Last checked at 
10 Sep 2012 07:05
NEW STAR INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT
This announcement constitutes regulated information.
UNAUDITED RESULTS
FOR THE YEAR ENDED 30th JUNE 2012
New Star Investment Trust plc (the `Company'), whose objective is to achievelong-term capital growth, announces its consolidated results for the year ended30th June 2012.FINANCIAL HIGHLIGHTS 30th June 30th June % 2012 2011 Change PERFORMANCE Net assets (£ `000) 68,067 75,484 (9.8) Net asset value per Ordinary share 95.84p 106.28p
(9.8)
Mid-market price per Ordinary share 66.50p 73.13p
(9.1)
Discount of price to net asset value 30.6% 31.2%
N/A
FTSE World Index (total return, sterling 603.27 624.88 (3.5)adjusted) FTSE All-Share Index (total return) 4,101.28 4,233.69 (3.1) 1st July 2011 to 1st July 2010 to 30th June 2012 30th June 2011 REVENUE Return per Ordinary share (0.11)p (0.38)p Dividend per Ordinary share - - TOTAL RETURN Net assets (9.8)% 11.1%CHAIRMAN'S STATEMENT
MARKET BACKDROP AND PERFORMANCE
The net asset value of your company declined 9.82% over the year to 30th June2012. This compares with a 3.13% fall in the FTSE All-Share Total Return indexand a 3.46% decline in the FTSE World Total Return Index. At the year end, thenet asset value per ordinary share was 95.84p.The main reason for your Company's underperformance relative to equity marketswas the above average exposure to emerging markets such as China, Russia andsub-Saharan Africa and stocks affected by commodity prices. With low interestrates continuing to depress returns on the Company's cash deposits, the netrevenue loss for the year was £78,000 after a £273,000 loss the previous year.Your Directors do not recommend the payment of a final dividend.The eurozone crisis was a key driver of global stockmarket sentiment over theyear under review. In the late summer of 2011, investors grew increasinglyconcerned about the deteriorating health of the currency union's southernmembers, principally Greece and Portugal. Although a second rescue package forGreece was organised, contagion set in, with investors selling bonds issued byother southern currency members. The European Central Bank (ECB) respondedinitially by buying Spanish and Italian bonds but the recovery in confidencewas short-lived and shares weakened again in November.There was a partial recovery during December and over the first quarter of 2012as the eurozone authorities unveiled emergency measures. The ECB, havingincreased its repo rate a quarter percentage point to 1.5% in July 2011, cut ittwice, taking the rate to 1%. Even more significantly, it also launchedlonger-term refinancing operations, offering European banks cheap three-yearloans to alleviate their funding difficulties in the wholesale markets.Meanwhile, eurozone governments agreed a package aimed at tackling the region'spublic finances. This involved new fiscal rules, the early creation of thepermanent European Stability Mechanism and extra European Union funding for theInternational Monetary Fund to help troubled eurozone members.Shares retreated again in the spring as eurozone tensions revived. Aninconclusive general election provoked a political crisis in Greece. Meanwhile,Spanish government bond yields rose to unsustainable levels and the health of aleading Spanish bank deteriorated to the point where an international rescuefor the country's banking system had to be organised. There was, however, ayear-end rally after eurozone governments agreed a scheme to allow troubledbanks to gain access to bail-out funds without adding to the government debtsof their countries of domicile. Outside the equity markets, the eurozone woesmade a significant impact on currency movements, with the euro falling 12.47%against the dollar and 10.40% against the pound. Gold, meanwhile, retained itssafe haven status, rising 5.73% in dollar terms.With investors' risk appetites reduced by the eurozone crisis, larger stockswere more resilient than smaller stocks. In the UK, the FTSE 100 Total ReturnIndex eased 2.66% while the FTSE 250 and FTSE Small Cap Total Return Indicesfell 5.58% and 6.48% respectively. The flight to perceived safety was alsoapparent in the US, where the Russell 1000 Index of larger stocks gained 4.61%in sterling terms while the Russell 2000 Index of smaller companies eased1.22%. In the bond markets, UK government bonds and US treasuries returned15.91% and 11.47% respectively while Spanish and Italian government bonds fell9.80% and 9.58% respectively.Within the Group of Seven (G7) major industrial nations, the eurozone memberssuffered the biggest losses, with Italian equities down 29.42% in sterlingterms while the French and German stockmarkets fell 23.25% and 21.05% insterling terms respectively. The resource-heavy Canadian market alsounderperformed as a result of weaker commodity prices, falling 12.85%. Bycontrast, US equities gained 6.50% amidst investor confidence that the USeconomy would continue to grow, albeit modestly, while Japanese shares eased2.96%. Among the smaller developed economies, Greece was particularly weak as aresult of its developing economic and fiscal woes, falling 54.00%, whilePortugal and Spain fell 37.00% and 32.05% respectively. New Zealand, up 2.41%,and Ireland, down 0.88%, were however, relatively resilient. Amid heightenedrisk aversion, emerging markets underperformed developed markets, falling13.68% on average. Eastern European markets suffered particularly badly, withBulgaria and Hungary down 41.87% and 37.88% respectively, but some LatinAmerican and Asian countries generated strong positive returns, with thevolatile Venezuelan market up 190.57% and the Philippines up 22.63%.At the sector level, basic materials suffered the biggest losses, falling24.92% in sterling terms, principally as a result of the 28.27% fall inindustrial commodity prices as measured by Thomson Reuters. With Brent Crudefalling 16.50% to $92.53 per barrel, energy stocks were also conspicuouslyweak, falling 11.72%. The eurozone's banking woes depressed financial stocks,down 10.70%, while weakening economic growth left industrials down 10.23%. Bycontrast, the healthcare and technology sectors generated gains, returning7.43% and 6.20% respectively, as did consumer services, up 4.44%, and consumergoods, up 1.33%.G7 industrial output slowed markedly in the first half of 2012 and decliningbusiness confidence over the early summer, particularly in the US, may lead tofurther weakness over the next few months. The growth slowdown followed adecline in the G7's inflation-adjusted money supply growth, typically a leadindicator of economic trends. Money supply trends stabilised in the secondquarter, however, suggesting there may be a recovery in economic momentumtowards the end of 2012.Conditions in the eurozone remained particularly precarious in the early summerof 2012, with Spanish short-term bond yields rising above the levels of late2011 and Italian yields also approaching unsustainable levels. The confidencecrisis affecting Spanish banks led to private sector outflows from thecountry's banking system, which required increasing central bank support. Inthe UK and the US, meanwhile, economic growth trends remained lacklustre, withthe US growing only modestly and the UK economy still in recession over thesecond quarter of 2012. Forward-looking UK money supply measures were, however,improving over the summer, suggesting a return to modest economic growth laterin 2012.
