NEW STAR INVESTMENT TRUST PLC
NEW START INVESTMENT TRUST PLC
INTERIM REPORT
For the six months ended 31 December 2016
INVESTMENT OBJECTIVE
The Company's objective is to achieve long term capital growth
31st 30th %
December June Change
2016 2016
PERFORMANCE
Net assets (£ '000) 98,302 89,274 10.1
Net asset value per Ordinary share 138.41p 125.70p 10.1
Mid-market price per Ordinary share 94.50p 76.00p 24.3
Discount of price to net asset value 31.7% 39.5% n/a
Six Six months
months ended 31st
ended December
31st 2015
December
2016
NAV performance (dividend added back) 10.35% 2.52% n/a
IA Mixed Investment 40-85% Shares 10.37% -0.48% n/a
(total return)
MSCI AC World Index (total return, 15.55% 1.72% n/a
sterling adjusted)
MSCI UK Index (total return) 11.52% -3.27% n/a
Six months Six months
ended 31st ended
December 31st December
2016 2015
REVENUE
Return (£'000) 495 112
Return per Ordinary share 0.70p 0.16p
Proposed dividend per Ordinary - -
share
Dividend paid per Ordinary share 0.30p 0.30p
TOTAL RETURN
Return (£'000) 9,241 2,010
Net assets 10.1% 2.3%
Net assets (dividend added back) 10.4% 2.5%
CHAIRMAN'S STATEMENT
PERFORMANCE
Your Company generated a total return of 10.35% over the six months to 31st
December 2016, leaving the net asset value (NAV) per ordinary share at 138.41p.
By comparison, the Investment Association's Mixed Investment 40-85% Shares
Index rose 10.37%. The MSCI AC World Total Return Index gained 15.55% while the
MSCI UK Total Return Index gained 11.52%. Over the same period, UK government
bonds fell 1.18%. Further information is provided in the Investment Manager's
report.
Your Company made a revenue profit for the six months of £495,000 (2015: £
112,000).
GEARING AND DIVIDENDS
Your Company has no borrowings. It ended the period under review with cash
representing 14.9% of its NAV and is likely to maintain a significant cash
position. Your Company has small retained revenue reserves and your Directors
do not recommend the payment of an interim dividend (2015: nil). Your Company
paid a dividend of 0.3p per share (2015: 0.3p) in November 2016 in respect of
the previous financial year.
DISCOUNT
During the period under review, the Company's shares continued to trade at a
significant discount to their NAV. Your Board has explored ways of reducing
this discount but no satisfactory solution has been found. The position is,
however, kept under continual review.
OUTLOOK
Political events are likely to have a significant impact on financial market
returns during 2017. The protectionism of Donald Trump, the new US president,
may benefit US companies but emerging market equities and bonds may be
negatively affected by substantive threats to free trade. In Europe, political
uncertainties include the UK's Brexit negotiations, France's forthcoming
presidential election and general elections in Germany and Holland and,
possibly, Italy. These elections will take place at a time of growing
nationalist opposition to European Union institutions, free trade and open
financial markets.
Reviving inflation on both sides of the Atlantic may also affect investor
sentiment over the coming months. US interest rates are likely to rise steadily
over the course of the year and the Bank of England may face pressures to
unwind its recent monetary easing following the stimulus to the UK economy
provided by the fall in sterling over the second half of 2016. Equities tend to
rise in the initial phase of a revival in inflation from low levels but
longer-dated government and investment grade corporate bonds could prove
vulnerable.
NET ASSET VALUE
Your Company's unaudited NAV at 31st January 2017 was 140.24p.
Geoffrey Howard-Spink
Chairman
2 March 2017
INVESTMENT MANAGER'S REPORT
MARKET REVIEW
Political events dominated financial markets during the six months to 31st
December 2016, the key events being the UK electorate's Brexit vote just before
the start of the period and Donald Trump's election as US president in
November. Brexit and Trump's victory realised the worst fears of some
observers, however, global equities advanced 15.55% in sterling terms, with the
dollar's 8.19% rise against the pound enhancing returns for sterling investors.
Market movements differed from expectations for a number of reasons. Equities
were buoyed by the slower-than-anticipated pace of US monetary tightening. The
Federal Reserve raised interest rates only once and then only in December.
Investors were heartened by the steady pace of global economic growth, a
recovery in the prices of oil and other industrial commodities and rising
inflation.
Trump's victory came to be viewed positively once investors weighed the
expansionary impact of tax cuts, increased infrastructure spending,
deregulation and "putting America first" on growth and inflation. US equities
outperformed, rising 16.65% in sterling terms over the period under review.
