Interim Results
Edinburgh US Tracker Trust plc
19 September 2007
NEWS RELEASE 19 September 2007
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 2007
• Company continues to track the performance of the S&P Composite Index
• Interim dividend maintained at 2.45p per share for the year ended 31
January 2008 (2007 - 2.45p)
• Discount management policy continued during period
- END -
For further information, please contact:-
David McCraw
Edinburgh Fund Managers plc 0131 313 1000
Ian Massie
Edinburgh Fund Managers plc 0131 313 1000
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 2007, the net asset
value per share (NAV) fell by 2.5% to 600.11p and this compares with a fall of
2.5% in the index (in sterling terms).
US equity markets struggled to make any progress in the first half of the year.
Corporate profits were ahead of expectations and pushed the equity indices to
record levels but the indices retreated subsequently on concerns over the impact
of defaults on sub-prime mortgages on hedge funds and banks around the world.
Over the period, the US dollar/sterling exchange rate weakened from $1.96 to
$2.03 which translated the rise of 1.2% in the S&P Composite Index in US
currency to a fall of 2.5% in sterling.
The revenue return per share rose by 4.5% to 3.50p. Dividend increases from
underlying investments were more than offset by adverse movements in the US
dollar/sterling exchange rate. The directors have declared an unchanged interim
dividend of 2.45p per share for the year to 31 January 2008 payable on 26
October 2007 to shareholders on the register on 28 September 2007.
The company bought back 4,561,000 shares for cancellation during the period at a
cost of £27.5 million, enhancing the NAV for continuing shareholders by 1.45p.
The share price fell by only 0.4% over the six month period to 31 July 2007 to
584.0p, a discount of 2.7% to the NAV.
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 Precision Castparts, Discover Financial Services, Covidien
and Akamai Technologies. The total value of purchases amounted to £5.6 million
while sales totaled £34.1 million.
Edinburgh US Tracker Trust is the only UK investment trust to track the
performance of the S&P Composite Index and provides shareholders with a
diversified portfolio which is invested in the leading 500 companies across the
main industries within the US economy. The method employed by the company to
track the index involves a full replication of the index constituents. This
means that the company's portfolio holds every stock making up the index in an
amount that equals the stock's proportionate weight in the index.
Events during the period
At the Company's AGM on 23 May 2007, all resolutions, with the exception of
resolutions 11 (dis-application of pre-emption rights) and 15 (amendment to
articles to remove the age 70 limit on directors) were passed. Resolutions 11
and 15, which were special resolutions and required a 75% majority of votes in
favour, were not passed. The resolution on continuation was passed by 57% of
votes cast.
As a result, the age 70 limit for directors in the Company's articles remains.
Sir Angus Grossart vacated office at the conclusion of the Annual General
Meeting and Mr James Ferguson was appointed Chairman of the Company.
At 18 September 2007, the date of this report, the following shareholders had
notified the Company of their holdings:
Name of shareholder Number of Ordinary shares % of Ordinary Shares held
held (1)
MLP Investments (Luxemburg) 17,910,923 26.5
Barclays PLC 7,775,034 11.5
HSBC 3,876,554 5.7
Legal & General Group Plc 2,751,623 4.1
Rensburg Sheppards 2,275,153 3.4
(1)Based on number of shares in issue at date of this report
Risks and Uncertainties
The Board has identified the key risks that affect its business as follows:
• Market and performance risk: The Company is exposed to the effect of
variations in share prices and movements in the US$/£ exchange rate due to
the nature of its business. A fall in the market value of its portfolio
would have an adverse effect on shareholders' funds. 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.
• Discount volatility: The Company's share price can trade at a discount to
its underlying net asset value. The Company operates a share buyback
programme with the aim of establishing a long term level of discount of no
greater than 3%.
• 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 UKLA Listing
Rules and the Companies Act, could lead to a number of detrimental outcomes
and reputational damage. The Audit Committee monitors compliance with
regulations by reviewing internal control reports from the Manager.
Other risks relating to the Company's investment activities include market
price, liquidity and foreign currency risks. The Company has established a
framework for managing these risks which is evolving continually in response to
market developments.
Directors' Responsibilities
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'; and
• the interim board report includes a fair review of the information
required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency
Rules.
For Edinburgh US Tracker Trust plc
James Ferguson
Chairman
18 September 2007
INCOME STATEMENT
Six months ended 31 July 2007
(unaudited)
Revenue Capital Total
£'000 £'000 £'000
(Losses)/gains on investments - (10,063) (10,063)
Foreign exchange movements - (201) (201)
Income from investments 4,120 - 4,120
Interest receivable 166 - 166
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 Ordinary share (pence): 3.50 (14.48) (10.98)
__________ __________ __________
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 2.45p per share (£1,653,000) is declared for the year to
31 January 2008 and is payable on 26 October 2007 (2007 - 2.45p).
In accordance with UK GAAP this dividend is not recognised in these financial
statements.
