RNS Number:9213C
Edinburgh UK Small Co Track Tst PLC
12 May 2006
EDINBURGH UK SMALLER COMPANIES TRACKER TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED ANNUAL RESULTS
FOR THE YEAR ENDED 31 MARCH 2006
Chairman's Statement
Performance of the Company
The twelve months ended 31 March 2006 witnessed further strong performance in
the UK equity market with continuing positive economic data and low inflation
coupled with further high levels of corporate activity, with particular interest
shown from overseas bidders.
Following the passing of a Resolution at the Company's EGM in October 2005, the
benchmark index of the Company was changed to the FTSE SmallCap Index (excluding
Investment Companies) from 1 November 2005. The Board believes this to be a more
widely accepted index, being a constituent block of the FTSE All-Share Index,
and that the change should help improve the marketability of the Company's
shares.
The composite performance of the previous FTSE All-Small Index (excluding
Investment Companies) to 31 October 2005 and the FTSE SmallCap Index (excluding
Investment Companies) thereafter showed a rise of 19.4% over the financial year.
The capital net asset value of an Ordinary share in the Company (the 'NAV')
increased from 240.55p (restated) to 289.67p, a rise of 20.4%. The Board is
pleased to note that your Company has continued to perform in line with its
stated investment objective. This is particularly noteworthy when one considers
that the cost of re-alignment of the portfolio to reflect the benchmark change
was 0.3% of continuing net assets and is also after taking account of the
trading costs associated with portfolio re-balancings in sometimes illiquid
markets.
The difference in returns between the Index and NAV partly reflected the benefit
to continuing Shareholders from the Company buying back shares at a discount to
NAV and also the continued dealing efficiency by the Manager. In the year ended
31 March 2006, the Company's share price rose by 21.6% to 274.25p and the
discount to net asset value further stabilised at 6.3% at year end compared with
7.3% (restated) a year ago.
The total expense ratio of the Company, being total expenses incurred during the
year under review shown as a percentage of the average month end net asset
value, has risen slightly to 0.79% from last year's 0.76%.
Dividends
Revenue return per Ordinary share for the year ended 31 March 2006 amounted to
3.93p (2005 - 3.95p). The Board previously declared an interim dividend of 1.75p
per share which was paid on 21 October 2005 and it recommends a final dividend
of 2.50p, payable on 11 July 2006 to Shareholders on the register on 9 June
2006. The total dividend of 4.25p compares with 4.00p paid in respect of the
previous year, an increase of 6.3%.
Tender Offer
In September 2005 I wrote to Shareholders giving details of a second proposed
annual tender offer which would give those Shareholders that so wished the
opportunity to realise up to 20%, or possibly more under a mix and match
facility, of their investment in the Company. The Board believes that such a
tender provides:
* an opportunity for all Shareholders to realise a proportion of their
investment in cash;
* an ability for continuing Shareholders to maintain their exposure to the
benchmark index; and
* a maximum discount to net asset value at which the share price should
trade.
In accordance with the terms of the tender offer, and as previously announced,
10,825,825 Ordinary shares were bought back at a price of 235.25329p per share,
an effective 3.9% discount to the final asset value, as calculated and reviewed
by the external auditor which reflected underlying portfolio share price spreads
and the costs involved. The assets which comprised the tender pool were quickly
and very efficiently realised by the Manager and the proceeds, less costs, were
paid to tendering Shareholders on 11 November 2005. By comparison, the discount
achieved for the 2004 20% tender offer was 5.6%. This shows that the 2005 tender
discount was particularly keen for this area of the market and might not be
repeatable.
Notwithstanding the commitment to an annual tender offer, the Board is aware
that some Shareholders would benefit from the ability to exit a larger
proportion of their holding in the Ordinary shares of the Company than might be
possible under the recent tender offer arrangements. It is therefore the Board's
intention, subject to the passing of the Company's annual continuation vote, to
put proposals to Shareholders later this year which would allow them to exit all
of their holding for cash by the end of 2006 if so desired. The exact method by
which such exit will be offered will be determined in due course.