Trump's election focused investor attention on the rise in inflation but
inflationary pressures were already building ahead of the vote because of
near-full employment and rising commodity prices. US unemployment remained
below 5% and the oil price rose 10.13% in sterling terms because of lower US
output and an Opec supply accord. Global bonds fell 6.31% in local currency
although this translated into a 1.36% gain for sterling investors because of
the pound's weakness.
The change in inflation expectations sparked a change in equity market
leadership. In the wake of the credit crisis, investors favoured companies with
dependable business models and strong market positions often secured by
competitive advantages such as strong brands or superior technology. The stable
nature of cash flows led to these businesses being dubbed "bond proxies". The
valuations of these companies became stretched during 2016, making them appear
expensive compared to more cyclical "value" stocks. The outperformance of
"value" stocks compared to "bond proxies" that characterised the period under
review may persist in conjunction with rising inflation.
The UK economy proved resilient during the third quarter of 2016 and into the
fourth quarter. Consumer spending remained strong despite the likely future
squeeze on real incomes from higher import prices following sterling's fall.
The robust growth may have resulted from the Bank of England's swift action in
cutting interest rates, increasing quantitative easing and fostering bank
lending but UK monetary conditions may have eased too much given the powerful
stimulus from the weaker pound. The Bank cut its 2017 UK gross domestic product
forecast from 2.3% to 0.8% in its August 2016 inflation report to reflect its
fears about the impact of Brexit. This pessimistic assessment was, however,
soon reversed and growth revised upwards to 2.0%, close to the pre-referendum
rate, in the February 2017 inflation report. UK government bonds fell 1.18%
over the period under review but could prove vulnerable to further falls if the
Bank tightens monetary policy in response to stronger growth and rising
inflation.
Emerging markets were buoyed over the period by the recovery in commodity
prices and slower-than-expected pace of US monetary tightening. The improvement
in the current account positions of some countries contributed to gains for
local currencies relative to sterling. Despite giving back some gains on fears
of protectionism following Trump's election, equities in Asia excluding Japan
and emerging markets gained 11.82% and 13.27% respectively in sterling terms.
Portfolio review
Your Company's total return was 10.35% over the period under review. By
comparison, the Investment Association's Mixed Investment 40-85% Shares Index,
which measures a peer group of funds with a multi-asset approach to investing
and a typical investment in global equities in the 40-85% range, rose 10.37%.
The MSCI AC World Total Return Index gained 15.55% in sterling terms while the
MSCI UK Total Return Index rose 11.52%. Your Company benefited from its
relatively-high holdings in foreign-currency investments. In particular, the
majority of your Company's significant cash allocation is held in dollars. Over
the period, profits were taken from some investments in overseas equity funds
and reinvested in US equities and one UK private company.
Rising inflation and the accompanying change in equity market leadership in
favour of more cyclical, "value" stocks proved, however, to be a headwind for
some of the portfolio's actively-managed funds. The managers of Fundsmith
Equity and Newton Global Income focus on companies with stable cash flows and
strong barriers to entry. These funds returned 10.18% and 10.46% respectively
over the period but fell short of the 15.55% sterling gain from global
equities. The holdings in both funds were reduced through profit-taking.
Artemis Global Income, however, outperformed, rising 19.81% because of its
higher holdings in cyclical companies.
Your Company's largest investment, FP Crux European Special Situations, was
also affected by the change in equity market leadership, rising 11.64% while
equities in Europe excluding UK gained 14.60%. The holding was reduced through
profit-taking.
From an economic perspective, the outlook for Europe ex-UK equities brightened
over the period. Economic leading indicators and employment and inflation data
all improved but the region is confronted in 2017 by a number of elections in
which populist, anti-European Union candidates may gain support. Your company's
investment in Europe ex-UK equities was reduced further through the outright
sale of Schroder European Alpha Income.
Following the US election, your Company invested directly in US equities
through purchases of the SPDR S&P 500 and iShares S&P 500 Financials Sector
exchange-traded funds. Trump's expansionary economic policies should benefit US
equities. Rising US bond yields and the new president's commitment to reducing
regulatory burdens favour financial companies. A high-water mark in financial
regulation appeared to have been reached in February 2017 when Trump signed an
executive order to review the Dodd-Frank Wall Street Reform and Consumer
Protection Act. During a period in which US equities gained 16.65% in sterling
terms, your Company benefited from its significant allocation to US equities
through investments in global equity and multi-asset funds. Polar Capital
Technology, which typically has a high allocation to US technology companies,
gained 18.22%.
