RNS Number:8385M
Edinburgh UK Small Co Track Tst PLC
26 May 2005
Edinburgh UK Smaller Companies Tracker Trust plc
PRELIMINARY ANNOUNCEMENT OF UNAUDITED ANNUAL RESULTS
for the year ended 31 March 2005
Chairman's Statement
Performance of the Company
The twelve month period to 31 March 2005 witnessed a continued improvement in
the UK equity market with stronger economic data, an encouraging low inflation
and low interest rate environment coupled with high levels of corporate
activity. A rally from September 2004 onwards saw gains of some 19% to the end
of February 2005 before the benchmark Index started to give up gains. Sellers
emerged as investors saw small and midcap valuations as having risen too far in
comparison to larger companies.
Our benchmark, the FTSE All-Small Index (excluding Investment Companies) - (the
'Index'), rose by 10.4% over the year. The capital net asset value of an
Ordinary Share in the Company (the 'NAV') increased from 217.53p to 240.97p, a
rise of 10.8%. The Board is pleased to note that your Company has continued to
perform in line with its stated investment objective particularly after taking
account of the trading costs associated with the levels of portfolio
re-balancing required in difficult and more illiquid markets. The difference in
returns between the Index and NAV partly reflected the benefit to continuing
Shareholders from the Company buying back shares for cancellation at a discount
to NAV and continued dealing efficiency by the manager. In the year to 31 March
2005, the Company's middle market share price rose by 15.1% to 225.5p.
I am also happy to report that 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 fallen to 0.76% from last year's
0.93%. This is mainly as a result of the decrease in the investment management
fee which was reduced to 0.4% per annum and which became effective on 1 April
2004.
Dividends
Revenue return per Ordinary Share for the year to 31 March 2005 amounted to
3.95p (2004 - 3.48p). The Board previously declared an interim dividend of 1.75
pence per share which was paid on 24 September 2004 and it recommends a final
dividend of 2.25 pence, payable on 11 July 2005 to Shareholders on the register
on 10 June 2005. The total dividend of 4.0 pence compares with 3.75 pence paid
in respect of the previous year, an increase of 6.7%. Earnings per share are
calculated on the average number of shares outstanding during the year, whereas
the final dividend is payable on the (lower) number of shares outstanding on the
record date. Thus, although the total dividend exceeds the quoted earnings per
share, there will be a small transfer to revenue reserve after payment of the
final dividend.
Share Price Discount to Net Asset Value
The issue of share price discount to net asset value per share continues to be a
problem in the investment trust sector. In line with many of its small-cap
peers, your Company is still not immune from this issue and the Board is very
much aware that this is an area requiring constant attention. The Board believes
that the combination of re-branding to use the Edinburgh name with re-packaged
savings plans, the manager's expanded index and marketing teams, increased
marketing effort, together with a strong commitment to a sensible share buy back
and tender programme, has helped to lower the discount and particularly reduce
discount volatility.
The Board believes that this package of measures, together with strong
performance from smaller companies and accurate index tracking, have helped to
improve the discount to net asset value which stood at 6.57% at year end
compared with 10.0% a year ago.
Tender Offer
In September 2004 I wrote to Shareholders giving details of a 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 believe 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,
13,532,258 Ordinary Shares were bought back at a price of 200.00532p per share,
an effective 5.6% discount to the fair asset value as calculated and audited,
reflecting underlying portfolio share price spreads and the costs involved of
such an exercise. The assets which comprised the tender pool were quickly and
efficiently realised by the investment manager and proceeds, less costs, paid to
those Shareholders who successfully tendered shares on 15 October 2004.
It is the intention of the Board to give those Shareholders that may wish to do
so the opportunity to tender up to 20% of their shareholding for cash in the
same manner this year. As the summer months are particularly quiet in terms of
share trading it is sensible to send documents to Shareholders in September and
complete the tender by the end of October 2005. To enable the tender offer to be
put into effect an Extraordinary General Meeting will be convened in early
October and a special resolution requiring the approval of at least 75% of
Shareholders will be proposed.
In order to facilitate the last tender offer process the Board declared an early
interim dividend payable in September 2004 rather than the normal December date.
It is the intention of the Board to do so once again with regard to the interim
dividend in respect of the year ending 31 March 2006. Both the continuing shares
and any shares tendered under the new tender offer will retain the right to
receive the interim dividend.
Share Buybacks (excluding tender offer)
Since the share buyback programme commenced in February 2000, a total of
16,792,537 Ordinary Shares have been bought back, representing 19.9% of the
original share capital. This includes 1,520,000 shares purchased during the
financial year under review.
The shares purchased during the financial year to 31 March 2005 were bought in
at an average discount of 11.1%. These buybacks enhanced the net asset value by
approximately 0.24%, helping in small part to offset the costs incurred in
portfolio re-balancing during the year.
The Board will be proposing an ordinary resolution at the AGM again seeking
authorisation to make purchases in the market for cancellation of up to 14.99%
of the current number of issued ordinary shares of 54,129,219.
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 on
the terms agreed 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 increased
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,
and notwithstanding the terms of the Articles of Association as they currently
stand, 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 Investment Manager. Shareholders may recall Robert Williams indicated his
intention to stand down from the Board at the 2005 Annual General Meeting, but
he has now agreed to stay on if shareholders so wish. I am pleased to recommend
that shareholders vote for his re-election as I believe that his experience adds
significantly to the Board's strength and that his independence is not
compromised by length of tenure. Andrew Robson has now taken on the role of
Senior Independent Director.
