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Edinburgh UK Tracker (AUKT)

  Print      Mail a friend       Annual reports

Wednesday 11 April, 2012

Edinburgh UK Tracker

Annual Financial Report - correction

RNS Number : 1517B
Edinburgh UK Tracker Trust plc
11 April 2012
 



EDINBURGH UK TRACKER TRUST PLC

 

Please note that the announcement released on 8th March 2012 at 15:07hrs (RNS No: 9912Y) was released with an incorrect payment date for the final dividend for the year ended 31 December 2011 of 4 May 2012. The correct date for payment of the final dividend for the year ended 31 December 2011 is 2 May 2012. All other information within the announcement remains unchanged. The full corrected text appears below.

 

 

ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2011

 

 

1. CHAIRMAN'S STATEMENT

 

The Company continues to meet its objective of tracking closely the performance of the FTSE All-Share Index.

 

In the 12 months ended 31 December 2011, the capital net asset value per share (excluding revenue reserves) fell by 6.8% to 259.02p and this compares with the return from the index of -6.7%. The difference between the NAV and the Index returns is attributable to the differing treatment of a special dividend received from Vodafone. The Company recorded the dividend as revenue whereas in the Index the dividend was treated as a capital event. The NAV received a small uplift from the Company buying back its own shares at a discount to the prevailing NAV.  The discount of the share price to the NAV remained within the five-year trading range and the total expenses ratio continues to be very competitive.

 

The Company's share price fell by 7.3% over the year to 247.00p which represented a discount of 4.6% to the net asset value per share of 259.02p. At the start of the year, the share price was trading at a discount to the net asset value of 4.1%. The Board monitors closely the discount level of the Company's shares and during the 12 months ended 31 December 2011 the Company bought back 1,439,137 ordinary shares at a cost of £3.7 million.

 

The Company's operating expenses fell slightly during the year. This was reflected in the total expense ratio which fell from 0.31% in the previous year to 0.29%. 

 

The recovery in dividends from constituents of the Index continued in 2011 and is reflected in the Company's revenue per share increased from 7.84p to 8.88p. The revenue per share figures for both years include non-recurring items. In 2010, a refund of VAT on management fees and associated interest income increased the revenue return by 0.47p per share, while in 2011, the special dividend from Vodafone provided an uplift of 0.31p per share. In line with the Company's investment strategy, the dividends paid to shareholders reflect the income received from the constituents of the index. The directors increased the interim dividend to 2.50p (2010: 2.25p) and are recommending a final dividend of 6.40p (2010: 5.65p), which will take total dividends for the year to 8.90p (2010: 7.90p).

 

Your Board continues to contribute to the Manager's marketing initiative, which provides a series of savings schemes through which savers can invest in Edinburgh UK Tracker Trust in a low cost and convenient manner. The Company contributed £106,000 to this initiative during the past year. Up to date information about the Company and the savings products is available on the Company's website, www.edinburghuktracker.co.uk.

 

Corporate Governance

The Board reviews annually the performance of the Manager, the Chairman, individual Directors and the Board as a whole. The Board has assessed the performance of the 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 Manager, on the terms agreed, is in the interests of shareholders.

 

Board

Having served on the Board since 2001 and as Chairman from 2008, I intend to retire from the Board early in 2013. Christopher Purvis, who joined the Board on the acquisition of Tribune UK Tracker Trust, whose Board he joined in 2004, has intimated that he will retire from the Board early in 2014. In order to provide continuity and a smooth transfer two new directors were appointed on 2 March 2012. Wendy Mayall is strategic adviser to Stamford Associates, a leading provider of investment consulting services, and prior to this was Chief Investment Officer of Unilever UK Pension Fund from 1995 to 2011. Paul Yates is a non-executive partner of 33 St James, a director of Merchants Trust and was previously Head of UK Equities and Head of Global Equities at UBS Global Asset Management. Wendy and Paul will be standing for election at the Annual General Meeting.

 

Annual General Meeting

As required by the Company's Articles of Association, shareholders are again being asked to confirm that Edinburgh UK Tracker Trust should continue for a further year. A resolution to this effect will be proposed as special business at the Annual General Meeting on 25 April 2012 (Resolution No.11). Should continuation not be approved, the Board has three months either to put forward proposals for the reconstruction of the Company or to propose its winding-up. If shareholders reject any proposals for reconstruction, the Company would then automatically be wound-up.

