Final Results

This announcement constitutes regulated information. NEW STAR INVESTMENT TRUST PLC AUDITED RESULTS FOR THE YEAR ENDED 30th JUNE 2009 New Star Investment Trust plc (the "Company"), whose objective is to achieve long-term capital growth, announces the consolidated results for the year ended 30th June 2009. FINANCIAL HIGHLIGHTS 30th June 30th June % 2009 2008 change PERFORMANCE Net assets (Â£'000) 58,746 96,405 (39.1) Net asset value per Ordinary share 82.71p 135.74p (39.1) Mid-market price per Ordinary share 58.00p 105.50p (45.0) Discount of price to net asset 29.9% 22.3% N/A value FTSE World Index (total return, 415.61 480.44 (13.5) sterling adjusted) FTSE All-Share Index (total return) 2,781.88 3,498.86 (20.5) 1st July 2008 to 1st July 2007 to 30th June 2009 30th June 2008 REVENUE Return per Ordinary share 0.92p 0.94p Dividend per Ordinary share 0.70p 0.73p TOTAL RETURN Net assets (38.6%) (21.6%) FTSE All-Share Index (20.5%) (13.0%) CHAIRMAN'S STATEMENT MARKET BACKDROP AND PERFORMANCE The year to 30th June 2009 was a disappointing one for your Company, with net assets falling 39.1% to Â£58.7 million. This compares with a 20.5% decline in the FTSE All-Share Index (total return) over the same period. As a result, your Company has suffered a 12.3% NAV decline on a total return basis from its inception in May 2000 to 30th June 2009 against a 2.4% fall for the FTSE All-Share Index. Net revenue for the year under review was Â£655,000 against Â£671,000 the previous year. Your Directors recommend the payment of a final dividend of 0.70p net per ordinary share. This compares with a 0.73p dividend in 2008. This should not be taken as an indication of future dividends, however, because the policy of your Company is to achieve capital growth and earnings per ordinary share may fluctuate. Global equities were weak and volatile during the year, with the MSCI World Total Return Index declining 14.21% in sterling terms. This decline does, however, mask the depth of the financial crisis because the pound's weakness partially shielded sterling-based investors from overseas market falls. The pound fell 17.2% against the dollar, 7.0% against the euro and 24.7% against the yen. Measured in local currencies, the global stockmarket decline was 25.2% and the year was marked by exceptional volatility. In early March 2009, US equities were 56.8% down in local currency terms from their October 2007 peak. Central banks responded to financial dislocation and recession by easing monetary policy significantly. The Federal Reserve cut its fed funds target rate by 1.75 percentage points to 0.25%, the Bank of England cut the bank rate from 5.0% to 0.5% while the European Central Bank cut repo rates from 4.0% to 1.0%. Despite these emergency measures, shares retreated in late 2008 and early 2009 as a result of bankruptcies such as Lehman Brothers and recognition that the world faced a serious recession. In addition, despite additional measures such as fiscal relaxation and financial sector rescues as well as ebbing inflation, investors feared that any economic recovery would be delayed by the banking sector's enfeebled condition, weak corporate investment and rising taxes to fund higher government deficits. The World Bank confirmed the depth of the crisis in June 2009 when it forecast a 2.9% global economic contraction during 2009. In the developed world, it predicted the worst contractions for Japan, down 6.8%, and the eurozone, down 4.5%, with the US facing a relatively modest 3.0% decline. Russia's economy was forecast to shrink 7.5% but growth in China and India was expected to remain robust at 7.2% and 5.1% respectively. In response to economic weakness, oil prices fell 50.6% in dollar terms, contributing to the 39.1% fall in industrial commodities overall. Gold, meanwhile, rose 1.7%, with bullion seen as a safe haven at a time of financial dislocation. Equities, however, rallied strongly from mid March through to May. In the US, the new administration produced a package seen by investors as a credible response to the country's banking woes while the Fed expanded its policy of quantitative easing by announcing plans to buy Treasury bonds, joining the Bank of England in "printing money". There was increased confidence that the global banking system would stabilise, helping, at some point, to restore economic growth. This led to strength in riskier asset classes such as emerging market equities, which were also buoyed by recovering commodity prices. As a result of the spring 2009 rally, riskier, more volatile UK securities such as small and medium-sized companies outperformed the FTSE 100 Index, with its focus towards financial and natural resources companies. The FTSE 100 Index fell 20.9% in the year under review, while medium-sized companies and small companies fell 16.1% and 19.1% respectively. The same revival in risk appetite was also apparent in bond markets. As a result, emerging market government bonds returned 23.8% in sterling terms while UK gilts returned 12.9%. Within the Group of Seven (G7) major economies, Italy was the weakest market, dropping 22.5% on fears that its economy was the most vulnerable to global recession. Other relatively weak markets included Germany, down 20.6%, Canada, down 20.2%, and the UK, down 20.1%. By contrast, currency strength was behind the relative resilience of Japan, down 3.5%, and the US, down 11.5%. Outside the G7, the weakest countries were in emerging Europe, with Bulgaria and Romania down 58.2% and 55.0% respectively and Russia, down 52.1%. By contrast, Latin America and Asia benefited from relatively robust economic growth, with Venezuela and Chile up 33.5% and 23.7% respectively while India recovered 20.4%, the Philippines gained 18.4% and China returned 17.7%. The weakest sectors were those perceived to be most vulnerable to the credit crunch and recession. Basic materials stocks fell 32.1%, energy fell 26.9% and industrial stocks fell 17.1% while financial stocks, weighed down by dilutive capital raisings and enhanced state control, fell 15.8%. The only market area that generated positive returns was the traditionally defensive healthcare sector, up 5.8%, while consumer goods, consumer services and technology were also relatively resilient, down 1.9%, 2.3% and 3.5% respectively. Over the summer of 2009, industrial output in the major industrial economies appeared to be stabilising and leading indicators such as the ratio of analysts' profit upgrades to downgrades and business sentiment surveys suggested some improvement later in 2009. The consensus view shared by the International Monetary Fund and the Organisation for Economic Cooperation and Development was that weak financial systems, consumer and corporate deleveraging and some reversal of the recent monetary stimulus would leave any recovery anaemic. Deep recessions in the past have typically, however, been followed by steep recoveries so there is potential for a faster revival. Positive factors include recent growth in the inflation-adjusted money supply as a result of quantitative easing, the likely turn in the stocks cycle, with production having fallen faster than retail sales, and the resilience of emerging markets growth. In such circumstances, recent deflationary trends may be short-lived. Inflation is likely to be capped in the near term by below-average industrial capacity utilisation but longer-term prospects are less benign because government debts have risen to levels unprecedented other than during times of global warfare. In such an environment, asset selection will be critical in generating outperformance. Your Company's unaudited net asset value at 30th September 2009 was 92.43p. BOARD On 13th May 2009 James Roe stepped down as chairman of the Company, although he remains on the Board. His fellow directors would like to thank James for his leadership and counsel during his tenure as chairman. Geoffrey Howard-Spink Chairman 14th October 2009 INVESTMENT MANAGER'S REPORT Your Company's strategy is to invest in a diversified portfolio of open-ended mutual funds, investment trusts, exchange-traded funds (ETFs) and hedge funds selected from across the market place as well as certain selected special situations. The portfolio is spread across