Interim Results

RNS Number : 5721D

Edinburgh US Tracker Trust plc

17 September 2008

 

 

                                                                                                                                             17 September 2008

 

 

 

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 2008

 

 

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

 

•     Interim dividend increased to 3.50p per share for the year ended 31 January 2009 (2008 – 2.45p)

 

 

 

 

 

 

- END -

 

 

For further information, please contact:-

 

David McCraw

Aberdeen Asset Management PLC                                                         0131 528 4000

 

 

 

INTERIM BOARD REPORT

 

Review of the Period

The Company continues to meet the objective of tracking the performance of the S&P 500 Composite Index. In the six months ended 31 July 2008, the net asset value per share (excluding undistributed revenue for the period) fell by 7.6% to 530.66p (NAV) while the Index fell by 7.7% (in sterling terms).

 

The net asset value total return was -6.2% and this compares with the total return from the Index of -6.7%. The difference in total returns is attributable to the tender offer in January this year which led to a significant increase in the final dividend payment. For comparative purposes, shareholders should note the impact of the Tender Offer, which was completed in January this year, on these financial statements.

 

The Company’s share price fell by 4.0% over the six month period to 31 July 2008 to 522.0p, which was a discount of 1.6% to the NAV.

 

The revenue return per share rose by 4.3% to 3.65p. The Directors have decided to reduce the disparity between the interim and final dividends and have declared an increased interim dividend of 3.50p for the year to 31 January 2009 (2008: 2.45p). The interim dividend is payable on 24 October 2008 to shareholders on the register on 26 September 2008. The interim dividend reflects more closely the revenue return for the period and will have an impact on the final dividend for this year.

 

US equity markets suffered further falls in the first half of the year. The write-downs in mortgage related assets held by banks and weak economic data highlighted the potential for recession while the bail-out of Bear Stearns by JP Morgan Chase focused attention on other financial institutions that could be at risk. Higher oil prices and sharp falls in house prices raised concerns about the prospects for the US economy which were reinforced when the Federal Reserve cited continued weakness in economic activity as the key factor influencing its decision to cut interest rates. 

 

The level of transactions within the portfolio during the period reflected changes to the constituents of the Index and the sale of investments to finance the purchase of the company’s own shares. The changes to the constituents of the Index in the period were mostly the result of takeover activity with the new holdings including HCP, Southwestern Energy, Philip Morris International, AK Steel and Mastercard. The other feature of the period was the additional equity raised by banks and insurance companies. The total value of purchases amounted to £2.6 million while sales totaled £9.0 million. 

 

Events During the Period

At the Company’s AGM on 21 May 2008, all resolutions were passed. A final dividend of 8.97p was paid to shareholders on 23 May 2008. 

 

Discount

The Board monitors closely the discount level of the Company’s shares, and, during the six month period to 31 July 2008, the Company bought back 347,000 shares for cancellation, at a cost of £2.0 million. The Company operates a share buy-back programme with the aim of establishing a long term level of discount of no greater than 3%.

 

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 and the underlying stock weightings in the portfolio relative to the benchmark (S&P 500 Composite Index) are monitored closely.

-        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 or a premium 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 absolute discretion.

-        Regulatory risk – the Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 842 of the Income and Corporation Taxes Act 1988, the UK Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage. The Audit Committee continually 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 Board Report includes a fair review of the information required by rule 4.2.7R and 4.2.8R of the FSA’s Disclosure and Transparency Rules. 

 

For Edinburgh US Tracker Trust plc

 

James Ferguson

Chairman

 

17 September 2008

INCOME STATEMENT

 

	Six months ended 31 July 2008
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Losses on investments	-	(16,493)	(16,493)
Foreign exchange gains/(losses)	-	71	71
Income (see note 2)	2,317	-	2,317
Investment management fee	(212)	-	(212)
Administrative expenses	(186)	-	(186)
	__________	__________	__________
Net return before finance costs and taxation	1,919	(16,422)	(14,503)
Finance costs	-	-	-
	__________	__________	__________
Return on ordinary activities before taxation	1,919	(16,422)	(14,503)
Taxation	(542)	-	(542)
	__________	__________	__________
Return on ordinary activities after taxation	1,377	(16,422)	(15,045)
	__________	__________	__________
Return per share (pence) (see note 4)	3.65	(43.48)	(39.83)
	__________	__________	__________

 

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 3.50p per share (£1,316,000) is declared for the year to 31 January 2009 and is payable on 24 October 2008 (2008 – 2.45p).

