TIDMNSPE
This submission replaces the one filed at 07:12 this morning.
The financial data herein is now correctly classified as "unaudited" which was
absent from the original disclosure. All remaining text remains as published.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
30 April 2009
This announcement contains regulated information
NEW STAR PRIVATE EQUITY INVESTMENT TRUST PLC
Annual Financial Report for the year ended 31 December 2008
New Star Private Equity Investment Trust PLC (the "Company") today announces
its annual results for the year ended 31 December 2008.
Investment Objective
The Company's investment objective is to produce capital gains through exposure
to a diversified portfolio of private equity investments.
Performance summary
31 December 2008 31 December 2007 Change
Net Asset Value (1) GBP61.0m GBP74.5m -18.1%
Net Asset Value per share (1) 323.7p 377.6p - 14.3%
Share price (2) 84.0p 299.0p -71.9%
Discount (1) 74.1% 20.8% N/A
FTSE All Share Index (2) 2,209.3 3,286.7 -32.8%
LPX Europe Index * (2) 189.2 402.1 -52.9%
* The LPX Europe Index represents the most actively traded private equity
companies traded on a European exchange.
Source: (1) New Star Asset Management Limited (2) Datastream
Chairman's Statement
The last year was an extraordinarily difficult one for financial markets and a
disappointing one for your Company. The consequences of the collapse of several
large financial institutions and the reduction in the availability of financing
for management buy-outs coupled with the falls in equity markets has had a
detrimental impact on the valuation of your Company's investments. As a result
the net asset value fell from 377.6p per Ordinary Share at 31 December 2007 to
323.7p at 31 December 2008 a fall of 14.3%. In the same period the FTSE
All-Share Index fell by 32.8% and the LPX Europe Index fell by 52.9%.
Valuation
At 31 December 2008 the value of the Company's investments, including cash and
treasury bills, was GBP61.0 million. The value of the Company's interest in
limited partnerships was GBP50.4 million, 29.0% of which is valued at cost. The
year end valuation is based on the figures provided by the managers of the
limited partnerships in which the Company invests. The Company has received
audited accounts in respect of all of the limited partnerships except Parallel,
Fondinvest and Zeus for each of which we have received unaudited management
accounts to 31 December 2008. The various limited partnerships have made
provisions against a number of the underlying investments and this is discussed
in more detail in the Investment Review. In light of the current economic
environment it is possible that the trading conditions for certain of the
underlying investments may deteriorate and that further provisions may be made
in subsequent quarters. Further information on the Company's limited
partnership interests and the look-through investments is shown below.
Liquidity and Gearing
Aggregated cash and money market balances were approximately GBP2.5 million at
31 December 2008. Including listed private equity vehicles, the Company
currently has GBP6.2 million of liquidity. In addition, the Company has undrawn
loan facilities of GBP30 million with the Bank of Scotland, GBP10 million until
July 2010 and GBP20 million until July 2011.
The Board of Directors monitors closely the Company's cashflow and has
considered the level of liquid assets, together with the timescales over which
investments may be realised and outstanding commitments may be drawn down. It
is the opinion of both the Board and the Manager that the Company has
sufficient resources to meet its future commitments.
Investment activity
During the year there were four full realisations of GBP4.7million, six partial
realisations of GBP3.4 million and GBP16.7 million of drawdowns of commitments. New
commitments of GBP18.0 million were made to two French mid-market buy-out funds
and a secondary fund-of-funds.
Share price
The most disappointing aspect of the year was the sharp fall in the Company's
share price though this was a sector wide phenomenon. As a function of this
fall, the shares moved from a discount to net asset value of approximately
20.8% at 31 December 2007 to a discount to net asset value of 74.1% at 31
December 2008.
There were several reasons for this.
Firstly, the lack of visibility regarding the valuations of private equity
investments following the sharp fall in financial markets and deterioration in
operating conditions for businesses led to a belief that there would be
material provisions against the previous values put on investment portfolios.
Secondly, the consequence of the high level of debt that many private equity
portfolio companies had taken on could result in, at a minimum, a significant
impact on valuations.
Finally, that as a result of overcommitment policies, private equity funds
would have insufficient cash to meet future commitments. This would then lead
to either dilutive rights issues and/or private equity funds selling some of
their limited partnership interests at significant discounts to their carrying
values.
While the fall in the share price was understandable, against the background
described above and the collapse of Lehman Brothers and bailout or part
nationalisation of a number of other US and European banks, the degree of fall
was extraordinary.
In the course of the year the Company bought back 882,000 Ordinary shares
during the year, of which 50,000 were cancelled and 832,000 were placed into
treasury. Against the sharp fall in share prices in the sector, however, it was
felt that further buybacks would have no effect on the Company's share price or
the level of discount. Nevertheless your Board is conscious of the need to seek
to narrow the discount to net asset value and will therefore continue to review
on a regular basis the Company's buyback policy with a view to do whatever is
in the best interests of shareholders.
Dividend
It is the Company's policy to pay dividends only to the extent required to
maintain investment trust status. No dividend has been declared in respect of
the year ended 31 December 2008 (2007: 0.66p per share). Shareholders should
note that the level of dividend will vary from year to year, as the Company's
income is expected to be changeable.
Manager
New Star Asset Management Group PLC, the parent company of the Manager, was
acquired by Henderson Group PLC ("Henderson Global Investors") with effect from
9 April 2009. Following this acquisition Nick Brind and Paul Craig have stepped
down as fund managers to the Company and the Board would like to thank them for
their efforts. Going forward the Company's assets will be managed by Ian
Barrass who is head of Fund of Funds at Henderson Private Equity. The Board
looks forward to working with Ian and his colleagues at Henderson Global
Investors.
