Final Results - Replace

Edinburgh US Tracker Trust plc 28 March 2008 AMENDMENT This announcement replaces the earlier announcement released today (28 March 2008) at 14:56hrs (RNS No: 0608R) Please note that the website address for Edinburgh US Tracker Trust plc, referred to in the Chairman's Statement, was noted as www.edinburghustracker.com. The correct website address is www.edinburghustracker.co.uk. Please see below the correct announcement. 28 March 2008 EDINBURGH US TRACKER TRUST PLC ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JANUARY 2008 Edinburgh US Tracker Trust aims to achieve long term growth of capital and income by tracking the performance of the S&P Composite 500 Index. SUMMARY • NAV fell by 5.2% compared to a fall of 5.6% in the S&P Composite 500 Index • Total dividends for year up 65.5% to 11.42p (2007 -6.9p) • Total expense ratio of 0.33% (2007 - 0.29%) For further information, please contact: David McCraw Aberdeen Asset Managers Limited 0131 528 4000 Ian Massie Aberdeen Asset Managers Limited 0131 528 4000 EDINBURGH US TRACKER TRUST PLC MANAGEMENT REPORT 1. CHAIRMAN'S STATEMENT The Company continues to meet the objective of tracking the performance of the S &P 500 Composite Index. In the 12 months to 31 January 2008, the net asset value per share (NAV) fell by 5.2% to 583.18p, compared to a decline of 5.6% in the Index (in sterling terms). Since the investment objective of the Company was revised in June 1997, the capital performance has matched that of the Index to within 0.25% per annum. The annualised returns of the Company's net asset values per share for the period 31 July 1997 to 31 January 2008 were 1.88% per annum compared to an annualised return of 1.67% per annum for the Index. US equity markets struggled to make progress last year. Corporate profits were ahead of expectations but this positive news was more than offset by concerns over the impact of defaults on sub-prime mortgages on financial institutions and economic activity. The US Federal Reserve cut interest rates on several occasions in the second half of the year in an effort to stabilise financial markets and re-invigorate the US economy. Within this six month period, the Fed Funds rate was cut from 5.25% to 3.0%. In January 2008, the Company completed a tender offer for the purchase of up to 50 per cent of its issued share capital. The tender offer was available to all shareholders and was put forward following discussions with MLP Investments, the Company's then largest shareholder. The repurchase value received by shareholders who participated in the tender offer was close to the net asset value and included the accrued income for the period. The costs and expenses of the tender offer were borne in full by tendering shareholders which ensured that remaining shareholders were not disadvantaged. A total of 29,206,363 shares were purchased for cancellation by the Company under the tender offer, representing 43.5% of the issued share capital, at a repurchase value of 559.1732p per share. MLP Investments sold all its shares through the tender offer. In the financial period prior to the tender offer, the Company bought back 5,373,500 of its own shares for cancellation, enhancing the NAV for continuing shareholders by 1.73p. The Company operates a share buy-back programme with the aim of establishing a long term level of discount of no greater then 3%. Dividend The revenue return per share over the year rose by 7.5% to 7.44p benefiting from dividend increases from underlying investments which more than offset adverse movements in the US dollar/sterling exchange rate. Your Board is recommending a final dividend of 8.97p which will take total dividends for the year to 11.42p, an increase of 65.5% from last year. The final dividend payment has been affected by the tender offer. Shareholders participating in the tender offer received their pro rata share of the Company's accrued income up to the date of the tender offer through the repurchase value and it has therefore been treated as a distribution of capital. For continuing shareholders, the full revenue return for the year, after payment of the interim dividend, is therefore available for distribution by way of a final dividend over the reduced number of shares in issue at the year end. This explains the significant increase in the final dividend per share over last year's payment. For the year ahead the dividends per share paid to shareholders should not be affected by these technical matters and will more closely reflect revenue return per share. Marketing Your Board continues to promote the Company through the 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.co.uk. Corporate Governance The Board reviews annually the performance of the Manager, the Chairman 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. On 28 March 2008, the investment management agreement was transferred under a novation agreement from Edinburgh Fund Managers plc, a wholly owned subsidiary of Aberdeen Asset Management PLC, to Aberdeen Asset Managers Ltd, also a wholly owned subsidiary of Aberdeen Asset Management PLC. The terms of the investment management agreement, including the management fee and notice period, remain unchanged. 