Joinery Retailers 5,977 0.5
Dr. Martens Personal Goods 5,297 0.5
Intel - US Listed Technology Hardware and Equipment 5,029 0.5
Investment Banking and Brokerage - -
EurovestechUQ Services
Raven PropertyUQ - Preference Real Estate Investment and - -
shares Services
------------------------------------ ----------------------------------- --------- ---------
TOTAL HOLDINGS 47 (31 MARCH
2022: 50) 1,089,205 100.0
------------------------------------ ----------------------------------- --------- ---------
Governance
Going Concern, Related Party Transactions and Statement of
Directors' Responsibilities in respect of the preparation of the
half-yearly financial report
GOING CONCERN
This half-yearly Financial Report has been prepared on a going
concern basis. The Directors consider this is the appropriate basis
as the Company has adequate resources to continue in operational
existence for the foreseeable future, being at least twelve months
from the date of this report. In considering this, the Directors
have reviewed the Company's investment objective and capital
structure generally. The Directors considered the diversified
portfolio of readily realisable securities which can be used to
meet funding commitments, the recent arrangement of private loan
notes and repayment of the 2022 debenture, and the ability of the
Company to meet all its liabilities and ongoing expenses from its
assets and revenue. The Directors also considered revenue forecasts
for the forthcoming year and future dividend payments and
accumulated revenue reserves in concluding that the going concern
basis is appropriate.
RELATED PARTY TRANSACTIONS
Under UK Generally Accepted Accounting Practice (UK Accounting
Standards and applicable law) and in accordance with the definition
provided by Listing Rule 11.1.4, the Company has identified the
Directors as related parties. No other related parties have been
identified. No transactions with related parties have taken place
which have materially affected the financial position or the
performance of the Company.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the half-yearly
Financial Report using accounting policies consistent with
applicable law and UK Accounting Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements has been prepared in
accordance with the FRS 104 Interim Financial Reporting and
- the interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rules
(DTR):
(a) DTR 4.2.7R, being an indication of important events that
have occurred during the first six months of the financial year and
their impact on the condensed set of financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R, being related party transactions that have taken
place in the first six months of the current financial year and
that have materially affected the financial position or performance
of the Company during that period; and any changes in the related
party transactions described in the last annual report that could
do so.
The half-yearly Financial Report has not been audited or
reviewed by the Company's auditor.
Signed on behalf of the Board of Directors
ELISABETH STHEEMAN /
CHAIR /
23 NOVEMBER 2022
Financial Review
Condensed Income Statement
Six Months To 30 September Six Months To 30 September
2022 2021
(Unaudited) (Unaudited)
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- --------- --------- -------- ------- -----------
(Losses)/gains on investments
held at fair value - (159,708) (159,708) - 82,797 82,797
Losses on foreign exchange - (223) (223) - (48) (48)
Income - note 2 28,071 - 28,071 26,447 - 26,447
---------------------------------- -------- --------- --------- -------- ------- -----------
28,071 (159,931) (131,860) 26,447 82,749 109,196
Investment management fee
- note 3 (722) (1,686) (2,408) (751) (1,752) (2,503)
Other expenses (504) (4) (508) (482) (4) (486)
---------------------------------- -------- --------- --------- -------- ------- -----------
Net return before finance
costs and taxation 26,845 (161,621) (134,776) 25,214 80,993 106,207
Finance costs - note 3 (1,285) (3,002) (4,287) (1,211) (2,826) (4,037)
---------------------------------- -------- --------- --------- -------- ------- -----------
Return on ordinary activities
before taxation 25,560 (164,623) (139,063) 24,003 78,167 102,170
Taxation - note 4 (376) - (376) (302) - (302)
---------------------------------- -------- --------- --------- -------- ------- -----------
Return on ordinary activities
after taxation for the financial
period 25,184 (164,623) (139,439) 23,701 78,167 101,868
---------------------------------- -------- --------- --------- -------- ------- -----------
Return per ordinary share:
Basic 14.77p (96.56)p (81.79)p 13.77p 45.39p 59.16p
---------------------------------- -------- --------- --------- -------- ------- -----------
Weighted average number of
ordinary shares in issue during 170, 486
the period ,924 172,182,929
---------------------------------- -------- --------- --------- -------- ------- -----------
The 'Total' column of this statement represents the Company's
income statement, prepared in accordance with UK Accounting
Standards. The 'Return on ordinary activities after taxation for
the financial period' is the total comprehensive income/(expense)
and therefore no additional statement of other comprehensive income
is presented. The supplementary 'Revenue' and 'Capital' columns are
presented for information purposes in accordance with the Statement
of Recommended Practice issued by the Association of Investment
Companies. All items in the above statement derive from continuing
operations of the Company. No operations were acquired or
discontinued in the period.