The Board
John Duffield resigned as a Director of the Company with effect from 30 April
2009. The Board would like to thank him for his support for and contribution to
the Company.
Change of name
The Manager is now part of the Henderson Global Investors and the Board
considers that it would be desirable for this to be reflected in the Company's
name. Accordingly a resolution to change the Company's name to "Henderson
Private Equity Investment Trust plc" will be proposed at the Annual General
Meeting to be held on Wednesday, 17 June 2009 at 3.00 p.m.
Outlook
As a result of the reduction in the availability of financing for management
buy-outs, the number of transactions in the industry has fallen substantially.
This has, however, had less impact on the Company than would have been expected
in the circumstances reflecting its focus on mid-market buyout funds.
Furthermore, although the short-term operating environment remains difficult,
the Company's focus on the mid-market buy-out sector and the experience and
track-records of those managers that we have invested with should ensure that
as and when conditions improve that the Company will provide attractive returns
to shareholders.
John Mackie CBE
Chairman
30 April 2009
Investment Review
The year ended 31 December 2008 proved a tumultuous period for financial
markets and private equity was no exception. The consequences of the financial
crisis had a significant impact on your Company including a slowdown in
portfolio realisations, a decline in the net asset value and most notably, a
sharp widening in the discount of the share price to net asset value.
Limited partnership interests
During the course of the year new commitments totalling GBP18 million were made
to three new limited partnership funds. All were European focused funds
reflecting the Company's strategy to increase both manager and geographical
diversification. In the French middle-market buyout sector new commitments were
made to Astorg IV and Pragma II. A secondary specialist was also added via
Fondinvest VIII as we anticipated an environment of distressed sellers of
limited partnerships following a significant slowdown in realisations.
The level of new commitments is in stark contrast to the previous year. This
reflects both the Manager's and the Board's view that a challenging economic
environment and the scarcity of bank finance will markedly reduce portfolio
realisations over the foreseeable future and thereby reduce the Company's
ability to recycle capital. That said, this should not preclude the Company
from participating in attractive investment opportunities thrown up by the
economic recession since a number of funds within the portfolio have undrawn
commitments.
New Investments
Seventeen new investments with a combined value of GBP11.4 million were made
during the year, primarily in the first half of 2008 through the Company's
limited partnership interests. The largest, through August Equity Partners II
("AEP II"), was a GBP3.8 million investment in Enara. AEP II also invested GBP2.9
million in Accura Support Services ("Accura"). Enara is a leading independent
provider of both private and social services-based home care in London and the
Home Counties. It focuses on providing care for adults with learning
difficulties and mental health needs and the elderly. Accura is a provider of
highly specified mission critical components principally to the oil & gas and
aerospace sectors.
Following the commitment to Astorg IV there was an immediate drawdown relating
to three investments made in 2007: Ethypharm - a world leader in the
development and manufacture of oral drug delivery systems; SCT Telecom - an
innovative telecom services provider and the French leader in the SME market
segment; and OGF - the French leading funeral services operator. There was also
one new investment in 2008 in Photonis - a world leader in photo-detection. The
four investments had a combined value of GBP2.5m. Similarly, the commitment to
Pragma II resulted in an immediate drawdown for two investments made in 2007
while there was one new investment in 2008. The total drawdown for Pragma II
was GBP1.1 million.
Realisations
There were four realisations during the year totalling GBP4.7m, although much of
this was achieved via the sale of Healthcare Homes Group, a specialist care
home operator, by August Equity Partners I ("AEP I"), in a secondary buyout to
Bowmark for 2.7 times the original investment. August backed the management
buy-in in August 2005 when the group consisted of only four homes and 100 beds
which had been expanded through acquisition to 21 homes and over 800 beds by
the date of the disposal. There were also three partial realisations from AEP I
involving Hat Trick, Planit Holdings and Imagine Publishing.
Rutland I also returned capital via a partial realisation of Wolstenhome Group,
a manufacturer of pigments and coatings. Rutland had already announced that
Wolstenhome had sold certain assets and goodwill of its metallic effect pigment
and metallic printing business and following this latest disposal the valuation
largely represents the value of the company's premises.
Listed Private Equity
Listed private equity trusts endured a torrid year amid a constant stream of
worries that wore down even the most loyal of supporters. To put this into
perspective, the LPX Europe Index fell 52.9% during the year compared with the
FTSE All-Share Index which fell 32.8%. Initially, investors focused on fears of
corporate failure among the underlying portfolio companies. These fears were
exacerbated by a lack of transparency and poor liquidity compared with more
generalist investment companies. As the year progressed and the financial
crisis became more pronounced, investors in listed private equity trusts were
exposed to the fear that certain trusts might have difficulty in their ability
to honour outstanding commitments to limited partnerships given the dramatic
slowdown in portfolio realisations and the reduced availability of bank debt.
Somewhat ironically, managers of private equity trusts had, in the past, been
criticised for an inefficient use of their balance sheets. This inevitably led
to many trusts over-committing to new limited partnerships to reduce the
effects of `cash drag'. In the current environment, however, those trusts which
have employed a more aggressive over-commitment strategy have been forced to
address the strength of their balance sheets. This has resulted in asset
disposals and capital fund raisings.
New Star Private Equity Investment Trust has avoided those trusts most exposed
to the current downturn, such as those with an aggressive over-commitment
strategy or focused on large leverage buyouts. Even the trusts with the most
respected managers endured falling net asset values and a significant widening
in discounts to net asset value. While we are acutely aware of the lack of
visibility in corporate earnings, difficulty in obtaining bank finance and the
over-commitment issue we remain confident that our managers are positioned to
weather the current financial storm while the large discounts to net asset
value provide some comfortable room for error.