diverse asset classes from UK and overseas equities and bonds to commercial property, commodities and private equity. Your Company's portfolio was extensively reshaped during the year under review. Retail fund purchases included the Artemis UK Special Situations fund, M&G Optimal Income fund, Natixis Loomis Sayles Multisector Income fund, Neptune Russia and Greater Russian fund, Occam Asia Focus fund, Prusik Asia fund and the Trojan fund. In addition, your Company bought a holding in the BH Global hedge fund and a stake in Hanson Westhouse Holdings, a corporate advisory boutique quoted on the Alternative Investment Market. A number of New Star open-ended and closed-ended funds and hedge funds were sold during the year including the European Growth fund, European Hedge fund, European High Yield fund, Financial Opportunities fund, the British Lion fund, China fund, UK Smaller Companies Portfolios fund, Global Financials fund, Global Strategic Capital fund, Heart of Africa fund, Hidden Value fund, Indian Equity fund, UK Alpha fund and UK Growth fund. In addition, the holding in Matrix Closed Ended was sold. Many of the funds within the portfolio suffered poor returns as a result of the financial and economic turmoil. It was also a troubled year for the holding in the New Star Asset Management Group. Following the dislocation precipitated by the Lehman Brothers insolvency and crises at other major financial services groups, New Star negotiated a debt-for-equity swap with its banks. This resulted in existing shareholders including your Company being diluted down to a minority position. At the same time, an auction process was initiated and this led to New Star's takeover by the Henderson Group in April at 2p per share. There were, however, some areas of relative resilience within your Company's portfolio. Of those funds held throughout the year, the Skandia UK Strategic Best Ideas fund declined only 14.5% while a number of purchases made during late 2008 and early 2009 contributed healthy positive returns. In the hedge fund area, BH Global returned 17.7% from its purchase to the year end. In fixed income, the M&G Optimal Income fund and Natixis Loomis Sayles Multisector Income fund returned 9.6% and 5.9% respectively. Among the equity funds, Occam Asia gained 8.7% while the Neptune Russia and Greater Russia fund returned 8.6%. As a result of the portfolio changes and market movements, your Company ended the year with 44.3% of its assets in retail funds, 8.3% in ETFs, 4.5% in investment trusts, 3.7% in hedge funds, 7.5% in other securities and 31.6% in cash. Geographically, the biggest non-cash exposures were the UK, at 15%, and the Pacific excluding Japan and emerging markets, both at 9%. In asset class terms, the biggest non-cash holdings were in equities, at 30%, commodities, at 13%, and fixed income, at 9%. At the end of the year, global stockmarkets were 25.1% off their October 2007 peak in sterling terms, with some markets having experienced particularly acute falls. Within the Group of Seven (G7), the weakest countries were Italy and the UK, down 36.4% and 32.2% respectively. Among smaller developed economies, the weakest countries included Ireland, down 70.1%, and Belgium, down 55.3%, while the weakest emerging markets included Bulgaria and Romania, down 70.4% and 66.0% respectively. By contrast, Japan, down 15.9%, was the most resilient G7 market as a result of the yen's strength while the strongest emerging markets were concentrated in Latin America, with Colombia and Venezuela up 33.8% and 29.0% respectively. While UK equities retreated in June 2009, share prices revived in the middle of July, generating their longest run of gains since 2004 as investors responded positively to company announcements showing that second quarter trading had been better than feared. The news was particularly reassuring within the troubled US financial sector. Across the global economy, data over the early summer of 2009 appeared to suggest that industrial activity and world trade were stabilising, led by continued growth in emerging markets. Investors in developed stockmarkets may remain relatively cautious for some time, with data from the critically important US jobs market continuing to cause concern and with business sentiment in the eurozone lagging. In emerging markets, however, industrial output was rising strongly in significant countries such as Brazil, China, India, South Korea and Taiwan although Russia and Mexico remained weak. New Star Asset Management Limited Investment Manager 14th October 2009 SCHEDULE OF TWENTY LARGEST INVESTMENTS at 30th June 2009 Holding of Investments Activity 30th June Percentage 2009 of Bid-market portfolio value Â£'000 BlackRock Gold & General Income Investment Fund 4,284 10.92 Fund Natixis Loomis Sayles Multisector Investment Fund 3,305 8.42 Income Fund Investec Africa Fund Investment Fund 3,275 8.35 Lyxor Gold Bullion Securities Fund Exchange Traded 3,053 7.78 Fund Occam Umbrella Asia Focus Fund Investment Fund 3,032 7.73 Skandia UK Strategic Best Ideas Investment Fund 2,610 6.65 Fund M&G Optimal Income Fund Investment Fund 2,139 5.45 Prusik Asia Fund Investment Fund 2,013 5.13 Artemis UK Special Situations Fund Investment Fund 1,990 5.07 Trojan Investment Fund Investment Fund 1,985 5.06 iShares FTSE / Xinhua China 25 Fund Exchange Traded 1,835 4.68 Fund Henderson Private Equity Investment Investment 1,183 3.02 Trust company Neptune Russia & Greater Russia Investment Fund 1,087 2.77 Fund The Sierra Investment Fund Investment Fund 1,000 2.55 Corndon Limited Investment Fund 1,000 2.55 BH Global Investment Limited Equity 992 2.53 New Star International Property Investment Fund 893 2.28 Fund Synergy Fund Limited B1 Investment Fund 817 2.08 Skandia Global Best Ideas Fund Investment Fund 726 1.85 GWI Brazil Fund Investment Fund 711 1.82 37,930 96.69 Balance held in 11 investments 1,298 3.31 Total investments 39,228 100.00 The investment portfolio can be further analysed as follows: Â£'000 Equities 2,681 Convertible securities 458 Fixed income securities - Other investments 36,089 39,228 All of the Company's investments are either unlisted or are unit trusts / OEIC funds with the exception of Henderson Private Equity Investment Trust, Midas Capital, Lyxor Gold Bullion Securities, Immedia Broadcasting and Hanson Westhouse Holdings. SCHEDULE OF TWENTY LARGEST INVESTMENTS at 30th June 2008 Holding of Investments Activity 30th June Percentage 2008 of Bid-market portfolio Value Â£'000 New Star UK Alpha Fund Investment Fund 8,463 9.89 Investec Africa Fund Investment Fund 4,556 5.32 New Star Global Financials Fund Investment Fund 4,514 5.28 New Star Accelerator Hedge Fund Investment Fund 4,450 5.20 New Star Hidden Value Portfolio Investment Fund 4,107 4.80 Fund New Star European Hedge Fund Investment Fund 4,098 4.79 New Star Asset Management Group Asset Management 4,040 4.72 Company Global Property Fund Investment Fund 3,995 4.67 New Star European Growth Fund Investment Fund 3,719 4.35 New Star European High Yield Fund Investment Fund 3,640 4.25 New Star Financials Hedge Fund Investment Fund 3,417 3.99 Skandia Global Best Ideas Fund Investment Fund 3,292 3.85 Skandia UK Strategic Best Ideas Investment Fund 3,041 3.55 Fund New Star International Property Investment Fund 2,976 3.48 Fund New Star Private Equity Investment Investment 2,896 3.38 Trust Company New Star UK Growth Fund Investment Fund 2,715 3.17 New Star Global Fund - British Lion Investment Fund 2,652 3.10 Portfolio New Star Heart of Africa Fund Investment Fund 2,211 2.58 New Star Global Strategic Capital Investment Fund 2,031 2.37 Fund Midas Capital Equity 1,955 2.29 72,768 85.03 Balance held in 17 investments 12,800 14.97 Total investments 85,568 100.00 The investment portfolio can be further analysed as follows: Â£'000 Equities 13,192 Convertible securities 458 Fixed income securities - Other investments 71,918 85,568 All of the Company's investments are either unlisted or are unit trusts / OEIC funds with the exception of New Star Asset Management Group, New Star Private Equity Investment Trust, Midas Capital, New Star Financial Opportunities Fund, Lindsell Train Investment Trust and Immedia Broadcasting. 