TIDMEUS
RNS Number : 3893A
Edinburgh US Tracker Trust plc
30 March 2012
30 March 2012
EDINBURGH US TRACKER TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2012
Edinburgh US Tracker Trust aims to achieve long term growth of
capital and income by tracking the performance of the S&P 500
Index.
-- During the year to 31 January 2012 the Company continued to
track the performance of the S&P 500 Index
For further information, please contact:
David McCraw
Aberdeen Asset Managers Limited 0131 528 4000
CHAIRMAN'S STATEMENT
While the corporate sector remained in good health with profits
generally exceeding forecasts, investors were unsettled by a number
of factors and becoming increasingly risk averse by the summer
months. Tensions in Libya and in other Arab countries led to
concerns about the risk to oil supplies and the impact of higher
oil prices on economic growth. On-going quarrelling of politicians
in Washington over the government debt ceiling created more
nervousness in equity markets which was reflected in the yields on
10 year Treasury bonds falling towards 2%. Weaker 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.
After falling by nearly 20% over the summer months, the S&P 500
Index started to recover at the beginning of October on signs of
possible resolution of the Eurozone debt crisis and improving
economic data in the USA. US equities made little progress in the
first half of the reporting period and the S&P 500 Index traded
in a relatively narrow range. By the end of the financial year to
31 January 2012, the Index had recovered all its losses and was 2%
ahead of its starting point for the year in local currency terms.
The US dollar strengthened slightly against sterling from $1.60 to
$1.58 which improved the returns for sterling based investors.
The Company continues to meet the objective of tracking the
performance of the S&P 500 Index. In the 12 months to 31
January 2012, the net asset value per share (excluding
undistributed revenue for the period) rose by 4.0% to 694.79p
(NAV), compared to an increase of 3.6% in the index (in sterling
terms). Since the investment objective of the Company was revised
in June 1997, the capital performance has slightly exceeded returns
from the Index. The annualised return of the Company's capital net
asset values per share for the period 31 July 1997 to 31 January
2012 was 2.70% per annum compared to an annualised return of 2.48%
per annum for the Index.
The Company operates a share buy-back programme with the aim of
managing the volatility and level of the discount and in the year
bought back 1,621,236 of its own shares for cancellation. The share
price rose by 3.9% during the year (compared to the index return of
3.6%) and at 31 January 2012 the shares were standing at a discount
of 4.9% to the net asset value per share (excluding the
undistributed revenue of the period) compared with a discount of
4.9% at 31 January 2011. The Directors will continue to operate the
share buyback programme to manage the discount when necessary in
the year ahead.
Dividend
The revenue return per share rose by 6.6% to 9.39p (2011:
8.81p). The revenue return for the year to 31 January 2011 included
a VAT refund and an interest claim amounting to 0.44p per share.
The Directors declared an interim dividend of 4.20p per share and
are recommending a final dividend of 5.20p (2011: 4.95p) which will
take the total dividends for the year to 9.40p (2011: 9.15p).
Marketing
The Board continues to promote the company through the
Investment 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. 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 Investment
Manager, the Chairman and the Board as a whole. The Board has
assessed the performance of the Investment Manager, the investment
process and risk controls. The Board has reviewed the terms of the
management agreement during the year and believes that the
continuing appointment of the Investment 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
at the Annual General Meeting to be held on Tuesday 29 May 2012. 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. Your Board strongly recommends all
shareholders to vote in favour of the continuation resolution.
Shareholder authority is being sought 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 and
to provide the Directors with powers to issue shares, within
limits, without being required to offer them first to existing
shareholders. Authority is also being sought to purchase the
Company's shares to provide the Company with the flexibility to
hold any shares that have been repurchased in treasury before
either cancelling those shares or selling them back to the market
at a later date. Repurchased shares would only be resold at a price
not less than the NAV at the relevant date. The share buyback
authority would only be exercised if to do so would increase the
net asset value per Ordinary share for the remaining shareholders
and is in the best interests of shareholders generally.
Proposals to change the Company's investment objective
On 21 March 2012 the Company announced proposals to seek
shareholder approval to amend the Company's investment policy to
provide investors with above average dividend income and long term
capital growth through active management of a portfolio consisting
predominantly of S&P 500 US equities and to make certain other
associated changes. A General Meeting of the Company will be
convened to approve the proposals and full details of the proposed
changes will be included in a separate circular which will also
contain the resolutions requiring shareholder approval
Outlook
Many investors have avoided investing in the United States since
the sub-prime debt crisis which pushed the economy into the longest
recession in decades and created high and persistent unemployment.
To ignore a country that is home to some of the most innovative
companies, advanced technologies and recognizable brands in the
world may be limiting investment in attractive opportunities.