Valuations
Amid a background of economic recession, a sharp fall in the value of equity
markets and the credit crisis there has been a number of downward pressures on
valuing private equity businesses. Historically, private equity managers have
been able to offset operational improvements against a decline in either top
line growth or comparable multiples. However, the speed and severity of the
current downturn has proved challenging for many managers and/or companies,
especially those with considerable levels of leverage. Furthermore, even
companies that have performed well, have, in many cases seen a decline in
comparable multiples and therefore their own valuation. Nevertheless, it is
also true that private equity managers have better access to information,
greater control over their investments and in many cases operational expertise
and experience. Consequently, crucial decisions can be taken early and we have
witnessed these measures first hand within the portfolio.
Outlook
Current market conditions are undeniably challenging and the immediate
prospects for all businesses remain uncertain. The crisis in the global
financial system has reduced credit availability and the ability of investors
to finance new transactions. Simultaneously, the sharp downturn in the economy
has put enormous pressure on corporate profits. Although not immune from these
pressures, we remain confident in our managers' ability to create value through
varying financial and economic environments over the longer-term. In the
short-term the prerequisite skills will be to monitor and manage portfolio
companies closely, taking action to protect and enhance value and detailed
attention to banking agreements. The best private equity managers find
opportunity in change and thrive on adapting to it.
The corollary of the current economic environment is that it will create
significant opportunities for many private equity managers. Lower valuations in
public equity markets should provide the opportunity for managers to acquire
high quality businesses at attractive prices. In addition, an increasing number
of businesses will need to restructure, refinance or drive operational change
which should further increase opportunities. Consequently, the overriding aim
is to ensure the Company preserves a strong balance sheet through current
financial and economic difficulties so that it remains well positioned to
benefit from the longer term opportunities.
New Star Asset Management Limited
Manager
30 April 2009
Investment Portfolio
The Company's investments at 31 December 2008 were:
Company Category Country Valuation % of
GBP000 Portfolio
August Equity Partners I Limited Partnership UK 11,380 18.4
Rutland Fund I Limited Partnership UK 10,795 17.4
Parallel Ventures 2006 Limited Partnership UK 9,820 15.9
August Equity Partners II Limited Partnership UK 9,555 15.4
Astorg IV Limited Partnership France 2,927 4.7
Logic Group Direct investment UK 2,500 4.0
Fondinvest Capital Limited Partnership France 1,884 3.0
Century Capital Partners Limited Partnership US 1,538 2.5
Fund IV
Rutland Fund II Limited Partnership UK 1,197 1.9
Evolvence India Listed UK 1,002 1.6
Ten largest investments 52,598 84.8
HG Capital Trust Listed UK 993 1.6
Graphite Enterprise Listed UK 920 1.5
Quorum Oil & Gas Technology Listed UK 884 1.4
Reconstruction Capital Listed UK 640 1.0
Pragma II Limited Partnership France 608 1.0
SVG Capital 8.25% Listed UK 525 0.8
Convertible Loan Stock
Renewable Energy Generation Listed UK 497 0.8
ARC Capital Listed UK 332 0.5
Private Equity Investor Listed UK 296 0.5
Wendel Investments Listed France 288 0.5
Twenty largest investments 58,541 94.4
Dinamia Listed Spain 280 0.4
Elderstreet Capital Partners Limited Partnership UK 275 0.4
Zeus Private Equity Limited Partnership UK 263 0.4
Lyceum Capital Fund II Limited Partnership UK 166 0.3
China Growth Opportunities Listed UK 55 0.1
KB Fund III B Limited Partnership UK 19 0.0
KB Fund III Limited Partnership UK 8 0.0
Total investments 59,607 96.0
French (Govt) 4% 12/09/2009 1,472 2.4
Cash 968 1.6
Total Portfolio 62,047 100.0
Portfolio Analysis
Type of investment
Type of investment Percentage of portfolio Percentage of portfolio
2008 2007
Limited partnerships 81% 71%
Listed funds 11% 13%
Cash and treasury 4% 12%
Direct investment 4% 4%
Geographic exposure ("look-through")
Country or region Percentage of portfolio Percentage of portfolio
2008 2007
UK 68% 82%
Europe 25% 13%
North America 4% 1%
India 2% 2%
China 1% 2%
Sector exposure of limited partnerships
Sector Percentage of portfolio Percentage of portfolio
2008 2007
Healthcare 28% 18%
Technology 21% 16%
Financial 13% 24%
Services 12% 10%
Industrial 12% 14%
Goods 9% 13%
Other 5% 5%
Limited partnership by vintage
Vintage Percentage of portfolio Percentage of portfolio
2008 2007
Less than 1 year 18% 21%
1 - 2 years 28% 52%
2 - 3 years 39% 11%
More than 3 years 15% 16%
Valuation basis of limited partnerships
Valuation basis Percentage of portfolio Percentage of portfolio
2008 2007
Earnings 71% 72%
Cost 29% 28%
Limited Partnerships
August Equity Partners
August Equity Partners provides equity capital for management buy-outs,
buy-ins, development capital and replacement capital in growing businesses.
They invest between GBP10 million and GBP50 million of equity in UK companies in
the healthcare, media and technology, industrial products and services and
business services sectors.
www.augustequity.com
Rutland Partners
Rutland Partners ("Rutland"), founded in 1986, invests in UK companies facing
difficult strategic challenges or which may be underperforming, in need of
restructuring or entering a period of change. Rutland does not focus on any
specific sectors and provide equity for management buy-outs, buy-ins,
public-to-privates, turnarounds, secondary purchases and replacement capital.
