Half-Yearly Financial Report

ABERDEEN UK TRACKER trust plc

 

Unaudited Half-Yearly Financial Report for the Six months ended 30 June 2016

 

 

HALF-YEARLY BOARD REPORT

 

Half-Year Performance and Investment Activity

The Company's capital net asset value per share (excluding revenue reserves) rose by 2.1% over the 6 months ended 30 June 2016 in line with the rise in the Company's benchmark, the FTSE All-Share Index (the "Index"). On a total return basis, with dividends deemed to have been reinvested, the Company's net asset value per share rose by 4.2% over the 6 months compared with a 4.3% rise in the Index.

 

The possibility that the UK might leave the European Union ("EU") (or 'Brexit' as it became known in the media) was the most-talked-about topic over recent months.  When the referendum on 23 June 2016 ("EU Referendum") resulted in a vote in favour of an exit from the EU, investors were surprised by the decision and market volatility ensued. Share prices of UK companies fell sharply with the Index losing 7% of its value in two days and sterling suffered relatively steep declines against a basket of international currencies. Nevertheless, a degree of stability returned to the markets in the final days of June and, since the appointment of the new prime minister, recovery has been marked with the Index up 12.9% at the time of writing from the low reached on 27 June 2016.

 

Throughout the half-year, notwithstanding the vote for Brexit, marked volatility has been observed with the Index falling some 11.5% between 31 December 2015 and 11 February 2016 only for all of this decrease to be recouped by the referendum date as markets anticipated a pro-'Remain' result.

 

At the sector level, the strongest performers included oil & gas, a beneficiary of the improvement in the oil price, and basic materials. In contrast, consumer services and financials lagged behind.

 

Dividends

The Directors have declared an interim dividend of 6.5p per share (2015 - 6.4p) for the year ending 31 December 2016. The interim dividend will be payable on 26 August 2016 to shareholders on the register on 12 August 2016 with an ex-dividend date of 11 August 2016.

 

It remains the Board's intention to pay out each year the total income generated by the investment portfolio, less operating expenses. However, the interim dividend, which reflects the greater part of the Company's total net income having been received in the first half of the financial year, is likely to be higher than the final dividend which is due to be declared in March 2017.

 

Share Price Discount

The Board continues to monitor closely the level of discount at which the Company's shares trade. The Company's share price fell 2.8% during the period to 30 June 2016 to 295.0p which represented a discount of 9.2% to the net asset value per share (including revenue reserves) of 324.9p. At the start of the period the share price was trading at a discount to the net asset value (including revenue reserves) of 4.1%. The wider discount was partly the market's response to a perceived stock overhang as a shareholder looked to scale back their closed end investments but also reflected the initial market turmoil which followed the EU referendum.  Discounts were wider across the investment company sector in the week before the period end as investors sought to de-risk their UK assets due to a combination of uncertainty surrounding the economic impact of a UK exit, talk of lower interest rates and the possibility of increased quantitative easing.

 

The Company seeks to manage the volatility of the discount through its policy of buying back its own shares. During the period the Company bought back 563,450 shares for treasury, at a cost of £1.6 million, resulting in the issued share capital comprising 100,428,518 Ordinary shares with voting rights and an additional 2,627,597 shares being held in treasury as at 30 June 2016.

 

A further 853,749 shares were bought back for treasury between 1 July 2016 and the date of approval of this Report and therefore the issued share capital comprises 99,574,769 Ordinary shares with voting rights and an additional 3,481,346 shares held in treasury at this date. It is pleasing to report that since the half-year end the discount has narrowed to 6.6% at the time of writing.

 

Annual General Meeting

At the Company's Annual General Meeting ("AGM") on 28 April 2016, all resolutions were passed by shareholders. A final dividend per share of 4.70p was paid to shareholders on 3 May 2016 (2015 - 4.50p). Your Board was encouraged by the continued support of shareholders as expressed by the vote for continuation of the Company at the AGM; of the shareholders who voted, over 99% voted in favour.

