Final Results
March 08 2006 - 4:38AM
UK Regulatory
LIFE OFFICES OPPORTUNITIES TRUST PLC
The investment objective of Life Offices Opportunities Trust Plc ("LOOT") is to
achieve long term capital growth from a diversified portfolio of with-profits
life assurance policies. The Trust, with net assets of �29 million, is managed
by SVM Asset Management (`SVM'), the independent Edinburgh based investment
boutique.
Results for the year ended 31 December 2005
Salient Points
* Net Asset Value per share increased 5.1% to 123.7 pence
* Trend for bonuses to lag underlying market returns has continued in 2005 as
life offices smooth returns
* Early stages of the bonus declaration season from life offices indicates
improved returns on 2004 with returns on funds at around 15 - 16%
* Board are still awaiting formal announcement of the timetable and terms of
a demutualisation of Standard Life. As the majority of LOOT policies mature
after the proposed flotation date, the size of higher bonuses or
demutualisation proceeds should result in a material uplift in value
* With 2005 being a reassuringly stable year for the life assurance industry,
together with strong financial markets, life offices have seen their assets
increase and should start to increase bonuses, thereby delivering capital
growth to the Company.
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 2005
Review of 2005
Over the year, the net asset value per share increased by 5.1 per cent to
123.73 pence. The investment objective of your Company is to achieve long-term
capital growth and no dividend is payable.
Last year, I commented on the failure of the value of the underlying assets to
respond to the upturn in financial markets. In particular, the lagged effects
of returns on bonuses as life offices smooth returns means that changes in
bonuses tend to lag underlying markets. These features have been repeated in
2005 where bonuses again were reduced but to a much lesser extent.
The bonus season in the spring of 2005 was somewhat mixed. Most offices reduced
bonuses further, but some by much more than others. Standard Life was the most
disappointing, cutting both in the Spring and again later in the year. Most
others cut bonuses in the Spring but resisted any further change at the interim
stage later in the year. Scottish Widows actually increased its bonuses,
showing that they had been more realistic at an earlier stage.
2004 saw the first positive returns on with-profits funds for four years, with
the typical mixed asset fund returning 10-12%. Although we are only in the
early stages of the bonus declaration season from the life offices, recent
announcements are confirming that 2005 was even better, with returns on funds
at around 15 - 16%.
Some funds may have fared a little worse than this, especially Standard Life,
depending on the degree to which they have switched out of equities into gilts
and bonds recognising the more stringent solvency testing regime introduced by
the Financial Services Authority in the last few years. But, in the main, it
has been a very good couple of years for with-profits funds.
Standard Life
We are still awaiting a formal announcement of the timetable and terms of a
demutualisation of Standard Life. Currently, they are in the midst of an
exercise to tidy up their membership register to ensure they are in
communication with all members. Although demutualisation is a slow process, it
would appear that this one is particularly costly and protracted being nearly
two years since this action was first mooted. It is entirely possible that
Standard Life might be subject to a takeover either before or after floatation.
Either way, this will be the catalyst for releasing value for the Company.
For your Company, the timing is very helpful as the great majority of policies
mature after the proposed flotation date this year. Although the size of higher
bonuses or demutualisation proceeds are unknown at present, they should result
in a material uplift in value.
Accounting Standards
The Company continues to prepare its financial statements under UK Generally
Accepted Accounting Practice and the AITC's 2003 Statement of Recommended
Practice. Your Board, following discussions with the Secretaries and your
Company's auditors, resolved not to adopt International Financial Reporting
Standards (IFRS). In your Board's view, there would be no material change in
the financial results and position of the Company were it to adopt IFRS. Your
Board will, of course, keep this matter under review.
However, consistent with the 2005 Interim Report, these financial statements do
incorporate three changes to accounting practices: Financial Reporting
Standards (FRS) 21 `Events after the Balance Sheet Date', FRS 25 `Financial
Instruments: Disclosure and Presentation' and FRS 26 `Financial Instruments:
Measurement'. As the Company does not pay a dividend or have any financial
instruments that require restatement, the adoption of these standards does not
require a major change in the treatment and presentation of the financial
statements. Further information regarding these accounting treatments are
provided in the notes to the financial statements.
Outlook
After the adverse events of preceding years, 2005 has been a reassuringly
stable year for the life assurance industry and the companies involved in it.
With strong financial markets, life offices have seen their assets increase
and, even accounting for some degree of smoothing, should start increasing
bonuses. It is likely that these will manifest themselves through increases in
terminal bonuses initially. Your Company should benefit from this and is
well-placed to deliver capital growth.
John C H Brumwell
Chairman
8 March 2006
.
Summarised Statement of Total Return
(unaudited)
Year to 31 December Year to 31 December 2004
2005
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains on investments - 2,848 2,848 - 78 78
Income 10 - 10 7 - 7
Investment management - (342) (342) - (335) (335)
fees
Other expenses (129) (214) (343) (120) (224) (344)
------ ------ ------ ------ ------ ------
Return before interest (119) 2,292 2,173 (113) (481) (594)
and taxation
Bank overdraft interest - (760) (760) - (753) (753)
------ ------ ------ ------ ------ ------
Transfer from reserves (119) 1,532 1,413 (113) (1,234) (1,347)
------ ------ ------ ------ ------ ------
Return per ordinary (0.51p) 6.51p 6.00p (0.48p) (5.24p) (5.72p)
share
.
Balance Sheet (unaudited) As at As at
31 December 31
December
2005
2004
�'000 �'000
Fixed assets - investments 42,675 41,193
Net current liabilities (13,536) (13,467)
------- -------
Ordinary shareholders' funds 29,139 27,726
------- -------
Net asset value per ordinary share 123.73p 117.73p
.
Summarised Cash Flow Statement Year to Year to
(unaudited)
31 December 31 December
2005 2004
�'000 �'000
Net cash outflow from operating (651) (674)
activities
Returns on investments and servicing of (760) (753)
finance
Capital expenditure and financial 1,303 130
investment
------ ------
Decrease in cash (108) (1,297)
------ ------
Notes
1. The results have been prepared in accordance with applicable accounting
standards and the 2003 Statement of Recommended Practice (SORP) issued by the
Association of Investment Trust Companies. In addition, these results
incorporate three changes to accounting practices: Financial Reporting
Standards (FRS) 21 `Events after the Balance Sheet Date', FRS 25 `Financial
Instruments: Disclosure and Presentation' and FRS 26 `Financial Instruments:
Measurement'. As the Company does not pay a dividend or have any financial
instruments that require restatement, the adoption of these standards does not
require a major change in the treatment and presentation of the financial
statements. In accordance with FRS26, the fixed asset investments are
categorized as "fair value through profit or loss".
2. Return per share is based on a weighted average of 23,550,000 (2004 -
23,550,000) ordinary shares in issue during the year. Capital return per share
is based on net gains during the year of �1,532,000 (2004 - loss of �
1,234,000). Revenue return per share is based on the revenue loss after
taxation for the year of �119,000 (2004 - �113,000). The number of shares in
issue at 31 December 2005 was 23,550,000 (2004 - 23,550,000).
3. The above figures do not constitute full accounts in terms of Section 240 of
the Companies Act 1985 and based on the accounts for the year to 31 December
2005, which are at present unaudited. The accounts for the year to 31 December
2004, on which the auditors issued an unqualified report, have been lodged with
the Registrar of Companies. The annual report and accounts will be mailed to
shareholders and will be lodged with the Registrar of Companies during March
2006. Copies will be available for inspection at 7 Castle Street, Edinburgh EH2
3AH, the registered office of the Company.
END
END
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