Edinburgh+Investment+Trust+PLC

=The Edinburgh Investment Trust Public Limited Company=

Company Number: SC001836 Date of Incorporation: 1 March 1889 Contact Details: Quartermile One, 15 Lauriston Place, Edinburgh, EH3 9EP Operating Details: Active Other names (if known): Function of Company*: Other financial intermediation (6523) Headquarters/Base of Operations Location: Edinburgh Area of Operation: Invests across the UK, previously invested internationally


 * Taken from Standard Industrial Classification 2003, as used by Companies House in 2010

Records
Held By: Dundee City Council Archives GB251/GD/EFM

Scope/type: Edinburgh Investment Trust Ltd.; Minutes, 1889-1975. Accounting records, 1889-1934. Registers of members, 1889-1913. Registers of Directors, 1926-1948. Photographs of managers, secretaries and directors, 1889-c1968. Frames of composite photographs of office-bearers, 1889-1994.

Conditions governing access/use: Open

Related records: Part of the Dunedin Investment group archives. Other records of the Group are held at Dundee City.

Company History
The Edinburgh Investment Trust was established in 1889. It had an initial capital of £1,000,000 in 100,000 shares of £10 each. This was divided between 180,000 4.5% preferred stocks and 120,000 of deferred stocks whose holders were entitled to the surplus net profits. The first issue of the company’s shares consisted of 30,000 fully paid-up £10 shares at a premium of 5%. The Articles of Association allowed debenture stock could also be issued up to an amount equalling 2/3rds of the nominal amount of the subscribed capital. The first board of directors comprised Alexander L. Bruce (of Wm Younger and Co, Brewers), Patrick William Campbell (of Myle and Campbell WS, Edinburgh), George Todd Chiene CA (of Chiene, Tait and Brewis CA, Edinburgh), James Ford (of Wm Ford and Sons Merchants, Leith), William Stuart Fraser WS (of Fraser, Stodart and Ballingall WS, Edinburgh), Henry Goudy (Advocate, Edinburgh), and James Dundas Lawrie (of Lawrie and Ker, Stockbrokers, Edinburgh). Wallace and Guthrie WS acted as the first company secretaries. The first registered offices of the investment trust were located at 137 George St, Edinburgh.

The Prospectus, issued on the 1st march stated ‘The principle on which trust companies are formed has become familiar to the investing public, but there are as yet only two or three such companies in Scotland, and there appears to be ample room for another. The object is to acquire and hold sound investment yielding a remunerative return, and to change them from time to time as may be deemed desirable. The shares of the present Company are to be fully paid so that no further liability can attach to the holders of them.’ Unlike many similar companies of the time, it did not invest in land mortgage schemes but instead 52% of its first 209 securities were made up of ordinary shares. This was unusual for its time. These investments were diverse, from brewing and shipping to diamond mines and tobacco companies. Equities included the Distillers Co Ltd, Hong Kong and Shanghai Bank, Stock Conversion, London and North Western Railway and the North British Rubber Co. The rest of their holdings were largely in railway bonds in companies across Central and South America, Greece, Spain and the USA. Scottish banks and British brewers were also later added to the portfolio, as well as investment trusts, shipping, gas companies and tobacco producers.

In the first year of its operations, the company was able to offer deferred shareholders dividend of 5.5%, rising the following year to 7%. However, the Barings crisis of 1890 meant that in 1896 and 1896, it had fallen again to 2%. It was a difficult period for all Scottish companies operating in North America as farming as was as markets collapsed. At the end of its first ten years, the company was facing a world-wide economic depression. By this time, it had also seem dramatic changes to its board. By 1899, directors Thomson, Chiene and Goudy had gone and been replaced by John Scott Tait (Chiene’s partner) and William B Dunlop. In 1901 James Lawrie died and was replaced by his son Henry Lawrie while Patrick Campbell was appointed chairman a position he would retain until his death in 1922. Despite all this, the success of the company was such that a sister body – the Second Edinburgh Investment Trust - was formed in 1902, the year in which the dividend once again reached 7% and the effects of an economic upturn began to be experienced. In 1906 an issue of Preferred and Deferred stock was made (60:40 proportion) which brought in about £80,000 and, partly due to the investment of this new capital, by 1908, the original company already had £1 million assets under management. By 1915, there would be 700 holders of deferred stock, mainly small investors from Scotland, who would benefit.

