Final Results
Edinburgh Worldwide Inv Trust PLC
01 December 2006
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Results for the year to 31 October 2006
Over the year Edinburgh Worldwide's share price rose by 17% and net asset value
per share increased by 15%. By comparison, the benchmark index (MSCI All
Countries Index in sterling terms) rose by 11%.
The investment focus remains long term and the approach taken is to choose
shares on a global basis on their merits alone rather than by reference to the
composition of the benchmark.
Baillie Gifford has been managing Edinburgh Worldwide for three years and over
that period the share price has risen by 79%, NAV per share by 55% and the
Benchmark by 34%
• Gearing. During the period equity gearing was increased on market weakness
with additions being made to existing holdings on setbacks. The current
level is likely to be maintained unless market sentiment changes
significantly.
• Earnings and Dividend. Earnings per share fell from 2.26p to 1.67p. A final
dividend of 1.50p is being recommended to give an unchanged total for the
year of 2.00p. Edinburgh Worldwide's objective is capital growth and
achieving income is not a consideration when selecting investments. In
future the level of the dividend is likely to equate roughly with the level
of earnings.
• Second half. In the second half of the year net asset value fell by 3%
while the Benchmark fell by 2%.
• Investments. There are 39 equity investments in the portfolio of which 19
have been held since the portfolio was reorganised in November 2003.
During the year two holdings were taken over: Golden West (Californian
mortgage lender) and McCarthy & Stone (retirement home builder). Notable
sales were: ABB (power generation and automation equipment), BMW
(automobiles), Imperial Tobacco, Wellpoint (managed care operator), BHP
Billiton (mining) and Dell (computer manufacturer). New holdings were taken
in Banco Itau (Brazilian bank), Essilor (lens manufacturer), Getty Images
(internet based picture library) Infosys (Indian IT outsourcer), Straumann
(Swiss dental company) and Yamada Denki (Japan's largest electronic retailer).
• Outlook. The Managers continue to find what they view as attractive long
term investment opportunities.
Past performance is no guarantee of future performance.
Edinburgh Worldwide aims to achieve long term capital growth by investing in
stock markets throughout the world. The Trust has total assets of £150 million
(before deduction of loans of £26 million).
Edinburgh Worldwide is managed by Baillie Gifford & Co, the Edinburgh based fund
management group with over £47 billion under management and advice as at 30
November 2006.
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 Baillie Gifford website at www.bailliegifford.com.
1 December 2006
- ends -
For further information please contact:
Mark Urquhart, Manager,
Edinburgh Worldwide Investment Trust plc 0131 275 2070
Robert O'Riordan, Marketing Manager
Baillie Gifford & Co 07730 412007
Mike Lord, Director,
Broadgate Marketing 020 7726 6111
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Chairman's Statement
This has been another satisfactory year for your Company: the share price rose
by 17.0% and net asset value (NAV) per share by 14.8%. In comparison, the MSCI
All Countries World Index (the benchmark against which performance is measured)
rose by 11.4%. As the Managers invest for the long term, performance over
several years is probably more telling. Currently, the picture here is good
too: over 3 years (when the current Managers assumed responsibility) the share
price is up by 79.3% and the NAV up by 55.5% while our benchmark is only 33.8%
higher. It is also worth noting that at one point during the year the shares
actually traded at a small premium, before slipping back to a discount in
single figures at the time of the spring market correction.
Investment
The Managers choose shares on a global basis for their long term attractions.
These investments are positioned in a relatively concentrated portfolio of about
40 publicly traded equities. The average holding period of companies in the
portfolio is likely to be at least 5 years. Those holdings which have been held
continuously since the portfolio was reorganised in November 2003 when Baillie
Gifford assumed control are marked as such later in the report.
The results of this approach are, to date, very encouraging. However I must
again reiterate that past performance should not be taken a as guide to future
performance and also point out that because there is little resemblance between
this portfolio and the index against which it is measured, there will inevitably
be periods, when performance lags the index. Shares in Edinburgh Worldwide are
really only suitable for those investors who share the Board's and the Managers'
long time horizons.