UK equities returned 11.52% as sterling's fall increased the export
competitiveness of UK companies. All your Company's UK equity fund holdings
outperformed because of their relatively high allocation to UK smaller
companies, which outperformed their larger peers. Aberforth Geared Income did
best, returning 16.41% as a result of the manager's focus on smaller companies
and value-investing.
Amongst your Company's emerging market investments, Neptune Russia & Greater
Russia did best. It returned 38.82%, buoyed by the rouble's 13.21% rise against
sterling and higher oil prices. The investment was reduced during the period
through profit taking. Indian equities underperformed other emerging market
equities, rising 5.44% in sterling terms, with their losses in local currency
more than offset by the rupee's 7.59% gain against the pound. The Stewart
Investors India Subcontinent holding, which returned 7.98%, was reduced through
profit-taking. In November, India's prime- minister, Narendra Modi, announced
the demonetisation of larger denomination bank notes to reduce corruption and
tax evasion. The unexpected money supply reduction led to temporary falls for
Indian equities followed by a recovery in January 2017.
The rise in inflation and expectations of further monetary tightening in 2017
resulted in a 6.25% fall in the gold price in sterling as the opportunity cost
of holding this nil-yielding asset increased. The gold price fall led to bigger
falls for gold equities, with BlackRock Gold & General declining 12.18%. Your
Company's holding in this fund was reduced although the residual investment
continues to provide an important source of diversification. In January 2017,
the gold price recovered 3.09% in sterling terms.
All six FP Brompton Global funds outperformed their respective benchmarks
during the period under review, with FP Brompton Global Equity the strongest
performer, rising 18.34%. FP Brompton Global Conservative was the weakest in
absolute terms, returning 6.91% as a result of its low-risk mandate.
In July, your Company invested in the unquoted Embark Group, a leading personal
pension and small self-administered pension scheme administrator through its
Hornbuckle and Rowanmoor brands. The industry is undergoing significant
regulatory and technological change. These developments should provide an
opportunity for larger players such as Embark to increase market share.
Outlook
Over the coming months, fresh details about Donald Trump's policies of fiscal
stimulus and protectionism are likely to have a significant impact on financial
markets. In Europe, meanwhile, the eurozone's stability and integrity may be
challenged by election results.
The recovery in inflation in developed economies is also likely to remain an
important theme. Equities could prove vulnerable if inflation rises rapidly and
precipitates a more hawkish stance on monetary policy from the Federal Reserve.
In this event, your Company's investments in gold equities, cash and FP
Brompton Global Conservative should provide some diversification and prove
defensive. Equities tend to perform well, however, when inflation rises from
subdued levels and conversely, longer-duration bonds could post losses. Your
Company is positioned for this environment with a high allocation to global
equities and no direct investments in bonds.
Brompton Asset Management LLP
2 March 2017
DIRECTORS' REPORT
PERFORMANCE
In the six months to 31st December 2016 the total return per Ordinary share
increased by 10.4% to 138.41p, whilst the share price increased by 24.3% to
94.50p. This compares to an increase of 10.4% in the IA Mixed Investment 40-85%
Shares Index.
INVESTMENT OBJECTIVE
The Company's investment objective is to achieve long-term capital growth.
INVESTMENT POLICY
The Company's investment policy is to allocate assets to global investment
opportunities through investment in equity, bond, commodity, real estate,
currency and other markets. The Company's assets may have significant
weightings to any one asset class or market, including cash.
The Company will invest in pooled investment vehicles, exchange traded funds,
futures, options, limited partnerships and direct investments in relevant
markets. The Company may invest up to 15% of its net assets in direct
investments in relevant markets.
The Company will not follow any index with reference to asset classes,
countries, sectors or stocks. Aggregate asset class exposure to any one of the
United States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan or
Emerging Markets and to any individual industry sector will be limited to 50%
of the Company's net assets, such values being assessed at the time of
investment and for funds by reference to their published investment policy or,
where appropriate, their underlying investment exposure.
The Company may invest up to 20% of its net asset value in unlisted securities
(excluding unquoted pooled investment vehicles) such values being assessed at
the time of investment.
The Company will not invest more than 15% of its net assets in any single
investment, such values being assessed at the time of investment.
Derivative instruments and forward foreign exchange contracts may be used for
the purposes of efficient portfolio management and currency hedging.
