NEW STAR INVESTMENT TRUST PLC 
By
NEW STAR INVESTMENT TRUST PLC
PRELIMINARY ANNOUNCEMENT
This announcement constitutes regulated information.
UNAUDITED RESULTS
FOR THE YEAR ENDED 30th JUNE 2013
New Star Investment Trust plc (the `Company'), whose objective is to achieve
long-term capital growth, announces its consolidated results for the year ended
30th June 2013.
FINANCIAL HIGHLIGHTS
30th June 30th June %
2013 2012 Change
PERFORMANCE
Net assets (£ `000) 73,320 68,067 7.7
Net asset value per Ordinary share 103.23p 95.84p 7.7
Mid-market price per Ordinary share 67.50p 66.50p 1.5
Discount of price to net asset value 34.6% 30.6% N/A
NAV performance 7.7% (9.8%)
IMA Mixed Investment 40% - 85% Shares 15.0% (3.7%)
(total return)
MSCI AC World Index (total return, sterling 21.2% (3.7%)
adjusted)
MSCI UK Index (total return) 15.7% (2.3%)
1st July 2012 to 1st July 2011 to
30th June 2013 30th June 2012
REVENUE
Return per Ordinary share (0.05)p (0.11)p
Dividend per Ordinary share - -
TOTAL RETURN
Net assets 7.7% (9.8%)
CHAIRMAN'S STATEMENT
Performance
Your Company's net asset value rose 7.7% over the year to 30th June 2013. This
took the year-end NAV per ordinary share to 103.23p. By comparison, the
Investment Management Association's (IMA's) Mixed Investment 40-85% Shares
index gained 15.0%. Your directors believe this comparison is appropriate
because your Company has since inception been invested in a broad range of
asset classes. Equity markets were buoyant, with the MSCI AC World Total Return
Index and the MSCI UK Total Return Index rising 21.2% and 15.7% respectively
whereas UK gilts fell by 2.4%. Your directors believe the MSCI AC World Index
is the most widely recognised benchmark for global equities and have,
accordingly, adopted MSCI benchmark data.
Your directors intend to maintain your Company's long-term conservative
investment strategy, investing in a diversified range of asset classes, sectors
and geographic locations. At the start of the year under review, 54.4% of your
Company's assets was invested in equity investments, 25.3% was in cash, 11.6%
was in gold and gold equities, 4.5% was in hedge funds and 4.2% was in bonds.
This defensive strategy has not served shareholders well in the recent bull
market. We do, however, intend at present to maintain this cautious approach.
The principal reasons for your Company's underperformance during the year under
review were its significant holdings in cash and in securities affected by weak
commodity prices. Your Company also suffered from having relatively small
holdings in US equities, which performed strongly.
Increased investment income helped the Company to reduce its net revenue loss
before taxation. After taxation, the net revenue loss for the year was £35,000
against a £78,000 loss the previous year. Your directors do not recommend the
payment of a final dividend.
Market review
Global stockmarkets gained 22.1% during the year, fuelled by abundant liquidity
as a result of central bank monetary activism and growing evidence that the US
economy was regaining momentum.
Among the stockmarkets of the Group of Seven (G7) major industrial nations,
Germany and France were the best performers, rising 31.5%, and 30.1%
respectively as hopes grew of a resolution of the eurozone crisis. US stocks
gained 25.3% and Japanese stocks also gained 25.3% in sterling, with their
50.8% local currency gain eroded by yen weakness stemming from the reforms
announced by Shinzo Abe, Japan's new prime minister. UK stocks returned 17.9%.
Emerging market equities retreated in early 2013 in response to China's growth
slowdown and suggestions of an end to US quantitative easing, ending the year
up only 6.8%. China's growth slowdown and the approaching end to US
quantitative easing also affected sector returns. Basic materials fell 7.3% yet
healthcare gained 28.3% while consumer services and financials rose 25.3% and
24.3% respectively.
With investors' risk appetites increased by greater eurozone stability and US
economic expansion, small and medium-sized companies outperformed larger
stocks. Investors' recovering risk appetite was also apparent in bond markets,
where Spanish bonds returned 22.2% but UK gilts fell 2.4%. In commodity
markets, gold fell 23.9% on fears that Cyprus would sell its gold reserves and
other weaker eurozone members might follow.
Outlook
The Federal Reserve has flagged a major change in monetary policy as it
attempts to halt quantitative easing, the defining policy initiative of the
post-credit crisis years. The rapid rise in bond yields that succeeded this
announcement raises the risk that the economic recovery will falter at a time
when developed market economies remain highly indebted. Your Company's
investments in gold and cash remain core elements of the overall asset
allocation given the considerable execution risk attendant on the Federal
Reserve's stated aim of achieving this major policy transition.
The discount
Your Company's shares continue to trade at a significant discount to their net
asset value. Your directors have explored various possibilities with a view to
reducing this discount but no satisfactory solution has been found. This
position is kept under continual review by the board.
