Interim Results
Edinburgh Worldwide Inv Trust PLC
15 June 2006
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
Results for the six months to 30 April 2006
Over the six months Edinburgh Worldwide's share price rose by 29% and net asset
value increased by 19%. The MSCI All Countries Index in sterling terms rose by
13%. Growth was driven by the strong individual performance of a number of
holdings over the period.
• Performance.
The operational performance of the majority of the holdings over the
period was good and in many cases this was reflected in strong share price
performance. Turnover of holdings remained low at 14% in line with the aim
of keeping turnover below 20% which would give an average holding period
for equity investments of 5 years.
• Purchases and Sales
During the period new purchases included Getty Images (a Seattle based
company which owns the world's largest database of photographic images);
Straumann, a Swiss listed company which supplies dental implants and
Infosys, a world leading and pioneering Bangalore based company which
provides software support globally.
Sales included BHP Billiton, a diversified mining company, car maker BMW
and ABB, a power generation and equipment company. Reductions were made
in the size of Russian oil producer Lukoil and HDFC (Indian mortgage bank).
While the long term case remains intact both holdings had seen strong share
price rises in short periods so some profits were taken.
• Dividend.
An unchanged interim dividend of 0.5p has been declared.
• Prospects.
Since the end of the interim period there have been some sharp declines
in share prices but the prospect of continued profit growth for Edinburgh
Worldwide's investments remains good in the Managers' view.
Edinburgh Worldwide aims to achieve long term capital growth by investing in
stock markets throughout the world. The Trust has total assets of £155 million
(before deduction of loans of £27 million).
Edinburgh Worldwide is managed by Baillie Gifford & Co, the Edinburgh based fund
management group with around £42 billion under management and advice as at 15
June 2006.
Past performance is no guarantee of future performance. 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.
- ends -
15 June 2006
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
Interim Report
Global equity markets made quite startling progress over the six months from
November 2005 to April 2006. The net asset value rose by 18.9% over the period
which compares to a 13.3% rise in the MSCI All Countries World Index over the
same period. The share price rose by 29.0% to 258p representing a discount of
1.5% to the net asset value at 30 April 2006. At the beginning of the period the
discount was standing at 9.3%. Such returns over six months are clearly well
above the long-run average for equities and will not be repeated often and nor
will the size of our outperformance. Indeed the vagaries of reporting on a six
month period mean that at the time of writing this report in early June, we have
seen noteworthy declines in net asset value, share price and the index level
whilst the discount has widened. Equity markets will always be volatile and we
view this subsequent pullback as an inevitable development.
The Directors have declared an interim dividend of 0.50p per share, unchanged
from last year. The interim dividend will be paid on 6 July 2006 to shareholders
on the register on 23 June 2006. The final dividend was decreased to 1.50p last
year and the Directors will consider this year's payment over the remainder of
the financial year.
Portfolio
The portfolio has been relatively stable since October 2005 with equity turnover
of 14% in the six months to April 2006 in line with our aim of keeping annual
turnover around 20%. It remains concentrated with 39 equity holdings at the end
of period. We have continued to make some occasional additions to stocks when we
feel that the market is affording us an opportunity - Pulte Homes is an example
in the period under consideration with the market so concerned about the
near-term outlook for US housing demand, that it is assuming next to no growth
for the company over the next decade which we think is wrong.
In constructing the portfolio no reference is paid to the composition of any
index - instead we seek long-term growth opportunities anywhere in the world.
This approach is reflected in the new purchases made over the last six months
which range from the world's largest provider of photos - Getty Images, which is
based in Seattle - to a Swiss-based provider of dental implants - Straumann. We
have also taken a holding in Infosys - the leader in outsourced Indian software
- after a trip to Bangalore convinced us of the sustainability of the company's
profitability and reinforced the size of the opportunity which it has.
These purchases were funded by sales of ABB and BMW where we felt that share
price appreciation had led to more appropriate valuations for the business. We
sold out of BHP Billiton after strong share price performance as we are
unconvinced by the company's ongoing diversification away from iron ore which is
in our view its most attractive asset. We also made sizeable reductions to our
holdings in Lukoil - the Russian oil company - and HDFC - the Indian mortgage
bank both of which had seen very strong share price moves in a short space of
time. We still believe the long-term case is intact in both these companies.