As this boom period continued, the Third Edinburgh Investment Trust was established in 1911 to allow shareholders to benefit from the climbing markets as well as experience of the Edinburgh Investment Trust’s directors and staff. By 1914, the ordinary dividend offer by the parent company had risen to 17% and would reach 20% by 1919. However, the company was about to undergo more significant changes brought about by the onset of the First World War. In 1916, in common with all British Businesses with investments in North America, the government asked for the Dollar element of the portfolio of investment trusts be liquidated. The North American assets in the company’s portfolio were therefore sold in order to support the government’s need for dollar currency to pay for the war. Sandy Wallace was instrumental in this on a national level when he was called to work at the Treasury selling off the national stock of foreign investments to finance the war. The bulk of this was then reinvested into British government stock on a voluntary basis.

None of the portfolio changes undertaken during the war proved to be an unprofitable policy for the company. By 1919, £528,000 of the £1,440,000 assets were in guilts and the rest spread over 236 investments with the aim of avoiding a high-risk portfolio due to the company’s high gearing. In the same year it was decided to make a bonus issue to deferred stockholders in order to make the price of deferred stock more saleable. However, because of the way ‘members’ had been defined in the articles of agreement, in order to be able to do this a special payment of 3% had to be made to preferred stockholders in return for cancelling their rights to such an issue on 3 January of that year. This being agreed and carried out, the bonus issue to deferred stockholders took place on the 15th January 1919. The bonus issue to deferred stockholders comprised £120,000 of preferred stock and debentures, plus a 1 for 5 scrip issue of deferred stock. A further scrip issue took place in 1921, a year before Campbell died and was replaced as chairman by Sandy Wallace, at the same time as W H Fraser WS (son of WS Fraser) joined the board.

Despite the upheavals, other things remained constant: the company’s registered offices had moved to 1 North Charlotte Street in 1892 as Wallace and Guthrie WS moved offices and by 1927 it would move with them again from North Charlotte Sq to 3 Charlotte Square. In 1907, when Alexander Clapperton was appointed Secretary to the trust on behalf of the firm and in 1917, on the retirement of Lawrence Guthrie from Wallace and Guthrie, Clapperton became manager as well as secretary, while Wallace joined the board of directors.

After the end of the First World War, there was an effort to rebuild the American element of the portfolio. By 1925 American holdings once more accounted for 16% of the total assets held by the company and by 1929, when John Chiene was appointed secretary to all the companies, the combined market value of the assets of the three trusts amounted to £5 million. Around £2.5m of this was held by the parent company, helped a small rights issues by in both 1928 and 1930. However, after the Wall Street crash and the onset of the Depression, by 1932 this had fallen to £1.5m. In that year, 41% of the company’s assets were in fixed interest securities and only 59% in equities. Of the total, 68% were in the Commonwealth, 17% in the USA, 6% in Latin America, 5% in the far East, 1% in Europe and 3% in other international markets. The total number of holdings was 549.

