Interim Results
NEW STAR INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT OF UNAUDITED INTERIM RESULTS
The Directors announce the unaudited statement of consolidated results for the
six months ended 31st December 2005 as follows:
FINANCIAL HIGHLIGHTS
At launch
31 December 30th June % 2nd May %
2005 2005 change 2000 change
(restated)
Performance
Net asset value per Ordinary 134.60p 113.43p 18.7 99.58 35.2
share
Mid-market value per Ordinary 122.00p 112.50p 8.4 100.00p 22.0
share
Discount of price to net asset 9.4% 0.8% - (0.4%) -
value
FTSE World Index 172.72 149.83 15.3 197.72 (12.)
FTSE All-Share Index 2,847.02 2,560.17 11.2 3.026.79 (5.9)
Six months ended Six months ended
31st December 31st December
2005 2004
(restated)
REVENUE
Return per Ordinary share 0.31p 0.19p
Dividend per Ordinary share - -
TOTAL RETURN
Total Assets total return 18.8% 8.2%
FTSE All-Share total return 12.8% 9.7%
CHAIRMAN'S STATEMENT
Your Company's total assets rose 18.7% during the six months to 31st December
2005 to £95.6 million which compares with an 11.2% rise in the FTSE All-Share
Index. This took the net asset value per Ordinary share to 134.6p. This
compares with the launch price of 100p in May 2000. The FTSE All-Share Index
over the same period fell by 5.9%
.
Net revenue before tax for the period was £250,000. In common with previous
years, your directors are not recommending the payment of an interim dividend
to shareholders.
This is the first time that your Company is reporting under the new
International Financial Reporting Standards. The effect of the change in
accounting standards on your Company is small and is mainly the difference
between the mid and bid market prices of the assets. This difference at 31st
December 2005 was equivalent to 0.2p per Ordinary share.
Global equities performed well during the period under review, with the FTSE
World Index returning 15.3% in sterling terms. Liquidity remained abundant,
with inflation-adjusted Group of Seven (G7) money supply growth running in
excess of industrial output growth, increasing the cash available for
investment in financial assets.
Sentiment was firm during the early summer, with investors believing US
monetary policy would soon moderate in response to higher oil prices. Shares
retreated in August following Hurricane Katrina and fell again in October on
fears that the trade-off between economic growth and inflation was
deteriorating. There was, however, a rebound towards the year end in response
to increased takeover activity, lower oil prices and less hawkish commentary
from the US Federal Reserve.
The Fed raised its Fed Funds Target Rate in four quarter point moves to 4.25%
during the period while the European Central Bank raised its repo rate a
quarter point to 2.25% after more than two years of stability. The Bank of
England, however, cut base rates a quarter percentage point to 4.5% in response
to lacklustre economic growth.
Within the G7, Japan made the second largest country contribution to global
market returns, gaining 39.2% as investors grew confident that deflation was
finally ending. The resource-heavy Canadian market gained 26.4% while Germany
rose 19.7%. Other G7 markets underperformed.
Among the sectors, financials gained 19.5%, making the biggest sector
contribution to global returns. Other strong sectors included cyclical areas
such as materials, up 28.9%, transport, up 26.2%, and automobiles, up 23.5%. By
contrast, telecommunications services gained just 2.5% and media gained 3.6%.
The highlight of the period for your Company was the admission of the shares of
New Star Asset Management Group PLC to the Alternative Investment Market. This
led to a material uplift to the value of your Company's holding in New Star
equivalent to 7.8p per Ordinary share over the six months.
Portfolio activity included the sale of Cox Insurance after a takeover. Your
Company also took partial profits on holdings in four larger New Star managed
funds: the European Growth Fund, the UK Alpha Fund, the UK Gemini Hedge Fund
and the UK Growth Fund. The proceeds were reinvested in five younger funds, the
Accelerator Hedge Fund, the Firefly Hedge Fund, the Global Financials Fund, the
Hidden Value Fund and the UK Special Situations Fund.
As a result, your Company ended the period with 46.7% of its invested assets in
retail funds, 35.2% in hedge funds and the remaining 18.2% in its holding in
New Star Asset Management, investment trust shares and equities.
In recent weeks, liquidity conditions have deteriorated, with the gap between
G7 inflation-adjusted money growth and industrial output shrinking. This could
threaten asset classes that have attracted speculative inflows recently such as
emerging markets and commodities. Developed market equities should, however,
prove relatively resilient, with the earnings yield on equities above its
average since 1985. Other supportive factors include cash takeovers and share
buy-backs.
The un-audited net asset value at 3rd March 2006 was 149.16p per Ordinary
share.