Your Company's unaudited net asset value at 31st August 2013 was 105.55p.
Geoffrey Howard-Spink
Chairman
26th September 2013
INVESTMENT MANAGER'S REPORT
The New Star Investment Trust's net asset value rose 7.7% during the year under
review. This compares with gains for the MSCI AC World Total Return Index and
the MSCI UK Total Return Index of 21.2% and 15.7% respectively, reflecting
strong performance from UK and global equity markets. The Company is invested
in a multi-asset portfolio with major holdings in cash and gold in addition to
the majority investment in global equities.
The IMA's Mixed Investment 40-85% Shares Index, which measures a peer group of
funds that typically have 40-85% of their portfolios invested in equities, rose
15.0% during the year. The investment manager intends to refer to the return
from this index as well as the MSCI AC World Total Return and MSCI UK Total
Return indices in future reports to increase the reference points for investors
in assessing the Company's performance in respect of its objective of
delivering long-term capital growth. This does not mean the Company's equity
allocation will be constrained within a 40-85% range because the investment
manager reserves the flexibility to adjust the asset allocation to meet the
Company's specific objective while maintaining a cautious approach to risk. The
returns delivered by the two pure equity benchmarks are, however, likely to
exceed the returns generated by a multi-asset portfolio in times of strongly
rising equity markets such as the year under review. Conversely, the lower
equity allocation may ensure that the Company does not fall as much in value in
times of falling markets and is part of the overall risk control within the
portfolio.
Equity investments, both equity funds and individual equities, accounted for
the majority of the Company's assets throughout the year under review. The
investment manager's principal focus remains on investing in a portfolio of
funds that reflects both high-conviction asset allocation views as well as the
talents of individual third-party fund managers. The approach remains, however,
a conservative one and diversification across different asset classes is
fundamental to portfolio risk control. This means that even in a year when
equities were the preferred asset class from an asset allocation perspective,
the Company also had substantial holdings in other asset classes and
consequently the equity indices quoted above should be seen as illustrative
rather than a target or benchmark level of return for this lower-risk,
multi-asset portfolio.
Aberforth Geared Income Trust was the Company's best performing fund, rising
59.9% as this portfolio of smaller companies outperformed both UK smaller
companies as a whole and the wider UK equity market. Recent economic data has
indicated that the UK economic recovery is gathering pace, favouring more
economically-sensitive small and medium-sized companies focused on the domestic
economy. This theme should also continue to benefit the PFS Brompton UK
Recovery and Artemis UK Special Situations funds, which delivered returns of
27.9% and 27.3% respectively.
The Company's allocation to equity markets has favoured funds investing in
developing economy equity markets. The best-performing developing economy
investment was Investec Africa, which gained 23.42%, and the worst was Neptune
Russia & Greater Russia, which still delivered a gain of 10.4%. These markets
as a whole, however, underperformed developed economy equity markets during the
year. Asia Pacific excluding Japan and emerging market equities delivered 11.9%
and 4.1% respectively during the year as concerns regarding the impact of
tapering monetary expansion in the US and the attendant rise in US dollar and
treasury yields affected the flow of capital into these economies. The
longer-term attractions of their generally higher economic growth rates and
lower levels of public sector debt remain.
There were a number of changes in the Company's developing economy investments.
The First State Indian Subcontinent Fund was bought in August and delivered a
21.0% return up to the year end. The Atlantis China holding was reduced in
September. Economic growth has slowed in China as the driver of expansion
shifts from exports to domestic consumption. Elsewhere in the region, Liontrust
Asia was sold and the proceeds invested in the recently-launched Liontrust Asia
Income Fund.
Fixed income investments typically account for a substantial proportion of the
non-equity investments in multi-asset portfolios such as that of the New Star
Investment Trust but quantitative easing, the extraordinary and unconventional
response of central banks in the wake of the credit crisis, ultimately led to
many fixed income investments being priced to deliver negative real returns.
The Company has held a substantial amount in cash during the year in preference
to potentially-overvalued fixed income investments. UK gilts fell 2.4% during
the year. UK corporate bonds performed better for the year as a whole but both
gilts and UK corporate bonds fell following the Federal Reserve's announcement
in May that its asset purchase programme might be reined in or "tapered" and
potentially halted outright in 2014.
The Company has progressively sold its fixed income investments, disposing of
the last traditional bond investment, M&G Optimal Income, through two sales in
December and February. Some of the proceeds were invested in the Fidelity
Global Inflation-linked Bond Fund, which has a relatively short duration,
meaning that it has a low exposure to future interest rate rises. This
investment increases the inflation protection in the portfolio given the
relatively high exposure to cash.
Growing investor confidence in the US economic recovery and a perceived
reduction in the risk of negative outcomes led to a sharp fall in the gold
price. Financial investors in particular, aware of the opportunity cost of
investing in a nil-yielding asset at a time of rising bond yields, contributed
to significant outflows from physical gold exchange-traded funds (ETFs). The
Company's two investments in gold and gold equities accounted for 11.6% of the
portfolio at the beginning of the year. The ETFS Gold Bullion Securities ETF
and the Blackrock Gold & General Fund fell by 22.1% and 41.9% respectively.