Share Buybacks (excluding tender offers) and Treasury Shares
Since the Company's share buyback programme commenced in February 2000, a total
of 19,432,537 Ordinary shares have been bought back up to 31 March 2006,
representing 23.0% of the original share capital. This includes 2,640,000 shares
purchased during the financial year under review which have been placed in
treasury following the Shareholder approval which was granted at the last EGM in
October 2005. As previously indicated, it is the Directors' intention that such
treasury shares will only be re-issued at a level of discount which is less than
the discount at which they were originally bought back by the Company.
The shares purchased during the financial year ended 31 March 2006 were bought
in at an average discount of 8.4%. These buybacks enhanced the net asset value
by approximately 0.5%, helping in small part to offset the costs incurred in
portfolio re-balancing during the year. The Board believes it is appropriate to
continue its commitment to a sensible ongoing share buy back policy to attempt
to limit discount volatility and with the aim of maintaining a long-term level
of discount below 6%.
The Board will be proposing an Ordinary Resolution at the Annual General Meeting
again seeking authorisation to make purchases in the market for cancellation (or
otherwise hold in treasury) of up to 14.99% of the current number of issued
Ordinary shares.
Investment Management
The Directors have undertaken an annual review of the Manager and are of the
opinion that the continuing appointment of Aberdeen Asset Managers Limited is in
the interests of Shareholders as a whole. This opinion is supported by the
competitive nature of the management fee, the continued satisfactory deliverance
of the stated investment policy and the marketing efforts undertaken by the
Manager.
Stocklending
The Company continued its policy of lending stock during the year. The Board
considers that stock lending provides a useful supplement to the Company's
income account, but only undertakes lending on a fully collateralised basis.
Website
The Company's website can be accessed at: www.edinburgh-uksmalltracker.co.uk.
It gives current and historical information about the Company including a daily
net asset value. I recommend this site to Shareholders as a way of following the
performance of the Company and of obtaining comprehensive statistics and fund
information.
Board Composition
The Company is committed to high standards of corporate governance. To this end,
although not required by the Articles of Association, the full Board submits
itself for re-election on an annual basis. All Directors are considered by your
Board to be independent of both the Company and the Manager.
Annual General Meeting
The Annual General Meeting will be held at the Company's registered office at
One Bow Churchyard, London, EC4 on 6 July 2006 at 11.30am. At the meeting
Shareholders will be given the opportunity to vote on the continuation of the
Company. This opportunity is offered at each Annual General Meeting. Edinburgh
UK Smaller Companies Tracker Trust PLC is the only investment trust specialising
in 'broadly matching' the FTSE SmallCap Index (excluding Investment Companies),
an index representing all listed companies outside the FTSE 350 which are
constituents of the FTSE All-Share Index. The Company has the virtue of a simple
capital structure, offers investors a low cost exposure to the UK smaller
companies equity market, and, as importantly, continues to track successfully
its benchmark index. The Board recommends that Shareholders vote in favour of
the continuation Resolution.
Michael Cumming
Chairman
12 May 2006
UNAUDITED INCOME STATEMENT
Year ended 31 March 2006 Year ended 31 March 2005
(Restated)
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Gains on investments - 19,824 19,824 - 10,432 10,432
Income 3,029 - 3,029 3,556 - 3,556
Investment management fee (593) - (593) (638) - (638)
Administration expenses (499) - (499) (488) - (488)
Exchange gains - - - - 3 3
_______ _______ _______ _______ _______ _______
Net return on ordinary activities before
interest payable and taxation 1,937 19,824 21,761 2,430 10,435 12,865
Interest payable (1) - (1) - - -
_______ _______ _______ _______ _______ _______
Net return on ordinary activities before 1,936 19,824 21,760 2,430 10,435 12,865
and after taxation
_______ _______ _______ _______ _______ _______
Return per share (pence) 3.93 40.28 44.21 3.95 16.97 20.92
_______ _______ _______ _______ _______ _______
The total column of this statement represents the profit and loss account of the
Company.