Condensed Statement of Changes in Equity
Capital
Share Share Redemption Capital Revenue
Capital Premium Reserve Reserve Reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ----------- --------- -------- ---------
For the six months ended
30 September 2022 (Unaudited)
At 31 March 2022 48,917 10,394 24,676 1,041,086 50,764 1,175,837
Return on ordinary activities - - - (164,623) 25,184 (139,439)
Dividends paid - note 5 - - - - (21,859) (21,859)
Shares bought back and held in
treasury - - - (11,569) - (11,569)
------------------------------- -------- -------- ----------- --------- -------- ---------
At 30 September 2022 48,917 10,394 24,676 864,894 54,089 1,002,970
------------------------------- -------- -------- ----------- --------- -------- ---------
For the six months ended
30 September 2021 (Unaudited)
At 31 March 2021 48,917 10,394 24,676 945,728 61,516 1,091,231
Return on ordinary activities - - - 78,167 23,701 101,868
Dividends paid - note 5 - - - - (28,669) (28,669)
------------------------------- -------- -------- ----------- --------- -------- ---------
At 30 September 2021 48,917 10,394 24,676 1,023,895 56,548 1,164,430
------------------------------- -------- -------- ----------- --------- -------- ---------
Condensed Balance Sheet
30 September 31 March
2022 2022
(Unaudited) (Audited)
GBP'000 GBP'000
------------------------------------------------------ ------------ -----------
Fixed assets
Investments held at fair value through profit or loss
- note 7 1,089,205 1,218,725
------------------------------------------------------ ------------ -----------
Current assets
Amounts due from brokers 7,198 1,138
Tax recoverable 2,220 1,897
Prepayments and accrued income 4,747 7,789
Cash and cash equivalents 29,679 68,728
------------------------------------------------------ ------------ -----------
43,844 79,552
------------------------------------------------------ ------------ -----------
Creditors: amounts falling due within one year
Debenture Stock 7 3/4 % 30 September 2022 - (99,874)
Amounts due to brokers (8,645) (1,316)
Share buybacks awaiting settlement - (448)
Accruals (1,434) (802)
------------------------------------------------------ ------------ -----------
(10,079) (102,440)
------------------------------------------------------ ------------ -----------
Net current assets/(liabilities) 33,765 (22,888)
------------------------------------------------------ ------------ -----------
Total assets less current liabilities 1,122,970 1,195,837
Creditors: amounts falling due after more than one
year
Unsecured Senior Loan Notes (120,000) (20,000)
------------------------------------------------------ ------------ -----------
Net assets 1,002,970 1,175,837
------------------------------------------------------ ------------ -----------
Capital and reserves
Share capital - note 6 48,917 48,917
Share premium 10,394 10,394
Capital redemption reserve 24,676 24,676
Capital reserve 864,894 1,041,086
Revenue reserve 54,089 50,764
------------------------------------------------------ ------------ -----------
Total Shareholders' funds 1,002,970 1,175,837
------------------------------------------------------ ------------ -----------
Net asset value per ordinary share - note 8
Basic - debt at par value 592.82p 687.24p
- debt at fair value 618.85p 686.69p
------------------------------------------------------ ------------ -----------
Number of 25p ordinary shares in issue at the period
end - note 6 169,187,037 171,078,129
------------------------------------------------------ ------------ -----------
Condensed Cash Flow Statement
SIX MONTHS TO
30 SEPTEMBER
2022 2021
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Cash flow from operating activities
Net return before finance costs and taxation (134,776) 106,207
Tax on overseas income - note 4 (376) (302)
Adjustments for:
--------- ---------
Purchase of investments (141,998) (174,387)
Sale of investments 113,079 168,219
--------- ---------
(28,919) (6,168)
Losses/(gains) on investments held at fair value 159,708 (82,797)
Decrease/(increase) in debtors 2,719 (783)
Increase in creditors 359 395
------------------------------------------------------- --------- ---------
Net cash (outflow)/inflow from operating activities (1,285) 16,552
------------------------------------------------------- --------- ---------
Cash flow from financing activities
Interest and commitment fees paid on bank facility (14) (49)
Interest paid on unsecured senior loan notes/debenture
stocks (3,874) (3,874)
Issue of unsecured senior loan notes 100,000 -
Redemption of debenture loan stock (100,000) -
Shares bought back and held in treasury (12,017) -
Dividends paid - note 5 (21,859) (28,669)
------------------------------------------------------- --------- ---------
