TIDMENI
RNS Number : 7618Z
Edinburgh New Income Trust plc
20 January 2011
News Release
20 January 2011
EDINBURGH NEW INCOME TRUST PLC
HALF YEARLY FINANCIAL REPORT FOR THE SIX MONTHS TO 30 NOVEMBER
2010
Edinburgh New Income Trust plc's investment objective is to
provide ordinary shareholders with an attractive level of income,
together with the potential for capital and income growth and its
zero dividend preference shareholders with a pre-determined capital
entitlement on 31 May 2011.
-- Second interim dividend of 1.3p per ordinary share payable on
18 February 2011.
For further information, please contact:
Charles Luke, Investment Manager, Aberdeen Asset Management PLC
Tel: 0207 463 6000
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise. Investors may not get back the
amount they originally invested.
EDINBURGH NEW INCOME TRUST
INTERIM BOARD REPORT FOR THE SIX MONTHS TO 30 NOVEMBER 2010
Equity markets continued to recover during the six months to 30
November 2010. Our net asset value per ordinary share rose by 12.4%
to 60.0p. On a total return basis the net asset value rose by 19.2%
compared to an increase in the FTSE All-Share Index of 8.6%. The
share price of the ordinary shares rose by 15.7% to 59.0p and the
share price of the ZDPs rose to 138.3p compared with an underlying
net asset value of 137.8p.
Dividends
A first interim dividend of 1.3p (2009 - 1.3p) was declared in
October 2010 and was paid the following month. The Board has
declared a second interim dividend of 1.3p which will be paid on 18
February 2011. The Board's aim remains to maintain the total
dividend at last year's level of 6.0p by drawing on revenue
reserves as necessary.
Portfolio Review
Across Europe, governments have begun to introduce austerity
measures to tackle fiscal deficits. These have yet to impact the
positive trends we are seeing in equity markets, perhaps because
aggressive monetary accommodation remains in place worldwide. In
the UK, the general economy has recovered more strongly than most
commentators expected.
The strongest areas of performance, which were helped by an
improving economic outlook, included the Trust's exposure to Oil
Equipment Services and Industrial Engineering. We have continued to
focus the equity portfolio on good quality companies with either
attractive overseas earnings where the recovery remains stronger,
or a value-focus for those companies operating primarily in the UK.
This has resulted in the equity part of the portfolio outperforming
the FTSE All-Share Index over the 6 month period by 4.1%. At the
total assets level, we keep gearing under control by maintaining a
cash buffer together with a corporate bond portfolio to generate
additional income (see investment portfolio for further detail on
page 4).
Gearing
At 30 November 2010 equity investments totalled GBP23.0 million
and the ratio of total equity investments to ordinary shareholders
funds was 187%.
The capital cover of the ZDPs, which compares gross assets
(excluding revenue reserves) to the final repayment entitlement of
the ZDPs increased from 1.41 times at the end of May 2010 to 1.51
times at the end of November 2010.
Outlook
As the economic recovery becomes more fully established, the
bias in monetary policy will inevitably shift towards tightening.
An early increase in interest rates seems unlikely given the
fragile state of consumers' balance sheets. Operationally, the
holdings are broadly performing well and meetings with management
have generally been positive. In addition, although the market has
recovered strongly, valuations do not look stretched and corporate
balance sheets are generally in good shape. The portfolio retains
exposure to high-quality companies, with strong competitive
positions and healthy financial characteristics and we continue to
believe that these attributes are the best way to ensure good
performance.
Winding-up of the Company
The Board is conscious of the winding-up provisions within the
Company's Articles and the approaching redemption date of the ZDPs
on 31 May 2011. As this date approaches, the Directors are
considering options for those shareholders who may wish to continue
their investment beyond that date. The Directors believe that the
Company has adequate resources to continue in operational existence
until 31 May 2011. However, as there are less than 5 months to the
winding-up date provided in the Articles, the accounts have been
prepared on a break-up basis. More information is provided within
the Notes to the Accounts.
