RNS Number:6061O
New Star Absolute Return Fund PCC
22 February 2008
NEW STAR ABSOLUTE RETURN FUND PCC LIMITED
(A closed-ended investment company incorporated in Guernsey with registered
number 45060 under the provisions of The Companies (Guernsey) Law 1994 to 1996
and the Protected Cell Companies Ordinances 1997 to 1998, as amended)
Unaudited interim results
for the six months ended 31 December 2007
New Star Absolute Return Fund PCC Limited (the "Company") today announces its
unaudited interim results for the six months ended 31 December 2007.
Highlights for the six months ended 31 December 2007:
* Shareholders' funds at 31 December 2007 were �25.3 million (unaudited)
* Total return of Growth Shares and the Income Shares exceed Sterling LIBOR
since inception
* Against a backdrop of falling global stock markets, both the Growth Shares
and the Income Shares deliver a positive total return
* Thomas MacNeil appointed by John Duffield as an alternate director with
effect from 29 August 2007
30 June 2007 31 December 2007 % change
30 June -
31 December 2007
Net Asset Value - Growth Class 108.53p 108.70p 0.16%
Net Asset Value - Income Class 105.07p 102.70p -2.26%
Income Class - Total NAV Return 0.12%
For further information please contact:
Ravi Anand, New Star Asset Management Limited: 020 7225 9292
Information on the Company
Investment objective
The investment objective of New Star Absolute Return Fund PCC Limited (the "
Company") is to provide shareholders with an absolute return in excess of the
Sterling London Interbank Offered Rate ("LIBOR").*
*There can be no guarantee that these or any level of absolute returns can be
achieved at all or on a continuing basis
To achieve this objective, the Company is organised as a feeder fund and it is
intended that all of the Company's assets be invested in New Star Multi Strategy
Master Hedge Fund Limited (the "Master Fund") Sterling Shares.
Investment policy
The Company, through its investment in the Master Fund, seeks to produce
absolute returns through a range of hedge fund strategies. The Master Fund's
portfolio is an actively managed diversified portfolio of predominantly equity
related positions.
By investing in a range of hedge fund strategies, the Investment Manager seeks
to diversify the Master Fund's portfolio by geography, sector and stock. The
Investment Manager actively manages the Master Fund's exposure to particular
markets, sectors and stocks as well as to individual managers and carefully
monitors risks.
Capital Structure
The Company has two classes of share; Income Shares in the Income Cell and
Growth Shares in the Growth Cell. The Income Shares aim to provide income in the
form of dividends, together with capital growth. The Growth Shares aim to
provide a capital only return.
Performance
Performance (%) since launch (net of fees)
2006 2007
Growth class Income class* Growth class Income class*
January - - 1.68 1.67
February - - 0.30 0.32
March - - 0.65 0.63
April - - 1.12 1.13
May - - 1.86 1.85
June - - 0.56 0.56
July - - 0.01 0.02
August -0.29 -0.29 -2.51 -2.50
September -0.22 -0.22 1.70 1.70
October 1.54 1.54 2.47 2.50
November -0.41 -0.41 -1.46 -1.51
December 1.47 1.46 0.03 0.04
YTD 2.08 2.08 6.49 6.32
Source: All fund information from New Star Asset Management, HSBC Securities
(Ireland) Limited. Returns to 31 December include amortisation of launch costs
of 2.32% of initial proceeds. * Includes dividends re-invested.
Investment Manager's Report
for the six months period ended 31 December 2007
31 December 2007 % change % change inception
30 June - to
30 June 2007 31 December 2007 31 December 2007
Net asset value - Growth class 108.53p 108.70p 0.16% 8.70%
Net asset value - Income class 105.07p 102.70p -2.26% 2.70%
Total return -Income class 0.12% 8.53%
The six months to 31 December 2007 was a difficult period for your Company and
for the hedge fund sector as a whole. The net asset value of the Growth class
shares rose 0.16% to 108.70p during the period. The net asset value of the
Income shares fell 2.3% but dividends totalling 2.50p were paid, leaving the
total return on the Income shares at 0.12%, assuming dividends were reinvested.
During the period, the return on cash was 3.2% as measured by sterling LIBOR.
Your Company commenced trading on 2 August 2006 with a net asset value per share
of 100.00p before launch costs of 2.3%. The net asset value of the Growth Class
shares had risen 8.7% by 31 December 2007. The total return on the Income shares
including dividends reinvested was 8.5% while the return on cash was 8.2% as
measured by sterling LIBOR.
Market review
Global equities faced volatile and challenging conditions during the period
under review, with the MSCI World Total Return Index gaining just 0.9% in
sterling terms amid fears that contagion from the US sub-prime lending crisis
could seriously damage the global economy. Japan fell 6.1% in sterling terms
while the US fell 0.3%. By contrast, Asia excluding Japan gained 20.7% and Latin
America gained 19.5%. Within Europe, the UK fell 2.1% while Europe excluding the
UK rose 3.9% in sterling, aided by the euro's strength.
The weakest sectors were those that suffered directly from the credit market
dislocation and from fears of a consumer-led US slowdown. Media fell 8.5% in
sterling terms, banks fell 5.1%, general financial services fell 3.3% and
retailing fell 2.3%. The best-performing areas included defensive sectors and
sectors that stood to benefit from emerging market economic growth. Chemicals
gained 22.9%, energy returned 17.4%, basic resources gained 17.2% and
telecommunications gained 16.0%.
