Source - PRN

NEW STAR INVESTMENT TRUST PLC

This announcement constitutes regulated information.

UNAUDITED RESULTS

FOR THE YEAR ENDED 30TH JUNE 2016

New Star Investment Trust plc (the ‘Company’), whose objective is to achieve long-term capital growth, announces its consolidated results for the year ended 30th June 2016.

FINANCIAL HIGHLIGHTS

30th June
2016
30th June
2015
%
Change
PERFORMANCE
Net assets (£ ‘000) 89,274 79,854 11.80
Net asset value per Ordinary share 125.70p 112.43p 11.80
Mid-market price per Ordinary share 76.00p 73.50p 3.40
Discount of price to net asset value 39.5% 34.6% n/a
Total Return 12.1% 4.8% n/a
IA Mixed Investment 40% - 85% Shares (total return) 2.2% 6.7% n/a
MSCI AC World Index (total return, sterling adjusted) 13.9% 10.1% n/a
MSCI UK Index (total return) 3.4% -0.2% n/a

   

1st July 2015 to
30th June 2016
1st July 2014 to
30th June 2015
REVENUE RETURN
Return per Ordinary share 0.27p 0.49p
Proposed Dividend per Ordinary Share 0.30p 0.30p
Dividend paid per Ordinary share 0.30p -

CAPITAL RETURN
Return per Ordinary Share

TOTAL RETURN
13.29p

12.1%
4.62p

4.8%

CHAIRMAN’S STATEMENT

PERFORMANCE

Your Company’s Total Return was 12.06% for the year to 30th June 2016. This took the year-end Net Asset Value (‘NAV’) per ordinary share to 125.70p. By comparison, the Investment Association’s Mixed Investment 40-85% Shares index gained 2.20%. Your Directors believe this benchmark is appropriate because your Company has, since inception, been invested in a broad range of asset classes. Equity markets generated positive returns, with overseas performance enhanced in sterling terms as a result of the pound’s fall against other major currencies. The MSCI AC World Total Return and MSCI UK Total Return Indices gained 13.92% and 3.43% respectively while UK government bonds returned 13.50%. Further information is provided in the investment manager’s report.

EARNINGS AND DIVIDEND

The revenue return for the year was 0.27p per share (2015: 0.49p).

Your Company has a small revenue surplus in its retained revenue reserve, which will enable it to pay a dividend. Your Directors recommend the payment of a final dividend in respect of the year of 0.3p per share (2015: 0.3p).

OUTLOOK

The shift in monetary conditions since early 2016 should be positive for equities and bonds. Emerging market assets, in particular equities, may recover further given their low relative valuations. Improvements in developing economies’ trade balances may also underpin recoveries in their currencies, particularly against sterling, which could weaken further if Brexit talks prove difficult. Your Company has maintained a significant allocation to these investments. Over the coming months, the US presidential election and the start of UK “Brexit” negotiations will influence market returns. Your Company’s investments in cash, lower-risk assets and gold equities should provide some diversification and prove defensive during periods of market stress. Central banks in aggregate, however, continue to pursue supportive monetary policies while the pace of interest rate rises by the US Federal Reserve is likely to be slow.

CASH AND BORROWINGS

Your Company has no borrowings and ended its financial year with cash representing 11.13% (2015: 14.89%) of its net asset value. Your Company is likely to maintain a significant cash position.

The Company is a small registered Alternative Investment Fund Manager under the European Union directive. The Company’s assets now exceed 100 million euros. As a result, should it wish to borrow it would require a change in regulatory permissions.

DISCOUNT

Your Company’s shares continued to trade at a significant discount to their NAV during the year under review. Your Directors have discussed various options with a view to reducing this discount but no satisfactory solution has yet been found. This position is, however, kept under continual review by the board.

Annual meeting

The annual general meeting will be held at 1 Knightsbridge Green, London SW1X 7QA on Thursday, 3rd November 2016 at 11am.

Net asset value

Your Company’s unaudited net asset value per share at 31st August 2016 was 134.45p.

INVESTMENT MANAGER’S REPORT

MARKET REVIEW

In December 2015, US Federal Reserve members voted unanimously to raise interest rates for the first time since 2007. After seven years of exceptional measures, members considered a change in monetary policy to be justified because unemployment had halved from its post credit crisis peak of 10% in October 2009 to 5% six years later in October 2015 and the US economy had continued to expand steadily. Inflation, however, remained below the Fed’s 2% target but its chair, Janet Yellen, considered this to be a “transitory” consequence of the sharp oil price fall. Members recognised that there were “downside risks” to the US economy from global economic and financial developments but these were ultimately considered to be “balanced” by the stronger domestic picture.

In raising rates, Fed members acted in the interests of the US economy but one of the broader consequences of this widely-anticipated monetary policy shift is a stronger dollar. Unfortunately, the dollar’s strength exacerbated some of those global risks recognised by the Fed. Global equity markets seemingly took December’s interest rate rise in their stride but fell sharply in the early days of 2016. The close link between the dollar and the Chinese currency in recent years has resulted in a strong renminbi at a time when Chinese economic growth has been slowing and has led to a substantial reduction in China’s export competitiveness. Chinese policy makers responded without warning in August 2015 and January 2016 by allowing the renminbi to depreciate against the dollar. These episodes of Chinese currency weakness coincided with falling oil prices and sparked fears of global deflation.