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 2009 The Business Review should be read in conjunction with the Chairman's Statement and the Investment Manager's Report, which provide a review of the year under review and the outlook for the future. Status The Company operates as an investment trust in accordance with Section 842 of the Income and Corporation Taxes Act 1988 ("Section 842"). It is required to seek approval from HM Revenue & Customs ("HMRC") of its status as an investment trust under Section 842 every year, and this approval will continue to be sought. HMRC approval of the Company's status as an investment trust has been received in respect of the year ended 30th June 2008; this approval is subject to there being no subsequent enquiries under Corporation Tax Self Assessment. The directors are of the opinion that the Company has continued to conduct its affairs in a manner that will enable it to continue to gain such approval. The Company is an investment company under Section 833 of the Companies Act 2006. The Company is listed on the London Stock Exchange. It must therefore conduct its affairs in accordance with the Listing Rules and Disclosure and Transparency Rules published by the Financial Services Authority. The Company is incorporated in England and Wales and is domiciled in the United Kingdom Investment objective and policy Investment Objective The Company's investment objective is to achieve long-term capital growth. Investment Policy Prior to 1st October 2008, the Company's investment objective was implemented through a policy of investing a significant proportion of the Company's assets in pooled investment vehicles managed by associates of New Star Asset Management Group PLC, the then parent of the Investment Manager. Following a review the Directors concluded that the investment objective could be better met by adopting a new investment policy which was approved by shareholders at the Annual General Meeting ("AGM") held on 1st October 2008. Since 1st October 2008, the Company's investment policy has been 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 also 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 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. Information on how the Company has invested its assets with a view to spreading investment risk in accordance with its investment policy is set out above. Financial review - Assets Total net assets at 30th June 2009 amounted to Â£58,746,000 compared with Â£96,405,000 at 30th June 2008. In the year under review the net asset value per ordinary share decreased by 39.1% from 135.74p to 82.71p. - Costs Total expenses for the year amounted to Â£411,000 (2008: Â£505,000). In the year under review the investment management fee amounted to Â£311,000 (2008: Â£263,000). No performance fee was payable in respect of the year under review as the Company did not outperform the hurdle rate. Further details on the Company's expenses may be found in notes 3 and 4. - Revenue The Company's gross revenue totalled Â£1,272,000 (2008: Â£1,405,000). After deducting expenses, the revenue return for the year was Â£655,000 (2008: Â£671,000). - Dividends Dividends do not form a central part of the Company's investment policy, however the Directors have declared a final dividend of 0.70p net per share (2008: final dividend of 0.73p) payable on 23rd November 2009 to shareholders on the register of members on 23rd October 2009. Funding The primary source of the Company's funding is shareholder funds. The Company is typically ungeared. VAT reclaim Following a judgement of the European Court of Justice in June 2007, HMRC accepted that the provision of investment management services to investment trust companies is VAT exempt and acknowledged its liability to pay claims in respect of VAT borne by investment trust companies. During the year under review the Company received refunds totalling Â£170,000, together with interest of Â£35,000, in respect of VAT paid on management fees between 2001 and 2007. It is not anticipated that any further refunds will be received. - Payment of suppliers The Company seeks to obtain the best possible terms for all business and, 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 2009 (2008: 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 both the Chairman's Statement and the Investment Manager's Report. - 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 which are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future. 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 % 2009 2008 Change Net assets (Â£000) 58,746 96,405 (39.1) Net asset value per share 82.71p 135.74p (39.1) Share price 58.00p 105.50p (45.0) Discount 29.9% 22.3% N/A Earnings per shares (52.3)p (37.42)p N/A FTSE World Index (total 415.61 480.44 (13.5) return, sterling adjusted) FTSE All-Share Index (total 2,781.88 3,498.56 (20.5) return) 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, are delegated to New Star Asset Management Limited ("New Star" or the "Investment Manager"). - Investment management services New Star has acted as Investment Manager to the Company throughout the year. This relationship is governed by an agreement dated 28th August 2008. Prior to 28th August 2008 the relationship was governed by an agreement dated 19th January 2001. New Star receives a management fee, payable quarterly in arrears, equivalent to 3/16 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 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 Â£311,000 (2008: Â£263,000). No performance fee was accrued or paid in respect of the year ended 30th June 2009. Mr Simon Akroyd replaced Mr Mark Harris as the Company's portfolio manager with effect from 10th December 2008. - Secretarial and administration services Secretarial services and general administration of the Company is undertaken by New Star Asset Management Limited for an annual fee of Â£70,000 (exclusive of VAT) payable in equal monthly instalments in arrears and reviewed annually by reference to the UK Index of Retail Prices. The agreement is terminable by not less than six months notice by either party. Related party transactions New Star Asset Management Limited has acted as Investment Manager to the Company throughout the period. This relationship is governed by an agreement dated 28th August 2008. Prior to 28th August 2008 the relationship was governed pursuant to an agreement dated 19th January 2001. Details of the investment management fee payable to New Star Asset Management Limited may be found in Note 3. On 6th April 2009, Mr Duffield resigned as chairman of New Star Asset Management Group PLC, the holding company of New Star Asset Management Limited. On 9th April 2009 New Star Asset Management Group PLC was acquired by Henderson Group PLC; prior to its acquisition by Henderson Group PLC, Mr Duffield was a shareholder of New Star Asset Management Group PLC. The total investment management fee payable for the year ended 30th June 2009 amounted to Â£311,000 (2008: Â£263,000). No performance fee was payable in respect of the year ended 30th June 2009 (2008: nil). During the year the Group's investments included funds managed by the Investment Manager or by associates of the Investment Manager. At 30th April 2009 the Company held 4 investments (2008: 21) that were managed by New Star or its associates. The total value of these investments was Â£2,130,000 (2008: 61,440,000). No investment management fees were payable by the Company in respect of such 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, are as follows: Investment strategy Inappropriate long-term strategy and asset allocation might lead to the underperformance of the Company. The Company's strategy is kept under regular review by the Board. In September 2008 the Board submitted proposals for a revised investment policy to shareholders. The new policy was approved by shareholders at the AGM held on 1st October 2008 and is detailed above. The Board considers that the new investment policy will enhance the ability of the Company to meet its objective of achieving long-term capital growth. 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 the performance of both the Company and its underlying investments. 