Half-yearly Report

NEW STAR INVESTMENT TRUST PLC STATEMENT OF RESULTS FOR THE SIX MONTHS ENDED 31ST DECEMBER 2008 The Directors announce the unaudited statement of condensed results for the six months ended 31st December 2008 as follows: FINANCIAL HIGHLIGHTS 31st December 2008 30th June 2008 % change PERFORMANCE Net assets (Â£'000) 61,771 96,405 (35.9) Net asset value per Ordinary 86.97p 135.74p (35.9) share Mid-market price per Ordinary 59.00p 105.50p (44.1) share Discount of share price to net 32.2% 22.3% - asset value FTSE World Index 103.75 116.42 (10.9) FTSE All-Share Index 2,209.29 2,855.69 (22.6) Six months ended Six months ended 31st December 2007 31st December 2008 REVENUE Return per Ordinary share 1.13p 0.62p Dividend per Ordinary share - - TOTAL RETURN Net assets total return (35.9%) (13.7%) FTSE All-Share total return (21.1%) (2.1%) CHAIRMAN'S STATEMENT The six months to 31st December 2008 was a disappointing period for your Company, with total assets falling 35.9% to Â£61.8 million. This compares with a 22.6% fall in the FTSE All-Share Index. At the period end, the net asset value per Ordinary share was 86.97p. This compares with the launch price of 100p in May 2000. The FTSE All-Share Index over the same period fell by 25.7%. Net revenue before tax for the period was Â£989,000. In common with previous years, your directors are not recommending the payment of an interim dividend to shareholders. Global equities were weak and volatile during the period under review, with the MSCI World Total Return Index falling 8.0% in sterling terms. The worst markdowns came in the autumn as bad news from the financial sector assailed investors and the developed world went into recession, dragging down economic growth rates in emerging markets. The official response was radical as governments injected capital into troubled banks and provided emergency funding to revive inter-bank lending. Leading central banks, meanwhile, responded with exceptional monetary easing. Over the six months, the Federal Reserve reduced its fed funds target rate from 2% to 0.25%, the Bank of England cut the rate from 5% to 2% and the European Central Bank, which had mistakenly tightened its repo rate to 4.25% in July, did a quick reversal and cut it to 2.5%. Latin American emerging markets fared worst, falling 38.4% in sterling terms, principally as a result of falling commodity prices. Over the half year, oil prices fell 71.9% to $39.5 per barrel having peaked at $145.6 in early July, while the Reuters Industrial Commodities Index fell 53.0%. A further reason for regional weakness was investor flight from riskier securities towards perceived safe haven asset classes. Other relatively weak areas within global stock markets included the UK, down 21.1%, Asia excluding Japan, down 16.2%, and Europe excluding the UK, down 13.4%. By contrast, Japanese and US equities were relatively robust, with Tokyo gaining 3.8% and Wall Street falling 2.0%. Such relative strength was, however, due to currency changes, with the pound falling 27.8% against the dollar and 38.2% against the yen. The US currency benefited from its safe haven status while the yen benefited from the unwinding of the "carry trade", which had involved investors borrowing in low-yielding currencies such as the yen and investing in higher yielding asset classes. Investor flight towards safer securities in the face of deteriorating economic conditions was apparent in sector returns and in the diverging fortunes of big and smaller companies. Basic materials fell 42.1%, energy fell 28.5%, financial stocks fell 15.8% and industrial stocks fell 14.1%. By contrast, healthcare gained 20.5%, telecommunications gained 7.2% and consumer services gained 5.9%. Blue chip stocks in the UK's FTSE 100 Index fell 19.6% while small and medium-sized companies fell 34.1% and 29.2% respectively. 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 15.4%. By contrast, lower-quality bonds underperformed, with high-yielding UK corporate bonds falling 19.8%. Your Company's portfolio was significantly reshaped during the period under review. Purchases included the BH Global Hedge Fund, the Blackrock Gold & General Fund, a Chinese equities exchange-traded fund ("ETF"), the GWI Brazil Fund, the Gold Bullion Securities ETF and the Occam Asia Focus Fund. In addition, the Company traded in the New Star Indian Equity Fund and in ETFs giving exposure to US financial sector companies, house builders and oil services companies. A number of New Star funds were sold during the period, including the New Star Eastern European, Korean and Smaller Companies Portfolios, European Leaders, Financials Hedge, Global Financials, Global Strategic Capital, Hidden Value, Pan-European Equity and UK Growth while the International Property Fund holding was reduced. Your Company ended the period with 70.9% of its invested assets in retail funds, 3.0% in investment trusts, 5.2% in hedge funds and the remaining 20.9% in other securities. In early 2009, the developed world was in recession. This was reflected in a de-rating of global equities, which were trading on a trailing