Derivatives may also be used outside of efficient portfolio management to meet
the Company's investment objective. The Company may take outright short
positions in relation to up to 30% of its net assets, with a limit on short
sales of individual stocks of up to 5% of its net assets, such values being
assessed at the time of investment. The Company may borrow up to 30% of net
assets for short-term funding or long-term investment purposes. No more than
10%, in aggregate, of the value of the Company's total assets may be invested
in other closed-ended investment funds except where such funds have themselves
published investment policies to invest no more than 15% of their total assets
in other listed closed-ended investment funds.
SHARE CAPITAL
The Company's share capital comprises 305,000,000 Ordinary shares of 1p each,
of which 71,023,695 (2015: 71,023,695) have been issued fully paid. No
Ordinary shares are held in treasury, and none were bought back or issued
during the six months to 31st December 2016.
RISK MANAGEMENT
The principal risks associated with the Company that have been identified by
the Board, together with the steps taken to mitigate them, are as follows:
Investment strategy: inappropriate long-term strategy, asset allocation and
manager selection might lead to the underperformance of the Company. The
Company's strategy is kept under regular review by the Board. Investment
performance is discussed at every Board meeting and the Directors receive
reports detailing the Company's asset allocation, investment selection and
performance.
Business conditions and general economy: the Company's future performance is
heavily dependent on the performance of different equity and currency markets.
The Board cannot mitigate the risks arising from adverse market movements.
However, diversification within the portfolio will reduce the impact. Further
information is given in portfolio risks below. The Board regularly considers
the economic environment in which the Company operates.
Portfolio risks - market price, foreign currency and interest rate risks: the
twenty largest investments are listed below. Investment returns will be
influenced by interest rates, inflation, investor sentiment, availability/cost
of credit and general economic conditions in the UK and globally. A proportion
of the portfolio is in investments denominated in foreign currencies and
movements in exchange rates could significantly affect their sterling value.
The Investment Manager takes all these factors into account when making
investment decisions but the Company does not normally hedge against foreign
currency movements. The Board's policy is to hold a spread of investments, both
asset classes and geographic regions, in order to reduce the impact of the
risks arising from the above factors.
Net Asset Value Discount: The discount in the price at which the Company's
shares trade to Net Asset Value means that shareholders cannot realise the real
underlying value of their investment. Over the last few years the Company's
share price has been at a significant discount to the Company's Net Asset
Value. The Directors review regularly the level of discount, however given the
investor base of the Company, the Board is very restricted in its ability to
control the discount to Net Asset Value.
Investment Manager: the quality of the team employed by the Investment Manager
is an important factor in delivering good performance and the loss by the
Investment Manager of key staff could adversely affect investment returns. The
Company's portfolio is managed by Gill Lakin. The Board receives a monthly
financial report which includes information on performance, and a
representative of the Investment Manager attends each Board meeting. The Board
is kept informed if any changes to the investment team employed by the
Investment Manager are proposed.
Tax and regulatory risks: a breach of The Investment Trusts (Approved company)
(Tax) Regulations 2011 (the Regulations) could lead to capital gains realised
within the portfolio being subject to UK capital gains tax. A breach of the
UKLA Listing Rules could result in suspension of the Company's shares, while a
breach of company law could lead to criminal proceedings, or financial or
reputational damage. The Board employs Brompton Asset Management LLP as
Investment
Manager and Maitland Administration Services Limited as Corporate Secretary and
Administrator to help manage the Company's legal and regulatory obligations.
The Board receives a monthly financial report which includes information on the
Company's compliance with the Regulations.
Operational: disruption to, or failure of, the Investment Manager's or
Administrator's accounting, dealing or payment systems or the Custodian's
records could prevent the accurate reporting and monitoring of the Company's
financial position. The Company is also exposed to the operational risk that
one or more of its suppliers may not provide the required level of service.
The Company receives regular reports from its contracted third parties.
INVESTMENT MANAGEMENT ARRANGEMENT AND RELATED PARTY TRANSACTIONS
In common with most investment trusts the Company does not have any executive
directors or employees. The day-to-day management and administration of the
Company, including investment management, accounting and company secretarial
matters, and custodian arrangements are delegated to specialist third party
service providers.
Details of related party transactions are contained in the Annual Report.
There have been no material transactions with related parties during the period
which have had a significant impact on the performance of the Company.
GOING CONCERN
The Directors believe that it is appropriate to continue to adopt the going
concern basis in preparing the accounts as the assets of the Company consist
mainly of securities that are readily realisable or cash and it has no
significant liabilities. Investment income exceeds annual expenditure and
current liquid net assets cover current annual expenses for many years.