Gold performed strongly following the credit crisis because investors saw it as
a safe-haven asset given the debasement of fiat currencies occasioned by
policies of quantitative easing. More recently, the gold price has fallen
sharply at the prospect of an end to Federal Reserve asset purchases and the
general perception that economic recovery has strengthened. However, five years
after the crisis unfolded developed economy nations remain highly indebted and
the execution risk inherent in the Federal Reserve's policy reversal means that
for the time being, the Company's investments in gold remain core to the
overall asset allocation.
Profits were taken through a partial sale of Henderson European Special
Situations, which gained 40.2% during the year and is the largest equity
investment within the portfolio. SW Mitchell Small Cap European rose 16.1% and
was sold in favour of increasing long-only European equity exposure through
investment in Standard Life European Equity Income, which gained 14.8%. The
Company invested a total of £5.0 million in three Brompton multi-manager funds
at launch. IFDS Brompton Global Income and IFDS Brompton Global Diversified are
multi-asset funds and IFDS Brompton Global Growth is a fund of equity funds.
These investments were mainly funded through proceeds from sales and
realisations from the Henderson Private Equity Investment Trust.
Brompton Asset Management LLP
Investment Manager
26th September 2013
SCHEDULE OF TWENTY LARGEST INVESTMENTS
at 30th June 2013
30th June
2013
Holding Activity Bid-market Percentage
value of
invested
£ `000 portfolio
Henderson Euro Special Situations Investment Fund 7,180 12.31
Fund
Investec Africa Fund Investment Fund 4,730 8.11
Fundsmith Equity Fund Investment Fund 4,720 8.09
Artemis UK Special Situations Fund Investment Fund 3,340 5.73
BlackRock Gold & General Fund Investment Fund 3,049 5.23
Trojan Investment Fund Investment Fund 2,966 5.09
Aquilus Inflection Fund Investment Fund 2,625 4.50
Brompton UK Quant Fund Investment Fund 2,487 4.26
Aberforth Geared Income Trust Investment Company 2,446 4.19
Gold Bullion Securities ETF Exchange Traded 2,137 3.66
Fund
IFDS Brompton Income Fund Investment Fund 1,851 3.17
IFDS Brompton Diversified Fund Investment Fund 1,821 3.12
Polar Capital Global Technology Investment Fund 1,789 3.07
Fund
PFS Brompton UK Recovery Unit Trust Investment Fund 1,681 2.88
IFDS Brompton Global Growth Fund Investment Fund 1,600 2.74
Standard Life Investment European Investment Fund 1,582 2.71
Income Fund
First State Indian Subcontinent Investment Fund 1,568 2.69
Fund
Neptune Russia & Greater Russia Investment Fund 1,466 2.51
Fund
Fidelity Global Inflation Linked Investment Fund 1,369 2.35
Bond Fund
Aberdeen Asia Pacific Fund Investment Fund 1,317 2.26
51,724 88.67
Balance held in 16 investments 6,602 11.33
Total investments 58,326 100.00
The investment portfolio can be further analysed as
follows:
£ `000
Equities (including Investment 6,084
Companies)
Loan 144
Investment funds and ETF's
52,098
58,326
All the Company's investments are either unlisted or are unit trusts/OEIC funds
with the exception of Aberforth Geared Income Trust, BH Global Limited, Miton
Group, Gold Bullion Securities ETF, Immedia Broadcasting and Bumi Plc.
SCHEDULE OF TWENTY LARGEST INVESTMENTS
at 30th June 2012
30th June
2012
Holding Activity Bid-market Percentage
value of
invested
£ `000 portfolio
Henderson Euro Special Situations Investment Fund 6,603 12.91
Fund
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 5.97
Trust Company
Trojan Investment Fund Investment Fund 2,989 5.84
Polar Capital Global Technology Investment Fund 2,986 5.84
Fund
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 2.89
Fund
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 funds
with the exception of Henderson Private Equity Investment Trust, Aberforth
Geared Income Trust, BH Global Limited, Miton Group, Gold Bullion Securities
ETF, Immedia Broadcasting, Westhouse Holdings and Bumi Plc.
BUSINESS REVIEW
The following business review is designed to provide information primarily
about the Company's business and results for the year ended 30th June 2013. The
Business Review should be read in conjunction with the Chairman's Statement
which provide a review of the year's performance of the Company and the outlook
for the future.
STATUS
The Company is incorporated and registered in England and Wales and is
domiciled in the United Kingdom. The Company number is 3969011.
The Company is an investment company under section 833 of the Companies Act
2006. It is an Approved Company under the Investment Trust (Approved Company)
(Tax) Regulations 2011 (the `Regulations') for accounting periods commencing on
or after 30th June 2012, and conducts its affairs in accordance with those
Regulations so as to continue to gain exemption from liability to United
Kingdom capital gains tax.