Outlook
We believe that the current bout of anxiety over the re-emergence of
inflationary pressures is overdone for several reasons. Firstly, there is
remarkably little evidence that the rises in energy and commodity prices have
created a general rise in prices or wages with the market's anxiety caused by
numbers being a few basis points over a low figure. Secondly, whilst there may
be some marginal decline in the price competitiveness of Chinese labour, there
remain substantial disinflationary forces at work in the world through the
ongoing development of countries with populations which dwarf those of the
largest current economies - there are millions of metaphorical workers at the
gates. Thirdly, the pricing transparency created by the internet is
unprecedented in its scale, speed and efficiency.
It is worth reiterating that the global economy has just enjoyed two of its best
consecutive years of growth in decades and 2006 shows no signs of this backdrop
changing. With India showing signs of joining China in sustaining GDP growth in
high single digits, one has the unprecedented prospect of one third of the human
race residing in countries which are growing at this rate which we believe
creates more opportunities than threats for the global investor. In addition
both Japan and continental Europe are showing healthy rates of growth. However,
after such a strong run in markets, an obvious question to pose is what has
happened to valuations or put another way is much of the opportunity captured in
stock prices?
We find great succour in the fact that we can buy businesses such as Pulte on
single digit multiples of earnings, Porsche on a huge discount to any other
luxury goods maker because it happens to make automobiles or oil companies based
in 'emerging' economies still on fractions of the price per barrel of oil which
one pays for a 'major'. In general, we see few signs that equity valuations have
reached levels which should worry our shareholders although there will always be
pockets of the market where greed has triumphed temporarily over fear as may be
the case in some commodity prices such as copper.
At the beginning of the period equity gearing was 117%. With prospects for
continued profit growth for Edinburgh Worldwide's stocks combined with
reasonable valuations, the Manager is currently optimistic about the prospects
for share price appreciation within the portfolio as reflected in the Company
having 113% of equity shareholder funds invested in equities at 30 April.
By order of the Board
Baillie Gifford & Co
15 June 2006
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
The following is the interim statement for the six months ended 30 April 2006
which has been neither reviewed nor audited by the auditors. This statement is
being printed and will be sent to all shareholders on 23 June 2006. Copies will
be available for inspection at the Registered Office of the Company or may be
obtained on request from the Managers and Secretaries after that date.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
INCOME STATEMENT *
(unaudited)
for the six months ended for the six months ended for the year ended
30 April 2006 30 April 2005 31 October 2005
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Restated+ Restated+ Restated+ Restated+
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Realised gains/(losses)
on investments - 8,901 8,901 - (327) (327) - 1,032 1,032
Unrealised gains on - 12,450 12,450 - 1,313 1,313 - 25,763 25,763
investments
Currency gains/(losses) - 507 507 - 880 880 - (243) (243)
Income (note 2) 1,100 - 1,100 1,188 - 1,188 2,379 - 2,379
Investment management fee (140) (421) (561) (80) (240) (320) (179) (537) (716)
Investment performance - (234) (234) - - - - (937) (937)
fee
Other administrative (203) - (203) (168) - (168) (359) - (359)
expenses
Net return before finance
costs and taxation 757 21,203 21,960 940 1,626 2,566 1,841 25,078 26,919
Finance costs of (195) (584) (779) (185) (556) (741) (395) (1,183) (1,578)
borrowings
Return on ordinary
activities before
taxation 562 20,619 21,181 755 1,070 1,825 1,446 23,895 25,341
Tax on ordinary (128) 63 (65) (173) 84 (89) (341) 184 (157)
activities
Return on ordinary
activities after
taxation 434 20,682 21,116 582 1,154 1,736 1,105 24,079 25,184
Return per ordinary
share (note 3) 0.89p 42.20p 43.09p 1.19p 2.35p 3.54p 2.26p 49.13p 51.39p
Dividend paid and
proposed per ordinary
share (note 4) 0.50p 0.50p 2.00p
+ Various changes in accounting policies, as disclosed in note 1, have had the
cumulative effect of increasing reported net assets by £628,000 for the year
ended 31 October 2005 and by £92,000 for the six months ended 30 April 2005.