Events During the Period
At the Company's AGM on 6 October 2010 all resolutions were
passed.
Risks and Uncertainties
The Board has adopted a matrix of the key risks that affect its
business. The principal risks are as follows:
-- Stockmarket risk: The Company is exposed to the effect of
variations in share prices due to the nature of its business. A
fall in the value of its portfolio will have an adverse effect on
shareholders' funds, which will be exacerbated by the gearing
effect of the zero dividend preference shares. It is not the aim of
the Board to eliminate entirely the risk of capital loss, rather it
is its aim to seek capital growth so that the gearing effect will
multiply the gains for ordinary shareholders. However, the Board
has to have regard to the damage which will result from a
significant fall in share prices and closely monitors the level of
gearing. An aim is to ensure that the future capital entitlement of
the zero dividend preference shares can always be met.
-- Capital structure risk: The Company's capital structure and
its accounting policies mean that the capital accrual on the zero
dividend preference shares and 50% of the management fee are
charged to the capital account rather than the revenue account. A
consequence is that the value of the portfolio must rise, or these
charges will result in a drop in net asset value for ordinary
shareholders.
-- Income/dividend risk: The investment objective of the
Company, to provide ordinary shareholders with an attractive level
of income, means that the Manager has to achieve an above average
dividend yield on the investments in the portfolio. A consequence
is that the performance of the equity portfolio may not always
match that of the stockmarket as a whole, with a consequential
impact on shareholder returns. The Board's aim is to maximise
returns consistent with achieving its dividend requirements.
-- Regulatory risk: The Company operates in a complex regulatory
environment and faces a number of regulatory risks. A breach of
section 1158-1159 of the Corporation Tax Act 2010 could result in
the Company being subject to capital gains tax on portfolio
investments. Breaches of other regulations such as the UKLA listing
rules, could lead to a number of detrimental outcomes and
reputational damage. Breaches of controls by service providers such
as the Manager could also lead to reputational damage or loss. The
Directors have adopted a robust framework of control which is
designed to monitor all key risks facing the Company, and to
provide a monitoring system to enable the Directors to mitigate
these risks as far as possible.
Directors' Responsibility Statement
The Directors are responsible for preparing the half yearly
financial report, in accordance with applicable law and
regulations. The Directors confirm that to the best of their
knowledge:
-- the condensed set of financial statements within the half
yearly financial report has been prepared in accordance with
Accounting Standards Board's Statement "Half Yearly Financial
Reports"; and
-- the Interim Board Report includes a fair view of the
information required by 4.2.7R and 4.2.8R of the FSA's Disclosure
and Transparency Rules.
For Edinburgh New Income Trust plc
David Ritchie
Chairman
INCOME STATEMENT
Six months ended Six months ended
30 November 2010 30 November 2009
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains on
investments
held at fair
value - 2,248 2,248 - 3,334 3,334
Income 2 608 - 608 583 - 583
Investment
management
fee (53) (53) (106) (49) (49) (98)
Administration
expenses (85) - (85) (86) - (86)
_______ ______ ______ _______ ______ ______
Net return
before finance
costs and
taxation 470 2,195 2,665 448 3,285 3,733
Finance costs
of ZDP
shareholders - (601) (601) - (568) (568)
_______ ______ ______ _______ ______ ______
Net return on
ordinary
activities
before and
after
taxation 470 1,594 2,064 448 2,717 3,165
_______ ______ ______ _______ ______ ______
Return per
Ordinary share
(pence) 3 2.29 7.77 10.06 2.18 13.24 15.42
_______ ______ ______ _______ ______ ______
Year ended
31 May 2010
(audited)
Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000
Gains on investments
held at fair value - 3,817 3,817
Income 2 1,264 - 1,264
Investment management
fee (100) (100) (200)
Administration expenses (166) - (166)
_______ _______ _______
Net return before finance
costs and taxation 998 3,717 4,715
Finance costs of ZDP
shareholders - (1,149) (1,149)
_______ _______ _______
Net return on ordinary
activities before and
after taxation 998 2,568 3,566
_______ _______ _______
Return per Ordinary share
(pence) 3 4.86 12.52 17.38
_______ _______ _______
The total column of this statement represents the profit and
loss account of the Company.
