The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 24
22 / STRATEGIC REPORT / THE EDINBURGH INVESTMENT TRUST PLC
Viability Statement
The directors’ view of the Company’s viability has not changed
since last year. The Company, as an investment trust, is a collective
investment vehicle rather than a commercial business venture
and is designed and managed for long term investment. The
Company’s investment objective clearly sets this out. Long term
for this purpose is considered by the Directors to be at least
five years, a timeframe in which the accuracy of estimates and
assumptions is deemed to be reasonable. The Company’s viability
has thus been assessed over that period. Five years is considered
a reasonable time frame for a forecast, however, the life of the
Company is not intended to be limited to that or any other period.
There are no current plans to amend the investment strategy,
which has delivered long term good investment performance for
shareholders and, the directors believe, should continue to do so.
The investment strategy and its associated risks are kept under
constant review by the board.
In assessing the viability of the Company under various scenarios,
the Directors undertook a robust assessment of the risks to which
it is exposed (including the issues arising from the COVID-19
pandemic, Russia’s invasion of Ukraine and climate change), as
set out on page 19 together with mitigating factors. The risks
of failure to meet the Company’s investment objective, and
contributory market and investment risks, were considered to be
of particular importance. The Directors also took into account: the
investment capabilities of the portfolio manager; the liquidity of
the portfolio, with nearly all investments being listed and readily
realisable; the Company’s borrowings as considered in further
detail in the Going Concern Statement on page 39; the ability of
the Company to meet its liabilities as they fall due; the Company’s
annual operating costs and that, as a closed ended investment
trust, the Company is not affected by the liquidity issues of openended companies caused by large or unexpected redemptions.
In taking account of these factors and on reviews conducted
as part of the detailed internal controls and risk management
processes set out on page 34, the Directors have concluded that
the viability of the Company may start to be challenged if the
value of investments reduced by over 80% from the aggregate
level at the year end and the board considers this implausible
having noted that since the inception of the Company’s All-Share
Index Total Return benchmark in December 1985, the largest fall
over any calendar year has been 29.9%, the largest fall over any
rolling five year period was 28.8% and the largest fall over any
period was 42.9% (all based on benchmark calendar month end
values).
Based on the above, and assuming there is no adverse change to
the regulatory environment and tax treatment of UK investment
trusts to the extent that would challenge the viability of the
UK investment trust industry as a whole, the Directors have a
reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the five
year period of assessment.