NSF.L Regulatory News (NSF)

22 Jan 2007 15:56

New Star Financial Opp Fd Ltd22 January 2007 New Star Financial Opportunities Fund Limited Announcement of Final Results for the year ended 30 November 2006 Chairman's Statement I am pleased to report the audited results for New Star Financial OpportunitiesFund (the "Company") for the year ended 30 November 2006. The period covered bythis report was another excellent one for Ordinary Shareholders with a totalreturn (based on the growth in net asset value plus the four gross interimdividends) of 33.7% compared with the FTSE Financials Index total return of20.7%. The reasons for this performance are two-fold. First, underlying the substantialrise in net asset value was a rise in total assets less current liabilities of18.3% to £86.3 million. This compares with a rise of 16.6% in the FTSEFinancials Index over the same period. Secondly, as the Company's OrdinaryShares are geared by prior ranking Zero Dividend Preference Shares ("ZDP Shares") their returns magnify the underlying rise, or fall, in total assets. The net asset value of the Ordinary Shares rose from 61.53p per share to 78.28pper share while the share price rose from 55.25p per share to 72.50p per share.As a result there was a narrowing of the discount to net asset value from 10.2%to 7.4% over the course of the year, although there were periods when it tradedat much tighter and wider discounts than this. The share price of the ZDP Sharesrose by 5.5% from 149.25p per share to 157.50p per share. ZDP Shareholders aredue to be repaid their fixed entitlement of 168.48p per share on 11 December2007, and your Directors will be considering the consequences of this over thecourse of the next year. The distributable return per Ordinary Share was 3.73p, and during the year, yourDirectors declared three interim dividends totalling 3.00p. On 11 December, afourth interim dividend of 1.10p per Ordinary Share was announced; it will bepaid to Shareholders on 31 January 2007. After deducting this dividend, yourCompany has revenue reserves of £715,550. Your Directors intend to maintain thislevel of quarterly payment over the next financial year, subject to unforeseencircumstances. The broadening of the investment strategy to include other European financialcompanies at the end of the last financial year and the resulting reduction inexposure to fixed-income securities has proved beneficial to performance overthe last year. However, the consequence of this reduction - exposure stood at42.1% of total assets at 30 November 2004 as against 16.6% at 30 November 2006 -has resulted in greater volatility in the net asset value of the OrdinaryShares. The market background over the last year has continued to be favourable thoughfinancial markets did suffer from a setback in the middle of the year. Equitymarkets, nevertheless, rallied strongly towards the end of the financial year.This was in part on the back of weaker crude oil prices as investors concludedthat inflation, and therefore interest rates, were unlikely to risesignificantly enough to affect the positive drivers underlying the rise incorporate earnings. Looking forward, recent economic data, though mixed, continue to point to aslowdown in economic growth over the coming year. Although market expectationspoint towards a "soft-landing" there remain a number of risks to this scenariowhich would have negative consequences for markets. Nevertheless, your Directorsremain optimistic on the outlook for equity markets and that they will continueto provide attractive returns over the next year. Actual and continued speculation of further merger & acquisition activity hascontinued to underpin the positive sentiment towards equity markets. Privateequity firms have raised significant amounts of money over the last year and,taken together with access to significant debt facilities, will provide afurther support to markets. Consolidation within the financial sector is alsoexpected to continue. The majority of the companies within the investment portfolio continue to makegood progress with earnings being better than analysts' forecasts. A numbercontinue to buy back their shares for cancellation while most are expected toincrease their dividends, in some cases substantially. As a result yourDirectors remain confident about the prospects of your Company and I lookforward to reporting to you in six months' time. Martyn ChambersChairman 22 January 2007 CONSOLIDATED STATEMENT OF OPERATIONSfor the year ended 30 November 2006 (Audited) 2006 2005 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Net investment gainsGains on investments - 13,870 13,870 - 10,429 10,429Exchange (losses)/gains