* The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in this statement derive from continuing
operations.
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
SUMMARISED BALANCE SHEET
(unaudited)
30 April 30 April 31 October
2006 2005 2005 Restated+
Restated+
£'000 £'000 £'000
FIXED ASSETS
Investments held at fair value 155,741 110,994 136,800
CURRENT ASSETS
Debtors 613 1,328 454
Cash and short term deposits 389 617 305
1,002 1,945 759
CREDITORS
Amounts falling due within one year (1,008) (1,390) (1,698)
NET CURRENT (LIABILITIES)/ ASSETS (6) 555 (939)
TOTAL ASSETS LESS CURRENT LIABILITIES 155,735 111,549 135,861
CREDITORS
Amounts falling due after more than one year (note 5) (27,318) (26,716) (27,825)
128,417 84,833 108,036
CAPITAL AND RESERVES
Called-up share capital 2,450 2,450 2,450
Share premium 82,180 82,180 82,180
Special reserve 35,220 35,220 35,220
Capital reserve - realised (38,195) (45,505) (45,920)
Capital reserve - unrealised 45,586 9,289 32,629
Revenue reserve 1,176 1,199 1,477
EQUITY SHAREHOLDERS' FUNDS 128,417 84,833 108,036
NET ASSET VALUE PER ORDINARY SHARE 262.05p 173.11p 220.46p
Ordinary shares in issue (note 6) 49,004,319 49,004,319 49,004,319
+ See note 1.
SUMMARISED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
Six months to Six months to 30 Year to
30 April 2006 April 2005 31 October 2005
£'000 £'000 £'000
Shareholders' funds at 1 November as previously stated 107,408 83,192 83,192
Prior year adjustments:
Revaluation of investments at bid prices (107) (95) (95)
Reversal of provision of interim and final dividend 735 833 833
Shareholders' funds at 1 November - restated 108,036 83,930 83,930
Return on ordinary activities after taxation 21,116 1,736 25,184
Dividends paid during the year (note 4) (735) (833) (1,078)
Shareholders' funds at 30 April/31 October 128,417 84,833 108,036
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
SUMMARISED CASH FLOW STATEMENT
(unaudited)
Six months to Six months to Year to
30 April 30 April 31 October
2006 2005 2005
£'000 £'000 £'000
Net cash (outflow)/inflow from operating activities (685) 610 1,475
Net cash outflow from servicing of finance (797) (760) (1,564)
Total tax paid (64) (89) (158)
Net cash inflow from financial investment 2,365 1,142 1,083
Equity dividends paid (735) (833) (1,078)
INCREASE/(DECREASE) IN CASH 84 70 (242)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash in the period 84 70 (242)
Exchange movement 507 888 (221)
MOVEMENT IN NET DEBT IN THE PERIOD 591 958 (463)
Net debt at start of the period (27,520) (27,057) (27,057)
NET DEBT AT END OF THE PERIOD (26,929) (26,099) (27,520)
RECONCILIATION OF NET REVENUE BEFORE FINANCE COSTS AND
TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net revenue before finance costs and taxation 21,960 2,566 26,919
Gains on investments (21,858) (1,866) (26,552)
Amortisation of fixed income book cost 45 88 141
Change in debtors and creditors (832) (178) 967
NET CASH (OUTFLOW)/INFLOW FROM OPERATING ACTIVITIES (685) 610 1,475
DISTRIBUTION OF ASSETS
at 30 April 2006 (unaudited)
30 April 2006 30 April 2005 31 October
Restated+ 2005
Restated+
% % %
Equities: United Kingdom 3.6 10.0 7.3
Continental Europe 19.7 19.3 18.3
North America 37.8 35.3 40.4
Japan 3.8 4.0 3.1
Asia Pacific 4.7 7.1 4.5
Emerging Markets 23.7 14.2 19.1
Total equities 93.3 89.9 92.7
Sterling bonds 0.9 1.3 1.0
US$ bonds 4.0 5.6 4.8
Yen bonds 1.8 2.7 2.2
Net current (liabilities)/assets - 0.5 (0.7)
Total assets (before deduction of loan) 100.0 100.0 100.0
