Final Results
February 10 2004 - 9:19AM
UK Regulatory
PRESS RELEASE 10 FEBRUARY 2004
LIFE OFFICES OPPORTUNITIES TRUST PLC
The investment objective of Life Offices Opportunities Trust Plc ("LOOT") is to
achieve long term capital growth from a diversified portfolio of with-profits
life assurance policies. The Trust, with net assets of �29 million, is managed
by SVM Asset Management (`SVM'), the independent Edinburgh based investment
boutique.
Results for the year ended 31 December 2003
Salient Points
* Net Asset Value per share fell by 19.2% to 123.5 pence. This change
reflects the delay between changes in net assets and bonus declarations
being made as life offices attempt to smooth returns.
* The life industry is through the worst. With the recovery in the equity
market, concerns over life office solvency have diminished. The picture has
been muddied again by the proposals from the FSA for valuation on a
realistic basis and the consequent developments at Standard Life.
* Restructuring in the life industry was limited in 2003. There were a couple
of small purchases of closed life funds, including one by Swiss Re. If this
leads to greater efficiency then it is to be welcomed, though the benefit
to policy holders may be small.
* Portfolio continues to be well-placed and should benefit from asset growth
in the near future.
For further information please contact:
Brian Moretta SVM Asset Management 0131 226 6699
Roland Cross Broadgate 020 7726 6111
*..
LIFE OFFICES OPPORTUNITIES TRUST PLC
Chairman's Statement for the year ended 31 December 2003
Commenting on the results, Chairman, John Brumwell, said:
"As indicated in my statement in August, 2003 has seen your Company's assets
perform poorly as life offices continued to cut bonuses. Over the year, the net
asset value per share fell by 19.2 per cent to 123.5 pence. This change
reflects the delay between changes in assets and bonus declarations being made
as life offices attempt to smooth returns. The investment objective of your
Company is to achieve long-term capital growth and no dividend is payable.
While in 2001 and 2002 the value of your Company's assets weathered the storms
in the equity markets relatively well, they have failed to respond to the
upturn in 2003. This has two main causes. Firstly, bonuses are based on
historic returns and those declared in the first quarter of 2003, when the bulk
of the fall in net asset value took place, reflected market falls in 2002 and
early 2003. Secondly, life offices have been smoothing returns and the recovery
in equities since March 2003 has clearly not matched the previous falls.
Consequently bonuses have continued to be reduced.
The portfolio comprises a spread of endowments, with an emphasis on life
offices we believe can benefit from the restructuring of the life industry.
During 2003, no further policies were purchased. This year we have started
issuing projections for termination values of the Company in 2008 which should
improve transparency for investors. These are discussed in more detail in the
Manager's Review. It is perhaps worth highlighting the estimated required
return to sustain current bonuses, which was 7.8% as at 31 December 2003.
Unless life offices manage to achieve this annual return, and this is in excess
of their own assumptions, bonuses will have to be cut further.
With the recovery in the equity market, concerns over life office solvency have
diminished. The picture has been muddied again by the proposals from the FSA
for valuation on a realistic basis. Most offices indicated that this would not
be a problem, but the recent news from Standard Life suggests that these may be
more onerous than first thought. There is reason to believe that this may be a
specific situation, but it seems that the new methods may still have an impact
on the industry.
As I predicted last year, restructuring activity in the life industry was
limited in 2003. There were a couple of small purchases of closed life funds,
including one by Swiss Re. If this leads to greater efficiency then it is to be
welcomed, though the benefit to policyholders may be small. AMP spun off its UK
businesses, including Pearl and NPI, into a new company, HHG; there will be no
immediate impact on policyholders from this.
It is safe to say that 2004 will see more activity. Standard Life has announced
a strategic review and demutualisation is firmly on the agenda. While any
windfall will be significantly lower than the figures suggested three years
ago, we are hopeful that there would still be a substantial demutualisation
benefit to the Fund.
It would seem that, subject to further asset movements, the life industry is
through the worst. While there is both good news and bad news to come, we do
believe that the portfolio is well placed and should benefit from asset growth
in the future."
*..
Summarised Group Statement of Total Return
(unaudited)
Year to 31 December 2003 Year to 31 December 2002
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Losses on investments - (5,526) (5,526) - (468) (468)
Income 2 - 2 8 - 8
Investment management - (351) (351) - (414) (414)
fees
Other expenses (131) (233) (364) (158) (276) (434)
------ ------ ------ ------ ------ ------
Return before interest (129) (6,110) (6,239) (150) (1,158) (1,308)
and taxation
Bank overdraft - (677) (677) - (635) (635)
interest
------ ------ ------ ------ ------ ------
Transfer from reserves (129) (6,787) (6,916) (150) (1,793) (1,943)
====== ====== ====== ====== ====== ======
Returnper ordinary (0.55p) (28.82p) (29.37p) (0.64p) (7.57p) (8.21p)
Share
.
Group Balance Sheet As at as at
(unaudited)
31 December 31 December
2003 2002
�'000 �'000
Endowment policies 41,093 46,863
Net current liabilities (2,011) (865)
Bank loan (10,000) (10,000)
------ ------
Ordinary shareholders funds 29,082 35,998
====== ======
Net asset value per ordinary share 123.49p 152.86p
.
Summarised Group Cash Flow Statement Year to Year to
(unaudited)
31 December 31 December
2003 2002
�'000 �'000
Net cash outflow from operating (732) (833)
activities
Interest / taxation paid (680) (647)
Capital expenditure and financial 61 937
investment
Financing - 4,856
------ ------
(Decrease) / increase in cash (1,351) 4,313
====== ======
*
Notes
1. The results reflect the adoption in the accounts of the 2003 Statement of
Recommended Practice (SORP) issued by the Association of Investment Trust
Companies.
2. Returns per Ordinary Share are based on 23,550,000 ordinary shares in issue
during the year (2002 - 23,677,808). The number of shares in issue at 31
December 2003 was 23,550,000 (2002 - 23,550,000).
3. The above figures do not constitute full group accounts in terms of Section
240 of the Companies Act 1985. The accounts for the year to 31 December 2002,
on which the auditor issued an unqualified report, have been lodged with the
Registrar of Companies. The annual report and accounts will be mailed to
shareholders and will be lodged with the Registrar of Companies during February
2004. Copies will be available for inspection at 7 Castle Street, Edinburgh,
the registered office of the Company.
END
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