In the commodities market, oil rose 34.1% to $94.92 in response to fears of
supply shortages while gold responded to the weakening dollar, fears of
financial instability and inflationary pressures by gaining 28.6% to $836.15.
With risk aversion increasing despite monetary easing in the US and the UK,
government bonds benefited from a "flight to quality", with UK gilts returning
8.6%. By contrast, lower-quality bonds underperformed. The JPM EMBI+ Total
Return Index, which tracks emerging market sovereign debt, returned 6.7% in
sterling while high-yielding corporate bonds fell 0.5%.
Portfolio review
Your Company invests in the New Star Multi Strategy Master Hedge Fund. This
master fund comprises an actively-managed diversified global equity portfolio
that seeks to generate absolute returns through long and short positions and
active risk management. In response to the volatility in equity markets and the
uncertain economic conditions resulting from credit market dislocation, the
managers of the underlying strategies in the master fund sought to reduce the
risks within their portfolios. This resulted in your Company's gross market
exposure falling from 195.7% to 154.6% over the period while its net market
exposure fell from 33.3% to 17.2%.
Of the underlying strategies, the UK mid-cap strategy did best to exploit the
turbulent conditions in financial markets, rising 14.0% over the period in
sterling, its base currency, while the European Opportunities strategy rose 8.1%
in euros, its base currency, and the European trading strategy gained 7.1% in
euros, its base currency. The weakest strategy was the European strategy, which
fell 12.1% in euros, its base currency, mainly as a result of its long positions
in mid-cap and financial stocks, which were particularly adversely affected by
credit market turmoil.
Three new strategies were added to the master fund during the period - a
European trading strategy and two long/short equity funds specialising in real
estate and technology respectively - while the weighting in the European
Opportunities strategy was significantly increased. At the period end, the UK
mid-cap strategy had the biggest weighting at 21.3%, followed by the financials
strategy, at 17.9%, the European Opportunities strategy, at 13.9%, the global
sector-biased strategy, at 12.2%, and the UK value/special situations strategy,
at 10.1%.
Outlook
At the turn of the year, there was increasing evidence that economic conditions
were deteriorating in the US and the more interest rate sensitive economies of
Europe such as the UK, Ireland and Spain. This was reflected in a de-rating of
equities, which were trading at the end of 2007 on a trailing earnings multiple
of 15.7 as measured by the MSCI World Index against more than 30 in 2002. The
dividend yield on the MSCI World Index, meanwhile, had risen to a four-year high
of 2.3%.
Momentum in the emerging markets and positive money supply trends may result in
a "soft landing" but the "credit crunch" has increased the risks of more serious
dislocation. Central banks have responded with looser monetary policies, with
the US
Federal Reserve being the most aggressive in its interest rate cuts, but their
room for further interest rate cuts may be constrained by increased inflationary
pressures. This is particularly the case in Europe, where the Bank of England
moved only modestly to ease monetary policy during the period and the European
Central Bank was on hold.
Such conditions may affect the government bond markets negatively. The central
bankers' shifting focus from bearing down on prices towards addressing financial
market dislocation could, however, result in rotation back into equities, which
look modestly valued, assuming the world economy avoids a full-scale recession.
The high dispersion of returns between sectors and individual stocks is likely
to continue over the coming months in response to the challenging economic
circumstances. In such an environment, careful long/short stock selection will
remain important.
Your Company's un-audited net asset value at 8 February 2008 was 107.43p per
Growth Class share and 100.24p per Income Class share.
Portfolio at 31 December 2007
Asset allocation by strategy (% of NAV)
Strategy %
UK mid-cap 21.3
Financials 17.9
European opportunities 13.9
Global, sector biased 12.2
UK value / special situations 10.1
UK multi-cap 8.2
Technology 5.4
Real estate 4.2
Europe 3.7
European trading 3.1
Aggregate largest net long and short sector exposures
Sector % of NAV
Mining 6.6
Aerospace & Defense 4.4
Industrial Engineering 3.4
Chemicals 2.7
Banks -1.4
Beverages -1.5
General Retailers -1.6
Travel & Leisure -5.2
Unaudited Statement of Net Assets
as at 31 December 2007
Income Growth Total
Cell Cell
Notes � � �
Assets:
Investment in New Star Multi Strategy 11,419,577 13,872,520 25,292,097
Master Hedge Fund Limited at fair value
through profit or loss (Cost: �21,632,110)
Cash and cash equivalents 76,329 92,724 169,053
Other receivables and prepayments 3,490 4,240 7,730
Total assets 11,499,396 13,969,484 25,468,880
Liabilities:
Performance fee payable 3 - - -
Management fees payable 3 28,807 38,721 67,528
Directors' fees payable 8 2,472 3,004 5,476
Custodian fees payable 3 4,339 5,270 9,609
Accrued liabilities and other payables 43,392 48,987 92,379
Total liabilities 79,010 95,982 174,992
Net assets: 11,420,386 13,873,502 25,293,888
As at 31 December 2007: Note Number of shares Net asset value Net asset value per
share (pence)
Income Shares 10,12 11,177,331 11,420,386 102.17
Growth Shares 10,12 12,828,002 13,873,502 108.15
