Half-yearly Report

NEW STAR INVESTMENT TRUST PLC INTERIM REPORT for the six months ended 31st December 2012 INVESTMENT OBJECTIVE The Company's objective is to achieve long-term capital growth. REGISTERED OFFICE 1 Knightsbridge Green, London, SW1X 7QA Company Number 3969011 COMPANY INFORMATION DIRECTORS G Howard-Spink (Chairman) J L Duffield (Deputy Chairman) M J Gregson INVESTMENT MANAGER Brompton Asset Management LLP 1 Knightsbridge Green, London SW1X 7QA (Authorised and Regulated by the Financial Services Authority) SECRETARY AND ADMINISTRATOR Phoenix Administration Services Limited Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW Telephone: 01245 398950 Facsimile: 01245 398952 SOLICITORS Olswang LLP 90 High Holborn, London WC1V 6XX AUDITORS Ernst & Young LLP 1 More London Place, London SE1 2AF CUSTODIAN Brown Brothers Harriman & Co Park House, 16 - 18 Finsbury Circus, London EC2M 7EB REGISTRARS Equiniti Limited Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA Telephone: 0871 384 2549 (calls cost 8p per minute plus network charges) Website: www.shareview.co.uk WEBSITE www.nsitplc.com The Company's shares are traded on the London Stock Exchange and their prices are shown in the Financial Times under "Investment Companies". FINANCIAL HIGHLIGHTS 31st December 30th June % 2012 2012 Change PERFORMANCE 71,691 68,067 5.3 Net assets (£'000) 71,691 68,067 5.3 Net asset value per Ordinary share 100.94p 95.84p 5.3 Mid-market price per Ordinary share 63.50p 66.50p (4.5) Discount of share price to net asset value 37.1% 30.6% n/a FTSE World Index (total return, sterling adjusted) 641.59 603.27 6.4 FTSE All-Share Index (total return) 4,458.04 4,101.28 8.7 Six months Six months ended ended 31st December 31st December 2012 2011 REVENUE Return per Ordinary share 0.24p 0.02p Dividend per Ordinary share - - TOTAL RETURN Net assets 5.3% (8.1)% FTSE World Index 6.4% (8.2)% CHAIRMAN'S STATEMENT Your Company's net assets rose 5.3% to £71.7 million over the half year to 31st December 2012. Over this period, the FTSE World Total Return Index gained 6.4% while the FTSE All-Share Total Return Index gained 8.7%. At the period end, the net asset value per ordinary share was 100.94p. The Company's cautious positioning, with cash and cash equivalents accounting for a substantial proportion of its assets, was the principal factor behind this marginal underperformance relative to global equities. The net revenue gain for the period was £172,000. As in previous years, your directors are not recommending payment of an interim dividend to shareholders. Market review Increasing optimism that the eurozone crisis would be resolved was a key driver of stockmarkets over the period under review. Shares began to rally in late July after Mario Draghi, the European Central Bank (ECB) president, said he was `ready to do whatever it takes to preserve the euro' adding that `believe me, it will be enough'. Policy action, he said, could include buying bonds issued by weaker member countries to drive down yields. A second factor was the evidence that the US was regaining economic momentum and that Congress would agree terms to prevent the country going over its `fiscal cliff', triggering mandatory tax rises and budget cuts of such size that recession would result. The US reported economic growth for the second and third quarters of 2012 in contrast to the eurozone, which contracted as a result of recessions in Greece, Italy, Portugal and Spain. Monetary authorities responded to economic strains with various initiatives. The ECB reduced its repo rate by a quarter percentage point to 0.75% in July while the Bank of England announced a £50 billion increase in its asset purchase programme. In September, the US Federal Reserve announced `QE3', an open-ended $40-billion-a-month programme to buy mortgage-backed securities, adding that it would maintain ultra-low interest rates until 2015. The dollar weakened in response, falling 3.5% against sterling and 3.7% against the euro. Geographically, emerging markets outperformed, gaining 9.9%, with Asia returning 11.3%. Among developed markets, Europe excluding the UK gained 15.3%. Currency weakness affected Japanese and US returns, up 1.3% and 2.4% respectively. At the sector level, financial stocks outperformed as euro confidence revived, returning 14.1%. Other strong sectors included industrials, up 9.2%, and basic materials, up 7.4%. Defensive areas were weak, with utilities down 0.9%. In bond markets, reviving eurozone confidence resulted in outperformance among peripheral countries such as Italy and Spain, where government bonds returned 11.4% and 9.8% respectively. Emerging market bonds also outperformed, returning 6.5%. By contrast, UK gilts returned 0.7%. Portfolio