Final Results
NEW STAR INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF FINAL RESULTS
The Directors announce the unaudited statement of consolidated
results for the year ended 30th June 2006 as follows:
CHAIRMAN'S STATEMENT
Your Company's net assets rose by 29.2% to £104.1 million over the
year to 30th June 2006. This compares with a 15.9% rise in the FTSE All-Share
Index.
From inception in May 2000 to 30th June 2006, the net asset value
per share rose 47.5% against a 0.2% fall in the FTSE All-Share Index, with
your Company outperforming in each of its six reporting periods. Initially,
its high weightings in bonds and hedge funds generated outperformance but
gains over the last five years have resulted from the portfolio's exposure to
equity markets through investments in retail funds and other quoted
securities, particularly the parent of your management company, New Star Asset
Management Group.
Net revenue for the year under review was £50,000, which compares
with £69,000 during the previous year. Your Directors recommend the payment of
a final dividend of 0.1p net per Ordinary share (annual dividend of 0.1p in
2005).
Global equities produced healthy returns during the year, with the
MSCI World Index returning 13.9% in sterling terms. Liquidity was abundant,
with inflation-adjusted Group of Seven (G7) money supply growth running in
excess of industrial output growth, increasing the cash available for
financial investment.
Apart from a temporary increase in risk aversion in October,
investor sentiment was firm during late 2005 and early 2006. Equities
benefited from healthy corporate profits growth, cash takeovers and share
buy-backs. There was, however, a setback between the middle of May and the
middle of June 2006 in response to fears that the trade-off between economic
growth and inflation was deteriorating.
Bonds were also strong in late 2005 but sentiment turned in early
2006 as central banks tightened monetary policies. The US Federal Reserve
raised interest rates in eight quarter point moves to 5.25% during the year
although this was insufficient to prevent the dollar falling 5.5% against the
euro and 3.2% against the pound. The European Central Bank responded to
revived eurozone economic growth by raising its repo rate in three quarter
point moves to 2.75% while the Japan monetary authorities ended their policy
of quantitative easing.
One reason for central bank nervousness about inflation was higher
commodity prices. Oil rose 28.2% over the year, copper gained 108.6% and gold
rose 39.8%. Another reason for nervousness was the rise in industrial capacity
usage above its long-term average, giving manufacturers more scope to pass on
higher raw material costs.
Within the G7, Japan made the biggest country contribution to
global equity market returns, gaining 31.8% as investors grew increasingly
confident about its prospects. The resource-heavy Canadian market gained 28.0%
while Germany gained 26.7% and France gained 23.9%. The US, however,
underperformed, rising 5.5% in sterling terms.
Among the global sectors, banks gained 18.2%, making the biggest
sector contribution to global returns. Other big contributors included
materials, up 35.9%, diversified financials, up 23.8%, energy, up 20.6%, and
capital goods, up 18.5%. By contrast, semiconductors fell 7.5% and healthcare
equipment fell 3.7%.
At the year end, economists were predicting a growth slowdown in late 2006 or
early 2007. Inflation has edged higher and central banks in Europe and Japan
are likely to tighten their monetary policies further although the US Federal
Reserve appears to be near to pausing in its programme of interest rate rises.
Liquidity conditions have recently become less favourable, with the gap
between G7 inflation-adjusted money supply growth and industrial output
shrinking. Equity valuations, however, appear reasonable and should provide
some support for stockmarkets along with increasing takeover activity. In such
an environment, careful stock selection will remain important.
Mr Martin Boase will be retiring as a director of your Company at
the forthcoming Annual General Meeting on 16 November 2006. He has served as a
director of your Company since its inception in 2000 and your directors would
like to thank him on behalf of all shareholders for his services and help
during this period.
Your Company's unaudited net asset value at 31st August 2006 was
141.43p.
James Roe
Chairman
4th October 2006
INVESTMENT MANAGER'S REPORT
Your Company's strategy is to invest in funds managed by New Star
Asset Management, both long-only and hedge, in New Star Asset Management Group
shares and in other retail funds.