The accompanying notes form an integral part of these financial statements
Audited Statement of Net Assets
as at 30 June 2007
Income Growth Total
Cell Cell
Notes � � �
Assets:
Investment in New Star Multi Strategy 10,946,769 15,150,449 26,097,218
Master Hedge Fund Limited at fair value
through profit or loss (Cost: �22,655,869)
Cash and cash equivalents 42,071 58,226 100,297
Other receivables and prepayments 3,559 4,926 8,485
Total assets 10,992,399 15,213,601 26,206,000
Liabilities:
Performance fee payable 3 162,565 222,516 385,081
Management fees payable 3 13,107 18,137 31,244
Directors' fees payable 8 15,101 20,900 36,001
Custodian fees payable 3 3,827 5,296 9,123
Accrued liabilities and other payables 23,176 34,555 57,731
Total liabilities 217,776 301,404 519,180
Net assets: 10,774,623 14,912,197 25,686,820
As at 30 June 2007: Note Number of shares Net asset value Net asset value per
share (pence)
Income Shares 10,12 10,300,000 10,774,623 104.61
Growth Shares 10,12 13,800,000 14,912,197 108.06
The accompanying notes form an integral part of these financial
statements
Unaudited Statement of Operations
for the six months period ended 31 December 2007
Income Growth Total
Cell Cell
Notes � � �
Investment income of the Company
Interest income 267 324 591
Net investment income 267 324 591
Investment gain/(loss) from
New Star Multi Strategy Master Hedge Fund
Limited
Net realised gain on investments 658,305 799,709 1,458,014
Net realised loss on foreign currency (215,438) (261,715) (477,153)
Net movement in unrealised gain on investments (264,026) (320,739) (584,765)
Net unrealised gain on foreign currency 8 9 17
Net investment gain from
New Star Multi Strategy Master Hedge Fund 178,849 217,264 396,113
Limited
Total investment gain 179,116 217,588 396,704
Expenses
Performance fee 3 - 3,717 3,717
Investment management fees 3 85,653 108,787 194,440
Launch Costs 3 5,996 7,285 13,281
Directors' fees and expenses 8 35,815 43,509 79,324
Audit fee 3,433 4,170 7,603
Custodian fees 3 2,684 3,261 5,945
Other expenses 37,199 45,189 82,388
Total expenses 170,780 215,918 386,698
Net profit 8,336 1,670 10,006
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Operations
for the six months period ended 31 December 2007 (continued)
Income Growth
Cell Cell
Earnings per Cell
Income Share Class �8,336 -
Growth Share Class - �1,670
Weighted Average Shares
Income Share Class 10,746,999 -
Growth Share Class - 13,328,168
Earnings per Share
Income Share Class �0.0008 -
Growth Share Class - �0.0001
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Operations
for the period from 29 June 2006 (date of incorporation) to 31 December 2006
Income Growth Total
Cell Cell
Notes � � �
Investment income of the Company
Interest income 339 458 797
Net investment income 339 458 797
Investment gain/(loss) from
New Star Multi Strategy Master Hedge Fund
Limited
Net realised gain on investments 165,843 224,047 389,890
Net realised gain on foreign currency 17,401 23,508 40,909
Net movement in unrealised gain on investments 277,473 374,856 652,329
Net investment gain from
New Star Multi Strategy Master Hedge Fund 460,717 622,411 1,083,128
Limited
Total investment gain 461,056 622,869 1,083,925
Expenses
Performance fee 3 41,008 56,312 97,320
Investment management fees 3 64,263 86,378 150,641
Launch Costs 3 39,715 53,654 93,369
Directors' fees and expenses 8 7,919 10,697 18,616
Audit fee 2,640 3,566 6,206
Custodian fees 3 1,760 2,377 4,137
Other expenses 25,472 34,515 59,987
Total expenses 182,777 247,499 430,276
Net profit 278,279 375,370 653,649
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Operations
for the period from 29 June 2006 (date of incorporation) to 31 December 2006
(continued)
Income Growth
Cell Cell
Earnings per Cell
Income Share Class �278,279 -
Growth Share Class - �375,370
Weighted Average Shares
Income Share Class 10,300,000 -
Growth Share Class - 13,800,000
Earnings per Share
Income Share Class �0.0270 -
Growth Share Class - �0.0272
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Changes in Equity
for the six months period ended 31 December 2007
Income Growth Total
Cell Cell
� � �
Balance as at 30 June 2007 10,774,623 14,912,197 25,686,820
Issuance of shares during the period 1,002,210 - 1,002,210
Share issuance costs (453) (551) (1,004)
Redemption of shares during the period (95,238) (1,039,814) (1,135,052)
Net profit 8,336 1,670 10,006
Dividends paid on Income Shares (269,092) - (269,092)
Balance as at 31 December 2007 11,420,386 13,873,502 25,293,888
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Changes in Equity
for the period from 29 June 2006 (date of incorporation) to 31 December 2006
Income Growth Total
Cell Cell
� � �
Balance at the date of incorporation - - -
Issuance of shares during the period 10,300,000 13,800,000 24,100,000
Share issuance costs (64,510) (87,136) (151,646)
Redemption of shares during the period - - -
Net profit 278,279 375,370 653,649
Dividends paid on Income Shares (85,490) - (85,490)
Balance as at 31 December 2006 10,428,279 14,088,234 24,516,513
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Cash Flows
for the six months period ended 31 December 2007
Income Growth Total
Cell Cell
� � �
Cash flows from operating activities
Net profit 8,336 1,670 10,006
Adjustment for:
- Net investment gain from New Star Multi Strategy (178,849) (217,264) (396,113)
Master Hedge Fund Limited
Adjustments to reconcile net increase in net assets for
the financial period to net cash from operating
activities:
Purchases of investments (836,324) - (836,324)