At the time of the US interest rate rise, many commentators expected a succession of rises during 2016. The fall in equity markets and corresponding increase in market volatility in January was, however, succeeded by weaker-than-anticipated economic data, raising concerns that economic growth could falter. In the light of these events, the Fed did not tighten monetary policy further during the second half of your Company’s financial year. The looming UK referendum on European Union (EU) membership may also have caused the Fed to stay its hand. In September 2016, however, a further interest rate rise in late 2016 was expected.

In June, pollsters, bookmakers and investors were wrong-footed when the UK electorate voted to leave the EU. Some 51.9% of those who voted chose Brexit, leaving 48.1% facing an outcome they had not endorsed. Importantly, a majority of voters in Scotland and Northern Ireland voted to remain, potentially sowing the seeds of another testing time for the union. The high turnout on polling day was testament to the strength of opinion across the country as practical consideration of the pros and cons of EU membership were swept up with issues related to globalisation and national identity.

Predictions that a Brexit vote would precipitate sustained falls in risky asset prices proved unfounded as global equities emerged from post-referendum turbulence to post gains of 13.92% in sterling terms during your Company’s financial year. The gains were fuelled by sterling weakness as the pound fell. This proved a “silver lining” for UK equities, which recovered from initial falls to gain 3.43% over the year because sterling-weakness improved export competitiveness and increased the value of overseas profits in sterling terms and may even

offset the impact of any future trade tariffs. The rally in global equities extended beyond your Company’s year- end, with US shares reaching record highs in August.

Interest rate expectations adjusted swiftly following the surprise Brexit vote as the prospect of monetary tightening receded. Weak May US employment data and downward revisions to data for the two preceding months had already pushed bond yields lower. UK gilts gained 13.50% over the year as yields hit historic lows. The Bank of England signalled after the Brexit vote that it would increase its support for the economy. In August, after your Company’s year end, the Bank’s Monetary Policy Committee cut the bank rate for the first time since 2009, reducing it from 0.5% to 0.25%. Renewed quantitative easing and measures to encourage bank lending were also announced and interest rates may be reduced further if the economy worsens.

Even after recovering from its low in February, the oil price still finished the year down 30.89%. The weak oil price is a consequence of over-supply following Saudi Arabia’s decision to maintain market share in the face of increased competition from US shale producers. In the last months of your Company’s year, the cumulative decline in US oil output brought supply and demand closer to equilibrium. Financial distress among US shale producers may also have convinced Saudi Arabia and other Opec countries that higher oil prices would not immediately lead to a recovery in US output. The recent recoveries in prices for oil and other commodities, the receding prospect of US interest rate rises and some respite from dollar strength contributed to rises in emerging market equities. Equities in Asia excluding Japan and emerging markets underperformed global equities during the year but by early September 2016 they had risen significantly from their values at your Company’s year- end.

PORTFOLIO REVIEW

During the year under review, New Star Investment Trust’s Total Return was 12.06%. Your Company ended the year with significant investments in cash and gold securities although the majority of its assets were in global equities. 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 equities in the 40-85% range, rose 2.20%. The MSCI AC World Total Return Index gained 13.92% in sterling and the MSCI UK Total Return Index gained 3.43% in sterling. Global equities outperformed UK peers in sterling terms primarily because most major currencies strengthened against sterling. Gilts also rose strongly, returning 13.50% as yields fell to historic lows. Your Company had no direct investments in bonds because they appeared expensive but this did not negatively affect performance because of the high allocation to global equities, which generated a similar return.

The strong gains made by many currencies relative to sterling contributed significantly to your Company’s overall performance. As a result of global diversification across asset classes, a majority of your company’s assets were held in investments denominated in foreign currencies. The dollar, euro and yen, for example, strengthened 17.65%, 17.30% and 40.32% respectively against the pound during the year. In consequence, the decision to invest your Company’s cash in dollars was a major positive contributor to overall returns.

Your Company invests principally through actively-managed funds. The managers of your company’s two largest investments, FP Crux European Special Situations and Fundsmith Equity, outperformed strongly. FP Crux European Special Situations rose 14.35% while Europe ex-UK equities gained 5.84% in sterling. Fundsmith Equity gained 33.56% while global equities rose 13.92% in sterling. Lindsell Train Japanese Equity also generated significant outperformance, rising 29.89% while Japanese equities gained 9.5% in sterling. All three managers have well-defined approaches to stock selection and remain committed to their core holdings for long periods of time.

Your Company’s investments in income-focused funds increased over the year. In November 2015, Artemis Global Income, Newton Global Income and Man GLG UK Income were added. In January 2016, Trojan Income was added and the Liontrust Asia Income and Newton Global Income holdings were increased. These additions contributed to your Company’s ability to pay a maintained dividend to shareholders for the year. The reduction in US interest rate expectations during the second half of the year led to good returns from high-yielding assets as a result of demand from income-seeking investors. These purchases were funded through sales of lower-yielding investments including sales of Artemis UK Special Situations, the iShares FTSE 250 exchange-traded fund (ETF), the BH Global investment trust, the Gold Bullion Securities ETF and Aberdeen Asia Pacific and a reduction in the holding in Trojan.