The financial statements for the year to 31 March 2005 have been restated to
reflect changes to accounting practices as set out in note 1. The cumulative
effect of these changes has been to increase revenue reserves by #1,218,000 and
to decrease capital reserves by #224,000.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses has not been prepared as all
gains and losses are recognised in the Income Statement.
UNAUDITED BALANCE SHEET
As at As at
31 March 2006 31 March
2005
(Restated)
#'000 #'000
Fixed assets
Investments at fair value through profit or loss 118,343 129,701
_________ _________
Current assets
Debtors and prepayments 396 802
Cash at bank and in hand 1,660 2,093
_________ _________
2,056 2,895
Creditors: amounts falling due within one year (1,402) (948)
_________ _________
Net current assets 654 1,947
_________ _________
Net assets 118,997 131,648
_________ _________
Share capital and reserves
Called-up share capital 10,166 13,532
Special reserve 11,626 43,872
Other capital reserves:
Capital reserve - realised 68,711 77,042
Capital reserve - unrealised 16,338 (11,817)
Capital redemption reserve 10,947 7,581
Revenue reserve 1,209 1,438
_________ _________
Shareholders' funds 118,997 131,648
_________ _________
Net asset value per share (pence) 292.64 243.21
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 March 2006 Capital Capital Capital
Share Special reserve reserve redemption Revenue
capital reserve - realised - reserve reserve Total
unrealised
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Balance at 31 March 2005 as 13,532 83,546 37,368 (11,593) 7,581 220 130,654
originally reported
Transfer to Special reserve - (39,674) 39,674 - - - -
Restatements - - - (224) - 1,218 994
__________ __________ __________ __________ __________ __________ __________
Balance at 31 March 2005 (restated) 13,532 43,872 77,042 (11,817) 7,581 1,438 131,648
Return on ordinary activities after - - (8,331) 28,155 - 1,936 21,760
taxation
Dividends paid - - - - - (2,165) (2,165)
Purchase of own shares (3,366) (32,246) - - 3,366 - (32,246)
__________ __________ __________ __________ __________ __________ __________
Balance at 31 March 2006 10,166 11,626 68,711 16,338 10,947 1,209 118,997
__________ __________ __________ __________ __________ __________ __________
For the year ended 31 March 2005 Capital Capital Capital
Share Special reserve reserve redemption Revenue
capital reserve - realised - reserve reserve Total
unrealised
#'000 #'000 #'000 #'000 #'000 #'000 #'000
Balance at 31 March 2004 as 17,295 83,546 70,909 (25,078) 3,818 167 150,657
originally reported
Restatements - - - (326) - 1,384 1,058
__________ __________ __________ __________ __________ __________ __________
Balance at 31 March 2004 (restated) 17,295 83,546 70,909 (25,404) 3,818 1,551 151,715
Return on ordinary activities after - - (3,152) 13,587 - 2,430 12,865
taxation
Dividends paid - - - - - (2,543) (2,543)
Purchase of own shares (3,763) - (30,389) - 3,763 - (30,389)
__________ __________ __________ __________ __________ __________ __________
Balance at 31 March 2005 13,532 83,546 37,368 (11,817) 7,581 1,438 131,648
__________ __________ __________ __________ __________ __________ __________
The revenue reserve represents the amount of the Company's reserves
distributable by way of dividend.