+ See note 1.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE
at 30 April 2006
(unaudited)
Fair value % of total
£'000 assets Performance+
Name Business Absolute Relative
Gazprom Gas exploration and production 9,738 6.3 87.0 63.2
Atlas Copco Engineering 7,153 4.6 59.9 39.6
Golden West Financial Savings and loans 6,740 4.3 19.3 4.1
Moody's Bond rating agency 6,558 4.2 13.6 (0.8)
Petrobras Oil exploration and production 6,226 4.0 53.9 34.3
Canon Printers, copiers and cameras 5,921 3.8 43.7 25.4
Lukoil Oil exploration and production 5,474 3.5 56.7 36.8
CVRD Iron ore mining 5,426 3.5 20.7 5.4
Samsung Electronics Electronics manufacturer 5,319 3.4 26.1 10.1
Porsche Luxury automobiles 4,682 3.0 35.5 18.3
SAP Business software 4,381 2.8 24.3 8.5
Teva Pharmaceuticals Generic drugs manufacturer 4,010 2.6 3.8 (9.4)
Pulte Homes American house builder 3,779 2.4 (3.3) (15.6)
Sandvik Engineering 3,390 2.2 31.3 14.6
Progressive Ohio Non-prime auto insurance 3,286 2.1 (8.7) (20.3)
Infosys Technologies Software company 3,263 2.1 5.0* 3.0*
Carnival Cruise ship operator 3,205 2.1 (7.2) (19.0)
Microsoft Software products 3,162 2.0 (8.0) (19.7)
Ericsson Telecommunications equipment 3,055 2.0 7.4 (6.3)
Wolseley Builders merchant 3,055 2.0 20.3 5.0
eBay Internet auction 3,034 1.9 (15.6) (26.3)
Hermes Luxury goods 2,916 1.9 11.3 (2.9)
Whole Foods Market Organic food chain 2,905 1.9 (14.9) (25.7)
Straumann Medical equipment 2,901 1.9 1.5* 0.3*
M & T Bank Retail banking 2,877 1.8 8.8 (5.0)
VCA Antech Animal hospitals and 2,736 1.8 17.4 2.4
diagnostics
Housing Development Finance
Corporation Mortgage bank 2,707 1.7 31.3 14.6
SCP Pool Swimming pool supplies 2,693 1.7 27.0 10.8
McCarthy & Stone Retirement home builder 2,597 1.7 23.1 7.5
Dell PC manufacturer 2,566 1.6 (20.0) (30.2)
Walgreen Pharmacy chain 2,403 1.5 (9.9) (21.4)
Getty Images Internet based image library 2,393 1.5 (20.1)* (20.0)*
L'Oreal Personal care 2,292 1.5 22.9 7.2
Amazon.com Online retailer 2,286 1.5 (14.1) (25.0)
Omnicom Advertising agency 2,132 1.4 6.2 (7.3)
Iron Mountain Document management services 2,086 1.3 (2.2) (14.7)
Patterson Companies Dental products and supplies 2,040 1.3 (23.1) (32.9)
William Wrigley Chewing gum manufacturer 1,994 1.3 (16.9) (27.4)
Zhejiang Expressway Toll-road operator 1,945 1.2 (0.4) (13.0)
Total Equity Investments 145,326 93.3
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
PORTFOLIO AND EQUITY PERFORMANCE (Ctd)
at 30 April 2006
(unaudited)
Fair value % of total
£'000 assets
Name
Fixed Interest
Sterling denominated bonds
Safeway 5.875% 2007 629
AMP Group Finance 7.125% 2019 569
Rentokil Initial 6.125% 2008 224
1,422 0.9
US$ denominated bonds
Daimler Chrysler FRN 2006 1,155
Stagecoach 8.625% 2009 591
HSBC Bank USA 3.875% 2009 576
Old Mutual 8% 2008 575
Ericsson 6.5% 2009 560
AIG 5.625% 2007 551
Egg Banking FRN 2006 550
Golden West 4.125% 2007 543
Vodafone Airtouch 7.75% 2010 295
BSkyB 8.2% 2009 295
Household Fin Corp 7% 2012 291
Deutsche Telecom 3.875% 2008 267
6,249 4.0
Yen denominated bonds
Toyota Motor Corp 0.75% 2008 1,061
HBOS Treasury Services 0.8% 2008 960
Pfizer Inco 0.8% 2008 723
2,744 1.8
Total Fixed Interest 10,415 6.7
Total Investments 155,741 100.0
Net Current Liabilities (6) 0.0
Total Assets at Market Value (before deduction of loan) 155,735 100.0
+ Absolute and relative performance has been calculated over the period 1
November 2005 to 30 April 2006. Absolute performance is in sterling terms;
relative performance is against MSCI All Countries World Index in sterling
terms.
