The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 41
THE EDINBURGH INVESTMENT TRUST PLC / GOVERNANCE / 39
GOING CONCERN
The financial statements have been prepared on a going concern
basis. The Directors consider this is the appropriate basis as they have
a reasonable expectation that the Company has adequate resources
to continue in operational existence for the foreseeable future, being
taken as at least twelve months after the signing of the balance
sheet, for the same reasons as set out in the Viability Statement
on page 22. In considering this, the Directors took into account
both ongoing expenses and any obligations under the Company’s
borrowing (each of the debenture, unsecured notes and the bank
facility). In reaching this conclusion, the Directors have considered
the liquidity of the Company’s portfolio of investments as well as its
cash position, income and expense flows. As at 31 March 2022, the
Company held £68.7 million (2021: £32.6 million) in cash and cash
equivalents and £1,218.7 million (2021: £1.151.0 million) in quoted
investments. The Company’s audited net assets at 31 March 2022
were £1,175.8 million (2021: £1,091.2 million).
Given the level of market volatility experienced due to the impact
of the COVID-19 pandemic and Russia’s invasion of Ukraine, the
Manager has performed stress tests on the Company’s portfolio
of investments under current conditions and the Board remain
comfortable with the liquidity of the portfolio.
It is estimated that over 99% by value of the quoted investments
held at the year end could be realised in one month under normal
market conditions.
The Board also considered the Company’s obligations under the
Company’s borrowing. On 30 September 2021, the Company
announced an issue of £120m of long-term fixed rate, Unsecured
Senior Loan Notes with a weighted average cost of 2.44% of
which £20m was drawn in October 2021. The other £100m will be
drawn in September 2022 to repay the £100m 7.75% debenture
on its maturity. These notes require the Net Tangible Assets of
the Company to remain not less than £300m. The Board, which
routinely monitors borrowing restrictions, does not anticipate
difficulties in meeting this. The £100 million debenture matures in
September 2022. The bank facility which is not currently drawn,
remains available whilst the Company’s Net Asset Value is above
£300 million (see notes 11 and 12 to the financial statements).
The bank facility was renewed on 16 June 2021 at £25 million
and matures on 15 June 2022. This facility is not expected to be
renewed.
The total ongoing charges (excluding taxation, non-recurring
legal and professional fees and finance costs) for the year ended
31 March 2022 were £6.0 million (2021: £4.2 million).
THE MANAGER
On 4 March 2020, the Board appointed Majedie Asset Management
Limited (‘Majedie’) as its Alternative Investment Fund Manager.
As disclosed in Note 21 (Post Balance Sheet Events), with effect
from 1 April 2022, Liontrust Fund Partners LLP was appointed the
Manager following completion of the acquisition of Majedie by
Liontrust Asset Management Plc. The responsibility for the day-today investment management activities of the Company has been
delegated to Liontrust Investment Partners LLP.
Investment Management Agreement (‘IMA’)
The Manager provides investment and administration services to
the Company under an investment management agreement dated
3 March 2020. The agreement is terminable by either party by
giving not less than three months’ notice.
The monthly management fee is calculated on 0.04000% on the
first £500 million and 0.03875% on the remainder of the market
capitalisation of the Company’s ordinary shares at each month
end and paid monthly in arrears (equivalent to an annualised fee
of 0.480% on the first £500m and 0.465% on the remainder).
There is no performance fee. In 2022 the Ongoing Charges ratio
was 0.52%.
Assessment of the Manager
The Management Engagement Committee has carried out a
review following the Company’s takeover of Majedie by Liontrust
with effect from 1 April 2022 and following recommendation
from the Committee, the Board considers that the continuing
appointment of Liontrust Fund Partners LLP as Manager is in the
best interests of the Company and its shareholders.
COMPANY SECRETARY
On 3 March 2020, the Board appointed PraxisIFM Fund Services
(UK) Limited as secretary to the Company. The Board has
continuous direct access to the advice and services of the corporate
Company Secretary, who are responsible for ensuring that the
Board and Committee procedures are followed and that applicable
rules and regulations are complied with. The Company Secretary
provides full company secretarial services to the Company, ensuring
that the Company complies with all legal, regulatory and corporate
governance requirements and officiating at Board meetings and
shareholders’ meetings. The Company Secretary is also responsible
to the Board for ensuring timely delivery of information and reports
and that the statutory obligations of the Company are met. Finally,
the Company Secretary is responsible for advising the Board
through the Chairman on all governance matters. On 2 February
2022 PraxisIFM Fund Services (UK) Limited was renamed Sanne
Fund Services (UK) Limited as a result of the company’s acquisition
by Sanne Group PLC.
SHARE CAPITAL
Capital Structure
At the year end, the Company’s allotted and fully paid share
capital consisted of 195,666,734 ordinary and treasury shares
of 25p each of which 24,588,605 shares are held in treasury.
To enable the Board to take action to deal with any significant
overhang or shortage of shares in the market, it seeks approval