Corporate profits as a proportion of GDP are at an all-time high as
companies have cut costs and restructured to remain competitive in
the face of weaker demand. US banks have been recapitalized,
monetary policy is loose and companies are flush with cash. The
manufacturing sector is showing encouraging signs of recovery and
the unemployment rate has been falling in recent months.
The rally in share prices in recent months may reflect investors
anticipating the return of more buoyant economic conditions in the
US. In addition, the shares of US companies are trading at
historically low valuations and many companies are operating with
solid balance sheets and positive cash flows. With expanding cash
reserves, numerous US companies have announced either initial or
increased dividend payments and, as a result, dividends are
becoming an increasingly important component of total return to
shareholders. Interest rates remain at close to zero whereas
dividend income, plus the potential of capital appreciation in the
longer term, provides a compelling case for investing in US
equities at this time.
James Ferguson
Chairman
29 March 2012
MANAGER'S REPORT
Edinburgh US Tracker Trust is the only UK investment trust to
track the performance of the S&P 500 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 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. The index is calculated on the basis of the market
capitalisation of its 500 constituents which are drawn from
companies listed on the New York Stock Exchange and NASDAQ and is
widely regarded as the best single gauge of the US equity
market.
The constituents of the S&P 500 Index are controlled by the
Standard & Poor's Index Committee which employs a strict
definition of a US company. To be considered for inclusion in one
of Standard and Poor's US index series, a company is required to
have the following characteristics:
-- File 10-K annual reports and not be considered a foreign entity by the SEC
-- The US portion of fixed assets and revenues should constitute
a plurality of the total but need not exceed 50%
-- The primary listing of the common stock should be on NYSE and
NASDAQ. ADRs are not eligible for inclusion
-- A corporate governance structure consistent with US practice
-- Public float of at least 50% of the stock
-- Four consecutive quarters of positive as-reported earnings
-- Initial public offerings should be seasoned for 6 to 12
months before being considered for addition to an index
Standard & Poor's undertake regular reviews of the market
cap guidelines for its US indices to ensure that these reflect
changes in share prices. The current guidelines, which were
implemented on 16 February 2011, are:
-- S&P 500 Index - market cap of $4.0 billion or greater
-- S&P MidCap 400 - $1.0 billion to $4.4 billion
-- S&P SmallCap 600 - $300 million to $1.4 billion
The level of activity within the portfolio reflected changes to
the constituents of the Index which resulted from takeover activity
(11 constituents were acquired) and companies leaving the index on
grounds of low market capitalisations (8 constituents were
removed).
Some of the better known names to leave the S&P 500 Index as
a result of takeover activity included McAfee, Genzyme, Novell,
Marshall & Ilsley, National Semiconductor and Nicor. The new
entrants to the index included Covidien, BlackRock, Accenture, The
Mosaic Company, TE Connectivity and Cooper Industries.
Apart from changes to the constituents of the Index, additional
trading activity was generated by sales from the portfolio to
finance the purchase of the Company's own shares - a total of
1,621,236 shares were purchased at a total cost of GBP10.2
million.
The total value of purchases in the year, excluding the
Company's own shares, amounted to GBP4.9 million while sales
totalled GBP14.5 million.
Aberdeen Asset Managers Limited
29 March 2012
RESULTS
Performance
1 year return 3 year return* 5 year return*
% % %
Capital return
Share price +3.9 +34.9 +12.6
Net asset value per share +4.0 +45.4 +13.8
S&P 500 Index (in sterling terms) +3.6 +45.2 +13.2
Total return (Capital return
plus dividends reinvested)
Share price +5.5 +41.8 +22.5
Net asset value per share +5.4 +52.4 +23.3
S&P 500 Index (in sterling terms) +5.8 +54.9 +26.1
* Cumulative return
Financial Summary
31 January 31 January %
2012 2011 change
Total assets GBP220,409,000 GBP222,855,000 -1.1
Equity shareholders' funds GBP220,409,000 GBP222,855,000 -1.1
Share price (mid market) 660.50p 635.50p +3.9
Net asset value per share (including
undistributed revenue for the period) 700.19p 673.28p +4.0
Net asset value per share (excluding
undistributed revenue for the period) 694.79p 668.37p +4.0
S&P 500 Index (in sterling terms) 831.67 802.95 +3.6
Discount (difference between share
price and net asset value){A} (4.9%) (4.9%)
Dividends and earnings
Revenue return per share 9.39p 8.81p +6.6
Dividends per share (including proposed
final dividend) 9.40p 9.15p +2.7
Dividend cover 1.00 0.96
Revenue reserves per share (prior
to payment of proposed final dividend) 10.66p 9.95p
Revenue reserves per share (after
payment of proposed final dividend) 5.46p 5.00p
Operating costs
Total expense ratio 0.38% 0.38%
{A} Based on net asset value per share (excluding undistributed
revenue for the period).
