Final Results
Edinburgh US Tracker Trust plc
17 March 2006
17 March 2006
EDINBURGH US TRACKER TRUST PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2006
Edinburgh US Tracker Trust aims to achieve long term growth of capital and
income by tracking the performance of the S&P Composite 500 Index.
HIGHLIGHTS
• NAV rose by 15.2% compared to a rise of 15.0% in the S&P Composite 500
Index
• Total dividend increased by 18.8% to 6.0p (2005 -5.05p)
• Share price rose by 17.5% to 570.0p.
• Total expense ratio of 0.28% (2005 - 0.29%)
For further information, please contact:
David McCraw
Edinburgh Fund Managers plc 0131 313 1000
Ian Massie
Edinburgh Fund Managers plc 0131 313 1000
EDINBURGH US TRACKER TRUST PLC
Chairman's Statement
The Company continues to meet the objective of tracking the performance of the S
&P 500 Composite Index. In the 12 months to 31 January 2006, the net asset value
per share (NAV) rose by 15.2% to 600.46p compared to an increase of 15.0% in the
index (in sterling terms). The Company's share price rose by 17.5% over the year
to 570.0p at 31 January 2006, which represented a discount of 5.1% to the net
asset value (including undistributed revenue for the period). At the start of
the financial year, the share price was standing at a discount of 7.0%. The
Company bought back 1,242,000 shares for cancellation during the year enhancing
the NAV for continuing shareholders by 0.46p.
US equity markets made little progress until the final quarter of the year.
Corporate profits were ahead of expectations but investors remained cautious
about the impact of both higher oil prices and higher interest rates on economic
activity. The Federal Reserve continued to increase short term interest rates to
combat inflation pressures and by the end of the year the Fed Funds Rate had
been raised to 4.5%. The US economy however has managed to withstand these
potential impediments to growth and at the start of a new year appears to be
gaining some momentum.
Over the financial year, the US dollar/sterling exchange rate rose from $1.89 to
$1.78 which translated the rise of 8.4% in the S&P 500 Composite Index in US
currency to 15.0% in sterling terms.
The revenue return per share over the year rose by 21.3% to 6.26p benefiting
from dividend increases from underlying investments and the recovery in the US
dollar. Your board is recommending a final dividend of 3.70p which will take
total dividends for the year to 6.00p, an increase of 18.8% over last year.
The financial statements, and the net asset value per share figures quoted
above, have been prepared in accordance with UK Generally Accepted Accounting
Principles (UK GAAP). The new Financial Reporting Standards, issued as part of
the programme to converge UK GAAP with International Financial Reporting
Standards (IFRS), were applicable for the accounting period ended 31 January
2006 and the financial statements for the twelve months ended 31 January 2005
have also been restated. The main change arising from these revisions to UK
GAAP, in relation to the Company's financial statements, is that dividends to
shareholders declared after the balance sheet date are now shown in the period
of payment rather than in the reporting period. This change has increased the
NAV as at 31 January 2005 from 518.26p to 521.31p.
Marketing
Your Board continues to promote the Company through the Manager's marketing
initiative which provides a series of savings schemes through which savers can
invest in Edinburgh US Tracker Trust in a low cost and convenient manner. The
Company contributed £26,000 to this initiative during the past year. Up to date
information about the Company is available on the Company's website on
www.edinburghustracker.com.
Corporate Governance
The Board reviews annually the performance of the Manager, the Chairman and the
Board as a whole. The Board has assessed the performance of the Manager, the
investment process and risk controls. The portfolio has tracked closely the
performance of the index and the discount at which the Company's shares trade
relative to the net asset value has reduced over the past year. The Board has
reviewed the terms of the management agreement during the year and believes that
the continuing appointment of the Manager, on the terms agreed, is in the
interests of shareholders.
Annual General Meeting
The Company's articles of association require shareholders to vote on the
continuation of the Company at every Annual General Meeting. Accordingly, a
resolution to this effect will be proposed as Special Business at the Annual
General Meeting to be held on 18 May 2006. If this resolution is not passed, a
resolution to liquidate the Company will be proposed later this year.