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 as Special Business at the Annual General Meeting to be held on Wednesday 21 May 2008. 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. There will be another opportunity to consider the future of the Company at the same time next year. I believe that our investment performance, aided by low management and administration costs, as evidenced by the total expense ratio of 0.33%, underlines the attractions of the index tracking approach to investors. Your Board therefore strongly recommends all shareholders to vote in favour of the resolution. The Directors are also seeking shareholder approval 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. Your Board also has the authority to purchase the Company's shares for cancellation were the shares to trade persistently at a level in excess of the Company's stated discount policy. Special resolutions proposing an extension of these facilities will be put to shareholders at the Annual General Meeting. James Ferguson Chairman 2. MANAGER'S REVIEW Edinburgh US Tracker Trust is the only UK investment trust to track the performance of the S&P 500 Composite Index and provides shareholders with a diversified portfolio which is invested in the leading 500 companies across the main industries within the US economy. The method employed by the Company to track the index involves 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, the American 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 Composite 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: • Incorporated in the US • Financial reporting is in US GAAP, in US dollars and the company should not be considered a foreign entity by the SEC • A corporate governance structure consistent with US practice • Headquartered in the US • The US portion of revenues, operations, fixed assets and employees should be a significant portion of the total, but need not exceed 50% • The common stock should be listed on NYSE, Amex or NASDAQ • The company should generally be considered a US company by analysts and investors The level of activity within the portfolio reflected changes to the constituents of the index and the sale of investments to finance the purchase of the Company's own shares. The Company bought and sold shares during the year to reflect any changes initiated by the Committee. Most of the changes to the index in the past year were the result of takeover activity with 28 of the constituents being acquired and another 10 constituents being removed on the grounds of low market capitalisation. Some of the better known names to leave the S&P 500 Index as a result of takeover activity included Phelps Dodge, Mellon Financial, NCR, TXU, Bausch & Lomb, Dow Jones and Tribune. The new entrants to the index included Polo Ralph Lauren, Kraft Foods, Precision Castparts, Discover Financial Services, Expedia, NYSE Euronext, The Washington Post and Cameron International. 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 5,375,000 shares were purchased at a total cost of £32.3 million (excluding the shares repurchased under the Tender Offer). The total value of purchases in the year, excluding the Company's own shares and the tender offer, amounted to £11.9 million while sales totaled £208.1 million. Aberdeen Asset Managers Limited 3. PERFORMANCE TABLES 31 January 2008 31 January 2007 % change Total Assets £221,404,000 A £446,406,000 (50.4) Equity shareholders' funds £221,354,000 A £446,344,000 (50.4) Share price (mid market) 543.50p 586.50p (7.3) Net Asset Value per share (including undistributed revenue for 583.18p 615.34p (5.2) the period) S&P Composite Index (in sterling terms) 693.44 734.77 (5.6) Discount (difference between share price and net asset value B 5.3% 3.9% ) Total expense ratio 0.33% 0.29% Dividends and earnings Revenue return per share 7.44p 6.92p 7.5 Dividends per share (including proposed final dividend) 11.42p 6.90p 65.5 Dividend cover 0.65 1.00 Revenue reserves per share (prior to payment of proposed final 15.01p 7.53p dividend) Revenue reserves per share (after payment of proposed final 6.04p 3.08p dividend) A The tender offer was largely responsible for the reduction in total assets of the Company. B Based on Net Asset Value per share (excluding undistributed revenue for the period) 4. BUSINESS REVIEW The Board has prepared this Business Review in accordance with the requirements of Section 234ZZB of the Companies Act 1985. 