NEW STAR
INVESTMENT TRUST PLC
HALF YEAR RESULTS
FOR THE SIX MONTHS ENDED 31st DECEMBER
2017
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE
The Company’s objective is to achieve long-term capital growth.
|
31st December 2017
|
30th June
2017 |
%
Change |
PERFORMANCE |
|
|
|
Net assets (£
‘000) |
110,144 |
105,056 |
4.8 |
Net asset value per
Ordinary share |
155.08p |
147.92p |
4.8 |
Mid-market price per
Ordinary share |
110.00p |
105.00p |
4.8 |
Discount of price to
net asset value |
29.1% |
29.0% |
n/a |
|
|
|
|
|
Six
months ended
31st December 2017 |
Six
months ended
31st December 2016 |
|
|
|
|
|
Total Return* |
5.38% |
10.35% |
n/a |
IA Mixed Investment
40-85% Shares (total return) |
4.34% |
10.37% |
n/a |
MSCI AC World Index
(total return, sterling adjusted) |
7.02% |
15.55% |
n/a |
MSCI UK Index (total
return) |
6.79% |
11.52% |
n/a |
|
Six months ended
31st December
2017 |
Six months ended
31st December
2016 |
REVENUE
Return (£’000) |
438 |
495 |
Return per Ordinary
share |
0.61p |
0.70p |
Proposed dividend per
Ordinary share |
- |
- |
Dividend paid per Ordinary
share |
0.80p |
0.30p |
TOTAL RETURN |
|
|
Return
(£’000)
Net assets |
5,656
4.8% |
9,241
10.1% |
Net assets (dividend
added back) |
5.4% |
10.4% |
* The total return figure for the Group represents the revenue and
capital return shown in the consolidated statement of comprehensive
income before dividends paid as a percentage of opening NAV (the
alternative performance measure).
INTERIM REPORT
CHAIRMAN’S STATEMENT
PERFORMANCE
Your Company generated a total return of 5.38% over the six
months to 31st December 2017, leaving
the net asset value (NAV) per ordinary share at 155.08p. By
comparison, the Investment Association’s Mixed Investment 40-85%
Shares Index rose 4.34%. The MSCI AC World Total Return Index
gained 7.02% while the MSCI UK Total Return Index gained 6.79%.
Over the same period, UK government bonds returned 1.63%. Further
information is provided in the investment manager’s report.
Your Company made a revenue profit for the six months of
£438,000 (2016: £495,000).
GEARING AND DIVIDENDS
Your Company has no borrowings. It ended the period under review
with cash representing 11.62% 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 (2016: nil). Your Company paid a dividend of
0.8p per share (2016: 0.3p) in November
2017 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
In March 2018, economic growth
looked healthy and inflation had risen modestly from subdued
levels. Equity market weakness and volatility in January and
February were signs of investor fears that stronger data would lead
to more rapid US interest rate rises. If this occurs, some
investors may switch from equities into cash and short-dated bonds.
Monetary tightening increases the importance of having a strong
valuation discipline. Your Company ended the period with a
relatively low allocation to US equities, which appeared expensive,
in favour of cheaper equities in Europe excluding the UK and emerging markets,
where monetary policy was looser.
Rising inflation may also lead to rotation from high-quality
“growth” companies, which have outperformed since the credit
crisis, into cyclical “value” stocks. Some “growth” companies have
suffered margin pressure as inflation increases costs, which may
not easily be recovered from consumers. Yet their valuations have
remained high and earnings disappointments may generate share price
falls.
Rising inflation and interest rates may also affect bond
markets. Your Company ended the period with no direct investments
in longer-duration bonds or commercial property, which are
typically more sensitive to rising interest rates and inflation.
Diversification was instead maintained through holdings in
dollar-denominated cash, gold equities and lower-risk multi-asset
funds.
NET ASSET VALUE
Your Company’s unaudited NAV at 28th
February 2018 was 153.03p.
Geoffrey Howard-Spink
Chairman
29th March 2018
INVESTMENT MANAGER’S REPORT
MARKET
REVIEW
Global equities gained 7.02% in sterling over the six months to
31 December 2017.
Stronger-than-expected economic growth driven by buoyant
manufacturing and a modest inflation pick-up supported equities. By
contrast, global bonds fell 1.23% in sterling as the Federal
Reserve raised interest rates in December for the fifth time since
2015 and the pound rose 4.14% against the dollar. Sterling bonds
fared better although the Bank of England did raise rates in November for the
first time in more than a decade. UK government bonds and sterling
corporate bonds returned 1.63% and 2.24% respectively during the
period.