 

 

	Six months ended 31 July 2007
	(unaudited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Losses on investments	-	(10,063)	(10,063)
Foreign exchange gains/(losses)	-	(201)	(201)
Income (see note 2)	4,286	-	4,286
Investment management fee	(425)	-	(425)
Administrative expenses	(270)	-	(270)
	__________	__________	__________
Return on ordinary activities before taxation	3,591	(10,264)	(6,673)
Taxation	(1,109)	-	(1,109)
	__________	__________	__________
Return on ordinary activities after taxation	2,482	(10,264)	(7,782)
	__________	__________	__________
Return per share (pence) (see note 4)	3.50	(14.48)	(10.98)
	__________	__________	__________

 

 

INCOME STATEMENT

 

		Year ended 31 January 2008
		(audited)
	Revenue	Capital	Total
	£'000	£'000	£'000
Losses on investments	-	(26,601)	(26,601)
Foreign exchange gains/(losses)	-	114	114
Income (see note 2)	8,575	-	8,575
Investment management fee	(815)	-	(815)
Administrative expenses	(536)	-	(536)
	__________	__________	__________
Net return before finance costs and taxation	7,224	(26,487)	(19,263)
Finance costs	(1)	-	(1)
	__________	__________	__________
Return on ordinary activities before taxation	7,223	(26,487)	(19,264)
Taxation	(2,160)	(21)	(2,181)
	__________	__________	__________
Return on ordinary activities after taxation	5,063	(26,508)	(21,445)
	__________	__________	__________
Return per share (pence) (see note 4)	7.44	(38.95)	(31.51)
	__________	__________	__________

 

BALANCE SHEET

 

	As at	As at	As at
	31 July 2008	31 July 2007	31 January 2008
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss	196,952	403,900	219,664
	__________	__________	__________
Current assets
Debtors and prepayments	590	419	378
Cash and short term deposits	4,175	4,548	3,243
	__________	__________	__________
	4,765	4,967	3,621
Creditors: amounts falling due within one year	(728)	(883)	(1,881)
	__________	__________	__________
Net current assets	4,037	4,084	1,740
	__________	__________	__________
Total assets less current liabilities	200,989	407,984	221,404
Provisions for liabilities and charges	(34)	(57)	(50)
	__________	__________	__________
Net assets	200,955	407,927	221,354
	__________	__________	__________
Capital and reserves
Called-up share capital	9,402	16,994	9,489
Share premium account	32,643	32,643	32,643
Capital redemption reserve	12,693	5,101	12,606
Capital reserve	142,541	348,420	160,917
Revenue reserve	3,676	4,769	5,699
	__________	__________	__________
Equity Shareholders' funds	200,955	407,927	221,354
	__________	__________	__________
Net asset value per share (pence)	534.32	600.11	583.18
	__________	__________	__________
Net asset value per share (excluding undistributed revenue for the period) (pence)	530.66	596.46	574.19
	__________	__________	__________

Reconciliation of Movements in Shareholders' Funds

 

Six months ended 31 July 2008 (unaudited)
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2008	9,489	32,643	12,606	160,917	5,699	221,354
Return on ordinary activities after taxation	-	-	-	(16,422)	1,377	(15,045)
Dividends paid (see note 3)	-	-	-	-	(3,400)	(3,400)
Purchase of own shares for cancellation	(87)	--	87	(1,954)	-	(1,954)
	______	________	_________	______	______	______
Balance at 31 July 2008	9,402	32,643	12,693	142,541	3,676	200,955
	______	________	_________	______	______	______
Six months ended 31 July 2007 (unaudited)
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2007	18,134	32,643	3,961	386,147	5,459	446,344
Return on ordinary activities after taxation	-	-	-	(10,264)	2,482	(7,782)
Dividends paid (see note 3)	-	-	-	-	(3,172)	(3,172)
Purchase of own shares for cancellation	(1,140)	-	1,140	(27,463)	-	(27,463)
	______	________	_________	______	______	______
Balance at 31 July 2007	16,994	32,643	5,101	348,420	4,769	407,927
	______	________	_________	______	______	______
Year ended 31 January 2008 (audited)
		Share	Capital
	Share	premium	redemption	Capital	Revenue
	capital	account	reserve	reserve	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 January 2007	18,134	32,643	3,961	386,147	5,459	446,344
Return on ordinary activities after taxation	-	-	-	(26,508)	5,063	(21,445)
Dividends paid (see note 3)	-	-	-	-	(4,823)	(4,823)
Purchase of own shares for cancellation	(1,343)	-	1,343	(32,254)	-	(32,254)
Tender offer of own shares	(7,302)		7,302	(166,468)	-	(166,468)
	______	________	_________	______	______	______
Balance at 31 January 2008	9,489	32,643	12,606	160,917	5,699	221,354
	______	________	_________	______	______	______

 

The comparative figures for the six months ended 31 July 2007 have been reclassified to conform with the current period and the year ended 31 January 2008.