UNAUDITED CASH FLOW STATEMENT
Year ended Year ended
31 March 2006 31 March 2005
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 2,079 2,591
Servicing of finance
Bank interest paid (1) -
Financial investment
Purchases of investments (41,776) (28,568)
Sales of investments 73,676 58,979
________ ________ ________ ________
Net cash inflow from financial investment 31,900 30,411
Equity dividends paid (2,165) (2,543)
________ ________
Net cash inflow before financing 31,813 30,459
Financing
Repurchase of Ordinary shares (32,246) (30,389)
________ ________
Net cash outflow from financing (32,246) (30,389)
________ ________
(Decrease)/increase in cash (433) 70
________ ________
Reconciliation of net cash flow to movements in net funds
(Decrease)/increase in cash as above (433) 70
Exchange movements - 3
________ ________
Movement in net funds in the year (433) 73
Net funds at 1 April 2,093 2,020
________ ________
Net funds at 31 March 1,660 2,093
________ ________
Notes:
1. Accounting policies
(a) Basis of accounting
The financial statements have been prepared on a going concern basis in
accordance with applicable UK Generally Accepted Accounting Practice ('UK GAAP')
and with the Statement of Recommended Practice for "Financial Statements of
Investment Trust Companies" (December 2005). They have also been prepared on the
assumption that approval as an investment trust will continue to be granted.
The new Financial Reporting Standards, issued as part of the programme to
converge UK GAAP with International Financial Reporting Standards (IFRS), were
applicable for the accounting period ended 31 March 2006 and the financial
statements for the twelve months ended 31 March 2005 have also been restated.
The main change arising from these revisions to UK GAAP, in relation to the
Company's financial statements, is that dividends to Shareholders declared after
the balance sheet date are now shown in the period of payment rather than in the
reporting period. Dividends were previously recognised in the statement of total
return (now income statement) but these are now dealt with as an appropriation
of equity and are taken directly through equity in the reconciliation of
movements in Shareholders' funds.
(b) Valuation of investments
Investments have been designated upon initial recognition as 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 as
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 blue chip securities.
Gains and losses arising from changes in fair value are included in net profit
or loss for the period as a capital item in the income statement and are
ultimately recognised in the unrealised reserve.
(c) Income
The revenue account includes income and expenditure of a revenue nature. Profits
and losses of a capital nature are dealt with in non-distributable capital
reserves, as required by the Articles of Association and the Companies Act 1985.
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 on deposits is
dealt with on an accruals basis.
(d) Management fee
The investment management fee is wholly charged to revenue and is accounted for
on an accruals basis.
(e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account except for transaction costs on the acquisition or
disposal of investments which are charged to capital.
(f) Taxation
The charge for taxation is based on the net revenue for the year. In accordance
with Financial Reporting Standard 16 'Current Tax', franked investment income is
shown net of notional tax credits.
Deferred tax
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Deferred taxation is
provided using the liability method on all timing differences, calculated at the
rate at which it is anticipated the timing differences will reverse. Deferred
tax assets are recognised only when, on the basis of available evidence, it is
more likely than not that there will be taxable profits in future against which
the deferred tax asset can be offset.
(g) Capital reserves
Gains and losses on the realisation of investments are accounted for in capital
reserve - realised.
Increases and decreases in the valuation of investments held at the year end are
accounted for in capital reserve - unrealised.
2. The financial information for the year ended 31 March 2006 comprises
non-statutory accounts within the meaning of section 240 of the Companies Act
1985. The financial information for the year ended 31 March 2005 has been
derived from the published accounts that have been delivered to the Registrar of
Companies and restated where required as a result of the implementation of the
new Financial Reporting Standards and on which the report of the auditors under
section 235 of the Companies Act 1985 is unqualified and does not contain a
statement under section 237 (2) or (3) of the Companies Act 1985. The statutory
accounts for 2006 will be finalised on the basis of the financial information
presented by the Directors in this preliminary announcement and will be
delivered to the Registrar of Companies in due course.
3. The Directors have today declared a final dividend of 2.50p per Ordinary
share for the year ended 31 March 2006 (2005 - 2.25p) which, if approved by
Shareholders at the Annual General Meeting, will be payable on 11 July 2006 to
Shareholders on the register on 9 June 2006.
4. Copies of the Annual Report will be posted to all Shareholders in
due course and further copies may be obtained from the Registered Office, One
Bow Churchyard, Cheapside, London EC4M 9HH.
5. This preliminary announcement was approved by the Board of Directors on
12 May 2006.
Aberdeen Asset Management PLC
Secretaries
This information is provided by RNS
The company news service from the London Stock Exchange
END
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