US business investment rose and consumer spending and confidence
stayed strong. Against this backdrop, Donald Trump’s tax cuts and
jobs act should stimulate an already strong economy, leading to
higher 2018 economic growth forecasts. Consumers benefit from
rationalised tax brackets, lower business income taxes and changes
to benefits and allowances. These measures should sustain consumer
spending, which may otherwise have faced pressure. The savings
ratio fell to historic lows, reaching 3.2% in January 2018 as investors saved less to maintain
living standards. The corporation tax cut from a 35% maximum to a
flat 21% should encourage companies to invest. The cut lowers the
hurdle return rate for capital spending, increasing the number and
value of viable investment opportunities.
Fiscal stimulus so late in the cycle, with unemployment down at
4.1%, may, however, prove inflationary and generate speedier
interest rate rises. Real wage declines and low productivity have
been hallmarks of the US economy in the wake of the credit crisis.
Some commentators have conjectured that secular trends such as
technological progress and falling unionisation explain workers’
lack of bargaining power. Janet
Yellen, the outgoing Fed chair, believes, however, that low
inflation will prove transitory and that the historically strong
relationship between employment and inflation will persist. In
February 2018, equity markets fell
and volatility rose because US wages increased more than
anticipated. In March 2018, President
Trump fulfilled campaign pledges to protect US heavy industry and
imposed import tariffs on steel and aluminium of 25% and 10%
respectively. Protectionist policies of this nature may also foster
inflation.
The recovery in manufacturing over the period under review was
particularly evident in the eurozone. In December, the
manufacturing purchasing managers’ index, a key leading indicator,
hit its highest level since its 1997 launch. Unemployment fell
while consumer spending and business investment rose. The European
Central Bank (ECB) president, Mario
Draghi, commented on the “solid and broad based growth
momentum” in the region. Wage growth is likely to remain subdued
for some time because, in contrast to the US, there is still
significant excess capacity in the eurozone economy. In
January 2018, eurozone unemployment
was 8.6% against 4.1% in the US. Regional variances were high, with
16.4% unemployment in Spain
compared to 3.6% in Germany. The
ECB has said asset purchases will continue until September 2018 or beyond if necessary.
Some eurozone political risks apparent in early 2017 receded
after Emmanuel Macron’s new centrist En Marche! party won the
French election. Macron’s programme, including about €50 billion of
state spending and lower corporate taxes, should soften the impact
of labour market reforms.
UK equities marginally underperformed, with the stronger pound
proving a headwind. Returns were, however, buoyed by some progress
in the Brexit talks, which moved forward to issues such as trade.
The Bank maintained its ultra-loose monetary policy amid fears of a
damaging “hard” Brexit, merely reversing the emergency
quarter-point cut after the Brexit vote. Unemployment fell to
historic lows and inflation rose to 3.1% in November, more than a
percentage point above the Bank’s 2% target, necessitating an
explanatory letter from the governor to the chancellor. Inflation
moderated, however, to 3.0% in December and January. Stronger
commodity prices and imported inflation driven by sterling’s fall
in 2016 generated higher retail price pressures. Wage growth was
weak but may accelerate in response to near full employment,
minimum wage increases and the removal of the 1% public sector wage
rise cap and the pound may strengthen.
Equities in Asia excluding
Japan and emerging markets posted
strong gains as trade expanded, the dollar weakened and the prices
of some industrial commodities rose significantly. Oil and copper,
for example, gained 23.08% and 16.42% respectively in sterling.
Russian and Chinese equities did particularly well, rising 19.06%
and 18.59% respectively in sterling. Indian equities gained 10.55%
in sterling despite the impact of higher oil prices on this
energy-importing nation. The latest World Bank
ease-of-doing-business survey lifted India 30 places thanks to Narendra Modi’s
reforms. It is now easier to start a company, obtain building
permits and bank loans, trade across regions, enforce contracts and
resolve insolvencies. During the period, Modi announced a
road-building programme and Indian sovereign debt was upgraded.
PORTFOLIO REVIEW
Your Company’s total return over the period under review was 5.38%.
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 4.34%. The MSCI AC World
Total Return Index gained 7.02% in sterling terms while the MSCI UK
Total Return Index rose 6.79%. Your Company benefited from its high
allocation to equity funds during the period but could not keep
pace with the strong gains from equity indices given the
diversified nature of the portfolio, whose holdings include cash in
dollars, gold equities and lower-risk multi-asset funds such as EF
Brompton Global Conservative and Trojan. The weakness of the
dollar, which fell 3.98% against sterling, and a 0.71% fall by
BlackRock Gold & General detracted from performance. These
investments may, however, prove defensive in less buoyant equity
markets.