Accordingly, the Company is of the opinion that it has adequate financial
resources to continue in operational existence for the foreseeable future which
is considered to be in excess of 5 years. In reaching this view the Directors
reviewed the anticipated level of annual expenditure against the cash and
liquid assets within the portfolio. The Directors have also considered the
risks the Company faces.
AUDITORS
The half year financial report has been reviewed, but not audited, by Ernst &
Young LLP pursuant to the Auditing Practices Board
guidance on the Review of Interim Financial Information.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
* The financial statements contained within the half year financial report to
31st December 2016 has been prepared in accordance with International
Accounting Standard 34 'Interim Financial Reporting';
* The Chairman's statement, Directors' report or the Investment Manager's
report include a fair review of important events that have occurred during
the first six months of the financial year and their impact on the
financial statements;
* The Chairman's statement, Directors' report or the Investment Manager's
report include a fair review of the potential risks and uncertainties for
the remaining six months of the year;
* The Director's report and note 8 to the half year financial report include
a fair review of the information concerning transactions with the
investment manager and changes since the last annual report.
By order of the Board
Maitland Administration Services Limited
2 March 2017
INDEPENDENT REVIEW REPORT TO NEW STAR INVESTMENT TRUST PLC
INTRODUCTION
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 31
December 2016 which comprises the consolidated statement of comprehensive
income, the consolidated statement of changes in equity, the consolidated
balance sheet, the consolidated cash flow statement and related explanatory
notes 1 to 8. We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed set of
financial statements.
This report is made solely to the company in accordance with guidance contained
in International Standard on Review Engagements 2410 (UK and Ireland) "Review
of Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we have formed.
DIRECTORS' RESPONSIBILITIES
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
OUR RESPONSIBILITY
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half year financial report based on our
review.
SCOPE OF REVIEW
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
CONCLUSION
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 31 December 2016 is not prepared, in
all material respects, in accordance with International Accounting Standard 34
as adopted by the European Union and the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
2 March 2017
SCHEDULE OF TOP TWENTY INVESTMENTS
at 31st December 2016
Holding Activity Bid-market % of Net
value Assets
£ '000
FP Crux European Special Investment Fund 9,488 9.65
Situations Fund
Fundsmith Equity Fund Investment Fund 7,945 8.08
Newton Global Income Fund Investment Fund 5,323 5.42
FP Brompton Global Conservative Investment Fund 3,922 3.99
Fund
Artemis Global Income Fund Investment Fund 3,809 3.87
Aberforth Geared Income Trust Investment 3,703 3.77
Company
Polar Capital Funds Plc- Global Investment Fund 3,558 3.62
Technology Fund
BlackRock Gold & General Fund Investment Fund 3,295 3.35
Aquilus Inflection Fund Investment Fund 3,117 3.17
Liontrust Asia Income Fund Investment Fund 2,643 2.69
FP Brompton Global Investment Fund 2,575 2.62
Opportunities Fund
FP Brompton Global Growth Fund Investment Fund 2,434 2.48
FP Brompton Global Equity Fund Investment Fund 2,419 2.46
Man GLG UK Income Fund Investment Fund 2,411 2.45
Embark Group Unquoted 2,400 2.44
investment
Trojan Income Fund Investment Fund 2,380 2.42
Lindsell Train Japanese Equity Investment Fund 2,313 2.35
Fund
MI Brompton UK Recovery Unit Investment Fund 2,257 2.30
Trust
Stewart Investors Indian Investment Fund 2,209 2.25
Subcontinent Fund
FP Brompton Global Income Fund Investment Fund 2,172 2.21
70,373 71.59
Balance held in 17 investments 13,519 13.75
Total investments (excluding 83,892 85.34
cash) 14,410 14.66
Net current assets 98,302 100.00
Net Assets
The investment portfolio can be further analysed as cash
follows:
£'000
Investment funds 72,625
Investment companies and ETFs 6,668
Unquoted investments 3,980
Other quoted investments 619
83,892
The Company's investments are either unlisted or
are unit trust/OEIC funds with the exception of
Aberforth Geared Income Trust, Miton Group,
Immedia Group, iShares US Financials ETF and
SPDR S&P UCITS ETF.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31st December 2016
(unaudited)
Six months ended
31st December 2016
(unaudited)
Revenue Capital Total
Return Return Return
Notes £ '000 £ '000 £ '000
INCOME
Investment income 942 - 942
Other operating income 9 - 9
Total income 2 951 - 951
GAINS AND LOSSES ON INVESTMENTS
Gains on investments at fair value 5 - 7,899 7,899
through profit or loss
Other exchange gains - 845 845
Management fee rebates - 2 2
951 8,746 9,697
EXPENSES
Management fees 3 (300) - (300)
Other expenses (150) - (150)
(450) - (450)
PROFIT BEFORE FINANCE COSTS AND TAX 501 8,746 9,247
Finance costs - - -
PROFIT BEFORE TAX 501 8,746 9,247
Tax (6) - (6)
PROFIT FOR THE PERIOD 495 8,746 9,241
EARNINGS PER SHARE
Ordinary shares (pence) 4 0.70p 12.31p 13.01p
The total column of this statement represents the Group's profit and loss
account, prepared in accordance with IFRS. The supplementary Revenue Return and
Capital Return columns are both prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive
from continuing operations. No operations were acquired or discontinued during
the period.
