267694 EdinburghIT AR 2024 WEB - Flipbook - Page 74
72 / FINANCIAL REVIEW / THE EDINBURGH INVESTMENT TRUST PLC
NOTES TO THE FINANCIAL STATEMENTS / CONTINUED
Income denominated in foreign currencies is converted to sterling on receipt. The Company does not use financial instruments
to mitigate the currency exposure in the period between the time that income is included in the financial statements and its
receipt.
The Company may invest up to 20% of the portfolio in securities listed on non-UK stock exchanges. At the year end holdings
of non-UK securities total £74.3 million (2023: £93.8 million) representing 6.2% (2023: 7.7%) of the portfolio.
Currency exposure
The fair values of the Company’s monetary items that had a material currency exposure at 31 March are shown below. Where
the Company’s equity investments (which are not monetary items) are priced in a foreign currency, they have been included
separately in the analysis so as to show the overall level of exposure.
2024
2023
USD
£’000
DKK
£’000
CHF
£’000
EUR
£’000
USD
£’000
DKK
£’000
CHF
£’000
EUR
£’000
Foreign currency exposure on
net monetary items
2,730
38
2,183
584
3,137
40
1,420
1,495
Investments at fair value
through profit or loss that are
equities
40,666
–
21,373
12,254
22,356
–
32,549
52,668
43,396
38
23,556
12,838
25,493
40
33,969
54,163
Currency exposure
Total net foreign currency
exposure
The above may not be representative of the exposure to risk during the year, because the levels of foreign currency exposure
may change significantly throughout the year.
Currency sensitivity
In respect of the Company’s material direct foreign currency exposure to investments denominated in currencies, if sterling
had weakened by 1.7% (2023: 3.9%) against the US dollar, 1.4% (2023: 3.5%) for the Swiss franc, 1.0% (2023: 2.0%) for the Euro,
and for the Danish Krone, 1.0% (2023: 2.0%) during the year, the capital return and net assets of the Company would have
increased for all currency exposures by £1.2 million (2023: £3.2 million). Conversely, if sterling had strengthened to the same
extent for the currencies mentioned above, the capital return and net assets of the Company would have decreased by the
same amount. The exchange rate variances noted above have been based on market volatility in the year, using the standard
deviation of sterling’s fluctuation to the applicable currency. This sensitivity takes no account of any impact on the market
values of the Company’s investments arising from the foreign currency mix of their respective revenues, expenses, assets and
liabilities.
16.1.3 Interest rate risk
Interest rate movements will affect the level of income receivable on cash deposits and money market funds, and the interest
payable on variable rate borrowings. When the Company has cash balances, they are held on variable rate bank accounts
yielding rates of interest dependent on the base rate determined by the custodian, The Bank of New York Mellon (International)
Limited.
The Company has Unsecured Senior Loan Notes of £120 million (2023: £120 million). The Unsecured Senior Loan Notes have
a fixed interest rate which only exposes the Company to changes in market value in the event that the debt is repaid before
maturity. Specifics of the Unsecured Senior Loan Notes are shown in Note 12. The details of their fair value and the affect on net
asset value within the Net Asset Value (NAV) – Debt at Fair Value reconciliation within the Alternative Performance Measures
on page 86.
The Company held no fixed income securities during the year (2023: two short-term zero coupon government bonds which
matured during the financial year). As at 31 March 2024 no government bonds (2023: none) were 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.