During the period, profits were taken from a number of holdings
and reinvested in equity income funds, a high-yielding
local-currency emerging market sovereign bond fund and in modest
additional investments in the Embark Group and another private UK
company. The increased bias towards income funds should enhance
your Company’s capacity to pay dividends.
Your Company has a significant investment in funds investing in
equities in Europe excluding the
UK, including FP Crux European Special Situations, its largest
holding. Equities in Europe ex-UK
lagged, rising 3.73% in sterling as the euro strengthened 1.10%
against the pound. FP Crux European Special Situations
outperformed, rising 5.02%. The smaller Standard Life European
Income holding marginally outperformed, rising 3.75%. The
investment in Europe ex-UK
equities increased through the purchase of BlackRock Continental
European Income. Aquilus Inflection, which takes both long and
short positions in European equities, rose 3.71%.
Amongst your Company’s global equity funds, Fundsmith Equity and
Artemis Global Income outperformed, rising 7.61% and 7.16%
respectively. Partial profits were taken in Fundsmith Equity.
Newton Global Income, which is more defensively positioned,
underperformed, rising 2.42%, but Polar Capital Global Technology
gained 11.96% as technology shares outperformed.
Equities in Asia excluding
Japan and emerging markets gained
10.98% and 11.53% respectively in sterling. Your Company benefited
from a significant allocation to these markets although fund
selection detracted from performance. Liontrust Asia Income and
Stewart Investors Indian Subcontinent lagged, rising 8.48% and
8.15% respectively. Wells Fargo China and Neptune Russia &
Greater Russia were sold in
November following strong gains for Chinese and Russian equities
and the proceeds reinvested in the JP Morgan Emerging Markets
Income Trust and the HSBC Russia Capped exchange-traded fund
(ETF).
UK equities marginally underperformed, rising 6.79%, with
sterling’s strength proving a headwind despite some progress in
Brexit negotiations. Man GLG UK Income outperformed, rising 10.30%,
but Trojan Income rose just 0.89%. The Man GLG UK Income manager
has a “value” investment approach, which may generate
outperformance as inflation and interest rates rise. By contrast,
Trojan Income’s manager typically invests in high-quality growth
stocks. Since the credit crisis, “bond proxies” or companies with
dependable business models and strong cash flows have been in
demand because of strong bond markets. Some of these companies
ended the period on high valuations relative to the market and
history. UK smaller companies outperformed larger peers, rising
8.50% and contributing to a 8.07% gain for MI Brompton UK
Recovery.
With interest rates rising, relatively-high US equity valuations
were a concern over the period. In isolation, high valuations may
not precipitate a fall but when fundamental circumstances do,
however, deteriorate, Wall Street may fall substantially before
cheaper valuations support share prices. Your Company began the
period with a relatively low US equity allocation, which reduced
further through the sale of the iShares S&P 500 ETF. The
iShares S&P 500 Financials ETF was, however, retained because
financial companies should benefit from higher long-term interest
rates and President Trump’s deregulation plans. US equities rose
6.99% in sterling and the iShares S&P Financials ETF
outperformed, rising 10.78%.
All six EF Brompton Global funds outperformed their respective
benchmarks over the period under review. EF Brompton Global Equity
did best, rising 7.94%. EF Brompton Global Conservative, up 2.86%,
delivered the lowest return as a result of its low-risk
mandate.
Within your Company’s private equity allocation, one company is
due to make a capital distribution to its shareholders of 500p per
share after the period-end. This will result in a £2.8 million
distribution to your Company. Shares in this long-held investment
were purchased at an average price of 205p and were previously
valued at 225p. Your Company retains its investment in the core
business of this company.
OUTLOOK
In March 2018, global economic
prospects were positive; growth remained steady and inflation had
recovered modestly from subdued levels. Equity market weakness and
increased volatility in January and February were, however,
evidence of investor fears that stronger economic data would lead
to a more rapid tightening of US monetary conditions. After recent
Fed rate rises and reductions in the size of its balance sheet,
further monetary tightening is expected in 2018. President Trump’s
newly signed tax cuts and jobs act should stimulate consumer
spending and business investment but may also encourage Fed policy
makers to tighten monetary conditions more rapidly. There were few
signs in early spring 2018 that monetary policy had become
restrictive. Increasing real interest rates may, however, lead some
investors to sell equities in favour of safer assets such as cash
and short-dated bonds.