 

Resolution No. 12 is asking shareholders to provide the Directors with the authority to issue new shares to meet investor demand, provided the Company's shares are trading above the net asset value per share. Resolution No. 13 will provide the Directors with powers to issue new shares, within limits, without being required to offer them first to existing shareholders. Resolution No. 14 will provide your Board with the authority to purchase the Company's shares for cancellation were the shares to trade persistently on a discount in excess of the levels reached in recent years, and it will also 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 Company's investment performance, aided by low management and administration costs, emphasises its considerable attractions, and I feel confident that shareholders will again wish to vote in favour of its continuation.

 

 

T M Ross

Chairman

8 March 2012

 

 

2. MANAGER'S REVIEW

In the 12 months ended 31 December 2011, the capital net asset value per share (excluding revenue reserves) fell by 6.8% and this compares with the return from the FTSE All-Share Index of -6.7%. The difference between the NAV and the Index returns is attributable to the differing treatment of a special dividend received from Vodafone. The Company recorded the dividend as revenue whereas in the Index the dividend was treated as a capital event. The NAV received a small uplift from the Company buying back its own shares at a discount to the prevailing NAV.

 

The constituents of the FTSE All-Share Index are controlled by the FTSE Equity Indices Committee which meets quarterly to review formally the constituents of the FTSE 100, 250 and Small Cap indices. The most recent review was on 7 March 2012 and the changes become effective after the close of business on 16 March 2012. An annual review of the constituents of the FTSE All-Share Index takes place each year in June. Outwith the quarterly and annual reviews, changes to the structure of the indices may also arise from corporate restructurings, new issues, scrip issues, rights issues, acquisitions, disposals and changes of domicile.

 

The level of activity within the portfolio reflected both changes to the constituents of the index and sales to finance purchases of the Company's own shares. The level of takeover activity dropped compared with recent years with Wellstream, British Insurance, Gartmore, Forth Ports, Autonomy and Northumbrian Water being the most prominent companies leaving the FTSE 350 Index through acquisition. The issue of new equity by companies also fell compared with 2010 with Glencore, New World Resources, CRH and Polymetal International being the largest entrants to the Index. The issue of new equity by companies through rights issues, placings and open offers fell sharply compared with 2010.   

 

Additional trading activity was generated from sales to finance the purchase of the Company's own shares - a total of 1,439,137 shares were purchased at a cost of £3.7 million. The total value of purchases in the year, excluding the Company's own shares, amounted to £6.1 million while sales totalled £9.6 million.

 

With effect from 1 January 2012, the minimum free float rules for the FTSE UK Index Series have been amended. Where a company is incorporated in the UK and has its sole listing in the UK, it will now be required to have minimum free float of 25% to become eligible for the UK Index Series. For companies not incorporated in the UK, adherence to the principles of the UK Corporate Governance Code, pre-emption rights and the UK Takeover Code is required plus a free float in excess of 50% for Index entry. There is no immediate impact on the eligibility of existing constituents of the UK Index Series where the free float is below 25% and any constituents affected by the rule changes will have a two year grandfathering period until 1 January 2014 to become compliant. The rule changes will not have any immediate impact on the Company's portfolio. The changes will have most impact on the eligibility of potential index constituents in the future. FTSE has also announced that it will move to use actual free float calculations in the UK Index Series with effect from the June 2012 review. This change may lead to additional transaction activity within the portfolio in June.

 

 

 

David McCraw

Aberdeen Asset Managers Limited

8 March 2012

 

 

3. BUSINESS REVIEW

A review of the Company's activities is given in the Chairman's Statement and the Manager's Review. This includes a review of the business of the Company and its principal activities, and likely future developments of the business.

 

Investment Objective

To invest in a portfolio designed to track closely the FTSE All-Share Index, in terms of both capital and income.

 

Benchmark

FTSE All-Share Index

 

Investment Policy

The strategy employed to track the FTSE All-Share Index is to replicate fully the constituents of the FTSE 350 Index and to hold the majority of the stocks in the FTSE Small Cap Index. This means that the Company holds all of the 356 stocks that make up the FTSE 350 Index, which represented 97.84% of the value of the FTSE All-Share Index at 31 December 2011. The remaining 2.16% of the FTSE All-Share Index covers smaller companies. At 31 December 2011, the total portfolio consisted of 593 stocks compared to 624 constituents in the FTSE All-Share Index.