James Roe
Chairman
9th March 2006
CONSOLIDATED INCOME STATEMENT
for the six months to 31st December 2005
(unaudited)
Six months ended Six months ended
31st December 2005 31st December 2004
(restated)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
INVESTMENT INCOME 408 - 408 315 - 315
Other operating income 58 - 58 34 - 34
Total income 466 - 466 349 - 349
GAINS AND LOSSES ON
INVESTMENT
Gains on fair value - 15,168 15,168 - 5,265 5,265
through profit
or loss assets
Gains on index futures - 135 135 - 136 136
contracts
Losses on forward
currency
Purchases - (417) (417) - - -
Other exchange gains - 6 6 - 167 167
466 14,892 15,358 349 5,568 5,917
EXPENSES
Management fees (92) - (92) (71) - (71)
Other expenses (124) - (124) (127) - (127)
PROFIT BEFORE FINANCE
COSTS AND TAX 250 14,892 15,142 151 5,568 5,719
Finance costs - - - - - -
PROFIT BEFORE TAX 250 14,892 15,142 151 5,568 5,719
Tax (33) - (33) (19) - (19)
PROFIT FOR THE PERIOD 217 14,892 15,109 132 5,568 5,700
EARNINGS PER SHARE
From continuing
operations
Ordinary shares 21.27 8.03
9pence)
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. 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 2005
Notes Share Share Special Retained Total
Capital Premium Reserve earnings £'000
£'000 £'000 £'000 £'000
AT 30 JUNE 2005 4(b) 710 21,573 56,908 1,371 80,562
(RESTATED)
Profit for the period 15,109 15,109
Dividends paid (71) (71)
710 21,573 56,908 16,409 95,600
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 December 2004
Notes Share Share Special Retained Total
Capital Premium Reserve earnings £'000
£'000 £'000 £'000 £'000
AT 30 JUNE 2005 4(A) 710 21,573 56,908 (12,027) 67,164
(RESTATED)
Profit for the period 5,700 5,700
Dividends paid (177) (177)
AT 31 DECEMBER 2004 710 21,573 56,908 (6,504) 72,687
RESTATED
CONSOLIDATED BALANCE SHEET
as at 31st December 2005
31st 31st 30th June
December December
2005
2005 2004
(restated)
(unaudited) (unaudited &
Restated)
Notes £'000 £'000 £'000
NON-CURRENT ASSETS
Investments at fair value 94,206 69,131 78,051
Through profit or loss
CURRENT ASSETS
Other receivables 9 534 1,196
Cash and cash equivalents 1,606 3,183 1,928
1,615 3,717 3,124
TOTAL ASSETS 95,821 72,848 81,175
CURRENT LIABILITIES
Other payables (221) (161) (613)
NET ASSETS 95,600 72,687 80,562
EQUITY ATTRIBUTABLE TO EQUITY H
OLDERS
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 2 16,409 (6,504) 1,371
TOTAL EQUITY 95,600 72,687 80,562
pence pence Pence
NET ASSET VALUE PER ORDINARY SHARE 134.60 102.34 113.43
CONSOLIDATED CASH FLOW STATEMENT
for the six months to 31st December 2005
(unaudited)
Six months Six months ended
ended
31st December 31st December
2004
2005
Notes £'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 15,142 5,719
Adjustments for:
(Gains)/losses on investments (16,155) (3,604)
Operating cash flows before movements (1,013) 2,115
in working capital
Decrease/(increase) in receivables 1,187 (416)
(Decrease)/increase in payables (392) 65
Net cash from operating activities (218) 1,764
before income taxes
Income taxes paid (33) (19)
NET CASH FROM OPERATING ACTIVITIES 3 (251) 1,745
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (71) (177)
NET CASH USED IN FINANCING ACTIVITIES (71) (177)
NET (DECREASE)/INCREASE IN CASH AND (322) 1,568
CASH EQUIVALENTS
Cash and cash equivalents at beginning 1,928 1,615
of period
CASH AND CASH EQUIVALENTS AT END OF 1,606 3,183
PERIOD
NOTES TO THE ACCOUNTS
for the six months ended 31 December 2005
1. Accounting Policies
These financial statements are presented in pounds sterling because that is the
currency of the primary economic environment in which the Group operates.
The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards ('IFRS'). These comprise standards
and interpretations approved by the International Accounting Standards Board
('IASB'), together with interpretations of the International Accounting
Standards and Standing Interpretations Committee ('IASC') that remain in
effect, and to the extent that they have been adopted by the European Union.
These are the Group's first unaudited results prepared in accordance with IFRS.
Previous accounts were prepared in accordance with UK Generally Accepted
Accounting Principles (UK GAAP) including the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies ('SORP'). Where
presentational guidance set out in the SORP is consistent with the requirements
of IFRS, the directors have sought to continue to prepare the financial
statements on a basis compliant with the recommendations of the SORP.
In preparing these accounts the following amendments to accounting and
valuation methods have been applied in order to comply with IFRS:
* The Group's investments are defined by IFRS as investments designated as
fair value through profit and loss. All investments are designated upon
initial recognition as held at fair value, and are measured at subsequent
reporting dates at fair value, which is either the bid price or the last
traded price, depending on the convention of the exchange on which the
investment is quoted. Investments in unit trusts or OEICS are valued at the
closing price, the bid price or the single price as appropriate, released
by the relevant investment manager;
* Bookcost of investments excludes transaction costs on purchases; and
* No equity dividend is accrued unless announced in the period.
