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26 Sep 2007 16:36
NEW STAR INVESTMENT TRUST PLC PRELIMINARY ANNOUNCEMENT OF FINAL RESULTS
The Directors announce the unaudited statement of consolidated results for the year ended 30th June 2007 as follows:
CHAIRMAN'S STATEMENT
Your Company's total assets rose by 18.8% to ‚£123.7 million over the year to 30th June 2007. This compares with an 18.4% rise in the FTSE All-Share Total Return Index.
From inception in May 2000 to 30th June 2007, your Company has delivered a total return of 84.1%. This compares with a 42.5% rise in the FTSE All-Share Total Return Index, with your Company outperforming in each of its seven reporting periods. Initially, holdings in bonds and hedge funds generated outperformance but gains since 2001 have resulted from investments in equity funds and quoted securities, particularly your management company, New Star Asset Management Group.
Net revenue for the year under review was ‚£865,000, which compares with ‚£50,000 during the previous year. Your Directors recommend the payment of a final dividend of 1p net per Ordinary share. This compares with a dividend of 0.1p for 2006. However, this should not be taken as an indication of future dividends as the policy of your Company is to achieve capital growth and earnings per Ordinary share may fluctuate.
Global equities produced healthy returns during the year, with the FTSE World Index returning 13.7% in sterling terms.
The progress was not unbroken and there were periods when increased risk aversion resulted in cash being withdrawn from volatile securities and placed in "safe haven" assets such as government bonds. The first occurred in November 2006, when rising oil prices led investors to fear that the trade-off between economic growth and inflation was deteriorating. The second, and more serious, correction occurred in late February 2007 and early March, when US sub-prime mortgage defaults heightened concerns that the US would experience a significant economic growth slowdown or recession in late 2007 or early 2008. The third period of profit taking occurred in June amid concerns that increased inflationary pressures would lead to tighter central bank monetary policies than had been expected.
Generally, however, equities experienced benign conditions, for which there were four main reasons. First, liquidity was abundant, with the inflation-adjusted money supply growth in the Group of Seven (G7) industrial nations remaining above the level of industrial output growth, freeing cash for financial market investment. Secondly, corporate profits were buoyant. Thirdly, the takeover market remained active, with strong buying from corporate purchasers and private equity firms. Lastly, the US Federal Reserve was inactive, enabling equity investors to take European and Japanese monetary tightening in their stride although divergent monetary policies affected currency markets.
The Bank of England raised the bank rate from 4.5% to 5.5%, the European Central Bank's repo rate rose from 2.75% to 4% and the Bank of Japan's target policy rate rose from 0.15% to 0.5%. Partly as a result, the dollar fell 7.9% against sterling and 5.6% against the euro.
Bonds were more subdued than equities, particularly in the second half, amid nervousness about inflation. Generally, investors were rewarded for taking risks, with emerging market debt and higher-yielding corporate bonds outperforming government bonds, although riskier securities retreated towards the year end in response to problems in the US sub-prime mortgage market.
Within the G7, Germany returned 37.5% while France added 23.0%, Canada added 21.1%, the UK returned 18.4% and Italy returned 16.6%. The two underperformers were Japan, which fell 2.2% and the US, which gained 11.1%. Among the global sectors, telecommunications did best, rising 32.1%, followed by basic materials, up 31.4%, and utilities, up 24.1%. Notable underperformers included healthcare, up 4.6% and financials, up 10.9%.
At the year end, it seemed likely that the major economies would experience a significant economic growth slowdown. Strong growth in the money supply may cushion this slowdown. There may, however, be a further deterioration in the trade-off between economic growth and inflation because the slowdown so far has been insufficient to relieve capacity pressures. This implies that central banks may raise interest rates further in the present cycle. Tighter monetary policies may weaken consumer-facing companies. Capacity utilisation within the G7 has, however, risen above its long-term average, a trend that should increase producer purchasing power and lead to greater capital spending.
Reflecting deteriorating economic conditions and the specific problems of the US housing market, equity and fixed income markets experienced falls during the summer of 2007 as investors re-evaluated their attitudes to risk. This may inhibit private equity takeovers and lead to rotation away from cyclical industries towards more defensive sectors. In such an environment, careful stock selection will remain important.
