Interim Results

30 September 2002 EDINBURGH HIGH INCOME TRUST PLC INTERIM RESULTS FOR THE 6 MONTHS TO 31 AUGUST 2002 The objective of Edinburgh High Income Trust plc is to provide holders of the listed ordinary shares with a high level of income, together with the opportunity for capital and income growth and to provide holders of the listed zero dividend preference shares with a predetermined capital entitlement in February 2005. Highlights · Total assets fell by 7.9% compared to a fall of 18.0% in the FTSE All-Share Index · As a result of gearing within the capital structure, the net asset value per share fell by 20.6% · A second interim dividend of 2.25p will be paid to shareholders on 31 October 2002 · In the absence of unexpected dividend cuts from the portfolio, it remains the intention to pay a total net dividend of 9p for the full year · The portfolio remains defensively structured to offer an element of security in an increasingly volatile stockmarket environment For further information please contact: Alex Gowans, Director, Edinburgh High Income Trust plc and Edinburgh Fund Managers plc, 0131 313 1000 David Binnie, Investment Manager, Edinburgh Fund Managers plc, 0131 313 1000 EDINBURGH HIGH INCOME TRUST PLC Chairman's Statement Background The period under review has continued to be extremely difficult for global financial markets. After the initial relief that hostilities in Afghanistan would be short-lived positive sentiment quickly evaporated as concerns emerged over the accuracy and reliability of corporate earnings following the collapse of Enron and Worldcom in the US and this led to a sharp fall in equity markets around the world. Performance Against this difficult background the company has adopted a fairly defensive portfolio strategy through its holdings in bonds and cash which collectively represented 9.8% of gross assets as at 31 August 2002. In addition the above average yields of many of the equity holdings offered a degree of protection during a period of falling prices. Nevertheless gross assets have fallen by 7.9% from £73.0 million to £67.2 million during the period under review. In contrast the FTSE All-Share Index has fallen by 18.0% over the same period. The company has long-term capital gearing in the form of zero dividend preference shares and bank debt which represented 62.1% of gross assets as at 31 August 2002. During a period of rising asset prices gearing enhances returns to ordinary shareholders but when values are falling it exacerbates the decline. As a result of the gearing, and after taking account of the apportionment of assets to the zero dividend preference shares, the net asset value per ordinary share fell by 20.6% from 101.7p to 80.7p. The ordinary share price fell from 104p to 59.5p and at 31 August 2002 represented a discount of 26.3% to the underlying net asset value. Income As outlined in last year's Chairman's statement the company has declared a first interim dividend of 2.25p which was paid to shareholders on 31 July 2002. The board is proposing a second interim dividend of 2.25p which will be paid on 31 October 2002 to shareholders on the register as at 11 October 2002. In the absence of any unexpected dividend cuts from the portfolio over the remainder of the year it remains the intention to pay dividends totalling 9.0p for the full year. Capital Structure Edinburgh High Income Trust and its subsidiary Edinburgh High Zeros 2005 have a capital structure comprising ordinary shares and zero dividend preference shares and bank debt. Edinburgh High Income Trust has an unlimited life and ordinary shareholders are entitled to all of the remaining assets after Edinburgh High Zeros 2005 have been wound up in 2005 to enable zero dividend preference shareholders to receive their final capital entitlement of 151.75p. The Portfolio As at 31 August total assets less current liabilities were £67.2 million. The assets were invested as follows: £m % FTSE 100 Stock 29.7 44.1 FTSE 250 Stock 22.9 34.1 Small Cap 7.1 10.6 Bonds 3.4 5.0 Split Capital 0.9 1.4 Shares Cash 3.2 4.8 67.2 100.0 Outlook Forecasting the outlook for the UK economy is becoming increasingly difficult due to conflicting reports from various parts of the economy. What does seem to be clear, however, is that a sustained pick-up in activity is unlikely to happen this year. In these circumstances interest rates are expected to remain low for some time. The portfolio is defensively structured which will offer some security in an increasingly volatile stockmarket environment. The high levels of bonds and cash also help to partially offset the effect of the gearing. We intend to maintain this position until there are clear signs of an improvement in sentiment towards equity investment. The trust remains financially sound with gross assets of £60.8 million as at 25 September 2002, some £20.2 million above the level required by the bank covenant. GROUP STATEMENT OF TOTAL RETURN (unaudited) For six months to 31 August 2002 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (5,590) (5,590) Investment income 2,439 - 2,439 Interest receivable 51 - 51 Other income 1 - 1 Investment management fee (128) (191) (319) Administrative expenses (131) - (131) Net return before