Gold also benefited from investors’ growing convictions that the pace of future US interest rate rises would be slower than anticipated, rising 32.06% in sterling. The opportunity cost of holding this nil-yielding asset is lower when interest rates are low. Gold-mining stocks did even better because most of their costs are fixed so the impact on their earnings of a gold price change is magnified. In consequence, Blackrock Gold & General was the portfolio’s best performer, gaining 76.27%.

The EU referendum result proved particularly challenging for UK commercial property. The prospects for City of London offices are now uncertain as London could be rendered less attractive as a financial centre by an unfavourable Brexit settlement with the EU. In consequence, some UK property funds suspended dealings or imposed significant dilution levies on transactions to reflect the difficulty of selling illiquid assets at short notice. Your Company was not affected by these developments because it had no direct investments in UK property funds during the year.

UK equities gained 3.43% during the year as sterling’s fall increased the competitiveness of exporters. UK smaller companies typically have a lower proportion of export sales than larger peers and consequently underperformed, falling 6.58%. This adversely impacted MI Brompton UK Recovery and Aberforth Geared Income, which fell 5.64% and 4.85% respectively.

Global consumers benefited from increased disposable incomes as a result of the weaker oil price, down 30.89% in sterling during the year. Fundsmith Equity’s concentrated portfolio of consumer-orientated businesses with strong brand franchises captured this trend. Oil importing countries such as India also benefited from low oil prices. This trend and the reforms of Narendra Modi, the prime minister, led to a 14.75% gain for First State Indian Subcontinent.

Emerging markets generally underperformed during the year although they recovered strongly in the weeks after the year end. Asia ex-Japan and emerging market equities both gained 3.86% in sterling during the year. Wells Fargo China fell 6.71%, however, as investors remained cautious following China’s currency devaluations in August 2015 and January 2016, which led to sharp falls in Chinese equities.

The six FP Brompton multi-asset funds all delivered positive returns during the year and outperformed their respective benchmarks.

OUTLOOK

The shift in monetary conditions that occurred in early 2016 should be positive for equities and bonds. Emerging market assets, in particular equities, may recover further given their low relative valuations. Improvements in the current account balances of many developing economies may also underpin recoveries in their currencies, particularly against sterling, which could weaken further if Brexit talks prove difficult. There is also further capacity for monetary easing, with India likely to cut interest rates if food inflation eases following the monsoon season. Your Company has maintained a significant allocation to these investments.

Over the coming months, unpredictable political events such as the US presidential election and the start of UK “Brexit” negotiations will influence market returns. Your Company’s investments in cash, gold equities and the FP Brompton Global Conservative Fund should provide some diversification and prove defensive at times of stress in markets. Central banks in aggregate continue to pursue highly-supportive monetary policies and although the Fed is expected to raise rates further the rate of increase is likely to be slow.

SCHEDULE OF TWENTY LARGEST INVESTMENTS

30th June 2016
Holding Activity Bid-market value
£ ‘000
Percentage of invested portfolio
FP Crux European Special Situations Fund Investment Fund 9,803 12.34
Fundsmith Equity Fund Investment Fund 8,106 10.20
Newton Global Income Fund Investment Fund 6,417 8.07
Blackrock Gold & General Fund Investment Fund 4,796 6.04
FP Brompton Global Conservative Fund Investment Fund 3,669 4.62
Aberforth Geared Income Trust Investment Company 3,361 4.23
Artemis Global Income Fund Investment Fund 3,254 4.09
First State Indian Subcontinent Fund Investment Fund 2,904 3.65
Polar Capital Global Technology Fund Investment Fund 2,868 3.61
Aquilus Inflection Fund Investment Fund 2,779 3.50
Liontrust Asia Income Fund Investment Trust 2,338 2.94
Trojan Income Fund Investment Fund 2,286 2.88
FP Brompton Global Opportunities Fund Investment Fund 2,259 2.84
Lindsell Train Japanese Equity Fund Investment Fund 2,170 2.73
Man GLG UK Income Fund Investment Fund 2,163 2.72
Neptune Russia & Greater Russia Fund Investment Fund 2,162 2.72
FP Brompton Global Growth Fund Investment Fund 2,158 2.72
FP Brompton Global Equity Fund Investment Fund 2,044 2.57
FP Brompton Global Income Fund Investment Fund 2,015 2.54
MI Brompton UK Recovery Unit Trust Investment Fund 1,958 2.46
69,510 87.47
Balance held in 16 investments 9,957 12.53
Total investments 79,467 100.00

   

The investment portfolio can be further analysed as follows:
£ ‘000
Investment funds 74,085
Investment companies and ETFs 3,361
Other quoted investments 441
Unquoted investments 1,580
79,467