Your Company's unaudited net asset value per Ordinary share at 31 August 2007was 164.5p.James RoeChairman26th September 2007 INVESTMENT MANAGER'S REPORT
Your Company's strategy is to invest in funds managed by subsidiaries of the New Star Asset Management Group, both long-only and hedge, in New Star Asset Management Group shares and in other retail funds and special situations.
Within the portfolio, all but one of the 21 New Star retail funds and hedge funds produced positive returns during the year under review.
The biggest contribution to your Company's overall return was its holding in the New Star Asset Management Group, whose shares rose 24.1% during the year. Other significant contributors to the overall return included the holdings in the New Star European Growth Fund, the New Star European Hedge Fund and the New Star Hidden Value Fund.
Among the pooled funds, the strongest relative performance was generated by the Hidden Value Fund, which gained 31.9% and outperformed its benchmark by 13.5 percentage points. Other strong performers included the New Star Global Financials Fund, which gained 24.1% and outperformed its benchmark by 13.2 percentage points, and the New Star UK Alpha Fund, which rose 22.9% and outperformed its benchmark by 4.6 percentage points.
Among the hedge funds, the best performers were the New Star European Hedge Fund, which gained 19.7%, and the New Star Financials Hedge Fund, which gained 10.5%.
There were various changes to the portfolio during the year of which the most significant involved your Company's shareholding in New Star. Your Company participated in a placing at 455p per share on 30th March, selling 418,460 shares or 7.8% of its holding. It also benefited from the 125p per share capital repayment that coincided with New Star's transfer on 13th June from the Alternative Investment Market to the Official List of the London Stock Exchange.
In addition, your Company took partial profits on holdings in two larger New Star retail funds, the European Growth Fund and the UK Growth Fund, and one hedge fund, the Apollo Hedge Fund. Holdings in two other New Star hedge funds, the Asia Renaissance Hedge Fund and the UK Hedge Fund, and a holding in the Sagitta Healthcare Fund were sold completely.
The proceeds were mostly reinvested in New Star's institutional Global Property Fund, the recently-launched New Star International Property Fund and the New Star East European Portfolio. In addition, holdings were purchased in two funds specialising in Africa, the Investec Africa Fund and the Sierra Investment Fund, and in Corndon, a privately-owned flour milling business.
As a result, your Company ended the year under review with 58.0% of its invested assets in retail funds, 19.0% in hedge funds, 15.2% in its holding in New Star Asset Management Group and 7.8% in other equities and investment trust shares. Geographically, 66.9% of the portfolio was exposed to the UK, 21.5% was exposed to Europe excluding the UK and the balance was invested elsewhere.
Global equity markets rose to an all-time peak shortly after the end of the year under review but then encountered a bout of profit taking as investors became increasingly risk averse in response to escalating problems in the US housing market and concerns about sub-prime mortgage debt and other riskier fixed income securities. In early 2007, merger and acquisition activity, in particular private equity activity, had been a particularly strong influence on equity values. With investors beginning to shun higher-yielding corporate debt, however, the underpinning provided by private equity transactions was starting to erode. In the coming months, central banks may tighten monetary policy further, potentially leading to further shifts by investors into more defensive areas of the equity markets.
New Star Asset Management Limited
26th September 2007 UNAUDITED CONSOLIDATED INCOME STATEMENT for the year ended 30th June 2007 Year ended Year ended 30th June 2007 30th June 2006 Revenue Capital Total Revenue Capital Total return return return return ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Investment Income 1,224 - 1,224 414 - 414Other operating 93 - 93 84 - 84incomeTotal income 1,317 - 1,317 498 - 498 GAINS AND LOSSES ON INVESTMENTSGains oninvestments at fairvalue throughprofit or loss - 18,432 18,432 - 23,111 23,111Gains on indexfuture - - - - 134 134contractsGains on forwardcurrency contracts - 708 708 - 308 308Other exchangelosses/(gains) - (27) (27) - 22 22 1,317 19,113 20,430 498 23,575 24,073 EXPENSESManagement fees (265) - (265) (208) - (208)Other expenses (222) - (222) (206) (3) (209) PROFIT BEFOREFINANCE COSTS ANDTAX 830 19,113 19,943 84 23,572 23,656Finance costs (39) - (39) - - - PROFIT BEFORE TAX 791 19,113 19,904 84 23,572 23,656Tax 74 (331) (257) (34) - (34)PROFIT FOR THE YEAR 865 18,782 19,647 50 23,572 23,622 EARNINGS PER SHAREOrdinary shares 1.22 26.44 27.66 0.07 33.19 33.26(pence)
The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment 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.
