Half Yearly Report

RNS Number : 8146N

Edinburgh US Tracker Trust plc

07 September 2011

 



                                                                                                                    7 September 2011

EDINBURGH US TRACKER TRUST PLC

Edinburgh US Tracker Trust aims to achieve long term growth of capital and income by tracking the performance of the S&P Composite Index.

Edinburgh US Tracker Trust is the only UK investment trust with the objective of tracking the performance of the S&P Composite Index.

HALF YEARLY FINANCIAL REPORT

FOR THE SIX MONTHS TO 31 JULY 2011

•     Company continues to track the performance of the S&P 500 Index

•     Interim dividend of 4.2p per share for the year ended 31 January 2011 (2011 - 4.2p)

- END -

For further information, please contact:-

David McCraw

Aberdeen Asset Management PLC                                                           0131 528 4000

INTERIM MANAGEMENT REPORT

US equities made little progress in the six months ended 31 July 2011 and the S&P500 Index traded in a relatively narrow range. While the corporate sector remained in good health with profits generally exceeding forecasts, investors were unsettled by a number of factors and towards the end of the period were becoming increasingly risk averse. Regime changes in Tunisia and Egypt had little impact on equity markets but as protests gained momentum in Libya and other Arab countries investors became concerned about the risk to oil supplies and the impact of higher oil prices on economic growth. The earthquake in Japan and the following tsunami added to the uncertainty which was exacerbated as sovereign debt issues in the eurozone once more came to the fore. Towards the end of the period, the on-going quarrelling of politicians in Washington over the government debt ceiling created more nervousness which was reflected in the yields on 10 year Treasury bonds falling towards 2%.

In the six months ended 31 July 2011, the net asset value per share (excluding undistributed revenue for the period) fell by 1.8% to 656.15p (NAV) while the Index fell by 2.0% (in sterling terms).    

The Company's share price fell by 2.3% over the six month period to 31 July 2011 to 621.00p, representing a discount of 5.4% to the NAV. At 31 January 2011, the shares were trading at a discount to NAV of 4.9%. In the six months ended 31 July 2011, 740,000 shares were bought back for cancellation at a cost of £4.8 million.

The revenue return per share has risen by 0.9% from 4.39p to 4.43p. The Directors have declared an interim dividend of 4.20p per share (2011: 4.20p) for the year to 31 January 2012 payable on 14 October 2011 to shareholders on the register on 16 September 2011.

The level of transactions within the portfolio during the period resulted from changes to the constituents of the Index, which arose mainly from takeover activity, and the need to raise cash from the portfolio to fund share buybacks. The new holdings included Covidien, Joy Global, Edwards Life Sciences, BlackRock, Alpha Natural Resources and Accenture. The total value of purchases amounted to £3.3 million while sales totalled £8.9 million.

Since the end of July there have been sharp falls in global equity markets. Weak economic data from the US and Europe, Standard & Poor's downgrading its credit rating of the USA, renewed concerns over the balance sheets of Western banks and disappointing profits from a number of European companies combined to push equity prices sharply lower. From the end of July to the date of this report (6 September 2011), the net asset value per share of the Company and the index have both fallen by 7.4%.

Recent US economic data have been weaker than expected, although corporate profits and dividends so far in 2011 have been stronger than anticipated.  Equity valuations remain below historical averages and, if the economic outlook improves for the balance of this year and into 2012, we would expect valuations to return to historical norms.

Events during the period.

At the Company's AGM on 25 May 2011, all resolutions were passed. A final dividend of 4.95p was paid to shareholders on 27 May 2011.  

Risks and Uncertainties

The Board has identified a number of key risks that affect its business. The principal risks are as follows:

-     Performance risk - the performance of the portfolio relative to the benchmark (S&P 500 Composite Index) is monitored closely by the Board. The NAV performance relative to the Index and the underlying stock weightings in the portfolio against the Index weightings are monitored closely to eliminate any risk of a significant tracking error developing.

-     Market risk - the Company's objective is to track the S&P 500 Composite Index, and the valuation of its portfolio will reflect movements in this Index and in the sterling/dollar exchange rate. Additionally, the Company's revenue will reflect the dividends generated by the constituents of the Index when translated into sterling.

