Half-yearly Report
NEW STAR INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED HALF YEAR RESULTS
The Directors announce the unaudited statement of condensed results for the six
months ended 31st December 2007 as follows:
FINANCIAL HIGHLIGHTS
31st December 2007 30th June 2007 % change
PERFORMANCE
Net assets (£'000) 106,725 123,689 (13.7)
Net asset value per Ordinary 150.27p 174.15p (13.7)
share
Mid-market price per Ordinary 121.00p 156.25p (22.6)
share
Discount of price to net asset 19.5% 10.3% -
value
FTSE World Index 132.45 129.72 2.1
FTSE All-Share Index 3,286.67 3,404.14 (3.5)
Six months ended Six months ended
31st December 2006
31st December 2007
REVENUE
Return per Ordinary share 0.62p 0.60p
Dividend per Ordinary share - -
TOTAL RETURN
Net assets total return (13.7%) 8.0%
FTSE All-Share total return (2.1%) 10.0%
CHAIRMAN'S STATEMENT
The six months to 31st December 2007 was a disappointing period for your
Company, with total assets falling 13.7% to £106.7 million. This compares with
a 3.5% fall in the FTSE All-Share Index. At the period end, the net asset value
per Ordinary share was 150.3p. This compares with the launch price of 100p in
May 2000. The FTSE All-Share Index over the same period rose by 10.5%.
Net revenue before tax for the period was £489,000. In common with previous
years, your directors are not recommending the payment of an interim dividend
to shareholders.
Global equities faced volatile and challenging conditions during the period
under review, with the MSCI World Total Return Index gaining just 0.9% in
sterling terms amid fears that contagion from the US sub-prime lending crisis
could seriously damage the global economy. Japan fell 6.1% in sterling terms
while the US fell 0.3%. By contrast, Asia excluding Japan gained 20.7% and
Latin America gained 19.5%. Within Europe, the UK was relatively weak while
Europe excluding the UK rose 3.9% in sterling, aided by the euro's strength.
The weakest sectors were those that suffered directly from the credit market
dislocation and from fears of a consumer-led US slowdown. Media fell 8.5% in
sterling terms, banks fell 5.2%, general financial services fell 3.3% and
retailing fell 2.3%. The best-performing areas included defensive sectors and
sectors that stood to benefit from emerging market economic growth. Chemicals
gained 22.9%, energy returned 17.4%, basic resources gained 17.2% and
telecommunications gained 16.0%.
In the commodities market, oil rose 34.1% to $94.92 in response to fears of
supply shortages while gold responded to the weakening dollar, fears of
financial instability and inflationary pressures by gaining 28.6% to $836.15.
With risk aversion increasing despite monetary easing in the US and the UK,
government bonds benefited from a "flight to quality", with UK gilts returning
8.6%. By contrast, lower-quality bonds underperformed. The JPM EMBI+ Total
Return Index, which tracks emerging market sovereign debt, returned 6.67% in
sterling while high-yielding corporate bonds fell 0.50%.
During the period under review, your Company sold its holdings in Arena
Leisure, the New Star Apollo Hedge Fund, the New Star Firefly Hedge Fund and
the New Star Select Opportunities Fund and reduced its holdings in the New Star
European Growth Fund, the New Star Pan-European Equity Fund and the New Star UK
Growth Fund. The proceeds were invested in the New Star Euro High Yield Fund,
the New Star Financial Opportunities Fund, the New Star Heart of Africa Fund,
the New Star Private Equity Investment Trust and the Skandia UK Strategic Best
Ideas Fund.
Your Company ended the period with 64.4% of its invested assets in retail
funds, 20.8% in hedge funds and the remaining 14.8% in its holding in New Star
Asset Management, investment trust shares and equities.
In recent weeks, economic conditions have deteriorated, with problems
exacerbated by credit market dislocation. Momentum in emerging markets and
positive money supply trends may result in a soft landing but the credit crunch
has increased the risks of more serious dislocation. Central banks have
responded with looser monetary policies but their room for further interest
rate cuts may be constrained by increased inflationary pressures.
Such conditions may affect government bonds. The central bankers' shifting
focus from bearing down on prices towards addressing financial market
dislocation, however, could result in rotation back into equities, assuming the
world economy avoids a full-scale recession.
The unaudited net asset value at 31st January 2008 was 138.16p per Ordinary
share.
James Roe
Chairman
29th February 2008
INTERIM MANAGEMENT REPORT
Performance
In the six months to 31st December 2007 the net asset value per share declined
13.7% to 150.27p. In the same period the share price fell 22.6% to 121.00p:
Further details of the Company's performance may be found in the Chairman's
Statement.
Share capital
At 31st December 2007, the Company had 71,023,695 1p Ordinary shares in issue.