 

It is the Company's policy to invest no more than 15% of its gross assets in other listed investment companies (including listed investment trusts).

 

The Company complies with section 1158 of the Corporation Tax Act 2010, and does not invest more than 15% of its assets in the shares of any one company.

 

Capital Structure

The Company's issued share capital as at 31 December 2011 consisted of 102,821,115 Ordinary shares of 10p and 235,000 shares held in treasury which do not have a dividend or voting entitlement. Each Ordinary shareholder is entitled to one vote on a show of hands and, on a poll, to one vote for every share held.

 

Total Assets and Net Asset Value

At 31 December 2011, the Company had Total Assets of £273.87 million and a Net Asset Value per Ordinary Share of 266.35p. The Company's total expenses (after tax) represented 0.29% of the average monthly net asset value during the year.

 

Duration

The Company does not have a fixed winding-up date, but shareholders are given the opportunity to vote on the continuation of the Company every year at the Annual General Meeting.

 

Risk

Managing a portfolio of shares necessarily involves certain risks, the more important of which are set out on below and in Note 18 to the financial statements.

 

Management of Risk

The Board has adopted a matrix of the key risks that affect the Company's business, and this is reviewed regularly by the Board in conjunction with the Manager. The main risks are:

 

(i)      Performance risk:  The performance of the portfolio relative to the Benchmark (FTSE All-Share Index) is monitored closely by the Board.

(ii)      Discount volatility:  The Company's shares can trade at a discount to its underlying net asset value. The Company operates a share buyback programme, which is reviewed on an ongoing basis.

(iii)     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 (formerly 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.

 

Risks relating to financial instruments are detailed in Note 18 to the Financial Statements.

 

Results and Dividends

A final dividend for the year ended 31 December 2010 of 5.65p per share was paid to shareholders on 4 May 2011. An interim dividend for the year ended 31 December 2011 of 2.50p per share (2010: 2.25p per share) was paid on 26 August 2011.

 

The Directors now recommend that a final dividend of 6.40p (2010 - 5.65p) is paid on 2 May 2012 to shareholders on the register on 13 April 2012. The ex-dividend date is 11 April 2012. A resolution in respect of the final dividend will be proposed at the forthcoming Annual General Meeting.

 

4. 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 comply 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.

 

Kevin Ingram

Chairman of the Audit Committee

8 March 2012

 


INCOME STATEMENT (AUDITED)

 

 



Year ended
31 December 2011

Year ended
31 December 2010



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

(Losses)/gains on investments

8

-

(19,713)

(19,713)

-

28,595

28,595

Income

2

10,099

98

10,197

8,861

-

8,861

Investment management fee

3

(428)

-

(428)

(424)

-

(424)

VAT recovered on investment management fees

3

-

-

-

310

-

310

Administrative expenses

4

(396)

-

(396)

(427)

-

(427)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities before taxation


9,275

(19,615)

(10,340)

8,320

28,595

36,915

Taxation

5

(71)

-

(71)

(97)

-

(97)



_______

_______

_______

_______

_______

_______

Net return on ordinary activities after taxation


9,204

(19,615)

(10,411)

8,223

28,595

36,818



_______

_______

_______

_______

_______

_______









Return per Ordinary share (pence)

7

8.88

(18.93)

(10.05)

7.84

27.25

35.09



_______

_______

_______

_______

_______

_______






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.

The accompanying notes are an integral part of the financial statements.



BALANCE SHEET (AUDITED)

 

 



As at

As at



31 December 2011

31 December 2010


Notes

£'000

£'000

Fixed assets




Investments at fair value through profit or loss

8

266,028

289,251



__________

__________

Current assets




Debtors and prepayments

10

1,451

1,187

Cash and short term deposits


6,663

6,261



__________

__________



8,114

7,448

Creditors: amounts falling due within one year

11

(273)

(273)



__________

__________

Net current assets


7,841

7,175



__________

__________

Net assets


273,869

296,426



__________

__________





Capital and reserves




Called-up share capital

12

10,306

10,426

Capital redemption reserve


1,398

1,278

Special reserve


219,664

223,356

Capital reserve

13

34,959

54,574

Revenue reserve


7,542

6,792



__________

__________

Equity shareholders' funds


273,869

296,426



__________

__________





Net asset value per share (pence)