They invest between GBP10 million and GBP50 million of equity per investment into
UK companies valued at between GBP20 million and GBP200 million.
www.rutlandpartners.com
Parallel Private Equity
Established in 1997 Parallel Private Equity ("Parallel") operates formal
co-investment agreements with a number of UK and European mid-market private
equity managers. In this time they have invested more than GBP1.3 billion in over
330 deals. In realising over 220 deals to date, in excess of GBP1.9 billion has
been returned to investors. They will invest up to GBP10 million of equity per
transaction in companies valued at between GBP10 million to GBP400 million.
www.parallelprivateequity.com
Astorg Partners
Astorg Partners ("Astorg") is an independent French private equity manager
whose origins date back to 1983 when it was created as a joint-venture between
SUEZ and state-owned Institut de Dévelopment Industriel. Astorg will invest at
least EUR15 million of equity in companies primarily in the healthcare,
professional services and retail sectors valued between EUR100 million and EUR800
million.
www.astorg-partners.com
Lyceum Capital
Established in 1999, and formerly known as West Private Equity prior to their
buy-out from West LB, Lyceum Capital invests in UK companies valued at between
GBP10 million and GBP75 million in most segments of the UK business and consumer
service industries, where consolidation strategies can be actively pursued.
They will invest in companies requiring between GBP10 million and GBP40 million in
equity.
www.lyceumcapital.co.uk
Fondinvest
Fondinvest was founded in 1994 and is a specialist primary fund of funds and
secondary funds investor and launched one of the first secondary funds in
Europe in 1996. They currently manage over EUR2 billion in private equity funds
and have offices in Paris, Tokyo and San Francisco.
www.fondinvest.com
Century Capital Management
Century Capital Management ("Century") is a Boston based investment adviser
whose origins date back to 1928. It formed its first private equity fund in
1987 and specialises in the middle market financial services industry with a
focus on insurance. Century will invest equity of between US$10 million and
US$30 million in individual transactions.
www.centurycap.com
Pragma Capital
Pragma Capital is a French private equity manager founded in 2002, in a
spin-out from Crédit Agricole and Crédit Lyonnais that focuses on the French
middle-market. They will typically invest between EUR10 million to EUR35 million
into companies, across a wide variety of sectors, valued at between EUR50 million
and EUR250 million.
www.pragmacapital.fr
Elderstreet
Elderstreet is a UK venture capital fund manager investing in early stage
businesses within the UK. It typically provides between GBP0.5 million and GBP5.0
million funding for MBOs and development capital. Elderstreet invests in a
range of industry sectors and has a specialist technology practice investing in
the software and computer services market.
www.elderstreet.com
Zeus Private Equity
Zeus Private Equity ("Zeus") was formed in 2005 by a team who had previously
worked together at Aberdeen Murray Johnstone Private Equity. Zeus provides
funding for management buy-outs, buy-ins, equity release and restructuring
opportunities for businesses in the UK valued at up to GBP50 million in a wide
range of sectors.
www.zeusprivateequity.co.uk
10 Largest "Look-through" Investments
Notemachine
Limited partnership Rutland Fund I
Valuation GBP4.118m
Percentage of Portfolio 6.6%
Rutland formed Notemachine in September 2006 via a recommended offer for
AIM-listed Scott Tod, a UK company involved in the provision of ATM services
throughout the UK. In January 2007, Rutland acquired TRM (ATM) Limited, a
complementary business involved in the deployment of ATMs in the UK and
Germany. The combined business currently operates approximately 6,000 ATMs in
the UK. At the year-end the investment was written down by 65%.
www.notemachine.com
Liberty Acquisitions ("Lifeways Community Care Group")
Limited partnership August Equity Partners I
Valuation GBP4.026m
Percentage of Portfolio 6.5%
Lifeways is a market leading provider of supported living for people with
complex needs and is the only provider offering nationwide coverage. Lifeways
offers specialist care to over 900 people with challenging needs, including
autism, psychiatric or learning disabilities and acquired brain injuries, in
their own home or a community setting.
www.lifeways.co.uk
Enara
Limited partnership August Equity Partners II
Valuation GBP3.981m
Percentage of Portfolio 6.4%
Enara is a leading provider of both private and social services-based home care
in London and the Home Counties. It focuses on care for the elderly and adults
with learning difficulties and mental health needs.
Advantage Healthcare Group
Limited partnership Rutland Fund I
Valuation GBP3,338
Percentage of Portfolio 5.4%
Advantage Healthcare was formed following the acquisition of a group of
healthcare-staffing businesses from BUPA and specialises in flexible healthcare
staffing. It has a significant database of temporary nurses, doctors, allied
health professionals and carers which provides to the NHS, BUPA and other
private carers to cover staff shortfalls and fluctuating workloads. At the
year-end the investment was written down by 23%.
www.advantagehealthcare.com
Accura
Limited partnership August Equity Partners II
Valuation GBP3.049m
Percentage of Portfolio 4.9%
Accura is a provider of highly specified mission critical components primarily
to the oil and gas and aerospace sectors. Accura operates as two separate
divisions: supply chain services under the brands Liniv and Concept and
technical contract services under the brands Accura Geometric and Accura
Geneva.
www.accura.co.uk
Rollford Holdings ("Rixonway")
Limited partnership August Equity Partners I
Valuation GBP2.646m
Percentage of Portfolio 4.3%
Rixonway is a UK kitchen manufacturing business dedicated to providing kitchens
for community regeneration and has over 25 years experience in social housing
and the public sector. It is a key supplier to many local authorities,
purchasing consortia, registered social landlords, arms length management
organisations and major regeneration contractors involved in social housing
refurbishment in the UK.