 

Principal Risks and Uncertainties

The principal risks and uncertainties affecting the Company are set out in detail on pages 8 to 9 of the Annual Report for the year ended 31 December 2015 and have not changed during the period nor are they expected to change in the second half of the financial year ended 31 December 2016.

 

They can be summarised under the following headings:

 

-     Shareholder concentration;

-     Performance;

-     Discount volatility;

-     Investment strategy and objectives;

-     Financial and regulatory; and

-     Operational.

 

The impact on the risks of the Company following the 'Leave' decision of the EU Referendum is difficult to assess at this stage. A more informed assessment can and will be made when the terms of the UK's exit are known.

 

Going Concern

In accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting issued in September 2014, the Directors have undertaken a rigorous review and consider both that there are no material uncertainties and that the adoption of the going concern basis of accounting is appropriate when preparing the Company's half-yearly financial statements for the 6 months ended 30 June 2016.

 

The Company's assets consist entirely of equity shares in companies listed on the London Stock Exchange which are, in most circumstances, realisable within a short timescale. The Company has no borrowing facilities.

 

The Directors' assessment of going concern is also based on the assumption that the Ordinary Resolution to be proposed at the AGM of the Company in April 2017, that the Company continues as an investment trust, is passed by shareholders.

 

The Directors are mindful of the Company's principal risks and uncertainties and have reviewed forecasts detailing revenue and liabilities, and they believe that the Company has adequate financial resources to continue in operational existence for the foreseeable future and at least 12 months from the date of approval of this Half-Yearly Report.

 

Directors' Responsibility Statement

The Directors are responsible for preparing the Half-Yearly Financial Report in accordance with applicable law and regulations. The Directors confirm that to the best of their knowledge:

 

-     the condensed set of Financial Statements has been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting);

-     the Half-Yearly Board Report includes a fair review of the information required by rule 4.2.7R of the Disclosure and Transparency Rules (being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of Financial Statements and a description of the principal risks and uncertainties for the remaining six months of the financial year); and

     the Half-Yearly Board Report includes a fair review of the information required by 4.2.8R (being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so).

 

The Half-Yearly Financial Report for the six months ended 30 June 2016 comprises the Half-Yearly Board Report, the Directors' Responsibility Statement and a condensed set of Financial Statements.

 

For and on behalf of the Board

 

Kevin Ingram

Chairman

 

1 August 2016

 

 

Financial Highlights

	6 months ended	Year ended
	30/06/2016	31/12/2015	% Change
Net asset value per Ordinary share {A}	317.3p	310.9p	+2.1
Net asset value per Ordinary share {B}	324.9p	316.6p	+2.6
Share price of Ordinary share (mid)	295.0p	303.5p	-2.8
Discount to net asset value {C}	9.2%	4.1%
Interim dividend	6.50p	6.40p {D}
{A}        Excluding revenue reserves.
{B}        Including revenue reserves.
{C}        Based on net asset value including revenue reserves.
{D}        For the six months ended 30 June 2015.

 

 

Performance
	6 month return	1 year return	3 year return{+}	5 year return{+}
	%	%	%	%
Capital return
Net asset value*	+2.1	-1.6	+2.1	+2.5
FTSE All-Share Index	+2.1	-1.5	+2.2	+2.6
Share price	-2.8	-6.7	+0.8	+2.2
Total return (Capital return plus dividends reinvested)
Net asset value	+4.2	+1.9	+5.5	+5.9
FTSE All-Share Index	+4.3	+2.2	+5.9	+6.3
Share price	-1.2	-3.2	+4.3	+5.7
* Excluding revenue reserves
{+} Annualised
Source: AAM PLC, Morningstar and Lipper

 

 