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. A schedule of the twenty largest investments may be found above. - 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. - Tax and regulatory risks A breach of Section 842 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation 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 New Star as Investment Manager and Secretary 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 Section 842. - Operational Disruption to, or failure of, the Investment Manager'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. Environmental, social and community issues The Company has no employees, with day-to-day management and administration of the Company being delegated to the Investment Manager. The Company's portfolio is managed in accordance with the investment objective and policy; environmental, social and community matters are considered to the extent that they potentially impact on the Company's investment returns. For and on behalf of the Board of Directors Geoffrey Howard-Spink Chairman 14th October 2009 STATEMENT OF DIRECTORS' RESPONSIBILITIES The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards ("IFRS") as adopted by the European Union. The directors are required to prepare Group financial statements for each financial year which present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing the financial statements, the directors are required to: - Select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently. - present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information. - provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entities financial position and financial performance; and - state that the Company has complied with IFRS, subject to any material departures disclosed and explained in the financial statements. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for the safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included in the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Statement under Disclosure and Transparency Rule 4.1.12 The Directors of the Company each confirm to the best of their knowledge that: a) the financial statements have been prepared in accordance with the applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and b) this Annual Report includes a fair review of the development and performance f the business and the position of the Company, together with a description of the principal risks and uncertainties they face. For and on behalf of the Board of Directors Geoffrey Howard-Spink Director 14th October 2009 AUDITED CONSOLIDATED INCOME STATEMENT for the year ended 30th June 2009 Year ended Year ended 30th June 2009 30th June 2008 Revenue Capital Total Revenue Capital Total Note return return return return Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment Income 2 1,049 - 1,049 1,031 - 1,031 Other operating 2 223 - 223 374 - 376 income Total income 1,272 - 1,272 1,405 - 1,405 Gains and losses on investments Losses on 9 investments at fair value through - (36,822) (36,822) - (27,203) (27,203) profit or loss Losses on index - (672) (672) - - - future contracts Losses on forward currency contracts - (302) (302) - (24) (24) Other exchange losses/(gains) - (167) (167) - 191 191 Trail commission - 129 129 - - - 1,272 (37,834) (36,562) 1,405 (27,036) (25,631) Expenses Management fees 3 (311) - (311) (263) - (263) VAT Recovery 3 170 - 170 - - - Other expenses 4 (268) (2) (270) (241) (1) (242) Profit/(loss) before finance 863 (37,836) (36,973) 901 (27,037) (26,136) costs and tax Finance costs (77) - (77) (60) - (60) Profit/(loss) 786 (37,836) (37,050) 841 (27,037) (26,196) before tax Tax 5 (131) 40 (91) (170) (208) (378) Profit/(loss) for 655 (37,796) (37,141) 671 (27,245) (26,574) the year Earnings per share Ordinary shares 7 0.92 (53.22) (52.30) 0.94 (38.36) (37.42) (pence) The total column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. 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. AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30th June 2009 Share Share Special Retained Total capital premium reserve earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30th June 710 21,573 56,908 17,214 96,405 2008 Loss for the - - - (37,141) (37,141) year Dividend paid - - - (518) (518) (note 8) At 30th June 710 21,573 56,908 20,445 58,746 2009 AUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 30th June 2008 Share Share Special Retained Total capital premium reserve earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30th June 710 21,573 56,908 44,498 123,689 2007 Loss for the - - - (26,574) (26,574) year Dividend paid - - - (710) (710) (note 8) At 30th June 710 21,573 56,908 17,214 96,405 2008 AUDITED COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 30th June 2009 Share Share Special Retained Total capital premium reserve earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30th June 710 21,573 56,908 16,750 95,941 2008 Loss for the - - - (37,172) (37,172) year Dividend paid - - - (518) (518) (note 8) At 30th June 710 21,573 56,908 20,940 58,251 2009 AUDITED COMPANY STATEMENT OF CHANGES IN EQUITY For the year ended 30th June 2008 Share Share Special Retained Total capital premium reserve earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 30th June 710 21,573 56,908 44,114 123,305 2007 Loss for the - - - (26,654) (26,654) year Dividend paid - - - (710) (710) (note 8) At 30th June 710 21,573 56,908 16,750 95,941 2008 AUDITED CONSOLIDATED BALANCE SHEET at 30th June 2009 Note 30th June 30th June 2009 2008 Â£'000 Â£'000 Non-current assets Investments at fair value through 9 39,228 85,568 profit or loss Current assets Other receivables 11 94 118 Cash and cash equivalents 12 20,189 11,834 20,283 11,952 Total assets 59,511 97,520 Current liabilities Other payables 13 (421) (689) Total assets less current liabilities 59,090 96,831 Non-current liabilities Deferred tax liability 5 (344) (426) Net assets 58,746 96,405 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 (20,445) 17,214 Total equity 58,746 96,405 Pence Pence Net Asset Value per ordinary share 16 82.71 135.74 Approved by the Board of Directors and authorised for issue on 14th October 2009 AUDITED COMPANY BALANCE SHEET at 30th June 2009 Note 30th June 30th June 2009 2008 Â£'000 Â£'000 Non-current assets Investments at fair value through 9 39,228 85,568 profit or loss Current assets Other receivables 11 974 993 Cash and cash equivalents 12 18,814 10,156 19,788 11,149 Total assets 59,016 96,717 Current liabilities Other payables 13 (421) (350) Total assets less current liabilities 58,595 96,367 Non-current liabilities Deferred tax liability 5 (344) (426) Net assets 58,251 95,941 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 (20,940) 16,750 Total equity 58,251 95,941 Approved by the Board of Directors and authorised for issue on 14th October 2009 AUDITED CASH FLOW STATEMENTS for the year ended 30th June 2009 Year ended Year ended Year ended Year ended 30th June 30th June 30th June 30th June 2009 2009 2008 2008 Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Cash flows from operating activities Profit before (36,973) (37,004) (26,136) (26,183) finance costs and tax Adjustments for: Losses on 46,340 46,340 32,600 32,600 investments Operating cash flows before 9,367 9,336 6,464 6,417 movements in working capital Decrease in 8 3 1,324 1,106 receivables (Decrease) / (347) (8) 514 175 increase in payables Net cash from operating activities before 9,028 9,331 8,302 7,698 finance costs and income taxes Taxation (78) (78) (221) (67) Net cash from operating activities 8,950 9,253 8,081 7,631 (note 17) Cash flows from financing activities Dividend paid (518) (518) (710) (710) Interest paid (77) (77) (60) (60) Net cash used in financing activities (595) (595) (770) (770) Net increase in cash 8,355 8,658 7,311 6,861 and cash equivalents Cash and cash 11,834 10,156 4,523 3,295 equivalents at beginning of year Cash and cash equivalents at end 20,189 18,814 11,834 10,156 of year NOTES TO THE ACCOUNTS for the year ended 30th June 2009 1. ACCOUNTING POLICIES These financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates, rounded to the nearest thousand. 