SCHEDULE OF TWENTY LARGEST INVESTMENTS

30th June 2015
Holding Activity Bid-market value
£ ‘000
Percentage of invested portfolio
FP Crux European Special Situations Fund Investment Fund 8,573 12.59
Fundsmith Equity Fund Investment Fund 6,069 8.91
Artemis UK Special Situations Fund Investment Fund 4,102 6.02
Aberforth Geared Income Trust Investment Company 3,722 5.47
FP Brompton Global Conservative Fund Investment Fund 3,515 5.16
Trojan Investment Fund Investment Fund 3,150 4.63
BlackRock Gold & General Fund Investment Fund 2,710 3.98
Aquilus Inflection Fund Investment Fund 2,586 3.80
First State Indian Subcontinent Fund Investment Fund 2,514 3.69
Polar Capital Global Technology Fund Investment Fund 2,409 3.54
FP Brompton Global Opportunities Fund Investment Fund 2,130 3.13
FP Brompton Global Growth Fund Investment Fund 2,090 3.07
PFS Brompton UK Recovery Unit Trust Investment Fund 2,075 3.05
FF Brompton Global Income Fund Investment Fund 1,981 2.91
Gold Bullion Securities ETF Exchange Traded Fund 1,975 2.90
FP Brompton Global Equity Fund Investment Fund 1,870 2.75
Neptune Russia & Greater Russia Fund Investment Fund 1,849 2.72
FP Brompton Global Balanced Fund Investment Fund 1,764 2.59
Schroder European Alpha Income Fund Investment Fund 1,716 2.52
Lindsell Train Japanese Equity Fund Investment Fund 1,693 2.49
58,493 85.92
Balance held in 14 investments 9,593 14.08
Total investments 68,086 100.00

   

The investment portfolio can be further analysed as follows:
£ ‘000
Investment funds 57,726
Investment companies and ETFs 8,170
Other quoted investments 627
Unquoted investments 1,563
68,086

STRATEGIC REVIEW

The strategic review is designed to provide information primarily about the Company’s business and results for the year ended 30th June 2016. The strategic review should be read in conjunction with the Chairman’s Statement and the Investment Manager’s Report, which provide a review of the year’s investment activities of the Company and the outlook for the future.

STATUS

The Company is an investment company under section 833 of the Companies Act 2006.  It is an Approved Company under the Investment Trust (Approved Company)(Tax) Regulations 2011 (the ‘Regulations’) and conducts its affairs in accordance with those Regulations so as to continue to gain exemption from liability to United Kingdom capital gains tax.

The Company is a small registered Alternative Investment Fund Manager under the European Union Directive.

INVESTMENT OBJECTIVE AND POLICY

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, the underlying investment exposure. 

The Company may invest up to 20% of its net assets in unlisted securities (excluding unquoted pooled investment vehicles) such values being assessed at the time of investment.

The Company will not invest more than 15% of its net assets in any single investment, such values being assessed at the time of investment.

Derivative instruments and forward foreign exchange contracts may be used for the purposes of efficient portfolio management and currency hedging. Derivatives may also be used outside of efficient portfolio management to meet the Company’s investment objective. The Company may take outright short positions in relation to up to 30% of its net assets, with a limit on short sales of individual stocks of up to 5% of its net assets, such values being assessed at the time of investment.

The Company may borrow up to 30% of net assets for short term funding or long term investment purposes.

No more than 10%, in aggregate, of the value of the Company’s total assets may be invested in other closed-ended investment funds except where such funds have themselves published investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds.

Information on the Company’s portfolio of assets with a view to spreading investment risk in accordance with its investment policy is given above.

FINANCIAL REVIEW

Net assets at 30th June 2016 amounted to £89,274,000 compared with £79,854,000 at 30th June 2015. In the year under review, the net asset value per Ordinary share increased by 11.8% from 112.43p to 125.70p.

The Group’s gross revenue fell to £944,000 (2015: £1,081,000). Although distributions from underlying investments increased, there was no similar special payment from the Company’s largest investment (2015: £148,000). After deducting expenses and taxation the revenue profit for the year was £193,000 (2015: £344,000).

Total expenses for the year amounted to £751,000 (2015: £737,000). In the year under review the investment management fee amounted to £509,000 (2015: £478,000). No performance fee was payable in respect of the year under review as the Company has not outperformed the cumulative hurdle rate. Further details on the Company’s expenses may be found in notes 3 and 4.

Dividends have not formed a central part of the Company’s investment objective.  The Directors propose a final dividend of 0.3p per Ordinary share in respect of the year ended 30 June 2016 (2015: 0.3p).  If approved at the Annual General Meeting, the dividend will be paid on 18 November 2016 to shareholders on the register at the close of business on 4 November 2016 (ex-dividend 3 November 2016).

The primary source of the Company’s funding is shareholder funds.  The Company is typically ungeared.

While the future performance of the Company is dependent, to a large degree, on the performance of international financial markets, which, in turn, are subject to many external factors, the Board’s intention is that the Company will continue to pursue its stated investment objective in accordance with the strategy outlined above.  Further comments on the short term outlook for the Company are set out in the Chairman’s Statement and the Investment Managers’ report.

Throughout the year the Group’s investments included seven funds managed by the Investment Manager (2015: seven).  No investment management fees were payable directly by the Company in respect of these investments.

PERFORMANCE MEASUREMENT AND KEY PERFORMANCE INDICATORS

In order to measure the success of the Company in meeting its objectives, and to evaluate the performance of the Investment Manager, the Directors review at each meeting:  net asset value, income and expenditure, asset allocation and attribution, share price of the Company and the discount.  The Directors take into account a number of different indicators as the Company does not have a formal benchmark, and performance against these is shown in the Financial Highlights.