DIRECTORS' REPORT
Business Review
The Board has prepared this Business Review in accordance with
the requirements of Section 417 of the Companies Act 2006.
Principal Activity and Status
The business of the Company is that of an investment trust and
the Directors do not envisage any change in this activity in the
foreseeable future.
The Company's registration number is SC5218.
The Company is registered as a public limited company and is an
investment company as defined by Section 833 of the Companies Act
2006. The Company has been approved by HM Revenue & Customs as
an investment trust for the purposes of Section 1158 of the
Corporation Tax Act 2010 for the year ended 31 January 2011. The
Directors are of the opinion, under advice, that the Company has
conducted its affairs for the year ended 31 January 2012 so as to
be able to continue to obtain approval as an investment trust under
Section 1158 of the Corporation Tax Act 2010 for that year,
although approval for the year would be subject to review were
there to be any enquiry under the Corporate Tax Self Assessment
regime.
The Company has conducted its affairs so as to satisfy the
requirements as a qualifying security for Individual Savings
Accounts. The Directors intend that the Company will continue to
conduct its affairs in this manner in the future.
Investment Objective and Policy
The investment objective is to invest in a portfolio designed to
track closely the S&P 500 Index, both in terms of capital and
income.
The Company's methodology in tracking the Index is full
replication of the Index constituents.
Review of Performance
An outline of the performance, market background, investment
activity and portfolio strategy during the year under review, as
well as the investment outlook, is provided in the Chairman's
Statement and Manager's Review.
Principal Risks and Uncertainties
The Board has reviewed the key risks that affect its business.
The principal risks are as follows:
-- Market and performance risk: The Company is exposed to the
effect of variations in share prices and movements in the US$/GBP
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 may operate
a share buyback programme when the level of discount is above
3%.
-- Regulatory risk: The Company operates in a complex regulatory
environment and faces a number of regulatory risks. Breaches of
regulations, such as Section 1158 of the Corporation Tax Act 2010,
the UKLA Listing Rules and the Companies Acts, 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.
Further details on other risks relating to the Company's
investment activities, including market price, liquidity and
foreign currency risks, are provided in note 16 to the
accounts.
Monitoring Performance - Key Performance Indicators
At each Board meeting, the Directors consider a number of
performance measures to assess the Company's success in achieving
its objectives. The following key performance indicators (KPIs)
have been identified by the Board for determining the progress of
the Company:
-- Net asset value
-- S&P 500 Index (in sterling terms)
-- Discount
-- Total expense ratio
A record of these measures is disclosed in the Results
section.
Resource
The Company has no employees. The responsibility for the
management of the Company has been delegated to Aberdeen Asset
Managers Limited under the investment management agreement.
As an investment trust, the Company has no direct social, or
community responsibilities.
Results and Dividends
An interim dividend of 4.20p per Ordinary share was paid to
shareholders on 14 October 2011. The Directors recommend that a
final dividend per Ordinary share of 5.20p be paid on 1 June 2012
to shareholders on the register on 4 May 2012, making a total of
9.40p (2011 - 9.15p) per Ordinary share for the year ended 31
January 2012. The ex-dividend date is 2 May 2012. A resolution in
respect of the final dividend will be proposed at the Annual
General Meeting.
Going Concern
In accordance with the Financial Reporting Council's guidance on
Going Concern and Liquidity Risk issued in October 2009, the
Directors have reviewed the Company's ability to continue as a
going concern. In accordance with the Company's Articles of
Association, shareholders have the right to vote annually at the
Annual General Meeting on whether to continue the Company. After
enquiry, the Directors believe that the Company has adequate
resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern
basis in preparing the accounts and are of the opinion that the
Company will continue in operational existence for the foreseeable
future.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with UK
Accounting Standards and applicable law (UK Generally Accepted
Accounting Practice).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these financial
statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Directors' Report, Directors'
Remuneration Report and Corporate Governance Statement that
complies with that law and those regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge:
-- the financial statements, prepared in accordance with the
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company; and
-- the Directors' Report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that the Company faces.
For Edinburgh US Tracker Trust plc
James Ferguson
Chairman
29 March 2012 INCOME STATEMENT (audited)
Year ended 31 January Year ended 31 January
2012 2011
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net gains on investments 8 - 7,597 7,597 - 37,695 37,695
Net currency gains 15 - 54 54 - 20 20
Income 2 4,532 - 4,532 4,390 - 4,390
Investment management fee 3 (435) - (435) (434) - (434)
VAT recovered on investment
management fees 3 - - - 75 31 106
Administrative expenses 4 (399) - (399) (371) - (371)
______ ______ _____ ______ ______ _____
Net return on ordinary
activities before finance
costs and taxation 3,698 7,651 11,349 3,660 37,746 41,406
Finance costs - - - - - -
______ ______ _____ ______ ______ _____
Return on ordinary activities
before taxation 3,698 7,651 11,349 3,660 37,746 41,406
Taxation 5 (652) - (652) (620) (28) (648)
______ ______ _____ ______ ______ _____
Return on ordinary activities
after taxation 3,046 7,651 10,697 3,040 37,718 40,758
______ ______ _____ ______ ______ _____
Return per share (pence) 7 9.39 23.60 32.99 8.81 109.36 118.17
______ ______ _____ ______ ______ _____
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.