15

266.35

284.31



__________

__________

Net asset value per share (excluding revenue reserve) (pence)


259.02

277.80



__________

__________



RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (AUDITED)

 

 

For the year ended 31 December 2011









Capital






Share

redemption

Special

Capital

Revenue



capital

reserve

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 December 2010

10,426

1,278

223,356

54,574

6,792

296,426

Return on ordinary activities after taxation

-

-

-

(19,615)

9,204

(10,411)

Dividends paid (see note 6)

-

-

-

-

(8,454)

(8,454)

Purchase of own shares for cancellation

(120)

120

(3,125)

-

-

(3,125)

Purchase of own shares to be held in treasury

-

-

(567)

-

-

(567)


______

______

________

_______

_______

________

Balance at 31 December 2011

10,306

1,398

219,664

34,959

7,542

273,869


______

______

________

_______

_______

________








For the year ended 31 December 2010









Capital






Share

redemption

Special

Capital

Revenue



capital

reserve

reserve

reserve

reserve

Total


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 31 December 2009

10,650

1,054

228,775

25,979

6,540

272,998

Return on ordinary activities after taxation

-

-

-

28,595

8,223

36,818

Dividends paid (see note 6)

-

-

-

-

(7,971)

(7,971)

Purchase of own shares for cancellation

(224)

224

(5,419)

-

-

(5,419)


______

______

________

_______

_______

________

Balance at 31 December 2010

10,426

1,278

223,356

54,574

6,792

296,426


______

______

________

_______

_______

________








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 December 2011

31 December 2010


Notes

£'000

£'000

£'000

£'000

Net cash inflow from operating activities

16


9,033


8,281







Taxation






Net overseas tax paid



(71)


(97)







Financial investment






Purchases of investments


(6,043)


(5,649)


Sales of investments


9,629


11,934




_______


_______


Net cash inflow from financial investment



3,586


6,285







Equity dividends paid

6


(8,454)


(7,971)




_______


_______

Net cash inflow before financing



4,094


6,498







Financing






Buy back of Ordinary shares



(3,692)


(5,419)




_______


_______

Increase in cash



402


1,079




_______


_______

Reconciliation of net cash flow to movement in net funds






Increase in cash as above



402


1,079




_______


_______

Movement in net funds in the year



402


1,079







Net funds at 1 January



6,261


5,182




_______


_______

Net funds at 31 December

17


6,663


6,261




_______


_______



NOTES:

 

 

For the year ended 31 December 2011


1.

Accounting policies


(a)

Basis of preparation and going concern - The financial statements have been prepared under the historical cost convention as modified to include the revaluation of investments and in accordance with applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies 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)

The results of the Company's subsidiaries are not consolidated as they are not material to the Company.





(c)

Revenue, 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.  Interest receivable, expenses and interest payable are treated on an accruals basis. All expenses are charged to revenue except where they relate directly 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.





(d)

Investments - Investments have been designated upon initial recognition at fair value through profit or loss. Investments are recognised and de-recognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time frame established by the market concerned, and are initially measured at fair value. Subsequent to initial recognition, investments are valued at fair value. For listed investments, this is deemed to be bid market prices or closing prices for SETS stocks sourced from The London Stock Exchange. SETS is the London Stock Exchange's electronic trading service for UK securities including all the FTSE All-Share Index constituents.





(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 are transferred to the capital reserve.





(g)

Deferred taxation - Deferred taxation is recognised in respect of all temporary 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 temporary differences can be deducted. Temporary 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, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future, the Company has not provided deferred tax on any capital gains and losses arising on the revaluation or disposal of investments. 





(h)

Foreign currency - The Company receives a small proportion of its investment income in foreign currency. These amounts are translated at the rate ruling on the date of receipt. Assets and liabilities in foreign currencies are translated at the rates of exchange ruling on the Balance Sheet date.

 



2011

2010

2.