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. (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. The new SORP (which has been adopted early) has not resulted in any changes to the financial statements. (b) Basis of consolidation: The Consolidated Income Statement and Balance Sheet include the Accounts of the Company and its subsidiary made up to 30th June 2009. No Income Statement is presented for the parent company as permitted by Section 408 of the Companies Act 2006. (c) Presentation of income statement: 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 income statement between items of a revenue and capital nature has been presented alongside the income statement. In accordance with the Company's status as a UK investment company under section 833 of the Companies Act 2006, net capital returns may not be distributed by way of a dividend. Additionally, the net revenue is the measure the Directors believe appropriate in assessing the Group's compliance with certain requirements set out in Section 842 Income and Corporation Taxes Act 1988. (d) Revenue: Dividends and such other distributions from investments are credited to the revenue column of the Income Statement on the day in which they are quoted ex-dividend. Interest on fixed interest securities and deposits is accounted for on a time apportionment 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. Any excess in the value of the shares received over the amount of cash dividend is credited to the capital reserve. (e) Expenses: Expenses are accounted for on an accruals basis. Management fees, administration and other expenses, with exception of the transaction charges are charged to the revenue column of the Income Statement. Transaction charges are charged to the capital column of the Income Statement. (f) Investments held at fair value: All "regular way" 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 closing bid price 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 cost in the Company's Balance Sheet. (g) 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 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. (h) 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) Special reserve: The Special Reserve can be used to finance the redemption and / or purchase of shares in issue. (i) 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, including those on settlement, together with related taxation effect; - unrealised gains and losses on investments. The capital reserve is not available for payment of dividends. (k) Cash and cash equivalents: Cash and cash equivalents comprises current deposits, overdrafts with banks and bank loans and these are subject to an insignificant risk of changes in value. Cash and cash equivalents are held for the purpose of either asset allocation or managing liquidity. (l) Dividends payable: Dividends are recognised from the date on which they are irrevocably committed to payment. (m) 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. (n) Accounting developments: The following standards, amendments and interpretations have been published by IASB and are effective for the year ended 30th June 2009: IAS 23 (revised) requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the costs of that asset. IFRS 8 replaces IAS 14 Segment Reporting and requires a "management approach", under which segment information is presented on the same basis as that used for internal reporting purposes. Following a review of IFRS 8, the Company has reached the conclusion that the current segmentation reporting reflects the management approach, and as such, adoption of IFRS 8 will not have a significant impact on financial disclosures. Amendments to IAS 1 prohibit the presentation of items of income and expense - that Is "non-owner changes in equity" - in the statement of changes in equity, requiring "non-owner changes in equity" to be presented separately from owner changes in equity. Amendments to IFRS 1 and IAS 27 allow first-time adopters to use a deemed cost to measure the initial cost of investments in the separate financial statements and removes the definition of the cost method from IAS 27 by replacing it with a new requirement. Amendments to IAS 27 require the effects of all transaction with non-controlling interest (minority interest) to be recognised in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Amendments to IAS 32 and IAS 1 require an entity to classify puttable financial instruments and instruments, or components of instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation as an entity. Amendment to IAS 39 clarifies whether a hedged risk or portion of cash flows is eligible for hedge accounting. The following interpretations are mandatory for accounting periods beginning on or after 1 January 2009: IFRIC 13 Customer Loyalty Programmes. IFRIC 15 Agreements for construction of real estates. IFRIC 16 Hedges of a net investment in a foreign operation. IFRIC 17 Distributions of Non-cash Assets to Owners. The above standards will be adopted from 1st July 2009. The Directors anticipate that the adoption of these standards /interpretations in future periods will have no material impact on the consolidated financial statements. 2. INVESTMENT INCOME Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 INCOME FROM LISTED INVESTMENTS UK net dividend income 319 460 UK unfranked investment income 570 569 Fixed interest income 105 - Interest of convertible loan stock 55 2 1,049 1,031 OTHER OPERATING INCOME Bank interest receivable 188 374 VAT reclaim interest receivable from HMRC 35 - 223 374 TOTAL INCOME COMPRISES Dividend 1,049 1,029 Other income 223 376 1,272 1,405 3. INVESTMENT MANAGEMENT FEES Year ended Year ended 30th June 2009 30th June 2008 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment management 311 - 311 263 - 263 fee Performance fee - - - - - - 311 - 311 263 - 263 At 30th June 2009 there were amounts outstanding of Â£203,000 (2008: Â£147,000) for management fees. Details of the investment management agreement are given in Note 19. Following a decision made by HM Revenue and Customs (HMRC) in November 2007, management fees invoiced after this date have not incurred a VAT charge. Â£170,000 of VAT paid on management fees in past years was recovered during the year (2008: nil). A summary of the terms of the investment management fee may be found in the Business Review. 4. OTHER EXPENSES Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 Legal fees 82 3 Directors' remuneration 65 65 Administrative and secretarial fee 55 82 Auditors' remuneration: - Audit 27 26 - Other 2 2 Other 39 39 270 242 Allocated to: - Revenue 268 241 - Capital 2 1 270 242 5. TAXATION (a) Analysis of tax charge for the year: Year ended Year ended 30th June 2009 30th June 2008 Revenue Capital Total Revenue Capital Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 UK corporation tax 138 35 173 12 (6) 6 Overseas tax 7 - 7 - - - Double tax relief (7) - (7) - - - Adjustments in respect of prior periods - - - - (27) (27) Irrecoverable income - - - 39 - 39 tax Total current tax for 138 35 173 51 (33) 18 the year Deferred tax (7) (75) (82) 119 241 360 Total tax for the year 131 (40) 91 170 214 378 (note 5b) (b) Factors affecting tax charge for the year: The charge for the year can be reconciled to the profit per the income statement as follows: Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 Loss before tax (37,050) (26,196) Tax at the UK corporation tax rate of - (5,894) 30% (2008: 30%) Tax at the UK corporation tax rate of (10,374) (1,834) 28% (2008: 30%) Effects of: Non-taxable UK dividends (89) (136) Gains and losses on investments that are 10,629 7,969 not taxable Movement in unrealised gains on non-qualifying offshore funds (75) (75) Irrecoverable income tax - 39 Deferred tax prior year movement - 27 Adjustments in respect of prior periods - (27) Small companies' rate on investment - (6) trust Marginal small companies relief on - (1) subsidiary Overseas tax 7 - Double tax relief (7) - Total tax for the year 91 378 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 investments. (c) Provision for deferred tax: Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 Provision at start of year 426 66 Deferred tax (credit)/charge for the (82) 360 year Provision at end of year 344 426 The deferred tax charge in the capital account of Â£75,000 (2008: Â£241,000) of the investment trust relates to an unrealised gain on a non-distributing offshore fund. The deferred tax credit of Â£7,000 in the revenue account (2008: charge of Â£119,000) relates to the reversal of the prior year tax credit for utilisation of revenue expenses on this unrealised offshore gain and Â£7,000 (2007: nil) arising on income taxable in the subsequent accounting period. There is no unrecognised deferred tax asset (2008: nil) as a result of excess expenses. 