Proposed change to investment policy
21 March 2012
EDINBURGH US TRACKER TRUST PLC (THE COMPANY)
Proposed change to the Company's investment policy
The Company proposes to seek shareholder approval to amend the Company's investment policy to provide investors with above average dividend income and long term capital growth through active management of a portfolio consisting predominantly of S&P 500 US equities and to make certain other associated changes. A document setting out the Proposals in full will be sent to shareholders shortly.
BACKGROUND
The Company currently provides index tracking performance for the large-cap US market through full replication of S&P 500 Index constituents. However, the Company has bought back a substantial number of its shares in recent years. The Board has consulted a number of the Company's larger shareholders and believes that by changing the Company's investment policy from passive to active management, with a bias toward income, the Company could both attract new investors and benefit existing shareholders by having an investment mandate with relevance to investors in the wider market for collective funds whilst maintaining exposure to US equities.
PROPOSALS
The Board, in conjunction with Aberdeen Asset Managers Limited ("Aberdeen" or the "Manager"), is proposing the following changes (together referred to as the "Proposals") with the aim of making the Company a more attractive and competitive investment proposition in the future:
· The investment objective and investment policy will be changed to provide investors with above average dividend income and long term capital growth through active management of a portfolio consisting predominantly of S&P 500 US equities.
· A maximum of 20 per cent of total assets can be invested in fixed income stocks and the Company will also be able to invest in Canadian stocks and US mid and small cap stocks to provide for diversified sources of income.
· The Company will retain the S&P 500 Index as its benchmark index.
· The Company will aim to provide an initial annual net dividend yield of 3.5 per cent, payable in quarterly dividends, other than in the first twelve months where dividends will continue to be paid semi-annually.
· The Company will be able to gear up to a maximum of 20 per cent of net assets. This is likely to be achieved by using bank or other short term borrowings rather than through structural or long term gearing.
· The initial portfolio is expected to comprise at least 50 holdings and no more than 10 per cent shall be invested in any one investment.
· The Company's name will be changed as part of the proposals.
· Aberdeen will continue to manage the Company and the responsibility for managing the portfolio will be with Paul Atkinson, head of North American Equities at Aberdeen, and his Philadelphia-based team, which is responsible for the management of £2.1 billion of equities and £5.2 billion of fixed income in North America¹.
· The management fee will be 0.8 per cent of gross assets reflecting the change from passive to active management. Management fees and borrowing costs, if any, will be charged 70 per cent to capital and 30 per cent to revenue.
· The total expense ratio is not expected to exceed 1.1 per cent of net assets and the costs of the changes are not expected to exceed 0.3 per cent of net assets.
· The Company will have a continuation vote in 2012 and every three years thereafter.
The Board is also seeking approval for the Company to be able to issue new shares to satisfy secondary market demand where it does not dilute shareholders' interests to do so.
(¹Figures as at 31 December 2011)
SHAREHOLDER APPROVAL
The Proposals are designed as a package and if the resolutions are not approved none of the changes outlined above will be implemented and the Company will continue as an index tracking fund.
A shareholder circular will be despatched shortly to convene a meeting at which approval will be sought from shareholders for the Proposals. It is expected that the meeting will take place in May 2012. The proposed changes will only be introduced after this date and in the meantime the Company will continue to be managed under its existing arrangements and will apply its existing buyback and non pre-emptive allotment powers, if required.
Enquiries
William Hemmings/Gary Jones
Aberdeen Asset Management
020 7463 6000
James Moseley/Robin Archibald
Winterflood Investment Trusts
020 3100 0250
This information is provided by RNS
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