Investing in markets at times of increased volatility requires both verve and
nerve. The Managers have displayed both in this period. Gearing into equities,
which had declined naturally as markets rose over the past two and a half years,
was increased when markets suffered a setback earlier this calendar year; a
number of holdings were increased taking advantage of falls in share prices
driven by short term market concerns.
Earnings and Dividend
Shares are not chosen for their income generation capability and this year's
earnings per share fell from 2.26p to 1.67p. As well as being unsuitable for
short term investors, Edinburgh Worldwide should not be held by those with a
preference for income. That said, we are recommending a final dividend of 1.50p
which will give an unchanged total for the year of 2.00p. The shortfall
compared to earnings is being taken from the revenue reserve which has been
built up over the years to stand at 1.51p per share at 31 October 2005 after
providing for the 2005 final dividend.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Chairman's Statement (Ctd)
The Board is recommending a maintained dividend this year as it realises that
private investors like a predictable income stream. Over the past three years
Edinburgh Worldwide's earnings have been boosted by a number of special
dividends that may not be repeated and our current forecast is for a decrease in
earnings in 2007. The revenue reserve is unlikely to be used to supplement
earnings in future. Edinburgh Worldwide's objective is capital growth so it is
logical that going forward the level of dividend per share will equate roughly
with the level of earnings per share.
Treasury Shares
We are seeking to renew the powers to hold any shares which may be bought back
in treasury with a view to re-issuing later but only at a premium. While no
shares were bought back last year, we consider this a useful tool to have at our
disposal in the event of an imbalance in, or a time lag, between the supply and
demand for our shares.
Performance Fee
A performance fee of £79,000 is payable to the Managers this year due to their
out performance of the agreed benchmark. Details of the fee arrangement and the
calculation are included within the Annual Report.
Outlook
The Managers continue to find investment opportunities which they view as
attractive over the long term and we intend maintaining gearing at around
current levels unless market sentiment changes significantly.
Annual General Meeting
The Annual General Meeting will be held at 12 noon on Thursday, 1 February 2007
in Discovery Point, Dundee, I do hope you will come. You will have the
opportunity to meet the Board and to listen to a short presentation by Mark
Urquhart, the partner at Baillie Gifford who manages our investments, on the
investment approach and the portfolio's progress.
David A Coltman
Chairman
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
The following is the unaudited preliminary statement for the year to 31 October
2006 which was approved by the Board on 30 November 2006. The Board of
Edinburgh Worldwide Investment Trust plc is recommending to the Annual General
Meeting of the Company to be held on 1 February 2007 the payment of a final
dividend of 1.50p (1.50p last year) per ordinary share making 2.00p (2.00p last
year) for the year ended 31 October 2006.
INCOME STATEMENT
For the year ended For the year ended
31 October 2006 31 October 2005
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
Restated+ Restated+
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 16,264 16,264 - 26,795 26,795
Currency gains/(losses) - 1,751 1,751 - (243) (243)
Income (note 2) 2,116 - 2,116 2,379 - 2,379
Investment management fee (note 3) (253) (841) (1,094) (179) (1,474) (1,653)
Other administrative expenses (399) - (399) (359) - (359)
Net return before finance costs
and taxation 1,464 17,174 18,638 1,841 25,078 26,919
Finance costs of borrowings (382) (1,146) (1,528) (395) (1,183) (1,578)
Return on ordinary activities
before taxation 1,082 16,028 17,110 1,446 23,895 25,341
Tax on ordinary activities (265) 135 (130) (341) 184 (157)
Return on ordinary activities
after taxation 817 16,163 16,980 1,105 24,079 25,184
Return per ordinary share
(note 4) 1.67p 32.98p 34.65p 2.26p 49.13p 51.39p
* The total column of this statement is the profit and loss account of the
Company.