Income

£'000

£'000


Income from investments




UK listed - franked

8,929

7,611


UK listed - unfranked and overseas income

1,071

963


Stock dividends

48

46



__________

__________



10,048

8,620



__________

__________


Other income




Interest recoverable on VAT (see note 3)

1

181


Underwriting commission

-

16


Deposit interest

50

44



__________

__________



51

241



__________

__________


Total income

10,099

8,861



__________

__________






During the year, the Liquidator of Tribune UK Tracker PLC, which is a 100% subsidiary of the Company and is in members' voluntary liquidation, advised that a sum of £33,000 would be payable as a distribution to the Company.  An un-utilised accrual of expenses on the original acquisition of £65,000 and the amount to be received in liquidation proceeds have been treated as capital income in the Income Statement. 

 



2011

2010

3.

Investment management fee

£'000

£'000


Investment management fee

428

424



__________

__________








The management agreement between the Company and Aberdeen is terminable by either party on three months' notice. In the event of termination on less than the agreed notice period, compensation is payable in lieu of the unexpired notice period.




On 5 November 2007, the European Court of Justice ruled that investment management fees for investment companies should be exempt from VAT. HMRC announced its intention not to appeal against this case to the UK VAT Tribunal and therefore protective claims which have been made in relation to the Company have now been processed by HMRC.




The VAT charged on the investment management fees has been refunded in stages. An amount of £193,000 relating to the period 1 January 2004 to 30 September 2007 was recognised in the financial statements for the year ended 31 December 2008. Further amounts of £169,000 and £141,000 were recognised in the financial statements for the year ended 31 December 2010 which represented the VAT charged on investment management fees for the periods 1 January 1990 to 3 December 1996 and 1 January 2001 to 31 December 2003 respectively. These repayments were allocated to revenue in line with the accounting policy of the Company for the periods in which the VAT was charged.




An interest debtor relating to these reclaims of £181,000 was recognised in the financial statements for the year ended 31 December 2010 and £182,000 was received in the year ended 31 December 2011.

 



2011

2010

4.

Administrative expenses

£'000

£'000


Directors' fees

66

59


Auditors' remuneration (excluding irrecoverable VAT):




- Fees payable to the Company's auditor for the audit of the Company's annual accounts

16

18


Custody fees and bank charges

12

17


Registrar's fees

90

102


Marketing

106

101


Subscriptions, Stock Exchange and licence fees

49

59


Printing and stationery

27

30


Other expenses

30

41



__________

__________



396

427



__________

__________






With the exception of auditors' remuneration, irrecoverable VAT has been included under the relevant expense line above. Irrecoverable VAT on auditors' remuneration is included within other expenses.




During the year £106,000 (2010 - £101,000) was paid to the Manager in respect of marketing of the Company through its Investment Trust Initiative.

 



2011

2010



Revenue

Capital

Total

Revenue

Capital

Total

5.

Taxation

£'000

£'000

£'000

£'000

£'000

£'000


(a)

Analysis of charge for the year



UK corporation tax

-

-

-

-

-

-



Irrecoverable overseas taxation

71

-

71

97

-

97




_______

______

_____

_______

______

_____



Current taxation

71

-

71

97

-

97




_______

______

_____

_______

______

_____











(b)

Factors affecting the tax charge for the year



The tax assessed for the year is lower than the effective rate of corporation tax of 26.5% (2010 - 28%). The differences are explained below:







2011

2010




Revenue

Capital

Total

Revenue

Capital

Total




£'000

£'000

£'000

£'000

£'000

£'000



Net return on ordinary activities before taxation

9,275

(19,615)

(10,340)

8,320

28,595

36,915




________

______

_____

_______

______

_____



Taxation on ordinary activities at an effective rate of 26.5% (2010 - 28%)

2,458

(5,198)

(2,740)

2,330

8,006

10,336



Effects of:









Losses/(gains) on investments not taxable

-

5,198

5,198

-

(8,006)

(8,006)



UK dividend income not taxable

(2,366)

-

(2,366)

(2,131)

-

(2,131)



Non-taxable overseas income

(251)

-

(251)

(247)

-

(247)



Non-taxable income

(13)

-

(13)

(13)

-

(13)



Excess management expenses

172

-

172

61

-

61



Irrecoverable overseas withholding tax

71

-

71

97

-

97




________

______

_____

_______

______

_____



Current revenue tax charge for the year

71

-

71

97

-

97




________

______

_____

_______

______

_____











(c)

Factors that may affect affecting future tax charges



At the year end, the Company has, for taxation purposes only, accumulated, unrelieved management expenses of £3,724,000 (2010 - £3,086,000). These have been generated because such a large part of the Company's income is derived from dividends from UK companies. Such dividend income does not fall to be taxed within the corporation tax regime and the Company therefore has very little income against which to deduct its expenses. This is not recognised as a deferred tax asset because the Company is not expected to generate taxable income in a future period in excess of deductible expenses for that period and, accordingly, is unlikely to be able to reduce future tax liabilities by offsetting these losses.