Performance is discussed in the Chairman’s Statement and Investment Manager’s report.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks identified by the Board are as follows:

- Investment strategy
- Business conditions and general economy
- Portfolio risks – including market price, foreign currency exposure and interest rates
- Net Asset Value discount
- Investment Manager
- Tax and regulatory issues
- Operational matters

Further details on these and the steps taken to mitigate them can be found in the annual accounts.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended
30th June 2016
Year ended
30th June 2015


Notes
Revenue Return
£ ‘000
Capital Return
£ ‘000

Total
£ ‘000
Revenue Return
£ ‘000
Capital Return
£ ‘000

Total
£ ‘000
INVESTMENT INCOME 2 934 - 934 1,076 - 1,076
Other operating income 2 10 - 10 5 - 5
944 - 944 1,081 - 1,081
GAINS AND LOSSES ON INVESTMENTS
Gains on investments at fair value through profit or loss
9

-

7,921

7,921


2,574

2,574
Other exchange gains/(losses) - 1,510 1,510 - 697 697
Trail rebates - 9 9 - 12 12
944 9,440 10,384 1,081 3,283 4,364
EXPENSES
Management fees 3 (509) - (509) (478) - (478)
Other expenses 4 (242) - (242) (259) - (259)
(751) - (751) (737) - (737)
PROFIT BEFORE FINANCE COSTS AND TAX 193 9,440 9,633 344 3,283 3,627
Finance costs - - - - - -
PROFIT BEFORE TAX 193 9,440 9,633 344 3,283 3,627
Tax 5 - - - - - -
PROFIT FOR THE YEAR 193 9,440 9,633 344 3,283 3,627
EARNINGS PER SHARE
Ordinary shares (pence) 7 0.27p 13.29p 13.56p 0.49p 4.62p 5.11p

The total column of this statement represents the Group's profit and loss account, prepared in accordance with IFRS, as adopted by the European Union. The supplementary Revenue Return and Capital Return columns are both prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations.

The Company did not have any income or expense that was not included in ‘profit for the year’.  Accordingly, the ‘profit for the year’ is also the ‘Total comprehensive income for the year’, as defined in IAS1 (revised) and no separate Statement of Other Comprehensive Income has been presented.

No operations were acquired or discontinued during the year.

All income is attributable to the equity holders of the parent company. There are no minority interests.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th June 2016

Note 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 8 - - - (213) (213)
AT 30TH JUNE 2016 710 21,573 56,908 10,083 89,274

Included within Retained earnings were £255,000 of Company reserves available for distribution.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30th June 2015

Share
capital
£ ‘000
Share premium
£ ‘000
Special reserve
£ ‘000
Retained earnings
£ ‘000

Total
£ ‘000
AT 30TH JUNE 2014 710 21,573 56,908 (2,964) 76,227
Total comprehensive income for the year - - - 3,627 3,627
AT 30TH JUNE 2015 710 21,573 56,908 663 79,854

Included within Retained earnings were £276,000 of Company reserves available for distribution.

CONSOLIDATED BALANCE SHEET

Notes 30th June
2016
£ ‘000
30th June
2015
£ ‘000
NON-CURRENT ASSETS
Investments at fair value through profit or loss 9 79,467 68,086
CURRENT ASSETS
Other receivables 11 55 46
Cash and cash equivalents 12 9,938 11,889
9,993 11,935
TOTAL ASSETS 89,460 80,021
CURRENT LIABILITIES
Other payables 13 (186) (167)
TOTAL ASSETS LESS CURRENT LIABILITIES 89,274 79,854
NET ASSETS 89,274 79,854
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS
Called-up share capital 14 710 710
Share premium 15 21,573 21,573
Special reserve 15 56,908 56,908
Retained earnings 15 10,083 663
TOTAL EQUITY 89,274 79,854
NET ASSET VALUE PER ORDINARY SHARE (Pence) 16 125.70p 112.43p

CASH FLOW STATEMENTS


 


 




Notes
Year ended
30th June
2016
Group
£ ‘000
Year ended
30th June
2015
Group
£ ‘000
NET CASH INFLOW FROM OPERATING ACTIVITIES
212

349
INVESTING ACTIVITIES
Purchase of Investments (14,613) (4,420)
Sale of Investments 11,153 4,092
NET CASH OUTFLOW FROM INVESTING ACTIVITIES
(3,460)

(328)
FINANCING
Equity Dividends Paid 8 (213) -
NET CASH (OUTFLOW)/INFLOW AFTER FINANCING (3,461) 21
(DECREASE)/INCREASE IN CASH (3,461) 21

RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN CASH & CASH EQUIVALENTS
(Decrease)/Increase in cash resulting from cash flows (3,461) 21
Exchange movements 1,510 697
Movement in net funds (1,951) 718
Net funds at 1st July 11,889 11,171
CASH & CASH EQUIVALENTS AT END OF YEAR 17 9,938 11,889

RECONCILIATION OF PROFIT BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES
Profit before finance costs and taxation 9,633 3,627
Gains on investments (7,921) (2,574)
Exchange differences (1,510) (697)
Capital trail rebates (9) (12)
Net revenue gains before finance costs and taxation
193

344
(Increase)/Decrease in debtors (7) 8
Increase/(Decrease)  in creditors 19 (28)
Taxation (2) 13
Capital trail rebates 9 12
NET CASH INFLOW FROM OPERATING ACTIVITIES
212

349

1.             ACCOUNTING POLICIES

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ('IFRS'). These comprise standards and interpretations  approved by the International Accounting Standards Board ('IASB'), together with  interpretations of the International Accounting Standards and Standing Interpretations Committee ('IASC') that remain in effect, and to the extent that they have been adopted by the European Union.