Within the portfolio, all but one of the 21 New Star retail funds
and hedge funds produced positive returns during the year under review. Eight
of the 14 pooled funds were in the top quartile when measured against their
respective peer groups while a further two were above the median.
Among the pooled funds, the strongest absolute and relative
performance was generated by the New Star Global Financials Fund, which gained
37.5% and outperformed its benchmark by 17.7 percentage points. Other strong
absolute performers included the Korean Portfolio, which gained 37.3%, the
China Portfolio, which gained 34.5%, the European Growth Fund, which gained
29.2%, and the New Star Global Strategic Capital Unit Trust, which gained
26.6%.
Among the hedge funds, the best performers were New Star Firefly
Hedge Fund, which rose 18.2%, New Star Financials Hedge Fund, which rose
18.1%, New Star European Hedge Fund, which gained 14.7%, and New Star Apollo
Hedge Fund, which gained 14.2%.
A further significant factor in your Company's outperformance was
the shareholding in New Star Asset Management Group, which performed strongly
following the admission of the company's shares to the Alternative Investment
Market in November 2005. By the end of the year under review, the shares had
risen 73.9% from their placing price.
Portfolio activity included the sale of Cox Insurance after a
takeover. Your Company also took partial profits on holdings in five larger
New Star managed funds: European Growth Fund, UK Alpha Fund, UK Hedge Fund, UK
Gemini Hedge Fund and UK Growth Fund.
The proceeds were mostly reinvested in the European Hedge Fund and
six younger New Star funds, Accelerator Hedge Fund, Firefly Hedge Fund, Global
Financials Fund, Hidden Value Fund, Pan-European Equity Fund and UK Special
Situations Fund. In addition, a holding was purchased in Skandia Global Best
Ideas Fund.
As a result, your Company ended the year under review with 53.3% of
its invested assets in retail funds, 24.9% in hedge funds, 20.5% in its
holding in New Star Asset Management Group and 1.3% in other equities and
investment trust shares. Geographically, 71.4% of the portfolio was exposed to
the UK, 22.1% was exposed to Europe excluding the UK and the balance was
invested elsewhere.
After the stockmarket correction from mid-May to mid-June, equity
prices recovered in the closing days of the year under review. Liquidity
conditions were tightened but price earnings multiples remained modest and
takeover and share buyback activity was buoyant. In early 2006, higher risk
asset classes were inflated by liquidity flows, pushing valuations in some
areas to extremes. Sentiment may, therefore, turn as central banks tighten
monetary policy, leading to sector rotation into more defensive areas of the
markets.
New Star Asset Management Limited
4th October 2006
UNAUDITED CONSOLIDATED INCOME STATEMENT
for the year ended 30th June 2006
Year ended Year ended
30th June 2006 30th June 2005
Revenue Capital Total Revenue Capital Total
return return return return
£'000 £'000 £'000 £'000 £'000 £'000
INVESTMENT INCOME 414 - 414 341 - 341
Other operating income 84 - 84 104 - 104
_______ _______ _______ _______ _______ _______
Total income 498 - 498 445 - 445
GAINS AND LOSSES
ON INVESTMENTS
Gains on fair value
through
profit or loss
assets - 23,111 23,111 - 13,813 13,813
Gains on index future
contracts - 134 134 - 271 271
Gains/(losses) on
forward
currency contracts - 308 308 - (518) (518)
Other exchange
gains/(losses) - 22 22 - (60) (60)
_______ _______ _______ _______ _______ _______
498 23,575 24,073 445 13,506 13,951
EXPENSES
Management fees (208) - (208) (140) - (140)
Other expenses (206) (3) (206) (217) - (217)
_______ _______ _______ _______ _______ _______
PROFIT BEFORE
FINANCE COSTS AND
TAX 84 23,572 23,656 88 13,506 13,594
Finance costs - - - - - -
_______ _______ _______ _______ _______ _______
PROFIT BEFORE TAX 84 23,572 23,656 88 13,506 13,594
Tax (34) - (34) (19) - (19)
_______ _______ _______ _______ _______ _______
PROFIT FOR THE YEAR 50 23,572 23,622 69 13,506 13,575
======= ======= ======= ======= ======= =======
EARNINGS PER SHARE
From continuing
operations Ordinary
shares (pence) 0.07 33.19 33.26 0.10 19.01 19.1
======= ======= ======= ======= ======= =======
The total column of this statement represents the Group's Income
Statement, prepared in accordance with IFRS. The supplementary revenue return
and capital return columns are both prepared under guidance published by the
Association of Investment Trust Companies. All items in the above statement
derive from continuing operations. No operations were acquired or discontinued
during the year.