The gradual withdrawal of liquidity introduces a greater degree
of moral hazard for investors and increases the importance of
investing in accordance with a strong valuation discipline. Your
Company ended the period with a relatively low allocation to US
equities, which appeared expensive, in favour of equities in
Europe ex-UK and some emerging
markets, where valuations were lower and where monetary policy
remained more accommodative.
The rise in inflation and interest rates may lead to a change in
equity market leadership. High-quality “growth” companies have
outperformed more cyclical “value” stocks since the credit crisis
as investors have sought out companies with strong and relatively
dependable cash flows and dividends. Some of these companies have
been experiencing margin pressure as rising inflation leads to
increased costs, which may not easily be passed on to consumers.
The high valuations of some of these stocks means that any
disappointment in earnings expectations may lead to sharp falls in
share prices.
Rising inflation and interest rates may also lead to falls in
bond markets. Your Company ended the period with no direct
investments in longer-duration bonds or other long-duration assets
such as commercial property, which are typically more sensitive to
increases in longer-term interest rates and inflation expectations.
Diversification was instead maintained through allocations to cash
held in dollars, gold equities and lower-risk multi-asset
funds.
Brompton Asset Management LLP
29th March 2018
DIRECTORS’ REPORT
PERFORMANCE
In the six months to 31st December
2017 the total return per Ordinary share increased by 5.4%
and the NAV increased to 155.08p, whilst the share price
increased by 4.8% to 110.00p. This compares to an increase of 4.3%
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 (2016: 71,023,695) have been
issued and fully paid. No Ordinary shares are held in
treasury, and none were bought back or issued during the six months
to 31st December 2017.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks identified by the Board, and the steps the
Board takes to mitigate them, are as follows:
Investment strategy: Inappropriate long-term strategy,
asset allocation and manager selection could lead to
underperformance. The Board discusses investment performance
at each of its meetings and the Directors receive reports detailing
asset allocation, investment selection and performance.
Business conditions and general economy: The Company’s
future performance is heavily dependent on the performance of
different equity and currency markets. The Board cannot mitigate
the risks arising from adverse market movements. However,
diversification within the portfolio will reduce the impact.
Further information is given in portfolio risks below.
Portfolio risks - market price, foreign currency and interest
rate risks: Investment returns will be influenced by interest
rates, inflation, investor sentiment, availability/cost of credit
and general economic conditions in the UK and globally. A
proportion of the portfolio is in investments denominated in
foreign currencies and movements in exchange rates could
significantly affect their sterling value. The Investment
Manager takes all these factors into account when making investment
decisions but the Company does not normally hedge against foreign
currency movements. The Board’s policy is to hold a spread of
investments in order to reduce the impact of the risks arising from
the above factors by investing in a spread of asset classes and
geographic regions.
Net asset value discount: The discount in the price at
which the Company’s shares trade to net asset value means that
shareholders cannot realise the real underlying value of their
investment. 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 of key staff could adversely affect
returns. A representative of the Investment Manager attends each
Board meeting and the Board is informed if any changes to the
investment team employed by the Investment Manager are
proposed.
Tax and regulatory risks: A breach of The Investment
Trust (Approved Company) (Tax) Regulations 2011 (the ‘Regulations’)
could lead to capital gains realised within the portfolio becoming
subject to UK capital gains tax. A breach of the UKLA Listing Rules
could result in suspension of the Company’s shares, while a breach
of company law could lead to criminal proceedings, financial and/or
reputational damage. The Board employs Brompton Asset Management
LLP as Investment Manager, and Maitland Administration Services
Limited as Secretary and Administrator, to help manage the
Company’s legal and regulatory obligations.
Operational: disruption to, or failure of, the Investment
Manager’s or Administrator’s accounting, dealing or payment systems
or the Custodian’s 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 five
years. Five years is considered a reasonable time for
investors when making their investment decisions. In reaching
this view the Directors reviewed the anticipated level of annual
expenditure against the cash and liquid assets within the
portfolio. The Directors have also considered the risks the
Company faces.