Your Company's unaudited net asset value at 31st August 2012 was 98.03p
Geoffrey Howard-SpinkChairman7th September 2012
INVESTMENT MANAGER'S REPORT
Your Company's strategy is to invest in a diversified portfolio of open-endedfunds, investment trusts, exchange-traded funds (ETFs) and hedge funds selectedfrom across the market place as well as certain selected special situations.The portfolio is spread across diverse asset classes from UK and overseasequities and bonds to commercial property, commodities and private equity.Various adjustments were made to the portfolio during the year under review.Your Company took a new position in Aberdeen Asia Pacific Fund, an open-endedfund managed by a team headed by the veteran Asian equities specialist, HughYoung. The Company also added to its holding in the Aberforth Geared IncomeTrust and participated in an equity fundraising for Westhouse Holdings, astockbroker specialising in smaller companies. The principal disposalscomprised reductions in the holdings in the Lion Trust Asia Fund (previouslyknown as the Occam Asia Fund) and the Henderson Private Equity InvestmentTrust, the latter as a result of a tender offer at a significant premium to themarket price.A number of holdings made significant gains over the year. Among theportfolio's investment trust holdings, Henderson Private Equity InvestmentTrust returned 20.07%, partly as a result of the tender offer. This was inaccordance with the board's announcement that the fund would be graduallyliquidated, with the proceeds distributed to shareholders. Among the open-endedfunds, Fundsmith Equity Fund, Terry's Smith's global special situations fund,returned 10.82% while M&G Optimal Income Fund and the Trojan Investment Fundreturned 9.00% and 7.33% respectively. In the commodities area, the GoldBullion Securities ETF gained 8.12% while in hedge funds, BH Global Limited, aclosed-end fund investing in Brevan Howard's Global Opportunities strategy,returned 2.71%. One particular disappointment was Bumi, the Indonesian thermalcoal miner, which fell 70.78%. Other weak areas in the portfolio includedAtlantis China Fund, down 36.47%, Neptune Russia & Greater Russia Fund, down28.53%, Blackrock Gold & General Fund, down 19.10%, Aquilus Inflection Fund,down 18.80% and Investec Africa down 17.71%.As a result of market movements and portfolio changes, your Company ended theyear with 52.87% of its assets in retail funds, 8.69% in investment trusts,4.53% in hedge funds, 3.99% in ETFs, 5.91% in other investments and 24.01% incash. Geographically, the biggest non-cash holdings were in the UK, at 19.82%,specialist and global equities, at 18.57%, emerging markets, at 11.26%, Europeexcluding the UK, at 9.65%. In asset class terms, the biggest non-cash holdingswere in equities, at 46.45%, commodities, at 11.58%, and private equity, at7.00%.There was a further escalation in the eurozone crisis in the weeks after theyear end, with Spanish bond yields rising above their highs of November 2011amid fears that the country would need further measures beyond June's supportpackage for its banks. Such concerns sent eurozone shares to a new low sincethe start of 2012 relative to other regions.Elsewhere, business confidence measures were suggesting that global economicnews was likely to remain weak over the third quarter of 2012, with growthcontinuing to slow in the US. Inflation-adjusted US money supply trends were,however, suggesting that there could be some re-acceleration in growth towardsthe year-end, aided by slower inflation. One particular cause for longer-termoptimism was the growing evidence that the US housing market was slowlyrecovering, albeit from a low base, with housing starts and house builders'sentiment improving. In the UK, prospects appeared more uncertain, with thegovernment's fiscal deficit reduction plans blown off course by the recession.There were, however, signs of recovering private sector confidence over thesummer, with consumers' financial optimism back to levels last seen in 2010,partly as a result of labour market trends that confounded pessimisticforecasts.Brompton Asset Management LLPInvestment Manager7th September 2012
SCHEDULE OF TWENTY LARGEST INVESTMENTS
at 30th June 2012 30th June 2012 Holding Activity Bid-market Percentage value of invested portfolio £ `000 Henderson Euro Special Situations Investment Fund 6,603 12.91Funds BlackRock Gold & General Fund Investment Fund 5,193 10.15 Investec Africa Fund Investment Fund 3,686 7.21
Henderson Private Equity Investment Investment 3,055
5.97Trust Company Trojan Investment Fund Investment Fund 2,989 5.84 Polar Capital Global Technology Investment Fund 2,986 5.84Fund M&G Optimal Income Fund Investment Fund 2,903 5.68 Gold Bullion Securities ETF Exchange Traded 2,732 5.35 Fund Artemis UK Special Situations Fund Investment Fund 2,651 5.18 Aquilus Inflection Fund Investment Fund 2,120 4.15 Atlantis China Fund Investment Fund 2,005 3.92 Fundsmith Equity Fund Investment Fund 1,798 3.52
Aberforth Geared Income Trust Investment 1,744
3.41 Company Neptune Russia & Greater Russia Investment Fund 1,476 2.89Fund PFS Brompton UK Recovery Unit Trust Investment Fund 1,315 2.57 Aberdeen Asia Pacific Fund Investment Fund 1,183 2.31 BH Global Limited Investment 1,149 2.25 Company
All Star Leisure (Group) Limited Equity 923
1.80
SW Mitchell Small Cap European Fund Investment Fund 919
1.80 Liontrust Asia Fund Investment Fund 853 1.67 48,283 94.42
Balance held in 16 investments 2,857
5.58 Total investments 51,140 100.00
The investment portfolio can be further analysed as
follows: £ `000
Equities (including Investment 7,931
Companies) Loan 348 Investment funds and ETF's 42,861 51,140 All the Company's investments are either unlisted or are unit trusts/OEIC fundswith the exception of Henderson Private Equity Investment Trust, AberforthGeared Income Trust, BH Global Limited, Mam Funds, Gold Bullion Securities ETF,Immedia Broadcasting, Westhouse Holdings and Bumi Plc.