HM Revenue & Customs granted the Company approval as an investment trust under
section 1158 Corporation Tax Act 2010 for the financial year ended 30th June
2012, subject to no subsequent enquiry into the Company's corporation tax
self-assessment being raised.
The Company is listed on the London Stock Exchange and conducts its affairs in
accordance with the Listing Rules issued by the UK Listing Authority, and the
Disclosure and Transparency Rules issued by the Financial Conduct Authority.
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 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, 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 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.
FINANCIAL REVIEW
Assets
Net assets at 30th June 2013 amounted to £73,320,000 compared with £68,067,000
at 30th June 2012. In the year under review, the net asset value per Ordinary
share increased by 7.7% from 95.84p to 103.23p.
Costs
Total expenses for the year amounted to £730,000 (2012: £727,000). In the year
under review the investment management fee amounted to £493,000 (2012: £
513,000). No performance fee was payable in respect of the year under review as
the Company has not outperformed the cumulative hurdle rate.
Revenue
The Group's gross revenue increased to £695,000 (2012: £485,000). After
deducting expenses and taxation the revenue loss for the year was £35,000
(2012: loss of £78,000).
Dividends
Dividends do not form a central part of the Company's investment objective. The
Directors have not declared a final dividend for the year ended 30th June 2013
(2012: nil).
Funding
The primary source of the Company's funding is shareholder funds. The Company
is typically ungeared.
VAT
No VAT is charged on investment management fees but is payable at standard rate
on other services provided to the Company.
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 2013 (2012: nil).
Future developments
While the future performance of the Company is dependent, to a large degree, on
the performance of international financial markets, which, in turn, are subject
to many external factors, the Board's intention is that the Company will
continue to pursue its stated investment objective in accordance with the
strategy outlined above. Further comments on the outlook for the Company for
the next 12 months are set out in the Chairman's Statement.
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. Accordingly, the Company has adequate financial
resources to continue in operational existence for the foreseeable future. In
reaching this view, the Directors reviewed the anticipated level of expenditure
of the Company for the next twelve months against the cash and liquid assets
within 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 %
2013 2012 Change
PERFORMANCE
Net assets (£ `000) 73,320 68,067 7.7
Net asset value per share 103.23p 95.84p 7.7
Share price 67.50p 66.50p 1.5
Discount 34.6% 30.6% N/A
Total return per share 7.40p (10.44p)
NAV performance 7.7% (9.8%)
IMA Mixed Investment 40% - 85% Shares 15.0% (3.7%)
(total return)
MSCI AC World Index (total return, sterling 21.2% (3.7%)
adjusted)
MSCI UK Index (total return) 15.7% (2.3%)
MANAGEMENT ARRANGEMENTS
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 companies.
Investment management services
The Company's investments are managed by Brompton Asset Management LLP (the
`Investment Manager'). 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 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 management agreement may
be terminated by either party giving three months written notice to expire on
the last calendar day of any month.
With effect from 1st September 2008, the Investment Manager has also been
entitled to a performance fee of 15 per cent of the growth in net assets over a
hurdle of 3 month Sterling LIBOR plus 1 per cent per annum, payable six monthly
in arrears, subject to a high watermark. The aggregate of the Company's
management fee and performance fee are subject to a cap of 4.99 per cent of net
assets in any financial year (with any performance fee in excess of this cap
capable of being earned in future years).
During the year under review the investment management fee amounted to £493,000
(2012: £513,000). No performance fee was accrued or paid in respect of the year
ended 30th June 2013 (2012: £nil).
Secretarial, administration and accounting services
Company secretarial services, general administration and accounting services
for the Company are undertaken by Phoenix Administration Services Limited (the
`Administrator').
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 the Investment Manager.
The investment management fee payable to the investment manager in relation to
the year ended 30th June 2013 was £493,000. No performance fee was payable in
respect of the year ended 30th June 2013.
During the year the Group's investments included five funds managed by the
Investment Manager or by associates of the Investment Manager. At 30th June
2013, the Company held five such investments. No investment management fees
were payable directly by the Company in respect of these investments.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks associated with the Company that have been identified by
the Board, together with the steps taken to mitigate them can be summarised 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 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 conditions
in the UK and globally. Factors such as interest rates, inflation, investor
sentiment and the availability and cost of credit could adversely affect
investment returns. The Board regularly considers the economic environment in
which 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 to
a reduction in the Company's net asset value. A proportion of the Company's
portfolio is invested in investments denominated in foreign currencies and
movements in exchange rates can significantly affect their sterling value. It
is the Board's policy to hold an appropriate spread of investments in order to
reduce the risk arising from factors specific to a particular investment or
sector. The Investment Manager takes account of foreign currency risk and
interest 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 an
important factor in delivering good performance and the loss by the Investment
Manager of key staff could adversely affect investment returns. 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 of any personnel changes to the investment team employed
by the Investment Manager.
