New Star Investment Trust PLC (NSI)
New Star Investment Trust PLC: Half Year Results of the six months ended
31st December 2019
20-March-2020 / 16:53 GMT/BST
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The issuer is solely responsible for the content of this announcement.
NEW STAR INVESTMENT TRUST PLC
HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31st DECEMBER 2019
FINANCIAL HIGHLIGHTS
INVESTMENT OBJECTIVE
The Company's objective is to achieve long-term capital growth.
31st December 30th June %
2019
2019 Change
PERFORMANCE
Net assets (GBP '000) 117,559 113,971 3.1
Net asset value per 165.52p 160.47p 3.1
Ordinary share
Mid-market price per 117.00p 111.00p 5.4
Ordinary share
Discount of price to 29.31% 30.83% n/a
net asset value
Six months ended Six months ended
31st December 31st December
2019 2018
Total Return* 4.02% -4.63% n/a
IA Mixed Investment 4.41% -6.62% n/a
40-85% Shares (total
return)
MSCI AC World Index 4.89% -5.47% n/a
(total return,
sterling adjusted)
MSCI UK Index (total 3.03% -10.04% n/a
return)
Six months ended Six months ended
31st December 31st December
2019 2018
REVENUE
Return (GBP'000) 792 607
Return per Ordinary share 1.1p 0.85p
Proposed dividend per Ordinary - -
share
Dividend paid per Ordinary 1.40p 1.00p
share
TOTAL RETURN
Return (GBP'000) 4,582 (5,154)
Net assets 3.1% -5.3%
Net assets (dividend added 4.0% -4.6%
back)
* The total return figure for the Group represents the revenue and capital
return shown in the consolidated statement of comprehensive income plus
dividends paid (the alternative performance measure).
INTERIM REPORT
CHAIRMAN'S STATEMENT
PERFORMANCE
Your Company generated a positive total return of 4.02% over the six months
to 31st December 2019, taking the net asset value (NAV) per ordinary share
to 165.52p. By comparison, the Investment Association's Mixed Investment
40-85% Shares Index rose 4.41%. The MSCI AC World Total Return Index rose
4.89% while the MSCI UK Total Return Index rose 3.03%. Over the same period,
UK government bonds returned 2.05%. Further information is provided in the
investment manager's report.
Your Company made a revenue profit for the six months of GBP792,000 (2018:
GBP607,000).
GEARING AND DIVIDENDS
Your Company has no borrowings and ended the period under review with cash
representing 14.28% of its NAV. Your Company has small retained revenue
reserves and your Directors do not recommend the payment of an interim
dividend (2018: nil). Your Company paid a dividend of 1.4p per share (2018:
1.0p) in November 2019 in respect of the previous financial year.
DISCOUNT
During the period, your Company's shares continued to trade at a significant
discount to their NAV. The Board keeps this issue under review.
PERFORMANCE FEE
In November 2019, your Company announced that the current performance fee
arrangement was not appropriate in a low interest rate environment. The
current performance fee arrangements ceased from 1 January 2020. A
performance fee of GBP622,000 (2018: GBPnil) was payable in respect of the
period under review.
OUTLOOK
Risky assets fell sharply in the early spring of 2020 as the Covid-19 virus
spread. Equity markets bore the brunt but corporate bonds and property also
registered declines. Central Banks have responded with unprecedented
interest rate reductions, increased quantitative easing and measures to
stimulate lending.
Monetary policy alone, however, is unlikely to be sufficient to address the
downturn because the virus impact is a supply-side shock, causing work place
closures and supply chain disruption. As a result, governments have moved to
alleviate the impact on businesses and families to shield the economy from
serious long-term harm.
Risky assets are likely to remain weak and volatile until the Covid-19
outbreak moderates. Your Company, however, entered this difficult period
with substantial cash holdings. Over the coming weeks, your Company's
defensive assets may provide some capital protection. There should also be
opportunities for your Company to deploy cash in investments with attractive
long-term potential, including in equity markets.