All income is attributable to the equity holders of the parent
company. There are no minority interests.
UNAUDITED CONSOLIDATED BALANCE SHEET
as at 30th June 2006
30th June 30 June
2006 2005
Notes £'000 £'000
NON-CURRENT ASSETS
Investments at fair value through profit 103,364 78,051
or loss _________ _________
CURRENT ASSETS
Other receivables 707 1,196
Cash and cash equivalents 229 1,928
_________ _________
936 3,124
_________ _________
TOTAL ASSETS 104,300 81,175
CURRENT LIABILITIES
Other payables (187) (613)
_________ _________
NET ASSETS 104,113 80,562
_________ _________
CAPITAL AND RESERVES
Called up share capital 710 710
Share premium 21,573 21,573
Special reserve 56,908 56,908
Retained earnings 24,922 1,371
_________ _________
TOTAL EQUITY 104,113 80,562
========= =========
pence pence
NET ASSET VALUE PER ORDINARY SHARE 146.59 113.43
(PENCE)
========= =========
UNAUDITED CONSOLIDATED CASH FLOW STATEMENTS
for the year ended 30th June 2006
Year ended Year ended
30th June 30th June
2006 2005
Group Group
£'000 £'000
CASH FLOWS FROM OPERATING
ACTIVITIES
Profit before tax 23,656 13,594
Adjustments for:
(Gains)/losses on (25,313) (12,524)
investments _________ _________
Operating cash flows
before movements in working
capital (1,657) 1,070
Decrease/(increase) in 489 (1,078)
receivables
(Decrease)/increase in (426) 517
payables _________ _________
Net cash from operating
activities before income (1,594) 509
taxes
Income taxes paid (34) (19)
_________ _________
NET CASH FROM OPERATING
ACTIVITIES
(1,628) 490
_________ _________
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividend paid (71) (177)
_________ _________
NET CASH USED IN FINANCING
ACTIVITIES (71) (177)
_________ _________
NET (DECREASE)/INCREASE IN
CASH AND CASH EQUIVALENTS
(1,699) 313
Cash and cash equivalents
at beginning of period 1,928 1,615
_________ _________
CASH AND CASH EQUIVALENTS
AT END OF PERIOD 229 1,928
========= =========
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30th June 2006
Share Share Special Retained Total
capital premium reserve earnings
£'000 £'000 £'000 £'000 £'000
AT 30TH JUNE 2005 710 21,573 56,908 1,371 80,562
Profit for the year - - - 23,622 23,622
Dividend paid - - - (71) (71)
_______ _______ ______ _______ _______
AT 30TH JUNE 2006 710 21,573 56,908 24,922 104,113
======= ======= ====== ======= =======
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30th June 2005
Share Share Special Retained Total
capital premium reserve earnings
£'000 £'000 £'000 £'000 £'000
AT 30TH JUNE 2004 710 21,573 56,908 (12,027) 67,164
Profit for the year - - - 13,575 13,575
Dividend paid - - - (177) (177)
_______ _______ ______ _______ _______
AT 30TH JUNE 2005 710 21,573 56,908 1,371 80,562
======= ======= ====== ======= =======
EXPLANATION OF TRANSITION TO IFRSs
This is the first period that the Group has presented its financial
statements under IFRS. The following disclosures are required in the year of
transition. The last financial statements under UK GAAP were for the year
ended 30th June 2005, and the date of transition to IFRS was therefore 1st
July 2004.
