TIDMNSI
NEW STAR INVESTMENT TRUST PLC
HALF YEAR RESULTS FOR THE SIX MONTHSED 31st DECEMBER 2018
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE
The Company's objective is to achieve long-term capital growth.
31st 30th June %
December 2018 Change
2018
PERFORMANCE
Net assets (GBP '000) 105,502 111,366 (5.3)
Net asset value per Ordinary share 148.54p 156.80p (5.3)
Mid-market price per Ordinary share 105.00p 113.00p (7.1)
Discount of price to net asset value 29.3% 27.9% n/a
Six months Six months
ended ended
31st 31st
December December
2018 2017
Total Return* -4.63% 5.38% n/a
IA Mixed Investment 40-85% Shares (total -6.62% 4.34% n/a
return)
MSCI AC World Index (total return, sterling -5.47% 7.02% n/a
adjusted)
MSCI UK Index (total return) -10.04% 6.79% n/a
Six months ended Six months ended
31st December 31st December
2018 2017
REVENUE
Return (GBP'000) 607 438
Return per Ordinary share 0.85p 0.61p
Proposed dividend per Ordinary share - -
Dividend paid per Ordinary share 1.00p 0.80p
TOTAL RETURN
Return (GBP'000) (5,154) 5,656
Net assets -5.3% 4.8%
Net assets (dividend added back) -4.6% 5.4%
* The total return figure for the Group represents the revenue and capital
return shown in the consolidated statement of comprehensive income before
dividends paid as a percentage of opening NAV (the alternative performance
measure).
INTERIM REPORT
CHAIRMAN'S STATEMENT
PERFORMANCE
Your Company's negative total return was 4.63% over the six months to 31st
December 2018, leaving the net asset value (NAV) per ordinary share at 148.54p.
By comparison, the Investment Association's Mixed Investment 40-85% Shares
Index fell 6.62%. The MSCI AC World Total Return Index fell 5.47% while the
MSCI UK Total Return Index fell 10.04%. Over the same period, UK government
bonds returned 0.24%. Further information is provided in the investment
manager's report.
Your Company made a revenue return for the six months of GBP607,000 (2017: GBP
438,000).
GEARING AND DIVIDS
Your Company has no borrowings. It ended the period under review with cash
representing 20.79% 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 (2017: nil). Your Company
paid a dividend of 1p per share (2017: 0.8p) in November 2018 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
The combination of share price falls in late 2018 despite rising global
corporate earnings left equities trading in early 2019 on lower earnings
multiples and higher dividend yields than a year previously. Global economic
growth has, however, slowed and is likely to slow further during 2019 and this
may put corporate profitability under pressure. Such developments may dictate
caution in making further commitments to global equity markets.
Buying opportunities may, however, emerge over the coming months in selected
markets. A successful resolution of the Brexit crisis may make UK equities,
which trade on below-average valuation multiples and above-average yields,
appear more attractive, particularly small and medium-sized companies, which
tend to be more sensitive to domestic UK political and economic developments. A
positive outcome to the Sino-US trade talks may also improve the prospects for
equities in some emerging markets.
Your Company ended the period positioned cautiously with respect to bond
investments because of the likelihood of rising inflation. Instead,
diversification away from equities is being maintained through your Company's
holdings in dollar-denominated cash, lower-risk multi-asset funds and gold
equities.
NET ASSET VALUE
Your Company's unaudited NAV at 28th February 2019 was 153.10p.
Geoffrey Howard-Spink
Chairman
28th March 2019
INVESTMENT MANAGER'S REPORT
MARKET REVIEW
Global equities fell 5.47% in sterling terms over the six months to 31st
December 2018. The 10.57% fall in sterling terms during the final quarter of
2018 more than erased the rise in the third quarter. Investors' risk-aversion
rose as the Federal Reserve responded to low unemployment and strong US
economic growth by raising the Fed Funds Target Rate by a quarter percentage
point in September and a further quarter point in December, taking its range to
2.25-2.50%. Interest rate rises are, however, not the only means by which the
Fed has tightened monetary policy. The process of shrinking the Fed's swollen
balance sheet is also underway, with the proceeds of maturing bonds no longer
wholly reinvested in further purchases, allowing the Fed's bond holdings to
reduce steadily. This is monetary tightening by another means.
