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Edinburgh New Income Trust plc

 

Objective

The objective of Edinburgh New Income Trust plc is to provide Ordinary Shareholders with an attractive level of income, together with the potential for capital and income growth; and ZDP Shareholders with a pre-determined capital entitlement on 31 May 2011. The Company will invest mainly in UK quoted equities selected primarily for their potential, in the opinion of the Investment Manager, to provide an attractive dividend yield and capital appreciation.

Edinburgh New Income Trust plc was launched on 1 June 2005 as the successor to Edinburgh Income & Value Trust plc and Edinburgh High Income Trust plc following their wind-up on 31 May 2005

Manager's Monthly Report

July 2010



The FTSE All-Share Index declined by 4.6% in June on a total return basis following a weak performance during May. Sovereign debt risk concerns remained at elevated levels with the potential negative impact on Europe’s banks generating greater focus. In addition, poor economic data from the US and concerns over the impact of tightening measures in China weighed on sentiment. From a sector perspective, on the one hand defensive areas of the market such as tobacco, utilities and pharmaceuticals outperformed. On the other hand, macro-sensitive areas such as mining and basic materials underperformed and the oil sector was particularly badly affected by the fall in BP’s share price. Over the month, we introduced three new holdings, Sage, Wm Morrison supermarkets and Imperial Tobacco, all are characterised by their strong cashflows and attractive valuations. Firstly, Sage, the accounting software company has a strong competitive position among small and medium sized companies. Secondly, Wm Morrison, which helped by its value focus is performing well and benefits from significant asset backing. Thirdly, Imperial Tobacco, where the integration of its acquisition of Altadis is progressing to plan and provides the company with good opportunities for revenue synergies. These purchases were funded by the sale of Arriva following the approval by shareholders of the acquisition of the company by Deutsche Bahn and we also tendered our Land Securities bond. There were a number of small additions where we felt that certain holdings had been oversold during the market fall including United Utilities, Pearson, Aviva and Close Brothers amongst others. On a fundamental basis, we believe the path to sustainable economic growth remains challenging and the outlook uncertain. Record budget deficits need to be repaired, savings ratios enhanced to historic levels, inflation restrained, interest rates normalised, banking re-regulated and quantitative easing unwound. None of these tasks is easy, and we remain cognisant that the market may not necessarily be factoring in the full implications of the tests ahead. We take increasing comfort that equity markets appear not to be expensive, but volatility is likely to remain a significant characteristic of the market. However, where opportunities present themselves we will continue to add to our holdings which we believe are attractively valued and maintain strong business models.


Source: Monthly Factsheet Aberdeen Asset Managers Limited