on capital items - (34) (34) - 1 1 - 13,836 13,836 - 10,430 10,430IncomeIncome from investments 3,093 - 3,093 3,448 - 3,448Bank interest 35 - 35 146 - 146Exchange losses on income (2) - (2) - - -Other income - - - 15 - 15 3,126 - 3,126 3,609 - 3,609ExpensesManagement fee (331) (331) (662) (195) (195) (390)Interest payable and similar charges - - - (562) (664) (1,226)Costs of interest rate swap - - - 171 (214) (43)Finance charge attributable to Zero - (2,787) (2,787) - (1,245) (1,245)Dividend Preference SharesAdministration fees (158) - (158) (159) - (159)Audit fee (22) - (22) (21) - (21)Directors' fees (80) - (80) (71) - (71)Taxation (168) - (168) (25) - (25)Miscellaneous expenses (73) - (73) (112) - (112) (832) (3,118) (3,950) (974) (2,318) (3,292) Total return for Ordinary Shares 2,294 10,718 13,012 2,635 8,112 10,747 Basic return per Ordinary Share (pence) 3.73 17.43 21.16 4.28 13.19 17.47Return per Zero Dividend Preference Share - 11.30 11.30 - 11.32 11.32(pence) CONSOLIDATED STATEMENT OF CHANGES IN NET EQUITYfor the year ended 30 November 2006 (Audited) Distributable Distributable Other non- Share Share reserves reserves distributable capital premium - revenue - special reserves Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 December 2005 15,375 3,623 1,558 17,338 (609) 37,285Net increase in net assets from - - 2,294 - 10,718 13,012operationsDividends paid - - (2,460) - - (2,460) At 30 November 2006 15,375 3,623 1,392 17,338 10,109 47,837 For the year ended 30 November 2005 (Audited) Distributable Distributable Other non- Share Share reserves reserves distributable capital premium - revenue - special reserves Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 December 2004 15,375 3,623 1,383 17,338 (8,721) 28,998Net increase in net assets from - - 2,635 - 8,112 10,747operationsDividends paid - - (2,460) - - (2,460) At 30 November 2005 15,375 3,623 1,558 17,338 (609) 37,285 CONSOLIDATED STATEMENT OF NET ASSETSas at 30 November 2006 30 November 2006 30 November 2005 £'000 £'000 (Audited) (Audited)Non-current assetsInvestments at fair value 82,421 71,457 Current assetsTrade and other receivables 1,693 555Cash and cash equivalents 4,364 2,264 6,057 2,819 Creditors - amounts falling due within one yearTrade and other payables 2,170 1,307Net current assets 3,887 1,512Total assets less current liabilities 86,308 72,969 Creditors - amounts falling due after more than one yearZero Dividend Preference Shares 38,471 35,684 Net assets 47,837 37,285 Capital and reservesCalled up share capital 15,375 15,375Share premium account 3,623 3,623Distributable reserves - revenue 1,392 1,558 - special 17,338 17,338Other non-distributable reserves 10,109 (609) Total equity shareholders' funds 47,837 37,285 Net asset value per Ordinary Share (pence) 78.28 61.53Net asset value per Zero Dividend Preference Share (pence) 154.69 142.37 CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 30 November 2006 (Audited) 2006 2005 £'000 £'000 Operating activitiesIncome received from financial investments 2,902 3,557Interest received 35 146Other income - 15Interest paid - (1,568)Operating expense payments (957) (590) Net cash inflow from operating activities 1,980 1,560 Investing activitiesPurchase of financial investments (55,450) (35,808)Sale of financial investments 58,120 37,280Realised gains on foreign currency transactions 23 - Net cash inflow from investing activities 2,693 1,472 Financing activitiesProceeds from issue of Zero Dividend Preference Shares - 21,050Issue expenses paid (103) (267)Repayment of bank loan - (20,340)Early redemption charge - (102)Swap breakage cost - (385)Dividends paid (2,460) (2,460) Net cash outflow from financing activities (2,563) (2,504) Increase in cash and cash equivalents 2,110 528 Notes: 1. Significant accounting policies New Star Financial Opportunities Fund Limited (the "Company") is a companydomiciled in Guernsey. The consolidated financial statements of the Company forthe year ended 30 November 2006 comprise the Company and its subsidiary(together referred to as the "Group"). a) Statement of compliance The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards ("IFRS") and interpretations adoptedby the International Accounting Standards Board (IASB). b) Basis of preparation The consolidated financial statements have been prepared on a fair value basisfor financial assets and financial liabilities at fair value through profit orloss and derivative financial instruments. Other financial assets andliabilities and non-financial assets and liabilities are stated at amortisedcost. The financial statements are presented in Sterling rounded to the nearestthousand. Sterling is the