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 

	Six months ended			Six months ended
	30 June 2016			30 June 2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	-	6,336	6,336	-	3,189	3,189
Currency gains/(losses)	-	4	4	-	(5)	(5)
Income (note 2)	7,055	-	7,055	7,024	-	7,024
Investment management fee	(199)	-	(199)	(229)	-	(229)
Administrative expenses	(269)	-	(269)	(266)	-	(266)
	_______	_______	_______	_______	_______	_______
Net return on ordinary activities before taxation	6,587	6,340	12,927	6,529	3,184	9,713
Taxation	(22)	-	(22)	(42)	-	(42)
	_______	_______	_______	_______	_______	_______
Net return on ordinary activities after taxation	6,565	6,340	12,905	6,487	3,184	9,671
	_______	_______	_______	_______	_______	_______
Return per Ordinary share (pence) (note 4)	6.52	6.30	12.82	6.40	3.14	9.54
	_______	_______	_______	_______	_______	_______
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 Condensed Statement of Comprehensive Income.
All revenue and capital items in the above statement derive from continuing operations.

 

 

CONDENSED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

 

		As at	As at
		30 June 2016	31 December 2015
	Notes	£'000	£'000
Fixed assets
Investments at fair value through profit or loss		319,601	314,048
		__________	__________
Current assets
Debtors and prepayments		1,713	879
Money market funds		4,020	4,345
Cash and short term deposits		1,110	675
		__________	__________
		6,843	5,899
		__________	__________
Creditors: amounts falling due within one year		(191)	(238)
		__________	__________
Net current assets		6,652	5,661
		__________	__________
Net assets		326,253	319,709
		__________	__________
Capital and reserves
Called-up share capital		10,306	10,306
Capital redemption reserve		1,398	1,398
Special reserve		212,514	214,151
Capital reserve	6	94,421	88,081
Revenue reserve		7,614	5,773
		__________	__________
Equity shareholders' funds		326,253	319,709
		__________	__________
Net asset value per share (pence)	7	324.86	316.57
		__________	__________
Net asset value per share (excluding revenue reserves) (pence)		317.28	310.85
		__________	__________

 

CONDENSED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

 

Six months ended 30 June 2016
			Capital
		Share	redemption	Special	Capital	Revenue
		capital	reserve	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2015		10,306	1,398	214,151	88,081	5,773	319,709
Return on ordinary activities after taxation		-	-	-	6,340	6,565	12,905
Dividend paid	3	-	-	-	-	(4,724)	(4,724)
Purchase of own shares to be held in treasury	8	-	-	(1,637)	-	-	(1,637)
		______	______	______	_______	______	______
Balance at 30 June 2016		10,306	1,398	212,514	94,421	7,614	326,253
		______	______	______	_______	______	______
Six months ended 30 June 2015
			Capital
		Share	redemption	Special	Capital	Revenue
		capital	reserve	reserve	reserve	reserve	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31 December 2014		10,306	1,398	215,807	96,608	5,570	329,689
Return on ordinary activities after taxation		-	-	-	3,184	6,487	9,671
Dividend paid	3	-	-	-	-	(4,568)	(4,568)
Purchase of own shares to be held in treasury	8	-	-	(1,549)	-	-	(1,549)
		______	______	______	_______	______	______
Balance at 30 June 2015		10,306	1,398	214,258	99,792	7,489	333,243
		______	______	______	_______	______	______

 

 

CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)

 

		Six months ended	Six months ended
		30 June 2016	30 June 2015
	Notes	£'000	£'000
Operating activities
Net return on ordinary activities before finance costs and taxation		12,927	9,713
Adjustments for:
Gains on investments		(6,336)	(3,189)
Currency (gains)/losses		(4)	5
Increase in dividend income		(150)	(146)
Increase in interest income		-	(3)
Stock dividends included in dividend income		(633)	(561)
Increase in other debtors		(72)	(11)
Decrease in other creditors		(47)	(149)
Net overseas tax paid		(3)	(68)
		__________	__________
Net cash inflow from operating activities		5,682	5,591
Investing activities
Purchases of investments		(7,888)	(4,945)
Sales of investments		8,673	6,251
		__________	__________
Net cash flow from investing activities		785	1,306
		__________	__________
Financing activities
Buy back of Ordinary shares	8	(1,637)	(1,114)
Equity dividends paid	3	(4,724)	(4,568)
		__________	__________
Net cash used in financing activities		(6,361)	(5,682)
		__________	__________
Increase in cash and cash equivalents		106	1,215
		__________	__________
Analysis of changes in cash and cash equivalents during the period
Opening balance		5,020	4,781
Increase in cash as above		106	1,215
Currency gains/(losses)		4	(5)
		__________	__________
Closing balance		5,130	5,991
		__________	__________