All income is attributable to the equity holders of the parent company. There
are no minority interests.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31st December 2015 and the year ended 30th June 2016
Six months ended Year ended
31st December 2015 30th June 2016
(unaudited) (audited)
Notes Revenue Capital Total Revenue Capital Total
Return Return Return Return Return Return
£'000 £'000 £'000 £'000 £'000 £'000
INCOME
Investment income 475 - 475 934 - 934
Other operating income 3 - 3 10 - 10
Total income 2 478 - 478 944 - 944
GAINS AND LOSSES ON
INVESTMENTS
Gains on investments
at fair value through 5 - 1,282 1,282 - 7,921 7,921
profit or loss
Other exchange gains - 610 610 - 1,510 1,510
Management fee rebates - 6 6 - 9 9
478 1,898 2,376 944 9,440 10,384
EXPENSES
Management fees 3 (242) - (242) (509) - (509)
Other expenses (124) - (124) (242) - (242)
(366) - (366) (751) - (751)
PROFIT BEFORE FINANCE
COSTS AND TAX 112 1,898 2,010 193 9,440 9,633
Finance costs - - - - - -
PROFIT BEFORE TAX 112 1,898 2,010 193 9,440 9,633
Tax - - - - - -
PROFIT FOR THE PERIOD 112 1,898 2,010 193 9,440 9,633
EARNINGS PER SHARE
Ordinary shares 4 0.16p 2.67p 2.83p 0.27p 13.29p 13.56p
(pence)
The total column of this statement represents the Group's profit and loss
account, prepared in accordance with IFRS. The supplementary Revenue Return and
Capital Return columns are both prepared under guidance published by the
Association of Investment Companies. All items in the above statement derive
from continuing operations. No operations were acquired or discontinued during
the periods.
All income is attributable to the equity holders of the parent company. There
are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31st December 2016
(unaudited)
Share Share Special Retained
capital premium reserve earnings Total
£ '000 £ '000 £ '000 £ '000 £ '000
At 30th JUNE 2016 710 21,573 56,908 10,083 89,274
Total comprehensive income - - - 9,241 9,241
for the period
Dividend paid - - - (213) (213)
At 31st DECEMBER 2016 710 21,573 56,908 19,111 98,302
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31st December 2015
(unaudited)
Share Share Special Retained
capital premium reserve earnings Total
£ '000 £ '000 £ '000 £ '000 £ '000
At 30th JUNE 2015 710 21,573 56,908 663 79,854
Total comprehensive income - - - 2,010 2,010
for the period
Dividend paid - - - (213) (213)
At 31st DECEMBER 2015 710 21,573 56,908 2,460 81,651
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30th June 2016
(audited)
Share Share Special Retained
capital premium reserve earnings Total
£ '000 £ '000 £ '000 £ '000 £ '000
At 30th JUNE 2015 710 21,573 56,908 663 79,854
Total comprehensive income - - - 9,633 9,633
for the year
Dividend paid - - - (213) (213)
At 30th JUNE 2016 710 21,573 56,908 10,083 89,274
CONSOLIDATED BALANCE SHEET
at 31st December 2016
Notes 31st 31st December 30th June
December 2015 2016
2016 (unaudited) (audited)
(unaudited) £ '000 £ '000
£ '000
NON-CURRENT ASSETS
Investments at fair
value through profit or 5 83,892 70,418 79,467
loss
CURRENT ASSETS
Other receivables 25 31 55
Cash and cash 14,580 11,370 9,938
equivalents
14,605 11,401 9,993
TOTAL ASSETS 98,497 81,819 89,460
CURRENT LIABILITIES
Other payables (195) (168) (186)
TOTAL ASSETS LESS
CURRENT LIABILITIES 98,302 81,651 89,274
NET ASSETS 98,302 81,651 89,274
EQUITY ATTRIBUTABLE TO
EQUITY HOLDERS
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 6 19,111 2,460 10,083
TOTAL EQUITY 98,302 81,651 89,274
NET ASSET VALUE PER 7 138.41p 114.96 125.70
ORDINARY SHARE (PENCE)
The interim report was approved and authorised for issue by the Board on 2
March 2017.