These financial statements are presented in pounds sterling, the Group’s functional currency, being the currency of the primary economic environment in which the Group operates, rounded to the nearest thousand.

(a) Basis of preparation: The financial statements have been prepared on a going concern basis. The principal accounting policies adopted are set out below.

Where presentational guidance set out in the Statement of Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC') in November 2014 is consistent with the requirements of IFRS, the Directors have sought  to  prepare  the  financial  statements  on  a  basis  compliant  with  the recommendations of the SORP.

(b) Basis of consolidation: The Consolidated Financial Statements include the Accounts of the Company and its subsidiary made up to 30th June 2016. No Statement of Comprehensive Income is presented for the parent company as permitted by Section 408 of the Companies Act 2006. 

The parent company is an investment entity as defined by IFRS 10.  The consolidated accounts include subsidiaries which are an integral part of the Group and not investee companies.

Subsidiaries are consolidated from the date of their acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of the subsidiary used in the preparation of the consolidated financial statements are based on consistent accounting policies. All intra-group balances and transactions, including unrealised profits arising therefrom, are eliminated

(c) Presentation of Statement of Comprehensive Income: In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Consolidated Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Consolidated Statement of Comprehensive Income.

In accordance with the Company's Articles of Association, net capital returns may not be distributed by way of a dividend. Additionally, the net revenue is the measure the Directors believe is appropriate in assessing the Group's compliance with certain requirements set out in the Investment Trust (Approved Company)(Tax) Regulations 2011.

(d) Use of estimates: The preparation of financial statements requires the Group to make estimates and assumptions that affect items reported in the Consolidated and Company Balance Sheets and Consolidated Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial instruments.  Although these estimates are based on the Directors’ best knowledge of current facts, circumstances and, to some extent, future events and actions, the Group’s actual results may ultimately differ from those estimates, possibly significantly.  

(e) Revenue: Dividends and other such distributions from investments are credited to the revenue column of the Consolidated Statement of Comprehensive Income on the day in which they are quoted ex-dividend.  Where the Company has elected to receive its dividends in the form of additional shares rather than in cash and the amount of the cash dividend is recognised as income, any excess in the value of the shares received over the amount recognised is credited to the capital reserve.  Deemed Revenue from non-reporting funds is credited to the Revenue account. Interest on fixed interest securities and deposits is accounted for on an effective yield basis.   Deposit interest is taken into account on a receipts basis.

(f) Expenses: Expenses are accounted for on an accruals basis.  Management fees, administration and other expenses, with the exception of transaction charges, are charged to the revenue column of the Consolidated Statement of Comprehensive Income.  Transaction charges are charged to the capital column of the Consolidated Statement of Comprehensive Income.

(g) Investments held at fair value: Purchases and sales of investments are recognised and derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value.

All investments are classified as held at fair value through profit or loss on initial recognition and are measured at subsequent reporting dates at fair value, which is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. Investments in units of unit trusts or shares in OEICs are valued at the bid price for dual priced funds, or single price for non-dual priced funds, released by the relevant investment manager.  Unquoted investments are valued by the Directors at the balance sheet date based on recognised valuation methodologies, in accordance with International Private Equity and Venture Capital ('IPEVC') Valuation Guidelines such as dealing prices or third party valuations where available, net asset values and other information as appropriate.

(h) Taxation: The charge for taxation is based on taxable income for the year.  Withholding tax deducted from income received is treated as part of the taxation charge against income.  Taxation deferred or accelerated can arise due to temporary differences between the treatment of certain items for accounting and taxation purposes. Full provision is made for deferred taxation under the liability method on all temporary differences not reversed by the Balance Sheet date. No deferred tax provision is made against deemed reporting offshore funds.

(i) Foreign currency: Assets and liabilities denominated in foreign currencies are translated at the rates of exchange ruling at the Balance Sheet date. Foreign currency transactions are translated at the rates of exchange applicable at the transaction date.  Exchange gains and losses are taken to the revenue or capital column of the consolidated statement of comprehensive income depending on the nature of the underlying item.

(j)  Capital reserve: The following are accounted for in this reserve:

- gains and losses on the realisation of investments together with the related taxation effect;

- foreign exchange gains and losses on capital transactions, including those on settlement, together with the related taxation effect;

- revaluation gains and losses on investments; and

- trail rebates received from the managers of the Company’s investments.

The capital reserve is not available for the payment of dividends.

(k) Special reserve: The special reserve can be used to finance the redemption and/or purchase of shares in issue.

(l) Cash and cash equivalents: Cash and cash equivalents comprise current deposits and overdrafts with banks. Cash and cash equivalents may be held for the purpose of either asset allocation or managing liquidity.

(m)Dividends payable: Dividends are recognised from the date on which they are irrevocably committed to payment.