+ Various changes in accounting policies, as described in note 1, have had the
cumulative effect of increasing reported net assets by £628,000 for the year
ended 31 October 2005.
All revenue and capital items in this statement derive from continuing
operations.
A Statement of Total Recognised Gains and Losses is not required as all
gains and losses of the Company have been reflected in the above statement.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
BALANCE SHEET
At 31 October 2006 At 31 October 2005
(unaudited) (audited)
Restated+
£'000 £'000
FIXED ASSETS
Investments held at fair value 148,870 136,800
CURRENT ASSETS
Debtors 1,629 454
Cash and short term deposits 3,934 305
5,563 759
CREDITORS
Amounts falling due within one year (4,335) (1,698)
NET CURRENT ASSETS/(LIABILITIES) 1,228 (939)
TOTAL ASSETS LESS CURRENT LIABILITIES 150,098 135,861
CREDITORS
Amounts falling due after more than one year (note 6) (26,062) (27,825)
124,036 108,306
CAPITAL AND RESERVES
Called-up share capital 2,450 2,450
Share premium 82,180 82,180
Special reserve 35,220 35,220
Capital reserve - realised (34,132) (45,920)
Capital reserve - unrealised 37,004 32,629
Revenue reserve 1,314 1,477
EQUITY SHAREHOLDERS' FUNDS 124,036 108,036
NET ASSET VALUE PER ORDINARY SHARE 253.11p 220.46p
+ See note 1.
DISTRIBUTION OF ASSETS
(unaudited)
At 31 October 2006 At 31 October 2005
Restated+
% %
Equities: United Kingdom 1.8 7.3
Continental Europe 24.3 18.3
North America 35.0 40.4
Japan 5.5 3.1
Asia Pacific 4.6 4.5
Emerging Markets 23.8 19.1
Total equities 95.0 92.7
Sterling denominated bonds 0.8 1.0
US$ denominated bonds 2.2 4.8
Yen denominated bonds 1.2 2.2
Net current assets/(liabilities) 0.8 (0.7)
Total assets (before deduction of loan) 100.0 100.0
+ See note 1.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
Called-up Share Special Capital Capital Revenue Equity
share premium reserve reserve - reserve - reserve shareholders'
capital realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 November 2005 as
previously reported 2,450 82,180 35,220 (45,920) 32,736 742 107,408
Prior year adjustments:
Revaluation of
investments at bid
prices - - - - (107) - (107)
Reversal of provision
of final dividend - - - - - 735 735
Shareholders' funds at
1 November 2005 as
restated 2,450 82,180 35,220 (45,920) 32,629 1,477 108,036
Return on ordinary
activities after
taxation - - - 11,788 4,375 817 16,980
Dividends paid during
the year - - - - - (980) (980)
Shareholders' funds at
31 October 2006 2,450 82,180 35,220 (34,132) 37,004 1,314 124,036
Called-up Share Special Capital Capital Revenue Equity
share premium reserve reserve - reserve - reserve shareholders'
capital realised unrealised funds
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Shareholders' funds at
1 November 2004 as
previously reported 2,450 82,180 35,220 (44,457) 7,182 617 83,192
Prior year adjustments:
Revaluation of
investments at bid
prices - - - - (95) - (95)
Reversal of provision
of final dividend - - - - - 833 833
Shareholders' funds at
1 November 2004 as
restated 2,450 82,180 35,220 (44,457) 7,087 1,450 83,930
Return on ordinary
activities after
taxation - - - (1,463) 25,542 1,105 25,184
Dividends paid during
the year - - - - - (1,078) (1,078)
Shareholders' funds at
31 October 2005 2,450 82,180 35,220 (45,920) 32,629 1,477 108,036
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