UNAUDITED CONSOLIDATED BALANCE SHEET as at 30th June 2007 30th June 30th June 2007 2006 ‚£'000 ‚£'000 NON-CURRENT ASSETSInvestments at fair value through profit 118,168 103,364or loss CURRENT ASSETSOther receivables 1,392 707Cash and cash equivalents 4,883 229 6,275 936 TOTAL ASSETS 124,443 104,300 CURRENT LIABILITIESOther payables (754) (187) NET ASSETS 123,689 104,113 CAPITAL AND RESERVESCalled up share capital 710 710Share premium 21,573 21,573Special reserve 56,908 56,908Retained earnings 44,498 24,922TOTAL EQUITY 123,689 104,113 pence penceNET ASSET VALUE PER ORDINARY SHARE 174.15 146.59(PENCE) UNAUDITED CASH FLOW STATEMENTS for the year ended 30th June 2007 Year ended Year ended 30th June 30th June 2007 2006 Group Group ‚£'000 ‚£'000 CASH FLOWS FROM OPERATINGACTIVITIESProfit before finance 19,943 23,656costs and taxAdjustments for: Gains on investments (14,804) (25,313)Operating cash flowsbefore 5,139 (1,657)movements in workingcapital(Increase)/decrease in (685) 489receivablesIncrease/(decrease) in 207 (426)payables Net cash from operatingactivities before financecosts and income taxes 4,661 (1,594)Taxation (257) (34)NET CASH FROM OPERATINGACTIVITIES 4,404 (1,628) CASH FLOWS FROM FINANCINGACTIVITIESDividend paid (71) (71)Interest paid (39) -NET CASH USED IN FINANCINGACTIVITIES (110) (71) NET INCREASE/(DECREASE) INCASH AND CASH EQUIVALENTS 4,294 (1,699)Cash and cash equivalentsat 229 1,928beginning of year CASH AND CASH EQUIVALENTSAT END OF YEAR 4,523 229 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30th June 2007 Share Share Special Retained Total capital premium reserve earnings ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000AT 30TH JUNE 710 21,573 56,908 24,922 104,1132006Profit for the - - - 19,647 19,647yearDividend paid - - - (71) (71)AT 30TH JUNE 710 21,573 56,908 44,498 123,6892007 UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30th June 2006 Share Share Special Retained Total capital premium reserve earnings ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000AT 30TH JUNE 710 21,573 56,908 1,371 80,5622005Profit for the - - - 23,622 23,622yearDividend paid - - - (71) (71)AT 30TH JUNE 710 21,573 56,908 24,922 104,1132006 ANALYSIS OF INCOME For the year ended 30th June 2007 Year ended 30th Year ended 30th June 2007 June 2006 ‚£'000 ‚£'000INCOME FROM LISTED INVESTMENTS 721 241UK net dividend income 503 173UK unfranked investment income 1,224 414 OTHER OPERATING INCOMEBank interest receivable 93 85Futures commission - (1) 93 84TOTAL INCOME COMPRISESDividends 1,224 414Other Income 93 84 1,317 498
The above financial information for the year ended 30th June 2007 does not constitute statutory accounts as defined in section 240 of the Companies Act 1985 and has been prepared on the basis of the accounting policies set out in the statutory accounts of the Group for the year ended 30th June 2006.
The comparative financial information is based on the statutory final statements for the year ended 30th June 2006. Those financial statements, upon which the auditors issued an unqualified opinion and which contained no statement under s237(2) or s237(3)of the Companies Act 1985, have been delivered to the Registrar of Companies. Statutory financial statements for the year ended 30th June 2007 will be delivered to the Registrar of Companies in due course.
The annual report will be sent to shareholders in September and will be available to members of the public from the registered office at 1 Knightsbridge Green, London SW1X 7NE. The Annual General Meeting of the Company will be held on 21st November 2007 at 12 noon at 1 Knightsbridge Green, London SW1X 7NE.
ENDS
NEW STAR INVESTMENT TRUST PLC