The accompanying notes are an integral part of the financial statements.
Proposed final dividend
The Board is proposing a final dividend of 5.20p per share (GBP1,637,000),
making a total dividend of 9.40p per share (GBP2,989,000) for the year
to 31 January 2012 which, if approved, will be payable on 1 June 2012
(see note 6).
For the year ended 31 January 2011, the final dividend was 4.95p per
share (GBP1,638,000) making a total dividend of 9.15p per share (GBP3,055,000).
BALANCE SHEET (audited)
As at As at
31 January 31 January
2012 2011
Notes GBP'000 GBP'000
Fixed assets
Investments at fair value through
profit or loss 8 217,966 219,994
________ ________
Current assets
Debtors and prepayments 9 240 282
Cash and short term deposits 15 2,402 2,772
________ ________
2,642 3,054
________ ________
Creditors: amounts falling due
within one year 10 (199) (193)
________ ________
Net current assets 2,443 2,861
________ ________
Net assets 220,409 222,855
________ ________
Capital and reserves
Called-up share capital 11 7,870 8,275
Share premium account 32,643 32,643
Capital redemption reserve 14,225 13,820
Capital reserve 12 162,314 164,822
Revenue reserve 3,357 3,295
________ ________
Equity shareholders' funds 220,409 222,855
________ ________
Net asset value per share (pence) 13 700.19 673.28
________ ________
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited)
For the year ended 31 January
2012
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 January 2011 8,275 32,643 13,820 164,822 3,295 222,855
Return on ordinary activities
after taxation - - - 7,651 3,046 10,697
Dividends paid (see note
6) - - - - (2,984) (2,984)
Purchase of own shares for
cancellation (405) - 405 (10,159) - (10,159)
_____ ______ ______ ______ ______ ______
Balance at 31 January 2012 7,870 32,643 14,225 162,314 3,357 220,409
_____ ______ ______ ______ ______ ______
For the year ended 31 January
2011
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 (see note
6) - - - - (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
_____ ______ ______ ______ ______ ______
The revenue reserve represents the amount of the Company's reserves
distributable by way of dividend.
The accompanying notes are an integral part of the financial statements.
CASH FLOW STATEMENT (audited)
Year ended Year ended
31 January 2012 31 January 2011
Notes GBP'000 GBP'000 GBP'000 GBP'000
Net cash inflow from operating
activities 14 3,745 3,620
Taxation
UK corporation tax paid - (37)
Overseas withholding tax paid (651) (648)
______ ______
Net tax paid (651) (685)
Financial investment
Purchases of investments (4,878) (6,601)
Sales of investments 14,503 26,694
______ ______
Net cash inflow from financial
investment 9,625 20,093
Equity dividends paid (2,984) (2,763)
______ ______
Net cash inflow before financing 9,735 20,265
Financing
Buy back of Ordinary shares
(including expenses) (10,159) (19,242)
______ ______
Net cash outflow from financing (10,159) (19,242)
______ ______
(Decrease)/increase in cash (424) 1,023
______ ______
Reconciliation of net cash flow
to movement in net funds
(Decrease)/increase in cash
as above (424) 1,023
Exchange movements 54 20
______ ______
Movement in net funds in the
year (370) 1,043
Opening net funds 2,772 1,729
______ ______
Closing net funds 15 2,402 2,772
______ ______
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 January 2012
1. Accounting policies
A summary of the principal accounting policies, all of which
have been consistently applied throughout the year and the
preceding year is set out below.
(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 the
applicable UK Accounting Standards and with the Statement
of Recommended Practice 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts'. 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 Directors believe this is appropriate for the reasons
outlined in the Directors' Report.
The financial statements and the net asset value per share
figures have been prepared in accordance with UK Generally
Accepted Accounting Practice (UK GAAP).
(b) Investment income, interest receivable, expenses and interest
payable
Income from investments (other than special dividends),
including taxes deducted at source, is included in revenue
by reference to the date on which the investment is quoted
ex dividend. Special dividends are credited to capital
or revenue, according to the circumstances. Expenses and
interest receivable and payable are recognised 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) 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 to meet the conditions required
to obtain approval for the foreseeable future, the Company
has not provided deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.