No Statement of Total Recognised Gains and Losses has been
prepared as all gains and losses have been reflected in the Income
Statement.
All revenue and capital items in the above statement derive from
continuing operations.
No operations were acquired or discontinued in the period.
BALANCE SHEET
As at As at As at
30 November 30 November 31 May
2010 2009 2010
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Investments at fair value
through profit or loss - 27,951 -
Current assets
Investments at fair value
through profit or loss 1 28,176 - 27,918
Debtors and prepayments 360 457 330
AAA Money Market funds - 800 -
Cash and short term deposits 4,759 1,671 3,157
_________ _________ _________
33,295 2,928 31,405
_________ _________ _________
Creditors: amounts falling
due within one year (20,982) (85) (20,458)
_________ _________ _________
Net current assets 12,313 2,843 10,947
_________ _________ _________
Total assets less current
liabilities 12,313 30,794 10,947
Creditors: amounts falling
due after more than one year
Zero Dividend Preference
shares - (19,715) -
_________ _________ _________
Net assets 12,313 11,079 10,947
_________ _________ _________
Capital and reserves
Called-up share capital 205 205 205
Special reserve 20,035 20,035 20,035
Capital reserve (8,633) (10,078) (10,227)
Revenue reserve 706 917 934
_________ _________ _________
Equity shareholders' funds 12,313 11,079 10,947
_________ _________ _________
Net asset value per Ordinary
share (pence) 4 60.01 53.99 53.34
_________ _________ _________
Reconciliation of Movements in Shareholders' Funds
Six months
ended 30
November 2010
(unaudited)
Share Special Capital Revenue
capital reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
May 2010 205 20,035 (10,227) 934 10,947
Return on
ordinary
activities
after
taxation - - 1,594 470 2,064
Dividends
paid 5 - - - (698) (698)
________ ________ ________ _________ ________
Balance at 30
November
2010 205 20,035 (8,633) 706 12,313
________ ________ ________ _________ ________
Six months
ended 30
November 2009
(unaudited)
Share Special Capital Revenue
capital reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
May 2009 205 20,035 (12,795) 1,167 8,612
Return on
ordinary
activities
after
taxation - - 2,717 448 3,165
Dividends
paid 5 - - - (698) (698)
________ ________ ________ _________ ________
Balance at 30
November
2009 205 20,035 (10,078) 917 11,079
________ ________ ________ _________ ________
Year ended 31
May 2010
(audited)
Share Special Capital Revenue
capital reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31
May 2009 205 20,035 (12,795) 1,167 8,612
Return on
ordinary
activities
after
taxation - - 2,568 998 3,566
Dividends
paid 5 - - - (1,231) (1,231)
________ ________ ________ _________ ________
Balance at 31
May 2010 205 20,035 (10,227) 934 10,947
________ ________ ________ _________ ________
CASHFLOW STATEMENT
Six months Six months Year
ended ended ended
30 November 30 November 31 May
2010 2009 2010
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net total return before finance costs
and taxation 2,665 3,733 4,715
Adjustment for:
Gains on investments at fair value
through profit or loss (2,248) (3,334) (3,817)
Effective yield adjustment 122 39 -
(Increase)/decrease in accrued income (94) (62) 17
(Increase)/decrease in other debtors (1) (2) 95
(Decrease)/increase in other
creditors (13) (8) 4
_________ _________ _________
Net cash inflow from operating
activities 431 366 1,014
Net cash inflow/(outflow) from
financial investment 1,868 (5,342) (4,785)
Equity dividends paid (698) (698) (1,231)
Overseas tax paid - (14) -
_________ _________ _________
Net cash inflow/(outflow) before
financing 1,601 (5,688) (5,002)
Net cash inflow from management of
liquid resources - 1,700 1,250
_________ _________ _________
Increase/(decrease) in cash 1,601 (3,988) (3,752)
_________ _________ _________
Reconciliation of net cash flow to
movement in net funds
Increase/(decrease) in cash as above 1,601 (3,988) (3,752)
Net change in liquid resources - (1,700) (1,250)
Net changes in debt due within one
year (601) (568) (1,149)
_________ _________ _________
Movement in net debt 1,000 (6,256) (6,151)
Opening net debt (17,139) (10,988) (10,988)
_________ _________ _________
Closing net debt (16,139) (17,244) (17,139)