Liquidation would result in a disposal of the Company's shares for taxation
purposes and therefore shareholders should consider carefully whether they wish
the Company to be wound up. There will be another opportunity to consider the
future of the Company at the same time next year.
Since the investment objective of the Company was revised in June 1997, the
capital performance has matched that of the index. The annualised returns for
the Company's net asset values per share for the period 31 July 1997 to 31
January 2006 were 2.87% per annum compared to an annualised return of 2.52% per
annum for the index. I believe that our investment performance, aided by low
management and administration costs, as evidenced by the total expense ratio of
0.28%, underlines the attractions of the index tracking approach to investors.
Your Board therefore strongly recommends all shareholders to vote in favour of
the resolution.
The directors are also seeking shareholder approval to renew the authority to
issue new shares for cash, to meet investor demand provided the subscription
price is not below the net asset value per share. Your Board also has the
authority to purchase the Company's shares for cancellation were the shares to
trade persistently on a discount in excess of the levels reached in recent
years. Special resolutions proposing an extension of these facilities will be
put to shareholders at the Annual General Meeting.
The size of the economy and stock market, the mobility of the nation's labour
force and the country's entrepreneurial culture have enabled a large number of
US companies to emerge as world leaders in many industries. Edinburgh US Tracker
Trust provides shareholders with a broadly diversified portfolio which covers
the top 500 listed companies in the United States.
Sir Angus Grossart
Chairman
INCOME STATEMENT
for the year ended 31 January 2006 (audited)
Revenue Capital Total
£000 £000 £000
Realised gains on investments - 4,136 4,136
Movement in unrealised appreciation - 59,302 59,302
Foreign exchange movements - 371 371
Income 8,631 - 8,631
Investment management fee (926) - (926)
Administrative expenses (357) - (357)
________ ________ ________
Return on ordinary activities before taxation 7,348 63,809 71,157
Taxation (2,205) - (2,205)
________ ________ ________
Return on ordinary activities after taxation 5,143 63,809 68,952
________ ________ ________
Return per share (pence) 6.26 77.62 83.88
________ ________ ________
INCOME STATEMENT
for the year ended 31 January 2005 (audited)
(restated)
Revenue Capital Total
£000 £000 £000
Realised gains on investments - 7,119 7,119
Movement in unrealised appreciation - (3,399) (3,399)
Foreign exchange movements - (325) (325)
Income 7,689 - 7,689
Investment management fee (881) - (881)
Administrative expenses (414) - (414)
________ ________ ________
Return on ordinary activities before taxation 6,394 3,395 9,789
Taxation (1,918) (398) (2,316)
________ ________ ________
Return on ordinary activities after taxation 4,476 2,997 7,473
________ ________ ________
Return per share (pence) 5.16 3.46 8.62
________ ________ ________
The total column represents the profit and loss account of the Company.
The financial statements for the year ended 31 January 2005 have been restated
to reflect the change to accounting practises as set out in the accompanying
notes.
All revenue and capital items in the above statement derive from continuing
operations.
Proposed Final Dividend
The Board are proposing a final dividend of 3.7p per share, making a total
dividend of 6.0p for the year to 31 January, which, if approved, will be payable
on 22 May 2006.