www.rixonway.co.uk
Logic Group
Limited partnership Direct investment
Valuation GBP2,500m
Percentage of Portfolio 4.0%
The Logic Group through its software delivers the secure provision of card
transaction processing, loyalty and insight programmes as well as IT services
consultancy for many of Europe's leading businesses. Logic's customers include
Norwich Union, HBOS, Arcadia, BP, B&Q, Comet, Dixons, Fortnum & Mason, RBS,
Tesco, Vodafone and Manchester United.
www.the-logic-group.com
Boat International
Limited partnership August Equity Partners I
Valuation GBP2.416m
Percentage of Portfolio 3.9%
Boat International ("Boat") is an international publisher of market leading
magazines and websites and an events organiser targeted at the super yacht
industry. Boat produces over 1.4 million magazines each year that sell in over
57 countries worldwide and are published in six different languages. They
organise 8 annual events across the world in London, Monaco, Fort Lauderdale,
Venice, Port Cervo and New York.
www.boatinternational.com
Wolstenholme Group
Limited partnership Rutland Fund I
Valuation GBP1.837m
Percentage of Portfolio 3.0%
Wolstenholme Group was a division of Wolstenholme Rink acquired in July 2000.
It is a leading manufacturer of pigments and coatings for the print industry.
In June 2007 Rutland announced that Wolstenholme had sold certain assets and
goodwill of its metallic effect pigment and metallic printing business to
Eckart GmbH and Co. Wolstenholme retains its carbon black dispersions business
in the US and Ronald Britton in the UK.
4Projects
Limited partnership August Equity Partners II
Valuation GBP1.754m
Percentage of Portfolio 2.8%
4Projects is a leading provider of project collaboration solutions. The
solutions are delivered via software principally to the architecture,
engineering and constructions sectors. 4Projects solutions are used to
co-ordinate large scale, multi-party construction projects and for the
management of complex or diverse property estates. The company has a blue chip
customer base and recent projects include the construction of Arsenal's
Emirates Stadium and the OCS stand at the Brit Oval.
www.4projects.com
Business Review
The Business Review is designed to give shareholders an insight into the
operations of the Company. Further information on the Company's activities and
prospects may be found in the Chairman's Statement and the Investment Review.
Investment Objective
The Company's investment objective is to produce capital gains through exposure
to a diversified portfolio of private equity investments.
Investment Policy
The Company seeks to achieve its investment objective through a policy of
investing principally in limited partnership interests and listed vehicles
exposed to private equity investments or other similar strategies. The main
focus of these investments is mid-market buyout funds in the UK and Europe. The
Company may also invest in cash, quoted companies, fixed income securities,
debt instruments and other alternative asset funds.
Where the Directors and the Manager believe that it would be beneficial to do
so, the Company may make direct investments in unquoted companies. It is
expected any such investments will be co-investments alongside private equity
managers with which the Company or Manager has existing investments.
The Company intends to reduce the "cash-drag" effect by investing its
uncommitted assets and committed but un-drawn assets in listed private equity
funds to gain investment exposure to private equity and also by employing a
policy of over-commitment. An over-commitment policy means that the Company may
commit more than its available uncommitted assets to limited partnerships on
the basis that such commitments can be managed by anticipating future cash
flows to the Company and through the use of borrowings where necessary.
It is expected that the portfolio will be fully invested in most market
conditions although the Company may maintain a large cash weighting from time
to time to manage its over-commitments policy, to protect capital returns or
pending identification of appropriate investment opportunities. The Company may
enter into derivative transactions for the purpose of efficient portfolio
management hedging (for example, interest rate, currency or market exposure).
In order to comply with the requirements for investment trust status, the
exposure to any one company will not exceed 15% of total assets at the time of
investment. The Company may invest more than 15% of its total assets in other
UK listed investment companies.
The Board has established guidelines with a view to spreading investment risk.
The principal guidelines are that:
* at least 25% of total assets must be invested in private equity funds which
themselves principally invest in the UK and Europe;
* up to 25% of total assets may be invested in private equity funds which
principally invest outside of the UK and Europe;
* the total value of investments in listed private equity funds should not
exceed 50% of total assets;
* the total value of direct unquoted investments will represent no more than
25% of the Company's net assets at the point of purchase;
* cash should not exceed 30% of total assets; and
* the Company may utilise gearing representing up to 30% of its total assets
at the point of drawdown.
Information on how the Company has invested its assets with a view to spreading
investment risk in accordance with its investment policy is set out above.
Performance
The performance of the Company is reviewed regularly by the Board using the
following key performance indicators:
* net asset value movement
* share price movement.
In the year ended 31 December 2008 the Company's NAV per share fell from 377.6p
to 323.7p, a decrease of 14.3%, whilst the share price fell by 71.9% from
299.0p to 84.0p. In the same period the FTSE All Share Index fell by 32.8%. An
analysis of performance during the year may be found in the Chairman's
Statement and the Investment Review.
The Board also monitors the discount of the NAV per share to the share price.
At 31 December 2008 the discount was 74.1% compared to 20.8% at 31 December
2007.
Regulatory environment
The Company is an investment trust and is subject to the rules governing
investment trust status laid down in the Income and Corporation Taxes Act 1988.
The Company has been approved by HM Revenue & Customs as an investment trust
for the year ended 31 December 2007. Approval for the year ended 31 December
2007 is subject to review should there be any subsequent enquiry under
Corporation Tax Self Assessment. In the opinion of the Directors the Company
has conducted its affairs so that it qualified as an investment trust during
the year ended 31 December 2008 and subsequently. The Company is an investment
company under Section 266 of the Companies Act 1985.