SCHEDULE OF TWENTY LARGEST INVESTMENTS
at 30th June 2011 30th June 2011 Holding Activity Bid-market Percentage value of invested portfolio £ `000 Henderson Euro Special Situations Investment Fund 7,711 12.71Fund BlackRock Gold & General Fund Investment Fund 6,485 10.69 Liontrust Asia Fund Investment Fund 4,378 7.21 Investec Africa Fund Investment Fund 4,299 7.08 Polar Capital Global Technology Investment Fund 3,216 5.30Fund Atlantis China Fund Investment Fund 3,191 5.26
Henderson Private Equity Investment Investment 3,006
4.95Trust Company Artemis UK Special Situations Fund Investment Fund 2,852 4.70 Trojan Investment Fund Investment Fund 2,797 4.61 M&G Optimal Income Fund Investment Fund 2,738 4.51 Aquilus Inflection Fund Investment Fund 2,578 4.25 Gold Bullion Securities ETF Exchange Traded 2,528 4.16 Fund Bumi Plc Quoted Equity 2,320 3.82 Neptune Russia & Greater Russia Investment Fund 2,055 3.39Fund Fundsmith Equity Fund Investment Fund 1,626 2.68 PFS Brompton UK Recovery Unit Trust Investment Fund 1,429 2.35 The Sierra Investment Fund Investment Fund 1,183 1.95 BH Global Limited Investment 1,118 1.84 Company
SW Mitchell Small Cap European Fund Investment Fund 1,112 1.83
Aberforth Geared Income Trust Investment 1,093
1.80 Company 57,715 95.09
Balance held in 11 investments 2,977
4.91 Total investments 60,692 100.00
The investment portfolio can be further analysed as
follows: £ `000
Equities (including Investment 9,165
Companies) Convertible securities 130 Loan 498 Investment funds and ETF's 50,899 60,692 All the Company's investments are either unlisted or are unit trusts/OEIC fundswith the exception of Henderson Private Equity Investment Trust, AberforthGeared Income Trust, BH Global Limited, Mam Funds, Gold Bullion Securities ETF,Immedia Broadcasting, Westhouse Holdings and Bumi Plc.BUSINESS REVIEWThe following business review is designed to provide information primarilyabout the Company's business and results for the year ended 30th June 2012. TheBusiness Review should be read in conjunction with the Chairman's Statement andthe Investment Manager's Report which provide a review of the year'sperformance of the Company and the outlook for the future.
STATUS
The Company is an investment company under section 833 of the Companies Act2006. It conducts its affairs in accordance with the requirements of sections1158/1159 Corporation Tax Act 2010 (`section 1158') so as to gain exemptionfrom liability to United Kingdom capital gains tax. For accounting periods upto 30th June 2012, approval by HM Revenue & Customs (`HMRC') under section 1158could only be obtained annually and has been granted for the financial yearended 30th June 2011, subject to no subsequent enquiry into the Company'scorporation tax self-assessment. For accounting periods from 1st July 2012 theCompany can apply for status as an Approved Investment Trust and the Directorsare of the opinion that the Company continues to conduct its affairs in such amanner that it will be granted such approval and exemption under section 1158.The Company is listed on the London Stock Exchange. It therefore conducts itsaffairs in accordance with the Listing Rules and Disclosure and TransparencyRules published by the Financial Services Authority.
The Company is incorporated and registered in England and Wales and is domiciled in the United Kingdom. The Company number is 3969011.
INVESTMENT OBJECTIVE AND POLICY
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 theUnited States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan orEmerging 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 ofinvestment and for funds by reference to their published investment policy or,where appropriate, the underlying investment exposure.
The Company may invest up to 20% of its net assets 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 forthe purposes of efficient portfolio management and currency hedging.Derivatives may also be used outside of efficient portfolio management to meetthe Company's investment objective. The Company may take outright shortpositions in relation to up to 30% of its net assets, with a limit on shortsales of individual stocks of up to 5% of its net assets, such values beingassessed 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 maybe invested in other closed-ended investment funds except where such funds havethemselves published investment policies to invest no more than 15% of theirtotal assets in other listed closed-ended investment funds.
FINANCIAL REVIEW
Assets
Net assets at 30th June 2012 amounted to £68,428,000 compared with £75,484,000at 30th June 2011. In the year under review, the net asset value per Ordinaryshare decreased by 9.3% from 106.28p to 96.35p.
Costs
Total expenses for the year amounted to £727,000 (2011: £822,000). In the yearunder review the investment management fee amounted to £513,000 (2011: £552,000). No performance fee was payable in respect of the year under review asthe Company did not outperform the hurdle rate. Further details on theCompany's expenses may be found in notes 3 and 4.
Revenue
The Company's gross revenue increased to £485,000 (2011: £402,000). After deducting expenses and adding back taxation the revenue loss for the year was £ 78,000 (2011: loss of £273,000).