Proceeds from sale of investments 542,365 1,495,190 2,037,555
Net decrease in other receivable and prepayments 69 686 755
Net decrease in liabilities (138,766) (205,418) (344,184)
Net cash (used in)/provided by operating activities (603,169) 1,074,864 471,695
Cash flows from financing activities
Issuance of shares during the period 1,002,210 - 1,002,210
Share issuance costs (453) (551) (1,004)
Redemption of shares during the period (95,238) (1,039,815) (1,135,053)
Dividends paid on Income Shares (269,092) - (269,092)
Net cash provided by/(used in) financing activities 637,427 (1,040,366) (402,939)
Net increase in cash and cash equivalents 34,258 34,498 68,756
Cash and cash equivalents at the beginning of the 42,071 58,226 100,297
period
Cash and cash equivalents at the end of the period 76,329 92,724 169,053
Supplementary cash flow information:
Interest received 267 324 591
Interest paid (19) (24) (43)
The accompanying notes form an integral part of these financial statements
Unaudited Statement of Cash Flows
for the period from 29 June 2006 (date of incorporation) to 31 December 2006
Income Growth Total
Cell Cell
� � �
Cash flows from operating activities
Net profit 278,279 375,370 653,649
Adjustment for:
- Net investment gain from New Star Multi Strategy (460,717) (622,411) (1,083,128)
Master Hedge Fund Limited
Adjustments to reconcile net increase in net assets for
the financial period to net cash from operating
activities:
Purchases of investments (9,936,492) (13,421,508) (23,358,000)
Proceeds from sale of investments 42,540 57,460 100,000
Net increase in other receivable and prepayments (129,319) (177,024) (306,343)
Net increase in liabilities 72,279 97,629 169,908
Net cash used in operating activities (10,133,430) (13,690,484) (23,823,914)
Cash flows from financing activities
Issuance of shares during the period 10,300,000 13,800,000 24,100,000
Share issuance costs (64,510) (87,136) (151,646)
Redemption of shares during the period
- - -
Dividends paid on Income Shares (85,490) - (85,490)
Net cash provided by financing activities 10,150,000 13,712,864 23,862,864
Net increase in cash and cash equivalents 16,570 22,380 38,950
Cash and cash equivalents at the beginning of the
period - - -
Cash and cash equivalents at the end of the period 16,570 22,380 38,950
Supplementary cash flow information:
Interest received 282 380 662
Interest paid
- - -
The accompanying notes form an integral part of these financial statements
Notes forming part of the unaudited financial statements
for the six months period ended 31 December 2007
1 Organisation and nature of business
New Star Absolute Return Fund PCC Limited (the "Company") is a closed ended
protected cell investment company registered and incorporated in Guernsey on 29
June 2006 under the provisions of the Companies (Guernsey) Laws 1994 to 1996 and
the Protected Cell Companies Ordinance 1997 to 1998, as amended. The company
commenced operations on the 2 August 2006.
The Company is organised as a feeder fund and all of the Company's assets, to
the extent they are not retained in cash to meet anticipated expenses or
dividends payable on the Income Shares, are invested in New Star Multi Strategy
Master Hedge Fund Limited (the "Master Fund") Sterling Shares. The Master Fund
is an exempted company incorporated with limited liability in the Cayman
Islands.
The investment objective of the Company is to provide its shareholders with
absolute returns in excess of the Sterling London Interbank Offered Rate. The
Company, through its investment in the Master Fund, seeks to produce absolute
returns through a range of hedge fund strategies.
The Income Shares and the Growth Shares are admitted to trading on the AIM
Market of the London Stock Exchange ("AIM") and the Channel Islands Stock
Exchange.
Earnings per Share (EPS) have been calculated at Share Class level for the
Company in the base currency of each Share Class, on a weighted average basis.
2 Summary of significant accounting policies
Statement of compliance
The financial statements have been prepared in accordance with International
Financial Reporting Standards issued by the International Accounting Standards
Board (IASB), interpretations issued by the International Financial Reporting
Interpretations Committee of the IASB, and the Companies (Guernsey) Law, 1994.
The financial statements are presented in Pounds Sterling ("�").
Basis of preparation
The financial statements have been prepared on a historical cost basis, except
for financial instruments classified at fair value through profit or loss that
have been measured at fair value.
The significant accounting policies adopted by the Company are as follows:
Use of estimates
The preparation of the financial information in accordance with International
Financial Reporting Standards requires the Directors to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
information and the reported amounts of revenues and expenses during the period.
Actual results could differ from such estimates.
Valuation of investments
The Company's investment in the Master Fund is valued at the latest available
net asset value per share at the period end. Unrealised gains and losses arising
from the Company's investment in the Master Fund are included in the Statement
of Operations. The performance of the Company is directly affected by the
performance of the Master Fund. The significant accounting policies, of the
Master Fund, are listed in note 2 of the Master Fund's financial statements. The
Master Fund's Financial Statements are available upon request from the
Administrator.