There were no changes to the issued share capital of the Company during the
period.
Risk Management
The principal risks the Company faces in the management of the portfolio are:
Foreign currency risk: a proportion of the Group's portfolio is invested in
investments denominated in foreign currencies and movements in exchange rates
can significantly affect their sterling value. The Investment Manager takes
account of foreign currency risk when making investment decisions. The Company
does not normally hedge against foreign currency movements affecting the value
of the investment portfolio, although hedging techniques may be employed in
appropriate circumstances.
Interest rate risk: the Investment Manager takes account of interest rate risk
when making investment decisions.
Market price risks: the downward movement of shares contained in the portfolio
would lead to a reduction in the Company's net asset value per share. It is the
Board's policy to hold an appropriate spread of investments in order to reduce
any risk arising from factors specific to particular sectors.
Related parties
During the period, Mr Duffield was chairman and a shareholder of New Star Asset
Management Group PLC, the holding company of New Star Asset Management Limited.
Pursuant to an agreement dated 29th January 2001 the Company's investments are
managed by New Star Asset Management Limited. The management fee is payable
quarterly in arrears and is calculated at a rate of 3/16% per quarter of the
total assets of the company and its subsidiaries after deduction of the value
of any Jupiter managed investments and any New Star managed assets (as defined
in the management agreement). Either party may terminate the appointment of the
Investment Manager by giving not less than three months written notice to
expire on the last day of any calendar month. In the six months ended 31st
December 2007, New Star Asset Management Limited received investment management
fees of £139,000 from the Company.
The Company's investments include funds managed by subsidiaries of New Star
Asset Management Group PLC.
Auditors
The half-yearly financial report has not been audited or reviewed by the
auditors
Responsibility Statement
The Directors confirm that to the best of their knowledge:
* The consolidated set of financial statements contained within the half
yearly report to 31st December 2007 has been prepared in accordance with
International Financial Reporting Standard 34 as adopted by the European
Union; and
* The interim management report includes a fair review of the information
required by DTR 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency
Rules.
New Star Asset Management Limited
29th February 2008.
CONSOLIDATED INCOME STATEMENT
for the six months to 31st December 2007
(unaudited)
Six months ended Six months ended
31st December 2007 31st December 2006
Notes Revenue Capital Total Revenue Capital Total
return return
£'000 return return £'000
£'000 £'000
£'000 £'000
Income
Investment income 701 - 701 704 - 704
Other operating 108 - 108 15 - 15
income
Total income 2 809 - 809 719 - 719
Gains and losses on
investments
(Losses)/gains on - (16,431) (16,431) - 7,522 7,522
investments at fair
value through
profit or loss
(Losses)/gains on - (23) (23) - 478 478
forward currency
contracts
Other exchange - (23) (23) - 8 8
(losses)/gains
809 (16,477) (15,668) 719 8,008 8,727
Expenses
Management fees (139) - (139) (133) - (133)
Other expenses (121) - (121) (104) - (104)
(Loss)/profit 549 (16,477) (15,928) 482 8,008 8,490
before finance
costs and tax
Finance costs (60) - (60) (21) - (21)
(Loss)/profit 489 (16,477) (15,988) 461 8,008 8,469
before tax
Tax (50) (216) (266) (38) - (38)
(Loss)/profit for 439 (16,693) (16,254) 423 8,008 8,431
the period
Earnings per share
Ordinary shares 3 0.62 (23.50) (22.88) 0.60 11.27 11.87
(pence)
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 Companies. All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the period.