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 is registered as a public limited company and is an investment company as defined by Section 266 of the Companies Act 1985. The Company has been approved by the Inland Revenue as an investment trust for the purposes of Section 842 of the Income and Corporation Taxes Act 1988 for the year ended 31 January 2007. The Directors are of the opinion, under advice, that the Company has conducted its affairs for the year ended 31 January 2008 so as to be able to continue to obtain approval as an investment trust under Section 842 of the Income and Corporation Taxes Act 1988 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 affairs of the Company were conducted in such a way as to comply with the qualifying equity rule as defined in the Personal Equity Plan Regulations. The Company has also 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 Composite Index, both in terms of capital and income. The Company's methodology in tracking the Index is full replication of the Index constituents. Performance An outline of the performance, market background, investment activity and portfolio strategy during the period under review, as well as the market outlook, is provided in the Chairman's Statement and Investment Manager's Review. 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$/£ exchange rate due to the nature of its business. A fall in the market value of its portfolio would have an adverse effect on shareholders' funds. The NAV performance relative to the Index and the underlying stock weightings in the portfolio against the Index weightings are monitored closely to eliminate any risk of a significant tracking error developing. • Discount volatility: The Company's share price can trade at a discount to its underlying net asset value. The Company operates a share buyback programme with the aim of establishing a long term level of discount of no greater than 3%. • Regulatory risk: The Company operates in a complex regulatory environment and faces a number of regulatory risks. Breaches of regulations, such as Section 842 of the Income and Corporation Taxes Act 1988, the UKLA Listing Rules and the Companies Act, could lead to a number of detrimental outcomes and reputational damage. The Audit Committee monitors compliance with regulations by reviewing internal control reports from the Manager. Further details on other risks relating to the Company's investment activities, including market price, liquidity and foreign currency risks, are provided in the notes to the accounts below. 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 Composite Index (in sterling terms) • Discount • Total expense ratio A record of these measures is disclosed in the above Performance section. DIRECTOR'S RESPONSIBILITY STATEMENT The Directors confirm to the best of their knowledge that: • the financial statements, prepared in accordance with applicable UK accounting standards, give a true and fair view of the assets, liabilities, financial position and return 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 INCOME STATEMENT (audited) for the year ended 31 January 2008 Year ended 31 January 2008 Year ended 31 January 2007 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Net (losses)/gains on investments - (26,601) (26,601) - 7,419 7,419 Net currency gains / (losses) - 114 114 - (680) (680) Income 8,575 - 8,575 8,857 - 8,857 Investment management fee (815) - (815) (902) - (902) Administrative expenses (536) - (536) (420) - (420) _______ _______ _______ _______ _______ _______ Net return before finance costs and taxation 7,224 (26,487) (19,263) 7,535 6,739 14,274 Finance costs (1) - (1) - - - _______ _______ _______ _______ _______ _______ Return on ordinary activities before taxation 7,223 (26,487) (19,264) 7,535 6,739 14,274 Taxation (2,160) (21) (2,181) (2,258) - (2,258) _______ _______ _______ _______ _______ _______ Return on ordinary activities after taxation 5,063 (26,508) (21,445) 5,277 6,739 12,016 _______ _______ _______ _______ _______ _______ Return per share (pence) 7.44 (38.95) (31.51) 6.92 8.84 15.76 _______ _______ _______ _______ _______ _______ The total column of this statement represents the profit and loss account of the Company. No Statement of Total Recognised Gains and Losses has been prepared as all gains and losses have been reflected in the Income Statement. All revenue and capital items in the above statement derive from continuing operations. Proposed final dividend The Board is proposing a final dividend of 8.97p per share (£3,405,000) making a total dividend of 11.42p (£5,055,000) for the year to 31 January 2008 which, if approved, will be payable on 23 May 2008 (see note 6). For the year ended 31 January 2007, the final dividend was 4.45p per share (£3,173,000) making a total dividend of 6.90p per share (£4,973,000). BALANCE SHEET (audited) as at 31 January As at 31 January 2008 As at 31 January 2007 £'000 £'000 £'000 £'000 Non-current assets Investments at fair value through profit or loss 219,664 442,446 Current assets Debtors and prepayments 378 500 Cash and short term deposits 3,243 4,654 ________ ________ 3,621 5,154 Creditors: amounts falling due within one year (1,881) (1,194) Net current assets ________ 1,740 ________ 3,960 ________ ________ Total assets less current liabilities 221,404 446,406 Provision for liabilities and charges (50) (62) ________ ________ Net assets 221,354 446,344 ________ ________ Capital and reserves Called up share capital 9,489 18,134 Share premium account 32,643 32,643 Capital redemption reserve 12,606 3,961 Capital reserve 160,917 386,147 Revenue reserve 5,699 5,459 ________ ________ Equity Shareholders' funds 221,354 446,344 ________ ________ Net asset value per share (pence) 583.18 615.34 ________ ________ RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (audited) For the year ended 31 January 2008 Share Capital Share premium redemption Capital Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2007 18,134 32,643 3,961 386,147 5,459 446,344 Return on ordinary activities after taxation - - - (26,508) 5,063 (21,445) Dividends paid - - - - (4,823) (4,823) Purchase of own shares for cancellation (1,343) - 1,343 (32,254) - (32,254) Tender offer of own shares (7,302) - 7,302 (166,468) (166,468) ________ ________ ________ ________ ________ ________ Balance at 31 January 2008 9,489 32,643 12,606 160,917 5,699 221,354 ________ ________ ________ ________ ________ ________ For the year ended 31 January 2007 Share Capital Share premium redemption Capital Revenue capital account reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 31 January 2006A 20,422 32,643 1,673 430,827 4,946 490,511 Return on ordinary activities after taxation - - - 6,739 5,277 12,016 Dividends paid - - - - (4,764) (4,764) Purchase of own shares for cancellation (2,288) - 2,288 (51,419) - (51,419) ________ ________ ________ ________ ________ ________ Balance at 31 January 2007 18,134 32,643 3,961 386,147 5,459 446,344 ________ ________ ________ ________ ________ ________ A Prior year comparatives have been classified to conform with the current year's presentation. The revenue reserve represents the amount of the Company's reserves distributable by way of dividend. CASHFLOW STATEMENT (audited) Year ended Year ended 31 January 2008 31 January 2007 £'000 £'000 £'000 £'000 Net cash inflow from operating activities 8,114 7,485 Servicing of finance Interest paid (1) - Taxation UK corporation tax paid (898) (987) Overseas tax paid (1,211) (1,257) ________ ________ Net tax paid (2,109) (2,244) Financial investment Purchases of investments (12,040) (13,678) Sales of investments 208,056 64,182 ________ ________ Net cash inflow from financial investment 196,016 50,504 Equity dividends paid (4,823) (4,764) ________ ________ Net cash inflow before financing 197,197 50,981 Financing Buy back of Ordinary shares (including expenses) (32,254) (51,084) Tender offer of own shares (including expenses) (166,468) - ________ ________ (198,722) (51,084) ________ ________ Decrease in cash (1,525) (103) ________ ________ Reconciliation of net cash flow to movement in net funds Decrease in cash as above (1,525) (103) Exchange movements 114 (680) ________ ________ Movement in net funds in the year (1,411) (783) Opening net funds 4,654 5,437 ________ ________ Closing net funds 3,243 4,654 ________ ________ NOTES : 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 applicable UK Accounting Standards and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (issued January 2003 and revised in December 2005). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis. During the year the Company adopted FRS 29 'Financial Instruments: Disclosures'. This standard primarily concern the disclosure of financial instruments and risks. These disclosures can be found primarily in note 17. (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. Short term deposits, expenses and interest payable are treated 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. 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 cost 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. 2008 2007 2. Income £'000 £'000 Income from investments held at fair value through profit or loss Dividends from overseas listed investments 8,165 8,511 Other income Deposit interest 410 346 _______ _______ Total income 8,575 8,857 2008 2007 3. Investment management fee £'000 £'000 Investment management fee 815 902 _______ _______ The fees disclosed above were paid to Edinburgh Fund Managers plc. On 28 March 2008, the investment management agreement was transferred under a novation agreement from Edinburgh Fund Managers plc, a wholly owned subsidiary of Aberdeen Asset Management PLC, to Aberdeen Asset Managers Limited, also a wholly owned subsidiary of Aberdeen Asset Management PLC. The terms of the investment management agreement, including the management fee and notice period, remain unchanged. The management fee payable to Aberdeen Asset Managers Limited is 0.05% per quarter of the total assets. The fee was subject to VAT at the appropriate rate for the six months to July 2007, although the Company was in a position to recover all VAT paid (2007 - fully recovered). The management agreement between the Company and Aberdeen Asset Managers Limited 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. 