INCOME STATEMENT
Six months ended 31 July 2006
(unaudited)
Revenue Capital Total
£'000 £'000 £'000
(Losses)/gains on investments - (23,629) (23,629)
Foreign exchange movements - (398) (398)
Income from investments 4,366 - 4,366
Interest receivable 176 - 176
Investment management fee (459) - (459)
Administrative expenses (206) - (206)
__________ __________ __________
Return on ordinary activities before taxation 3,877 (24,027) (20,150)
Taxation (1,233) - (1,233)
__________ __________ __________
Return on ordinary activities after taxation 2,644 (24,027) (21,383)
__________ __________ __________
Return per Ordinary share (pence): 3.35 (30.43) (27.08)
__________ __________ __________
Year ended 31 January 2007
(audited)
Revenue Capital Total
£'000 £'000 £'000
(Losses)/gains on investments - 7,419 7,419
Foreign exchange movements - (680) (680)
Income from investments 8,511 - 8,511
Interest receivable 346 - 346
Investment management fee (902) - (902)
Administrative expenses (420) - (420)
__________ __________ __________
Return on ordinary activities before taxation 7,535 6,739 14,274
Taxation (2,258) - (2,258)
__________ __________ __________
Return on ordinary activities after taxation 5,277 6,739 12,016
__________ __________ __________
Return per Ordinary share (pence): 6.92 8.84 15.76
__________ __________ __________
BALANCE SHEET
At At At
31 July 31 July 31 January 2007
2007 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Non-current assets
Investments at fair value through profit or loss 403,900 424,370 442,446
__________ __________ __________
Current assets
Debtors 419 408 500
Cash and short term deposits 4,548 11,816 4,654
__________ __________ __________
4,967 12,224 5,154
Creditors: amounts falling due within one year (883) (1,290) (1,194)
__________ __________ __________
Net current assets 4,084 10,934 3,960
__________ __________ __________
Total assets less current liabilities 407,984 435,304 446,406
Provisions for liabilities and charges (57) (63) (62)
__________ __________ __________
Net assets 407,927 435,241 446,344
__________ __________ __________
Capital and reserves
Called-up share capital 16,994 19,043 18,134
Capital redemption reserve 5,101 3,052 3,961
Share premium account 32,643 32,643 32,643
Reserves 353,189 380,503 391,606
__________ __________ __________
Equity Shareholders' funds 407,927 435,241 446,344
__________ __________ __________
Net asset value per share (pence): 600.11 571.40 615.34
__________ __________ __________
Reconciliation of Movements in Shareholders' Funds
Six months ended 31 July 2007 (unaudited)
Capital Share Capital Capital
Share Redemption Premium Reserve Reserve Revenue
Capital Reserve Account Realised Unrealised Reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2007 18,134 3,961 32,643 281,041 105,106 5,459 446,344
Net return on ordinary activities - - - 5,716 (15,980) 2,482 (7,782)
after taxation
Dividends paid (see note 2) - - - - - (3,172) (3,172)
Purchase of own shares for (1,140) 1,140 - (27,463) - - (27,463)
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 31 July 2007 16,994 5,101 32,643 259,294 89,126 4,769 407,927
_______ _______ _______ _______ _______ _______ _______
Six months ended 31 July 2006
(unaudited)
Capital Share Capital Capital
Share redemption premium reserve reserve Revenue
capital reserve account realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2006 20,422 1,673 32,643 321,756 109,071 4,946 490,511
Net return on ordinary activities - - - 8,440 (32,467) 2,644 (21,383)
after taxation
Dividends paid (see note 2) - - - - - (2,965) (2,965)
Purchase of own shares for (1,379) 1,379 - (30,922) - - (30,922)
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 31 July 2006 19,043 3,052 32,643 299,274 76,604 4,625 435,241
_______ _______ _______ _______ _______ _______ _______
Year ended 31 January 2007 (audited)
Capital Share Capital Capital
Share redemption premium reserve reserve Revenue
capital reserve account realised unrealised reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 January 2006 20,422 1,673 32,643 321,756 109,071 4,946 490,511
Net return on ordinary activities - - - 10,704 (3,965) 5,277 12,016
after taxation
Dividends paid (see note 2) - - - - - (4,764) (4,764)
Purchase of own shares for (2,288) 2,288 - (51,419) - - (51,419)
cancellation
_______ _______ _______ _______ _______ _______ _______
Balance at 31 January 2007 18,134 3,961 2,643 281,041 105,106 5,459 446,344
_______ _______ _______ _______ _______ _______ _______
CASHFLOW STATEMENT
Six months ended Six months ended Year
ended
31 July 31 July 31 January 2007
2007 2006
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net return on ordinary activities before taxation (6,673) (20,150) 14,274