Tax and regulatory risks
A breach of The Investment Trusts (Approved Companies)(Tax) Regulations 2011
(the `Regulations') could lead to a loss of investment trust status, resulting
in capital gains realised within the portfolio being subject to United Kingdom
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 as Investment Manager, and Phoenix Administration Services Limited as
Secretary & 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.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30th June 2013
Year ended Year ended
30th June 2013 30th June 2012
Revenue Capital Revenue Capital
Return Return Total Return Return Total
Notes £ `000 £ `000 £ `000 £ `000 £ `000 £ `000
INVESTMENT INCOME 2 688 - 688 468 - 468
Other operating income 2 7 - 7 17 - 17
695 - 695 485 - 485
GAINS AND LOSSES ON
INVESTMENTS
Gains/(losses) on
investments at 9 - 4,996 4,996 - (7,824) (7,824)
fair value through
profit or loss
Other exchange gains - 109 109 - 65 65
Trail rebates - 34 34 - 141 141
695 5,139 5,834 485 (7,618) (7,133)
EXPENSES
Management fees 3 (493) - (493) (513) - (513)
VAT Recovery - - - 35 - 35
Other expenses 4 (237) - (237) (249) - (249)
(730) - (730) (727) - (727)
PROFIT/(LOSS) BEFORE
FINANCE COSTS AND TAX (35) 5,139 5,104 (242) (7,618) (7,860)
Finance costs - - - - - -
PROFIT/(LOSS) BEFORE TAX (35) 5,139 5,104 (242) (7,618) (7,860)
Tax 5 - 149 149 164 279 443
PROFIT/(LOSS) FOR THE
YEAR (35) 5,288 5,253 (78) (7,339) (7,417)
EARNINGS PER SHARE
Ordinary shares (pence) 7 (0.05) 7.45 7.40 (0.11) (10.33) (10.44)
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 revenue and capital items in the above
statement 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 2013
Share Share Special Retained
capital premium reserve earnings Total
£ `000 £ `000 £ `000 £ `000 £ `000
AT 30TH JUNE 2012 710 21,573 56,908 (11,124) 68,067
Total comprehensive income for the - - - 5,253 5,253
year
AT 30TH JUNE 2013
710 21,573 56,908 (5,871) 73,320
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30th June 2012
Share Share Special Retained
capital premium reserve earnings Total
£ `000 £ `000 £ `000 £ `000 £ `000
AT 30TH JUNE 2011 710 21,573 56,908 (3,707) 75,484
Total comprehensive income for the - - - (7,417) (7,417)
year
AT 30TH JUNE 2012
710 21,573 56,908 (11,124) 68,067
CONSOLIDATED BALANCE SHEET
at 30th June 2013
Notes 30th June 30th June
2013 2012
£ `000 £ `000
NON-CURRENT ASSETS
Investments at fair value through profit or loss 9 58,326 51,140
CURRENT ASSETS
Other receivables 11 251 127
Cash and cash equivalents 12 14,969 17,181
15,220 17,308
TOTAL ASSETS 73,546 68,448
CURRENT LIABILITIES
Other payables 13 (226) (232)
TOTAL ASSETS LESS CURRENT LIABILITIES 73,320 68,216
NON-CURRENT LIABILITIES
Deferred tax liability 5 - (149)
NET ASSETS
73,320 68,067
EQUITY ATTRIBUTABLE 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 (5,871) (11,124)
TOTAL EQUITY
73,320 68,067
NET ASSET VALUE PER ORDINARY SHARE (Pence) 16
103.23 95.84
CONSOLIDATED CASH FLOW STATEMENTS
for the year ended 30th June 2013
Year ended Year ended
30th June 30th June
2013 2012
Group Group
Note £ `000 £ `000
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES 22 (107)
INVESTING ACTIVITIES
Purchase of Investments (15,008) (5,415)
Sale of Investments 12,665 7,143
NET CASH (OUTFLOW )/INFLOW FROM
INVESTING ACTIVITIES
(2,343) 1,728
NET CASH (OUTFLOW) /INFLOW BEFORE (2,321)
FINANCING
1,621
(DECREASE)/INCREASE IN CASH (2,321) 1,621
RECONCILIATION OF NET CASH FLOW
TO
MOVEMENT IN NET FUNDS
(Decrease) /increase in cash
resulting from (2,321) 1,621
cash flows
Exchange movements 109 65
Movement in net funds
(2,212) 1,686
Net funds at 1st July 17,181 15,495
NET FUNDS AT END OF YEAR 17
14,969 17,181
RECONCILIATION OF PROFIT/(LOSS)
BEFORE FINANCE COSTS AND
TAXATION TO NET CASH FLOW FROM
OPERATING ACTIVITIES
Profit/(loss) before finance 5,104 (7,860)
costs and
taxation
(Gains)/losses on investments (4,996) 7,824
Exchange differences (109) (65)
Capital trail rebates (34) (141)
Net revenue loss before finance
costs and (242)
taxation
(35)
(Increase)/decrease in debtors (6) 14
(Decrease)/increase in creditors (6) 11
Taxation 35 (31)
Capital trail rebates 34 141
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES 22
(107)
NOTES TO THE ACCOUNTS
for the year ended 30th June 2013
1. ACCOUNTING POLICIES
The financial statements of the Group have been prepared in accordance with
International Financial Reporting Standards ('IFRS'). These comprise standards
and interpretations approved by the International Accounting Standards Board
('IASB'), together with interpretations of the International Accounting
Standards and Standing Interpretations Committee ('IASC') that remain in
effect, and to the extent that they have been adopted by the European Union.