_________ _________ _________
Represented by:
Cash at bank 4,759 1,671 3,157
AAA Money Market funds - 800 -
Debt due within one year (20,898) (19,715) (20,296)
_________ _________ _________
Net debt (16,139) (17,244) (17,139)
_________ _________ _________
Notes:
1. Accounting policies
(a) Basis of accounting
The accounts have been prepared in accordance with applicable
UK Accounting Standards, with pronouncements on half-yearly
reporting issued by the Accounting Standards Board and
with the Statement of Recommended Practice 'Financial Statements
of Investment Trust Companies and Venture Capital Trusts'
issued in January 2009. They have also been prepared on
the assumption that approval as an investment trust will
continue to be granted. The financial statements have been
prepared on a break-up basis. Accordingly, the investments
have been included as current assets and the Zero Dividend
Preference shares as current liabilities since there is
less than one year until redemption.
The financial statements and the net asset value per share
figures have been prepared in accordance with UK Generally
Accepted Accounting Practice (UK GAAP).
The half-yearly financial statements have been prepared
using the same accounting policies as the preceding annual
accounts.
(b) Dividends payable
Dividends are recognised in the period in which they are
approved by shareholders.
Six months ended Six months ended Year ended
30 November 30 November
2010 2009 31 May 2010
2. Income GBP'000 GBP'000 GBP'000
Income from
investments
UK dividend income 415 366 834
Overseas dividends 6 9 25
Stock dividend - 7 14
PID (Property Income
Distributions)
dividend 11 7 18
Fixed interest 156 167 337
____________ ____________ ____________
588 556 1,228
____________ ____________ ____________
Other income
AAA Money Market
funds interest - 2 3
Deposit interest 14 6 13
Certificates of deposit
interest - 9 9
Treasury Bill interest - 2 2
Underwriting commission 6 8 9
____________ ____________ ____________
20 27 36
____________ ____________ ____________
Total income 608 583 1,264
____________ ____________ ____________
Six months ended Six months ended Year ended
30 November 30 November
2010 2009 31 May 2010
Return per
3. Ordinary share p p p
Revenue return 2.29 2.18 4.86
Capital return 7.77 13.24 12.52
____________ ____________ ____________
Total return 10.06 15.42 17.38
____________ ____________ ____________
The figures above are based on the following attributable assets:
Six months ended Six months ended Year ended
30 November 30 November
2010 2009 31 May 2010
GBP'000 GBP'000 GBP'000
Revenue return 470 448 998
Capital return 1,594 2,717 2,568
____________ ____________ ____________
Total return 2,064 3,165 3,566
____________ ____________ ____________
Weighted average
number of Ordinary
shares in issue 20,519,056 20,519,056 20,519,056
____________ ____________ ____________
As at As at As at
Net asset value per 30 November 30 November
4. share 2010 2009 31 May 2010
Ordinary
Attributable net
assets (GBP'000) 12,313 11,079 10,947
Number of Ordinary
shares in issue 20,519,056 20,519,056 20,519,056
Net asset value per
share (p) 60.01 53.99 53.35
____________ ____________ ____________
Zero Dividend Preference
Attributable net
assets (GBP'000) 20,898 19,715 20,296
Number of ZDP shares
in issue 15,166,618 15,166,618 15,166,618
Net asset value per
share (p) 137.79 129.99 133.82
____________ ____________ ____________
5. Dividends
Ordinary dividends on equity shares deducted from reserves
are analysed below:
Six months ended Six months ended Year ended
30 November 30 November
2010 2009 31 May 2010
Second interim dividend
2010 - 1.3p (2009
- 1.3p) - - 267
Third interim dividend
2010 - 1.3p (2009
- 1.3p) - - 266
Fourth interim dividend
2010 - 2.1p (2009
- 2.1p) 431 431 431
First interim dividend
2011 - 1.3p (2010
- 1.3p) 267 267 267
____________ ____________ ____________
698 698 1,231
____________ ____________ ____________
The Company has declared a second interim dividend in respect
of the year ending 31 May 2011 of 1.3p net (2010 - 1.3p) per
Ordinary share which will be paid on 18 February 2011 to Ordinary
shareholders on the register on 28 January 2011. This dividend
has not been included as a liability in these financial statements.