(n) Segmental Reporting: The Directors consider that the Group is engaged in a single segment of business with the primary objective of investing in securities to generate long term capital growth for its shareholders.  Consequently no business segmental analysis is provided.

(o) New standards, amendments to standards and interpretations effective for annual accounting periods beginning after 1 July 2015:

There have been no new standards, amendment to standards and interpretations effective for annual accounting periods beginning after 1 July 2015 that impact these financial statements.

(p) Accounting standards issued but not yet effective: Standards issued but not yet effective up to the date of issuance of the Group’s Financial Statements are listed below. This listing of standards and interpretations issued are those the Group reasonably expects will have an impact on disclosure, financial position and/or financial performance, when applied at a future date. The Group intends to adopt those standards (where applicable) when they become effective.

The revised IFRS 9 Financial Instruments replaces IAS 39 and applies to the classification and measurement and impairment of financial assets and financial liabilities, and hedge accounting.  The adoption of IFRS 9 will have an effect on the classification and measurement of the Groups financial assets, but will potentially have no impact on the classification and measurement of financial liabilities.  It will also introduce a new expected loss impairment model requiring more timely recognition of expected credit losses and a reformed model for hedge accounting with enhanced disclosure of risk management activity.  The standard is effective for annual periods beginning on or after 1 January 2018.

IFRS 15 Revenue from Contracts with Customers recognises revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. This standard may result in enhanced disclosure about revenue.  The standard is effective for years beginning on or after 1 January 2018.

Amendments to IFRS 10 Consolidated Financial Statements, clarify which subsidiaries of an investment entity should be consolidated instead of being measured at par value through profit and loss. The amendment also clarified that the exemption from presenting consolidated financial statements continues to apply to subsidiaries of an investment entity that are themselves parent entities.  The Standard is effective for years beginning on or after 1 January 2016.

2.             INVESTMENT INCOME

Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000
INCOME FROM INVESTMENTS
UK net dividend income 877 917
Unfranked investment income 57 156
Loan interest income - 3
934 1,076
OTHER OPERATING INCOME
Bank interest receivable 10 5
TOTAL INCOME COMPRISES
Dividends 934 1,073
Other income 10 8
944 1,081

3.             MANAGEMENT FEES

Year ended
30th June 2016
Year ended
30th June 2015
Revenue
£ ‘000
Capital
£ ‘000
Total
£ ‘000
Revenue
£ ‘000
Capital
£ ‘000
Total
£ ‘000
Investment management fee 509 - 509 478 - 478
Performance fee - - - - - -
509 - 509 478 - 478

At 30th June 2016 there were amounts accrued of £138,000 (2015: £120,000) for investment management fees.

A summary of the terms of the investment management agreement may be found in the Directors’ Report.

4.             OTHER EXPENSES

Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000
Directors’ remuneration 50 50
Administrative and secretarial fee 94 92
Auditors’ remuneration
- Audit 27 27
- Interim review 8 8
-Taxation compliance services* 12 22
Other 51 60
242 259
*The 2015 expenses cover two tax periods.
Allocated to:
- Revenue 242 259
- Capital - -
242 259

5.             TAXATION

Factors affecting tax charge for the year:

The charge for the year of £nil (2015: £nil) can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:

Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000
Profit before tax 9,633 3,627
Theoretical tax at the UK corporation tax rate of 20.0% (2015: 20.75%) 1,927 753
Effects of:
Non-taxable UK dividend income (176) (190)
Gains and losses on investments that are not taxable (1,886) (679)
Excess expenses not utilized 144 146
Overseas dividends which are not taxable (9) (30)
Total tax for the year - -

Due to the Company’s tax status as an investment trust and the intention to continue meeting the conditions required to obtain approval of such status in the foreseeable future, the Company has not provided tax on any capital gains arising on the revaluation or disposal of the majority of investments.

There is no deferred tax (2015: £nil) in the capital account of the Company.  There is no deferred tax charge in the revenue account (2015: £nil).  No deferred tax provision has been made for deemed reporting offshore funds.

At the year-end there is an unrecognised deferred tax asset of £420,000 (2015: £319,000) as a result of excess expenses.

6.             COMPANY RETURN FOR THE YEAR

The Company’s total return for the year was £9,633,000 (2015: £3,627,000).

7.             RETURN PER ORDINARY SHARE

Total return per Ordinary share is based on the Group total return on ordinary activities after taxation of £9,633,000 (2015: £3,627,000) and on 71,023,695 (2015: 71,023,695) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

Revenue return per Ordinary share is based on the Group revenue profit on ordinary activities after taxation of £193,000 (2015: £344,000) and on 71,023,695 (2015: 71,023,695) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

Capital return per Ordinary share is based on net capital gains for the year of £9,440,000 (2015: £3,283,000) and on 71,023,695 (2015: 71,023,695) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year.

8.             DIVIDENDS ON EQUITY SHARES

Amounts recognised as distributions in the year:



 
Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000

   Dividends paid during the year
Dividends payable in respect of the year ended:

213

30th June 2016: 0.3p (2015: 0.3p) per share 213 213

It is proposed that a dividend of 0.3p per share will be paid in respect of the current financial year.