Foreign currencies
(i) Functional and presentation currency
Items included in the Company's financial statements are measured using the
currency of the primary economic environment in which it operates ('the
functional currency'). This is Sterling the base currency of the Company.
(ii) Foreign currency transactions
Monetary assets and liabilities denominated in currencies other than Sterling
are translated into Sterling at the closing rates of exchange at each period
end. Transactions during the period, including purchases and sales of
securities, income and expenses, are translated at the rate of exchange
prevailing on the date of the transaction. Foreign currency transaction gains
and losses are included in net realised loss on foreign currency.
Cash and cash equivalents
Cash and cash equivalents consist of bank balances.
Net asset value per share
The Net Asset Value per share disclosed on the face of the statement of net
assets is calculated in accordance with the International Financial Reporting
Standards by dividing net assets included in the balance sheet by the number of
shares outstanding at 31 December 2007.
Recognition of expenses and income
(i) Interest and dividends
Interest income and expense are accounted for on an accruals basis. Dividend
income is recognised on the ex-dividend date.
(ii) Expenses
All operating expenses are recognised in the Statement of Operations on the
accruals basis.
Accounting standards issued but not yet effective
IFRS 7, Financial Instruments: Disclosures, and the complementary amendment to
IAS 1, Presentation of Financial Statements - Capital Disclosures, were issued
during 2006. IFRS 7 introduces new disclosures relating to financial
instruments. The amendment to IAS 1 requires additional disclosures regarding
the Company's objectives and policies for its capital, which is represented by
the net assets attributable to the holders of ordinary shares. These standards
are effective for annual accounting periods beginning on or after 1 January 2007
and will be adopted at that time. There will be no impact on the classification
and measurement of the Company's capital.
3 Fees and expenses
(a) Investment Management Fee
New Star Asset Management (Bermuda) Limited (the "Investment Manager") is paid
by the Company an investment management fee of 1.5 per cent per annum of the Net
Asset Value (before deducting the amount of any accrued liability for
Performance Fee) attributable to the Income Shares and of the Growth Shares. The
investment management fee is calculated and accrued and is paid monthly in
arrears. Investment management fees of �85,653 (Dec 2006: �64,263) and �108,787
(Dec 2006: � 86,378) respectively for Income Cell and Growth Cell were incurred
during the period ended 31 December 2007 of which �28,807 (June 2007: �13,107)
and �38,721(June 2007: �18,137) respectively for Income Cell and Growth Cell was
payable to the Investment Manager at the period end.
With effect from 1 February 2008, the arrangements were changed for the
calculation and payment of the management fee to its investment manager such
that management fees are calculated and paid by New Star Multi Strategy Master
Hedge Fund Limited (the "Master Fund) rather than by the company. Substantially
all of the Company's assets are invested in the Master Fund.
The change has been introduced to ensure equitable treatment between the two
cells upon conversions and other cash movements. The economic effect for
Shareholders is minimal.
(b) Performance Fee
The Investment Manager is also paid by the Company the Performance Fee which is
calculated in respect of last valuation day prior to 30 June and 31 December in
each year ("Performance Period"), accrued on each valuation day and paid in
arrears.
For each Performance Period, the Performance Fee in respect of each Cell is
equal to 20 per cent of the appreciation (before deducting the amount of any
accrued liability for the Performance Fee) in the Net Asset Value of the
relevant Cell above the previous peak Net Asset Value of that Cell, being the
greater of:
(i) the aggregate amount subscribed under the Placing for shares within that
Cell; and
(ii) the Net Asset Value of that Cell at the last Valuation Day of the last
Performance Period in respect of which a Performance Fee was charged.
Payment of the Performance Fee will be subject to the achievement of a "
Performance Fee Trigger".
Performance Fee Trigger
If the Net Asset Value per Share at the end of a Performance Period (together,
in the case of Income Shares, with all dividends paid or to be paid for the
period from Admission to the end of the relevant Performance Period) is less
than 100p increased by 2.5p for every Performance Period (pro-rated for any part
period thereof) (the "Performance Fee Trigger"), the Investment Manager will not
at that time be entitled to be paid the Performance Fee otherwise due. If the
Performance Fee Trigger has been met but payment in full of any Performance Fee
would lead to the Net Asset Value per Share falling below the relevant
Performance Fee Trigger, the Performance Fee will only be paid to the extent it
does not reduce the Net Asset Value per Share below the Performance Fee Trigger.
If the Performance Fee Trigger is met in the future, any previously unpaid
Performance Fees (due to the prior application of the Performance Fee Trigger)
will be payable to the Investment Manager (but again only to the extent such
payment does not reduce the Net Asset Value per Share below the relevant
Performance Fee Trigger).
In any period where the Net Asset Value per Share is below the Performance Fee
Trigger, a contingent Performance Fee liability will exist. The Company intends
to accrue such contingent liability within the Net Asset Value per Share which
it announces following each Valuation Day.
Accordingly, any such announced Net Asset Value may differ from the Net Asset
Value per Share calculated on a normal accounting basis.
