EDINBURGH Investment Trust (EIT), the #1847m flagship of Edinburgh Fund Managers, yesterday confirmed its return to health with index-beating annual results.
The UK-focused trust's turnaround is good news for its manager, which is benefiting from a dramatic improvement in the investment performance of many of its funds in the last year or so. Edinburgh Fund Managers' pooled pension fund put in the fifth-best performance of 66 such UK funds in the year to March 31.
An overweight position in financial stocks, including domestic banks such as Lloyds TSB, Abbey National and Barclays, and in telecommunications, notably BT, helped EIT increase net asset value per share by 33.3% to 559.9p in the 12 months to end-March.
The fund, which with total assets of #1847m at March 31 is one of the UK's largest investment trusts, beat the 32.5% rise notched up by a buoyant All-Share Index.
EIT, which aims for greater capital growth than the All-Share and inflation-beating dividend increases, is raising its total dividend by 6.0% to 11.4p with a final payout of 7.75p.
The trust, which decided to drop its overseas holdings at the beginning of last year and move to a lower-yielding portfolio aimed more at capital growth, also benefited from its decision to issue #100m of debenture stock last May.
Such borrowings enhance performance in times of rising markets and EIT was able to take full advantage of a strong UK bond market by investing the proceeds of the debenture issue in gilts.
It also benefited from a marginally overweight position in pharmaceutical stocks such as Glaxo Wellcome, SmithKline Beecham and Zeneca, though the first two of these suffered after calling off their merger.
On the downside, EIT missed out on the dramatic rises of some information technology companies in the support services sector.
Trust manager David McCraw said EIT had been held back slightly by its overweight position on industrials during the 12 months but, with these stocks now back ''in vogue'' and the pound having slipped from its highs, this stance was now beginning to work for it.
He said the trust had been in line with the All-Share since its year-end.
The discount at which EIT's shares trade to underlying net asset value narrowed significantly during the year to March. The share price rose 37.3% and the discount narrowed from 13.2% to 10.6%.
In spite of the strong run which the UK stock market has enjoyed, McCraw remains confident that there is more money to be made and EIT will maintain its geared exposure to equity and bond markets.
Highlighting the amount of cash washing around, McCraw said: ''We feel reasonably confident that the UK equity market is quite well supported at this time.''
But he added that he did not expect returns this year would be of the magnitude seen in the 12 months to March.
EIT has 81% of its equity portfolio in FTSE-100 stocks, 13% in Mid-250 shares and 6% in small-caps. Its shares added 4p to 499p yesterday.
Edinburgh Fund Managers' fee for managing the trust increased from #4.26m to #5.27m in the year to March 31.
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