a) Reconciliation of equity at 1st July 2004 (date of transition to IFRSs)
Notes Previously Effect of
reported transition Restated
UK GAAP to IFRSs IFRSs
£'000 £'000 £'000
GROUP
NON-CURRENT ASSETS
Investments at fair value 1 65,662 (135) 65,527
__________ __________ _________
CURRENT ASSETS
Other receivables 118 - 118
Cash and cash equivalents 1,615 - 1,615
__________ __________ _________
1,733 - 1,733
__________ __________ _________
TOTAL ASSETS 67,395 (135) 67,260
__________ __________ _________
CURRENT LIABILITIES
Other payables 2 (273) 177 (96)
__________ __________ _________
(273) 177 (96)
__________ __________ _________
NET ASSETS 67,122 42 67,164
__________ __________ _________
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Called-up share capital 710 - 710
Share premium 21,573 - 21,573
Special reserve 56,908 - 56,908
Retained earnings:
Capital 1 (12,298) (135) (12,433)
Revenue 2 229 177 406
__________ __________ _________
TOTAL EQUITY 67,122 42 67,164
========== ========== =========
Notes Previously Effect of
reported transition Restated
UK GAAP to IFRSs IFRSs
£'000 £'000 £'000
COMPANY
NON-CURRENT ASSETS
Investments at fair value 1 65,662 (135) 65,527
__________ __________ _________
CURRENT ASSETS
Other receivables 121 - 121
Cash and cash equivalents 1,606 - 1,606
__________ __________ _________
1,727 - 1,727
__________ __________ _________
TOTAL ASSETS 67,389 (135) 67,254
__________ __________ _________
CURRENT LIABILITIES
Other payables 2 (273) 177 (96)
__________ __________ _________
(273) 177 (96)
__________ __________ _________
NET ASSETS 67,116 42 67,158
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Called-up share capital 710 - 710
Share premium 21,573 - 21,573
Special reserve 56,908 - 56,908
Retained earnings:
Capital 1 (12,298) (135) (12,433)
Revenue 2 223 177 400
__________ __________ _________
TOTAL EQUITY 67,116 42 67,158
========== ========== =========
Notes to the reconciliation of equity at 1st July 2004
1. Investments are designated as held at fair value under IFRSs and
are carried at bid prices which total their fair value of £65,527,000.
Previously, under UK GAAP they were carried at mid prices. The aggregate
differences, being a revaluation downwards of £135,000, also decrease retained
earnings.
2. No provision has been made for the final dividend on the Ordinary shares
for the year ended 30th June 2004 of £177,000. Under IFRSs this is not
recognised until approved by the shareholders.
b) Reconciliation of equity at 30th June 2005
Notes Previously Effect of
reported transition Restated
UK GAAP to IFRS IFRSs
£'000 £'000 £'000
GROUP
NON-CURRENT ASSETS
Investments at fair value 1 78,119 (68) 78,051
__________ __________ _________
CURRENT ASSETS
Other receivables 1,196 - 1,196
Cash and cash equivalents 1,928 - 1,928
__________ __________ _________
3,124 - 3,124
__________ __________ _________
TOTAL ASSETS 81,243 (68) 81,175
__________ __________ _________
CURRENT LIABILITIES
Other payables 2 (684) 71 (613)
__________ __________ _________
(684) 71 (613)
__________ __________ _________
NET ASSETS 80,559 3 80,562
__________ __________ _________
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Called-up share capital 710 - 710
Share premium 21,573 - 21,573
Special reserve 56,908 - 56,908
Retained earnings:
Capital 1 1,141 (68) 1,073
Revenue 2 227 71 298
__________ __________ _________
TOTAL EQUITY 80,559 3 80,562
========== ========== =========
Notes Previously Effect of
reported transition Restated
UK GAAP to IFRSs IFRSs
£'000 £'000 £'000
COMPANY
NON-CURRENT ASSETS
Investments at fair value 1 78,119 (68) 78,051
__________ __________ _________
CURRENT ASSETS
Other receivables 1,199 - 1,199
Cash and cash equivalents 1,919 - 1,919
__________ __________ _________
3,118 - 3,118
__________ __________ _________
TOTAL ASSETS 81,237 (68) 81,169
__________ __________ _________
CURRENT LIABILITIES
Other payables 2 (166) 71 (95)
__________ __________ _________
(166) 71 (95)
__________ __________ _________
NET ASSETS 81,071 3 81,074
__________ __________ _________
EQUITY ATTRIBUTABLE TO EQUITY
HOLDERS
Called-up share capital 710 - 710
Share premium 21,573 - 21,573
Special reserve 56,908 - 56,908
Retained earnings:
Capital 1 1,659 (68) 1,591
Revenue 2 221 71 292
__________ __________ _________
TOTAL EQUITY 81,071 3 81,074
========== ========== =========
Notes to the reconciliation of equity at 30th June 2005
1. Investments are designated as held at fair value under IFRS and
are carried at bid prices which total their fair value of £78,051,000.
