The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 73
THE EDINBURGH INVESTMENT TRUST PLC / FINANCIAL REVIEW / 71
The Company also has an uncommitted bank overdraft facility which it uses for settlement purposes and the interest rate is dependent on
the base rate as determined by the custodian. At the year end, no amounts were overdrawn (2021: none).
The Company’s debt of £120 million (2021: £100 million) of debenture stock and Unsecured Senior Loan Notes is fixed which exposes the
Company to changes in market value in the event that the debt is repaid before maturity. Details of the debenture stock interest is shown
in note 12, with details of its market value and the affect on net asset value in note 15(b).
The Company held one fixed income security during the year (2021: nil), being a short-term zero coupon government bond which
matures on the 30 May 2022. As at 31 March 2022 this government bond was recognised as a Cash and Cash Equivalent on the
Balance Sheet.
Interest rate exposure
At 31 March the exposure of financial assets and financial liabilities to interest rate risk is shown by reference to:
– floating interest rates (giving cash flow interest rate risk) – when the interest rate is due to be re-set; and
– fixed interest rates (giving fair value interest rate risk) – when the financial instrument is due for repayment.
2022
2021
Within
one
year
£’000
Between
one and
five years
£’000
After
five
years
£'000
Total
£’000
Within
one
year
£’000
Between
one and
five years
£’000
Total
£’000
48,748
–
–
48,748
32,570
–
32,570
19,980
–
(100,000)
–
–
19,980
–
–
(100,000)
–
Exposure to floating interest rates:
Cash and cash equivalents
Exposure to fixed interest rates:
UK Government Treasury Bill
Debenture stock - debt at par value
Unsecured Senior Loan Notes - debt at
par value
Total exposure to interest rates
–
(31,272)
–
(20,000)
(20,000)
–
–
(20,000)
(51,272)
32,570
–
(100,000)
–
(100,000)
–
(100,000)
–
(67,430)
16.1.3 Other price risk
Other price risks (i.e. changes in market prices other than those arising from interest rate risk or currency risk) may affect the value of the
equity investments, but it is the business of the Manager to manage the portfolio to achieve the best return that he can.
Management of the other price risk
The Directors manage the market price risks inherent in the investment portfolio by meeting regularly to monitor on a formal basis the
Manager’s compliance with the Company’s stated objectives and policies, and to review investment performance.
The Company’s portfolio is the result of the Manager’s investment process and need not be highly correlated with the Company’s
benchmark or the market in which the Company invests. The value of the portfolio will not move in line with the market but will move as
a result of the performance of the company shares within the portfolio.
If the value of the portfolio fell by 10% at the balance sheet date, the profit after tax for the year and the net assets of the Company
would decrease by £121.9 million (2021: £115.1 million). Conversely, if the value of the portfolio rose by 10%, the profit after tax and the
net assets of the Company would increase by the same amounts.