CASHFLOW STATEMENT

 

 

	Six months ended	Six months ended	Year ended
	31 July 2008	31 July 2007	31 January 2008
	(unaudited)	(unaudited)	(audited)
	£'000	£'000	£'000
Net return on ordinary activities before taxation	(14,503)	(6,673)	(19,263)
Adjustment for:
Losses on investments	16,493	10,063	26,601
Foreign exchange (gains)/losses	(71)	201	(114)
Decrease in accrued income	126	19	28
Decrease/(increase) in other debtors	18	(8)	26
(Decrease)/increase in other creditors	(979)	(56)	836
	__________	__________	__________
Net cash inflow from operating activities	1,084	3,546	8,114
Servicing of finance
Interest paid	-	-	(1)
Taxation
UK corporation tax paid	(534)	(444)	(898)
Overseas tax paid	(349)	(626)	(1,211)
	__________	__________	__________
Net tax paid	(883)	(1,070)	(2,109)
Financial investment
Purchases of investments	(2,649)	(6,098)	(12,040)
Sales of investments	8,960	34,202	208,056
Index Futures (payments)/receipts	(297)	150	-
	__________	__________	__________
Net cash inflow from financial investment	6,014	28,254	196,016
Equity dividends paid	(3,400)	(3,172)	(4,823)
	__________	__________	__________
Net cash inflow before financing	2,815	27,558	197,197
Financing
Buy back of Ordinary shares (including expenses)	(1,954)	(27,463)	(32,254)
Tender offer of own shares (including expenses)	-	-	(166,468)
	__________	__________	__________
Increase/(decrease) in cash	861	95	(1,525)
	__________	__________	__________
Analysis of changes in cash during the period
Opening net funds	3,243	4,654	4,654
Increase/(decrease) in cash as above	861	95	(1,525)
Foreign exchange movements	71	(201)	114
	__________	__________	__________
Closing net funds	4,175	4,548	3,243
	__________	__________	__________

NOTES:

1.     Accounting policies

(a)     Basis of accounting

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, with pronouncements on half-yearly reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies' (December 2005). They have also been prepared on the assumption that approval as an investment trust will continue to be granted.

 

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 2008.

 

(b)     Dividends payable

Interim and final dividends are recognised in the period in which they are paid.

 

(c)     Capital reserve

Gains or losses on realisation of investments and changes in fair values of investments which are readily convertible to cash, without accepting adverse terms, are transferred to the capital reserve. The cost of share buybacks are also deducted from this reserve.

 

		Six months  ended	Six months  ended	Year ended
2.	Income	31 July 2008	31 July 2007	31 January 2008
	Income from investments	£'000	£'000	£'000
	Overseas listed - unfranked	2,268	4,120	8,165
	Other income
	Deposit interest	49	166	410
		__________	__________	__________
	Total income	2,317	4,286	8,575

 

		Six months  ended	Six months  ended	Year ended
		31 July 2008	31 July 2007	31 January 2008
3.	Dividends	£'000	£'000	£'000
	Interim dividend	-	-	1,651
	Final dividend	3,400	3,172	3,172
		__________	__________	__________
		3,400	3,172	4,823
		__________	__________	__________

 

A final dividend of 8.97p for the year ended 31 January 2008 (2007 - 4.45p) was paid to shareholders on 23 May 2008.

 

An interim dividend of 3.50p (2008 - 2.45p) for the year ending 31 January 2009 will be paid on 24 October 2008 to shareholders on the register at 26 September 2008. The ex-dividend date is 24 September 2008. In accordance with UK GAAP this is not recognised in these financial statements.