Net cash outflow from financing activities (37,764) (32,592)
------------------------------------------------------- --------- ---------
Net decrease in cash and cash equivalents (39,049) (16,040)
Cash and cash equivalents at start of the period 68,728 32,570
------------------------------------------------------- --------- ---------
Cash and cash equivalents at the end of the period 29,679 16,530
------------------------------------------------------- --------- ---------
Reconciliation of cash and cash equivalents to the
Balance Sheet is as follows:
Cash held at custodian 2,324 2,007
Goldman Sachs Liquidity Reserve International Fund 27,355 14,523
------------------------------------------------------- --------- ---------
Cash and cash equivalents 29,679 16,530
------------------------------------------------------- --------- ---------
Cash flow from operating activities includes:
Dividends received 30,342 25,340
------------------------------------------------------- --------- ---------
At 1 April Non-cash At 30 September
2022 Cash flows movement 2022
GBP'000 GBP'000 GBP'000 GBP'000
Reconciliation of net debt:
Cash and cash equivalents 68,728 (39,049) - 29,679
Debenture Stock 7 3/4 % 30 September
2022 (99,874) 100,000 (126) -
Unsecured Senior Loan Notes (20,000) (100,000) - (120,000)
------------------------------------- ---------- ---------- --------- ---------------
Total (51,146) (39,049) (126) (90,321)
------------------------------------- ---------- ---------- --------- ---------------
Notes to the Condensed Financial Statements
1. ACCOUNTING POLICIES
The condensed financial statements have been prepared in
accordance with applicable United Kingdom Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice),
including FRS 102. The Financial Reporting Standard applicable in
the UK and Republic of Ireland, FRS 104 Interim Financial Reporting
and the Statement of Recommended Practice Financial Statements of
Investment Trust Companies and Venture Capital Trusts, issued by
the Association of Investment Companies in July 2022. The financial
statements are issued on a going concern basis.
The accounting policies applied to these condensed financial
statements are consistent with those applied in the financial
statements for the year ended 31 March 2022.
2. INCOME
SIX MONTHS TO
30 SEPTEMBER
2022 2021
(Unaudited) (Unaudited)
GBP'000 GBP'000
--------------------- ----------- ------------- -------------
Income from investments:
UK dividends - ordinary 19,076 18,770
- special 5,693 4,954
UK zero coupon bond income 41 -
Overseas dividends 3,116 2,686
UK unfranked investment income 145 -
---------------------------------- ------------- -------------
28,071 26,410
--------------------------------- ------------- -------------
Other income:
Underwriting commission - 37
---------------------------------- ------------- -------------
Total income 28,071 26,447
---------------------------------- ------------- -------------
3. MANAGEMENT FEE AND FINANCE COSTS
The management fee arrangements are as reported in the Company's
2022 annual financial report, being 0.04000% on the first GBP500
million and 0.03875% on the remainder of the market capitalisation
of the Company's ordinary shares at each month end and paid monthly
in arrears (equivalent to an annualised fee of 0.480% on the first
GBP500m and 0.465% on the remainder). The management fee and
finance costs are allocated 30% to revenue and 70% to capital.
4. TAXATION
Owing to the Company's status as an investment company, no tax
liability arises on capital gains. The tax charge represents
withholding tax suffered on overseas income. A deferred tax asset
is not recognised in respect of surplus management expenses since
the Directors believe that there will be no taxable profits in the
future against which these can be offset.
5. DIVIDS PAID ON ORDINARY SHARES
SIX MONTHS TO 30 SEPTEMBER
2022 2021
(Unaudited) (Unaudited)
---------------- ---------------
pence GBP'000 pence GBP'000
----------------------------------------------- ------- ------- ------ -------
Third interim 6.40 10,934 6.00 10,331
Final 6.40 10,925 6.00 10,331
----------------------------------------------- ------- ------- ------ -------
Total (excluding special dividends) 12.80 21,859 12.00 20,662
Special dividend in respect of previous period - - 4.65 8,007
----------------------------------------------- ------- ------- ------ -------
Total paid 12.80 21,859 16.65 28,669
----------------------------------------------- ------- ------- ------ -------
The first interim dividend of 6.40p per ordinary share for the
year ended 31 March 2023 (2022: 6.00p) will be paid on 25 November
2022 to shareholders on the register on 4 November 2022.