BALANCE SHEET (audited)
as at 31 January
2005
2006 (restated)
£000 £000 £000 £000
Fixed assets
Investments at fair value through profit or loss 485,539 427,653
Current assets
Debtors 1,075 353
Cash and short term deposits 5,437 5,318
________ ________
6,512 5,671
Creditors: amounts falling due within one year (1,477) (943)
________ ________
Net current assets 5,035 4,728
Provision for liabilities and charges (63) (54)
________ _______
Net assets 490,511 432,327
________ _______
Capital and reserves
Called up share capital 20,422 20,733
Share premium 32,643 32,643
Capital redemption reserve 1,673 1,362
Capital reserve - realised 321,756 323,606
Capital reserve - unrealised 109,071 49,769
Revenue reserve 4,946 4,214
________ _______
Equity shareholders' funds 490,511 432,327
________ _______
Net asset value per share (pence) 600.46p 521.31p
Reconciliation of movements in shareholders' funds
For the year ended 31 January 2006 Share Capital Capital Capital
Share premium redemption reserve reserve Revenue
capital account reserve Realised Unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2005 as 20,733 32,643 1,362 323,606 49,769 1,685 429,798
originally reported
Restatement - - - - - 2,529 2,529
_______ _______ _______ _______ _______ _______ _______
Balance at 31 January 2005 (restated) 20,733 32,643 1,362 323,606 49,769 4,214 432,327
Total recognised gains - - - 4,507 59,302 5,143 68,952
Dividends paid - - - - - (4,411) (4,411)
Purchase of ordinary shares for (311) - 311 (6,357) - - (6,357)
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 31 January 2006 20,422 32,643 1,673 321,756 109,071 4,946 490,511
_______ _______ _______ _______ _______ _______ _______
For the year ended 31 January 2005 Share Capital Capital Capital
Share Premium Redemption reserve reserve Revenue
capital account reserve Realised Unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2004 as 22,095 32,643 - 343,575 53,168 1,472 452,953
originally
reported
Restatement - - - - - 2,519 2,519
_______ _______ _______ _______ _______ _______ _______
Balance at 31 January 2004 (restated) 22,095 32,643 - 343,575 53,168 3,991 455,472
Return on ordinary activities after - - - 6,396 (3,399) 4,476 7,473
taxation
Dividends paid - - - - - (4,253) (4,253)
Purchase of ordinary shares for (1,362) - 1,362 (26,365) - - (26,365)
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 31 January 2005 (restated) 20,733 32,643 1,362 323,606 49,769 4,214 432,327
_______ _______ _______ _______ _______ _______ _______
CASHFLOW STATEMENT (audited)
for the year ended 31 January
2006 2005
£000 £000 £000 £000
Net cash inflow from operating activities 7,333 6,591
Taxation
UK corporation tax paid (1,137) (745)
Overseas tax paid (1,240) (1,355)
________ _______
Net tax paid (2,377) (2,100)
Financial Investment
Purchase of investments (17,010) (10,907)
Sale of investments 22,570 40,008
_______ _______
Net cash inflow from financial investment 5,560 29,101
Equity dividends paid (4,411) (4,253)
_______ _______
Net cash inflow before financing 6,105 29,339
Financing
Buyback of ordinary shares (6,357) (26,365)
_______ _______
Net cash outflow from financing (6,357) (26,365)
_______ _______
(Decrease)/Increase in cash (252) 2,974
_______ _______
Analysis of changes in cash during the year
Opening cash balance 5,318 2,669
(Decrease)/increase in cash as above (252) 2,974
Exchange movements 371 (325)
_______ _______
Closing cash balance 5,437 5,318
_______ _______
NOTES :
1. Accounting policies
(a) Basis of preparation and going concern - The financial statements have
been prepared under the historical cost convention as modified to include the
revaluation of investments and in accordance with applicable UK Accounting
Standards and with the Statement of Recommended Practice 'Financial Statements
of Investment Trust Companies' (issued January 2003 and revised in December
2005). They have also been prepared on the assumption that approval as an
investment trust will continue to be granted. The financial statements have been
prepared on a going concern basis.
The financial statements, and the net asset value per share figures,
have been prepared in accordance with UK Generally Accepted Accounting
Principles (UK GAAP). The new Financial Reporting Standards, issued as part of
the programme to converge UK GAAP with International Financial Reporting
Standards (IFRS), were applicable for the accounting period ended 31 January
2006 and the financial statements for the twelve months ended 31 January 2005
have also been restated.
The main change arising from these revisions to UK GAAP, in relation to the
Company's financial statements, is that dividends to shareholders declared after
the balance sheet date are now shown in the period of payment rather than in the
reporting period. Dividends were previously recognised in the statement of total
return (now income statement). These are now dealt with as an appropriation of
equity and are taken directly through equity in the reconciliation of movements
in shareholders' funds. A further change arising from the revisions to UK GAAP
is the recognition of investments at fair value, which for listed investments is
deemed to be bid market prices or closing prices for SETS stocks. For Edinburgh
US Tracker Trust, therefore, the change of valuation basis has no impact as the
closing price, which was used for both years, is deemed to be fair value.