-     Discount volatility - the Company's shares can trade at a discount to its underlying net asset value. The Company operates a discount management policy in the form of an active share buyback programme. The timing of any purchases is decided by the Board, in consultation with management, and is at its discretion.

-     Regulatory risk - the Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Sections 1158 of the Corporation Tax Act 2010, the UK Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors the Company's compliance with regulations.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for preparing the half yearly financial report in accordance with applicable law and regulations.  The Directors confirm that to the best of their knowledge:

-     the condensed set of financial statements within the half-yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement "Half Yearly Financial Reports";

-     the Interim Management Report includes a fair review of the information required by rules 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules. 

For Edinburgh US Tracker Trust plc

James Ferguson

Chairman

6 September 2011

INCOME STATEMENT

	Six months ended 31 July 2011
		(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Losses on investments	-	(4,036)	(4,036)
Foreign exchange losses (note 9)	-	(86)	(86)
Income  (note 2)	2,200	-	2,200
Investment management fee	(221)	-	(221)
Administrative expenses	(204)	-	(204)
	__________	__________	__________
Net return before taxation	1,775	(4,122)	(2,347)
Taxation (note 3)	(316)	-	(316)
	__________	__________	__________
Return on ordinary activities after taxation	1,459	(4,122)	(2,663)
	__________	__________	__________
Return per share (pence)  (note 5)	4.43	(12.52)	(8.09)
	__________	__________	__________

The total column of this statement represents the profit and loss account of the Company.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued in the period.

Interim dividend

An interim dividend of 4.20p per share (£1,359,000) has been declared for the year ending 31 January 2012 and is payable on 14 October 2011 (2011 - 4.20p).

		Six months ended 31 July 2010
		(unaudited)
		Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	10,333	10,333
Foreign exchange gains (note 9)		-	57	57
Income  (note 2)		2,305	-	2,305
Investment management fee		(218)	-	(218)
Administrative expenses		(198)	-	(198)
		__________	__________	__________
Net return before taxation		1,889	10,390	12,279
Taxation (note 3)		(336)	-	(336)
		__________	__________	__________
Return on ordinary activities after taxation		1,553	10,390	11,943
		__________	__________	__________
Return per share (pence)  (note 5)		4.39	29.33	33.72
		__________	__________	__________

INCOME STATEMENT

	Year ended 31 January 2011
		(audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Gains on investments	-	37,695	37,695
Foreign exchange gains (note 9)	-	20	20
Income  (note 2)	4,390	-	4,390
Investment management fee	(434)	-	(434)
VAT recovered on investment management fees	75	31	106
Administrative expenses	(371)	-	(371)
	__________	__________	__________
Net return before taxation	3,660	37,746	41,406
Taxation (note 3)	(620)	(28)	(648)
	__________	__________	__________
Return on ordinary activities after taxation	3,040	37,718	40,758
	__________	__________	__________
Return per share (pence)  (note 5)	8.81	109.36	118.17
	__________	__________	__________

BALANCE SHEET

	As at	As at	As at
	31 July 2011	31 July 2010	31 January 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	210,330	205,074	219,994
	__________	__________	__________
Current assets
Debtors and prepayments	236	342	282
Cash and short term deposits	3,441	1,654	2,772
	__________	__________	__________
	3,677	1,996	3,054
Creditors: amounts falling due within one year	(213)	(183)	(193)
	__________	__________	__________
Net current assets	3,464	1,813	2,861
	__________	__________	__________
Net assets	213,794	206,887	222,855
	__________	__________	__________
Capital and reserves
Called-up share capital	8,090	8,776	8,275
Share premium account	32,643	32,643	32,643
Capital redemption reserve	14,005	13,319	13,820
Capital reserve	155,934	148,924	164,822
Revenue reserve	3,122	3,225	3,295
	__________	__________	__________
Equity shareholders' funds	213,794	206,887	222,855
	__________	__________	__________
Net asset value per share (pence)	660.68	589.36	673.28
	__________	__________	__________
Net asset value per share (excluding undistributed revenue for the period) (pence)	656.15	584.94	668.37
	__________	__________	__________