6. SHARE CAPITAL, INCLUDING MOVEMENTS
Share capital represents the total number of shares in issue,
including treasury shares.
SIX MONTHS
TO YEAR TO
30 SEPTEMBER
2022 31 MARCH 2022
(Unaudited) (Audited)
Share capital GBP'000 GBP'000
---------------------------- ------------ -------------
Ordinary shares of 25p each 42,297 42,770
Treasury shares of 25p each 6,620 6,147
---------------------------- ------------ -------------
48,917 48,917
---------------------------- ------------ -------------
SIX MONTHS
TO YEAR TO
30 SEPTEMBER
2022 31 MARCH 2022
Share capital (Unaudited) (Audited)
------------------------------------ ------------ -------------
Number of ordinary shares in issue:
Brought forward 171,078,129 172,182,929
Shares bought back into treasury (1,891,092) (1,104,800)
------------------------------------ ------------ -------------
Carried forward 169,187,037 171,078,129
------------------------------------ ------------ -------------
Number of shares held in treasury:
Brought forward 24,588,605 23,483,805
Shares bought back into treasury 1,891,092 1,104,800
------------------------------------ ------------ -------------
Carried forward 26,479,697 24,588,605
------------------------------------ ------------ -------------
Total ordinary shares 195,666,734 195,666,734
------------------------------------ ------------ -------------
Subsequent to the period end 809,000 ordinary shares were bought
back at an average price of 580p.
7. CLASSIFICATION UNDER FAIR VALUE HIERARCHY
All except two of the Company's portfolio of investments are in
the Level 1 category as defined in FRS 102 as amended for fair
value hierarchy disclosures (March 16). The three levels set out in
this follow.
Level 1 - The unadjusted quoted price in an active market for
identical assets or liabilities that the entity can access at the
measurement date.
Level 2 - Inputs other than quoted prices included within Level
1 that are observable (i.e. developed using market data) for the
asset or liability, either directly or indirectly.
Level 3 - Inputs are unobservable (i.e. for which market data is
unavailable) for the asset or liability.
The fair value hierarchy analysis for investments and related
forward currency contracts held at fair value at the period end is
as follows:
30 SEPTEMBER
2022 31 MARCH 2022
(Unaudited) (Audited)
GBP'000 GBP'000
-------------------------------------------------- ------------ -------------
Financial assets designated at fair value through
profit or loss:
Level 1 1,089,205 1,218,419
Level 3 - 306
-------------------------------------------------- ------------ -------------
Total for financial assets 1,089,205 1,218,725
-------------------------------------------------- ------------ -------------
There were two investments in Level 3 at the period end (31
March 2022: two investments) totalling GBPnil (31 March 2022:
GBP306,000).
The position size for neither holding changed during the
reporting period, although the estimated fair value of both was
reduced; for Eurovestech to GBPnil (31 March 2022: GBP69,000) and
for Raven Russia to GBPnil (31 March 2022: GBP237,000).
8. NET ASSET VALUE (NAV) PER ORDINARY SHARE
Refer to Alternative Performance Measures for definitions of NAV
- debt at par and NAV - debt at fair value.
(a) NAV - debt at par
The shareholders funds in the balance sheet are accounted for in
accordance with accounting standards. Prior to the redemption of
the GBP100m debenture stock on 30 September 2022 this did not
reflect the rights of shareholders on a return of assets under the
Articles of Association. Those rights were reflected in the net
assets with debt at par and the corresponding NAV per share. A
reconciliation between the two sets of figures follows. As the
GBP120m Unsecured Senior Loan Notes were issued at and being
recorded at par, a reconciliation is not required.