In October, the Fed chairman, Jerome Powell, said US interest rates had a long
way to go to reach their neutral rate, stoking fears that the pace of monetary
tightening would choke off growth. Following sharp share price falls, Powell
revised his guidance in late-November, saying interest rates were close to
neutral. In early 2019, the Fed adopted a "patient" or more dovish approach to
monetary policy.
US gross domestic product growth slowed from an annualised 3.4% in the third
quarter of 2018 to 2.6% in the fourth quarter as the impact of President
Trump's fiscal stimulus faded and growth is expected to slow further in 2019.
In January 2019, US headline inflation fell to 1.6% as oil prices fell but core
inflation excluding energy and food prices held steady at 2.2%. The Fed's
progress towards monetary normalisation resulted in a positive real interest
rate in contrast to the negative real interest rates that typically prevailed
in the aftermath of the 2008-09 credit crisis.
Growth also slowed in China and Beijing policy makers took measures to
stimulate activity such as cutting the reserve requirement ratio for bank
lending. In December, Sino-US trade discussions adjourned without resolution
although the US extended by 90 days the deadline for raising tariffs from 10%
to 25% on $200 billion of imports. Talks continued in early 2019. Failure to
avert the impending tariff hike would most likely lead to weaker growth and
higher inflation.
The economic weakness in the eurozone was more pronounced. Italy went into
recession during the period and Germany narrowly avoided the same fate. As
result, equities in Europe excluding the UK underperformed, falling 8.19%. In
March 2019, the European Central Bank announced more monetary support, delaying
any interest rate rises until 2020 at the earliest.
Equities in Asia excluding Japan and emerging markets fell 6.63% and 4.92%
respectively in sterling during the period. There was, however, a wide
disparity of returns. Brazilian shares gained 24.99% in sterling following
presidential elections but Chinese equities fell 14.33% because of slowing
growth and tariff concerns. Indian equities rose 3.90% in sterling but Russian
equities declined 0.57%.
UK equities underperformed, falling 10.04% on Brexit fears. The UK stockmarket
and sterling recovered after the period end, however, despite two defeats for
the government's Brexit deal because the likelihood of "no deal" also
diminished. Brexit uncertainty may have weighed on the UK economy. Growth
slowed from 1.6% to 1.3% year-on-year over the third and fourth quarters of
2018.
In an environment of slowing growth and stable inflation, global bonds and
sterling government bonds rose 3.94% and 0.24% respectively in sterling over
the period. Safe-haven assets were in demand during the final quarter of 2018
when equity markets fell. Gold rose 5.60% in sterling over the period. The yen
and the dollar also proved defensive, rising 4.65% and 3.66% respectively
against sterling.
PORTFOLIO REVIEW
Your Company's negative return was 4.63% during 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, fell 6.62%.
The MSCI AC World Total Return Index fell 5.47% in sterling while the MSCI UK
Total Return Index fell 10.04%. Your Company proved relatively defensive
because of its significant holdings in safe-haven assets including dollars,
gold securities and lower-risk multi-asset funds.
The significant allocation to the dollar was a major positive contributor to
performance over the period. The dollar rose as a result of interest rate
increases and, more latterly, safe-haven buying. The holdings in dollar cash
increased significantly ahead of the sharp equity market falls during the final
quarter of 2018. Profits were taken through sales of FP Crux European Special
Situations, Polar Capital Global Technology and the iShares S&P Financials
exchange-traded fund (ETF). An investment in Fundsmith Equity, which has a
concentrated portfolio of quality stocks, was the only significant purchase
during the period. At the period end, cash represented 20.79% of your Company's
net asset value.