These 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 Investment
Companies ('AIC') in January 2009 is consistent with the requirements of IFRS,
the Directors have sought to prepare the financial statements on a basis
compliant with the recommendations of the SORP.
(b) Basis of consolidation: The Consolidated Financial Statements include the
Accounts of the Company and its subsidiary made up to 30th June 2013. No
Statement of Comprehensive Income is presented for the parent company as
permitted by Section 408 of the Companies Act 2006.
(c) Presentation of Statement of Comprehensive Income: In order to better
reflect the activities of an investment trust company and in accordance with
guidance issued by the AIC, supplementary information which analyses the
Consolidated Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Consolidated Statement of
Comprehensive Income.
In accordance with the Company's Articles of Association, net capital returns
may not be distributed by way of a dividend. Additionally, the net revenue is
the measure the Directors believe is appropriate in assessing the Group's
compliance with certain requirements set out in section 1159 of the Corporation
Tax Act 2010.
(d) Use of estimates: The preparation of financial statements requires the
Group to make estimates and assumptions that affect items reported in the
Consolidated and Company Balance Sheets and Consolidated Statement of
Comprehensive Income and the disclosure of contingent assets and liabilities at
the date of the financial instruments. Although these estimates are based on
the Directors' best knowledge of current facts, circumstances and, to some
extent, future events and actions, the Group's actual results may ultimately
differ from those estimates, possibly significantly.
(e) Revenue: Dividends and other such distributions from investments are
credited to the revenue column of the Consolidated Statement of Comprehensive
Income on the day in which they are quoted ex-dividend. Interest on fixed
interest securities and deposits is accounted for on an effective yield basis.
Where the Company has elected to receive its dividends in the form of
additional shares rather than in cash, the amount of the cash dividend is
recognised as income, and any excess in the value of the shares received over
the amount recognised is credited to the capital reserve. Deemed income from
non reporting funds is credited to the Revenue account. Deposit interest is
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 of
Comprehensive Income. Transaction charges are charged to the capital column of
the Consolidated Statement of Comprehensive Income.
(g) Investments held at fair value: Purchases and sales of investments are
recognised and derecognised on the trade date where a purchase or sale is under
a contract whose terms require delivery within the timeframe established by the
market concerned, and are initially measured at fair value.
All investments are classified as held at fair value through profit or loss on
initial recognition and are measured at subsequent reporting dates at fair
value, which is either the bid price or the last traded price, depending on the
convention of the exchange on which the investment is quoted. Investments in
units of unit trusts or shares in OEICs are valued at the bid price for dual
priced funds, or single price for non-dual priced funds, released by the
relevant investment manager. Unquoted investments are valued by the Directors
at the balance sheet date based on recognised valuation methodologies, in
accordance with International Private Equity and Venture Capital ('IPEVC')
Valuation Guidelines such as dealing prices or third party valuations where
available, net asset values and other information as appropriate.
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 the
taxation charge against income. Taxation deferred or accelerated can arise due
to temporary differences between the treatment of certain items for accounting
and taxation purposes. Full provision is made for deferred taxation under the
liability method on all temporary differences not reversed by the Balance Sheet
date. No deferred tax provision is made against deemed reporting offshore
funds.
(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 27 Reissued as IAS 27 Consolidated and Separate 1st January 2014
Financial Statements
(as amended in 2011)
IAS 28 Investments in Associates and Joint Ventures 1st January 2013
IFRS 10 Consolidated Financial Statements 1st January 2014
IFRS 11 Joint Arrangements 1st January 2014
IFRS 12 Disclosure of Interests in Other Entities 1st January 2014
IFRS 13 Fair Value Measurement 1st January 2013
The Directors are considering what impact, if any, the adoption of these
standards/interpretations in future periods will have. Currently they do not
believe that there will be a material impact on the consolidated financial
statements.
2. INVESTMENT INCOME
Year ended Year ended
30th June 30th June
2013 2012
£ `000 £ `000
INCOME FROM INVESTMENTS
UK net dividend income 561 310
Unfranked investment income 127 158
688 468
OTHER OPERATING INCOME
Bank interest receivable 7 10
VAT reclaim interest received from HMRC - 7
7 17
TOTAL INCOME COMPRISES
Dividends 688 468
Other income 7 17
695 485
3. MANAGEMENT FEES
Year ended Year ended
30th June 2013 30th June 2012
Revenue Capital Total Revenue Capital Total
£ `000 £ `000 £ `000 £ `000 £ `000 £
`000
Investment management fee 493 - 493 513 - 513
Performance fee - - - - - -
493 - 493 513 - 513
At 30th June 2013 there were amounts accrued of £120,000 (2012: £126,000) for
investment management fees.