30 SEPTEMBER
2022 31 MARCH 2022
(Unaudited) (Audited)
Pence per share Pence per share
----------------------------------------------------- --------------- ---------------
Shareholders' funds 592.82 687.31
Less: unamortised discount and expenses arising from
debenture issue - (0.07)
----------------------------------------------------- --------------- ---------------
NAV - debt at par 592.82 687.24
----------------------------------------------------- --------------- ---------------
NAV - debt at par GBP'000 1,002,970 1,175,711
----------------------------------------------------- --------------- ---------------
(b) NAV - debt at fair value
The fair value of each tranche of the GBP120m Unsecured Senior
Loan Notes is ascertained by the administrator by aggregating the
discounted value of future cashflows, being the contractual
interest payments and the repayment of capital at maturity as each
falls due. The discount factor used for each tranche is based on
the market yield of UK Treasuries with similar maturity dates
adjusted to incorporate a credit spread. The GBP100m debenture
stock was redeemed in full on 30 September 2022. Prior to its
redemption, its fair value was determined by reference to the daily
closing price.
30 SEPTEMBER
2022 31 MARCH 2022
(Unaudited) (Audited)
Pence per
share Pence per share
----------------------------------------------------- ------------ ---------------
NAV - debt at par 592.82 687.24
Debenture Stock - debt at par - 58.45
Unsecured senior loan notes - debt at par 70.92 11.69
- debt at fair value (44.89) (70.69)
---------------------------------------------------- ------------ ---------------
NAV - debt at fair value 618.85 686.69
----------------------------------------------------- ------------ ---------------
NAV - debt at fair value GBP'000 1,047,022 1,174,773
----------------------------------------------------- ------------ ---------------
Debenture Stock at fair value GBP'000 - 102,734
----------------------------------------------------- ------------ ---------------
Unsecured senior loan notes at fair value GBP'000 75,948 18,204
----------------------------------------------------- ------------ ---------------
9. INVESTMENT TRUST STATUS
It is the intention of the Directors to conduct the affairs of
the Company in order that they satisfy the conditions for approval
as an investment trust company within the meaning of section 1159
of the Corporation Tax Act 2010.
10. STATUS OF HALF-YEARLY FINANCIAL REPORT
The financial information contained within the financial
statements in this half-yearly financial report does not constitute
statutory accounts within the meaning of section 434 of the
Companies Act 2006. The financial information for the half years
ended 30 September 2022 and 30 September 2021 has not been audited
or reviewed by the Company's auditors. The figures and financial
information for the year ended 31 March 2022 are extracted and
abridged from the latest audited accounts and do not constitute the
statutory accounts for that year. Those accounts have been
delivered to the Registrar of Companies and included the
Independent Auditor's Report which was unqualified and did not
contain a statement under section 498 of the Companies Act
2006.
By order of the Board
SANNE FUND SERVICES (UK) LIMITED
Company Secretary
23 November 2022
Other Information for Shareholders
Directors, Advisors and Principal Service Providers
DIRECTORS
Elisabeth Stheeman, Chair
Victoria Hastings, Senior Independent Director
Steve Baldwin, Audit Committee Chairman
Patrick Edwardson
Aidan Lisser (Appointed 27 May 2022)
Glen Suarez (Resigned 21 July 2022)
REGISTERED OFFICE
Quartermile One
15 Lauriston Place
Edinburgh
EH3 9EP
COMPANY NUMBER
Registered in Scotland.
Number: SC1836
ALTERNATIVE INVESTMENT FUND MANAGER (MANAGER)
Liontrust Fund Partners
LLP 2 Savoy Court
London
WC2R 0EZ
020 7412 1700
COMPANY SECRETARY
Sanne Fund Services (UK) Limited
6th Floor, 125 London Wall
London
EC2Y 5AS
020 3327 9720
INDEPENT AUDITOR
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
DEPOSITARY AND CUSTODIAN
The Bank of New York Mellon (International) Limited
160 Queen Victoria Street
London
EC4V 4LA
BANKER
The Bank of New York Mellon
160 Queen Victoria Street
London
EC4V 4LA
CORPORATE BROKER
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
LAWYER
Dentons UK and Middle East LLP
Quartermile One
15 Lauriston Place Edinburgh
EH3 9EP
THE ASSOCIATION OF INVESTMENT COMPANIES
The Company is a member of the Association of Investment
Companies. Contact details are as follows:
020 7282 5555
Email: enquiries@theaic.co.uk
Website: www.theaic.co.uk
REGISTRAR
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds, LS1 4DL
If you hold your shares direct and not through a Savings Scheme
or ISA and have queries relating to your shareholding, you should
contact the Registrars on:
0371 664 0300
Calls are charged at the standard geographic rate and will vary
by provider.