earnings multiple of 9.8 at 31st December 2008 as measured by Datastream against 31.0 in April 2000. The market's dividend yield, meanwhile, rose in November to a 26-year high of 4.6% and ended 2008 at 4.0%. The unprecedented official response to the financial crisis and recessionary conditions may lead to some revival of economic momentum in 2009 but the sclerosis in credit markets, weak consumer and business confidence and rising unemployment may dampen economic confidence for a considerable time. The high dispersion of returns between sectors and individual stocks is likely to persist in response to these challenging economic circumstances. In such an environment, careful stock selection will be particularly important. The un-audited net asset value at 31st January 2009 was 85.52p per Ordinary share. James Roe Chairman 26th February 2009 INTERIM MANAGEMENT REPORT Performance In the six months to 31st December 2008 the net asset value per share declined 35.9% to 86.97p. In the same period the share price fell 44.1% to 59.0p. This compares to declines of 22.6% and 10.9% respectively in the FTSE All-Share Index and the FTSE World Index. Further details of the Company's performance may be found in the Chairman's Statement. Investment policy On 1st October 2008 shareholders approved a new investment policy. Under the new investment policy the Company will allocate its assets actively to global investment opportunities while spreading investment risk through investment in equity, bond, commodity, real estate, currency and other asset classes. Aggregate asset class exposure to any one of the United States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan or Emerging Markets and to any individual industry sector will be limited to 50% of the Company's net assets. It is anticipated that under the new investment policy a lower proportion of the Company's assets will be invested in funds managed by New Star. Full details of the new investment policy may be found in the annual accounts for the year ended 30th June 2008 and the Notice of Annual General Meeting dated 5th September 2008. Share capital At 31st December 2008, 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 and uncertainties that the Company faces in the management of the portfolio are: Inappropriate strategy: inappropriate long-term strategy, asset allocation and manager selection might lead to the underperformance of the Company. The Company's strategy is kept under regular review by the Board and in September 2008 the Company proposed the adoption of a new, more flexible, investment policy. This new investment policy was approved by shareholders on 1st October 2008. Business conditions and general economy: the Company's investment returns are influenced by general economic conditions in the UK and globally. Factors such as interest rates, inflation, investor sentiment and the availability and cost of credit could adversely affect investment returns. 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 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 Manager takes account of interest rate risk when making investment decisions Market price risk: 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 a particular investment or sector. Manager: the quality of the management team employed by the Manager is an important factor in delivering good performance and the loss by New Star of key staff could adversely affect investment returns. 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. 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 the deduction of the value of any New Star managed assets (as defined in the management agreement). Since 1st September 2008, the Manager has also been entitled to a performance fee of 15% of the growth in net assets over a hurdle of 3 month Sterling LIBOR plus 1% per annum, payable six monthly in arrears, subject to a high water mark. The aggregate of the Company's management fee and performance fee are subject to a cap of 4.99% of net assets in any financial period (with any performance fee in excess of this cap capable of being earned in subsequent periods). The performance fee will be charged 100% to capital, in accordance with the Board's expectation of how any outperformance will be generated. In the six months ended 31st December 2008, New Star Asset Management Limited received investment management fees of Â£88,000 (2007: Â£ 139,000) from the Company. Either party may terminate the appointment of the Manager by giving not less than three months written notice to expire on the last day of any calendar month. The Company's investments include funds managed by subsidiaries of New Star Asset Management Group PLC ("New Star Group"). On 30th January 2009 the New Star Group announced the terms of a recommended acquisition of the New Star Group by Henderson Group PLC ("Henderson"). It is anticipated that the acquisition, which is subject to the approval of the shareholders of both the New Star Group and Henderson, will be completed by the end of March 2009. The combined group is expected to be the fifth largest UK retail fund manager with in excess of