The Company is listed on the London Stock Exchange. It must therefore conduct
its activities in accordance with the Listing Rules and Disclosure and
Transparency Rules published by the Financial Services Authority.
Risk Management
The principal risks associated with the Company include the following:
Investment strategy
Inappropriate long-term strategy, asset allocation and manager selection might
lead to the underperformance of the Company. The Board regularly considers the
Company's strategy, asset allocation, investment selection and performance.
Long term nature of private equity investments
Private equity investments are long-term in nature and it may take several
years before they can be realised.
Financial risks of private equity
A substantial proportion of the Company's assets are invested in limited
partnerships which invest in private companies. These unquoted investments are
less readily marketable than quoted securities. In addition, such investments
may carry a higher degree of risk than quoted securities.
Valuation uncertainty
In valuing its investments in unlisted private equity funds or limited
partnerships and in calculating its net asset value, the Company relies to a
significant extent on the accuracy of financial and other information provided
by these funds to the Manager. Limited partnerships typically only provide
updated valuations on a quarterly or six-monthly basis.
Regulatory risk
Failure to comply with applicable legal and regulatory requirements could lead
to the suspension or loss of the Company's Stock Exchange listing or result in
financial penalties. Breach of Section 842 of the Income and Corporation Taxes
Act 1988 could lead to the loss of the Company's investment trust status,
leading to the Company being subject to tax on its capital gains.
Manager
The quality of the management team employed by the Manager is an important
factor in delivering good performance and the loss by the Manager of key staff
could adversely affect investment returns. In addition, the failure of the
Manager's core fund management systems might lead to the loss of data or
inaccurate reporting. The performance of the Manager is reviewed by the Board
on an ongoing basis. In addition, the Board undertakes a formal review each
year.
Business conditions and general economy
The Company's investment returns are influenced by general economic conditions
in the UK and globally. Factors such as interest rates, inflation, investor
sentiment and the availability and cost of credit could adversely affect the
performance of both the Company and its underlying investments.
The Company's assets are invested on a fund-of-funds basis. This helps mitigate
investment risk by providing access to a range of different private equity
funds and private equity managers. In addition, the underlying portfolio is
diversified across a spread of different vintages, sectors and countries. The
Board regularly monitors the Company's asset allocation, investment selection
and performance. A detailed analysis of the portfolio may be found above.
Dividends
The Company has a policy of only paying dividends to the extent necessary to
comply with investment trust status. Therefore, to the extent that there is net
income within an accounting period, the Directors intend to declare dividends
such that no more than 15% of the Company's investment income for the
accounting period is retained.
No dividend has been declared in respect of the year ended 31 December 2008
(2007: 0.66p per share).
Share capital
At 31 December 2008 there were 18,850,212 (2007: 19,732,212) shares in issue,
together with a further 832,000 (2007: nil) shares held in treasury.
In the year ended 31 December 2008 the Company repurchased a total of 882,000
shares at prices between 254.0p and 262.0p per share. Of these shares 832,000
are held in treasury, whilst 50,000 shares were cancelled. In the year ended
31 December 2007 a total of 10,881,800 shares were repurchased at prices
between 310.0p and 342.0p per share; all of the shares repurchased during 2007
were cancelled.
No shares were issued during the year under review (2008: 3,534,512 shares).
Management
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, is delegated to New Star Asset
Management Limited. On 9 April 2009 the parent company of the Manager, New Star
Asset Management Group PLC, was acquired by Henderson Group plc ("Henderson")
Under the terms of the investment management agreement, New Star receives a
fee, payable monthly in arrears, equivalent to 1.25% per annum of the Company's
assets invested in limited partnerships and direct private equity interests and
0.75% per annum on the remainder of the Company's assets. No management fee is
payable by the Company in respect of any asset invested in funds managed New
Star. New Star will also be entitled to an annual performance fee of 10% of any
return in excess of 8% per annum. The Investment Management Agreement may be
terminated by either party by giving 12 months notice in writing, subject to
there being an initial period of 24 months which ends on 1 July 2009.
The Board monitors the performance of the Manager and considers that the
continuing appointment of the Manager is in the interests of shareholders as a
whole. In carrying out its review, the Board considered the past investment
performance of the Company, the capability and resources of the Manager and the
terms and conditions of the management agreement.
Employee, environmental and community issues
The Company does not have any employees, with the day-to-day management and
administration of the Company being delegated to the Manager. New Star Asset
Management Limited manages the Company's portfolio in accordance with the
investment objective and policy; environmental, social and community matters
are considered to the extent that they impact on the Company's investment
returns. The Manager's parent company, Henderson, has implemented environmental
management practices, which includes systems to limit the use of non-renewable
resources and minimise the impact of operations on the environment where
possible.
Going Concern
The Directors believe that the Company has adequate resources to continue in
operational existence for the foreseeable future. In forming this judgement the
Directors have considered the level of the Company's liquid assets (including
its committed GBP30 million loan facility) and the likely timescales over which
investments are likely to be realised and outstanding commitments are likely to
be drawn down. In light of these factors, the Directors consider that it is
appropriate to adopt the going concern basis in preparing these accounts.
New Star Asset Management Limited, Secretary
30 April 2009
Statement under Disclosure and Transparency Rule 4.1.12
The Directors of the Company each confirm to the best of their knowledge that:
a) the financial statements have been prepared in accordance with applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and
b. this Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties they face.