NET ASSET VALUE
Your Company's unaudited NAV per share at 29th February 2020 was 156.62p.
Your Company's unaudited NAV per share at 19th March 2020 was 136.12p.
Geoffrey Howard-Spink
Chairman
20th March 2020
INVESTMENT MANAGER'S REPORT
MARKET REVIEW
Global equities rose 4.89% and bonds fell 2.77% in sterling over the six
months to 31st December 2019 as central banks maintained policies of
monetary easing. Returns in overseas stock markets were stronger but
sterling investors were adversely affected as the pound rose against the
euro, yen and dollar by 5.60%, 4.99% and 4.09% respectively.
The Federal Reserve reduced interest rates by three-quarters of a percentage
point to 1.5-1.75%. Jobs data were strong but inflation remained below its
2% target. The European Central Bank increased further its negative interest
rate by 10 basis points to -0.5%, said interest rates would not rise until
inflation was closer to 2% and resumed asset purchases. The Bank of England
left its bank rate unchanged. UK government and sterling corporate bonds
rose 2.05% and 3.52% respectively over the period. Gold and gold securities
rose 3.07% and 10.92% respectively in sterling as the opportunity cost of
holding this nil-yielding asset remained low.
The Conservatives won December's UK election, averting a shift to the left.
UK stocks rose 3.03% but smaller companies, typically more sensitive to
domestic conditions, outperformed, rising 13.28%. Sterling briefly rose
above $1.35 but retreated as investors decided the risk of a "no deal"
Brexit had not disappeared, with the government legislating that a trade
deal had to be agreed during 2020, setting a demanding timetable. UK assets
are likely to prove sensitive to news about the talks.
Progress in Sino-US trade talks was confirmed when an interim deal was
signed in January 2020. Equities in emerging markets and Asia excluding
Japan benefited from end-of-year optimism but still lagged, up 3.11% and
2.74% respectively in sterling. Under the deal, China will increase
purchases of US goods and improve the protection of intellectual property.
In return, December's planned tariff increases were cancelled. The thornier
issues of national security and technology are outside the deal's scope and
may never be resolved. Protectionism is likely to remain a feature of US
trade policy.
US equities outperformed, rising 6.56% in sterling, with technology stocks,
up 13.57%, leading the way. Steady US jobs data supported consumer spending
but business investment and exports were weak. The Sino-US agreement may,
however, provide a fillip to exports in the longer term. China's economy
expanded 6% year-on-year during the period, the lowest growth rate since
1992.
PORTFOLIO REVIEW
Your Company's total return over the period under review was 4.56% before
performance fees and 4.02% after performance fees. By comparison, the
Investment Association's Mixed Investment 40-85% Shares sector, comprising a
peer group of multi-asset funds that typically invest 40-85% of their assets
in global equities, rose 4.41%. The MSCI AC World Total Return Index rose
4.89% in sterling while the MSCI UK Total Return Index rose 3.03%. Your
Company benefited from investments in funds invested in UK smaller
companies, gold securities and technology stocks. The high allocation to
dollar cash, however, hurt performance as sterling strengthened.
The Aberforth Split Level Income investment trust was the portfolio's best
performer, rising 26.09%, partly as a result of the leverage provided by its
zero-dividend preference shares. The manager takes a value-oriented approach
to investing in UK smaller companies. Such companies performed strongly as
the Tories' election victory reduced domestic political risk and
strengthened the government's hand in its EU trade negotiations. Chelverton
UK Equity Income, which also invests in smaller companies, rose 14.67%. Your
Company's holding was increased in November. The Aberforth and Chelverton
funds have above-average dividend yields and their income is derived from a
broad range of sectors in contrast to the income from the FTSE 100 Index,
which is dominated by financial and resources stocks. Man GLG UK Income and
MI Brompton UK Recovery outperformed, benefitting from gains among small and
medium-sized companies. Trojan Income and Schroder Income focus on larger
companies but both outperformed, gaining 7.79% and 5.32% respectively.
BlackRock Gold & General gained 6.24%, beating the return from physical gold
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