(d) Investments
All purchases and sales of investments are recognised
on the trade date, being the date the Company commits
to purchase or sell the investment. Investments are initially
recognised and subsequently re-measured at fair value
in the Income Statement. Transaction costs on purchases
and sales are expensed through the Income Statement.
(e) Dividends payable
Interim and final dividends are recognised in the period
in which they are paid.
(f) 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 costs of share buybacks are
also deducted from this reserve.
(g) Foreign currency
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 capital reserve.
(h) Derivative financial instruments
Index future contracts are accounted for as separate derivative
contracts and are shown in other assets or other liabilities
in the Balance Sheet at their fair value.
2012 2011
2. Income GBP'000 GBP'000
Income from investments held at fair value
through profit or loss
Dividends from overseas listed investments 4,532 4,311
______ ______
Other income
Interest on VAT recovered on investment management
fees - 78
Deposit interest - 1
______ ______
Total income 4,532 4,390
______ ______
2012 2011
3. Investment management fee GBP'000 GBP'000
Investment management fee 435 434
______ ______
The management fee payable to Aberdeen Asset Managers Limited
("Aberdeen") is 0.05% per quarter of the total assets of the
Company after deducting current liabilities and excluding commonly
managed funds.
The management agreement between the Company and Aberdeen is
terminable by either party on three months' notice. In the
event of a resolution being passed at the AGM to wind up the
Company the Manager shall be entitled to three months' notice
from the date the resolution was passed. In the event of termination
on not less than the agreed notice period, compensation is
payable in lieu of the unexpired notice period.
During the year ended 31 January 2011 the Trust received GBP106,000
in relation to VAT previously charged on investment management
fees.
2012 2011
4. Administrative expenses GBP'000 GBP'000
Directors' fees 51 49
Registrar's fees 61 59
Custody and bank charges 33 40
Auditor's remuneration:
fees payable to the Company's auditor for
the audit of the annual accounts 15 16
Contribution to the Investment Trust Initiative 73 67
Printing, postage and stationery 22 23
Fees, subscriptions and publications 35 34
Standard & Poors' licence fee 22 22
Other expenses 87 61
399 371
The contribution to the Investment Trust Initiative was paid
to the Manager in respect of marketing of the Company. At the
year end GBP6,000 was due (2011 - GBP6,000 due) to the Manager.
2012 2011
Revenue Capital Total Revenue Capital Total
5. Taxation GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(a) Analysis of charge
for the year
Overseas tax suffered 652 - 652 629 19 648
Current tax charge
for the year 652 - 652 629 19 648
Tax on capital income
received - - - (9) 9 -
_____ _____ _____ _____ _____ _____
Taxation 652 - 652 620 28 648
_____ _____ _____ _____ _____ _____
(b) Factors affecting
the tax charge for
the year
2012 2011
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net profit on ordinary
activities before
taxation 3,698 7,651 11,349 3,660 37,746 41,406
_____ _____ _____ _____ _____ _____
Return on ordinary
activities before
taxation multiplied
by the applicable
rate of corporation
tax of 26.33% (2011
- 28%) 974 2,014 2,988 1,025 10,569 11,594
Effects of:
Non taxable overseas
dividends (1,186) - (1,186) (1,205) - (1,205)
Unutilised management
expenses 215 - 215 178 (9) 169
Income taxable in
different periods (3) - (3) 2 - 2
Overseas taxes 652 - 652 629 19 648
Revenue expenses utilised
against capital income - - - (9) 9 -
Capital gains not
taxable - (2,000) (2,000) - (10,554) (10,554)
Currency gains not
taxable - (14) (14) - (6) (6)
_____ _____ _____ _____ _____ _____
Current tax charge 652 - 652 620 28 648
_____ _____ _____ _____ _____ _____
(c) Provision for deferred
taxation
No provision for deferred taxation has been made in the
current year or in the prior year. The Company has not provided
for deferred tax on capital gains or losses arising on the
revaluation or disposal of investments as it is exempt from
tax on these items because of its status as an investment
trust company.
2012 2011
6. Dividends GBP'000 GBP'000
Amounts recognised as distributions to equity
holders in the year:
Final dividend for 2011 - 4.95p per share
(2010 - 3.80p) 1,638 1,344
Interim dividend for 2012 - 4.20p per share
(2011 - 4.20p) 1,352 1,417
Unclaimed dividends from previous years (6) (2)
________ ________
2,984 2,759
________ ________
The proposed final dividend for 2012 is subject to approval
by shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements. The
final dividend, subject to shareholder approval, will be paid
on 1 June 2012 to shareholders on the register at the close
of business on 4 May 2012. The ex-dividend date is 2 May 2012.