functional currency of the Company. There are no material differences between the Group and Company Statement ofOperations, Statement of Changes in Net Equity and the Statement of Cash Flows. The accounting policies have been consistently applied by the Group and areconsistent with those used in the previous year. c) Impact of revisions to International Financial Reporting Standards IAS No.1 "Presentation of Financial Instruments", IAS No.8 "AccountingEstimates: Changes in Accounting Estimates and Errors" and IAS No.10 "Eventsafter the Balance Sheet Date" have been revised for accounting periods beginningon or after 1 January 2005. The adoption of these revisions has not had asignificant financial impact on the Company's financial statements. The following new standard has been issued but is not effective for 2006 and theDirectors have chosen not to early adopt: In August 2005, the IASB issued IFRS 7 - "Financial Instruments: Disclosure"which becomes effective for periods starting on or after 1 January 2007. Thestandard requires disclosures about the significance of financial instrumentsfor an entity's financial position and performance. These disclosuresincorporate many of the requirements of IAS 32 - "Financial Instruments:Disclosure and Presentation". IFRS 7 also requires information about the extentto which the entity is exposed to risks arising from financial instruments, anda description of management's objectives, policies and processes for managingthose risks. The Group will apply IFRS 7 for its accounting period commencing 1December 2006. 2. Under the terms of the Company's Articles of Association, distributions canbe made up to the total of accumulated gross income received less the runningcosts (all of the ongoing costs and expenses of the Group, other than 50% of themanagement fees and financing costs and 100% of the interest rate swap breakagecosts and early redemption charge on the bank loan). For the year ended 30November 2006, the amount available for distribution is £2,294,000 (3.73p perOrdinary Share based on the number of Ordinary Shares in issue throughout theyear of 61,500,000) (2005: £2,635,000; 4.28p per Ordinary Share based on thenumber of Ordinary Shares in issue throughout the year of 61,500,000).Distributions of £2,460,000 (4.00p per Ordinary Share) (2005: £2,460,000; 4.00pper Ordinary Share) have been distributed. The retained deficit of £166,000(2005: surplus of £175,000) is included in reserves. On 11 December 2006 a dividend of 1.10p per Ordinary Share was announced. Thisis payable to Shareholders on 31 January 2007. In accordance with InternationalFinancial Reporting Standards (IFRS), this dividend will be reflected in the2007 financial statements of the Company. 3. The basic return per Ordinary Share is based on the total return for OrdinaryShares, as shown on the Consolidated Statement of Operations and on 61,500,000(2005: 61,500,000) Ordinary Shares in issue throughout the year. The return perZero Dividend Preference Share ("ZDP" Share) is based on an annualisedredemption yield of 8.65%. There are no potential Ordinary Shares and thereforeno diluted returns per Ordinary Share have been shown. 4. The net asset value per Ordinary Share is based on the net assetsattributable to Ordinary Shareholders of £48,139,000 (being £86,308,000 less thenet assets due to ZDP Shareholders of £38,169,000 (see note 5)) (2005:£37,838,000) and on 61,500,000 (2005: 61,500,000) Ordinary Shares in issue atthe end of the year. The net asset value per ZDP Share is based on the net assets attributable to ZDPShareholders of £38,169,000 (see note 5) (2005: £35,131,000) and on 24,675,000(2005: 24,675,000) ZDP Shares in issue at the end of the year. 5. On 17 November 2005, a further 14,175,000 ZDP Shares were issued at a priceof 148.50p (before expenses) producing net proceeds of £20,679,000. Each of the two tranches of ZDP Shares is accounted for on an amortised costbasis such that the carrying value for each tranche increases from the net issueproceeds to the redemption amount of 168.48p per ZDP Share on 11 December 2007at a consistent daily rate. The difference between the carrying value of ZDP Shares and the net assetsattributable based on the redemption formula amounted to £302,000 at 30 November2006. This difference will diminish over time, falling to £nil at 11 December2007. 6. In respect of the year ended 30 November 2006, the Directors have declared afourth interim dividend of 1.10p per Ordinary Share with an associatedex-dividend date of 20 December 2006 and a record date of 22 December 2006. Thedividend will be paid on 31 January 2007. 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