 

 

 

 

 

 

		Six months ended	Six months ended	Year ended
		31 July  2008	31 July  2007	31 January  2008
4.	Return per Ordinary share	£'000	£'000	£'000
	Return per share is based on the following figures:
	Revenue return per Ordinary share	1,377	2,482	5,063
	Capital return per Ordinary share	(16,422)	(10,264)	(26,508)
		__________	__________	__________
	Total return per Ordinary share	(15,045)	(7,782)	(21,445)
		__________	__________	__________
	Weighted average number of shares in issue	37,775,588	70,888,347	68,064,361
		__________	__________	__________
		p	p	p
	Revenue return per Ordinary share	3.65	3.50	7.44
	Capital return per Ordinary share	(43.48)	(14.48)	(38.95)
		__________	__________	__________
	Total return per Ordinary share	(39.83)	(10.98)	(31.51)
		__________	__________	__________

 

5. Transaction costs

During the six months ended 31 July 2008 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 (losses)/gains on investments in the Income Statement. The total costs were as follows:

 

		Six months ended	Six months ended	Year ended
		31 July 2008	31 July 2007	31 January 2008
		£'000	£'000	£'000
	Purchases	1	2	7
	Sales	2	6	10
		__________	__________	__________
		3	8	17
		__________	__________	__________

 

 

		Capital	Capital	Total
		reserve -	reserve -	capital
		realised	unrealised	reserve
6.	Capital reserve	£'000	£'000	£'000
	Six months ended 31 July 2008 (unaudited)			-
	Balance at 31 January 2008	119,539	41,378	160,917
	Movement in unrealised fair value gains		(18,313)	(18,313)
	Gains on realisation of investments at fair value	1,820		1,820
	Foreign exchange losses	71	-	71
	Taxation	-	-	-
	Purchase of own shares for cancellation	(1,954)	-	(1,954)
	Tender offer of own shares	-	-	-
		________	__________	________
	Balance at 31 July 2008	119,476	23,065	142,541
		________	__________	________
	Six months ended 31 July 2007 (unaudited)
	Balance at 31 January 2007	281,041	105,106	386,147
	Movement in unrealised fair value gains	-	(15,980)	(15,980)
	Gains on realisation of investments at fair value	5,917	-	5,917
	Foreign exchange losses	(201)	-	(201)
	Taxation	-	-	-
	Purchase of own shares for cancellation	(27,463)	-	(27,463)
		________	__________	________
	Balance at 31 July 2007	259,294	89,126	348,420
		________	__________	________
	Year ended 31 January 2008 (audited)
	Balance at 31 January 2007	281,041	105,106	386,147
	Movement in unrealised fair value gains	-	(63,728)	(63,728)
	Gains on realisation of investments at fair value	37,127	-	37,127
	Foreign exchange losses	114	-	114
	Taxation	(21)	-	(21)
	Purchase of own shares for cancellation	(32,254)	-	(32,254)
	Tender offer of own shares	(166,468)	-	(166,468)
		________	__________	________
	Balance at 31 January 2008	119,539	41,378	160,917
		________	__________	________

 

The above split is shown in accordance with provisions of the Statement of Recommended Practice Financial Statements of Investment Trust Companies'.

 

The total capital reserve is available to be utilised to fund share buy-backs.

 

		As at	As at	As at
7.	Net asset value per Ordinary share	31 July 2008	31 July 2007	31 January 2008
	The net assets attributable to the Ordinary shares were as follows:
	Net assets attributable	£200,955,000	£407,927,000	£221,354,000
	Number of Ordinary shares in issue	37,609,379	67,975,242	37,956,379
	Net asset value per Ordinary share	534.32p	600.11p	583.18p

 

8.    Commitments, contingencies and post Balance Sheet events

During the period to 31 July 2008, 347,000 Ordinary shares of 25p each were bought back for cancellation at a total cost of £1,954,000, including expenses. Subsequent to the period end, a further 10,000 Ordinary shares were bought back at a total cost of £56,000, including expenses, leaving 37,599,379 Ordinary shares in issue at the date of this report.

 

9.    On 5 November 2007, the European Court of Justice ruled that management fees should be exempt from VAT. HMRC has announced its intention not to appeal against this case to the UK VAT Tribunal and therefore the recovery of VAT, which is due to the Company, will be processed in due course. The amount of any repayment of VAT for the Company is immaterial and the Company has made no provision in these financial statements for any such repayment.

 

10. The financial information for the six months ended 31 July 2008 and 31 July 2007 comprises non-statutory accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for the year ended 31 January 2008 has been extracted from published accounts that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and did not contain a statement under either Section 237(2) or 237(3) of the Companies Act 1985. The half yearly accounts have been prepared on the same basis as the preceding annual accounts.

 

11. The half yearly financial report has not been reviewed by the Company’s auditors.

 

12.  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 early October 2008 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

 

 



 

END

 

 

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