6. REVENUE RETURN FOR THE YEAR The revenue return for the year dealt with in the accounts of the parent company was Â£624,000 (2008: Â£598,000). 7. RETURN PER ORDINARY SHARE Total return per Ordinary share is based on the Group total return on ordinary activities after taxation of Â£(37,141,000) (2008: Â£(26,574,000) and on 71,023,695 (2008: 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 return on ordinary activities after taxation of Â£655,000 (2008: Â£671,000) and on 71,023,695 (2008: 71,023,695) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year. Capital return per Ordinary share is based on net capital losses for the year of Â£37,023,695 (2008: capital losses of Â£27,245,000) and on 71,023,695 (2007: 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 2009 2008 Â£'000 Â£'000 Dividends paid for the year ended 30th June 2008 of 0.73p (2007: 1.00p) per share) 518 710 518 710 The total dividend payable in respect of the financial year, which is the basis on which the requirement of Section 842 Income and Corporation Taxes Act 1988 are considered, is set out below. Year ended Year ended 30th June 30th June 2008 2008 Â£'000 Â£'000 Proposed Final dividend for the year ended 30th June 2009 of 0.70p (2008: 0.73p) per share) 497 518 497 518 Revenue available for distribution by way of dividend 624 598 9. INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 GROUP AND COMPANY 39,228 85,568 ANALYSIS OF INVESTMENTS PORTFOLIO - GROUP AND COMPANY Listed* Unlisted Total Â£'000 Â£'000 Â£'000 Opening book cost 70,127 3,098 73,225 Opening investment holdings gain 13,149 (806) 12,343 Movements in classification of (2,458) 2,458 - investments** Opening valuation 80,818 4,750 85,568 Movement in period Purchases at cost 59,786 - 59,786 Sales - Proceeds (68,088) (1,216) (69,304) - Realised losses on sales (8,981) - (8,981) (Increase)/decrease in investment (27,950) 109 (27,841) holding gains Closing valuation 35,585 3,643 39,228 Closing book cost 50,386 4,340 54,726 Closing investment holding gains (14,801) (697) (15,498) Closing valuation 35,585 3,643 39,228 * Listed investments include the unit trust and OEIC funds show in the schedule of twenty largest investments. ** Movement of the Sierra Investment Fund, Corndon Limited and Corndon Limited 12% Loan Notes from listed to unlisted. Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 ANALYSIS OF CAPITAL (LOSSES)/PROFITS Realised losses on sales 8,981 7,275 (Decrease)/increase in investment holding (27,841) (34,478) gains (36,822) (27,203) Significant movement in unquoted holdings During the year capital repayments of Â£1,002,000 were received on Synergy fund B1 and Â£214,000 on Synergy Fund A1. The closing bookcost of these Funds were Â£282,000 (Synergy Fund A1) and Â£390,000 (Synergy Fund B1). The closing market value was Â£334,000 (Synergy Fund A1) and Â£817,000 (Synergy Fund B1). Transaction costs The purchases and sales proceeds figures above included transaction costs on purchases of Â£31,000 (2008: nil) and on sales of Â£16,000 (2008: nil). 10. INVESTMENT IN SUBSIDIARY The Company owns the whole of the issued share capital (Â£1) of JIT Securities Limited, an investment company registered in England and Wales. The financial results of the subsidiary are summarised as follows: Year ended Year ended 30th June 30th June 2009 2008 Â£'000 Â£'000 Net assets brought forward 464 383 Profit for the year 31 81 Net assets carried forward 495 464 11. OTHER RECEIVABLES 30th June 30th June 30th June 30th June 2009 2009 2008 2008 Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Prepayments and accrued income 60 60 68 63 Taxation 34 - 50 16 Amounts owed by subsidiary - 914 - 914 undertakings 94 974 118 993 12. CASH AND CASH EQUIVALENTS 30th June 30th June 30th June 30th June 2009 2009 2008 2008 Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Cash at bank 20,189 18,814 11,834 10,156 20,189 18,814 11,834 10,156 13. OTHER PAYABLES 30th June 30th June 30th June 30th June 2009 2009 2008 2008 Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Accruals 342 342 350 350 Forward currency purchases - - 339 - Corporation tax payable 79 79 - - 421 421 689 350 14. CALLED UP SHARE CAPITAL 30th June 30th June 2009 2008 Â£'000 Â£'000 Authorised 3,050 3,050 305,000,000 (2008: 305,000,000) Ordinary shares of Â£0.01 each Issued and fully paid 710 710 71,023,695 (2008: 71,023,695) Ordinary shares of Â£0.01 each 15. RESERVES Share Special Retained premium reserve Earnings account Â£'000 Â£'000 Â£'000 GROUP At 30th June 2008 21,573 56,908 17,214 Decrease in investment holding gains - - (27,841) Net gains on realisation of - - (8,981) investments Realised losses on future contracts - - (672) Unrealised losses on revaluations of - - (860) bank accounts Realised gains on foreign currency - - 693 Losses on forward currency purchases - - (302) Trail commission - - 129 Expenses charged to capital - - (2) Deferred tax charge in capital - - 75 Relief on taxable income in capital - - (35) Final dividend - - (518) Retained profit for year - - 655 At 30th June 2009 21,573 56,908 (20,445) Share Special Retained premium reserve Earnings account Â£'000 Â£'000 Â£'000 COMPANY At 30th June 2008 21,573 56,908 16,750 Decrease in investment holding gains - - (27,841) Net gains on realisation of - - (8,981) investments Realised losses on future contracts - - (672) Unrealised gains on revaluations of - - (904) bank accounts Realised gains on foreign currency - - 737 Losses on forward currency purchases - - (302) Trail commission - - 129 Expenses charged to capital - - (2) Deferred tax charge in capital - - 75 Relief on taxable income in capital - - (35) Final dividend - - (518) Retained profit for year - - 624 At 30th June 2009 21,573 56,908 (20,940) The components of retained earnings are set out below: 30th June 30th June 2009 2008 Â£'000 Â£'000 GROUP Capital reserve-realised (5,165) 4,269 Capital reserve-unrealised (16,449) 11,913 Revenue reserve 1,169 1,032 (20,445) 17,214 COMPANY Capital reserve-realised (5,428) 3,623 Capital reserve-unrealised (16,538) 12,207 Revenue reserve 1,026 920 (20,940) 16,750 16. NET ASSET VALUE PER ORDINARY SHARE The net asset value per Ordinary share is calculated on net assets of Â£58,746,000 (2008: Â£96,405,000) and 71,023,695 (2008: 71,023,695) Ordinary shares in issue at the year end. 17. NOTES TO THE CASH FLOW STATEMENT Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with a maturity of three months or less. Cash flows from operating activities Included within the cash flows from operating activities are the cash flows associated with the purchases and sales of investments, as these are not considered to be investment activities, given the objective of the Company. Cash flows from operating activities can therefore be further analysed as follows: 30th June 30th June 30th June 30th June 2009 2009 2008 2008 Group Company Group Company Â£'000 Â£'000 Â£'000 Â£'000 Proceeds on disposal of fair value through profit and loss investments 69,304 69,304 23,611 23,611 Purchases of fair value through (59,786) (59786) (17,054) (17,054) profit and loss investments Net cash flows from investment 9,518 9,518 6,557 6,557 transactions Cash flows from operating (568) (265) 1,524 1,074 activities Net cash from operating activities (8,950) (9,253) (8,081) (7,631) 18. FINANCIAL INSTRUMENTS The Group's investment objective is to achieve long term capital growth. The investment objective is implemented by allocating assets to global investment opportunities through investment in equities, bonds, commodity, real estate, currency and other markets. The Group's assets are stated at fair value. For listed securities, these represent bid prices, or for unit trusts and OEICs, the closing price released by the relevant investment manager. The fair value of unquoted investments is based on the market price at the close