Final Results
05 Mars 2008 - 2:17PM
UK Regulatory
LIFE OFFICES OPPORTUNITIES TRUST PLC
Results for the year ended 31 December 2007
Key Points
* Net Asset Value per share increased 13.4% to 162.27 pence.
* Maturity proceeds were approximately 4.4% higher than forecasted last year.
* Company now almost 50% in cash and equivalents
* The median projected maturity asset value at the end of the Fund's life is
approximately 169 pence per share. Using a share price of 152 pence, this
equates to a yield to maturity in excess of 11% per annum.
* Liquidation vote to take place in the fourth quarter of 2008
* Accounts now presented on a break-up basis.
For further information please contact:
Colin McLean SVM Asset Management 0131 226 6699
Roland Cross Broadgate 020 7726 6111
*..
LIFE OFFICES OPPORTUNITIES TRUST PLC
Chairman's Statement for the year ended 31 December 2007
Commenting on the results for the year ended 31 December 2007, Chairman, John
Brumwell, said:
"I am pleased to report that the net asset value per share increased by 13.4
per cent to 162.27 pence for the year to 31 December 2007. The investment
objective of your Company has been to achieve long-term capital growth and no
dividend is payable.
This performance is superior to life office with-profit fund returns for the
year for the same reasons as intimated last year. Four years of favourable
markets have allowed life offices to pass on the positive investment
performance of the underlying life funds to policyholders by way of increased
annual and terminal bonuses. In addition, the Company maintained an
appropriately prudent valuation policy and there have been uplifts as policies
mature.
Going concern
As set out in the Articles of Association, an Extraordinary General Meeting
will be convened in the fourth quarter of 2008 in order to approve the
voluntary winding-up of the Company. The Directors believe that this approval
will be given and accordingly the financial statements for the year to 31
December 2007 accounts have been prepared on a break-up basis . Further details
are disclosed in the accounting policies.
Over recent years, the Company has published projected terminal maturity values
on a quarterly basis. The median projected terminal asset value based on 31
December 2007 numbers is slightly in excess of 169 pence per share. Assuming
the Company is wound up at the end of December this year and using the share
price of 152 pence, this would equate to a yield to maturity in excess of 11%.
Review of 2007
There are 818 policies still to mature in 2008, spread evenly through the first
seven months of the year. There were 777 maturities in 2007 yielding
approximately �27.9 million, including all eight of the large Century Life
policies. The average proceeds for all maturities in the year were
approximately 4.4% higher than forecasted this time last year. Initially,
maturity proceeds were used to repay the Company's overdraft. Thereafter,
following full repayment in August 2007, surplus liquidity was split between
short dated UK Government Securities ("gilts") and Sterling deposits. As at the
end of December 2007, the Company has approximately 45% of assets in cash and
cash equivalents. In order to retain investment trust status, the Company
retains more gilts than deposits and the average yield on liquidity is slightly
in excess of 5.3%. This rate is higher than the 4% used in the recent quarterly
projected terminal maturity value announcements.
Life office bonus announcements made in the first quarter of 2007 proved
favourable with bonus rates mostly being raised. Generally, terminal bonus
rises were favoured ahead of rises in reversionary terminal bonuses. The major
with-profit life office funds produced returns of around 9% in calendar year
2006, after taxation and some reserving held back for smoothing. Over the
summer, a couple of life offices, principally Standard Life, increased their
payouts for policies maturing after August 2007.
Undoubtedly, 2007 was a more challenging year for life offices with returns
forecast to be in low single digits. The average cautious managed fund has
yielded around 2�% net of charges and the median balanced managed fund around 4
�%. With property unlikely to have contributed much in the way of return,
with-profit funds have probably only returned 3� - 4% gross and around 2�% or
so net.
Therefore, it is not surprising to see that recent maturities are not only very
close to the Managers' estimations but also at levels only slightly higher than
end December 2007 valuations. As previously intimated, the valuation
methodology has tended to under-promise and over-deliver.
Standard Life
The Company was allocated Standard Life ordinary shares in July 2006, these
being retained in order to take advantage of the bonus allocation on the first
anniversary of flotation. The opportunity was taken subsequently to realise the
entire holding at an average price of 320 pence. This contributed approximately
0.75 pence per share to the asset value during the year. At the time of sale,
it had been one of the best performing stocks in the FTSE 100 Share Index.
Winding up
The remaining policies should have matured by the end of the third quarter of
2008. It is the Board's intention to convene a formal shareholder meeting in
the fourth quarter, as stipulated in the Company's Articles of Association, to
approve the winding up of the Company. A further update will be circulated to
shareholders in the interim report in August.
Conclusion
With approximately half the assets now matured and in cash and cash equivalents
and the remaining policies scheduled for maturity this year, we believe the
risks to the Company have been markedly reduced. Barring unforeseen
circumstances, the Managers believe that the Company should deliver its
projected terminal asset value."