From outside the UK: +44 371 664 0300. Calls from outside the
United Kingdom will be charged at the applicable international
rate. Lines are open from 9.00am to 5.30pm, Monday to Friday
(excluding UK Public Holidays).
Shareholders can also access their holding details via Link's
website:
www.signalshares.com
Link Group provide an on-line and telephone share dealing
service to existing shareholders who are not seeking advice on
buying or selling. This service is available at
www.linksharedeal.com or 0371 664 0445
Calls are charged at the standard geographic rate and will vary
by provider.
From outside the UK: +44 371 664 0445. Calls from outside the
United Kingdom will be charged at the applicable international
rate. Lines are open from 8.00am to 5.30pm, Monday to Friday
(excluding UK Public Holidays).
Link Group is the business name of Link Market Services
Limited.
Alternative Performance Measures
ALTERNATIVE PERFORMANCE MEASURE (APM)
An APM is a measure of performance or financial position that is
not defined in applicable accounting standards and cannot be
directly derived from the financial statements. The calculations
shown in the corresponding tables are for the interim period ended
30 September 2022 and the year ended 31 March 2022. The APMs listed
here are widely used in reporting within the investment company
sector and consequently aid comparability, providing useful
additional information.
BENCHMARK (OR BENCHMARK INDEX)
A standard against which performance can be measured, usually an
index that averages the performance of companies in a stock market
or a segment of the market. The benchmark most often referred to in
this interim financial report is the FTSE All-Share Index.
BENCHMARK RETURN
Total return on the benchmark is on a mid-market value basis,
assuming all dividends received were reinvested, without
transaction costs, into the shares of the underlying companies at
the time the shares were quoted ex-dividend.
DISCOUNT OR PREMIUM (APM)
Discount is a measure of the amount by which the mid-market
price of an investment company share is lower than the underlying
net asset value of that share. Conversely, Premium is a measure of
the amount by which the mid-market price of an investment company
share is higher than the underlying net asset value of that share.
In this interim financial report, the discount is expressed as a
percentage of the NAV per share with debt at fair value (see
reconciliation of NAV per share with debt at fair value in note 8)
and is calculated according to the formula set out below. If the
shares are trading at a premium the result of the below calculation
will be positive and if they are trading at a discount, it will be
negative.
30 SEPTEMBER
2022 31 MARCH 2022
------------------------------------ ------------ ------------ -------------
Share price a 553.00p 634.00p
Net asset value per share - debt at
fair value (note 8) b 618.85p 686.69p
------------------------------------- ----------- ------------ -------------
Discount c = (a-b)/b (10.6)% (7.7)%
------------------------------------- ----------- ------------ -------------
GEARING
The gearing percentage reflects the amount of borrowings that a
company has invested. This figure indicates the extra amount by
which net assets, or shareholders' funds, would move if the value
of a company's investments were to rise or fall. A positive
percentage indicates the extent to which net assets are geared; a
nil gearing percentage, or 'nil', shows a company is ungeared. A
negative percentage indicates that a company is not fully invested
and is holding net cash as described below.
There are several methods of calculating gearing and the
following has been used in this report:
GROSS GEARING (APM)
This reflects the amount of gross borrowings in use by a company
and takes no account of any cash balances. It is based on gross
borrowings as a percentage of net assets.
30 SEPTEMBER
2022 31 MARCH 2022
GBP'000 GBP'000
------------------------------------- -------- ------------ -------------
Unsecured Senior Loan Notes - debt
at fair value (note 8) 75,948 18,204
Debenture stock - debt at fair value
(note 8) - 102,734
------------------------------------------------ ------------ -------------
Gross borrowings a 75,948 120,938
Net asset value - debt at fair value
(note 8) b 1,047,022 1,174,773
-------------------------------------- ------- ------------ -------------
Gross gearing c = a/b 7.3% 10.3%
-------------------------------------- ------- ------------ -------------
NET GEARING OR NET CASH (APM)
Net gearing reflects the amount of net borrowings invested, i.e.
borrowings less cash and cash equivalents (incl. investments in
money market funds). It is based on net borrowings as a percentage
of net assets. Net cash reflects the net exposure to cash and cash
equivalents, as a percentage of net assets, after any offset
against total borrowings.