review During the period under review, a net £4.2 million was invested in markets, with seven holdings added, two sold and four reduced. Of the additions, IFDS Brompton Global Income and IFDS Brompton Diversified are multi-asset class funds while Brompton UK Quant invests in UK equities. In Asia, the company bought First State Indian Subcontinent while Liontrust Asia Income was substituted for Liontrust Asia. In Europe, Standard Life European Income was substituted for SW Mitchell Small Cap European while Fidelity Global Inflation-Linked Bond was added in fixed income. The partial disposals comprised Atlantis China, Henderson Private Equity, M&G Optimal Income and Polar Capital Global Technology. Your Company ended the period with 62.5% of its assets in retail funds, 5.2% in investment trusts, 3.8% in exchange-traded funds, 3.2% in hedge funds, 7.2% in other securities and 18.1% in cash. Geographically, the biggest non-cash exposures were the UK, at 22.3%, Europe excluding the UK, at 12.8%, and emerging markets, at 12.4%. In asset class terms, the biggest non-cash holdings were in equities, at 61.6%, and commodities, at 11.2%. Outlook Economic growth is likely to regain momentum in 2013 for various reasons. First, the global inflation-adjusted money supply, typically a precursor of economic growth, was expanding in late 2012. The strongest growth was in the US and the eurozone core countries while Japanese and UK monetary conditions were also improving. Secondly, yield spreads between high-quality and low-quality bonds narrowed in late 2012, improving the prospects for companies wishing to raise capital. Thirdly, sentiment among businesses and consumers, though not universally positive, was broadly robust. One reason for this was the gradual US house price recovery; another was that US financial service burdens as a percentage of disposable incomes had fallen to levels not seen since the 1980s. The degree to which such trends will feed through into sustained stockmarket performance is, however, unclear. Sentiment among global fund managers ended 2012 near the top of its recent range, suggesting possible over-optimism. This may lead to selling at some point. One possibility is that economic growth might pick up to the point where the liquidity created by inflation-adjusted money supply rises is absorbed. Such a trend may be felt first in bond markets, leading to pressure on equity valuations. In such circumstances, relative performance among stocks and sectors is likely to vary significantly, emphasising the importance of security selection in generating performance. The published unaudited net asset value at 31st January 2013 was 106.24p per ordinary share. Geoffrey Howard-Spink Chairman 22nd February 2013 DIRECTORS' REPORT Performance In the six months to 31stDecember 2012 the net asset value per Ordinary share increased by 5.3% to 100.94p. In the same period the share price decreased by 4.5% to 63.50p. This compares to increases of 8.7% and 6.4% 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 objective The Company's investment objective is to achieve long-term capital growth. Investment policy The Company's investment policy is to allocate assets to global investment opportunities through investment in equity, bond, commodity, real estate, currency and other markets. The Company's assets may have significant weightings to any one asset class or market, including cash. The Company will invest in pooled investment vehicles, exchange traded funds, futures, options, limited partnerships and direct investments in relevant markets. The Company may invest up to 15% of its net assets in direct investments in relevant markets. The Company will not follow any index with reference to asset classes, countries, sectors or stocks. 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, such values being assessed at the time of investment and for funds by reference to their published investment policy or, where appropriate, their underlying investment exposure. The Company may invest up to 20% of its net asset value in unlisted securities (excluding unquoted pooled investment vehicles) such values being assessed at the time of investment. The Company will not invest more than 15% of its net assets in any single investment, such values being assessed at the time of investment. Derivative instruments and forward foreign exchange contracts may be used for the purposes of efficient portfolio management and currency hedging. Derivatives may also be used outside of efficient portfolio management to meet the Company's investment objective. The Company may take outright short positions in relation to up to 30% of its net assets, with a limit on short sales of individual stocks of