Â£15 billion under management. Auditors The half-yearly financial report has been reviewed, but not audited, by Ernst & Young pursuant to the Auditing Practices Board guidance on the Review of Interim Financial Information. Responsibility Statement We confirm that to the best of our knowledge: * The condensed set of financial statements contained within the half yearly report to 31st December 2008 has been prepared in accordance with International Financial Reporting Standards. * The interim management report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on financial statements * The interim management report includes a description of the principal risks and uncertainties for the remaining six months of the year. * The interim management report includes a fair review of the information concerning related party transactions as required by DTR 4.2.8R of the FSA's Disclosure and Transparency Rules. New Star Asset Management Limited 26th February 2009 INDEPENDENT REVIEW REPORT Introduction We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31st December 2008 which comprises the consolidated income statement, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and related explanatory notes 1 to 10. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' Responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union. Our Responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31st December 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. Ernst & Young LLP London 26th February 2009 SCHEDULE OF TOP TWENTY INVESTMENTS At 31st December 2008 Schedule of investments Activity Value % of Â£'000 portfolio New Star UK Alpha Fund Investment fund 5,418 11.18 Blackrock Gold & General Income Fund Investment fund 3,749 7.74 New Star Euro High Yield Fund Investment fund 3,607 7.45 Natixis Loomis Sayles Multisector Income Investment fund 3,255 6.72 Fund Lyxor Gold Bullion Securities Investment fund 3,253 6.72 Investec Africa Fund Investment fund 3,179 6.57 New Star European Growth Fund Investment fund 3,070 6.34 Skandia UK Strategic Best Ideas Fund Investment fund 2,694 5.56 Synergy Fund Limited B1 Investment fund 1,959 4.04 Global Property Fund Investment fund 1,921 3.97 New Star Global Fund - British Lion Investment fund 1,578 3.26 Portfolio iShares FTSE / Xinhua China 25 Investment fund 1,547 3.19 New Star Heart of Africa Fund Investment fund 1,394 2.88 Occam Umbrella Asia Focus Fund Investment fund 1,389 2.87 New Star International Property Fund Investment fund 1,278 2.64 New Star Global Fund - China Investment fund 1,004 2.07 The Sierra Investment Fund Investment fund 1,000 2.06 Corndon Limited Investment fund 1,000 2.06 New Star Global Fund - UK Smaller Investment fund 990 2.04 Companies Portfolio New Star Private Equity Investment Trust Investment company 884 1.82 44,169 91.18 Balance held in 15 investments 4,271 8.82 Total investments 48,440 100.0 All investments, listed above, are unlisted with the exception of New Star Private Equity Investment Trust and iShares FTSE / Xinhua China 25. CONSOLIDATED INCOME STATEMENT for the six months to 31st December 2008 Six months ended 31st December 2008 (unaudited) Notes Revenue Capital Total return return Â£'000 Â£'000 Â£'000 INCOME Investment income 918 - 918 Other operating income 163 - 163 Total income 2 1,081 - 1,081 GAINS AND LOSSES ON INVESTMENTS Losses on investments at - (34,928) (34,928) fair value through profit or loss Gains on index future - 25 25 contracts Losses on forward currency - (302) (302) contracts Other exchange gains / - 285 (23) (losses) 1,081 (34,920) (33,839) EXPENSES Investment Management fees 3 (88) - (88) VAT refund 4 170 - 170 Other expenses (103) (1) (103) LOSS BEFORE FINANCE COSTS 1,060 (34,921) (33,861) AND TAX Finance costs (71) - (71) LOSS BEFORE TAX 989 (34,921) (33,932) Tax (50) (216) (266) LOSS FOR THE PERIOD 805 (34,921) (34,116) EARNINGS PER SHARE Ordinary shares (pence) 5 1.13 (49.17) (48.04) 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 INCOME STATEMENT for the six months to 31st December 2007 and the year ended 30th June 2008 Six months ended Year ended 31st December 2007 30th June 2008 (unaudited) (audited) Notes Revenue Capital Total Revenue Capital Total return return Â£'000 return return Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 INCOME Investment income 701 - 701 1,029 - 1,029 Other operating 108 - 108 376 - 376 income Total income 2 809 - 809 1,405 - 1,405 GAINS AND INVESTMENT LOSSES ON INVESTMENTS Losses on - (16,431) (16,431) - (27,203) (27,203) investments at fair value through profit or loss Gains on index - - - - - - future contracts Losses on forward - (23) (23) - (24) (24) currency contracts Other exchange gains - (23) (23) - 191 191 / (losses) 809 (16,477) (15,668) 1,405 (27,036) (25,631) EXPENSES Investment 3 (139) - (139) (263) - (263) Management fees VAT refund 4 - - - - - - Other expenses (121) - (121) (241) (1) (242) LOSS BEFORE FINANCE 549 (16,477) (15,928) 901 (27,037) (26,136) COSTS AND TAX Finance costs (60) - (60) (60) - (60) LOSS BEFORE TAX 489 (16,477) (15,988) 841 (27,037) (26,196) Tax (50) (216) (266) (170) (208) (378) LOSS