6. Capital reserve
The capital reserve reflected in the Balance Sheet at 30 November
2010 includes gains of GBP3,355,000 (30 November 2009 - GBP962,000;
31 May 2010 - GBP1,441,000) which relate to the revaluation
of investments held at the reporting date.
7. Transaction costs
During the six months ended 30 November 2010 expenses were
incurred in acquiring or disposing of investments classified
as fair value through profit or loss. These have been expensed
through capital and are included within gains on investments
in the Income Statement. The total costs were as follows:
Six months ended Six months ended Year ended
30 November 30 November
2010 2009 31 May 2010
GBP'000 GBP'000 GBP'000
Purchases 15 21 27
Sales 2 1 2
____________ ____________ ____________
17 22 29
____________ ____________ ____________
8. Contingent assets
On 5 November 2007, the European Court of Justice ruled that
management fees on investment trusts should be exempt from
VAT. HMRC has accepted the ruling and acknowledged its liability
to pay claims in respect of VAT borne by investment companies.
The Company has received a refund GBP108,000 representing
all VAT charged on investment management fees for the period
1 June 2005 to 31 August 2007; this was recognised in the
financial statements for the year end 31 May 2009 and has
been allocated to revenue and capital respectively, in accordance
with the accounting policy of the Company for the periods
in which the VAT was charged. HMRC confirmation on the amount
of interest receivable in respect of claims settled has still
to be received. Therefore, the Company has taken no account
in these financial statements of any such amount payable.
The Company has not been charged VAT on its investment management
fees from 1 September 2007.
9. In accordance with the Articles of Association, the Directors
are obliged to convene a general meeting on 31 May 2011 at
which a special resolution will be proposed to wind up the
Company on a voluntary basis when the Zero Dividend Preference
shares fall due for redemption. Accordingly the accounts have
been prepared on a break-up basis. The estimated maximum break-up
costs include liquidation costs of GBP150,000 and portfolio
realisation costs of GBP12,000 which will be charged in the
Company's accounts at 31 May 2011.
10. The financial information contained in this half-yearly financial
report does not constitute statutory accounts as defined in
Sections 434 - 436 of the Companies Act 2006. The financial
information for the year ended 31 May 2010 has been extracted
from the latest published audited financial statements which
have been filed with the Registrar of Companies. The report
of the auditors on those accounts contained no qualification
or statement under Section 498 (2),(3) or (4) of the Companies
Act 2006.
11. The half-yearly financial report was approved by the Board
on 19 January 2011.
12. The half-yearly report will be posted to shareholders in February
2011 and copies will be available from the Manager and on
the Company's website, www.edinburghnewincome.co.uk.
For Edinburgh New Income Trust plc
Aberdeen Asset Management Limited, SECRETARY
This information is provided by RNS
The company news service from the London Stock Exchange
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