Adjustment for:
Losses/(gains) on investments 10,063 23,629 (7,419)
Foreign exchange movements 201 398 680
Decrease in accrued income 19 4 5
Increase in other debtors (8) (16) (38)
Decrease in other creditors (56) (31) (17)
___________ __________ ___________
Net cash inflow from operating activities 3,546 3,834 7,485
Taxation
UK corporation tax paid (444) (499) (987)
Overseas tax paid (626) (644) (1,257)
___________ __________ ___________
Net tax paid (1,070) (1,143) (2,244)
Financial investment
Purchases of investments (6,098) (8,001) (13,678)
Sales of investments 34,202 45,777 64,182
Index Futures payments 150 197 -
___________ __________ ___________
Net cash inflow from financial investment 28,254 37,973 50,504
Equity dividends paid (3,172) (2,965) (4,764)
___________ __________ ___________
Net cash inflow before financing 27,558 37,699 50,981
Financing
Buy back of Ordinary shares (including expenses) (27,463) (30,922) (51,084)
___________ __________ ___________
Increase/(decrease) in cash 95 6,777 (103)
___________ __________ ___________
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash as above 95 6,777 (103)
Foreign exchange movements (201) (398) (680)
___________ __________ ___________
Movement in net funds in the year (106) 6,379 (783)
Opening net funds 4,654 5,437 5,437
___________ __________ ___________
Closing net funds 4,548 11,816 4,654
___________ __________ ___________
NOTES:
1. Accounting policies
(a) Basis of accounting
The financial statements have been prepared in accordance with UK Generally
Accepted Accounting Practice (UK GAAP), the Accounting Standards Board statement
'Half-Yearly Financial Reports' (issued July 2007) and with the Statement of
Recommended Practice for 'Financial Statements of Investment Trust Companies'
(issued in 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 interim financial statements have been prepared using the same accounting
policies applied for the year ended 31 January 2007.
(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 31 31 January 2007
July 2007 July 2006
2. Dividends £'000 £'000 £'000
Interim dividend for 2007 of 2.45p - - 1,800
Final dividend for 2007 of 4.45p (2006 - 3.70p) 3,172 2,965 2,964
__________ __________ __________
3,172 2,965 4,764
__________ __________ __________
An interim dividend for 2008 of 2.45p (2007 - 2.45p) will be paid on 26 October
2007 (2007 - 20 October 2006) to Shareholders on the register at 28 September
2007. The ex-dividend date is 26 September 2007. In accordance with UK GAAP this
is not recognised in these financial statements.
Six months ended Six months ended Year
ended
31 July 2007 31 July 2006 31 January 2007
3. Return per share p p p
Revenue return 3.50 3.35 6.92
Capital return (14.48) (30.43) 8.84
__________ __________ __________
Total return (10.98) (27.08) 15.76
__________ __________ __________
The figures above are based on the following figures:
£'000 £'000 £'000
Revenue return per Ordinary share 2,482 2,644 5,277
Capital return per Ordinary share (10,264) (24,027) 6,739
__________ __________ __________
Total return per Ordinary share (7,782) (21,383) 12,016
__________ __________ __________
Weighted average number of shares in issue 70,888,347 78,963,808 76,226,950
__________ __________ __________
4. Transaction costs
During the six months ended 31 July 2007 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 2007 31 July 2006 31 January 2007
£'000 £'000 £'000
Purchases 2 16 20
Sales 6 37 41
__________ __________ __________
8 53 61
__________ __________ __________
As at As at As at
5. Net asset value per equity share 31 July 31 July 31 January 2007
2007 2006
The net assets attributable to the Ordinary
shares were as follows:
Net assets attributable ('000) £407,927 £435,241 £446,344
Number of Ordinary shares in issue 67,975,242 76,170,664 72,536,242
Net asset value per share (pence) 600.11 571.40 615.34
6. Subsequent to 31 July 2007 the Company has bought back a further 509,000
Ordinary shares for a consideration including expenses of £2,969,000.
7. The financial information for the six months ended 31 July 2007 and 31
July 2006 comprises non-statutory accounts within the meaning of Section 240 of
the Companies Act 1985. The financial information for the year ended 31 January
2007 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 interim accounts have been prepared on the same basis as
the preceding annual accounts.
8. The half yearly financial report has not been reviewed by the Company's
auditors.
9. The Interim Report will be posted to shareholders in late September
2007 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
Edinburgh Fund Managers plc, Secretary
END
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