FOR THE PERIOD 439 (16,693) (16,254) 671 (27,245) (26,574) EARNINGS PER SHARE Ordinary shares 5 0.62 (23.50) (22.88) 0.94 (38.36) (37.42) (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 31stDecember 2008 (Unaudited) Share Share Special Retained Total Capital Premium Reserve Earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30th June 2008 710 21,573 56,908 17,214 96,405 Loss for the period - - - (34,116) (34,116) Dividends paid - - - (518) (518) At 31st December 2008 710 21,573 56,908 (17,420) 61,771 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31stDecember 2007 (Unaudited) Share Share Special Retained Total Capital Premium Reserve Earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'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 yearended 30th June 2008 (Audited) Share Share Special Retained Total Capital Premium Reserve Earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30th June 2007 710 21,573 56,908 44,498 123,689 Loss for the year - - - (26,574) (26,574) Dividends paid - - - (710) (710) At 30th June 2008 710 21,573 56,908 17,214 96,405 CONSOLIDATED BALANCE SHEET at 31st December 2008 31st December 31st December 30th June 2008 2007 2008 (unaudited) (unaudited) (audited) Notes Â£'000 Â£'000 Â£'000 NON-CURRENT ASSETS Investments at fair value 48,440 96,264 85,568 through profit or loss CURRENT ASSETS Other receivables 8,744 77 118 Cash and cash equivalents 6,728 11,434 11,834 15,472 11,511 11,952 TOTAL ASSETS 63,912 107,775 124,443 Other payables (2,141) (1,050) (1,115) NET ASSETS 61,771 106,725 96,405 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 6 (17,420) 27,534 17,214 TOTAL EQUITY 61,771 106,725 96,405 NET ASSET VALUE PER 7 86.97 150.27 135.74 ORDINARY SHARE (PENCE) CONSOLIDATED CASH FLOW STATEMENT for the sixmonths ended 31st December 2008 Notes Six months Six months Year ended ended ended 31st December 31st December 30th June 2008 2007 2008 (unaudited) (unaudited) (audited) Â£'000 Â£'000 CASH FLOWS FROM OPERATING ACTIVITIES Loss before finance costs and (33,861) (15,928) (26,136) tax Adjustments for: Losses on investments 37,128 21,904 32,600 Operating cash flows before 3,267 5,976 6,464 movements in working capital (Increase) /decrease in (8,635) 1,320 1,324 receivables Increase in payables 1,026 87 514 Net cash from operating (4,342) 7,383 8,302 activities before income taxes Income taxes paid (175) (55) (221) NET CASH FROM OPERATING 8 (4,517) 7,328 8,081 ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid (518) (710) (710) Interest paid (71) (67) (60) NET CASH USED IN FINANCING (589) (777) (770) ACTIVITIES NET (DECREASE) / INCREASE IN (5,106) 6,551 7,311 CASH AND CASH EQUIVALENTS Cash and cash equivalents at 11,834 4,883 4,523 beginning of period CASH AND CASH EQUIVALENTS AT 6,728 11,434 11,834 END OF PERIOD NOTES TO THE INTERIM FINANCIAL REPORT for the six months ended 31 December 2008 1. Accounting Policies The consolidated Interim Financial Report above comprise the unaudited financial results of the Company and its subsidiary, JIT Securities Limited, for the six months to 31st December 2008, and do not constitute statutory accounts under the Companies Act 1985. Full statutory accounts for the year to 30th June 2008 included an unqualified audit report, did not contain any statements under section 237(2) or section 237(3) of the Companies Act 1985 and have been filed with the Registrar of Companies. The interim financial report has been prepared in compliance with International Financial Reporting Standards (IFRS) adopted by the International Financial Reporting Interpretations Committee of the IASB (IFRIC). And are presented in pounds sterling, as this is the principal currency in which the Group's transactions are undertaken. The same accounting policies have been followed in the interim financial report as compared to the accounts for the year ended 30th June 2008, which are prepared in accordance with IFRSs as adopted by the European Union. 2. Total Income For the six For the six For the year months ended months ended ended 31st December 31st December 30th June 2008 2007 2008 Â£'000 Â£'000 Â£'000 Income from listed investments UK net dividend income 308 391 460 UK unfranked investment 555 310 569 income Fixed interest income 27 - - Interest on convertible 28 - 2 loan stock 918 701 1,029 Other Operating Income Bank interest receivable 155 108 374 HMRC interest received 8 - - 163 108 376 Total Income Comprises Dividends 918 701 1,031 Other income 163 108 374 1,081 809 1,405 3. Investment management fees For the six For the six 30th June months ended months ended 31st December 31st December 2008 2008 2007 Â£'000 Â£'000 Â£'000 Investment management fee 88 139 263 Performance fee - - - 88 139 263 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 the deduction of the value of any New Star managed investments (as defined in the management agreement). With effect from 1st September 2008, the Manager has also been entitled to a performance fee of 15% of the growth in net assets over a hurdle of 3 month Sterling LIBOR plus 1% per annum, payable six monthly in arrears, subject to a high watermark. The aggregate of the Company' management fee and any performance fee are subject to a cap of 4.99% of net assets in any financial year (with any performance fee in excess of this cap capable of being earned in subsequent periods). The performance fee will be charged 100% to capital, in accordance with the Board's expectation of how any outperformance will be generated. 