A performance fee of nil (Dec 2006: �41,008) and �3,717 (Dec 2006: �56,312)
respectively for Income Cell and Growth Cell was incurred during the period
ended 31 December 2007 of which nil (June 2007: �162,565) and nil (June 2007:
�222,516) respectively for Income Cell and Growth Cell was payable to the
Investment Manager at the period end.
With effect from 1 February 2008, the arrangements were changed for the
calculation and payment of the performance fee to its investment manager such
that performance fees are calculated and paid by New Star Multi Strategy Master
Hedge Fund Limited (the "Master Fund) rather than by the company. Substantially
all of the Company's assets are invested in the Master Fund.
The change has been introduced to ensure equitable treatment between the two
cells upon conversions and other cash movements. The economic effect for
Shareholders is minimal.
(c) Administration Fees
HSBC Securities Services (Guernsey) Limited, the administrator and secretary, is
paid an annual fee. The, minimum fee is �11,600 to perform, or procure the
performance of, all general administrative and company secretarial tasks for the
Company, including the calculation of the Net Asset Value of the Company and the
Net Asset Value per Share of the Income Shares and the Growth Shares,
maintaining its financial records and the organising of shareholder meetings and
will be reimbursed reasonable out of pocket expenses by the Company. The
Administrator is responsible for payment of all of the Sub-Administrator's fees
and expenses.
(d) Custodian Fees
HSBC Institutional Trust Services (Ireland) Limited, the Custodian is paid a
monthly fee of US$1,000. The Custodian is also reimbursed by the Company
reasonable out-of-pocket expenses. Custodian fees of �2,684 (Dec 2006: �1,760)
and �3,261 (Dec 2006: �2,377) respectively for Income Cell and Growth Cell was
incurred during the period ended 31 December 2007 of which �4,339 (June 2007:
�3,827) and �5,270 (June 2007: �5,296) respectively for Income Cell and Growth
Cell was payable at the period end.
(e) Registrar Fees
Capital IRG (CI) Limited, the Registrar, is paid a minimum annual fee of �7,500
and on a per shareholder basis. The Registrar is also reimbursed by the Company
reasonable out-of-pocket expenses. During the period ended 31 December 2007,
registration fees of �3,676 (Dec 2006: �1,320) and �4,465 (Dec 2006: �1,783)
respectively for Income Cell and Growth Cell was incurred of which nil (June
2007: �112) and nil (June 2007: �155) was payable at the period end.
(f) Financial advisory and broking services fees
Winterflood Securities Limited, the Nominated Broker, is paid an annual fee of
�10,000. The Nominated Broker is also reimbursed by the Company for reasonable
out-of-pocket expenses. During the period ended 31 December 2007, a brokerage
fee of �2,288 (Dec 2006: �1,760) and �2,780 (Dec 2006: � 2,377) respectively for
Income Cell and Growth Cell was incurred of which �1,499 (June 2007: �3,662) and
�1,693 (June 2007: �5,461) respectively for Income Cell and Growth Cell was
payable at the period end.
KPMG LLP was appointed as the Nominated Adviser from 26 June 2007 and is paid an
annual fee of �32,000 and is also reimbursed reasonable out-of-pocket expenses.
(g) CISX listing sponsor Fees
HSBC Securities Services (Guernsey) Limited, CISX listing sponsor, is paid an
annual fee of �1,800 and is also reimbursed reasonable out-of-pocket expenses.
During the period ended 31 December 2007 a listing fee of �1,108 (Dec 2006:
�317) and �1,345 (Dec 2006: �428) respectively for Income Cell and Growth Cell
was incurred of which �428 (June 2007: �689) and �484 (June 2007: �953)
respectively for Income Cell and Growth Cell was payable at the period end.
(h) Launch costs and share issuance costs
The launch costs and share issuance costs of the Company are those which are
necessary for the incorporation of the Company and the Placing. These expenses
have been met by the Company and paid on or around Admission out of the Initial
Gross Proceeds. These were amortized in the Net Asset Value per Share over the
period from Admission to 30 June 2007. These include the fees and expenses of
the Nominated Adviser, the Nominated Broker, the CISX Sponsor, the
Administrator, the fees of the London Stock Exchange and Channel Islands Stock
Exchange, legal and accounting fees, promotion, printing, advertising and
distribution costs.
During the period ended 31 December 2007, share issuance costs of �453 (Dec
2006: �64,510) and �551 (Dec 2006: �87,136) respectively for Income Cell and
Growth Cell was incurred, which have been accounted for in the Statement of
Changes in Equity. During the period ended 31 December 2007, launch costs of
�5,996 (Dec 2006: �39,715) and �7,285 (Dec 2006: �53,654) respectively for
Income Cell and Growth Cell was incurred, which have been accounted for in the
Statement of Operations.
4 Dividend policy
Subject to market conditions, the Directors intend to pay dividends to Income
Shareholders in respect of the three month periods ending 31 March, 30 June, 30
September and 31 December. The Company may receive dividends from its holding of
Master Fund Sterling Shares. To the extent that any such Master Fund dividends
attributable to the Income Shares are insufficient to pay dividends on Income
Shares, the Company may use available cash resources, redeem Master Fund
Sterling Shares attributable to the Income Shares or draw down on borrowings to
fund dividend payments. Any such borrowings would be secured on and only have
recourse to assets in the Income Cell and cost of borrowing would only be borne
by assets in the Income Cell.