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31st December 2016
Six months Six months Year
ended ended ended
31st 31st 30th June
December December 2016
2016 2015 (audited)
(unaudited) (unaudited) £ '000
£ '000 £ '000
NET CASH INFLOW FROM OPERATING 536 134 212
ACTIVITIES
INVESTING ACTIVITIES
Purchase of investments (5,577) (9,129) (14,613)
Sale of investments 9,051 8,079 11,153
NET CASH INFLOW/ (OUTFLOW) FROM
INVESTING ACTIVITIES 3,474 (1,050) (3,460)
FINANCING
Equity dividend paid (213) (213) (213)
NET CASH INFLOW/(OUTFLOW) AFTER 3,797 (1,129) (3,461)
FINANCING
INCREASE/ (DECREASE) IN CASH 3,797 (1,129) (3,461)
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET FUNDS
Increase/ (Decrease) in cash 3,797 (1,129) (3,461)
resulting from cash flows
Exchange movements 845 610 1,510
Movement in net funds 4,642 (519) (1,951)
Net funds at start of period/year 9,938 11,889 11,889
NET FUNDS AT END OF PERIOD/YEAR 14,580 11,370 9,938
RECONCILIATION OF PROFIT BEFORE
FINANCE COSTS AND TAXATION TO NET
CASH FLOW FROM OPERATING ACTIVITIES
Profit before finance costs and 9,247 2,010 9,633
taxation *
Gains on investments (7,899) (1,282) (7,921)
Exchange differences (845) (610) (1,510)
Management fee rebates (2) (6) (9)
Revenue profit before finance costs 501 112 193
and taxation
Decrease/(increase) in debtors 37 15 (7)
Increase in creditors 9 1 19
Taxation (13) - (2)
Management fee rebates 2 6 9
NET CASH INFLOW FROM OPERATING 536 134 212
ACTIVITIES
* Includes dividends received in cash of £646,000 (2015: £298,000), accumulated
dividend income of £296,000 (2015: £177,000)
and interest income of £9,000 (2015: £3,000)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 31st December 2016
1. ACCOUNTING POLICIES
These consolidated half year financial statements comprise the unaudited
results of the Company and its subsidiary, JIT Securities Limited (together
"the Group"), for the six months to 31st December 2016. The comparative
information for the six months to 31st December 2015 and the year to 30th June
2016 do not constitute statutory accounts under the Companies Act 2006. Full
statutory accounts for the year to 30th June 2016 included an unqualified audit
report, did not contain any statements under section 498 of the Companies Act
2006, and have been filed with the Registrar of Companies.
The half year financial statements have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting', and are
presented in pounds sterling, as this is the Group's functional currency.
The same accounting policies have been followed in the interim financial
statements as applied to the accounts for the year ended 30th June 2016, which
were prepared in accordance with IFRSs as adopted by the European Union.
No segmental reporting is provided as the Group is engaged in a single segment.
2. TOTAL INCOME
Six months Six months Year
ended 31st ended 31st ended
December December 2015 30th June
2016 £'000 2016
£'000
£'000
Income from Investments
UK net dividend income 847 454 877
UK unfranked investment income 95 21 57
942 475 934
Operating Income
Bank interest receivable 9 3 10
9 10
3
Six months Six months Year
ended 31st ended 31st ended
December December 30th June
2016 2015 2016
£'000 £'000
£'000
Total income comprises
Dividends 942 475 934
Other income 9 3 10
951 478 944
3. MANAGEMENT FEES
Six months Six months Year
ended 31st ended 31st ended
December December 30th June
2016 2015 2016
£'000 £'000
£'000
Investment management fee 300 242 509
Performance fee - - -
300 242 509
The Investment Manager receives a management fee, payable quarterly in arrears,
equivalent to an annual 0.75 per cent of total assets after the deduction of
the value of any investments managed by the Investment Manager or its
associates (as defined in the investment management agreement). The Investment
Manager is also entitled to a performance fee of 15% of the growth in net
assets over a hurdle of 3-month Sterling LIBOR plus 1% per annum, payable six
monthly in arrears, subject to a high water mark. The aggregate of the
Company's management fee and any performance fee are subject to a cap of 4.99%
of net assets in any financial year (with any performance fee in excess of this
cap capable of being earned in subsequent periods). The performance fee will be
charged 100% to capital, in accordance with the Board's expectation of how any
out-performance will be generated. No performance fee is payable for the
period.