For and on behalf of the Board of Directors
Terry Connor
Director
30 April 2009
Unaudited Income Statement
for the 12 months ended 31 December 2008
Year to Year to
31 December 2008 31 December 2007
Notes Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses) / gains on - (11,105) (11,105) - 11,212 11,212
investments held at
fair value through
profit or loss
Gains on foreign - 99 99 - 21 21
exchange
Income 2 2,378 - 2,378 2,323 - 2,323
Investment Management 3 (377) - (377) (913) (323) (1,236)
fee
Administration expenses (934) - (934) (553) (1,018) (1,571)
Return on ordinary 1,067 (11,006) (9,939) 857 9,892 10,749
activities before
finance costs and
taxation for the
financial year
Interest payable and (70) - (70) (176) - (176)
similar charges
Return on ordinary 997 (11,006) (9,923) 681 9,892 10,573
activities before
taxation for the
financial year
Taxation (1,066) - (1,066) (290) 97 (193)
Return on ordinary (69) (11,006) (11,075) 391 9,989 10,380
activities after
finance costs and
taxation for the
financial year
Return per Ordinary (0.4p) (57.0p) (57.4p) 1.7p 42.6p 44.3p
Share (based on average
number of shares in
financial year)
Number of Ordinary Shares 18,850,212 19,732,212
in issue at year end
Average number of 19,280,488 23,436,058
Ordinary Shares in issue
during the year
The total columns of this statement are the profit and loss account for the
Company and the revenue and capital columns represent supplementary
information. The total columns represent all the information required to be
disclosed in the Statement of Total Recognised Gains and Losses ("STRGL"). For
this reason a STRGL is not presented.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the current or prior
year.
The notes which follow form an integral part of these financial statements.
Unaudited Reconciliation of Movement in Shareholders' Funds
for the year ended 31 December 2008
Year ended 31 December 2008
Called Share Capital Realised Revaluation Revenue Shareholders'
up
premium redemption capital capital Reserve funds
share
capital account reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 987 17,321 702 35,840 18,036 1,630 74,516
January 2008
Net loss on - - - (246) - - (246)
listed
investments
Net gain on - - - 3,601 - - 3,601
unlisted
investments
Transfer on - - - 86 (86) - -
disposal of
investments
Decrease in - - - - (14,460) - (14,460)
unrealised
appreciation
on unlisted
investments
Net gains on - - - 99 - - 99
foreign
exchange
Dividends - - - - - (130) (130)
paid
Revenue - - - - - (69) (69)
attributable
to Ordinary
Shareholders
Shares bought (3) - 3 (128) - - (128)
back and
cancelled
Shares bought - - - (2,169) - - (2,169)
back and held
in treasury
Balance at 31 984 17,321 705 37,083 3,490 1,431 61,014
December 2008
The notes which follow form an integral part of these financial statements.
Unaudited Reconciliation of Movement in Shareholders' Funds
for the year ended 31 December 2008
Year ended 31 December 2007
Called up Share Capital Realised Revaluation Revenue Shareholders'
share premium redemption capital capital Reserve funds
capital
account reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 1,354 5,145 158 70,887 9,271 2,661 89,476
January 2007
Net loss on - - - (1,231) - - (1,231)
listed
investments
Net loss on - - - (6,680) - - (6,680)
unlisted
investments
Transfer on - - - 10,358 (10,358) - -
disposal of
investments
Increase in - - - - 19 - 19
unrealised
appreciation
on listed
investments
Increase in - - - - 19,104 - 19,104
unrealised
appreciation
on unlisted
investments
Net gains on - - - 21 - - 21
foreign
exchange
Dividends paid - - - - - (1,422) (1,422)
Revenue - - - - - 391 391
attributable
to Ordinary
Shareholders
Share (3) - 3 (156) - - (156)
buy-backs
Capital (364) 12,176 541 (36,115) - - (23,762)
reorganisation
Performance - - - (226) - - (226)
fee
Reconstruction - - - (1,018) - - (1,018)
expenses
Balance at 31 987 17,321 . 35,840 18,036 1,630 74,516
December 2007
702
The notes which follow form an integral part of these financial statements.
Unaudited Balance Sheet
at 31st December 2008
2008 2007
GBP'000 GBP'000
Fixed assets
Investments 61,079 71,150
Current assets
Debtors 197 969
Cash at bank 2,277 5,173
2,474 6,142
Creditors
Amounts falling due within one (2,539) (2,776)
year
Net current assets 790 3,366
Net assets 61,014 74,516
Capital and reserves
Called up share capital 984 987
Share premium 17,321 17,321
Capital redemption reserve 705 702
Capital reserve 40,573 53,876
Revenue reserve 1,431 1,630
Shareholders' funds 61,014 74,516
Net asset value per Ordinary Share 323.7p 377.6p
Approved by the Board of Directors on 30 April 2009.
The notes which follow form an integral part of these financial statements.
Unaudited Cash Flow Statement
for the year ended 31 December 2008
2008 2007
GBP'000 GBP'000
Net cash (outflow) / inflow from 550 1,365
operating activities
Taxation
Tax paid 119 (313)
Financial investment
Purchase of listed fixed asset (13,228) (14,849)
investments
Purchase of unlisted fixed asset (16,395) (49,636)
investments
Sale of listed fixed asset investments 15,288 44,727
Sale of unlisted fixed asset investments 13,056 44,997
Net cash (outflow) / inflow from (1,279) 25,239
financial investment
Equity dividends paid (130) (1,422)
Net cash inflow before financing 740 24,869
Financing
Issue of Ordinary Shares - 12,353
Purchase of Ordinary Shares for (2,297) (36,271)
cancellation
Bank interest paid (74) (169)
Reconstruction costs - (1,018)
Decrease in cash (3,111) (236)
Net funds at start of the year 3,980 4,195
Gains on foreign exchange 99 21
Net funds at the end of the year 968 3,980
The notes which follow form an integral part of these financial statements.