Previously, under UK GAAP they were carried at mid prices. The aggregate
differences, being a revaluation downwards of £68,000, also decrease retained
earnings.
2. No provision has been made for the final dividend on the Ordinary shares
for the year ended 30th June 2005 of £71,000. Under IFRS this is not
recognised until approved by the shareholders.
c) Reconciliation of the Statement of Total Return to the Income Statement
Under IFRSs the Income Statement is the equivalent of the Statement of Total
Return reported previously.
Notes 30th June
2005
£'000
Total transfer to reserves
per the Statement of Total Return 13,437
Revaluation of investments
at 1st July 2004 1 135
Revaluation of investments
at 30th June 2005 1 (68)
Add back 2005 dividend 2 71
proposed
_________
Net profit per the Income 13,575
Statement =========
Notes to the reconciliation of profit or loss
1. The portfolio valuations at 1st July 2004 and 30th June 2005 are required
to be valued at fair value under IFRS. These values are lower than previous
valuations by £135,000 and £68,000 respectively.
2. Ordinary dividends declared and paid during the period are dealt with
through the Statement of Changes in Equity.
d) Reconciliation of the Cash Flow Statement as at 30th June 2005
Notes Previously Effect of
reported transition Restated
UK GAAP to IFRS IFRSs
£'000 £'000 £'000
Net cash from operating 1 (541) 1,031 490
activities
Net cash from capital 1 1,031 (1,031) -
expenditure and
financial investment
Equity dividends paid 2 (177) 177 -
Financing 2 - (177) (177)
__________ __________ _________
Increase in cash 313 - 313
========== ========== =========
1. Investing activities are considered to be operating activities of the
company.
2. Ordinary dividends paid are now analysed within financing.
The Directors have declared a final dividend of 0.1p net (2005:
0.1p) per Ordinary share payable on 20th November 2006 to shareholders on the
register at the close of business on 27th October 2006. The ex-dividend date
is 25th October 2006.
The above financial information for the year ended 30th June 2006
does not constitute statutory accounts as defined in section 240 of the
Companies Act 1985 and has been prepared on the basis of the accounting
policies set out in the statutory accounts of the Group for the year ended
30th June 2005 as modified to comply with IFRSs.
The comparative financial information is based on the statutory
final statements for the year ended 30th June 2005. Those financial
statements, upon which the auditors issued an unqualified opinion, have been
delivered to the Registrar of Companies. Statutory financial statements for
the year ended 30th June 2006 will be delivered to the Registrar of Companies.
The annual report will be sent to shareholders in October and will
be available to members of the public from the registered office at 1
Knightsbridge Green, London SW1X 7NE. The Annual General Meeting of the
Company will be held on 16th November 2006 at 12 noon at 1 Knightsbridge
Green, London SW1X 7NE.
ENDS
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