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

1.	Accounting policies
	(a)	Basis of preparation
		The condensed financial statements have been prepared in accordance with Financial Reporting Standard 104 (Interim Financial Reporting) and with the Statement of Recommended Practice for 'Financial Statements of Investment Trust Companies and Venture Capital Trusts'. They have also been prepared on a going concern basis and on the assumption that approval as an investment trust will continue to be granted.
		The half-yearly financial statements have been prepared using the same accounting policies applied as the preceding annual accounts. The Company has early adopted Amendments to FRS 102 - Fair Value Hierarchy Disclosures, issued by the Financial Reporting Council in March 2016.

 

		Six months ended	Six months ended
		30 June 2016	30 June 2015
2.	Income	£'000	£'000
	Income from investments
	UK listed - franked	5,819	5,573
	UK listed - unfranked and overseas income	589	877
	Stock dividends	633	561
		__________	__________
		7,041	7,011
		__________	__________
	Other income
	Interest from money market funds	13	13
	Deposit interest	1	-
		__________	__________
		14	13
		__________	__________
	Total income	7,055	7,024
		__________	__________

 

		Six months ended	Six months ended
		30 June 2016	30 June 2015
3.	Dividends	£'000	£'000
	Final dividend for 2015 - 4.70p (2014 - 4.50p)	4,724	4,568
		__________	__________
	A final dividend of 4.70p for the year ended 31 December 2015 (2014 - 4.50p) was paid to shareholders on 3 May 2016.
	An interim dividend of 6.50p (2015 - 6.40p) for the year ending 31 December 2016 will be paid on 26 August 2016 to shareholders on the register at 12 August 2016. The ex-dividend date is 11 August 2016.

 

		Six months ended	Six months ended
		30 June 2016	30 June 2015
4.	Return per Ordinary share	p	p
	Revenue return	6.52	6.40
	Capital return	6.30	3.14
		__________	__________
	Total return	12.82	9.54
		__________	__________
	The figures above are based on the following attributable returns:
		£'000	£'000
	Revenue return	6,565	6,487
	Capital return	6,340	3,184
		__________	__________
	Total return	12,905	9,671
		__________	__________
	Weighted average number of Ordinary shares in issue	100,648,986	101,394,705
		__________	__________

 

5.	Transaction costs
	During the six months ended 30 June 2016, the direct expenses incurred in acquiring or disposing of investments (classified as fair value through profit or loss) have been expensed through capital and are included within gains/(losses) on investments in the Condensed Statement of Comprehensive Income. The total costs were as follows:
		Six months ended	Six months ended
		30 June 2016	30 June 2015
		£'000	£'000
	Purchases	34	21
	Sales	2	1
		__________	__________
		36	22
		__________	__________

 

		Six months ended	Six months ended
		30 June 2016	30 June 2015
6.	Capital reserve	£'000	£'000
	Opening balance	99,792	96,608
	Increase in investment holding fair value gains	3,876	1,232
	Gains on realisation of investments at fair value	2,460	1,957
	Currency gains/(losses)	4	(5)
		__________	__________
	Closing balance	106,132	99,792
		__________	__________
	The capital reserve reflected in the Condensed Statement of Financial Position at 30 June 2016 includes gains amounting to £74,032,000 (31 December 2015 - gains of £70,156,000) which relate to the revaluation of investments held at the reporting date compared to historical cost.