SUMMARISED CASH FLOW STATEMENT
For the year ended For the year ended
31 October 2006 31 October 2005
(unaudited) (audited)
£'000 £'000 £'000 £'000
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES
(note 8) (82) 1,475
NET CASH OUTFLOW FROM SERVICING OF FINANCE (1,554) (1,564)
TOTAL TAX PAID (128) (158)
FINANCIAL INVESTMENT
Acquisitions of investments (35,655) (26,528)
Disposals of investments 42,040 27,633
Realised currency loss (12) (22)
NET CASH INFLOW FROM FINANCIAL INVESTMENT 6,373 1,083
EQUITY DIVIDENDS PAID (980) (1,078)
INCREASE/(DECREASE) IN CASH 3,629 (242)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash in the period 3,629 (242)
Exchange movement on bank loans 1,763 (221)
MOVEMENT IN NET DEBT IN THE YEAR 5,392 (463)
NET DEBT AT 1 NOVEMBER (27,520) (27,057)
NET DEBT AT 31 OCTOBER (22,128) (27,520)
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE
at 31 October 2006
(unaudited)
Fair value
Fair value % of Performance+ 2005
£'000 total Restated++
assets £'000
Name Business Absolute Relative
% %
Atlas Copco* Engineering 7,009 4.7 51.1 32.6 4,541
Moody's* Bond rating agency 6,684 4.5 16.0 1.8 6,421
Canon* Printers, copiers and cameras 5,939 4.0 45.0 27.2 4,156
CVRD Iron ore mining 5,895 3.9 13.9 (0.1) 4,616
Gazprom* Gas exploration and production 5,874 3.9 68.9 48.2 5,208
SAP* Business software 5,501 3.7 8.8 (4.5) 2,890
Petrobras* Oil exploration and production 5,337 3.5 31.9 15.7 4,136
Porsche* Luxury automobiles 5,230 3.5 51.2 32.7 3,486
Pulte Homes American house builder 5,069 3.4 (23.2) (32.6) 2,486
Samsung Electronics* Electronics manufacturer 4,815 3.2 14.3 0.3 4,245
eBay Internet auction 4,437 2.9 (24.4) (33.6) 2,400
Infosys Technologies Software company 4,147 2.8 35.5** 33.7** -
Lukoil* Oil exploration and production 4,065 2.7 35.6 19.0 5,381
Sandvik Engineering 3,942 2.6 21.5 6.6 2,581
Teva Pharmaceuticals* Generic drugs manufacturer 3,805 2.5 (19.2) (29.1) 3,878
Microsoft* Software products 3,577 2.4 4.9 (7.9) 3,452
Hermes* Luxury goods 3,532 2.4 34.8 18.3 2,391
HDFC Mortgage bank 3,414 2.3 42.1 24.7 2,719
Banco Itau Retail and commercial bank 3,251 2.2 22.1** 14.4** -
Carnival Cruise ship operator 3,186 2.1 (6.6) (18.0) 2,585
Ericsson* Telecommunications equipment 3,121 2.1 9.5 (3.9) 2,898
VCA Antech Animal hospitals and diagnostics 3,056 2.0 16.3 2.1 2,333
Omnicom* Advertising agency 2,995 2.0 14.5 0.5 2,016
Straumann Dental implants 2,903 1.9 (10.3)** (10.9)** -
Whole Foods Market Organic food chain 2,874 1.9 (15.3) (25.7) 3,498
Essilor Opthalmology 2,860 1.9 (3.2)** (2.7)** -
Pool Swimming pool supplies 2,822 1.9 6.5 (6.5) 2,129
Progressive Ohio* Auto insurance 2,789 1.9 (22.5) (31.9) 3,595
Wolseley* Builders' merchant 2,755 1.8 10.5 (3.1) 2,559
Iron Mountain Document management services 2,539 1.7 3.4 (9.2) 1,980
M&T Bank* Retail banking 2,487 1.7 6.7 (6.3) 2,659
Walgreen* Pharmacy chain 2,384 1.6 (10.3) (21.3) 2,670
Amazon.com Online retailer 2,354 1.5 (11.4) (22.2) 2,023
L'Oreal Personal care 2,295 1.5 23.6 8.5 1,626
Yamada Denki Consumer electronics retailer 2,256 1.5 6.2** (0.1)** -
William Wrigley* Chewing gum manufacturer 2,095 1.4 (11.5) (22.3) 2,415
Zhejiang Expressway Toll-road operator 2,089 1.4 10.8 (2.8) 1,860
Getty Images Internet based image library 1,768 1.2 (48.5)** (48.1)** -
Patterson Companies Dental products and supplies 1,428 0.9 (26.1) (35.1) 1,920