During the period ended 31 December 2007, the Company paid the following
dividends in respect of the Income Shares:
Dividend per share Dividend
�
First Quarterly Dividend
(Paid on date 23 August 2007
to shareholders registered on 27 July 2007) 1.25p 128,750
Second Quarterly Dividend
(Paid on date 30 November 2007 to shareholders registered
on 16 November 2007) 1.25p 140,342
Total Dividends paid during the period 269,092
Any dividends received from the Master Fund Sterling Shares attributable to the
Growth Shares will either be reinvested in the Master Fund or held as cash.
5 Taxation
The Company is registered in Guernsey as an exempt company and therefore, is not
resident in Guernsey for the purposes of liability to Guernsey income tax.
Confirmation has been obtained from the Administrator of Income Tax that, under
current law and practice in Guernsey, the Company will only be liable to tax in
Guernsey in respect of income arising in Guernsey, other than bank deposit
interest.
Guernsey does not levy capital gains tax (with the exception of dwellings profit
tax) and therefore, neither the Company nor any of the shareholders will suffer
any tax in Guernsey on capital gains. Payments made by the Company to non
Guernsey resident shareholders whether made during the life of the Company or by
distribution on the liquidation of the Company should not be subject to Guernsey
tax.
6 Fair value information
For certain of the Company's financial instruments not carried at fair value
including interest receivable, other receivables, fees payable, interest
payable and accrued liabilities and other payables, the carrying amounts
approximate fair value due to the immediate or short-term nature of these
financial instruments.
Fair value estimates are made at a specific point in time, based on market
conditions and information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgement and therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates. There were no such
estimates during the period.
7 Risks
The Company carries the same financial risks inherent in the Master Fund as the
Company's only investment is in the Master Fund.
The Master Fund maintains active trading positions in a variety of derivative
and non-derivative financial instruments as dictated by its investment
management strategy. As a result, the Master Fund is exposed to various types of
risk such as credit risk, counterparty risk, leverage risk, liquidity risk,
short sale risk and market risk. Market risk includes currency risk, interest
rate risk and equity price risk. The nature and extent of the financial
instruments outstanding at the date of the statement of net assets and the risk
management policies employed by the Master Fund are discussed below.
(a) Market risk
The Master Fund trades in financial instruments, taking positions in traded and
over the counter instruments including derivatives, to take advantage of short
term market movements in the equity and bond markets.
Market risk is the risk that changes in interest rates, foreign exchange rates
or equity and commodity prices will make an instrument less valuable or more
onerous. All trading financial instruments are recognised at fair value, and all
changes in market conditions directly affect net income. Market risk is managed
through diversification of the portfolio.
(b) Credit risk
Credit risk is the risk that counterparty to a financial instrument will fail to
discharge an obligation or commitment that it has entered into with the Master
Fund. Credit risk is generally higher when a non-exchange traded financial
instrument is involved because the counterparty for non-exchange traded
financial instruments is not backed by an exchange clearing house. All financial
instruments in the Master Fund are cleared through and held in custody primarily
by Goldman Sachs International and Morgan Stanley & Co. International Limited.
(c) Counterparty risk
The Master Fund is subject to counterparty risk to the extent that its prime
brokers may be unable to fulfil their obligations either to return the Master
Fund's securities or repay amounts owed. The Master Fund does not anticipate any
losses as a result of this concentration. The risk that counterparties to both
derivative and other instruments might default on their obligations is monitored
on an ongoing basis. To manage the level of counterparty risk, the Master Fund
deals with counterparties of good credit standing only.
(d) Interest rate risk
The majority of the Master Fund's financial assets and liabilities are
non-interest bearing. Margin cash at brokers and counterparties comprise current
and call accounts which bear interest at short term market rates and therefore
are not exposed to significant amounts of interest rate risk.
(e) Currency risk
The Master Fund may invest in financial instruments denominated in currencies
other than its measurement currency. Consequently, the Master Fund is exposed to
risks that the exchange rate of its currency relative to other currencies may
change in a manner that has an adverse effect on the value of that portion of
the Master Fund's assets or liabilities denominated in currencies other than
USD. In addition to the above the Net Asset Value of the GBP class is exposed to
possible adverse currency fluctuations between USD and GBP. The Investment
Manager may use currency hedging techniques with an aim of reducing currency
risk in the Master Fund. The Fund will only invest in the Sterling shares of the
Master Fund.
(f) Liquidity risk
The Master Fund's financial instruments include investments in derivative
contracts traded over-the-counter, which are not traded in an organised public
market and may generally be illiquid. As a result, the Master Fund may not be
able to quickly liquidate its investments in these instruments at an amount
close to their fair value in order to meet its liquidity requirements or to
respond to specific events such as deterioration in the credit worthiness of a
particular issuer. The Master Fund's investments are considered to be readily
realisable as they are listed on major stock exchanges only.
(g) Leverage risk
The Master Fund is subject to leverage risk to the extent that leveraged
investments may increase the potential loss to investors should any depreciation
in the value of the leveraged investments occur. The Master Fund's use of
contracts for differences ('CFDs') as part of its portfolio management
techniques results in certain additional risks. CFDs provide leverage and
consequently may increase the potential loss to the investors should any
depreciation in the value of the leveraged instruments or underlying investments
occur. The Master Fund's leverage policy may expose the Master Fund to greater
than average risk.