Reconciliation of Movements in Shareholders' Funds

Six months ended 31 July 2011 (unaudited)
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2011	8,275	32,643	13,820	164,822	3,295	222,855
Return on ordinary activities after taxation	-	-	-	(4,122)	1,459	(2,663)
Dividends paid (note 4)	-	-	-	-	(1,632)	(1,632)
Purchase of own shares for cancellation	(185)	-	185	(4,766)	-	(4,766)
	______	________	_________	______	______	______
Balance at 31 July 2011	8,090	32,643	14,005	155,934	3,122	213,794
	______	________	_________	______	______	______
Six months ended 31 July 2010 (unaudited)
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2010	9,114	32,643	12,981	146,346	3,014	204,098
Return on ordinary activities after taxation	-	-	-	10,390	1,553	11,943
Dividends paid (note 4)	-	-	-	-	(1,342)	(1,342)
Purchase of own shares for cancellation	(338)	-	338	(7,812)	-	(7,812)
	______	________	_________	______	______	______
Balance at 31 July 2010	8,776	32,643	13,319	148,924	3,225	206,887
	______	________	_________	______	______	______
Year ended 31 January 2011 (audited)
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2010	9,114	32,643	12,981	146,346	3,014	204,098
Return on ordinary activities after taxation	-	-	-	37,718	3,040	40,758
Dividends paid (note 4)	-	-	-	-	(2,759)	(2,759)
Purchase of own shares for cancellation	(839)	-	839	(19,242)	-	(19,242)
	______	________	_________	______	______	______
Balance at 31 January 2011	8,275	32,643	13,820	164,822	3,295	222,855
	______	________	_________	______	______	______

CASHFLOW STATEMENT

	Six months ended	Six months ended	Year ended
	31 July 2011	31 July 2010	31 January 2011
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net return on ordinary activities before taxation	(2,347)	12,279	41,406
Adjustment for:
Losses/(gains) on investments	4,036	(10,333)	(37,695)
Foreign exchange losses/(gains)	86	(57)	(20)
Decrease/(increase)in accrued income	52	(152)	6
Increase in other debtors	(6)	(5)	(78)
Increase/(decrease) in other creditors	21	(9)	1
	__________	__________	__________
Net cash inflow from operating activities	1,842	1,723	3,620
Taxation
UK corporation tax paid	-	(37)	(37)
Overseas withholding tax paid	(313)	(313)	(648)
	__________	__________	__________
Net tax paid	(313)	(350)	(685)
Financial investment
Purchases of investments	(3,258)	(3,969)	(6,601)
Sales of investments	8,885	11,618	26,694
	__________	__________	__________
Net cash inflow from financial investment	5,627	7,649	20,093
Equity dividends paid	(1,635)	(1,342)	(2,763)
	__________	__________	__________
Net cash inflow before financing	5,521	7,680	20,265
Financing
Buy back of Ordinary shares (including expenses)	(4,766)	(7,812)	(19,242)
	__________	__________	__________
Net cash outflow from financing	(4,766)	(7,812)	(19,242)
	__________	__________	__________
Increase/(decrease) in cash	755	(132)	1,023
	__________	__________	__________
Analysis of changes in cash during the period
Opening net funds	2,772	1,729	1,729
Increase/(decrease) in cash as above	755	(132)	1,023
Foreign exchange movements	(86)	57	20
	__________	__________	__________
Closing net funds	3,441	1,654	2,772
	__________	__________	__________

NOTES:

1.	Accounting policies
	(a)	Basis of accounting
		The accounts have been prepared in accordance with applicable UK Accounting Standards, with pronouncements on half yearly reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009. 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 Practice (UK GAAP).
		The half yearly financial statements have been prepared using the same accounting policies applied for the year ended 31 January 2011.
	(b)	Dividends payable
		Interim and final dividends are recognised in the period in which they are paid.