Total Equities 142,579 95.0
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE (Ctd)
at 31 October 2006
(unaudited)
Fair value % of total
£'000 assets
Name
Total Equities (brought forward) 142,579 95.0
Fixed Interest
Sterling denominated bonds
Safeway 5.875% 2007 626 0.4
AMP Group Finance 7.125% 2019 562 0.4
1,188 0.8
US$ denominated bonds
HSBC Bank USA 3.875% 2009 558 0.4
Old Mutual 8% 2008 547 0.4
Inmarsat 7.625% 2008/12 541 0.4
AIG 5.625% 2007 525 0.3
Golden West 4.125% 2007 514 0.3
Household Fin Corp 7% 2012 281 0.2
Deutsche Telecom 3.875% 2008 256 0.2
3,222 2.2
Yen denominated bonds
Toyota Motor Corp 0.75% 2008 986 0.6
HBOS Treasury Services 0.8% 2008 895 0.6
1,881 1.2
Total Fixed Interest 6,291 4.2
Total Investments 148,870 99.2
Net Liquid Assets 1,228 0.8
Total Assets at Fair Value (before deduction of loan) 150,098 100.0
+ Absolute and relative performance has been calculated over the period 1
November 2005 to 31 October 2006.
Absolute performance is in sterling terms; relative performance is against
MSCI All Countries World Index in sterling terms.
++ See note 1.
* Held since November 2003 when Baillie Gifford & Co were appointed as
Investment Managers and
Secretaries to the Company.
** Figures relate to part-period returns.
Past performance is no guarantee of future performance.
(Source: Baillie Gifford & Co, StatPro)
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
NOTES
1. A number of new UK Financial Reporting Standards have been introduced with which the Company must
comply this year. These standards are part of the UK convergence programme with International
Accounting Standards and as such have required most UK listed companies to restate prior year figures
to reflect the new accounting treatment. The financial statements for the year to 31 October 2006
have been prepared on the basis of the accounting policies set out in the Company's Annual Financial
Statements at 31 October 2005 except as detailed below:
a) investments have been valued at fair value through profit or loss in accordance with FRS 26
'Financial Instruments: Measurement'. The effect is to move from a mid price to a bid price basis of
valuation, resulting in a reduction in the value of investments and unrealised capital reserves of
£112,000 (2005- £107,000);
b) in compliance with FRS 21 'Events after the Balance Sheet Date', dividends declared after
the period end are no longer treated as a liability at the period end. The effect is to reduce
creditors and increase revenue reserves by £735,000 (2005 - £735,000);
c) the implementation of FRS 25 and the revision of the Statement of Recommended Practice '
Financial Statements of Investment Trust Companies' (SORP) in 2005 has resulted in changes in the
presentation of total returns. Previously dividend distributions in respect of a year were disclosed
on the Statement of Total Return and the revenue column of that statement was deemed to be the profit
and loss account of the Company. We now present an Income Statement which does not show the
distribution in respect of equity shares and, whilst it still shows information on capital and
revenue returns, it is the total column which is regarded as the profit and loss account of the
Company. Dividend distributions are now shown in the Reconciliation of Movements in Shareholders'
Funds and in the Notes to the Accounts.