FP Crux European Special Situations was your Company's largest investment at
the beginning of the period. Through sales in August and October, the
investment more than halved. The manager of FP Crux European Special Situations
has historically delivered strong relative returns as a result of a bias toward
small and medium-sized companies. Europe ex-UK smaller companies underperformed
larger peers, however, falling 15.27% in sterling over the period. FP Crux
European Special Situations and Standard Life European Equity Income fell
13.42% and 10.94% respectively. Blackrock Continental European Income, with its
large-cap focus, fell only 6.85%.
In late 2018, UK equities traded on lower valuation multiples and higher
dividend yields than overseas equities. UK stocks fell over the period because
this valuation support proved insufficient in the face of investors' Brexit
fears and general risk aversion. Your Company's holdings in income-oriented UK
equity funds, however, provided some resilience, with Trojan Income, Schroder
Income and Man GLG UK Income all outperforming. Smaller companies, with their
greater sensitivity to the domestic economy, underperformed larger peers,
however, falling 14.84%. As a result, Aberforth Split Level Income Trust, which
represents a geared investment in smaller stocks, fell 20.99%. A favourable
outcome to Brexit negotiations may provide an attractive buying opportunity for
UK equities as a whole and smaller companies in particular. In the meantime,
these investments generate significant income for your Company.
Among the holdings in Asia ex-Japan and emerging markets, Stewart Investors
Indian Subcontinent lagged the gain by Indian equities but still rose 0.31%.
The 33.99% oil price fall in sterling supported India's economy, which is
heavily dependent on imported oil. Volatility may increase, however, as the
2019 general election approaches. The HSBC Russia Capped ETF rose 0.37% over
the period, at the end of which it yielded more than 7%. Russia's equity market
in early 2019 was lowly valued relative to other emerging markets. JP Morgan
Emerging Market Income was your Company's best performer over the period,
rising 5.04%. A favourable resolution of the Sino-US trade dispute may lead to
strong performance for some emerging markets.
Diversification across different asset classes provided some protection during
the period. In response to the rising gold price, Blackrock Gold & General
proved relatively resilient, falling only 2.09%. The lower-risk EF Brompton
Global Conservative and Trojan funds fell 3.07% and 1.31% respectively. Global
bonds posted gains and Franklin Templeton Emerging Market Bond, your Company's
highest-yielding investment, returned 0.27%.
Your Company's investments in private companies helped to mitigate the impact
of equity market falls. Embark, the largest private equity investment,
continued on its growth path and increased its market share. Following two
fundraisings in the final quarter of 2018, the valuation increased although it
is held at a discount to the prices at which new shares were issued.
The bias towards income funds and the interest income from dollar deposits will
enhance your Company's ability to pay distributions because the majority of
this income will be paid out as dividends.
OUTLOOK
Global corporate earnings rose during 2018 and this, when combined with share
price falls, left stocks trading on lower earnings multiples at the start of
2019. Global economic growth is likely to slow in 2019, however, putting
earnings under pressure. The fall in valuations may not have fully reflected
the deterioration in economic prospects and your Company has not increased its
allocation to equities in the wake of the falls at the end of the period. A
successful outcome to the Sino-US trade negotiations and an end to the Brexit
impasse may, however, provide buying opportunities for equities, particularly
in the UK and emerging markets.
Your Company has minimal direct investment in bond funds. Diversification is
achieved through investments in dollar cash, gold equities and lower-risk
multi-asset funds. Investments in a small number of unquoted companies may
provide an additional and uncorrelated source of potential returns.
Brompton Asset Management LLP
28th March 2019
DIRECTORS' REPORT
PERFORMANCE
In the six months to 31st December 2018 the total return per Ordinary share was
a negative 4.6% and the NAV decreased to 148.54p, whilst the share price
decreased by 7.1% to 105.00p. This compares to a decrease of 6.6% 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 (2017: 71,023,695) have been issued and fully paid. No
Ordinary shares are held in treasury, and none were bought back or issued
during the six months to 31st December 2018.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks identified by the Board, and the steps the Board takes to
mitigate them, are as follows:
Investment strategy: Inappropriate long-term strategy, poor asset allocation
and manager selection could lead to underperformance. The Board discusses
investment performance at each of its meetings and the Directors receive
reports detailing 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.