(b) Investment income, interest receivable, expenses and interest payable -
Dividends (other than special dividends), including taxes deducted at source,
are included in revenue by reference to the date on which the investment is
quoted ex-dividend. Special dividends are reviewed on a case-by-case basis and
may be credited to capital if circumstances dictate. Interest receivable on bank
balances, expenses and interest payable are dealt with on an accruals basis. All
expenses are charged to revenue except where they directly relate to the
acquisition or disposal of an investment, in which case, they are added to the
cost of the investment or deducted from the sale proceeds.
(c) Investments - Listed investments
have been designated upon initial recognition as fair value through profit and
loss. Investments are recognised and derecognised on the trade date where a
purchase or sale is under a contract whose terms require delivery within the
timeframe established by the market concerned and are initially measured at fair
value. Transaction costs on purchases and sales are expensed through the income
statement. Subsequent to initial recognition, investments are valued at fair
value.
Gains and losses arising from changes in fair value are included in net profit
or loss for the period as a capital item in the income statement and are
ultimately recognised in the unrealised reserve.
(d) Dividends payable - Interim and final dividends are recognised in
the period in which they are paid.
(e) Realised capital reserve - Gains or losses on investments realised in
the year that have been recognised in the income statement are transferred to
the realised capital reserve. In addition, any prior unrealised gains or losses
on such investments are transferred from the unrealised capital reserve to
realised capital reserve on disposal of the investment. The cost of share
buybacks are deducted from this reserve.
(f) Unrealised capital reserve - Increases and decreases in the fair
value of investments are recognised in the income statement and are then
transferred to the unrealised capital reserve.
(g) Deferred taxation - Deferred taxation is provided on all timing
differences that have originated but not reversed at the balance sheet date,
where transactions or events that result in an obligation to pay more or a right
to pay less tax in future have occurred at the balance sheet date measured on an
undiscounted basis and based on enacted tax rates. This is subject to deferred
tax assets only being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of the underlying
timing differences can be deducted. Timing differences are differences arising
between the Company's taxable profits and its results as stated in the accounts
which are capable of reversal in one or more subsequent periods.
Due to the Company's status as an investment trust company, and the intention to
continue meeting the conditions required to obtain approval in the foreseeable
future, the Company has not provided deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
(h) Foreign currencies - Assets and liabilities in foreign currencies are
translated at the rates of exchange ruling on the balance sheet date.
Transactions involving foreign currencies are converted at the rate ruling on
the date of the transaction. Gains and losses on the realisation of foreign
currencies are recognised in the income statement and are then transferred to
the realised capital reserve.
2. The proposed final dividend of 3.70p per share, subject to shareholder
approval, will be paid on 22 May 2006 to shareholders on the register at the
close of business on 18 April 2006. The ex-dividend date is 12 April 2006.
3. The income statement, balance sheet, reconciliation of movement in
shareholders' funds and the cashflow statement set out above do not represent
full accounts in accordance with Section 240 of the Companies Act 1985. The
financial information for the year ended 31 January 2005 has been extracted from
the Annual Report and Accounts of the Company which have been filed with the
Registrar of Companies and restated where required as a result of the
implementation of the new Financial Reporting Standards. The auditors' report
on those accounts as originally filed was unqualified. The statutory accounts
for 2006 are unqualified and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting which will be held at Donaldson
House, 97 Haymarket Terrace, Edinburgh EH12 5HD on 18 May 2006 at 11.00am
4. The Annual Report and Accounts will be posted to shareholders in early April
2006 and copies will be available from the investment manager.
Please note that past performance is not necessarily a guide to the future and
that the value of investments and the income from them may fall as well as rise
and may be affected by exchange rate movements. Investors may not get back the
amount they originally invested.
For Edinburgh US Tracker Trust plc
Edinburgh Fund Managers plc, Secretary
END
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