* Figures relate to part-period returns relating to the holding period of the
relevant stock.
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 by its 31 October 2006 financial year end. 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 six months to 30 April 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 £88,000 (30 April 2005 - £153,000; 31 October 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 £245,000 (30 April 2005 - £245,000; 31 October
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 shown in the Reconciliation of Movements in Shareholders'
Funds and in the Notes to Accounts.
The overall effect of these changes on shareholders' funds is detailed below.
30 April 30 April 31 October
2006 2005 2005
£'000 £'000 £'000
Investments/Capital reserve - unrealised (88) (153) (107)
Creditors: dividends payable/Revenue reserve 245 245 735
157 92 628
2. Income
Income from investments and interest receivable 1,100 1,188 2,379
3. Return per ordinary share
Revenue return 434 582 1,105
Capital return 20,682 1,154+ 24,079+
Return per ordinary share is based on the above totals of revenue and capital and on 49,004,319
ordinary shares, being the number of ordinary shares in issue during each period.
+Restated, see note 1.
EDINBURGH WORLDWIDE INVESTMENT TRUST plc
NOTES
30 April 30 April 31 October
2006 2005 2005
£'000 £'000 £'000
4. Dividends
Amounts recognised as distributions in period:
Final dividend for the year ended 31 October 2005
of 1.50p (2004 - 1.70p), paid 2 February 2006 735 833 833
Interim dividend for the year ending 31 October
2005 of 0.50p, paid 7 July 2005 - - 245
735 833 1,078
Interim dividend for the year ending 31 October
2006 of 0.50p (2005 - 0.50p) 245 245 245
The interim dividend was declared after the period end date and has therefore not been included as
a liability in the balance sheet. It is payable on 6 July 2006 to shareholders on the register at
the close of business on 23 June 2006. The ex dividend date is 21 June 2006.
5. The loan includes US$31.25 million, Y1,313.2 million and £3.8 million drawn down under a
multi-currency loan facility with ING Bank N.V. (31 October 2005 and 30 April 2005 - US$31.25
million, Y1,313.2 million and £3.8 million). The loan is due for repayment in July 2008.
6. On 29 January 1999 authority was first granted to the Company to buy back its ordinary shares
(equivalent to 14.99% of its issued share capital at that date). The authority has been renewed
at each subsequent AGM and was last renewed at the AGM on 30 January 2006 in respect of 7,345,747
ordinary shares (equivalent to 14.99% of its issued share capital at that date). In the six
months to 30 April 2006 no ordinary shares were bought back therefore the Company's authority
remains unchanged at 7,345,747 ordinary shares.
7. The financial information contained within this Interim Report does not constitute statutory
accounts as defined in section 240 of the Companies Act 1985. The financial information for the
year ended 31 October 2005 has been extracted from the statutory accounts and restated as disclosed
in note 1. Those accounts have been filed with the Registrar of Companies and contain an unqualified
Auditors' Report and do not contain a statement under sections 237 (2) or (3) of the Companies Act
1985.
8. The Interim Report was approved by the Board on 15 June 2006.
None of the views expressed in this document should be construed as advice to buy or sell a
particular investment.
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Friday, 31st May 2024
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