John C H Brumwell
Chairman
8 March 2008
Summarised Income Statement
unaudited)
Year to 31 December 2007 Year to 31 December 2006
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains on investments - 5,463 5,463 - 5,964 5,964
Income 153 - 153 2 - 2
Investment management - (324) (324) - (371) (371)
fees
Other expenses (257) (155) (412) (111) (189) (300)
------ ------ ------ ------ ------ ------
Return before interest (104) 4,984 4,880 (109) 5,404 5,295
and taxation
Finance costs - (376) (376) - (723) (723)
------ ------ ------ ------ ------ ------
Return on ordinary (104) 4,608 4,504 (109) 4,681 4,572
activities before tax
Taxation - - - - - -
------ ------ ------ ------ ------ ------
Transfer from reserves (104) 4,608 4,504 (109) 4,681 4,572
------ ------ ------ ------ ------ ------
Return per ordinary share (0.44p) 19.57p 19.13p (0.47p) 19.88p 19.41p
.
Summarised Balance Sheet As at As at
(unaudited)
31 December 31 December
2007 2006
�'000 �'000
Fixed assets
Investments at fair value through - 44,695
profit or loss
--------- ---------
Current assets
Investments at fair value through 29,229 -
profit or loss
Bank 4,912 16
Debtors 4,356 165
--------- ---------
38,497 181
Creditors: amounts falling due (282) (11,165)
within one year
--------- ---------
Net current assets / (liabilities) 38,215 (10,984)
--------- ---------
Ordinary shareholders' funds 38,215 33,711
--------- ---------
Net asset value per ordinary share 162.27p 143.15p
Summarised Cash Flow Statement
(unaudited)
Year to Year to
31 31
December December
2007 2006
�'000 �'000
Net cash outflow from operating (737) (704)
activities
Returns on investments and (376) (723)
servicing of finance
Capital expenditure and financial 16,866 3,976
investment
Taxation (2) 1
------- -------
Increase in cash 15,751 2,550
------- -------
Reconciliation of Movements in Shareholders Funds
(unaudited)
For the year to 31 December 2007
Share Share Special Capital Capital Revenue
capital premium reserve reserve reserve reserve
realised unrealised
�'000 �'000 �'000 �'000 �'000 �'000
As at 1 January 2007 17,662 5,859 638 (5,572) 16,051 (927)
Net gain on sale of - - - 14,226 - -
investments
Expenses charged to - - - (855) - -
capital
Movement in unrealised - - - - (8,763) -
appreciation on
investments
Return on ordinary - - - - - (104)
activities after
taxation
-------- -------- -------- -------- -------- --------
As at 31 December 2007 17,662 5,859 638 7,799 7,288 (1,031)
-------- -------- -------- -------- -------- --------
For the year to 31 December 2006
Share Share Special Capital Capital Revenue
capital premium reserve reserve reserve reserve
realised unrealised
�'000 �'000 �'000 �'000 �'000 �'000
As at 1 January 2006 17,662 5,859 638 (5,905) 11,703 (818)
Net gain on sale of - - - 1,616 - -
investments
Expenses charged to - - - (1,283) - -
capital
Movement in unrealised - - - - 4,348 -
appreciation on
investments
Return on ordinary - - - - - (109)
activities after
taxation
-------- -------- -------- -------- -------- --------
As at 31 December 2006 17,662 5,859 638 (5,572) 16,051 (927)
-------- -------- -------- -------- -------- --------
Notes (unaudited)
1. The accounts have been prepared in accordance with applicable accounting
standards and the 2005 Statement of Recommended Practice (SORP) issued by the
Association of Investment Companies.
2. The accounts have been prepared on a break-up basis and all assets and
liabilities are stated at their recoverable value. As a consequence, all assets
and liabilities have been re-classified as current. In addition, a provision of
�120,000 has been made for liquidation expenses.
3. Returns per share are based on a weighted average of 23,550,000 (2006 -
23,550,000) ordinary shares in issue during the year.
Total return per share is based on the post tax total return for the year of �
4,504,000 (2006 - �4,572,000).
Capital return per share is based on net capital gains during the year of �
4,608,000 (2006 - �4,681,000).
Revenue return per share is based on the revenue loss after taxation for the
year of �104,000 (2006 - �109,000).
The number of shares in issue at 31 December 2007 was 23,550,000 (2006 -
23,550,000).
4. Investment management fees, policy advisory fees and finance interest have
been allocated 100% to capital (2006: same).
5. The above figures do not constitute full accounts in terms of Section 240 of
the Companies Act 1985 and are based on the accounts for the year to 31
December 2007, which are at present unaudited. The accounts for the year to 31
December 2006, on which the auditors issued an unqualified report under Section
235 of the Companies Act 2005, have been lodged with the Registrar of Companies
and did not contain a statement required under Section 237(2) or (3) of the
Companies Act 1985. The annual report and accounts will be mailed to
shareholders and will be lodged with the Registrar of Companies during March
2008. Copies will be available for inspection at 7 Castle Street, Edinburgh EH2
3AH, the registered office of the Company.
END
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