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 in
order to reduce the impact of the risks arising from the above factors by
investing in a spread of asset classes and geographic regions.
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. For a number of 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 of key staff
could adversely affect returns. A representative of the Investment Manager
attends each Board meeting and the Board is informed if any changes to the
investment team employed by the Investment Manager are proposed.
Tax and regulatory risks: A breach of The Investment Trust (Approved Company)
(Tax) Regulations 2011 (the 'Regulations') could lead to capital gains
realised within the portfolio becoming 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,
financial and/or reputational damage. The Board employs Brompton Asset
Management LLP as Investment Manager, and Maitland Administration Services
Limited as Secretary and Administrator, to help manage the Company's legal and
regulatory obligations.
Operational: disruption to, or failure of, the Investment Manager's or
Administrator's accounting, dealing or payment systems or the Custodian's
custody systems 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 five years. Five years is considered a
reasonable time for investors when making their investment decisions. 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 financial statements contained within the half year financial report to
31st December 2018 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
28th March 2019
SCHEDULE OF TOP TWENTY INVESTMENTS at 31st December 2018
Holding Activity Bid-market % of Net
value Assets
GBP '000
Fundsmith Equity Fund Investment Fund 6,323 5.99
Embark Group Unquoted investment 5,007 4.75
Schroder Income Fund Investment Fund 4,773 4.53
FP Crux European Special Situations Investment Fund 4,353 4.13
Fund
Polar Capital - Global Technology Investment Fund 4,246 4.02
Fund
EF Brompton Global Conservative Fund Investment Fund 3,979 3.77
Aberforth Split Level Income Trust Investment Company 3,644 3.46
Artemis Global Income Fund Investment Fund 3,486 3.30
BlackRock Continental European Income Investment Fund 3,400 3.22
Fund
Aquilus Inflection Fund Investment Fund 3,081 2.92
Lindsell Train Japanese Equity Fund Investment Fund 2,920 2.77
BlackRock Gold & General Fund Investment Fund 2,843 2.69
Stewart Investors Indian Subcontinent Investment Fund 2,714 2.57
Fund
Man GLG UK Income Fund Investment Fund 2,584 2.45
EF Brompton Global Opportunities Fund Investment Fund 2,572 2.44
Liontrust Asia Income Fund Investment Fund 2,571 2.44
EF Brompton Global Equity Fund Investment Fund 2,482 2.35
EF Brompton Global Growth Fund Investment Fund 2,448 2.32
MI Brompton UK Recovery Trust Investment Fund 2,406 2.28
Trojan Income Fund Investment Fund 2,168 2.05
68,000 64.45
Balance held in 21 investments 15,561 14.75
Total investments (excluding cash) 83,561 79.20
Net current assets (including cash) 21,941 20.80
Net Assets 105,502 100.00
The investment portfolio can be further analysed as follows:
GBP'000
Investment funds 68,803
Unquoted investments, including interest bearing loans 7,424
of GBP250,000 Investment companies and exchange traded 6,505
funds
Other quoted investments
The Company's investments are either unlisted or are 83,561
unit trust/OEIC funds with the exception of Aberforth
Split Level Income Trust, JP Morgan Emerging Markets
Income Trust, Miton Group, Immedia Group, iShares S&P
500 Financials Sector UCITS and HSBC MSCI Russia Capped
UCITS ETF.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the six months ended 31st
December 2018 (unaudited)
Six months ended
31st December 2018