AUDITORS
The half year financial report has been reviewed, but not audited,
by Ernst & Young LLP pursuant to the Auditing Practices Board
guidance on the Review of Interim Financial Information.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
- The financial statements contained within the half year
financial report to 31st December
2017 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
29th March 2018
SCHEDULE OF TOP TWENTY INVESTMENTS at 31st December 2017
Holding |
Activity |
Bid-market value
£ ‘000 |
% of
Net Assets |
FP Crux European Special Situations
Fund |
Investment Fund |
11,466 |
10.41 |
Newton Global Income Fund |
Investment Fund |
5,560 |
5.05 |
Fundsmith Equity Fund |
Investment Fund |
4,850 |
4.40 |
Aberforth Split Level Income
Trust |
Investment Company |
4,800 |
4.36 |
Polar Capital Global Technology
Fund |
Investment Fund |
4,758 |
4.32 |
EF Brompton Global Conservative
Fund |
Investment Fund |
4,129 |
3.75 |
Artemis Global Income Fund |
Investment Fund |
4,101 |
3.72 |
BlackRock Continental European
Income Fund |
Investment Fund |
3,929 |
3.57 |
Aquilus Inflection Fund |
Investment Fund |
3,527 |
3.20 |
Embark Group |
Unquoted investment |
3,268 |
2.97 |
BlackRock Gold & General
Fund |
Investment Fund |
3,200 |
2.91 |
Liontrust Asia Income Fund |
Investment Fund |
2,935 |
2.66 |
Man GLG UK Income Fund |
Investment Fund |
2,906 |
2.64 |
Lindsell Train Japanese Equity
Fund |
Investment Fund |
2,886 |
2.62 |
All Star Leisure |
Unquoted investment |
2,843 |
2.58 |
EF Brompton Global Opportunities
Fund |
Investment Fund |
2,833 |
2.57 |
EF Brompton Global Equity Fund |
Investment Fund |
2,707 |
2.46 |
MI Brompton UK Recovery Unit
Trust |
Investment Fund |
2,698 |
2.45 |
EF Brompton Global Growth Fund |
Investment Fund |
2,667 |
2.42 |
Stewart Investors Indian
Subcontinent Fund |
Investment Fund |
2,634 |
2.39 |
|
|
78,697 |
71.45 |
Balance held in 19 investments |
|
18,748 |
17.02 |
Total investments (excluding
cash)
Net current assets (including cash)
Net Assets |
|
97,445
12,699
110,144 |
88.47
11.53
100.00 |
The investment portfolio
can be further analysed as follows: |
cash |
|
£’000 |
|
Investment funds |
80,729 |
|
Investment companies and ETFs
Unquoted investments, including loans of £250,000
Other quoted investments |
9,475
6,550
691 |
|
The Company’s investments are either unlisted or are unit
trust/OEIC funds with the exception of Aberforth Split Level Income
Trust, JP Morgan Emerging Markets Income Trust, Miton Group,
Immedia Group, iShares S&P 500 Financials Sector UCITS and HSBC
MSCI Russia Capped UCITS ETF. |
97,445 |
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the
six months ended 31st December
2017 (unaudited)
|
|
Six
months ended
31st December 2017
(unaudited) |
|
Notes |
Revenue Return
£ ‘000 |
Capital Return
£ ‘000 |
Total
Return
£ ‘000 |
INCOME |
|
|
|
|
Investment income |
|
856 |
- |
856 |
Other operating income |
|
37 |
- |
37 |
Total income |
2 |
893 |
- |
893 |
GAINS AND LOSSES ON
INVESTMENTS |
|
|
|
|
Gains on investments at fair value
through profit or loss |
5 |
- |
5,601 |
5,601 |
Other exchange (losses)/gains |
|
- |
(386) |
(386) |
Trail rebates |
|
- |
3 |
3 |
|
|
893 |
5,218 |
6,111 |
EXPENSES |
|
|
|
|
Management fees |
3 |
(331) |
- |
(331) |
Other expenses |
|
(122) |
- |
(122) |
|
|
(453) |
- |
(453) |
PROFIT BEFORE FINANCE COSTS AND
TAX |
|
440 |
5,218 |
5,658 |
Finance costs |
|
- |
- |
- |
PROFIT BEFORE TAX |
|
440 |
5,218 |
5,658 |
Tax |
|
(2) |
- |
(2) |
PROFIT FOR THE PERIOD |
|
438 |
5,218 |
5,656 |
EARNINGS PER SHARE |
|
|
|
|
Ordinary shares (pence) |
4 |
0.61p |
7.35p |
7.96p |
The total return column of this statement represents the Group’s
profit and loss account, prepared in accordance with IFRS. The
supplementary Revenue Return and Capital Return columns are both
prepared under guidance published by the Association of Investment
Companies. All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the
period.