 



2011

2010

6.

Dividends

£'000

£'000


Amounts recognised as distributions to equity holders in the period:




Final dividend for 2010 - 5.65p (2009 - 5.35p)

5,870

5,627


Interim dividend for 2011 - 2.50p (2010 - 2.25p)

2,586

2,348


Unclaimed dividends written back

(2)

(4)



________

________



8,454

7,971



________

________






The proposed final dividend, of 6.40p per share for the current year, is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements.




Set out below are 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 £9,204,000 (2010 - £8,223,000).





2011

2010



£'000

£'000


Interim dividend for 2011 - 2.50p (2010 - 2.25p)

2,586

2,348


Proposed final dividend for 2011 - 6.40p (2010 - 5.65p)

6,581

5,884


Unclaimed dividends written back

(2)

(4)



________

________



9,165

8,228



________

________





 

7.

Return per Ordinary share






The return per Ordinary share is based on the following figures:







2011

2011

2010

2010



p

£'000

p

£'000


Revenue return

8.88

9,204

7.84

8,223


Capital return

(18.93)

(19,615)

27.25

28,595



________

________

_______

________


Total return

(10.05)

(10,411)

35.09

36,818



________

________

_______

________








Weighted average number of Ordinary shares in issue (excluding treasury shares)

103,628,286


104,910,610



___________


___________

 



2011

2010

8.

Investments

£'000

£'000


Fair value through profit or loss:




Opening fair value

289,251

267,062


Opening investment holding gains

(45,374)

(17,821)



________

________


Opening book cost

243,877

249,241


Purchases at cost

6,117

5,530


Sales - proceeds

(9,627)

(11,936)


          - realised gains on sales

1,385

1,042



________

________


Closing book cost

241,752

243,877


Closing investment holding gains

24,276

45,374



________

________


Closing fair value

266,028

289,251



________

________






All investments are listed on the London Stock Exchange.








2011

2010


(Losses)/gains on investments

£'000

£'000


Realised gains on sales

1,385

1,042


Movement in investment holding gains

(21,098)

27,553



________

________



(19,713)

28,595



________

________




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 (losses)/gains on investments in the Income Statement. The total costs were as follows:







2011

2010



£'000

£'000


Purchases

24

25


Sales

1

3



________

________



25

28



________

________

 

9.

Subsidiaries


The results of the following subsidiary companies, which both operate in the United Kingdom, have not been consolidated as the Directors consider that they are not material to the Company.







Name

Shares held

Country of
incorporation

Principal
activity


Edinburgh Tribune Acquisitions Limited ("ETA")

Ordinary

Scotland

Asset holding







Tribune UK Tracker PLC ("Tribune")

Ordinary Deferred

England

Investment company







The Company owns 100% of ETA and ETA owns 100% of Tribune. Tribune was placed in members' voluntary liquidation on 29 February 2008 and ETA was placed in members' voluntary liquidation on 25 July 2008.

 



2011

2010

10.

Debtors: amounts falling due within one year

£'000

£'000


Dividends and interest receivable

1,214

1,034


Amount due from brokers

-

2


Tribune liquidation proceeds outstanding

33

-


Other debtors and prepayments

204

151



________

________



1,451

1,187



________

________

 



2011

2010

11.

Creditors: amounts falling due within one year

£'000

£'000


Investment management fee payable

105

111


Amount due to brokers

74

-


Other creditors

94

162



________

________



273

273



________

________

 

12.

