The Edinburgh Investment Trust Plc Annual Financial Report 2022 - Flipbook - Page 74
72 / FINANCIAL REVIEW / THE EDINBURGH INVESTMENT TRUST PLC
Notes to the Financial Statements / continued
16.2 Liquidity risk
Liquidity risk is minimised as the majority of the Company’s investments constitute a diversified portfolio of readily realisable securities
which can be sold to meet funding commitments as necessary. In addition, the Company has a bank facility which it can use to provide
short-term funding flexibility.
Liquidity risk exposure
The contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be required, are as
follows:
Three
months
or less
£’000
More
than three
months
but
less than
one year
£’000
Debenture stock - debt at par value
–
Loan note - debt at par value
–
Interest on debenture stock
–
3,875
–
3,875
Interest on loan note
–
506
14,421
14,927
1,316
–
–
1,316
448
–
–
448
2022
Amounts due to brokers
Share buybacks awaiting settlement
Accruals
2021
More than
one year
£’000
Total
£’000
100,000
–
100,000
–
20,000
20,000
802
–
–
802
2,566
104,381
34,421
141,368
Three
months
or less
£’000
More
than three
months
but
less than
one year
£’000
More than
one year
£’000
Total
£’000
Debenture stock - debt at par value
–
–
100,000
100,000
Interest on debenture stock
–
7,750
3,875
11,625
Accruals
698
–
–
698
698
7,750
103,875
112,323
16.3 Credit risk
Credit risk encompasses the failure by counterparties to deliver securities which the Company has paid for, or to pay for securities which
the Company has delivered, and cash balances. Counterparty risk is minimised by using only approved counterparties. The Company’s
ability to operate in the short-term may be adversely affected if the Company’s custodian suffers insolvency or other financial difficulties.
However, with the support of the depositary’s restitution obligation the risk of outright credit loss on the investment portfolio is remote.
The Board reviews the custodian’s annual controls report and the Manager’s management of the relationship with the custodian. Cash
balances are limited to a maximum of 1% of net assets with any one deposit taker, with only approved deposit takers being used, and a
maximum deposit of 6% of net assets in aggregate in liquidity funds with credit ratings of AAAm (or equivalent). These limits are at the
discretion of the Board and are reviewed on a regular basis. The investment policy also allows for UK Government Treasuries to be held.
Such holdings are recorded as cash equivalents if they meet the criteria set out in Note 1D on page 59.