(h) Short sale risk
The Master Fund is subject to short sale risk whereby increases in the market
price of an investment sold short could result in an inability to cover the
short position and lead to significant losses.
8 Directors
Each director is entitled to receive fees of �15,000 per annum. John Duffield's
fee is paid by the Company to New Star Asset Management Holdings Limited for
making available his services as a director of the Company.
Directors fees and expenses for the period ended 31 December 2007, amounted to
�35,815 (Dec ember 2006: �7,919) and �45,309 (December 2006: �10,697)
respectively for Income Cell and Growth Cell of which �2,472 (June 2007:
�15,101) and �3,004 (June 2007: �20,900) respectively for Income Cell and Growth
Cell was payable at the period end.
9 Related party transactions
Certain of the directors of the Company are also directors, shareholders or
partners of companies or firms who provide services to the Company. Mr. John
Duffield is chairman of New Star Asset Management (Bermuda) Limited and New Star
Asset Management Limited which receives fees as described in note 3. Funds under
management of New Star Asset Management Group PLC held 6,830,000 Growth Shares
in the Company as at 31 December 2007. Mr. John Hawkins is a Director of a HSBC
plc Group Company, HSBC Investment Management (International) Limited.
10 Share Capital
Authorised:
The authorised share capital of the Company consists of 100 Management Shares of
no par value and unlimited number of ordinary shares of no par value. Currently
two Share Classes, the Income Share Class and the Growth Share Class have been
created by the Directors.
Issued:
The Company is a closed ended protected cell investment company. Two management
shares have been allotted in respect of the non cellular assets of the Company
to the investment manager and to its nominee.
Shares of both the cells have been issued at 100p per share
Transactions in shares during the six month period ended 31 December 2007 were
as follows:
Income Cell Growth Cell
Income Share Class Growth Share Class
Shares Amount Shares Amount
� �
Opening balance 10,300,000 10,300,000 13,800,000 13,800,000
Shares issued - - - -
Net shares issued / (redeemed) 927,331 955,069 (886,998) (993,540)
by conversion
Shares redeemed (50,000) (48,097) (85,000) (84,575)
Closing balance 11,177,331 11,206,972 12,828,002 12,721,885
Transactions in shares during the period from 29 June 2006 (date of
incorporation) to 31 December 2007 were as follows:
Income Cell Growth Cell
Income Share Class Growth Share Class
Shares Amount Shares Amount
� �
Opening balance - - - -
Shares issued 10,300,000 10,300,000 13,800,000 13,800,000
Net shares issued / (redeemed) - - - -
by conversion
Shares redeemed - - - -
Closing balance 10,300,000 10,300,000 13,800,000 13,800,000
Share conversions
The Company's Articles of Association enable Shareholders to convert some or all
of their shares in one class into shares of any other Class with the same Cell
on the first business day of January, April, July and October in each year or
such other days as the Directors may determine. Shares are converted from one
class to another by reference to the ratio of the most recently published NAV
per share of the respective share classes.
On 1 October 2007 the following shares were converted utilising this facility:
Shares redeemed Shares allotted Net conversions
Income Shares 46,199 973,530 927,331
Growth Shares 931,187 44,189 (886,998)
During the six months to 31 December 2007, the Company repurchased a total of
50,000 Income shares at an average price of 96.0p per share and 85,000 Growth
shares at an average price of 99.5p per share.
Substantial shareholders:
The Annual General Meeting held on 16 November 2007 approved an amendment to the
Articles of Association, requiring shareholders to disclose to the Company any
significant interests in shares or any relevant changes to those interests. The
amendment to the Articles of Association was introduced to assist the Company in
complying with the AIM rules.
11 Cross Class Liability
The Company is constituted as a protected cell company under the Protected Cell
Companies Ordinances 1997 to 1998 (as amended). A protected cell company is a
multi-cellular company whose principal feature is that each cell has its own
distinct assets which are not available to the creditor of the other cell of
that Company or the Company as a whole. However, jurisdictions outside Guernsey
may not be prepared to accept the same principles. The Protected Cell Companies
Ordinances 1997 to 1998 (as amended) has not yet been tested in the courts.
12 Adjustment to Net Asset Value per Share as at 31 December 2007
Income Cell Growth Cell
GBP GBP
Net asset value per share for financial statement purposes 102.17 p 108.15 p
Add: IAS 39 adjustment to restate investments 0.52 p 0.55 p
from bid/ask basis of valuation
Net asset value per share as 102.70 p 108.70 p
reported to shareholders
Adjustment to Net Asset Value per Share as at 30 June 2007
Income Cell Growth Cell
GBP GBP
Net asset value per share for financial statement purposes 104.61p 108.06p
Add: IAS 39 adjustment to restate investments 0.46p 0.47p
from bid/ask basis of valuation
Net asset value per share as 105.07p 108.53p
reported to shareholders
13 Subsequent events
There have been no events since 31 December 2007, which would have a bearing on
the understanding of the financial statements.
Website:
In accordance with the AIM rules, the Company maintains a website which provides
important information about the Company. This information includes: the most
recent annual and interim report; constitutional documents such as the Articles
of Association; and all announcements made to a Regulatory News Service within
the last 12 months. The Company's website may be found at:
www.newstaram.com/alternative-investments/closed-end-funds
This information is provided by RNS
The company news service from the London Stock Exchange
END
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