The table below sets out the total dividends paid and proposed
in respect of the financial year, which is the basis on which
the requirements of Sections 1158-1159 of the Corporation Tax
Act 2010 are considered. The revenue available for distribution
by way of dividend for the year is GBP3,046,000 (2011 - GBP3,040,000).
2012 2011
GBP'000 GBP'000
Interim dividend for 2012 - 4.20p per share
(2011 - 4.20p) 1,352 1,417
Proposed final dividend for 2012 - 5.20p
per share (2011 - 4.95p) 1,637 1,638
Unclaimed dividends from previous years (6) (2)
________ ________
2,983 3,053
________ ________
The amount payable for the proposed final dividend above is
based on the shares in issue at the date of this report (31,478,582)
and this satisfies the investment trust status test.
2012 2012 2011 2011
7. Return per Ordinary share GBP'000 p GBP'000 p
Based on the following figures:
Revenue return 3,046 9.39 3,040 8.81
Capital return 7,651 23.60 37,718 109.36
Total return 10,697 32.99 40,758 118.17
_____ ________ _____ ________
Weighted average number of Ordinary
shares in issue 32,427,651 34,491,096
________ ________
2012 2011
8. Investments GBP'000 GBP'000
Fair value through profit or loss:
Opening fair value 219,994 202,656
Opening investment holdings gains (64,430) (33,482)
________ ________
Opening book cost 155,564 169,174
Purchases at cost 4,878 6,337
Sales - proceeds (14,503) (26,694)
Sales - realised gains 3,781 6,747
________ ________
Closing book cost 149,720 155,564
Closing investment holdings gains 68,246 64,430
________ ________
Closing fair value 217,966 219,994
________ ________
Listed on overseas stock exchanges 217,966 219,994
________ ________
2012 2011
Gains on investments GBP'000 GBP'000
Realised gains on sales 3,781 6,747
Movement in investment holdings gains 3,816 30,948
________ ________
7,597 37,695
________ ________
Transaction costs
During the year 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:
2012 2011
GBP'000 GBP'000
Purchases 16 31
Sales 3 8
________ ________
19 39
________ ________
2012 2011
9. Debtors: amounts falling due within one year GBP'000 GBP'000
Dividends receivable 191 182
Other debtors and prepayments 40 91
Overpayment of dividend 9 9
________ ________
240 282
________ ________
2012 2011
10. Creditors: amounts falling due within one GBP'000 GBP'000
year
Investment management fee payable 110 111
Other creditors 89 82
________ ________
199 193
________ ________
2012 2011
11. Called-up share capital GBP'000 GBP'000
Allotted, called-up and fully paid:
Opening balance 8,275 9,114
Shares bought back for cancellation (405) (839)
________ ________
31,478,582 (2011 - 33,099,818) Ordinary shares
of 25p each 7,870 8,275
________ ________
During the year the Company bought back and cancelled 1,621,236
Ordinary shares of 25p each (2011 - 3,356,690) for a total
consideration of GBP10,159,000 (2011 - GBP19,242,000). This
represents 5% of the Company's issued share capital at 31 January
2011.
There have been no buy-backs of Ordinary shares since the year
end, leaving 31,478,582 Ordinary shares in issue at the date
of this report.
2012 2011
12. Capital reserve GBP'000 GBP'000
At 1 February 164,822 146,346
Movement in fair value gains 7,597 37,695
Foreign exchange movements 54 20
Purchase of own shares for cancellation (10,159) (19,242)
Taxation - (19)
Tax relief to revenue - (9)
VAT recoverable on management fees - 31
________ ________
At 31 January 162,314 164,822
________ ________
Included in the total above are investment holdings gains at
the year end of GBP68,246,000 (2011 - GBP64,430,000).
The Directors regard the total capital reserve as being available
to fund share buy-backs.
13. Net asset value per equity share
The net asset value per share and the net assets attributable
to the Ordinary shareholders at the year end were as follows:
2012 2011
Net assets attributable GBP220,409,000 GBP222,855,000
Number of Ordinary shares in issue 31,478,582 33,099,818
Net asset value per share 700.19p 673.28p
14. Reconciliation of net return before finance 2012 2011
costs and taxation to
net cash inflow from operating activities GBP'000 GBP'000
Return on ordinary activities before finance
costs and taxation 11,349 41,406
Adjustments for:
Net gains on investments (7,597) (37,695)
Foreign exchange movements (54) (20)
Increase/(decrease) in accrued income (10) 6
(Decrease)/increase in other debtors 51 (78)
Increase in other creditors 6 1
________ ________
Net cash inflow from operating activities 3,745 3,620
________ ________
At At
1 February Cash Exchange 31 January
2011 flow movements 2012
15. Analysis of changes in GBP'000 GBP'000 GBP'000 GBP'000
net funds
Cash and short term deposits 2,772 (424) 54 2,402
________ ________ ________ ________
16. Financial instruments
The Company's financial instruments, other than derivatives,
comprise listed securities, cash balances, debtors and creditors
that arise directly from its operations; for example, in respect
of sales and purchases awaiting settlement, and debtors for
accrued income.