Dividends
Dividends do not form a central part of the Company's investment objective. TheDirectors have not declared a final dividend for the year ended 30th June 2012(2011: nil).Funding
The primary source of the Company's funding is shareholder funds. The Company is typically ungeared.
VATNo VAT is charged on investment management fees but is payable at standard rateon other services provided to the Company. During the year, £35,000 of VAT wasrefunded in respect of amounts paid in prior periods.
Payment of suppliers
The Company seeks to obtain the best possible terms for the business it conducts, therefore, there is no single payment of supplier policy. In general the Company agrees with its suppliers the terms on which business will take place. There were no trade creditors at 30th June 2012 (2011: nil).
Future developments
While the future performance of the Company is dependent, to a large degree, onthe performance of international financial markets, which, in turn, are subjectto many external factors, the Board's intention is that the Company willcontinue to pursue its stated investment objective in accordance with thestrategy outlined above. Further comments on the outlook for the Company forthe next 12 months are set out in both the Chairman's Statement and theInvestment Manager's Report.
Going concern
The Directors believe that it is appropriate to continue to adopt the goingconcern basis in preparing the accounts as the assets of the Company consistmainly of securities that are readily realisable or cash and it has nosignificant liabilities. Accordingly, the Company has adequate financialresources to continue in operational existence for the foreseeable future. Inreaching this view, the Directors reviewed the anticipated level of expenditureof the Company for the next twelve months against the cash and liquid assetswithin the portfolio.
PERFORMANCE MEASUREMENT AND KEY PERFORMANCE INDICATORS
In order to measure the success of the Company in meeting its objectives and to evaluate the performance of the Investment Manager, the Directors take into account the following key performance indicators.
30th June 30th June % 2012 2011 Change PERFORMANCE Net assets (£ `000) 68,067 75,484 (9.3) Net asset value per share 95.84p 106.28p (9.3) Share price 66.50p 73.13p (9.1) Discount 30.6% 31.2% N/A Total return per share (10.44p) 10.58p N/A FTSE World Index (total return, sterling 603.27 624.88 (3.5)adjusted) FTSE All-Share Index (total return) 4,101.28 4,233.69
(3.1)
MANAGEMENT ARRANGEMENTS
In common with most investment trusts, the Company does not have any executivedirectors or employees. The day-to-day management and administration of theCompany, including investment management, accounting and company secretarialmatters, and custodian arrangements are delegated to specialist companies.
Investment management services
The Company's investments are managed by Brompton Asset Management LLP (`Brompton'). This relationship is governed by an agreement dated 23rd December 2009. The portfolio manager is Gill Lakin.
Brompton receives a management fee, payable quarterly in arrears, equivalent toan annual 0.75 per cent of total assets after the deduction of the value of anyinvestments managed by the Investment Manager or its associates (as defined inthe investment management agreement). The investment management agreement maybe terminated by either party giving three months written notice to expire onthe last calendar day of any month.With effect from 1st September 2008, the Investment Manager has also beenentitled to a performance fee of 15 per cent of the growth in net assets over ahurdle of 3 month Sterling LIBOR plus 1 per cent per annum, payable six monthlyin arrears, subject to a high watermark. The aggregate of the Company'smanagement fee and performance fee are subject to a cap of 4.99 per cent of netassets in any financial year (with any performance fee in excess of this capcapable of being earned in future years).During the year under review the investment management fee amounted to £513,000(2011: £552,000). No performance fee was accrued or paid in respect of the yearended 30th June 2012 (2011: £nil).
Secretarial, administration and accounting services
Secretarial services, general administration and accounting services for the Company are undertaken by Phoenix Administration Services Limited.
Custodian services
Brown Brothers Harriman & Co is the independent custodian to the Company.
RELATED PARTY TRANSACTIONS
Mr Duffield is the senior partner of Brompton Asset Management Group LLP the ultimate parent of Brompton.
The investment management fee payable to Brompton in relation to the year ended30th June 2012 was £513,000. No performance fee was payable in respect of theyear ended 30th June 2012.
During the year the Group's investments included one fund managed by the Investment Manager or by associates of the Investment Manager. At 30th June 2012, the Company held one such investment. No investment management fees were payable by the Company in respect of this investment.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks associated with the Company that have been identified bythe Board, together with the steps taken to mitigate them can be summarised
asfollows: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, investment selection and performance.
Business conditions and general economy
The Company's investment returns are influenced by general economic conditionsin the UK and globally. Factors such as interest rates, inflation, investorsentiment and the availability and cost of credit could adversely affectinvestment returns. The Board regularly considers the economic environment inwhich 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 toa reduction in the Company's net asset value. A proportion of the Company'sportfolio is invested in investments denominated in foreign currencies andmovements in exchange rates can significantly affect their sterling value. Itis the Board's policy to hold an appropriate spread of investments in order toreduce the risk arising from factors specific to a particular investment orsector. The Investment Manager takes account of foreign currency risk andinterest rate risk when making investment decisions.
The Company does not normally hedge against foreign currency movements affecting the value of the portfolio, although hedging techniques may be employed in appropriate circumstances.
Investment Manager
The quality of the management team employed by the Investment Manager is animportant factor in delivering good performance and the loss by the InvestmentManager of key staff could adversely affect investment returns. The Boardreceives a monthly financial report which includes information on performance,and a representative of the Investment Manager attends each Board meeting. TheBoard is kept informed of any personnel changes to the investment team employedby the Investment Manager.Tax and regulatory risks
A breach of sections 1158 to 1165 Corporation Tax Act 2010 could lead to a lossof investment trust status, resulting in capital gains realised within theportfolio being subject to United Kingdom capital gains tax. A breach of theUKLA Listing Rules could result in suspension of the Company's shares, while abreach of company law could lead to criminal proceedings, or financial orreputational damage. The Board employs Brompton as Investment Manager, andPhoenix Administration Services Limited as Secretary and Administrator, to helpmanage the Company's legal and regulatory obligations. The Board receives amonthly financial report which includes information on the Company's compliancewith section 1158.OperationalDisruption to, or failure of, the Investment Manager's or Administrator'saccounting, dealing or payment systems or the Custodian's records could preventthe accurate reporting and monitoring of the Company's financial position. TheCompany is also exposed to the operational risk that one or more of itssuppliers may not provide the required level of service.
UNAUDITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30th June 2012
Year ended Year ended 30th June 2012 30th June 2011 Notes Revenue Capital Total Revenue Capital Total Return Return Return Return £`000 £`000 £`000 £`000 £'000 £'000 INVESTMENT INCOME 2 468 - 468 391 - 391 Other operating income 2 17 - 17 11 - 11 485 - 485 402 - 402 GAINS AND LOSSES ON INVESTMENTS Losses/gains on 9 - (7,824) (7,824) - 8,388 8,388investments at fair value through profit or loss Other exchange gains/ - 65 65 - (414) (414)(losses) Trail rebates - 141 141 - 92 92 485 (7,618) (7,133) 402 8,066 8,468 EXPENSES Management fees 3 (513) - (513) (552) - (552) VAT Recovery 35 - 35 - - - Other expenses 4 (249) - (249) (270) - (270) (727) - (727) (822) - (822) (LOSS)/PROFIT BEFORE (242) (7,618) (7,680) (420) 8,066 7,646FINANCE COSTS AND TAX Finance costs - - - - - - (LOSS)/PROFIT BEFORE TAX (242) (7,618) 7,860) (420) 8,066 7,646 Tax 5 164 279 443 147 (281) (134) (LOSS)/PROFIT FOR THE YEAR (78) (7,339) (7,417) (273) 7,785 7,512 EARNINGS PER SHARE Ordinary shares (pence) 7 (0.11) (10.33) (10.44) (0.38) 10.96 10.58The total column of this statement represents the Group's profit and lossaccount, prepared in accordance with IFRS. The supplementary Revenue Return andCapital Return columns are both prepared under guidance published by theAssociation of Investment Companies. All revenue and capital items in the abovestatement derive from continuing operations.
The Company did not have any income or expense that was not included in `profit for the year'. Accordingly, the `profit for the year' is also the `Total comprehensive income for the year', as defined in IAS1 (revised) and no separate Statement of Other Comprehensive Income has been presented.
No operations were acquired or discontinued during the year.
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 year ended 30th June 2012
Note Share Share Special Retained Total capital premium reserve earnings £`000 £`000 £`000 £`000 £`000 AT 30TH JUNE 2011 710 21,573 56,908 (3,707) 75,484 Total comprehensive income for - - - (7,417) (7,417)the year AT 30TH JUNE 2012 710 21,573 56,908 (11,124) 68,067
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30th June 2011
Note Share Share Special Retained Total capital premium reserve earnings £`000 £`000 £`000 £`000 £`000 AT 30TH JUNE 2010 710 21,573 56,908 (11,219) 67,972
Total comprehensive income for the - - - 7,512
7,512year AT 30TH JUNE 2011 710 21,573 56,908 (3,707) 75,484CONSOLIDATED BALANCE SHEETat 30th June 2012 Notes 30th June 30th June 2012 2011 £`000 £`000 NON-CURRENT ASSETS Investments at fair value through profit or loss 9 51,140 60,692 CURRENT ASSETS Other receivables 11 127 61 Cash and cash equivalents 12 17,181 15,495 17,308 15,556 TOTAL ASSETS 68,448 76,248 CURRENT LIABILITIES Other payables 13 (232) (221) TOTAL ASSETS LESS CURRENT LIABILITIES 68,216 76,027 NON-CURRENT LIABILITIES Deferred tax liability 5 (149) (543) NET ASSETS 68,067 75,484
EQUITY ATTBIBUTABLE TO EQUITY HOLDERS
Called-up share capital 14 710 710 Share premium 15 21,573 21,573 Special reserve 15 56,908 56,908 Retained earnings 15 (11,124) (3,707) TOTAL EQUITY 68,067 75,484 NET ASSET VALUE PER ORDINARY SHARE (Pence) 16 95.84
106.28
CASH FLOW STATEMENTS
for the year ended 30th June 2012
Note Year Year Year Year ended ended ended ended 30th June 30thJune 30thJune 30th June 2012 2012 2011 2011 Group Company Group Company £`000 £`000 £`000 £`000 NET CASH OUTFLOW FROM OPERATING (107) (108) (361) (390)ACTIVITIES
NET CASH OUTFLOW FROM SERVICING - -
-OF FINANCE - FINANCIAL INVESTMENT Purchase of Investments (5,415) (5,415) (8,247) (8,247) Sale of Investments 7,143 7,143 4,845 4,845
NET CASH INFLOW/(OUTFLOW) FROM
FINANCIAL INVESTMENT 1,728 1,728 (3,402) (3,402) EQUITY DIVIDENDS PAID - - - - NET CASH INFLOW/(OUTFLOW) BEFORE 1,621 1,620 (3,763) (3,792)FINANCING INCREASE/(DECREASE) IN CASH 1,621 1,620 (3,763) (3,792)
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET FUNDS Increase/(decrease) in cash 1,621 1,620 (3,763) (3,792)resulting from cash flows Exchange movements 65 66 (414) (415) Movement in net funds 1,686 1,686 (4,177) (4,207) Net funds at 1st July 15,495 14,082 19,672 18,289 NET FUNDS AT END OF YEAR 17 17,181 15,768 15,495 14,082
RECONCILIATION OF (LOSS)/PROFIT BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING
ACTIVITIES (Loss)/profit before finance (7,860) (7,860) 7,646 7,643costs and taxation Losses/(gains) on investments 7,824 7,824 (8,388) (8,388) Exchange differences (65) (66) 414 415 Capital trail rebates (141) (141) (92) (92) Net revenue loss before finance (242) (243) (420) (422)costs and taxation
Decrease/(increase) in debtors 14 14 (20)
(20)
Increase/(decrease) in creditors 11 11 (9)
(9) Taxation (31) (31) (4) (31) Capital trail rebates 141 141 92 92 NET CASH OUTFLOW FROM OPERATING (107) (108) (361) (390) ACTIVITIES NOTES TO THE ACCOUNTS
for the year ended 30th June 2012
1. ACCOUNTING POLICIES
The financial statements of the Group have been prepared in accordance withInternational Financial Reporting Standards ('IFRS'). These comprise standardsand interpretations approved by the International Accounting Standards Board('IASB'), together with interpretations of the International AccountingStandards and Standing Interpretations Committee ('IASC') that remain ineffect, and to the extent that they have been adopted by the European Union.