2008 2007 4. Administrative expenses £'000 £'000 Directors' fees 49 50 Registrar's fees 69 54 Custody and bank charges 57 57 Auditor's remuneration: - fees payable to the Company's auditor for the audit of the annual accounts 13 11 - fees payable to the Company's auditor and its associates for other services: - interim review - 3 Contribution to the Investment Trust Initiative 153 100 Printing, postage and stationery 27 23 Fees, subscriptions and publications 49 25 Standard & Poors' licence fee 44 43 Other expenses 75 54 _______ _______ 536 420 _______ _______ The contribution to the Investment Trust Initiative was paid to the Manager in respect of marketing and promotion of the Company. At the year end £13,000 (2007 - £13,000) was due to the Manager. During the year an additional amount of £21,000 was paid to KPMG for services relating to the tender offer. This figure is reflected within the tender offer of own shares in the Reconciliation of Movements in Shareholders' Funds. Included within other expenses is an amount of £13,763 being Special Projects Advisory fees payable to Noble Grossart Limited for the services of Sir Angus Grossart who served as a Director of the Company until 23 May 2007. 2008 2007 Revenue Capital Total Revenue Capital Total 5. Taxation £'000 £'000 £'000 £'000 £'000 £'000 (a) Analysis of the tax charge for the year Corporation tax before overseas tax relief 2,167 21 2,188 2,262 - 2,262 Overseas tax relief (1,208) (21) (1,229) (1,258) - (1,258) ________ ________ ________ ________ ________ ________ Corporation tax payable 959 - 959 1,004 - 1,004 Overseas tax 1,213 21 1,234 1,257 - 1,257 ________ ________ ________ ________ ________ ________ Current tax charge for the year 2,172 21 2,193 2,261 - 2,261 Movement in deferred tax (12) - (12) (1) - (1) Prior year adjustment - - - (2) - (2) ________ ________ ________ ________ ________ ________ Charge per Income Statement 2,160 21 2,181 2,258 - 2,258 ________ ________ ________ ________ ________ ________ 2008 2007 (b) Factors affecting the current revenue tax charge £'000 £'000 for the year Revenue return on ordinary activities 7,223 7,535 before taxation ________ ________ Return on ordinary activities multiplied by standard rate of corporation tax in 2,167 2,260 the UK of 30% (2007 - 30%) Effects of: Income taxable in different periods 5 1 ________ ________ Current tax charge for year 2,172 2,261 2008 2007 6. Dividends £'000 £'000 Amounts recognised as distributions to equity holders in the year: Final dividend for 2007 - 4.45p per share (2006 - 3.70p) 3,173 2,964 Interim dividend for 2008 - 2.45p per share (2007 - 2.45p) 1,650 1,800 ________ ________ 4,823 4,764 ________ ________ The proposed final dividend for 2008 is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. 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 Section 842 ('s.842') of the Income and Corporation Taxes Act 1988 are considered. The revenue available for distribution by way of dividend for the year is £5,063,000 (2007 - £5,277,000). 2008 2007 £'000 £'000 Interim dividend for 2008 - 2.45p per share (2007 - 2.45p) 1,650 1,800 Proposed final dividend for 2008 - 8.97p per share (2007 - 4.45p) 3,405 3,211 ________ ________ 5,055 5,011 ________ ________ The amount payable for the proposed final dividend above is based on the current shares in issue and this satisfies the s.842 test. 2008 2008 2007 2007 7. Return per Ordinary share £'000 p £'000 p The return per Ordinary share is based on the following figures: Revenue return 5,063 7.44 5,277 6.92 Capital return (26,508) (38.95) 6,739 8.84 _________ _________ _________ _________ Total return (21,445) (31.51) 12,016 15.76 _________ _________ _________ _________ Weighted average number of Ordinary shares in issue 68,064,361 76,226,950 2008 2007 8. Investments £'000 £'000 Fair value through profit or loss: Opening fair value 442,446 485,539 Opening unrealised appreciation (105,106) (109,071) ________ ________ Opening book cost 337,340 376,468 Purchases at cost 11,875 12,990 Sales - proceeds (208,056) (63,502) - realised gains on sales 37,127 11,384 ________ ________ Closing book cost 178,286 337,340 Closing unrealised appreciation 41,378 105,106 ________ ________ Closing fair value 219,664 442,446 ________ ________ Listed on overseas stock exchanges 219,664 442,446 ________ ________ 2008 2007 (Losses)/gains on investments £'000 £'000 Realised gains on sales 37,127 11,384 Decrease in unrealised appreciation (63,728) (3,965) ________ ________ (26,601) 7,419 ________ ________ 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: 2008 2007 £'000 £'000 Purchases 7 20 Sales 10 41 ________ ________ 17 61 ________ ________ The above transaction costs do not include the transactions costs associated with the tender offer which were included in the Repurchase NAV. 2008 2007 9. Debtors: amounts falling due within one year £'000 £'000 Dividends receivable 319 345 Other debtors and prepayments 59 155 ________ ________ 378 500 2008 2007 10. Creditors: amounts falling due within one year £'000 £'000 Taxation payable 532 516 Amounts due to brokers (including buy-backs) 170 335 Investment management fee payable 180 223 Payable on account of tender offer 905 - Other creditors 94 120 ________ ________ 1,881 1,194 ________ ________ Included within payable on account of tender offer is an amount of £21,000 payable to KPMG for accounting work on the tender offer (see note 12). 2008 2007 11. Provision for liabilities and charges £'000 £'000 Deferred taxation provision: Opening balance 62 63 Credited to revenue (12) (1) ________ ________ Closing balance 50 62 ________ ________ The provision relates to the deferred tax liability in connection with the dividends receivable. 2008 2007 12. Called-up share capital £'000 £'000 Authorised: 120,000,000 (2007 - 120,000,000) Ordinary shares of 25p each 30,000 30,000 ________ ________ Allotted, called-up and fully paid: Opening balance 18,134 20,422 Shares bought back for cancellation (1,343) (2,288) Tender offer of own shares (7,302) - ________ ________ 37,956,379 (2007 - 72,536,242) Ordinary shares of 25p each 9,489 18,134 ________ ________ During the year the Company bought back and cancelled 5,373,500 shares of 25p each (2007 - 9,152,922) for a total consideration of £32,254,000 (2007 - £51,419,000). This represents 7.4% of the Company's issued share capital at 31 January 2007. During the year the Company announced a tender offer for up to 50% of the Ordinary shares of the Company, which resulted in 43.49% being tendered (29,206,363 Ordinary shares). As a result, 43.49% of the assets of the Company (valued at £166,468,000) were allocated to a 'Tender Pool' which was subsequently liquidated and distributed to exiting Ordinary shareholders. The costs of the tender offer were wholly incurred by the Tender Pool. Capital Capital Total reserve - reserve - capital realised unrealised reserve 13. Capital reserve £'000 £'000 £'000 Year ended 31 January 2008 At 1 February 2007 281,041 105,106 386,147 Movement in unrealised fair value gains - (63,728) (63,728) Gains on realisation of investments at fair value 37,127 - 37,127 Foreign exchange movements 114 - 114 Taxation (21) - (21) Purchase of own shares for cancellation (32,254) - (32,254) Tender offer of own shares (166,468) - (166,468) _________ _________ _________ At 31 January 2008 119,539 41,378 160,917 _________ _________ _________ Year ended 31 January 2007 At 1 February 2006 321,756 109,071 430,827 Movement in unrealised fair value gains - (3,965) (3,965) Gains on realisation of investments at fair value 11,384 - 11,384 Foreign exchange movements (680) - (680) Purchase of own shares for cancellation (51,419) - (51,419) _________ _________ _________ At 31 January 2007 281,041 105,106 386,147 _________ _________ _________ The above split in capital reserve is shown in accordance with provisions of the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies'. The Directors regard the total capital reserve as being available to fund share buy-backs. 14. 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: 2008 2007 Net assets attributable £221,354,000 £446,344,000 Number of Ordinary shares in issue 37,956,379 72,536,242 Net asset value per share 583.18p 615.34p 15. Reconciliation of net return before finance costs and taxation to 2008 2007 net cash inflow from operating activities £'000 £'000 Return on ordinary activities before taxation (19,263) 14,274 Adjustments for: Net losses/(gains) on investments 26,601 (7,419) Foreign exchange movements (114) 680 Decrease in accrued income 28 5 Decrease/(increase) in other debtors 26 (38) Increase/(decrease) in other creditors 836 (17) _________ _________ Net cash inflow from operating activities 8,114 7,485 ________ ________ At At 1 February Cash Exchange 31 January 2007 flow movements 2008 16. Analysis of changes in net funds £'000 £'000 £'000 £'000 Cash and short term deposits 4,654 (1,525) 114 3,243 ________ ________ ________ ________ 17. Risk management, financial assets and liabilities The Company's financial instruments, other than derivatives, comprise securities and other investments, cash balances, loans and 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 entered into certain derivative contracts. In periods when the Company builds up cash, the Manager may enter into certain derivative contracts to gain exposure to the market. Positions closed during the year realised a loss of £605,000 (2007 - profit of £285,000) which reflected the movements in the Index. The largest position in derivative contracts held during the year was £5.8million (2007 - £8.5million). The Company had no open positions in derivative contracts at 31 January 2008 or 2007. 