Final Results
March 05 2007 - 11:13AM
UK Regulatory
LIFE OFFICES OPPORTUNITIES TRUST PLC
Results for the year ended 31 December 2006
Key Points
* Net Asset Value per share increased 15.7% to 143.15 pence.
* Performance was boosted by an increase in the valuation of company
endowment policies as:
* Life companies passed on positive investment performance of underlying
funds to policy holders.
* LOOT has maintained a prudent valuation policy and there have been uplifts
when policies mature.
* The flotation and subsequent share price appreciation of Standard Life
contributed around 4.5% to performance.
* Maturity proceeds were approximately 2.5% higher than forecasted last year
and have been used to reduce borrowings.
* Bonus rates were mostly raised in 2006 and the Managers expect the 2007
annual bonus season to be positive.
* Funds which remain open to new business, and those with large surpluses had
a strong year.
* The median projected maturity asset value at the end of the Fund's life is
157.4 pence per share. Using a share price of 133 pence, this equates to a
yield to maturity in excess of 9% per annum.
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 2006
Commenting on the results for the year ended 31 December 2006, Chairman, John
Brumwell, said:
"Over the year, the net asset value per share increased by 15.7 per cent to
143.15 pence. The investment objective of your Company is to achieve long-term
capital growth and no dividend is payable. Part of this year's performance,
approximately 4.5 per cent, was the result of the flotation of Standard Life
and its subsequent share price appreciation. However, the balance was due to
the underlying increase in the valuation of the Company's endowment policies.
This increase can itself be broken down into two components. Life offices have
passed on the positive investment performance of the underlying life funds to
policyholders by way of increased annual and terminal bonuses. In addition, the
Company has maintained a prudent valuation policy and there have been uplifts
as policies mature.
Review of 2006
There were 162 maturities in 2006 yielding approximately �5.1 million. The
maturity proceeds were approximately 2.5% higher than forecasted this time last
year. There are just under 1,600 policies still to mature, split equally
between 2007 and 2008. To date, the proceeds have been used to reduce
borrowings. The Managers have estimated that borrowings, which currently stand
at slightly less than �11 million, should be eliminated in July 2007.
Thereafter, cash balances will be accumulated through to the end of 2008.
The 2006 annual bonus declaration season, which was announced in the first
quarter of 2006, generally proved to be favourable, with bonus rates mostly
being raised. Typically, the major with-profit life office funds produced
returns, after taxation and some reserving held back for smoothing in an above
trend year, to policyholders of some 13%.
Early indications are that with-profit funds had another good year in 2006 and
we expect the 2007 annual bonus season to be positive. However, returns were
lower in 2006 and it is likely that, on a comparable basis, net returns to
policyholders will be closer to 9%. With-profit funds tend to be mixed asset
funds with investments spread over a variety of asset classes such as equities,
property and bonds. In 2006, equity markets performed well with most markets
yielding double digit returns and similarly property enjoyed another strong
year. However, bond markets have been falling as yields have been rising.
Although bonds have been paying their regular coupons, this has been
accompanied by some capital depreciation.
It has been a stronger year for funds which remain open to new business, or for
those with large surpluses. This has permitted a high degree of investment
freedom and they have tended to hold a higher proportion of equities. However
it has been a less exciting year for funds which are relatively thinly funded
or closed and in run off and where bonds predominate.
One of the big tests of confidence is whether life offices increase rates of
annual rather than terminal bonuses. As annual bonus are reversionary, they
effectively form additional guarantees on policies and require sound finances
for support. To date, some have increased their non-reversionary bonuses and we
anticipate increases from other offices.
Standard Life
Following the flotation of Standard Life in July, the Company was allocated and
still retains 442,860 ordinary shares. Since flotation, the share price of
Standard Life's ordinary shares has increased by approximately 30%, making it
one of the best performing stocks in the FTSE 100 Share Index. The Managers are
closely monitoring the position and will realise the investment as and when
deemed appropriate.
Standard Life was among the last of the major mutuals to demutualise either
through direct flotation or trade sale. Due to the lengthy timetables required
to effect such an exercise, it is unlikely that the Company will benefit
further from demutualisation although it does retain a small exposure to the
two largest remaining mutuals, Royal London and Co-Operative Insurance.
Outlook
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 2006 numbers is 157.4 pence per share based on the previously
indicated assumptions. Using the share price of 133 pence, this equates to a
yield to maturity in excess of 9% per annum. As bonuses are generally seen as
having bottomed and with-profits funds are generating positive returns, we
believe that the Company is well placed to achieve this level at maturity."
John C H Brumwell
Chairman
5 March 2007
.
Summarised Income Statement
(unaudited)
Year to 31 December Year to 31 December 2005
2006
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Gains on investments - 5,964 5,964 - 2,848 2,848
Income 2 - 2 10 - 10
Investment management - (371) (371) - (342) (342)
fees
Other expenses (111) (189) (300) (129) (214) (343)
------ ------ ------ ------ ------ ------
Return before interest (109) 5,404 5,295 (119) 2,292 2,173
and taxation
Finance costs - (723) (723) - (760) (760)
------ ------ ------ ------ ------ ------
Return on ordinary (109) 4,681 4,572 (119) 1,532 1,413
activities before tax
Taxation - - - - - -
------ ------ ------ ------ ------ ------
Transfer from reserves (109) 4,681 4,572 (119) 1,532 1,413
------ ------ ------ ------ ------ ------
Return per ordinary (0.47p) 19.88p 19.41p (0.51p) 6.51p 6.00p
share
.
Summarised Balance Sheet (unaudited) As at As at
31 December 31
December
2006
2005
�'000 �'000
Fixed assets - investments 44,695 42,675
Net current liabilities (10,984) (13,536)
-------- --------
Ordinary shareholders' funds 33,711 29,139
-------- --------
Net asset value per ordinary share 143.15p 123.73p
.
Summarised Cash Flow Statement Year to Year to
(unaudited)
31 December 31 December
2006 2005
�'000 �'000
Net cash outflow from operating (704) (651)
activities
Returns on investments and servicing of (723) (760)
finance
Capital expenditure and financial 3,976 1,303
investment
Taxation 1 -
------- -------
Increase / (decrease) in cash 2,550 (108)
------- -------
Notes (unaudited)
1. The results have been prepared in accordance with UK Generally Accepted
Accounting Practice (GAAP) and the 2005 Statement of Recommended Practice
(SORP) issued by the Association of Investment Companies. This information has
been prepared on the basis of the accounting policies used in the statutory
accounts of the Company for the year ended 31 December 2005.
2. Capital return per share is based on net gains during the year of �4,681,000
(2005 - �1,532,000). Revenue return per share is based on the revenue loss
after taxation for the year of �109,000 (2005 - �119,000). The number of shares
in issue throughout the years ending 31 December 2006 and 2005 was 23,550,000.
Capital and Revenue returns per share are based on that figure, being the
weighted average of such shares in issue in each year.
3. The above figures do not constitute full accounts in terms of Section 240 of
the Companies Act 1985. The accounts for the year to 31 December 2005, on which
the auditors issued an unqualified report, have been lodged with the Registrar
of Companies. The annual report and accounts, which are at present unaudited,
will be mailed to shareholders and will be lodged with the Registrar of
Companies during March 2007. Copies will be available for inspection at 7
Castle Street, Edinburgh EH2 3AH, the registered office of the Company.
END
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