Notes
* Basis of preparation
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of investments and in
accordance with applicable United Kingdom accounting standards.
The Company is not an investment company within the meaning of Section 833 of
the Companies Act 2006. However, it conducts its affairs as an investment trust
for taxation purposes under Section 842 of the Income and Corporation Taxes Act
1988. As such, the Directors consider it appropriate to present the accounts in
accordance with the Statement of Recommended Practice "Financial Statements of
Investment Trust Companies" (the "SORP"), as issued by the Association of
Investment Companies in December 2005. Under the SORP, the financial
performance of the Company is presented in an Income Statement in which the
total column is the profit and loss account of the Company. Additional
disclosure of the total revenue is provided by including the revenue and
capital column analysis, which the Directors consider better demonstrates
revenue profits available for distribution by dividend. The Directors therefore
consider that the departures from the specified provisions of Schedule IV of
the Companies Act 1985, relating to the format of accounts for companies that
are investment companies, are appropriate to give a true and fair view. The
departures have no effect on total return or on the balance sheet.
2 Income
2008 2007
GBP'000 GBP'000
Income from fixed asset investments
Franked income: 86
Dividends from unlisted UK - 1
investments
Unfranked income:
Dividends from listed overseas 119 -
investments
Distribution fro UK unlisted 1,730 723
investments
Listed UK treasury gilts 90 1,155
Listed UK loan stock investments 35 -
Listed overseas treasury gilts 90 -
2,064 1,878
Total income from fixed asset 2,150 1,879
investments
Other income
Deposit interest 168 347
Other income 60 97
228 444
2,378 2,323
Income from fixed asset investments
Listed 420 1,155
Unlisted 1,730 724
2,150 1,879
3 Investment management fee
2008 2007
GBP'000 GBP'000
Investment management fee - charged 803 913
to revenue
VAT on management fee recovered (426) -
Performance fee - charged to capital - 323
377 1,236
The investment management agreement provides for a management fee of 1.25% per
annum of the Company's assets (at valuation) invested in limited partnerships
and direct private equity interests and 0.75% per annum on the remainder of the
Company's assets. No management fee is payable by the Company in respect of any
asset invested in funds managed by the Manager or its associates. The Company's
Manager will be entitled to an annual performance fee of 10% of any return in
excess of 8% per annum.
The investment management agreement may be terminated by either party by giving
12 months notice in writing, subject to there being an initial period of 24
months which ends on 1 July 2009. Prior to 2 July 2007, the Company's manager
was August Equity Management Limited ("August Equity") and a fee of 1.25% of
the net asset vale of the Company was payable. At 31 December 2008 management
fees of GBP146,000 (2007: GBP212,000) and performance fees of GBPnil (2007: GBP323,000)
were payable to the Manager. As the performance fee is expected to be driven by
capital appreciation, the Directors have determined that it should be charged
to the capital account.
Investment management fees are no longer subject to VAT. In recognition that
VAT was paid in error prior to 2008, the Company has recovered from HM Revenue
& Customs, via August Equity, VAT amounting to GBP426,000.
4 Dividend
No dividend has been declared in respect of the year ended 31 December 2008
(2007: 0.66p per share).
5 Return per ordinary share
2008 2008 2008
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Attributable to ordinary (69) (11,006) (11,075)
shareholders
Return per ordinary share (0.4p) (57.0p) (57.4p)
2007 2007 2007
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Attributable to ordinary 391 9,989 10,380
shareholders
Return per ordinary share 1.7p 42.6p 44.3p
The return per ordinary share is based on the weighted average of 19,280,488
ordinary shares in issue (2007: 23,436,058). At the year end there were
18,850,212 ordinary shares n issue (2007: 19,732,212).
6 Related party transactions
During the year under review Mr Duffield was a Director of the Company and
Chairman of the Manager, New Star Asset Management Limited. Details of the
contractual arrangements between the Company and the Manager may be found in
the Business Review and in note 3 above. Mr Duffield resigned as a Director of
the Company with effect from 30 April 2009 and resigned as Chairman and
Director of the Manager with effect from 9 April 2009.
7 2007 Financial information
The figures and financial information for 2007 are an extract of the Annual
Report and Financial Statements for the year ended 31 December 2007 and do not
constitute statutory accounts. The Annual Report and Financial Statements for
the year ended 31 December 2007 have been delivered to the Registrar of
Companies and included the Report of the Independent Auditors which was
unqualified and did not contain a statement under s237(2) or (3) Companies Act
1985.
8 2008 Financial information
The figures and financial information for 2008 are an extract of the Annual
Report and Financial Statements for the year ended 31 December 2008 and do not
constitute statutory accounts. The statutory accounts for 2008 will be
finalised on the basis of the financial information presented by the directors
in this preliminary announcement and will be delivered to the Registrar of
Companies in due course.
9 Annual Report and Financial Statements
The Annual Report and Financial Statements will be posted to shareholders in
May 2009 and will be available on the Company's webpage:
www.itshenderson.com/privatequitytrust
or in hard copy format from the Registered Office, 201 Bishopsgate, London EC2M
3AE.
The Annual General Meeting will be held on Wednesday, 17 June 2009 at 3.00 p.m.
at the offices of Henderson Global Investors, 201 Bishopsgate, London EC2M 3AE.
By Order of the Board
New Star Asset Management Limited, Secretary
30 April 2008
For further information please contact:
Ian Barrass, Henderson Global Investors, 020 7818 2964
END
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