4. OTHER EXPENSES
Year ended Year ended
30th June 30th June
2013 2012
£ `000 £ `000
Legal fees - 7
Directors' remuneration 50 50
Administrative and secretarial fee 87 96
Auditors' remuneration
- Audit 27 26
- Interim review 7 7
-Taxation compliance services 10 9
Other 56 54
237 249
Allocated to:
- Revenue 237 249
- Capital - -
237 249
5. TAXATION
a. Analysis of tax charge for the year:
Year ended Year ended
30th June 2013 30th June 2012
Revenue Capital Total Revenue Capital Total
£ `000 £ `000 £ `000 £ `000 £ `000 £
`000
UK corporation tax - - - - - -
Overseas tax - - - - - -
Tax relief to income - - - (115) 115 -
Irrecoverable income tax - - - - - -
Prior year adjustment - - - (49) - (49)
Total current tax for the year
- - - (164) 115 (49)
Deferred tax - (149) (149) - (394) (394)
Total tax for the year (note 5b)
- (149) (149) (164) (279) (443)
b. Factors affecting tax charge for the year:
The charge for the year can be reconciled to the profit/(loss) per the
Consolidated Statement of Comprehensive Income as follows:
Year Year
ended ended
30th June 30th June
2013 2012
£ `000 £ `000
Profit/(loss) before tax 5,104
(7,860)
Theoretical tax at the UK corporation tax rate of 23.75% (2,004)
* (2012: 25.5%) 1,212
Effects of:
Non-taxable UK dividend income (133) (79)
Gains and losses on investments that are not taxable (1,225) 1,985
Movement in unrealised gains on non-qualifying offshore (149) (394)
funds
Excess expenses not utilised 146 98
Prior year adjustment - (49)
Total tax for the year
(149) (443)
* Under the Finance Act 2011, the rate of Corporation Tax was lowered to 23%
from 24% on 1st April 2012. An average rate of 23.75% was applicable for the
year ended 30th June 2013.
Due to the Company's tax status as an investment trust and the intention to
continue meeting the conditions required to obtain approval of such status in
the foreseeable future, the Company has not provided tax on any capital gains
arising on the revaluation or disposal of the majority of investments.
c. Provision for deferred tax:
Group and Company
Year Year
ended ended
30th June 30th June
2013 2012
£ `000 £ `000
Provision at start of year 149 543
Deferred tax credit for the year (149) (394)
Provision at end of year - 149
The deferred tax credit of £149,000 (2012: credit of £394,000) in the capital
account of the Company relates to unrealised gains on non-reporting offshore
funds. There is no deferred tax charge in the revenue account (2012: nil)
relating to the reversal of the prior year tax charge on income taxable in the
subsequent accounting period. No deferred tax provision has been made for
deemed reporting offshore funds.
At the year end there is an unrecognised deferred tax asset of £43,000 (2012:
nil) as a result of excess expenses.
6. COMPANY RETURN FOR THE YEAR
The Company's total return for the year was £5,253,000 (2012: loss (£
7,417,000)).
7. RETURN PER ORDINARY SHARE
Total return per Ordinary share is based on the Group total return on ordinary
activities after taxation of £5,253,000 (2012: (£7,417,000)) and on 71,023,695
(2012: 71,023,695) Ordinary shares, being the weighted average number of
Ordinary shares in issue during the year.
Revenue return per Ordinary share is based on the Group revenue loss on
ordinary activities after taxation of £35,000 (2012: (£78,000) and on
71,023,695 (2012: 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 gains for the year of
£5,288,000 (2012: capital losses of £7,339,000) and on 71,023,695 (2012:
71,023,695) Ordinary shares, being the weighted average number of Ordinary
shares 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
2013 2012
£ `000 £ `000
Dividends paid for the year ended
30th June 2013: nil (2012: nil) per share - -
The total dividend payable in respect of the financial year, which is the basis
on which the requirements of section 1159 of the Corporation Tax Act 2010 are
considered, is set out below.
Year ended Year ended
30th June 30th June
2013 2012
£ `000 £ `000
Final dividend for the year ended
30th June 2013: nil (2012: nil) - -
The Company had a net revenue loss for the year ended 30th June 2013 (2012:
loss).
The Directors do not recommend the payment of a final dividend for the year
ended 30th June 2013 (2012: nil).
9. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Year ended Year ended
30th June 30th June
2013 2012
£ `000 £ `000
GROUP AND COMPANY
58,326 51,140
ANALYSIS OF INVESTMENT
PORTFOLIO - GROUP AND COMPANY
Listed* Unlisted Total
£ `000 £ `000 £ `000
Opening book cost 45,048 4,943 49,991
Opening investment holding gains 3,904 (2,755) 1,149
Movement in classification of investments** (3,149) 3,149 -
Opening valuation 5,337
45,803
51,140
Movement in period
Purchases at cost 15,008 - 15,008
Sales
- Proceeds (9,461) (3,357) (12,818)
- Realised gains on sales 1,671 (47) 1,624
Movement in investment holding gains for the year 3,595 (223) 3,372
Closing valuation
56,616 1,710 58,326
Closing book cost 48,997 4,808 53,805
Closing investment holding gains 7,619 (3,098) 4,521
Closing valuation
56,616 1,710 58,326
* Listed investments include unit trust and OEIC funds.
** Movement of Westhouse Holdings and Henderson Private Equity Investment Trust
from listed to unlisted.
Year ended Year ended
30th June 30th June
2013 2012
£ `000 £ `000
ANALYSIS OF CAPITAL GAINS AND LOSSES
Realised gains on sales of investments 1,624 2,191
Increase in investment holding gains/(losses) 3,372 (10,015)
Net gains on investments attributable to ordinary
shareholders 4,996 (7,824)
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 (2012: £nil) and on sales of £nil (2012: £nil).
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 is summarised as follows:
Year ended Year ended
30th June 30th June
2013 2012
£ `000 £ `000
Net assets brought forward 499 499
Profit for year 1 -
NET ASSETS CARRIED FORWARD
500 499
11. OTHER RECEIVABLES
30th June 30th June
2013 2012
Group Group
£ `000 £ `000
Amounts due from brokers 153 -
Prepayments and accrued income 53 47
Taxation 45 80
Amounts owed by subsidiary undertakings - -
251 127
12. CASH AND CASH EQUIVALENTS
30th June 30th June
2013 2012
Group Group
£ `000 £ `000
Cash at bank 14,969
17,181
13. OTHER PAYABLES
30th June 30th June
2013 2012
Group Group
£ `000 £ `000
Accruals
226 232
14. CALLED UP SHARE CAPITAL
30th June 30th June
2013 2012
£ `000 £ `000
Authorised
305,000,000 (2012: 305,000,000) Ordinary shares of £ 3,050 3,050
0.01 each
Issued and fully paid
71,023,695 (2012: 71,023,695) Ordinary shares of £0.01
each 710 710
15. RESERVES
Share Special Retained
Premium Reserve earnings
account
£ `000 £ `000 £ `000
GROUP
At 30th June 2012 21,573 56,908 (11,124)
Increase in investment holding gains - - 3,372
Net gains on realisation of investments - - 1,624
Gains on foreign currency - - 109
Trail rebates - - 34
Deferred tax credit in capital - - 149
Retained revenue loss for year - - (35)
At 30th June 2013 21,573 56,908 (5,871)
Share Special Retained
Premium Reserve earnings
account
£ `000 £ `000 £ `000
COMPANY
At 30th June 2012 (restated) 21,573 56,908 (11,124)
Increase in investment holding gains - - 3,373
Net gains on realisation of investments - - 1,624
Gains on foreign currency - - 109
Trail rebates - - 34
Deferred tax credit in capital - - 149
Retained revenue profit for year - - (36)
At 30th June 2013 21,573 56,908 (5,871)
The components of retained earnings are set out below:
30th June 30th June
2013 2012
£ `000 £ `000
GROUP
Capital reserve-realised (10,124) (12,040)
Capital reserve-revaluation 4,248 876
Revenue reserve 5 40
(5,871) (11,124)
COMPANY Restated
Capital reserve-realised (10,476) (12,392)
Capital reserve-revaluation 4,748 1,375
Revenue reserve (143) (107)
(5,871) (11,124)
16. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per Ordinary share is calculated on net assets of £
73,320,000 (2012: £68,067,000) and 71,023,695 (2012: 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 2012 flow movement June 2013
£ `000 £ `000
GROUP
Cash at bank and on deposit 17,181 (2,321) 109 14,969
18. FINANCIAL INFORMATION
2013Financial information
The figures and financial information for 2013 are unaudited and do not
constitute the statutory accounts for the year. The preliminary statement has
been agreed with the Company's auditors and the Company is not aware of any
likely modification to the auditor's report required to be included with the
annual report and accounts for the year ended 30th June 2013.
2012Financial information
The figures and financial information for 2012 are extracted from the published
Annual Report and Accounts for the year ended 30th June 2012 and do not
constitute the statutory accounts for that year. The Annual Report and Accounts
has been delivered to the Registrar of Companies and includes the Report and
Independent Auditors which was unqualified and did not contain a statement
under 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 2013 will be sent to shareholders in
October 2013 and will be available on the Company's website (www.nsitplc.com)
or in hard copy format at the Company's registered office, 1 Knightsbridge
Green, London SW1X 7QA.
The Annual General Meeting of the Company will be held on 7th November 2013 at
11.00am at 1 Knightsbridge Green, London SW1X 7QA.New Star Investment Trust plc : - Final Results
September 27, 2013 at 02:01 am EDT
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