Fund Objective

The UK 100 Index Tracker Fund is designed to track the capital performance of the FTSE 100 Index and to maintain a gross income yield equal to that of the index.

View on Past Performance

Over the period under review the bid price of the Fund's units rose by 7.5%. The Fund has holdings in all 100 constituents of the Index in the same weightings as in the Index. It also holds a Linked Medium Term Note that closely tracks the price of BP. Hence investment activity, other than to raise or invest cash, was only neccessary when there were changes in the issued share capital of the constituent companies, or to the constituents of the Index.During the six months to 31 August 2005 there were two quarterly Index reviews. In March Cairn Energy was replaced by International Power, whilst in June plasterboard manufacturer BPB and property company Hammerson replaced Corus Group and Bunzl, which moved down to the FTSE 250 Index.There were one major takover during the period, an agreed bid for drinks group Allied Domecq by French company Pernod Ricard for a mixture of shares and cash. The major event of the six months however was an increase in the weighting in an existing constituent, Shell Transport and Trading (Registered).As a result the weighting of the new company, as represented by two lines, Royal Dutch Shell A and B shares, increased substantially in size at the opening of 20 July 2005. The combined group rose to 9.4% of the FTSE 100 Index by market capitalisation, becoming the second largest constituent after BP.Noticable increases in issued share capital were seen from HSBC Holdings, BAE Systems and SABMiller, whilst reductions due to share buy-backs were seen from Vodafone Group, BP, Diageo and Centrica. United Utilities also completed the las t part of a two stage rights issue, to fund infrastructure spending. There were also significant cash returns to shareholders from interContinental Hotels, Whitbread and National Grid.

Future Expectations

The FTSE 100 Index has risen steadily in the last few months, helped by relatively attractive ratings, a high level of corporate actions including share buy-backs, and an interest rate reduction towards the end of the period. One worry has been the dramatic rise in oil prices theis year, driven by strong demand from China and more recently supply disruptions folllowing hurricanes in the Gulf of Mexio.However, the market has remained sanguine, anticipating that this rise is temporary, rather than worrying about the inflation outlook, and the increased costs for industry and the consumer.Overall the market appears to be supported by undemanding valuation levels, and the prospect of more interest rate cuts, which would enable further progress to be made.

Fund Details