The overall effect of these changes on shareholders' funds and reserves is detailed below:
31 October 2006 31 October 2005
£'000 £'000
Effect on shareholders' funds:
Investments (112) (107)
Creditors: dividends payable 735 735
623 628
Effect on reserves:
Capital reserve - unrealised (112) (107)
Revenue reserve 735 735
623 628
31 October 2006 31 October 2005
£'000 £'000
2. Income
Income from investments and interest receivable 2,090 2,354
Other income 26 25
2,116 2,379
3. The investment management fee includes an investment performance fee of £79,000 (2005 - £890,000).
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
NOTES (Ctd)
31 October 2006 31 October 2005
Restated
£'000 £'000
4. Return per ordinary share
Revenue return 1.67p 2.26p
Capital return 32.98p 49.13p
Revenue return per ordinary share is based on the net revenue on ordinary activities after taxation of
£817,000 (2005 - £1,105,000), and on 49,004,319 ordinary shares, being the number of ordinary shares in
issue during each year.
Capital return per ordinary share is based on the net capital gain for the financial year of £16,163,000
(2005 - £24,079,000), and on 49,004,319 ordinary shares, being the number of ordinary shares in issue
during each year.
2006 2005 2006 2005
Restated Restated
£'000 £'000
5. Ordinary dividends
Amounts recognised as distributions in
the period:
Previous year's final (paid 2 February 1.50p 1.70p 735 833
2006)
Interim (paid 6 July 2006) 0.50p 0.50p 245 245
2.00p 2.20p 980 1,078
We also set out below the total dividends paid and proposed in respect of the financial year, which is
the basis on which the requirements of section 842 of the Income and Corporation Taxes Act 1988 are
considered. The revenue available for distribution by way of dividend for the year is £817,000 (2005 -
£1,105,000).
2006 2005 2006 2005
£'000 £'000
Dividends paid and proposed in the period:
Interim dividend per ordinary share
(paid 6 July 2006) 0.50p 0.50p 245 245
Proposed final dividend per ordinary
share (payable 2 February 2007) 1.50p 1.50p 735 735
2.00p 2.00p 980 980
If approved the final dividend will be paid on 2 February 2007 to all shareholders on the register at the
close of business on 12 January 2007. The ex-dividend date is 10 January 2007.
6. The loan includes US$31,250,000, Y1,313,200,000 and £3,800,000 drawn down under a multi-currency loan
facility with ING Bank N.V. (2005 - US$31,250,000, Y1,313,200,000 and £3,800,000). The loan is due for
repayment in July 2008.
7. At the Annual General Meeting on 30 January 2006 the Company renewed its authority to purchase shares in the
market, in respect of 7,345,747 ordinary shares (equivalent to 14.99% of its issued share capital at that
date). No shares were bought back during the year to 31 October 2006 or 2005. At 31 October 2006 the
Company had authority to buy back 7,345,747 ordinary shares.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
NOTES (Ctd)
31 October 2006 31 October 2005
Restated
£'000 £'000
8. Reconciliation of net revenue before finance costs and
taxation to net cash (outflow)/inflow from operating
activities
Net return on ordinary activities before finance costs
and taxation 18,638 26,919
Gains on investments - securities (16,264) (26,795)
Currency (gains)/losses (1,751) 243
Changes to debtors and creditors (778) 967
Amortisation of fixed income book cost 73 141
(82) 1,475
9. The financial information set out above does not constitute the Company's statutory accounts for the
year ended 31 October 2006. The financial information for 2005 is derived from the statutory accounts for 2005
and restated as disclosed in note 1. The accounts have been delivered to the Registrar of Companies.
The Auditors have reported on the 2005 accounts, their report was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985. The statutory accounts for 2006 are
unaudited and will be finalised on the basis of the financial information presented in this
preliminary announcement and will be delivered to the Registrar of Companies following the Company's
Annual General Meeting.
10. None of the views expressed in this document should be construed as advice to buy or sell a particular
investment.
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