All income is attributable to the equity holders of the parent
company. There are no minority interests.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31st December
2016 and the year ended 30th June
2017
|
|
Six months ended
31st December 2016
(unaudited) |
Year ended
30th June 2017
(audited) |
|
Notes |
Revenue
Return
£’000 |
Capital
Return
£’000 |
Total
Return
£’000 |
Revenue
Return
£’000 |
Capital
Return
£’000 |
Total
Return
£’000 |
INCOME |
|
|
|
|
|
|
|
Investment income |
|
942 |
- |
942 |
1,686 |
- |
1,686 |
Other operating
income |
|
9 |
- |
9 |
29 |
- |
29 |
Total income |
2 |
951 |
- |
951 |
1,715 |
- |
1,715 |
|
|
|
|
|
|
|
|
GAINS AND LOSSES ON
INVESTMENTS |
|
|
|
|
|
|
|
Gains on investments
at fair value through profit or loss |
5 |
- |
7,899 |
7,899 |
- |
14,814 |
14,814 |
Other exchange
(losses)/gains |
|
- |
845 |
845 |
- |
367 |
367 |
Trail rebates |
|
- |
2 |
2 |
- |
4 |
4 |
|
|
951 |
8,746 |
9,697 |
1,715 |
15,185 |
16,900 |
EXPENSES |
|
|
|
|
|
|
|
Management fees |
3 |
(300) |
- |
(300) |
(622) |
- |
(622) |
Other expenses |
|
(150) |
- |
(150) |
(276) |
- |
(276) |
|
|
(450) |
- |
(450) |
(898) |
- |
(898) |
PROFIT BEFORE
FINANCE COSTS AND TAX |
|
501 |
8,746 |
9,247 |
817 |
15,185 |
16,002 |
Finance costs |
|
- |
- |
- |
- |
- |
- |
PROFIT BEFORE
TAX |
|
501 |
8,746 |
9,247 |
817 |
15,185 |
16,002 |
Tax |
|
(6) |
- |
(6) |
(7) |
- |
(7) |
PROFIT FOR THE
PERIOD |
|
495 |
8,746 |
9,241 |
810 |
15,185 |
15,995 |
EARNINGS PER
SHARE |
|
|
|
|
|
|
|
Ordinary shares
(pence) |
4 |
0.70p |
12.31p |
13.01p |
1.14p |
21.38p |
22.52p |
The total return column of this statement represents the Group’s
profit and loss account, prepared in accordance with IFRS. The
supplementary Revenue Return and Capital Return columns are both
prepared under guidance published by the Association of Investment
Companies. All items in the above statement derive from continuing
operations. No operations were acquired or discontinued during the
periods.
All income is attributable to the equity holders of the parent
company. There are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the
six months ended 31st December
2017 (unaudited)
|
Share
capital
£ ‘000 |
Share premium
£ ‘000 |
Special reserve
£ ‘000 |
Retained earnings
£ ‘000 |
Total
£ ‘000 |
|
|
|
|
|
|
At 30th JUNE 2017 |
710 |
21,573 |
56,908 |
25,865 |
105,056 |
Total comprehensive income for the
period |
- |
- |
- |
5,656 |
5,656 |
Dividend paid |
- |
- |
- |
(568) |
(568) |
At 31st DECEMBER 2017 |
710 |
21,573 |
56,908 |
30,953 |
110,144 |
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
year ended 30th June 2017
(audited)
|
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
year |
- |
- |
- |
15,995 |
15,995 |
Dividend paid |
- |
- |
- |
(213) |
(213) |
At 30th JUNE 2017 |
710 |
21,573 |
56,908 |
25,865 |
105,056 |
CONSOLIDATED BALANCE SHEET at 31st December 2017
|
Notes |
31st December
2017
(unaudited)
£ ‘000 |
31st December
2016
(unaudited)
£ ‘000 |
30th June
2017
(audited)
£ ‘000 |
NON-CURRENT ASSETS |
|
|
|
|
Investments at fair value through
profit or loss |
5 |
97,445 |
83,892 |
91,730 |
CURRENT ASSETS |
|
|
|
|
Other receivables |
|
103 |
25 |
85 |
Cash and cash equivalents |
|
12,804 |
14,580 |
13,451 |
|
|
12,907 |
14,605 |
13,536 |
TOTAL ASSETS |
|
110,352 |
98,497 |
105,266 |
CURRENT LIABILITIES |
|
|
|
|
Other payables |
|
(208) |
(195) |
(210) |
TOTAL ASSETS LESS CURRENT
LIABILITIES |
|
110,144 |
98,302 |
105,056 |
NET ASSETS |
|
110,144 |
98,302 |
105,056 |
|
|
|
|
|
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 |
30,953 |
19,111 |
25,865 |
|
|
