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