Except for the amendments required in connection with the adoption of IFRS as
listed above, the accounting policies have not varied from those described in
the Report and Accounts for the year ended 30 June 2005.
The disclosures required by IFRS 1 'First Time Adoption of International
Financial Reporting Standards' ('IFRS 1') concerning the transition from UK
GAAP to IFRS are given in note 4 below.
2. Retained earnings and capital reserve
The components of retained earnings that relate to revenue and capital are set
out below:
31st December 31st December 30th June
2005 2004 2005
£'000 £'000 £'000
Retained earnings - retained 444 361 298
earnings reserve
Retained earnings - capital 15,965 (6,865) 1,073
reserve
16,409 (6,504) 1,371
3. 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:
31st December 31st December
2005 2004
£'000 £'000
Proceeds on disposal of fair value through 9,117 8,175
profit and loss investments
Purchases of fair value through profit and (9,375) (6,254)
loss investments
(258) 1,921
4. 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 30 June
2005. And the date of transition to IFRS was therefore 1 July 2004.
(a) Reconciliation of equity at 1 July 2004 (date of transition to IFRS)
Previously Effect of Restated
reported Transition to IFRSs
UK GAAP IFRS
Notes £'000 £'000 £'000
NON-CURRENT ASSETS
Investments of 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 to the reconciliation of equity at 1 July 2004
1. Investments are designated as held at fair value under IFRS 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 30 June 2004 of £177,000. Under IFRS this is not recognised
until approved by the shareholders.
(b) Reconciliation of equity at 30 June 2005
Previously Effect of Restated
reported Transition to IFRSs
UK GAAP IFRS
Notes £'000 £'000 £'000
NON-CURRENT ASSETS
Investments of 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 to the reconciliation of equity at 30 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 30 June 2005 of £71,000. Under IFRS this is not recognised until
approved by the shareholders.
(c) Reconciliation of equity at 31 December 2004
Previously Effect of Restated
reported Transition to IFRSs
UK GAAP IFRS
Notes £'000 £'000 £'000
NON-CURRENT ASSETS
Investments of fair value 1 69,578 (447) 69,131
CURRENT ASSETS
Other receivables 534 - 534
Cash and cash equivalents 3,183 - 3,183
3,717 - 3,717
TOTAL ASSETS 73,295 (447) 72,848
CURRENT LIABILITIES
Other payables 2 (161) (161)
(161) (161)
NET ASSETS 73,134 (447) 72,687
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 (6,418) (447) (6,865)
Revenue 2 361 - 361
TOTAL EQUITY 73,134 (447) 72,687
Notes to the reconciliation of equity at 31 December 2004
1. Investments are designated as held at fair value under IFRS and are carried
at bid prices which total their fair value of £69,131,000. Previously, under UK
GAAP they were carried at mid prices. The aggregate differences, being a
revaluation downwards of £447,000, also decrease retained earnings.
(d) Reconciliation of the Statement of Total Return to the Income Statement
Under IFRS the Income Statement is the equivalent of the Statement of Total
Return reported previously.
30th June 31st December
2005 2004
Notes £'000 £'000
Total transfers to reserves 13,437 6,012
per the Statement
Investments held at fair value 1 135 135
changed
Investments held at fair value 1 (68) -
changed
Investments held at fair value 1 - (447)
changed
Add back 2005 dividend 2 71 -
proposed
NET PROFIT PER THE INCOME 13,575 5,700
STATEMENT
Notes to the reconciliation of profit or loss
1. The portfolio valuations at 1 July 2004, 30 June 2005 and 31 December 2004
are required to be valued at fair value under IFRS. These values are lower than
previous valuations by £135,000, £68,000 and £447,000 respectively.
2. Ordinary dividends declared and paid during the period are dealt with
through the Statement of Changes in Equity.
(e) Reconciliation of the Cash Flow Statement as at 31 December 2004
Previously Effect of Restated
reported Transition IFRSs
to
UK GAAP
IFRS
Notes £'000 £'000 £'000
Net cash operating 1 (253) 1,998 1,745
activities
Net cash from capital 1 1,998 (1,998) _
expenditure and financial
investment
Equity dividends paid 2 (177) 177 _
Financing 2 - (177)
(177)
Increase in cash 1,568 - 1,568
1. Investing activities are considered to be operating activities of the
company.
2. Ordinary dividends paid are now analysed within financing.
5. The financial information contained in this interim report does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The financial information for the year ended 30 June 2005 has been
extracted from published accounts that have been delivered to the Registrar of
Companies and on which the report of the Auditors was unqualified. As described
above these accounts have been restated for the six months ended 31 December
2004 and the year ended 30 June 2005.
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