|
|
|
TOTAL EQUITY |
|
110,144 |
98,302 |
105,056 |
|
|
|
|
|
NET ASSET VALUE PER ORDINARY
SHARE (PENCE) |
7 |
155.08p |
138.41p |
147.92p |
CONSOLIDATED CASH FLOW STATEMENT for the six months
ended 31st December 2017
|
Six months
ended
31st December
2017
(unaudited)
£ ‘000 |
Six months
ended
31st December
2016
(unaudited)
£ ‘000 |
Year
ended
30th June
2017
(audited)
£ ‘000 |
NET CASH INFLOW FROM OPERATING
ACTIVITIES |
421 |
536 |
808 |
INVESTING ACTIVITIES |
|
|
|
Purchase of
investments |
(9,516) |
(5,577) |
(6,500) |
Sale of
investments |
9,402 |
9,051 |
9,051 |
NET
CASH (OUTFLOW)/ INFLOW FROM INVESTING ACTIVITIES
FINANCING |
(114) |
3,474 |
2,551 |
Equity dividend paid |
(568) |
(213) |
(213) |
NET CASH (OUTFLOW)/
INFLOW AFTER FINANCING |
(261) |
3,797 |
3,146 |
(DECREASE)/INCREASE IN
CASH |
(261) |
3,797 |
3,146 |
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET FUNDS |
|
|
|
(Decrease)/ increase in cash
resulting from cash flows |
(261) |
3,797 |
3,146 |
Exchange movements |
(386) |
845 |
367 |
Movement in net funds |
(647) |
4,642 |
3,513 |
Net funds at start of
period/year |
13,451 |
9,938 |
9,938 |
NET FUNDS AT END OF
PERIOD/YEAR |
12,804 |
14,580 |
13,451 |
RECONCILIATION OF PROFIT BEFORE
FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING
ACTIVITIES |
|
|
|
Profit before finance costs and
taxation * |
5,658 |
9,247 |
16,002 |
Gains on investments |
(5,601) |
(7,899) |
(14,814) |
Exchange differences |
386 |
(845) |
(367) |
Management fee rebates |
(3) |
(2) |
(4) |
Revenue profit before finance costs
and taxation |
440 |
501 |
817 |
(Increase)/decrease in debtors |
(7) |
37 |
(18) |
(Decrease)/increase in
creditors |
(2) |
9 |
24 |
Taxation |
(13) |
(13) |
(19) |
Management fee rebates |
3 |
2 |
4 |
NET CASH INFLOW FROM OPERATING
ACTIVITIES |
421 |
536 |
808 |
* Includes dividends received in cash of £542,000 (2016:
£646,000), accumulation income of £335,000 (2016: £296,000) and
interest income of £30,000 (2016: £9,000)
NOTES TO THE INTERIM FINANCIAL STATEMENTS for the six
months ended 31st December
2017
1. ACCOUNTING POLICIES
The condensed consolidated interim financial statements comprise
the unaudited results of the Company and its subsidiary, JIT
Securities Limited (together “the Group”), for the six months to
31st December 2017. The
comparative information for the six months to 31st December 2016 and the year to 30th June 2017 are a condensed set of accounts
and do not constitute statutory accounts under the Companies Act
2006. Full statutory accounts for the year to 30th June 2017 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 2017, 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 2017
£’000 |
Six
months ended 31st December 2016
£’000 |
Year
ended 30th June
2017
£’000 |
Income from
Investments |
|
|
|
UK net dividend
income |
765 |
847 |
1,540 |
Unfranked investment
income |
91 |
95 |
146 |
|
856 |
942 |
1,686 |
Other
Income |
|
|
|
Bank interest
receivable |
31 |
9 |
28 |
Loan interest
income |
6 |
- |
1 |
|
37 |
9 |
29 |
|
|
|
|
Total income
comprises |
|
|
|
Dividends |
856 |
942 |
1,686 |
Other income |
37 |
9 |
29 |
|
893 |
951 |
1,715 |
3. MANAGEMENT FEES
|
Six
months ended 31st December 2017
£’000 |
Six
months ended 31st December 2016
£’000 |
Year
ended 30th June
2017
£’000 |
Investment management
fee |
331 |
300 |
622 |
Performance fee |
- |
- |
- |
|
331 |
300 |
622 |
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 2017
£’000 |
Six
months ended 31st December 2016
£’000 |
Year
ended 30th June
2017
£’000 |
|
|
|
|
Revenue return |
438 |
495 |
810 |
Capital return |
5,218 |
8,746 |