 

		As at	As at
7.	Net asset value per Ordinary share	30 June 2016	31 December 2015
	Net assets attributable	£326,253,000	£319,709,000
	Number of Ordinary shares in issue (excluding shares in issue held in treasury)	100,428,518	100,991,968
	Net asset value per Ordinary share	324.86p	316.57p

 

8.	Called-up share capital
	During the period ended 30 June 2016, 563,450 (30 June 2015 - 478,000) Ordinary shares of 10p each were bought back at a total cost of £1,637,000 (30 June 2015 - £1,549,000) including expenses, all of which were placed in treasury. Treasury shares, which are non-voting, held by the Company may be reissued at a premium to net asset value per share for the benefit of all shareholders.
	As at 30 June 2016, the Company's issued share capital consisted of 100,428,518 (31 December 2015 - 100,991,968) Ordinary shares of 10p each, with voting rights and 2,627,597 (31 December 2015 - 2,064,147) Ordinary shares of 10p each held in treasury which represented 2.5% (31 December 2015 - 2.0%) of the Company's total issued share capital.
	As at the date of approval of this Report, the Company's issued share capital consisted of 99,574,769 Ordinary shares of 10p each, with voting rights and 3,481,346 Ordinary shares of 10p each held in treasury.

 

9.	Fair value hierarchy
	FRS 102 requires 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 company has early adopted Amendments to FRS 102 - Fair value hierarchy disclosures issued by the Financial Reporting Council in March 2016. The fair value hierarchy shall have the following classifications:
	Level 1: Unadjusted quoted prices in an active market for identical assets or liabilities that the entity can access at the measurement date.
	Level 2: inputs other than quoted prices included within level 1 that are observable (i.e., developed using market data) for the asset or liability, either directly or indirectly.
	Level 3: inputs are unobservable (i.e., for which market data is unavailable) for the asset or liability.
	The Company's investments consist of quoted equities and quoted futures contracts (31 December 2015 - same) all of which are actively traded on recognised stock exchanges, with their fair value being determined by reference to their quoted bid prices at the reporting date. The total value of the investments as at the period end of £319,601,000 (31 December 2015 - £314,048,000) have therefore been deemed as Level 1.

 

10.	Segmental information
	The company is engaged in a single segment of business, which is to invest in equity securities. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based on the Company as one segment.

 

11.	Transactions with the Manager
	The Company has agreements with Aberdeen Fund Managers Limited ("AFML" or the "Manager") for the provision of investment management, secretarial, accounting and administration and promotional services.
	The management fee is charged to the Company on the basis of 0.09% per annum of the total assets of the Company, after deducting current liabilities and excluding the value of any investments managed by AAM, in excess of £100m and a fee of 0.20% per annum of the total assets of the Company, after deducting current liabilities and excluding the value of any investments managed by AAM, is charged on assets under £100m. The Board and Manager have agreed that the minimum annual fee payable to the Manager shall be £300,000. During the period £199,000 (2015 - £229,000) was paid to the Manager in respect of management fees and the balance due to AFML at the period end was £101,000 (2015 - £108,000). The fee is wholly chargeable to revenue. The total value of Aberdeen-managed investment trusts within the portfolio at the period end was £641,000 (2015 - £629,000).
	The management agreement between the Company and AFML 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.
	During the period £68,000 (2015 - £71,000) was paid to the Manager in respect of promotional activities for the Company through its Investment Trust Initiative and the balance prepaid at the period end was £35,000 (2015 - due - £105,000).

 

12.	Related party disclosures
	There were no related party transactions during the period.

 

13.	Half-Yearly Financial Report
	The financial information contained in this Half-Yearly Financial Report does not constitute statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the six months ended 30 June 2016 and 30 June 2015 has not been audited.
	The information for the year ended 31 December 2015 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditor on those accounts contained no qualification or statement under Section 498 of the Companies Act 2006.

 

14.	This Half-Yearly Financial Report was approved by the Board on 1 August 2016.

 

 

For Aberdeen UK Tracker Trust plc

Aberdeen Asset Management PLC, SECRETARY

 

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.

 

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