finance costs 2,232 (5,781) (3,549) and taxation Interest payable (303) (454) (757) Return on ordinary activities 1,929 (6,235) (4,306) before taxation Taxation - - - Return on ordinary activities 1,929 (6,235) (4,306) after taxation Non-equity minority interest - (869) (869) Return attributable to equity 1,929 (7,104) (5,175) shareholders Dividends in respect of equity (1,424) - (1,424) shares 505 (7,104) (6,599) Return per ordinary share 6.10p (22.45p) (16.35p) The revenue column of this statement represents the profit and loss account of the group. All revenue and capital items in the above statement derive from continuing operations. GROUP STATEMENT OF TOTAL RETURN (unaudited) For six months to 31 August 2001 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 1,344 1,344 Investment income 2,546 - 2,546 Interest receivable 82 - 82 Other income - - - Investment management fee (130) (195) (325) Administrative expenses (120) - (120) Net return before finance 2,378 1,149 3,527 costs and taxation Interest payable (303) (454) (757) Return on ordinary activities 2,075 695 2,770 before taxation Taxation (25) 25 - Return on ordinary activities 2,050 720 2,770 after taxation Non-equity minority interest - (802) (802) Return attributable to equity 2,050 (82) 1,968 shareholders Dividends in respect of (1,582) - (1,582) equity shares 468 (82) 386 Return per ordinary share 6.48p (0.26p) 6.22p GROUP STATEMENT OF TOTAL RETURN (unaudited) Year to 28 February 2002 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (3,026) (3,026) Investment income 4,407 - 4,407 Interest receivable 152 - 152 Other income - - - Investment management fee (253) (380) (633) Administrative expenses (237) - (237) Net return before finance costs 4,069 (3,406) 663 and taxation Interest payable (602) (902) (1,504) Return on ordinary activities 3,467 (4,308) (841) before taxation Taxation (50) 50 - Return on ordinary activities 3,417 (4,258) (841) after taxation Non-equity minority interest - (1,623) (1,623) Return attributable to equity 3,417 (5,881) (2,464) shareholders Dividends in respect of equity (3,164) - (3,164) shares 253 (5,881) (5,628) Return per ordinary share 10.80p (18.59p) (7.79p) BALANCE SHEET (unaudited) At 31 August 2002 At 28 February 2002 At 31 August 2001 £'000 £'000 £'000 Group Company Group Group Group Company FIXED ASSETS Investments 63,657 63,605 70,973 70,921 76,132 76,080 CURRENT ASSETS Debtors 1,102 1,153 340 379 644 680 Cash at bank 3,421 3,419 2,753 2,753 3,500 3,500 4,523 4,572 3,093 3,132 4,144 4,180 CREDITORS: 939 22,888 1,095 22,116 2,112 22,261 Amounts falling due within one year NET CURRENT 3,584 (18,316) 1,998 (18,984) 2,032 (18,081) ASSETS/LIABILITI ES TOTAL ASSETS 67,241 45,289 72,971 51,937 78,164 57,999 LESS CURRENT LIABILITIES CREDITORS: 20,300 20,300 20,300 20,300 20,300 20,300 Amounts falling due after more than one year 46,941 24,989 52,671 31,637 57,864 37,699 CAPITAL AND RESERVES Ordinary share 316 316 316 316 316 316 capital Reserves 24,846 24,673 31,445 31,321 37,459 37,383 EQUITY 25,162 24,989 31,761 31,637 37,775 37,699 SHAREHOLDERS' FUNDS NON-EQUITY 21,779 20,910 20,089 MINORITY INTERESTS 46,941 52,671 57,864 Net asset value 80.68p 101.71p 120.88p per equity share CASHFLOW STATEMENT (unaudited) Six months Six months Year to 28 to to February 31 August 31 August 2002 2002 2001 £'000 £'000 £'000 Net return before finance costs and 2,232 2,378 4,069 taxation Increase in debtors (571) (157) 91 Increase in creditors (18) 1 6 Tax on investment income - 24 24 Expenses charged to capital (191) (195) (380) Net cash inflow from operating 1,452 2,051 3,810 activities Return on investment and servicing of finance Interest paid (753) (669) (1,500) Capital expenditure and financial 1,472 2,543 2,450 investment Equity dividends paid (1,503) (1,361) (2,943) Net cash inflow before financing 668 (2,564) 1,817 Net cash outflow from financing - - - Increase in cash 668 (2,564) 1,817 Notes : 1. The directors have declared an interim dividend of 2.25p (2001 - 2.5p) per ordinary share for the year ended 28 February 2003. The interim dividend, payable on 31 October 2002, will be paid to shareholders on the register on 11 October 2002. The ex-dividend date is 9 October 2002. 2. The statement of total return (incorporating the revenue account), balance sheet and cashflow statement set out above do not represent full accounts in accordance with Section 240 of the Companies Act 1985. The accounts have been prepared in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. The same accounting policies have been applied in preparing the accounts throughout the period. Franked investment income is reported net of tax credits in accordance with FRS 16 'Current Tax'. 3. The interim report will be posted to shareholders on 10 October 2002 and copies will be available at the head office of the Secretary - Edinburgh Fund Managers plc, Donaldson House, 97 Haymarket Terrace, Edinburgh EH12 5HD. 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 for Edinburgh High Income Trust plc, Edinburgh Fund Managers plc, SECRETARY END ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2002/09/27/20020927BIT00660/wkr0001.doc http://www.waymaker.net/bitonline/2002/09/27/20020927BIT00660/wkr0002.pdf