Annual General Meeting
The AGM will be held at the Company's registered office at One Bow Churchyard,
London, EC4 on 7 July 2005 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 AGM. Edinburgh UK Smaller Companies Tracker Trust plc is the
only investment trust specialising in 'broadly matching' the FTSE All-Small
Index, a small-cap index encompassing all listed companies outside of the FTSE
350 but excluding AIM listings. The Company has the virtue of a simple capital
structure, it continues to offer investors a low cost exposure to the UK smaller
companies equity market, and continues to track successfully its index. The
Board recommends that Shareholders vote in favour of the continuation
resolution.
Michael Cumming
Chairman
26 May 2005
Statement of Total Return
Year ended Year ended
31 March 2005 31 March 2004
(unaudited) (audited)
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
Gains on investments - 10,330 10,330 - 63,290 63,290
Income 3,556 - 3,556 3,836 - 3,836
Investment management fee (excl. VAT) (543) - (543) (679) - (679)
Administration expenses (583) - (583) (640) (18) (658)
Exchange gains - 3 3 - - -
Net return on ordinary activities before
interest payable and taxation 2,430 10,333 12,763 2,517 63,272 65,789
Interest payable - - - (2) - (2)
Net return on ordinary activities before 2,430 10,333 12,763 2,515 63,272 65,787
and after taxation
Dividends in respect of equity shares (2,377) - (2,377) (2,631) - (2,631)
Transfer to/(from) reserves 53 10,333 10,386 (116) 63,272 63,156
Return per share (pence) 3.95 16.80 20.75 3.48 87.65 91.13
The revenue column of this statement represents the revenue account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
No operations were acquired or discontinued in the year.
Balance Sheet
As at As at
31 March 2005 31 March 2004
(unaudited) (audited)
#'000 #'000
Fixed assets
Investments 129,925 150,109
Current assets
Debtors and prepayments 802 973
Cash at bank and in hand 2,093 2,020
2,895 2,993
Creditors: amounts falling due within one year (2,166) (2,445)
Net current assets 729 548
Net assets 130,654 150,657
Share capital and reserves
Called-up share capital 13,532 17,295
Special reserve 83,546 83,546
Other capital reserves:
Capital reserve - realised 37,368 70,909
Capital reserve - unrealised (11,593) (25,078)
Capital redemption reserve 7,581 3,818
Revenue reserve 220 167
Shareholders' funds 130,654 150,657
Net asset value per share (pence) 241.37 217.77
Cash Flow Statement
Year ended Year ended
31 March 2005 31 March 2004
(unaudited) (audited)
#'000 #'000 #'000 #'000
Net cash inflow from operating activities 2,591 2,352
Servicing of finance
Bank interest paid - (2)
Financial investment
Purchases of investments (28,568) (34,885)
Sales of investments 58,979 44,385
Net cash inflow from financial investment 30,411 9,500
Equity dividends paid (2,543) (2,743)
Net cash inflow before financing 30,459 9,107
Financing
Repurchase of Ordinary shares (30,389) (9,285)
Costs relating to cancellation of share premium - (18)
account
Net cash outflow from financing (30,389) (9,303)
Increase/(decrease) in cash 70 (196)
Reconciliation of net cash flow to
movements in net funds
Increase/(decrease) in cash as above 70 (196)
Exchange movements 3 -
Movement in net funds in the year 73 (196)
Net funds at 1 April 2,020 2,216
Net funds at 31 March 2,093 2,020
Notes:
1. Income
2005 2004
#'000 #'000
Income from investments
UK dividend income 3,166 3,501
UK scrip dividends 31 -
Overseas dividends 22 38
3,219 3,539
Other income
Deposit interest 73 47
Underwriting commission 4 -
Stock lending fees 260 250
337 297
Total income 3,556 3,836
2. Return per share
2005 2004
Revenue Capital Total Revenue Capital Total
p p p p p p
Ordinary 3.95 16.80 20.75 3.48 87.65 91.13
The revenue return per Ordinary share is based on the net revenue on ordinary
activities after taxation of #2,430,000 (2004 - #2,515,000) and on 61,499,315
(2004 - 72,190,088) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
The capital return per Ordinary share is based on the net capital gain for the
financial year of #10,333,000 (2004 - gain of #63,272,000) and on 61,499,315
(2004 - 72,190,088) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
3. Net asset value per share
The net asset value per share and the net assets attributable to Shareholders at
the year end, calculated in accordance with the
Articles of Association were as follows:
Net asset value Net asset values
per share attributable attributable
2005 2004 2005 2004
p p #'000 #'000
Ordinary share 241.37 217.77 130,654 150,657
The net asset value per Ordinary share is based on total Shareholders' funds and
on 54,129,219 (2004 - 69,181,477) Ordinary shares, being the number of Ordinary
shares in issue at the year end.
4. The financial information for the year ended 31 March 2005 comprise
non-statutory accounts within the meaning of section 240 of the Companies Act
1985. The financial information for the year ended 31 March 2004 has been
derived from the published accounts that have been delivered to the Registrar of
Companies and on which the report of the auditors is unqualified and does not
contain a statement under section 237 (2) or (3) of the Companies Act 1985. The
statutory accounts for 2005 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.
5. The Directors have today declared a final dividend of 2.25p per Ordinary
share for the year ended 31 March 2005 (2004 - 2.0p) which, if approved by
Shareholders at the Annual General Meeting, will be payable on 11 July 2005 to
Shareholders on the register on 10 June 2005.
6. 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.
Aberdeen Asset Management PLC
Secretaries
26 May 2005
This information is provided by RNS
The company news service from the London Stock Exchange
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