All income is attributable to the equity holders of the parent company. There
are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2007
(Unaudited)
Share Share Special Retained Total
Capital Premium Reserve Earnings £'000
£'000 £'000 £'000 £'000
At 30th June 2007 710 21,573 56,908 44,498 123,689
Loss for the period - - - (16,254) (16,254)
Dividends paid - - - (710) (710)
At 31st December 2007 710 21,573 56,908 27,534 106,725
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2006
(Unaudited)
Share Share Special Retained Total
Capital Premium Reserve Earnings £'000
£'000 £'000 £'000 £'000
At 30th June 2006 710 21,573 56,908 24,922 104,113
Profit for the period - - - 8,431 8,431
Dividends paid - - - (71) (71)
At 31st December 2006 710 21,573 56,908 33,282 112,473
CONSOLIDATED BALANCE SHEET
at 31st December 2007
31st December 31st December 30th
2007 2006 June
(unaudited) (unaudited) 2007
(audited)
Notes £'000 £'000 £'000
NON-CURRENT ASSETS
Investments at fair value 96,264 110,976 118,168
through
profit or loss
CURRENT ASSETS
Other receivables 77 1,110 1,392
Cash and cash equivalents 11,434 571 4,883
11,511 1,681 6,275
TOTAL ASSETS 107,775 112,657 124,443
Current liabilities
Other payables (1,050) (184) (754)
NET ASSETS 106,725 112,473 123,689
CAPITAL AND RESERVES
Called-up share capital 710 710 710
Share premium 21,573 21,573 21,573
Special reserve 56,908 56,908 56,908
Retained earnings 4 27,534 33,282 44,498
TOTAL EQUITY 106,725 112,473 123,689
NET ASSET VALUE PER 5 150.27 158.36 174.15
ORDINARY SHARE (PENCE)
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31st December 2007
(unaudited)
Six months Six months
ended ended
31st December 31st December
2007 2006
Notes £'000
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit before finance costs and tax (15,928) 8,490
Adjustments for:
Losses/(gains) on investments 21,904 (7,612)
Operating cash flows before movements in 5,976 878
working capital
Decrease/(Increase) in receivables 1,320 (403)
Increase/(decrease) in payables 87 (19)
Net cash from operating activities before 7,383 456
income taxes
Income taxes paid (55) (38)
NET CASH FROM OPERATING ACTIVITIES 6 7,328 418
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (710) (71)
Interest paid (67) (5)
NET CASH USED IN FINANCING ACTIVITIES (777) (76)
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,551 342
Cash and cash equivalents at beginning of 4,883 229
period
CASH AND CASH EQUIVALENTS AT END OF PERIOD 11,434 571
NOTES TO THE ACCOUNTS
for the six months ended 31 December 2007
1. Accounting Policies
The consolidated financial statements on pages 9 to 16 comprise the unaudited
financial results of the Group for the six months to 31st December 2007, and do
not constitute statutory accounts under section 240 of the Companies Act 1985.
Full statutory accounts for the year to 30th June 2007 included an unqualified
audit report and were filed with the Registrar of Companies on 13th November
2007. The auditors report contained no statement under section 237(2) or 237(3)
of the Companies Act 1985.
The interim financial report has been prepared in compliance with International
Accounting Standard 34: Interim Financial Reporting ("IAS34").
The same accounting policies have been followed in the interim financial report
as compared to the accounts for the year ended 30th June 2007.
2. Total Income
For the six months For the six months
ended 31st December ended 31st December
2007 2006
£'000 £'000
Income from listed investments
UK net dividend income 391 466
UK unfranked investment income 310 238
701 704
Other Operating Income
Bank interest receivable 108 15
108 15
Total Income Comprises
Dividends 701 704
Other income 108 15
809 719
3. Return per ordinary share
For the six For the six months
months ended ended 31st December
31st December
2006
2007
£'000 £'000
Revenue return 439 423
Capital return (16,693) 8,008
Total return (16,254) 8,431
Weighted average number 71,023,695 71,023,695
of shares in issue
Revenue return 0.62p 0.60p
Capital return (23.50)p 11.27p
Total return (22.88)p 11.87p
4. Retained earnings and capital reserve
The components of retained earnings are set out below:
31st December 31st December 30th
2007 2006 June
2007
£'000 £'000 £'000
Capital reserve - 3,046 (10,868) (3,318)
realised
Capital reserve - 23,688 43,521 46,745
unrealised
Revenue reserve 800 629 1,071
27,534 33,282 44,498
5. Net asset value per ordinary share
31st December 31st December 30th
2007 2006 June
2007
£'000 £'000 £'000
Net assets attributable to 106,725 112,473 123,689
ordinary shareholders
Ordinary shares in issue at 71,023,695 71,023,695 71,023,695
end of period
Net asset value per 150.27p 158.36p 174.15p
ordinary share
6. Notes to the cash flow statement
Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with a maturity of three months or less.
Purchases and sales of investments are considered to be operating activities of
the company, given its purpose, rather than investing activities. However, the
cash flows associated with these activities are presented below:
Six months ended Six months ended
31st December 2007 31st December 2006
£'000 £'000
Proceeds on disposal of fair value 19,451 4,248
through profit and loss investments
Purchases of fair value through profit (13,977) (5,441)
and loss investments
5,474 (1,193)
7. Contingent Asset
In 2004 the AIC lodged a joint appeal for the payment of investment trust
management fees to be exempt from VAT. In November 2007 HM Revenue & Customs
(HMRC) declared its acceptance that fund management services to investment
trusts are exempt from VAT. This means that VAT is no longer charged on
investment management fees and that the Company is entitled to seek
reimbursement of VAT paid in the past. The Manager has confirmed that it has
lodged claims with HMRC to recover VAT paid from January 2001.
In the absence of a definitive agreement with the Manager or specific guidance
from HMRC on the mechanisms of the reclaim process it is not yet possible to
quantify the amount or timing of any recovery. Accordingly no asset has been
recognised in the accounts at 31st December 2007.
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