These financial statements are presented in pounds sterling, the Group's functional currency, being the currency of the primary economic environment in which the Group operates, rounded to the nearest thousand.
(a) Basis of preparation: The financial statements have been prepared on a going concern basis. The principal accounting policies adopted are set out below.
Where presentational guidance set out in the Statement of Recommended Practice('SORP') for investment trusts issued by the Association of InvestmentCompanies ('AIC') in January 2009 is consistent with the requirements of IFRS,the Directors have sought to prepare the financial statements on a basiscompliant with the recommendations of the SORP.(b) Basis of consolidation: The Consolidated Statement of Comprehensive Incomeand Balance Sheet include the Accounts of the Company and its subsidiary madeup to 30th June 2012. No Statement of Comprehensive Income is presented for theparent company as permitted by Section 408 of the Companies Act 2006.(c) Presentation of Statement of Comprehensive Income: In order to betterreflect the activities of an investment trust company and in accordance withguidance issued by the AIC, supplementary information which analyses theConsolidated Statement of Comprehensive Income between items of a revenue andcapital nature has been presented alongside the Consolidated Statement ofComprehensive Income.In accordance with the Company's Articles of Association, net capital returnsmay not be distributed by way of a dividend. Additionally, the net revenue isthe measure the Directors believe is appropriate in assessing the Group'scompliance with certain requirements set out in section 1159 of the CorporationTax Act 2010.(d) Use of estimates: The preparation of financial statements requires theGroup to make estimates and assumptions that affect items reported in theConsolidated and Company Balance Sheets and Consolidated Statement ofComprehensive Income and the disclosure of contingent assets and liabilities atthe date of the financial instruments. Although these estimates are based onthe Directors' best knowledge of current facts, circumstances and, to someextent, future events and actions, the Group's actual results may ultimatelydiffer from those estimates, possibly significantly.(e) Revenue: Dividends and other such distributions from investments arecredited to the revenue column of the Consolidated Statement of ComprehensiveIncome on the day in which they are quoted ex-dividend. Interest on fixedinterest securities and deposits is accounted for on an effective yield basis.Where the Company has elected to receive its dividends in the form ofadditional shares rather than in cash, the amount of the cash dividend isrecognised as income, and any excess in the value of the shares received and
over the amount recognised is credited to the capital reserve. Deposit interest and capital trail rebates are taken into account on a receipts basis.
(f) Expenses: Expenses are accounted for on an accruals basis. Management fees,administration and other expenses, with the exception of transaction charges,are charged to the revenue column of the Consolidated Statement ofComprehensive Income. Transaction charges are charged to the capital column ofthe Consolidated Statement of Comprehensive Income.(g) Investments held at fair value: Purchases and sales of investments arerecognised and derecognised on the trade date where a purchase or sale is undera contract whose terms require delivery within the timeframe established by themarket concerned, and are initially measured at fair value.All investments are classified as held at fair value through profit or loss oninitial recognition and are measured at subsequent reporting dates at fairvalue, which is either the bid price or the last traded price, depending on theconvention of the exchange on which the investment is quoted. Investments inunits of unit trusts or shares in OEICs are valued at the closing bid pricereleased by the relevant investment manager. Unquoted investments are valued bythe Directors at the balance sheet date based on recognised valuationmethodologies, in accordance with International Private Equity and VentureCapital ('IPEVC') Valuation Guidelines such as dealing prices or third partyvaluations where available, net asset values and other information asappropriate.
The Company's investment in its subsidiary company, JIT Securities Limited, is valued at net asset value in the Company's Balance Sheet.
(h) Taxation: The charge for taxation is based on taxable income for the year.Withholding tax deducted from income received is treated as part of thetaxation charge against income. Taxation deferred or accelerated can arise dueto temporary differences between the treatment of certain items for accountingand taxation purposes. Full provision is made for deferred taxation under theliability method on all temporary differences not reversed by the Balance Sheetdate.
(i) Foreign currency: Assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the Balance Sheet date. Foreign currency transactions are translated at the rates of exchange applicable at the transaction date. Foreign currency differences including exchange gains and losses are dealt with in the capital reserve.
(j) Capital reserve: The following are accounted for in this reserve:
- gains and losses on the realisation of investments together with the related taxation effect;
- foreign exchange gains and losses on capital transactions, including those on settlement, together with the related taxation effect;
- revaluation gains and losses on investments; and
- trail rebates received from the managers of the Company's investments.
The capital reserve is not available for the payment of dividends.
(k) Special reserve: The special reserve can be used to finance the redemption and/or purchase of shares in issue.
(l) Cash and cash equivalents: Cash and cash equivalents comprise current deposits, overdrafts with banks and bank loans. Cash and cash equivalents may be held for the purpose of either asset allocation or managing liquidity.
(m)Dividends payable: Dividends are recognised from the date on which they are irrevocably committed to payment.
(n) Segmental Reporting: The Directors consider that the Group is engaged in a single segment of business with the primary objective of investing in securities to generate long term capital growth for its shareholders. Consequently no business segmental analysis is provided.