4. VAT recoverable The Association of Investment Companies and JPMorgan Claverhouse Investment Trust lodged a join appeal in 2004 for the payment of management and performance fees ("fees") by investment trusts to be treated as exempt from VAT. In June 2007 the European Court of Justice ("ECJ") found in favour of the appellants, declaring that investment trusts should be treated as special investment funds and thus exempt from VAT on fees. Her Majesty's Revenue and Customs ("HMRC") has announced that it will not appeal against this decision, enabling the Manager (New Star Asset Management Limited) and its former manager (Jupiter Asset Management Limited) to reclaim a proportion of VAT paid on behalf of the Company to HMRC. As result of claims lodged with HMRC, the Company has to date received a refund of Â£30,000 from the former manager (Jupiter Asset Management Limited) in respect of the period 1st January 2001 to 31st March 2001 and this sum has been recognised in these accounts. The Manager is negotiating with HMRC regarding a refund of VAT paid on fees in the period 1st April 2001 to 30th June 2007. Taking into account HMRC's acceptance of the ECJ decision and the status of negotiations between HMRC and the Manager, the Directors believe it is virtually certain that the Company will receive a refund from the Manager of Â£ 140,000 in respect of the period 1st April 2001 to 30th June 2007 and this sum has been recognised in these accounts. 5. Return per ordinary share 31st December 31st December 30th June 2008 2007 2008 Â£'000 Â£'000 Â£'000 Revenue return 805 439 671 Capital return (34,921) (16,693) (27,245) Total return (34,116) (16,254) (26,574) Weighted average number 71,023,695 71,023,695 71,023,695 of shares in issue Revenue return 1.13p 0.62p 0.94p Capital return (49.17)p (23.50)p (38.36)p Total return (48.04)p (22.88)p (37.42)p 6. Retained earnings The components of retained earnings are set out below: 31st December 31st December 30th June 2008 2007 2008 Â£'000 Â£'000 Â£'000 Gains on investments sold 498 3,046 4,269 Investment holding gains (19,237) 23,688 11,913 Revenue reserve 1,319 800 1,032 (17,420) 27,534 17,214 7. Net asset value per ordinary share 31st December 31st December 30th June 2008 2007 2008 Â£'000 Â£'000 Â£'000 Net assets attributable to 61,771 106,725 96,405 ordinary shareholders Ordinary shares in issue at 71,023,695 71,023,695 71,023,695 end of period Net asset value per 86.97p 150.27p 135.74p ordinary share 8. 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. Cash flows from operating activities Included within the cash flows from operating activities are the cash flows associated with the purchases and sales of investments, as these are not considered to be investment activities, given the purpose of the Company. Cash flows from operating activities can therefore be analysed as follows: 31st December 31st December 30th June 2008 2007 2008 Â£'000 Â£'000 Â£'000 Proceeds on disposal of 41,202 19,451 23,611 fair value through profit and loss investments Purchases of fair value (46,252) (13,977) (17,054) through profit and loss investments Net cash flows from (5,050) 5,474 6,557 investment transactions Cash flows from other 533 1,854 1,524 operating activities Net cash from operating (4,517) 7,328 8,081 activities 9. Related party transactions The Company's investments are managed by New Star Asset Management Limited. 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. On 1st September 2008 the Company entered into a new management agreement with New Star Asset Management Limited. Details of the management fee payable to New Star Asset Management Limited may be found in Note 3 above. The Company's investments include funds managed by subsidiaries of New Star Asset Management Group PLC. There were no other related party transactions during the period that materially affected the financial position or performance of the Group. 10. Comparative information The financial information contained in the half year report to 31st December 2008 do not constitute statutory accounts under the Companies Act 1985. The financial information for the six months to 31st December 2008 and 2007 has not been audited. The information for the year ended 30th June 2008 has been extracted from the latest published audited financial statements. The audited financial statements for the year ended 30th June 2008 have been filed with the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain any statements under section 237(2) or section 237(3) of the Companies Act 1985. 11. Website The Company's accounts for the six months ended 31st December 2008 may be found at: www.newstaram.com/alternative-investments/closed-end-funds

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