4. RETURN PER ORDINARY SHARE
Six months Six months Year ended
ended 31st ended 31st 30th June
December December 2016
2016 2015
£'000 £'000 £'000
Revenue return 495 112 193
Capital return 8,746 1,898 9,440
Total return 9,241 2,010 9,633
Weighted average number of 71,023,695 71,023,695 71,023,695
Ordinary shares
Revenue return per Ordinary 0.70p 0.16p 0.27p
share
Capital return per Ordinary 12.31p 2.67p 13.29p
share (before dividend)
Total return per Ordinary share 13.01p 2.83p 13.56p
(before dividend)
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
At At At
31st 31st 30th June
December December 2016
2016 2015 £'000
£'000 £'000
GROUP AND COMPANY 83,892 70,418 79,467
ANALYSIS OF INVESTMENT
PORTFOLIO - GROUP AND COMPANY
Six months ended 31st December
2016
Listed* Unlisted** Total
(level 1 (level 3)
and 2) £'000
£'000 £'000
Opening book cost 58,833 4,325 63,158
Opening investment holding 19,054 (2,745) 16,309
gains/(losses)
Opening valuation 77,887 1,580 79,467
Movement in period:
Purchase at cost 3,177 2,400 5,577
Sales
- Proceeds (9,051) - (9,051)
- Realised gains on sales 2,739 - 2,739
Investment holding gains 5,160 - 5,160
Closing valuation as at 31 79,912 3,980 83,892
December 2016
Closing book cost 55,698 6,725 62,423
Unrealised investment holding 24,214 (2,745) 21,469
gains/(losses)
Closing valuation 79,912 3,980 83,892
* Listed investments include unit trust and OEIC funds which are valued at
quoted prices. Included within Listed Investments is one level 2 investment of
£3,117,000 (2015: £2,612,000).
** The Unlisted investments, representing approximately 4% of the Company's
NAV, have been valued in accordance with IPEVC valuation guidelines. The
largest unquoted investment amounting to £2,400,000 (2015: £1,280,000) was
valued at the latest transaction price. A 10% increase or decrease in earnings
would not have a material impact on the value of the investment.
There were no reclassifications for assets between Level 1 and Level 3.
Six months Six months Year
ended 31st ended 31st ended
December December 30th June
2016 2015 2016
£'000 £'000
£'000
ANALYSIS OF CAPITAL GAINS AND
LOSSES
Realised gains on sales of 2,739 772 1,096
investments
Increase in investment holding 5,160 510 6,825
gains
7,899 1,282 7,921
6. RETAINED EARNINGS
At At At
31st 31st 30th June
December December 2016
2016 2015 £'000
£'000 £'000
Capital reserve - realised (3,046) (7,859) (6,632)
Capital reserve - revaluation 21,469 9,994 16,309
Revenue reserve 688 325 406
19,111 2,460 10,083
7. NET ASSET VALUE PER ORDINARY SHARE
31st 31st 30th June
December December 2016
2016 2015 £'000
£'000 £'000
Net assets attributable to 98,302 81,651 89,274
Ordinary shareholders
Ordinary shares in issue at end 71,023,695 71,023,695 71,023,695
of period
Net asset value per Ordinary 138.41p 114.96p 125.70p
share
8. TRANSACTIONS WITH THE INVESTMENT MANAGER
During the period there have been no new related party transactions that have
affected the financial position or performance of the Group.
Since 1st January 2010 Brompton has acted as Investment Manager to the Company.
This relationship is governed by an agreement dated 23rd December 2009.
Mr Duffield is the senior partner of Brompton Asset Management Group LLP the
ultimate parent of Brompton.
The total investment management fee payable to Brompton for the half year ended
31st December 2016 was £300,000 (2015: £242,000) and at the half year end £
151,000 (2015 £124,000) was accrued. No performance fee was payable in respect
of the half year ended 31st December 2016 (2015: £nil).
The Group's investments include seven funds managed by Brompton or its
associates valued at £17,828,000 (2015: £15,504,000). No investment management
fees were payable directly by the Company in respect of these investments.
New Star Investment Trust : Half-year Report
March 03, 2017 at 02:58 am EST
Share
Share
© PRNewswire - 2017