(o) Accounting developments: At the date of authorisation of these financial statements, the following Standards which have not been applied in these financial statements were in issue but were not yet effective (and in some cases had not yet been adopted by the European Union):
Accounting periods beginning on or after
IAS 1 Financial statements presentation - Presentation of 1st July 2012
items of other comprehensive income IAS 27 Reissued as IAS 27 Consolidated and Separate 1st January
2013
Financial Statements (as amended in 2011) IFRS 7 Financial Instruments: Disclosures - Enhanced 1st July
2011
Derecognition Disclosure Requirements
IFRS 9 Financial Instruments: Classification & Measurement 1st January 2013 IFRS 10 Consolidated Financial Statements
1st January
2013
IFRS 11 Joint Arrangements 1st January
2013
IFRS 12 Disclosure of Interests in Other Entities 1st January
2013
IFRS 13 Fair Value Measurement 1st January
2013
The Directors are considering what impact, if any, the adoption of thesestandards/interpretations in future periods will have. Currently they do notbelieve that there will be a material impact on the 2013 consolidated financialstatements.2. INVESTMENT INCOME Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000INCOME FROM INVESTMENTS UK net dividend income 310 120
Unfranked investment income 158
271 468 391 OTHER OPERATING INCOME Bank interest receivable 10 11
VAT reclaim interest received from HMRC 7
- 17 11TOTAL INCOME COMPRISES Dividends 468 391Other income 17 11 485 4023. MANAGEMENT FEES Year ended Year ended 30th June 2012 30th June 2011 Revenue Capital Total Revenue Capital Total £`000 £`000 £`000 £`000 £`000 £`000 Investment management fee 513 - 513 552 - 552Performance fee - - - - - - 513 - 513 552 - 552
At 30th June 2012 there were amounts accrued of £126,000 (2011: £139,000) for investment management fees.
£35,000 of VAT paid on management fees in past years was recovered during theyear (2011: £nil).4. OTHER EXPENSES Year ended Year ended 30thJune 30th June 2012 2011 £`000 £`000 Legal fees 7 26Directors' remuneration 50 50
Administrative and secretarial fee 96
95Auditors' remuneration - Audit 26 26- Other 16 16Other 54 57 249 270Allocated to: - Revenue 249 270- Capital - - 249 2705. TAXATION
a. Analysis of tax charge for the year:
Year ended Year ended 30th June 2012 30th June 2011 Revenue Capital Total Revenue Capital Total £`000 £`000 £`000 £`000 £`000 £`000 UK corporation tax - - - - - -Overseas tax - - - - - -Tax relief to income (115) 115 - (178) 178 -Irrecoverable income tax - - - 49 - 49Prior year adjustment (49) - (49) (18) - (18)
Total current tax for the year (164) 115 (49) (147) 178
31 Deferred tax - (394) (394) - 103 103
Total tax for the year (note 5b) (164) (279) (443) (147) 281 134
b. Factors affecting tax charge for the year:
The charge for the year can be reconciled to the (loss)/profit per the Consolidated Statement of Comprehensive Income as follows:
Year ended Year ended 30thJune 30th June 2012 2011 £`000 £`000 (Loss)/Profit before tax (7,860) 7,646
Theoretical tax at the UK corporation tax rate of 25.5%*
(2011: 27.5%) (2004) 2,103 Effects of:
Non-taxable UK dividend income (79)
(33)
Gains and losses on investments that are not taxable 1,801
(2,085)
Movement in unrealised gains on non-qualifying offshore (394) 103funds Irrecoverable income tax - 49
Overseas dividends which are not taxable -
(8)
Excess expenses not utilised -
23 Prior year adjustment 49 (18) Total tax for the year (443) 134
* Under the Finance Act 2011, the rate of Corporation Tax was lowered to 24% from 26% on 1st April 2012. An average rate of 25.5% was applicable for the year ended 30th June 2012.
Due to the Company's tax status as an investment trust and the intention tocontinue meeting the conditions required to obtain approval of such status inthe foreseeable future, the Company has not provided tax on any capital gainsarising on the revaluation or disposal of the majority of investments.
c. Provision for deferred tax:
Group and Company Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000 Provision at start of year 543 440
Deferred tax charge for the year (394)
103
Provision at end of year 149
543
The deferred tax credit of £394,000 (2011: charge of £103,000) in the capitalaccount of the Company relates to unrealised gains on non-reporting offshorefunds. There is no deferred tax charge in the revenue account (2011: nil)relating to the reversal of the prior year tax charge on income taxable in thesubsequent accounting period.
There is no unrecognised deferred tax asset (2011: nil) as a result of excess expenses.
6. COMPANY RETURN FOR THE YEAR
The Company's total return for the year was £(7,417,000) (2011: £7,509,000).
7. RETURN PER ORDINARY SHARE
Total return per Ordinary share is based on the Group total return on ordinaryactivities after taxation of £(7,417,000) (2011: £7,512,000) and on 71,023,695(2011: 71,023,695) Ordinary shares, being the weighted average number ofOrdinary shares in issue during the year.
Revenue return per Ordinary share is based on the Group revenue loss on ordinary activities after taxation of £78,000 (2011: £(273,000)) and on 71,023,695 (2011: 71,023,695) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.
Capital return per Ordinary share is based on net capital losses for the yearof £7,339,000 (2011: capital gains of £7,785,000) and on 71,023,695 (2011:71,023,695) Ordinary shares, being the weighted average number of Ordinaryshares in issue during the year.
8. DIVIDENDS ON EQUITY SHARES
Amounts recognised as distributions in the year:
Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000
Dividends paid for the year ended 30th June 2012: nil (2011: nil) per share -
-
The total dividend payable in respect of the financial year, which is the basison which the requirements of section 1159 of the Corporation Tax Act 2010 areconsidered, is set out below. Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000
Final dividend for the year ended 30th June 2012: nil (2011: nil) -
-
Revenue available for distribution by way of dividend (79) (275)
The Directors do not recommend the payment of a final dividend for the year ended 30th June 2012 (2011: nil).
9. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000GROUP AND COMPANY 51,140 60,692ANALYSIS OF INVESTMENTPORTFOLIO - GROUP AND COMPANY Listed* Unlisted Total £`000 £`000 £`000 Opening book cost 44,435 5,093 49,528Opening investment holding gains/(losses) 13,416 (2,252) 11,164 Opening valuation 2,841 57,851 60,692Movement in period Purchases at cost 5,415 - 5,415 Sales - Proceeds (6,938) (205) (7,143)- Realised gains on sales 2,136 55 2,191Investment holding losses (9,512) (503) (10,015) Closing valuation 48,952 2,188 51,140 Closing book cost 45,048 4,943 49,991 Closing investment holding gains/(losses) 3,904 (2,755) 1,149 Closing valuation 48,952 2,188 51,140
* Listed investments include unit trust and OEIC funds.
Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000
ANALYSIS OF CAPITAL GAINS AND LOSSES Realised gains/(losses) on sales of investments 2,191
(5,349)
Increase in investment holding (losses)/gains (10,015) 13,737 (7,824) 8,388
9. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS CONTINUED
Transaction costs
The purchases and sales proceeds figures above include transaction costs on purchases of £nil (2011: £3,000) and on sales of £nil (2011: £3,000).
10. INVESTMENT IN SUBSIDIARY UNDERTAKING
The Company owns the whole of the issued share capital (£1) of JIT Securities Limited, an investment company registered in England and Wales.
The financial position of the subsidiary are summarised as follows:
Year ended Year ended 30th June 30th June 2012 2011 £`000 £`000 Net assets brought forward 499 496Profit for year - 3NET ASSETS CARRIED FORWARD 499 49911. OTHER RECEIVABLES 30th June 30th June 30th June 30th June 2012 2012 2011 2011 Group Company Group Company £`000 £`000 £`000 £`000
Prepayments and accrued income 47 47 61
61Taxation 80 80 - -Amounts owed by subsidiary - 914 - 914undertakings 127 1,041 61 975
12. CASH AND CASH EQUIVALENTS
30th June 30th June 30th June 30th June 2012 2012 2011 2011 Group Company Group Company £`000 £`000 £`000 £`000 Cash at bank 15,495 14,082 17,181 15,768 13. OTHER PAYABLES 30th June 30th June 30th June 30th June 2012 2012 2011 2011 Group Company Group Company £`000 £`000 £`000 £`000 Accruals 232 232 221 22114. CALLED UP SHARE CAPITAL 30th June 30th June 2012 2011 £`000 £`000Authorised 305,000,000 (2011: 305,000,000) Ordinary shares of £ 3,050 3,0500.01 each Issued and fully paid
71,023,695 (2011: 71,023,695) Ordinary shares of £0.01
each 710 71015. RESERVES Share Special Retained Premium Reserve earnings account £`000 £'000 £'000 GROUP At 30th June 2011 21,573 56,908 (3,707)Decrease in investment holding gains - -
(10,015)
Net gains on realisation of investments - - 2,191Gains on foreign currency - - 65Trail rebates - - 141
Deferred tax charge in capital - -
394
Tax relief to income from capital - -
(115)
Retained revenue loss for year - - (78)
At 30th June 2012 21,573 56,908 (11,124) Share Special Retained Premium Reserve earnings account £`000 £'000 £'000 COMPANY At 30th June 2011 21,573 56,908 (4,206)Decrease in investment holding gains - -
(10,015)
Net gains on realisation of investments - - 2,191Gains on foreign currency - - 66Trail rebates - - 141
Deferred tax charge in capital - -
394
Tax relief to income from capital - -
(115)
Retained revenue loss for year - -
(79)At 30th June 2012 21,573 56,908 (11,623)
The components of retained earnings are set out below:
30th June 30th June 2012 2011 £`000 £`000 GROUP Capital reserve-realised (12,040) (14,791)Capital reserve-revaluation 876 10,966Revenue reserve 40 118 (11,124) (3,707) COMPANY Capital reserve-realised (12,392) (15,144)Capital reserve-revaluation 876 10,966Revenue reserve (107) (28) (11,623) (4,206)
16. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per Ordinary share is calculated on net assets of £ 68,067,000 (2011: £75,484,000) and 71,023,695 (2011: 71,023,695) Ordinary shares in issue at year end.
17. ANALYSIS OF CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
At 1st Cash Exchange At 30th July 2011 flow movement June2012 £ `000 £ `000 GROUP Cash at bank and on deposit 15,495 1,621 65 17,181 COMPANY Cash at bank and on deposit 14,082 1,620 66 15,76818. FINANCIAL INFORMATION2012Financial informationThe figures and financial information for 2012 are unaudited and do notconstitute the statutory accounts for the year. The preliminary statement hasbeen agreed with the Company's auditors and the Company is not aware of anylikely modification to the auditor's report required to be included with theannual report and accounts for the year-ended 30th June 2012.
2011Financial information
The figures and financial information for 2011 are extracted from the publishedAnnual Report and Accounts for the year ended 30th June 2011 and do notconstitute the statutory accounts for that year. The Annual Report and Accountshas been delivered to the Registrar of Companies and includes the Report andIndependent Auditors which was unqualified and did not contain a statementunder either section 237(2) or section 237(3) of the Companies Act 1985.
Annual Report and Accounts
The accounts for the year ended 30th June 2012 will be sent to shareholders inSeptember 2012 and will be available on the Company's website (www.nsitplc.com)or in hard copy format at the Company's registered office, 1 KnightsbridgeGreen, London SW1X 7QA.
The Annual General Meeting of the Company will be held on 8th November 2012 at 11.00am at 1 Knightsbridge Green, London SW1X 7QA.
XLON