Called-up share capital






Ordinary
shares
number

Treasury
shares
number

Total Ordinary
shares in issue
number


At 1 January 2011

104,260,252

-

104,260,252


Ordinary shares bought back for cancellation

(1,204,137)

-

(1,204,137)


Ordinary shares bought back to be held in treasury

(235,000)

235,000

-



___________

___________

___________


At 31 December 2011

102,821,115

235,000

103,056,115



___________

___________

___________









2011

2010




£'000

£'000


Allotted, called-up and fully paid





Ordinary shares of 10p each


10,282

10,426


Treasury Shares


24

-




_________

_________




10,306

10,426




_________

_________







During the year 1,439,137 (2010 - 2,239,060) Ordinary shares of 10p each (representing 1.4% of the issued Ordinary share capital at 31 December 2011) were bought back at a total cost of £3,692,000 (2010 - £5,419,000) including expenses. 235,000 of these shares were placed in treasury. Shares held in treasury represent 0.23% of the Company's total issued share capital at 31 December 2011.

 



2011

2010

13.

Capital reserve

£'000

£'000


At 1 January

54,574

25,979


Movement in investment holding fair value gains

(21,098)

27,553


Gains on realisation of investments at fair value

1,385

1,042


Movement in Tribune fair value (see note 2)

98

-



_________

_________


At 31 December

34,959

54,574



_________

_________






The capital reserve includes investment holding gains amounting to £24,276,000 (2010 - £45,374,000) as disclosed in note 8.




The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'.

 

14.

Commitments and contingencies


There were no uncalled or outstanding contingent liabilities at either year end.

 

15.

Net asset value per share

2011

2010


The net assets attributable to the Ordinary shares were as follows:




Net assets attributable

£273,869,000

£296,426,000


Number of Ordinary shares in issue (excluding shares in issue held in treasury)

102,821,115

104,260,252


Net asset value per share

266.35p

284.31p

 

16.

Reconciliation of net return before taxation to net

2011

2010


cash inflow from operating activities

£'000

£'000


Net return on ordinary activities before taxation

(10,340)

36,915


Adjustments for:




Losses/(gains) on investments

19,713

(28,595)


Increase in accrued income

(180)

(216)


(Increase)/decrease in other debtors

(86)

166


(Decrease)/increase in other creditors

(74)

11



_________

_________


Net cash inflow from operating activities

9,033

8,281



_________

_________

 



At


At



1 January


31 December



2011

Cash flow

2011

17.

Analysis of changes in net funds

£'000

£'000

£'000


Cash and short term deposits

6,261

402

6,663



_________

_________

_________


Net funds

6,261

402

6,663



_________

_________

_________

 

18.

Financial instruments


The Company's financial instruments comprise UK listed equities, 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. The Company may enter into derivative transactions for the purpose of managing market risks arising from the Company's activities though there was no exposure to derivative instruments, including contracts for difference, during the year.




The Manager's Investment Risk department reviews the investment risk parameters of the Company's portfolio on a regular basis. The department reports to the Manager's Performance Review Committee which is chaired by the Manager's Chief Investment Officer. The department's responsibility is to review and monitor ex-ante (predicted) portfolio risk. Additionally, the Manager's Compliance department continually monitors the trust's investment powers and reports to the Manager's Risk Management Committee.




The main risks the Company faces from its financial instruments are (i) market risk (comprising price risk and interest rate risk), (ii) liquidity risk and (iii) 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 fair value and future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises two elements - price risk and interest rate risk. 






Price risk



Price risks (i.e. changes in market prices other than those arising from interest rate risk) will affect the value of the quoted investments. The Company's stated objective is to track the FTSE All-Share Index and this is achieved by holding all of the stocks in the FTSE 350 Index and holding most of the stocks in the FTSE Small Cap Index. The Company's portfolio therefore contains a wide spread of investments but is exposed to movements in the underlying Index.






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 London Stock Exchange.






Price risk sensitivity



If market prices at the Balance Sheet date had been 10% higher or lower while all other variables remained constant, the return attributable to Ordinary shareholders for the year ended 31 December 2011 would have increased /decreased by £26,603,000 (2010 - £28,925,000). This is based on the Company's equity portfolio at each year end and is not representative of the year as a whole.






Interest rate risk



Interest rate movements will affect the level of income receivable on cash deposits.