30 SEPTEMBER 31 MARCH 2022
2022
GBP'000 GBP'000
------------------------------------- -------- ------------ -------------
Unsecured Senior Loan Notes - debt
at fair value (note 8) 75,948 18,204
Debenture stock - debt at fair value
(note 8) - 102,734
Less: cash and cash equivalents (29,679) (68,728)
------------------------------------------------ ------------ -------------
Net borrowings a 46,269 52,210
Net asset value - debt at fair value
(note 8) b 1,047,022 1,174,773
-------------------------------------- ------- ------------ -------------
Net gearing c = a/b 4.4% 4.4%
-------------------------------------- ------- ------------ -------------
NET ASSET VALUE (NAV)
Also described as shareholders' funds, the NAV is the aggregate
value of all assets less all liabilities. Liabilities for this
purpose include debt, deducted at either par value or fair value as
described in more detail below. The NAV per share is calculated by
dividing the net asset value by the number of ordinary shares in
issue (excluding shares held in treasury).
NET ASSET VALUE (NAV) - DEBT AT PAR
The NAV with debt at par recognises the value of the debt
liability as the nominal amount that will be repaid at maturity.
For the GBP120m unsecured Senior Loan Notes, this recognises a
liability of GBP120m. This is the basis used in the preparation of
the Condensed Balance Sheet on page 17.
NET ASSET VALUE (NAV) - DEBT AT FAIR VALUE
As set out above, NAV with debt at par is the basis for
preparation of the Condensed Balance Sheet. An alternative, NAV
with debt at fair value, is widely used within the investment
company sector for the reporting of performance, premium or
discount and gearing, thereby aiding the comparability of similar
investment companies. NAV with debt at fair value estimates the
current value of the debt liability rather than the amount to be
repaid at maturity. This estimates the amount that a willing lender
and willing borrower may be expected to agree on an arms length
basis as the value of debt of the same amount, contracted interest
rate and repayment schedule as that borrowed by the Company.
Further detail of the valuation mechanism is set out in Note 8(b)
on page 22.
RETURN
The return generated in a period from the investments.
CAPITAL RETURN
Reflects the return on NAV, but excluding any dividends
reinvested.
TOTAL RETURN
Total return is the theoretical return to shareholders that
measures the combined effect of any dividends paid together with
the rise or fall in the share price or NAV. In this half-yearly
financial report these return figures shave been sourced from
Refinitiv who calculate returns on an industry comparative
basis.
NET ASSET VALUE TOTAL RETURN (APM)
Total return on net asset value per share, with debt at fair
value, assuming dividends paid by the Company were reinvested into
the shares of the Company at the NAV per share at the time the
shares were quoted ex-dividend.
SHARE PRICE TOTAL RETURN (APM)
Total return to shareholders, on a mid-market price basis,
assuming all dividends received were reinvested, without
transaction costs, into the shares of the Company at the time the
shares were quoted ex-dividend.
SIX MONTHS ENDED 30 SEPTEMBER NET ASSET VALUE SHARE PRICE
2022
--------------------------------- -------- --------------- -----------
As at 30 September 2022 618.85p 553.00p
As at 31 March 2022 686.69p 634.00p
-------------------------------------------- --------------- -----------
Change in period a -9.9% -12.8%
Impact of dividend reinvestments
(1) b 1.7% 1.8%
---------------------------------- ------- --------------- -----------
Total return for the period c = a+b -8.2% -11.0%
---------------------------------- ------- --------------- -----------
YEAR ENDED 31 MARCH 2022 NET ASSET VALUE SHARE PRICE
--------------------------------- -------- --------------- -----------
As at 31 March 2022 686.69p 634.00p
As at 31 March 2021 628.29p 600.00p
-------------------------------------------- --------------- -----------
Change in year a 9.3% 5.7%
Impact of dividend reinvestments
(1) b 4.8% 4.9%
---------------------------------- ------- --------------- -----------
Total return for the year c = a+b 14.1% 10.6%
---------------------------------- ------- --------------- -----------
(1) Total dividends paid during the period of 12.80p (31 March
2022: 28.65p) reinvested at the NAV or share price on the
ex-dividend date. NAV or share price falls subsequent to the
reinvestment date consequently further reduce the returns, vice
versa if the NAV or share price rises.
The Edinburgh Investment Trust plc
Quartermile One
15 Lauriston Place
Edinburgh
EH3 9EP
www.edinburghinvestmenttrust.com
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