up to 5% of its net assets, such values being assessed at the time of investment. The Company may borrow up to 30% of net assets for short-term funding or long-term investment purposes. No more than 10%, in aggregate, of the value of the Company's total assets may be invested in other closed-ended investment funds except where such funds have themselves published investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds. Share capital The Company's share capital comprises 305,000,000 Ordinary shares of 1p each, of which 71,023,695 (2011: 71,023,695) have been issued fully paid. No Ordinary shares are held in treasury, and none were bought back or issued during the six months to 31st December 2012. Risk management The principal risks associated with the Company that have been identified by the Board, together with the steps taken to mitigate them, are as follows: Investment 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. Investment performance is discussed at every Board meeting and the Directors receive a monthly report which details the Company's asset allocation, portfolio changes and performance. 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. The Board regularly considers the economic environment in which the Company operates. The portfolio is managed with a view to mitigating risk by investing in a spread of different asset classes and geographic regions. Portfolio risks - market price, foreign currency and interest rate risks: the downward valuation of investments contained in the portfolio would lead to a reduction in the Company's net asset value. A proportion of the Company's portfolio is invested in investments denominated in foreign currencies and movements in exchange rates can significantly affect their sterling value. It is the Board's policy to hold an appropriate spread of investments in order to reduce the risk arising from factors specific to a particular investment or sector. The Investment Manager takes account of foreign currency risk and interest rate 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. Investment Manager: the quality of the management team employed by the Investment Manager is an important factor in delivering good performance and the loss by the Investment Manager of key staff could adversely affect investment returns. With effect from the beginning of 2011 the Company's portfolio has been managed by Gill Lakin. The Board receives a monthly financial report which includes information on performance, and a representative of the Investment Manager attends each Board meeting. The Board is kept informed of any personnel changes to the investment team employed by the Investment Manager. Tax and regulatory risks: a breach of sections 1158 to 1165 Corporation Tax Act 2010 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to United Kingdom capital gains tax. A breach of the UKLA Listing Rules could result in suspension of the Company's shares, while a breach of company law could lead to criminal proceedings, or financial or reputational damage. The Board employs Brompton Asset Management LLP as Investment Manager and Phoenix Administration Services Limited as Company Secretary and Administrator to help manage the Company's legal and regulatory obligations. The Board receives a monthly financial report which includes information on the Company's compliance with section 1158. Operational: disruption to, or failure of, the Investment Manager's and Administrator's accounting, dealing or payment systems or the Custodian's records could prevent the accurate reporting and monitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service. Investment Management Arrangements and Related Party Transactions In common with most investment trusts the Company does not have any executive directors or employees. The day-to-day management and administration of the Company, including investment management, accounting and company secretarial matters, and custodian arrangements are delegated to specialist third party service providers. Details of related party transactions are contained in the Annual Report. There have been no material transactions with related parties during the period which have had a significant impact on the performance of the Company. Going Concern The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the accounts as the assets of the Company consist mainly of securities that are readily realisable or cash and it has no significant liabilities. Accordingly, the Company has adequate financial resources to continue in operation existence for the foreseeable future. Auditors The half year financial report has been reviewed, but not audited, by Ernst & Young LLP pursuant to the Auditing Practices Board guidance on