Interest risk profile



The interest rate risk profile of the portfolio of financial assets and liabilities at the Balance Sheet date was as follows:




Weighted





average

Floating




interest rate

rate



At 31 December 2011

%

£'000



Assets





Cash deposits

 0.79

6,663




_________

_________



Total assets

0.79

 6,663




_________

_________









Weighted





average

Floating




interest rate

rate



At 31 December 2010

%

£'000



Assets





Cash deposits

  0.75

 6,261




_________

_________



Total assets

 0.75

 6,261




_________

_________








The weighted average interest rate is based on the current yield of each asset, weighted by its market value.



The floating rate assets consist of cash deposits on call earning interest at prevailing market rates.



The Company had no liabilities with exposure to changes in interest rates (2010 - £nil).



The Company's equity portfolio and short-term debtors and creditors have been excluded from the above tables.






Interest rate sensitivity



The sensitivity analyses below have been determined based on the exposure to interest rates at the Balance Sheet date and with the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates.






If interest rates had been 100 basis points higher or lower and all other variables were held constant, the Company's:






-       profit for the year ended 31 December 2011 would increase/decrease by £67,000 (2010 - increase/decrease by £63,000). This is mainly attributable to the Company's exposure to interest rate on its floating rate cash balances.



-       the Company holds no financial instruments that will have an equity reserve impact.






The above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently.





(ii)

Liquidity risk



Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary, and short term cash deposits. The Company also has access to bank overdraft facilities. The Company's liabilities are short-term in nature and due for payment within one year.





(iii)

Credit risk



This is failure of the counter party to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss.






The risk is managed as follows:






-       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;



-       the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review by the Manager of failed trade reports on a daily basis. In addition, both stock and cash reconciliations to the custodian's 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. This review will also include checks on the maintenance and security of investments held;



-       cash is held only with reputable banks with high quality external credit ratings.






None of the Company's financial assets is 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 December was as follows:







2011

2010




Exposure to

Exposure to




credit risk

credit risk




£'000

£'000



Non-current assets





Securities at fair value through profit or loss

266,028

289,251



Current assets





Trades and other receivables

237

153



Accrued income

1,214

1,034



Cash and cash equivalents

6,663

6,261




_________

_________




274,142

296,699




_________

_________








None of the Company's financial assets is past due or impaired.






Fair values of financial assets and financial liabilities



The book value of cash at bank and all other short-term debtors and creditors included in these financial statements approximate to fair value because of their short-term maturity.

 

19.

Fair value hierarchy


The Company adopted the amendments to FRS 29 'Financial Instruments: Disclosures' effective from 1 January 2009. These amendments require 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 shall have 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 statement of financial position are grouped into the fair value hierarchy at the Balance Sheet date as follows:









At 31 December 2011


Level 1

Level 2

Level 3

Total



Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

266,028

-

-

266,028


Net fair value


 266,028

-

-

266,028






At 31 December 2010


Level 1

Level 2

Level 3

Total



 Note

£'000

£'000

£'000

£'000


Financial assets at fair value through profit or loss







Quoted equities

a)

 289,251

-

-

289,251


Net fair value


 289,251

-

-

289,251




a) Quoted equities


The fair value of the Company's investments in quoted equities have 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.

 

20.

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.

 

21.                   The Annual Financial Report is not the Company's statutory accounts. The above results for the year ended 31 December 2011 have been agreed with the auditors and are an abridged version of the Company's statutory accounts, which have been approved and audited with an unqualified report, which did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The financial information for 2010 is derived from the statutory accounts for 2010 which have been delivered to the Registrar of Companies, and included a report of the auditors which was unqualified   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 section 498(2) or (3) of the Companies Act 2006. The 2011 accounts will be filed with the Registrar of Companies in due course.

 

22.       The Company's Annual General Meeting will be held at Bow Bells House, 1 Bread Street, London, EC4M 9HH on Wednesday 25 April 2012 at 11.00 a.m.

 

23.       The Annual Report and Accounts will be posted to shareholders by the end of March 2012, and additional copies will be available from the Manager (Investor Helpline - Tel. 0500 00 40 00) or by download for the Company's webpage (www.edinburghuktracker.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.  Investors may not get back the amount they originally invested.

 

 

For Edinburgh UK Tracker Trust plc

Aberdeen Asset Management PLC, Secretary

8 March 2012

 

 

Neither the Company's website nor the content of any website accessible from hyperlinks on that website (or any other website) is (or is deemed to be) incorporated into, or forms (or is deemed to form) part of this announcement.

 

 

END

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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