9.             INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS

Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000
GROUP AND COMPANY 79,467 68,086

ANALYSIS OF INVESTMENT

PORTFOLIO

Listed*
£ ‘000
Unlisted
£ ‘000
Total
£ ‘000
Opening book cost 54,175 4,427 58,602
Opening investment holding gains/(losses) 12,348 (2,864) 9,484
Opening valuation 66,523 1,563 68,086
Movement in period
Purchases at cost 14,476 137 14,613
Sales
- Proceeds (11,040) (113) (11,153)
- Realised gains/(losses) on sales 1,222 (126) 1,096
Movement in investment holding gains for the year 6,706 119 6,825
Closing valuation 77,887 1,580 79,467
Closing book cost 58,833 4,325 63,158
Closing investment holding gains/(losses) 19,054 (2,745) 16,309
Closing valuation 77,887 1,580 79,467

* Listed investments include unit trust and OEIC funds.

Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000
ANALYSIS OF CAPITAL GAINS AND LOSSES
Realised gains on sales of investments 1,096 425
Increase in investment holding gains 6,825 2,149
Net gains on investments attributable to ordinary shareholders 7,921 2,574

Transaction costs

The purchases and sales proceeds figures above include transaction costs on purchases of £685 (2015: £525) and on sales of £6,373 (2015: £nil).

10.           INVESTMENT IN SUBSIDIARY UNDERTAKING

The Company owns the whole of the issued share capital (£1) of JIT Securities Limited, an investment company registered in England and Wales.

The financial position of the subsidiary is summarised as follows:

Year ended
30th June
2016
£ ‘000
Year ended
30th June
2015
£ ‘000
Net assets brought forward 502 501
Profit for year 1 1
Net assets carried forward 503 502

11.           OTHER RECEIVABLES

30th June
2016
£ ‘000
30th June
2015
£ ‘000
Prepayments and accrued income 52 45
Taxation 3 1
55 46

12.           CASH AND CASH EQUIVALENTS

30th June
2016
£ ‘000
30th June
2015
£ ‘000
Cash at bank and on deposit 9,938 11,889

13.           OTHER PAYABLES

30thJune
2016
£ ‘000
30th June
2015
£ ‘000
Accruals 186 167

14.           CALLED UP SHARE CAPITAL

30th June
2016
£ ‘000
30th June
2015
£ ‘000
Authorised
305,000,000 (2015: 305,000,000) Ordinary shares of £0.01 each 3,050 3,050
Issued and fully paid
71,023,695 (2015: 71,023,695) Ordinary shares of £0.01 each 710 710

15.           RESERVES

Share
Premium
account
£ ‘000
Special
Reserve
£ ‘000
Retained
earnings
£ ‘000
GROUP
At 30th June 2015 21,573 56,908 663
Increase in investment holding gains - - 6,825
Net gains on realisation of investments - - 1,096
Gain on foreign currency - - 1,510
Trail rebates - - 9
Retained revenue profit for year - - 193
Dividend paid (213)
At 30th June 2016 21,573 56,908 10,083

   

Share
Premium
account
£ ‘000
Special
Reserve
£ ‘000
Retained
earnings
£ ‘000
COMPANY
At 30th June 2015 21,573 56,908 663
Increase in investment holding gains - - 6,826
Net gains on realisation of investments - - 1,096
Gain on foreign currency - - 1,510
Trail rebates - - 9
Retained revenue profit for year - - 192
Dividend paid (213)
At 30th June 2016 21,573 56,908 10,083

15.           RESERVES CONTINUED

The components of retained earnings are set out below:

30th June
2016
£ ‘000
30th June
2015
£ ‘000
GROUP
Capital reserve-realised (6,632) (9,247)
Capital reserve-revaluation 16,309 9,484
Revenue reserve 406 426
10,083 663
COMPANY
Capital reserve-realised (6,984) (9,599)
Capital reserve-revaluation 16,812 9,986
Revenue reserve 255 276
10,083 663

16.           NET ASSET VALUE PER ORDINARY SHARE

The net asset value per Ordinary share is calculated on net assets of £89,274,000 (2015: £79,854,000) and 71,023,695 (2015: 71,023,695) Ordinary shares in issue at year end.

17.           ANALYSIS OF CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR

At 1st July 2015
£ ‘000
Cash flow Exchange movement At 30th June 2016
£ ‘000
GROUP
Cash at bank and on deposit 11,889 (3,461) 1,510 9,938

18.           FINANCIAL INFORMATION

2016 Financial information

The figures and financial information for 2016 are unaudited and do not constitute the statutory accounts for the year.  The preliminary statement has been agreed with the Company’s auditors and the Company is not aware of any likely modification to the auditor’s report required to be included with the annual report and accounts for the year ended 30th June 2016.

2015 Financial information

The figures and financial information for 2015 are extracted from the published Annual Report and Accounts for the year ended 30th June 2015 and do not constitute the statutory accounts for that year. The Annual Report and Accounts  (available on the Company’s website www.nsitplc.com) has been delivered to the Registrar of Companies and includes the Report and Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Annual Report and Accounts

The accounts for the year ended 30th June 2016 will be sent to shareholders in October 2016 and will be available on the Company’s website or in hard copy format at the Company’s registered office, 1 Knightsbridge Green, London SW1X 7QA.

The Annual General Meeting of the Company will be held on 3rd November 2016 at 11.00am at 1 Knightsbridge Green, London SW1X 7QA.

15th September 2016