During the year, the Company did not enter into any derivative
contracts. In periods when the Company builds up cash, the
Manager may enter into certain derivative contracts to gain
exposure to the S&P 500 Index. The Company had no open positions
in derivative contracts at 31 January 2012 or 2011.
Fixed asset investments (see note 8) are valued at closing
market prices, which equates to their fair value. The fair
values of all other assets and liabilities are represented
by their carrying values in the Balance Sheet.
There were no financial liabilities, other than short term
creditors, at 31 January 2012 (2011 - GBPnil).
Risk management
The main risk to the Company is the failure to track closely
the S&P 500 Index. The main risks associated with the Company's
financial instruments are market risk (comprising price risk,
interest rate risk and foreign currency risk), liquidity risk
and credit risk.
The Board regularly reviews and agrees policies for managing
each of these risks. The Manager's policies for managing these
risks are summarised below and have been applied throughout
the year. The numerical disclosures exclude short-term debtors
and creditors.
(i) Market risk
The Company's exposure to market risk comprises of changes
in interest rates, valuations awarded to equities, movements
in prices and liquidity of financial instruments. In pursuing
the Company's primary objective of tracking its benchmark index,
the Company does not increase the level of cash balances through
the sale of equities.
The fair value of or future cash flows from a financial instrument
held by the Company may fluctuate because of changes in market
prices. This market risk comprises three elements - price risk,
interest rate risk and foreign currency risk.
Price risk
Price risks (i.e. changes in market prices other than those
arising from interest rate risk) may affect the value of the
quoted investments. The Company's stated objective is to track
the S&P 500 Index. As a result the Company is exposed to movements
in the underlying Index.
As the Company tracks its benchmark Index it will hold an appropriate
spread of investments in the portfolio. This will reduce the
risk arising from factors specific to a particular sector.
The Manager actively monitors market prices throughout the
year and reports investment performance to the Board on a regular
basis. The investments held by the Company are listed on the
New York Stock Exchange and NASDAQ.
Price risk sensitivity
If market prices, in sterling terms, at the Balance Sheet date
had been 10% higher or lower while all other variables remained
constant, the return attributable to Ordinary shareholders
at the year ended 31 January 2012 would have increased/decreased
by GBP21,797,000 (2011 - increase/decrease of GBP21,999,000)
and equity reserves would have increased/decreased by the same
amount. The calculations are based on the portfolio valuations,
as at the respective Balance Sheet dates, and are not representative
of the year as a whole.
Interest rate risk
Interest rate movements may affect the level of income receivable
on cash deposits.
The possible effects on fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment decisions.
The Company holds cash on deposit in Sterling and US Dollars.
The US Dollar value of cash and short term deposits can be
significantly affected by movements in foreign exchange rates.
The tables below sets out the currency exposure of the cash
and short term deposits as at 31 January 2012 and 2011:
Interest Local Foreign Sterling
rate currency exchange equivalent
As at 31 January 2012 % '000 rate GBP'000
US Dollar 0.00 3,755 1.5781 2,380
Sterling 0.25 22 - 22
________
Total cash on deposit per
Balance Sheet 2,402
________
Interest Local Foreign Sterling
rate currency exchange equivalent
As at 31 January 2011 % '000 rate GBP'000
US Dollar 0.00 4,408 1.6018 2,752
Sterling 0.25 20 - 20
________
Total cash on deposit per
Balance Sheet 2,772
________
Cash and short term deposits are held in floating rate accounts.
The benchmark that determines the interest received, or paid
on balances, is the bank base rate which was 0.25% (2011 -
0.25%) for Sterling funds, and nil (2011 - nil) for US Dollar
funds at 31 January 2012. Movements in interest rates would
not significantly affect net assets attributable to the Company's
shareholders and total profit.
Foreign currency risk
The Company's portfolio is invested in US quoted securities
and the Balance Sheet can be significantly affected by movements
in foreign exchange rates. It is not the Company's policy
to hedge this risk on a continuing basis.
The revenue account is subject to currency fluctuation arising
on overseas income. The Company does not hedge this currency
risk as its investment objective is to track closely the S&P
500 Index.
Foreign currency risk exposure by currency of denomination:
31 January 2012 31 January 2011
Net Total Net Total
Overseas monetary currency Overseas monetary currency
investments assets exposure investments assets exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
US Dollar 217,966 2,571 220,537 219,994 2,934 222,928
Sterling - (128) (128) - (73) (73)
________ ________ ________ ________ ________ _______
Total 217,966 2,443 220,409 219,994 2,861 222,855
________ ________ ________ ________ ________ _______
The asset allocation between specific markets can vary from
time to time based on the constituents of the Company's benchmark
index.