the Review of Interim Financial Information. Responsibility statement The Directors named on page 2 confirm that to the best of their knowledge: * The condensed set of financial statements contained within the half year financial report to 31st December 2012 has been prepared in accordance with International Accounting Standard 34 `Interim Financial Reporting'; * The Chairman's statement includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the financial statements; * The Chairman's statement includes a fair review of the potential risks and uncertainties for the remaining six months of the year; * The Director's report includes a fair review of the information concerning related party transactions and changes since the last annual report. By order of the Board Phoenix Administration Services Limited 22nd February 2013 INDEPENDENT REVIEW REPORT TO NEW STAR INVESTMENT TRUST PLC Introduction We have been engaged by the Company to review the condensed set of financial statements in the half year financial report for the six months ended 31st December 2012 which comprises the consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated balance sheet, consolidated cash flow statement and related explanatory notes 1 to 8. We have read the other information contained in the half year 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 International Standard on Review Engagements 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 year financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half year 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 year 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 year 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 2012 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 22nd February 2013 SCHEDULE OF TOP TWENTY INVESTMENTS at 31st December 2012 Holding Activity Bid-market Investment value % of £'000 portfolio Henderson Euro Special Situations Investment Fund 7,798 13.21 BlackRock Gold & General Fund Investment Fund 5,361 9.08 Investec Africa Fund Investment Fund 4,010 6.79 Fundsmith Equity Fund Investment Fund 3,881 6.57 Artemis UK Special Situations Fund Investment Fund 3,023 5.12 Trojan Investment Fund Investment Fund 3,002 5.09 Gold Bullion Securities ETF Fund Exchange Traded 2,733 4.63 Brompton UK Quant Fund Investment Fund 2,582 4.37 Aquilus Inflection Fund Investment Fund 2,265 3.84 Aberforth Geared Income Trust Investment Company 2,124 3.60 IFDS Brompton Income Fund Investment Fund 1,752 2.97 IFDS Brompton Diversified Fund Investment Fund 1,697 2.87 Neptune Russia & Greater Russia Fund Investment Fund 1,604 2.72 First State Indian Subcontinent Fund Investment Fund 1,562 2.65 Polar Capital Global Technology Fund Investment Fund 1,550 2.63 PFS Brompton UK Recovery Unit Trust Investment Fund 1,512 2.56 Standard Life Investment Euoprean Income Investment Fund 1,456 2.47 M&G Optimal Income Fund Investment Fund 1,450 2.46 Fidelity Global Inflation Linked Investment Bond Fund 1,427 2.42 Aberdeen Asia Pacific Fund Investment Fund 1,293 2.19 52,082 88.24 Balance held in 16 investments 6,939 11.76 Total investments 59,021 100.00 The investment portfolio can be further analysed as follows: Equities (including investment companies) 5,683 Loan 213 Investment funds and ETFs 53,125 59,021 All the Company's investments are either unlisted or are unit trust/OEIC funds with the exception of Henderson Private Equity Investment Trust, Aberforth Geared Income Trust, BH Global Limited, MAM Funds, Gold Bullion Securities ETF, Immedia Broadcasting, Westhouse Holdings and Bumi Plc. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 31st December 2012 Six months ended 31st December 2012 (unaudited) Notes Revenue Capital Total Return Return Return £'000 £'000 £'000 INCOME Investment income 486 - 486 Other operating income 3 - 3 Total income 2 489 - 489 GAINS AND LOSSES ON INVESTMENTS Gains on investments at fair value through profit or loss - 3,771 3,771 Other exchange losses - (281) (281) Management fee rebates - 26 26 489 3,516 4,005 EXPENSES Management fees 3 (244) - (244 Other expenses (115) - (115) (359) - (359) PROFIT BEFORE FINANCE COSTS AND TAX 130 3,516 3,646 Finance costs - - - PROFIT BEFORE TAX 130 3,516 3,646 Tax 42 (64) (22) PROFIT FOR THE PERIOD 172 3,452 3,624 EARNINGS PER SHARE Ordinary shares (pence) 4 0.24 4.86 5.10 The total column of this statement represents the Group's profit and loss account, 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 COMPREHENSIVE INCOME for the six months ended 31st December 2011 and the year ended 30th June 2012 Six months ended Year ended 31st December 2011 30th June 2012 (unaudited) (audited) Notes Revenue Capital Total Revenue Capital Total Return Return Return Return