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
2.	Income	£'000	£'000	£'000
	Income from investments held at fair value through profit or loss
	Dividends from overseas listed investments	2,200	2,179	4,311
	Stock dividends	-	126	-
		__________	__________	__________
		2,200	2,305	4,311
		__________	__________	__________
	Other income
	Interest on VAT recovered on investment management fees	-	-	78
	Deposit interest	-	-	1
		__________	__________	__________
	Total income	2,200	2,305	4,390
		__________	__________	__________

3.	Taxation
	The charge for the period represents withholding tax suffered on overseas dividend income.

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
4.	Dividends	£'000	£'000	£'000
	Interim dividend for 2011 - 4.20p	-	-	1,417
	Final dividend for 2011 - 4.95p (2010 - 3.80p)	1,638	1,344	1,344
	Unclaimed dividends written back	(6)	(2)	(2)
		__________	__________	__________
		1,632	1,342	2,759
		__________	__________	__________
	A final dividend of 4.95p for the year ended 31 January 2011 (2010 - 3.80p) was paid to shareholders on 27 May 2011.
	An interim dividend of 4.20p (2011 - 4.20p) for the year ending 31 January 2012 will be paid on 14 October 2011 to shareholders on the register at 16 September 2011. The ex-dividend date is 14 September 2011. In accordance with UK GAAP this is not recognised in these financial statements.

		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
5.	Return per Ordinary share	£'000	£'000	£'000
	Based on the following figures:
	Revenue return	1,459	1,553	3,040
	Capital return	(4,122)	10,390	37,718
		__________	__________	__________
	Total return	(2,663)	11,943	40,758
		__________	__________	__________
	Weighted average number of shares in issue	32,927,000	35,413,023	34,491,096
		__________	__________	__________
		p	p	p
	Revenue return per Ordinary share	4.43	4.39	8.81
	Capital return per Ordinary share	(12.52)	29.33	109.36
		__________	__________	__________
	Total return per Ordinary share	(8.09)	33.72	118.17
		__________	__________	__________

6.	Transaction costs
	During the six months ended 31 July 2011 expenses were incurred in acquiring or disposing of investments classified as fair value through profit or loss. These have been expensed through capital and are included within gains on investments in the Income Statement. The total costs were as follows:
		Six months ended	Six months ended	Year ended
		31 July 2011	31 July 2010	31 January 2011
		£'000	£'000	£'000
	Purchases	8	13	31
	Sales	2	3	8
		__________	__________	__________
		10	16	39
		__________	__________	__________

7.	Capital reserve
	The capital reserve reflected in the Balance Sheet at 31 July 2011 includes gains of £57,795,000 (31 July 2010 - £40,299,000; 31 January 2011 - £64,430,000) which relate to the revaluation of investments held at the reporting date.

		As at	As at	As at
8.	Net asset value per Ordinary share	31 July 2011	31 July 2010	31 January 2011
	Net assets attributable	£213,794,000	£206,887,000	£222,855,000
	Number of Ordinary shares in issue	32,359,818	35,103,608	33,099,818
	Net asset value per Ordinary share	660.68p	589.36p	673.28p

		At 1 Feb 2011	Cashflow	Exchange movements	At 31 July 2011
9.	Analysis of changes in net funds	£'000	£'000	£'000	£'000
	Cash and short term deposits	2,772	755	(86)	3,441

10.	Called-up share capital
	During the period to 31 July 2011, 740,000 Ordinary shares of 25p each were bought back for cancellation at a total cost of £4,765,950, including expenses. Subsequent to the period end, a further 175,000 Ordinary shares were bought back at a total cost of £1,033,000, including expenses, leaving 32,184,818 Ordinary shares in issue at the date of this report.

11.	Subsequent events
	Since the period end, equity markets have fallen, with share prices in the US equity markets being particularly affected. The NAV has fallen by 7.4% and the (benchmark) has fallen by 7.4% in the period 31 July 2011 to 6 September 2011.

12.	Half-Yearly Financial Report
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 31 July 2011 and 31 July 2010 has not been audited.
	The information for the year ended 31 January 2011 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2),(3) or (4) of the Companies Act 2006.

13.	This Half-Yearly Financial Report was approved by the Board on 6 September 2011.

14.        The half yearly financial report has not been reviewed by the Company's auditors.

15.        The half yearly financial report is available on the Company's website, www.edinburghustracker.co.uk.  The Interim Report will be posted to shareholders in September 2011 and copies will be available from the Company Secretary.

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

Aberdeen Asset Management PLC, Secretary

END

 

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