Foreign currency sensitivity
There is no sensitivity analysis included as the Company's
significant foreign currency financial instruments are in the
form of equity investments, and they have been included within
the other price risk sensitivity analysis so as to show the
overall level of exposure.
(ii) Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with financial
liabilities. Liquidity risk is not considered to be significant
as the Company's assets comprise of mainly readily realisable
securities, which can be sold to meet funding commitments if
necessary.
(iii) Credit risk
This is the risk that a counter-party to a transaction fails
to discharge its obligations under that transaction, resulting
in a loss to the Company.
The Company considers credit risk not to be significant as
it is actively managed as follows:
- investment securities are safeguarded by an independent custodian;
- the risk of counterparty exposure due to failed trades causing
a loss to the Company is mitigated by the review of failed
trade reports on a daily basis. In addition, both stock and
cash reconciliations to the Custodians' records are performed
on a daily basis to ensure discrepancies are investigated on
a timely basis. The Manager's Compliance department carries
out periodic reviews of the Custodian's operations and reports
its finding to the Manager's Risk Management Committee.
- investment transactions are carried out with a large number
of brokers, whose credit-standing is reviewed periodically
by the Manager and limits are set on the amount that may be
due from any one broker;
- cash is held only with banks with high quality external credit
ratings;
- the Company does not undertake stocklending.
None of the Company's financial assets are secured by collateral
or other credit enhancements.
Exposure to credit risk
In summary, compared to the amounts in the Balance Sheet, the
exposure to credit risk at 31 January 2012 was as follows:
2012 2011
GBP'000 GBP'000
Debtors and prepayments 240 282
Cash and short term deposits 2,402 2,772
________ ________
2,642 3,054
________ ________
17. Capital management policies and procedures
The capital of the Company consists of equity, comprising issued
capital, reserves and retained earnings. The Board monitors
and reviews the broad structure of the Company's capital on
an ongoing basis. This review includes the impact of share
buybacks and the extent to which revenue should be retained.
The Company is not subject to any externally imposed capital
requirements.
18. Fair value hierarchy
FRS 29 'Financial Instruments: Disclosures' requires an entity
to classify fair value measurements using a fair value hierarchy
that reflects the significance of the inputs used in making
the measurements. The fair value hierarchy has the following
levels:
- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the assets or liability, either
directly (ie as prices) or indirectly (ie derived from prices);
and
- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The financial assets and liabilities measured at fair value
in the Balance Sheet of financial position are grouped into
the fair value hierarchy at 31 January 2012 as follows:
Level Level Level Total
1 2 3
Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
Quoted equities a) 217,966 - - 217,966
_______ _______ _______ _______
Net fair value 217,966 - - 217,966
_______ _______ _______ _______
As at 31 January 2011
Level Level Level Total
1 2 3
Note GBP'000 GBP'000 GBP'000 GBP'000
Financial assets at fair
value through profit or loss
Quoted equities a) 219,994 - - 219,994
_______ _______ _______ _______
Net fair value 219,994 - - 219,994
_______ _______ _______ _______
a) Quoted equities
The fair value of the Company's investments in quoted equities
has been determined by reference to their quoted bid prices
at the reporting date. Quoted equities included in Fair Value
Level 1 are actively traded on recognised stock exchanges.
Additional Notes to Annual Financial Report
The Annual Financial Report Announcement is not the Company's statutory
accounts. The above results for the year ended 31 January 2012
have been agreed with the auditors and are an abridged version
of the Company's full accounts, which have been approved and audited
with an unqualified report. The 2012 and 2011 statutory accounts
received unqualified reports from the Company's auditors and did
not include any reference to matters to which the auditors drew
attention by way of emphasis without qualifying the reports, and
did not contain a statement under either section 498(2) or 498(3)
of the Companies Act 2006. The financial information for 2011 is
derived from the statutory accounts for 2011 which have been delivered
to the Registrar of Companies. The 2012 accounts will be filed
with the Registrar of Companies in due course.
The Annual General Meeting will be held at 40 Princes Street, Edinburgh
EH2 2BY on 29 May 2012 at 11.00am.
The Annual Report and Accounts will be posted to shareholders in
April 2012 and copies will be available from the investment manager
or from the Company's website, www.edinburghustracker.co.uk*.
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.
* Neither the Company's website nor the content of any website
accessible from hyperlinks on the Company's website (or any other
website) is (or is deemed to be) incorporated into, or forms (or is
deemed to form) part of this announcement.
By Order of the Board
Aberdeen Asset Management PLC, Secretary
This information is provided by RNS
The company news service from the London Stock Exchange
END
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