Return Return £'000 £'000 £'000 £'000 £'000 £'000 INCOME Investment income 318 - 318 468 - 468 Other operating income 5 - 5 17 - 17 Total income 2 323 - 323 485 - 485 GAINS AND LOSSES ON INVESTMENTS Losses on investments at fair value through profit or loss - (6,779) (6,779) - (7,824) (7,824) Other exchange gains - 189 189 - 65 65 Management fee rebates - 70 70 - 141 141 323 (6,520) (6,197) 485 (7,618) (7,133) EXPENSES Management fees 3 (255) - - (513) - (513) VAT Recovery - - - 35 - 35 Other expenses (121) - (121) (249) - (249) (376) - (376) (727) - (727) LOSS BEFORE FINANCE COSTS AND TAX (53) (6,520) (6,573) (242) (7,618) (7,860) Finance costs - - - - - - LOSS BEFORE TAX (53) (6,520) (6,573) (242) (7,618) (7,860) Tax 68 355 423 164 279 443 PROFIT/(LOSS)FOR THE PERIOD 15 (6,165) (6,150) (78) (7,339) (7,417) EARNINGS PER SHARE 4 0.02 (8.68) (8.66) (0.11) (10.33) (10.44) Ordinary shares (pence) The total column of this statement represents the Group's profit and loss account, 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 periods. 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 31st December 2012 (unaudited) Share Share Special Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 AT 30TH JUNE 2012 710 21,573 56,908 (11,124) 68,067 Total comprehensive income for the period - - - 3,624 3,624 AT 31ST DECEMBER 2012 710 21,573 56,908 (7,500) 71,691 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31st December 2011 (unaudited) Share Share Special Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 AT 30TH JUNE 2011 710 21,573 56,908 (3,707) 75,484 Total comprehensive income for the period - - - (6,150) (6,150) AT 31ST DECEMBER 2011 710 21,573 56,908 (9,857) 69,334 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th June 2012 (audited) Share Share Special Retained capital premium reserve earnings Total £'000 £'000 £'000 £'000 £'000 AT 30TH JUNE 2011 710 21,573 56,908 (3,707) 75,484 Total comprehensive income for the year - - - (7,417) (7,417) AT 30TH JUNE2012 710 21,573 56,908 (11,124) 68,067 CONSOLIDATED BALANCE SHEET at 31st December 2012 Notes 31st 31st December December 30th June 2012 2011 2012 (unaudited) (unaudited) (audited) £'000 £'000 £'000 NON-CURRENT ASSETS Investments at fair value through profit or loss 5 59,021 52,245 51,140 CURRENT ASSETS Other receivables 74 138 127 Cash and cash equivalents 12,980 17,321 17,181 13,054 17,459 17,308 TOTAL ASSETS 72,075 69,704 68,448 CURRENT LIABILITIES Other payables (213) (201) (232) TOTAL ASSETS LESS CURRENT LIABILITIES 71,862 69,503 68,216 NON-CURRENT LIABILITIES Deferred tax liability (171) (169) (149) NET ASSETS 71,691 69,334 68,067 EQUITY ATTRIBUTABLE TO EQUITY HOLDERS Called-up share capital 6 710 710 710 Share premium 21,573 21,573 21,573 Special reserve 56,908 56,908 56,908 Retained earnings (7,500) (9,857) (11,124) TOTAL EQUITY 71,691 69,334 68,067 NET ASSET VALUE PER ORDINARY 7 100.94 97.62 95.84 SHARE (PENCE) This half year report was approved and authorised for issue by the Board on 22nd February 2013. CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31st December 2012 Six months Six months ended ended Year 31st 31st ended December December 30th June 2012 2012 2011 (unaudited) (unaudited) (audited) £'000 £'000 £'000 NET CASH INFLOW/(OUTFLOW)FROM OPERATING ACTIVITIES 194 (31) (107) FINANCIAL INVESTMENT Purchase of investments (13,258) (2,518) (5,415) Sale of investments 9,144 4,186 7,143 NET CASH(OUTFLOW)/INFLOW FROM FINANCIAL INVESTMENT (4,114) 1,668 1,728 EQUITY DIVIDENDS PAID - - - NET CASH (OUTFLOW)/INFLOW BEFORE FINANCING (3,920) 1,637 1,621 FINANCING - - - (DECREASE)/INCREASE IN CASH (3,920) 1,637 1,621 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS (Decrease)/increase in cash resulting from cash flows (3,920) 1,637 1,621 Exchange movements (281) 189 65 Movement in net funds (4,201) 1,826 1,686 Net funds at start of period/year 17,181 15,495 15,495 NET FUNDS AT END OF PERIOD / YEAR 12,980 17,321 17,181 RECONCILIATION OF PROFIT/(LOSS) BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES Profit/(loss) before finance costs 3,646 (6,573) (7,860) and taxation (Gains)/losses on investments (3,771) 6,779 7,824 Exchange differences 281 (189) (65) Management fee rebates (26) (70) (141) Net profit/(loss) before finance costs and taxation 130 (53) (242) (Increase)/decrease in debtors 22 (12) 14 (Decrease)/increase in creditors (19) (20) 11 Taxation 35 (16) (31) Management fee rebates 26 70 141 NET CASH INFLOW/(OUTFLOW)FROM 194 (31) (107) OPERATING ACTIVITIES NOTES TO THE INTERIM FINANCIAL STATEMENTS for the six months ended 31st December 2012 1. Accounting policies The consolidated half year financial statements on pages 15 to 24 comprise the unaudited results of the Company and