(unaudited)
Revenue Capital Total
Return Return Return
Notes GBP '000 GBP '000 GBP '000
INCOME
Investment income 930 - 930
Other operating income 147 - 147
Total income 2 1,077 - 1,077
GAINS AND LOSSES ON INVESTMENTS
Losses on investments at fair value through 5 - (6,168) (6,168)
profit or loss
Other exchange gains - 405 405
Trail rebates - 2 2
1,077 (5,761) (4,684)
EXPENSES
Management fees 3 (339) - (339)
Other expenses (131) - (131)
(470) - (470)
PROFIT /LOSS) BEFORE TAX 607 (5,761) (5,154)
Tax - - -
PROFIT /(LOSS) FOR THE PERIOD 607 (5,761) (5,154)
EARNINGS PER SHARE
Ordinary shares (pence) 4 0.85p (8.11)p (7.26)p
The total return 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 2017 and the year ended 30th June
2018
Six months ended Year ended
31st December 2017 30th June 2018
(unaudited) (audited)
Notes Revenue Capital Total Revenue Capital Total
Return Return Return Return Return Return
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
INCOME
Investment income 856 - 856 1,654 - 1,654
Other operating income 37 - 37 122 - 122
Total income 2 893 - 893 1,776 - 1,776
GAINS AND LOSSES ON
INVESTMENTS
Gains on investments at - 5,601 5,601 - 6,218 6,218
fair value through profit 5
or loss
Other exchange losses - (386) (386) - (176) (176)
Trail rebates - 3 3 - 5 5
893 5,218 6,111 1,776 6,047 7,823
EXPENSES
Management fees 3 (331) - (331) (668) - (668)
Other expenses (122) - (122) (272) - (272)
(453) - (453) (940) - (940)
PROFIT BEFORE TAX 440 5,218 5,658 836 6,047 6,883
Tax (2) - (2) (5) - (5)
PROFIT FOR THE PERIOD 438 5,218 5,656 831 6,047 6,878
EARNINGS PER SHARE
Ordinary shares (pence) 4 0.61p 7.35p 7.96p 1.17p 8.51p 9.68p
The total return 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 2018 (unaudited)
Share Share Special Retained
capital premium reserve earnings Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
At 30th JUNE 2018 710 21,573 56,908 32,175 111,366
Total comprehensive income for - - - (5,154) (5,154)
the period
Dividend paid - - - (710) (710)
At 31st DECEMBER 2018 710 21,573 56,908 26,311 105,502
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the six months ended 31st
December 2017 (unaudited)
Share Share Special Retained
capital premium reserve earnings Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
At 30th JUNE 2017 710 21,573 56,908 25,865 105,056
Total comprehensive income for - - - 6,878 6,878
the year
Dividend paid - - - (568) (568)
At 30th JUNE 2018 710 21,573 56,908 32,175 111,366
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 30th June 2018
(audited)
Share Share Special Retained
capital premium reserve earnings Total
GBP '000 GBP '000 GBP '000 GBP '000 GBP '000
At 30th JUNE 2016 710 21,573 56,908 10,083 89,274
Total comprehensive income for - - - 15,995 15,995
the year
Dividend paid - - - (213) (213)
At 30th JUNE 2017 710 21,573 56,908 25,865 105,056
CONSOLIDATED BALANCE SHEET at 31st December 2018
Notes 31st December 31st December 30th June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP '000 GBP '000 GBP '000
NON-CURRENT ASSETS
Investments at fair value 5 83,561 97,445 96,301
through profit or loss
CURRENT ASSETS
Other receivables 213 103 272
Cash and cash equivalents 21,938 12,804 15,027
22,151 12,907 15,299
TOTAL ASSETS 105,712 110,352 111,600
CURRENT LIABILITIES
Other payables (210) (208) (234)
TOTAL ASSETS LESS CURRENT 105,502 110,144 111,366
LIABILITIES
NET ASSETS 105,502 110,144 111,366
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 26,311 30,953 32,175
TOTAL EQUITY 105,502 110,144 111,366
NET ASSET VALUE PER ORDINARY 7 148.54p 155.08p 156.80p
SHARE (PENCE)
The interim report was approved and authorised for issue by the Board on 28th
March 2019.
CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31st December 2018
Six months Six months Year
ended ended ended
31st December 31st December 30th June
2018 2017 2018
(unaudited) (unaudited) (audited)
GBP '000 GBP '000 GBP '000
NET CASH INFLOW FROM OPERATING ACTIVITIES 644 421 673
INVESTING ACTIVITIES
Purchase of investments (2,023) (9,516) (16,016)
Sale of investments 8,595 9,402 17,663
NET CASH INFLOW/(OUTFLOW) FROM INVESTING
ACTIVITIES 6,572 (114) 1,647
FINANCING
Equity dividend paid (710) (568) (568)
NET CASH INFLOW/(OUTFLOW) AFTER FINANCING 6,506 (261) 1,752
INCREASE /(DECREASE) IN CASH 6,506 (261) 1,752
RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET FUNDS
Increase/(Decrease) in cash resulting 6,506 (261) 1,752
from cash flows
Exchange movements 405 (386) (176)
Movement in net funds 6,911 (647) 1,576
Net funds at start of period/year 15,027 13,451 13,451
NET FUNDS AT OF PERIOD/YEAR 21,938 12,804 15,027
RECONCILIATION OF (LOSS)/PROFIT BEFORE
FINANCE COSTS AND TAXATION TO NET CASH
FLOW FROM OPERATING ACTIVITIES
(Loss)/Profit before finance costs and (5,154) 5,658 6,883
taxation *
Loss/(gains) on investments 6,168 (5,601) (6,218)
Exchange differences (405) 386 176
Management fee rebates (2) (3) (5)
Revenue profit before finance costs and 607 440 836
taxation
Decrease/(Increase) in debtors 59 (7) (187)
(Decrease)/increase in creditors (24) (2) 24
Taxation - (13) (5)
Management fee rebates 2 3 5
NET CASH INFLOW FROM OPERATING ACTIVITIES 644 421 673
* Includes dividends received in cash of GBP788,000 (30th June 2018: GBP1,164,000)
(2017: GBP542,000), accumulation income of GBP255,000 (30th June 2018: GBP381,000)
(2017: GBP335,000) and interest income of GBP84,000 (30th June 2018: GBP42,000)
(2017: GBP30,000)
NOTES TO THE INTERIM FINANCIAL STATEMENTS for the six months ended 31st
December 2018
1. ACCOUNTING POLICIES
The condensed consolidated interim 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 2018. The comparative
information for the six months to 31st December 2017 and the year to 30th June
2018 are a condensed set of accounts and do not constitute statutory accounts
under the Companies Act 2006. Full statutory accounts for the year to 30th June
2018 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 2018, which
were prepared in accordance with IFRSs as adopted by the European Union, as
updated for the adoption of IFRS 9 and IFRS 15. These standards have not had a
material effect since:
a. The majority of the financial instruments of the Group were previously
designated at fair value through profit or loss under IAS 39 and continue
to be classified as carried at fair value through profit or loss under IFRS
9. The accounting for the financial instruments carried at fair value
through profit or loss has not changed under the new standard.
b. The revenue earned by the Group is not under the scope of IFRS 15.
No segmental reporting is provided as the Group is engaged in a single segment.
2. TOTAL INCOME
Six months Six months Year ended
ended 31st ended 31st 30th June
December 2018 December 2017 2018
GBP'000 GBP'000
GBP'000
Income from Investments
UK net dividend income 792 765 1,481
Unfranked investment income 138 91 173
930 856 1,654
Other Income
Bank interest receivable 140 31 111
Loan interest income 7 6 11
147 37 122
Six months Six months Year ended
ended 31st ended 31st 30th June
December 2018 December 2017 2018
GBP'000 GBP'000
GBP'000
Total income comprises
Dividends 930 856 1,654
Other income 147 37 122
1,077 893 1,776
3. MANAGEMENT FEES
Six months Six months Year ended
ended 31st ended 31st 30th June
December 2018 December 2017 2018
GBP'000 GBP'000
GBP'000
Investment management fee 339 331 668
Performance fee - - -
339 331 668
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 is 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 2018 December 2017 2018
GBP'000 GBP'000
GBP'000