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 2008 (2007 - £nil). Risk management The main risk to the Company is the failure to track closely the S&P 500 Composite Index. The main risks associated with the Company's financial instruments are liquidity risk, market price risk (comprising interest risk, foreign currency risk and other price risk) and credit risk. The Company has established a framework for managing these risks which is evolving continually. The Directors have provided the Manager with guidelines for the management of investments and financial instruments. 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. 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. Market price risk The Company's exposure to market price 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 - interest rate risk, foreign currency risk and other price risk. 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 Sterling 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 2008 and 2007: Interest Local Foreign Sterling rate currency exchange equivalent As at 31 January 2008 % '000 rate £'000 US Dollar 3.00 2,099 1.9880 1,056 Sterling 5.50 2,187 - 2,187 _________ Total cash on deposit per Balance Sheet 3,243 _________ Interest Local Foreign Sterling rate currency exchange equivalent As at 31 January 2007 % '000 rate £'000 US Dollar 5.00 8,125 1.9574 4,151 Sterling 5.00 503 - 503 _________ Total cash on deposit per Balance Sheet 4,654 _________ 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 5.50% (2007 - 5.00%) for Sterling funds, and 3.00% (2007 - 5.00%) for US Dollar funds at 31 January 2008. Movements in interest rate 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 Composite Index. Foreign currency risk exposure by currency of denomination: 31 January 2008 31 January 2007 Net Total Net Total Overseas monetary currency Overseas monetary currency investments assets exposure investments assets exposure £'000 £'000 £'000 £'000 £'000 £'000 US Dollar 219,664 1,205 220,869 442,446 4,496 446,942 Sterling - 535 535 - (536) (536) _________ ________ ________ _________ ________ ________ Total 219,664 1,740 221,404 442,446 3,960 446,406 _________ ________ ________ _________ ________ ________ During the year to 31 January 2008 the Company announced a tender offer, which resulted in 43.49% of the assets of the Company being tendered and therefore the current year figures above do not reflect the full risk the Company faced during the whole of the year to 31 January 2008. 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. Other price risk Other 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 Composite Index through full replication. 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 to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are listed on the New York Stock Exchange, the American Stock Exchange and NASDAQ. 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 at the year ended 31 January 2008 would have increased/decreased by £21,966,000 (2007 - increase/decrease of £44,245,000) 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. 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 risk is not significant, and is managed as follows: - trust investments are safeguarded by RBC Dexia, a reputable and highly rated custodian; - investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the investment manager, and limits are set on the amount that may be due from any one broker; - cash is held only with reputable banks with high quality external credit enhancements; - the Company does not undertake stocklending. None of the Company's financial assets are secured by collateral or other credit enhancements. 2008 2007 £'000 £'000 Debtors and prepayments 378 500 Cash and short term deposits 3,243 4,654 _________ _________ 3,621 5,154 _________ _________ 18. The financial information set out above do not constitute statutory accounts for the year ended 31 January 2008 in accordance with Section 240 of the Companies Act 1985. The financial information for the year ended 31 January 2007 has been extracted from the Annual Report and Accounts of the Company which have been filed with the Registrar of Companies. The auditors' report on those accounts as originally filed was unqualified. The statutory accounts for 2008 are unqualified and will be delivered to the Registrar of Companies following the Company's Annual General Meeting which will be held at 40 Princes Street, Edinburgh EH2 2BY on 21 May 2008 at 11.00am 19. The Annual Report and Accounts will be posted to shareholders in April 2008 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. For Edinburgh US Tracker Trust plc Aberdeen Asset Management PLC, Secretary END This information is provided by RNS The company news service from the London Stock Exchange

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