15,185 |
Total return |
5,656 |
9,241 |
15,995 |
|
|
|
|
Weighted average
number of Ordinary shares |
71,023,695 |
71,023,695 |
71,023,695 |
|
|
|
|
Revenue return per
Ordinary share |
0.61p |
0.70p |
1.14p |
Capital return per
Ordinary share (before dividend) |
7.35p |
12.31p |
21.38p |
Total return per
Ordinary share (before dividend) |
7.96p |
13.01p |
22.52p |
5. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND
LOSS
|
At
31st December 2017
£’000 |
At
31st December 2016
£’000 |
At
30th June
2017
£’000 |
|
|
|
|
GROUP AND
COMPANY |
97,445 |
83,892 |
91,730 |
|
|
|
|
ANALYSIS OF
INVESTMENT |
|
|
|
PORTFOLIO – GROUP
AND COMPANY |
|
|
|
Six months ended
31st December 2017 |
|
|
|
|
Listed*
(level 1 and 2)
£’000 |
Unlisted**
(level 3)
£’000 |
Total
£’000 |
Opening book cost |
55,791 |
7,555 |
63,346 |
Opening investment
holding gains/(losses) |
31,129 |
(2,745) |
28,384 |
Opening valuation |
86,920 |
4,810 |
91,730 |
Movement in
period: |
|
|
|
Purchase at cost |
9,365 |
151 |
9,516 |
Sales |
|
|
|
- Proceeds |
(9,402) |
- |
(9,402) |
- Realised gains on
sales |
4,447 |
- |
4,447 |
Movement in investment
holding gains/(losses) |
(435) |
1,589 |
1,154 |
Closing valuation as
at 31 December 2017 |
90,895 |
6,550 |
97,445 |
Closing
book cost |
60,201 |
7,706 |
67,907 |
Closing investment
holding gains/(losses) |
30,694 |
(1,156) |
29,538 |
Closing valuation |
90,895 |
6,550 |
97,445 |
* Listed investments include unit trust and OEIC funds which are
valued at quoted prices. Included within Listed Investments is one
monthly valued level 2 investment of £3,527,000 (2016:
£3,117,000).
** The Unlisted investments, representing approximately 6% of
the Company’s NAV, have been valued in accordance with IPEVC
valuation guidelines. The largest unquoted investment amounting to
£3,268,000 (2016: £2,400,000) was valued at the latest transaction
price. The second largest investment has been valued based on the
expected capital distribution.
There were no reclassifications for assets between Level 1, 2
and 3.
|
Six
months ended
31st December 2017
£’000 |
Six
months ended
31st December 2016
£’000 |
Year
ended
30th June
2017
£’000 |
ANALYSIS OF CAPITAL
GAINS AND LOSSES |
|
|
|
Realised gains on
sales of investments |
4,447 |
2,739 |
2,739 |
Increase in investment
holding gains |
1,154 |
5,160 |
12,075 |
|
5,601 |
7,899 |
14,814 |
6. RETAINED EARNINGS
|
At
31st December 2017
£’000 |
At
31st December 2016
£’000 |
At
30th June
2017
£’000 |
Capital reserve -
realised |
925 |
(3,046) |
(3,522) |
Capital reserve –
revaluation* |
29,155 |
21,469 |
28,384 |
Revenue reserve |
873 |
688 |
1,003 |
|
30,953 |
19,111 |
25,865 |
* The Capital reserve-revaluation includes unrealised currency
(losses)/gains of £(383,000), £847,000 and £371,000
respectively.
7. NET ASSET VALUE PER ORDINARY SHARE
|
31st
December 2017
£’000 |
31st
December 2016
£’000 |
30th
June
2017
£’000 |
Net
assets attributable to Ordinary shareholders |
110,144 |
98,302 |
105,056 |
Ordinary
shares in issue at end of period |
71,023,695 |
71,023,695 |
71,023,695 |
Net asset value per
Ordinary share |
155.08p |
138.41p |
147.92p |
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 2017
was £331,000 (2016: £300,000) and at the half year end £167,000
(2016: £151,000) was accrued. No performance fee was payable in
respect of the half year ended 31st December
2017 (2016: £nil).
The Group’s investments include seven funds managed by Brompton
or its associates valued at £19,501,000 (2016: £17,828,000).
No investment management fees were payable directly by the Company
in respect of these investments.