Revenue return 607 438 831
Capital return (5,761) 5,218 6,047
Total return (5,154) 5,656 6,878
Weighted average number of Ordinary 71,023,695 71,023,695 71,023,695
shares
Revenue return per Ordinary share 0.85p 0.61p 1.17p
Capital return per Ordinary share (8.11)p 7.35p 8.51p
(before dividend)
Total return per Ordinary share (7.26)p 7.96p 9.68p
(before dividend)
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
At At At
31st 31st 30th June
December December 2018
2018 2017 GBP'000
GBP'000 GBP'000
GROUP AND COMPANY 83,561 97,445 96,301
ANALYSIS OF INVESTMENT
PORTFOLIO - GROUP AND COMPANY
Six months ended 31st December 2018
Listed* Unlisted** Total
(level 1 and (level 3)
2) GBP'000 GBP
GBP'000 '000
Opening book cost 61,574 7,582 69,156
Opening investment holding gains/ 29,351 (2,206) 27,145
(losses)
Opening valuation 90,925 5,376 96,301
Movement in period:
Purchase at cost 1,701 322 2,023
Sales
- Proceeds (8,595) - (8,595)
- Realised gains on sales 4,168 - 4,168
Movement in investment holding gains/ (12,062) 1,726 (10,336)
(losses)
Closing valuation at 31 December 2018 76,137 7,424 83,561
Closing book cost 58,848 7,904 66,752
Closing investment holding gains/ 17,289 (480) 16,809
(losses)
Closing valuation 76,137 7,424 83,561
* Listed investments include unit trust and OEIC funds which are valued at
quoted prices. Included within Listed Investments is one monthly valued level 2
investment of GBP3,081,000 (30th June 2018: GBP3,562,000) (2017: GBP3,527,000).
** The Unlisted investments, representing approximately 7% of the Company's
NAV, have been valued in accordance with IPEVC valuation guidelines. The
largest unquoted investment amounting to GBP5,007,000 (30th June 2018: GBP
3,268,000) (2017: GBP3,268,000) was valued at the latest transaction price,
discounted. The second largest investment has been valued based on an offer
price. A 10% increase or decrease in the earnings of the largest investment
would not have a material impact on the valuation of the investment. This
investment has not reached maturity and is not valued on the basis of its
current earnings.
There were no reclassifications for assets between Level 1, 2 and 3.
Six months Six months Year
ended ended ended
31st December 31st December 30th June
2018 2017 2018
GBP'000 GBP'000 GBP'000
ANALYSIS OF CAPITAL GAINS AND LOSSES
Realised gains on sales of investments 4,168 4,447 7,457
Increase in investment holding (losses)/ (10,336) 1,154 (1,239)
gains
(6,168) 5,601 6,218
6. RETAINED EARNINGS
At At At
31st December 31st December 30th June
2018 2017 2018
GBP'000 GBP'000 GBP'000
Capital reserve - realised 8,339 925 3,764
Capital reserve - revaluation* 16,809 29,155 27,145
Revenue reserve 1,163 873 1,266
26,311 30,953 32,175
* The Capital reserve-revaluation includes unrealised currency gains/(losses)
of GBP(402,000), GBP383,000 and GBP174,000 respectively.
7. NET ASSET VALUE PER ORDINARY SHARE
31st December 31st December 30th June
2018 2017 2018
GBP'000 GBP'000 GBP'000
Net assets attributable to Ordinary 105,502 110,144 111,366
shareholders
Ordinary shares in issue at end of 71,023,695 71,023,695 71,023,695
period
Net asset value per Ordinary share 148.54p 155.08p 156.80p
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 2018 was GBP339,000 (30th June 2018: GBP668,000) (2017: GBP331,000) and
at the half year GBP164,000 (30th June 2018: GBP173,000) (2017: GBP167,000) was
accrued. No performance fee was payable in respect of the six months ended 31st
December 2018 (30th June 2018: GBPnil) (2017: GBPnil).
The Group's investments include seven funds managed by Brompton or its
associates valued at GBP18,001,000 (30th June 2018: GBP19,331,000) (2017: GBP
19,501,000). No investment management fees were payable directly by the
Company in respect of these investments.
END
(END) Dow Jones Newswires
March 28, 2019 13:53 ET (17:53 GMT)
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