In 1933, at the height of the crisis, Sandy Wallace stepped down as chairman and was replaced by Willie Fraser. The company was damaged by the Depression, but survived. By 1936, when John Chiene visited the USA, the securities that the company had purchased at the bottom of the market, while not yet providing sufficient returns to income, were proving strong in terms of capital appreciation. The portfolio now had a market value of £2.4m that year, with 77% in equities as confidence increased. The dividend had also recovered to provide 7.5% to deferred stockholders. The valuation rose to 2.9 in 1937, with 83% in equities and a dividend of 9%. This period of improvement appeared to be on the verge of being ended by the outbreak of the Second World War. Alexander Clapperton retired the same year, before coming back to help the trust after hostilities broke out. However, he died in 1943. Sandy Wallace resigned in 1942. John Chiene had been promoted to assistant manager in 1937 and became manager in 1939 but enlisted in when hostilities began. Willie MacGregor became secretary in 1939 and was this assistant manager who helped run the investment trusts during this difficult period. Under him, through the wartime period, the value of the assets held by the trust almost doubled in value despite the dividend not being raised throughout the period. By the end of the war, the combined gross assets of the company were around £6m around where they had been before 1929. In the first year after the war, the board of directors included W H Fraser as chairman, Sir Gilbert Archer, John Chiene (who would leave to work for Seagrams and be in charge of Chivas Brothers in Aberdeen in 1952), Ellis Inglis, William Wallace and Alexander Harrison. In April 1947, the 4% debenture stock was repaid at 105 and replaced with a larger issue of 3% debenture stock at a price of 95.5%, so lowering the cost of borrowing for the company.

In 1957, the three Edinburgh Investment Trusts merged under the leadership of Willie McGregor despite the significant differences in gearing of each when this step was first proposed. The First Company acquired the assets of the second and third in exchange for similar stocks under a scheme of arrangement. The total gross assets of the newly enlarged company amounted to c. £18,036,000. In 1969, the deferred stock of the company became officially dealt in units of £1 each. Ten year later there were finally converted into ordinary shares of 25p. W G Cochrane succeeded MacGregor as manager in 1970. Before the crash in 1974, the overseas proportion of the portfolio had increased considerably so that by the end of 1974, 25% of the company’s assets was comprised of the Dollar premium. By the late 1970s, the company was at the forefront of investment in new areas such as North Sea Oil, and was one of the founder investors in London and Scottish Marine Oil.

In 1983, the trust took over Scottish United Investors, a Glasgow based investment trust, doubling the size of the latter company. The final deal included a combination of Edinburgh Investment trust ordinary shares being sold at a 15% discount, and cash on a mix and match basis. As part of the deal, EIT shareholders were offered a free issue of warrants to compensate them for the likely fall in the ordinary share price as a result of the increased number of shares issued. As a result the number of ordinary shares in issue increased by 56% to 286 million. At this, Sir Robert Smith, Sir David Nickson and Peter Dunn joined the board and Guy Crawford joined the management team, bringing with him a knowledge of Japanese markets. The following year, the management of the company was changed and a new management company was formed. All the investment trusts based at Belsize House merged their resources and personnel, along with those of the Edinburgh Investment Trust and Dunedin Fund Managers was formed. The new company had its base in Edinburgh’s Charlotte Square, though Belsize house was retained for accounting and administration work.

In 1995, the company had assets of 1.097 billion and a net asset value of 319.9P earnings on the ordinary shares was 10.37p and a dividend of 9.35p was paid to shareholders. Changes came in 1996, when Edinburgh Fund Managers acquired Dunedin Fund Managers for £83.25m and took over responsibility for managing the trust. By 1998, the assets had reached 1.846bn and earnings were 14.48p with a div of 11,40. however, asset values then began to fall, to a low of 0.876bn at year end in 2003 when the nav was 278p per ordinary share. However, the div had continued to rise to 13.15 despite earnings of only 11.05p. In August 2002, Fidelity were appointed to manage the trust and they undertook changes to the portfolio. The aim of the trust was stated to be achieving it objectives portfolio by holding predominantly of UK equities and outperform the FTSE All-Share Index in capital terms, as well as to increase the dividend per ordinary share by more than UK inflation. This was to be done by allocating the Company's capital to a number, initially four, of sub-portfolios of slightly different characteristics. The portfolio was to be run with a bias away from FTSE 100 stocks. By the end of 2004, it was the largest and oldest investment trust focused solely on UK companies. The company’s investments are currently managed by INVESCO.

This history has been taken from previous BACS work done on the history of the company, and is unpublished to the best of my knowledge.

Thanks and acknowledgement to Dundee City Archives for permission to republish details of their holdings.