of business on the balance sheet date where an organised market exists. Otherwise, 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 holding of securities, investing activities and associated financing undertaken pursuant to this objective involve certain inherent risks. Events may occur that would result in either a reduction in the Group's net assets or a reduction of potential revenue profits available for dividend. As an investment trust, the Group invests in securities for the long term. Accordingly it is, and has been throughout the year under review, the Group's policy that no short-term trading in investments or other financial instruments shall be undertaken. The main financial instrument risks arising from the Group's pursuit of its investment objective are market risk (comprising price risk, currency risk, and interest rate risk), liquidity risk and credit risk. The Board has reviewed and agreed policies for managing each of these risks, which are unchanged from the previous year, and which are summarised below. Note 18 (h) sets out a summary of the Group's financial assets and liabilities by category. (a) Market Risk The fair value or future cash flows of a financial instrument held by the Group may fluctuate because of changes in market prices of investments held by the Group. This market risk comprises three elements - currency risk (see note 18 (b)), interest rate risk (see note 18 (c)), and other price risk (see note 18 (d)). The Board reviews and agrees policies for managing these risks. The Group's Investment Manager assesses the exposure to market risk when making each investment decision, and monitors the overall level of market risk on the whole of the investment portfolio on an ongoing basis. (b) Currency Risk A proportion of the Group's portfolio is invested in investments denominated in a foreign currency and movements in exchange rates can significantly affect their Sterling value. Management of the risk The Investment Manager does not normally hedge against foreign currency movements affecting the value of the investment portfolio, but takes account of this risk when making investment decisions. In addition, the directors may authorise the Investment Manager to hedge currency risk in appropriate circumstances. Foreign currency exposure During the year under review, the Investment Manager entered into a forward currency contract. In view of the Group's exposure to the US dollar both directly and indirectly by investing in funds, many of whose assets and/or revenues are related to the dollar, it was thought appropriate to hedge a part of this exposure. Therefore in August 2008, the Group sold approximately US$14 million for sterling for settlement in one month. This contract resulted in the forward sale of US for sterling and is for one month's duration. This contract together with the settlement of the contract brought forward from the prior year resulted in losses being realised of Â£302,000. At 30th June 2009 there was no outstanding forward currency contract (2008: unrealised gain of Â£339,000). The fair values of the Group's monetary items that have foreign currency exposure at 30th June 2009 are shown below. 2009 2009 2009 2008 2008 2008 US US Dollars Euros Total Dollars Euros Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investments at fair value 11,529 - 11,529 12,780 5,349 18,129 through profit or loss Cash at bank and 108 4,257 4,365 - 2,957 2,957 short-term deposits Total net foreign currency 11,637 4,257 15,894 12,780 8,306 21,086 exposure Foreign currency sensitivity During the financial year sterling depreciated by 17.2% against the US Dollar (2008: depreciated by 0.8%) and depreciated by 7.0% against the Euro (2008: depreciated by 15.0%). It is not possible to forecast how much exchange rates might move in the next year, but based on the movements in currencies above in the last two years, it appears reasonably possible that rates could change by 10%. Applying a 10% change in rate to the exposures listed above would affect net assets and total return as follows: 2009 2009 2009 2008 2008 2008 US US Dollars Euros Total Dollars Euros Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 If exchange rates (1,058) (387) (1,445) (1,162) (755) (1,917) appreciated by 10% If exchange rates 1,293 473 1,766 1,420 923 2,343 depreciated by 10% It should be noted that the above illustration is based on exposures at the year end. Exposures may be subject to change during the year as a result of investment decisions. (c) Interest Rate Risk The Group will be affected by interest rate changes as it holds convertible loan stock assets. The majority of the Group's investments are equity based and are not therefore subject to interest rate risk. However interest rate changes will have an impact on the valuation of equities, although this forms part of other price risk, which is considered separately below. Management of the risk The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment decisions. The Group currently has no gearing. The Group, generally, does not hold significant cash balances, with short-term borrowings being used when required. Cash balances are held on call deposit and earn interest at the bank's daily rate. Derivative contracts are not used to hedge against the exposure to interest rate risk. Interest rate exposure The exposure, at 30th June of financial assets and liabilities to interest rate risk is shown by reference to: - floating interest rates - when the rate is due to be re-set; - fixed interest rates - when the financial instrument is due for repayment. 2009 2009 2009 2008 2008 2008 In 1 year Greater Total In 1 year Greater Total or less than or less than one year one year Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Exposure to floating interest rates: Cash at bank 20,189 - 20,189 11,834 11,834 11,834 20,189 - 20,189 11,834 11,834 11,834 2009 2009 2009 2008 2008 2008 In 1 year Greater Total In 1 year Greater Total or less than or less than one year one year Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Exposure to fixed interest rates: Investments at fair value through - 458 458 - 458 458 profit and loss Total exposure to 20,189 458 20,647 11,834 458 12,292 interest rates The above year end amounts are not representative of the exposure to interest rates during the year, since the level of cash held during the year will be affected by the strategy being followed in response to the Board and Investment Manager's perception of the market prospects and the investment opportunities available at any particular time. Interest receivable and finance cash are at the following rates: - Interest received on cash balances, or paid on bank overdrafts is at a margin over LIBOR or its foreign currency equivalent (2008: same). - The nominal and weighted average interest rate on Cordon Limited 12% Loan Notes is 12% (2008: 12%). Interest rate sensitivity The following table illustrates the sensitivity of the profit after taxation for the year and equity to an increase or decrease of 50 (2008: 50) basis points in interest rates in regard to the Group's monetary financial assets which are subject to interest rate risk. This level of change is considered to be reasonably possible based on observations of current market conditions. The sensitivity analysis is based on the Group's monetary financial instruments held at each balance sheet date, with all other variables held constant. Increase Decrease Increase Decrease in rate in rate in rate in rate 2009 2009 2008 2008 Â£'000 Â£'000 Â£'000 Â£'000 Effect on total 101 (101) 59 (59) return and equity (d) Other price risk The Group's exposure to other price risk comprises mainly movements in the value of its equity investments. A Schedule of Twenty Largest Investments is shown above. Investments are valued in accordance with the Group's accounting policies. Uncertainty arises as a result of future changes in valuations of the Group's investments, the market prices of the Group's listed equity investments and the effect changes in exchange rates may have on the sterling value of the investments. Management of the risk In order to manage this risk the Directors meet regularly with the Investment Manager to compare the performance of the portfolio