its subsidiary, JIT Securities Limited, for the six months to 31st December 2012. The comparative information for the six months to 31st December 2011 and the year to 30th June 2012 do not constitute statutory accounts under the Companies Act 2006. Full statutory accounts for the year to 30th June 2012 included an unqualified audit report, did not contain any statements under section 498 of the Companies Act 2006, and have been filed with the Registrar of Companies. The half year financial statements have been prepared in accordance with International Accounting Standard 34 `Interim Financial Reporting', and are presented in pounds sterling, as this is the Group's functional currency. The same accounting policies have been followed in the interim financial statements as applied to the accounts for the year ended 30th June 2012, which are prepared in accordance with IFRSs as adopted by the European Union. 2. Total income For the six For the six For the months ended months ended year ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 Income from Investments1 UK net dividend income 418 238 310 UK unfranked investment income 68 80 158 486 318 468 Operating Income Bank interest receivable 3 5 10 VAT reclaim interest received from HMRC - - 7 3 5 17 2. Total income continued For the six For the six For the months ended months ended year ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 Total income comprises Dividends 486 318 468 Other income 3 5 17 489 323 485 3. Management fees For the six For the six For the months ended months ended year ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 Investment management 244 255 513 Performance fee - - - 244 255 513 The management fee is payable in arrears and is calculated at a rate of 3/16% per quarter of the total assets of the Company and its subsidiary after the deduction of the value of any investments managed by the Investment Manager (as defined in the management agreement). The Investment Manager is also 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 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 out-performance will be generated. No performance fee is payable for any period. 4. Return per Ordinary share For the six For the six For the months ended months ended year ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 Revenue return 172 15 (78) Capital return 3,452 (6,165) (7,339) Total return 3,624 (6,150) (7,417) Weighted average number of Ordinary 71,023,695 71,023,695 71,023,695 shares Revenue return per Ordinary share 0.24p 0.02p (0.11)p Capital return per Ordinary share 4.86p (8.68)p (10.33)p Total return per Ordinary share 5.10p (8.66)p (10.44)p 5. Investments at fair value through profit or loss Six months Six months Year ended ended ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 GROUP AND COMPANY 59,021 52,245 51,140 ANALYSIS OF INVESTMENT PORTFOLIO - GROUP AND COMPANY Six months ended 31st December 2012 Listed* Unlisted Total £'000 £'000 £'000 Opening book cost 45,048 4,943 49,991 Opening investment holding gains/ (losses) 3,904 (2,755) 1,149 Opening valuation 48,952 2,188 51,140 Movement in period: Purchases at cost Sales 13,258 - 13,258 - Proceeds (9,007) (141) (9,148) - Realised gains on sales 1,293 6 1,299 Investment holding gains/(losses) 2,898 (426) 2,472 Closing valuation 57,394 1,627 59,021 Closing book cost 50,592 4,808 55,400 Unrealised investment holding gains/ 6,802 (3,181) 3,621 (losses) Closing valuation 57,394 1,627 59,021 * Listed investments include unit trust and OEIC funds Six months Six months Year ended ended ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 ANALYSIS OF CAPITAL GAINS AND LOSSES Realised gains on sales of 1,299 1,616 2,191 investments Decrease in investment holding gains 2,472 (8,395) (10,015) 3,771 (6,779) (7,824) 6. Retained earnings The components of retained earnings are set out below: Six months Six months Year ended ended ended 31st December 31st December 30th June 2012 2011 2012 £'000 £'000 £'000 Capital reserve - realized (11,024) (12,561) (12,040) Capital reserve - revaluation 3,312 2,571 876 Revenue reserve 212 133 40 (7,500) (9,857) (11,124) 7. Net asset value per Ordinary share 31st 31st 30th December December June 2012 2011 2012 £'000 £'000 £'000 Net assets attributable to Ordinary 71,691 69,334 68,067 shareholders Ordinary shares in issue at end of 71,023,695 71,023,695 71,023,695 period Net asset value per Ordinary share 100.94p 97.62p 95.84p 8. Related party transactions There have been no related party transactions that have materially affected the financial position or performance of the Group. The Company has four (2011: one) investments managed by the Investment manager.

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