against market indices and comparable investment trusts. Given the Group's investment objective, the Group does not hedge against the effect of changes in the underlying prices of the investments. The Group had no derivative instruments, other than currency contracts, at the year end, but, in the event that it had, the value of derivative instruments held at the balance sheet date would be determined by reference to their market value at that date. The unquoted investments are held at directors' valuations. All valuations are reviewed by the Investment Manager, the Group's Audit Committee and subsequently recommended to the Board for acceptance. Other price risk exposure The Group's exposure to other changes in market prices at 30th June on its quoted investments, which are all equities, was as follows: 2009 2008 Â£'000 Â£'000 Fixed asset quoted investments at fair value 38,585 80,818 through profit or loss The Group's exposure to other changes in prices at 30th June on its unquoted investments was as follows: 2009 2008 Â£'000 Â£'000 Fixed asset unquoted investments at fair value 3,643 4,7502 through profit or loss Analysed as: Equities 37,585 82,818 Fixed interest 458 458 38,043 83,276 A Schedule of Twenty Largest Investments is shown above. Other price risk sensitivity The following table illustrates the sensitivity of the profit after taxation for the year and the equity to an increase or decrease of 10% in the fair values of the Group's investments. This level of change is considered to be reasonably possible based on observation of current market conditions. The sensitivity analysis is based on the Group's investments at each balance sheet date, with all other variables held constant. Increase Decrease Increase Decrease in fair in fair in fair in fair value value value value 2009 2009 2008 2008 Â£'000 Â£'000 Â£'000 Â£'000 Effect on total return 3,923 (3,923) 8,557 (8,557) and on net assets (e) Liquidity Risk Liquidity risk is the possibility of failure of the Group to realise sufficient assets to meet its financial liabilities, including outstanding commitments associated with financial instruments. The Group's assets mainly comprise securities which can be readily sold to meet future funding commitments, if necessary. Unlisted securities, which carry a higher degree of liquidity risk form only 9.3% (2008: 2.7%) of the investment portfolio. Management of the risk The liquidity risk is managed by maintaining some cash or cash equivalent holdings in order to meet investment requirements as they fall due. At the year end the Group had liquid resources of Â£58.2 million. This was made up of Â£20.2 million cash and money market instruments and Â£38.0 million of listed investments. Liquidity risk exposure A summary of the Group's financial liabilities is provided in note 18 (h). The Group has sufficient funds to meet these financial liabilities as they fall due. (f) Credit Risk Credit risk is the exposure to loss from failure of a counterparty to deliver securities or cash for acquisitions or disposals of investments or to repay deposits. Management of the risk Credit risk is managed as follows: investment transactions are carried out with approved brokers, whose credit standard is reviewed periodically by the Investment Manager. Cash at bank is held only with reputable banks, with ratings of A or higher. NEW STAR INVESTMENT TRUST PLC Audited Results for the Year Ended 30 June 2009 Credit risk exposure The maximum exposure to credit risk at 30th June 2009 was Â£94,000 (2008: Â£115,000), comprising: 2009 2008 Â£'000 Â£'000 Accrued income 60 65 Tax recoverable 34 50 94 115 All of the above financial assets are current, their fair values are considered to be the same as the values shown and the likelihood of a material credit default is considered to be low. (g) Fair Values of Financial Assets and Financial Liabilities The Group's financial instruments are stated at their fair values at the year end. The fair value of listed shares and securities is based on last traded market prices. The fair value of unlisted shares and securities is based on Directors' valuations as detailed in note 1(f). (h) Summary of Financial Assets and Financial Liabilities by Category The carrying amounts of the Group's financial assets and financial liabilities as recognised at the balance sheet date of the reporting periods under review are categorised as follows: 2009 2008 Â£'000 Â£'000 Financial Assets Financial assets at fair value through profit or loss: Fixed asset investments - designated as 39,228 85,568 such on initial recognition Loans and receivables: Current assets: Debtors (due from brokers, dividends 60 68 receivable, accrued income and other debtors) Tax recoverable 34 50 Cash and cash equivalents 20,189 11,834 59,511 97,520 Financial Liabilities Measured at amortised cost: Creditors: amounts falling due within one year Creditors (due to brokers and deferred consideration) Forward currency purchases - 339 Other taxation payable 79 - Accruals 342 350 Creditors: amounts falling due after one year Creditors (due to brokers and deferred 344 344 consideration) 765 1,115 (i) Capital Management The Group and the Company's capital is as disclosed in the Balance Sheets and is managed on a basis consistent with its investment objective and policies, as disclosed in the Business Review above. The principal risks and their management are disclosed above. 19. RELATED PARTIES New Star Asset Management Limited has acted as Investment Manager to the Company throughout the period. This relationship is governed by an agreement dated 28th August 2008. Prior to 28th August 2008 the relationship was governed pursuant to an agreement dated 19th January 2001. Details of the investment management fee payable to New Star Asset Management Limited may be found in Note 3. On 6th April 2009, Mr Duffield resigned as chairman of New Star Asset Management Group PLC, the holding company of New Star Asset Management Limited. On 9th April 2009 New Star Asset Management Group PLC was acquired by Henderson Group PLC; prior to its acquisition by Henderson Group PLC, Mr Duffield was a shareholder of New Star Asset Management Group PLC. The total management fee payable for the year ended 30th June 2009 amounted to Â£311,000 (2008: Â£263,000). No performance fee was payable in respect of the year ended 30th June 2009 (2008: nil). During the year the Group's investments included funds managed by the Investment Manager or by associates of the Investment Manager. At 30th June 2008 the Company held 4 investments (2008: 22) that were managed by New Star or its associates. The total value of these investments was Â£2,130,000 (2008: Â£63,656,000). No investment management fees were payable by the Company in respect of such investments. 20. FINANCIAL INFORMATION 2009 financial information The figures and financial information for 2009 are extracted from the Annual Report and Accounts for the year ended 30 June 2009 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts has not yet been delivered to the Register of Companies. 2008 financial information The figures and financial information for 2008 are extracted from the published Annual Report and Accounts for the year ended 30 June 2008 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the 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 30 June 2009 will be sent to shareholders in October 2009 and will be available on the Company's website ( www.newstaram.com/alternative-investments/closed-end-funds/) or in hard copy format at the Company's registered office, 1 Knightsbridge Green, London SW1X 7NE. www.newstaram.com/alternative-investments/closed-end-funds/ The Annual General Meeting of the Company will be held on 18th November 2009 at 11.30am at 1 Knightsbridge Green, London SW1X 7NE. - ENDS -

Companies

New Star Investment Trust (NSI)

Thursday, 9th May 2024

COMPANIES COVERED:

RBN AAF HBR

Airtel Africa left investors underwhelmed despite customer growth, Robinson’s share price jumps on profit upgrade and Harbour Energy nudges higher on trading update.

Full Archive

UK 100

Latest directors dealings

3 hours ago SSP Group
4 hours ago Real Estate Investors
4 hours ago WPP
4 hours ago Spectris
4 hours ago Clarkson

All directors dealings today