DJ New Star Investment Trust PLC: Annual Results for the year ended 30th June 2020
New Star Investment Trust PLC (NSI)
New Star Investment Trust PLC: Annual Results for the year ended 30th June
2020
30-Sep-2020 / 12:05 GMT/BST
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The issuer is solely responsible for the content of this announcement.
NEW STAR INVESTMENT TRUST PLC
This announcement constitutes regulated information.
UNAUDITED RESULTS
FOR THE YEAR ENDED 30TH JUNE 2020
New Star Investment Trust plc (the 'Company'), whose objective is to achieve
long-term capital growth, announces its consolidated results for the year
ended 30th June 2020.
FINANCIAL HIGHLIGHTS
30th June 30th June %
2020 2019 Change
PERFORMANCE
Net assets (GBP '000) 113,885 113,971 (0.1)
Net asset value per Ordinary share 160.35p 160.47p (0.1)
Mid-market price per Ordinary share 106.00p 111.00p (4.5)
Discount of price to net asset value 33.9% 30.83% n/a
Total Return* 0.80% 2.98% n/a
IA Mixed Investment 40% - 85% Shares (0.15)% 3.66% n/a
(total return)
MSCI AC World Index (total return, 5.72% 10.30% n/a
sterling adjusted)
MSCI UK Index (total return) (15.21)% 1.68% n/a
1st July 2019 to 1st July 2018 to
30th June 2020 30th June 2019
Revenue return per Ordinary 1.87p 1.81p
share
Capital return per share (0.59)p 2.86p
Return per Ordinary share 1.28p 4.67p
TOTAL RETURN* 0.80% 2.98%
PROPOSED DIVIDEND PER ORDINARY 1.40p 1.40p
SHARE
* The total return figure for the Group represents the revenue and capital
return shown in the Consolidated Statement of Comprehensive Income divided
by the net asset value at the beginning of the period.
CHAIRMAN'S STATEMENT
PERFORMANCE
Your Company generated a positive total return of 0.80% over the year to
30th June 2020, taking the net asset value (NAV) per ordinary share to
160.35p. By comparison, the Investment Association's Mixed Investment 40-85%
Shares Index fell 0.15%. The MSCI AC World Total Return Index rose 5.72%
while the MSCI UK Total Return Index fell 15.21%. Over the year, UK
government bonds returned 11.98%. Further information is provided in the
investment manager's report.
Your Company made a revenue profit for the year of GBP1.32 million (2019:
GBP1.28 million).
GEARINGS AND DIVIDEND
Your Company has no borrowings. It ended the year under review with cash
representing 9.63% of its NAV and is likely to maintain a significant cash
position. In respect of the financial year to 30th June 2020, your Directors
recommend the payment of a dividend of 1.4p per share (2019: 1.4p). The
level of future dividends may, in the short term, be adversely affected by
Covid-19-related dividend cuts.
DISCOUNT
During the year under review, 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 arrangement for
performance fees was not appropriate in a low interest rate environment,
with the result that the existing performance fee arrangement ceased from
1st January 2020. A performance fee of GBP623,000 (2019: GBP410,000) was payable
in respect of the year to 30th June 2020.
OUTLOOK
Over the late summer of 2020, equities appeared attractive for long-term
investors, supported by large-scale monetary and fiscal stimulus measures.
By July, leading indicators for some of the world's major economies had
risen significantly from their lows, implying that a global economic
recovery was on the horizon, and there was some positive news on vaccines
and treatments for Covid-19. Corporate bonds may also perform well as yield
spreads over sovereign bonds narrow. Resurgent Covid-19 infection rates in
some countries, tense Sino-US relations and the approaching US election may,
however, lead to renewed short-term weakness. Shortly after the year end,
your Company took some profits from investments in equity funds because of
uncertainty regarding the spread of Covid-19.
ANNUAL GENERAL MEETING
The annual general meeting will be held on 12 November 2020.
NET ASSET VALUE
Your Company's unaudited net asset value per share at 31st August 2020 was
162.94p.
INVESTMENT MANAGER'S REPORT
MARKET REVIEW
The Covid-19 pandemic and the impact of lockdowns to contain the spread of
the virus dominated financial markets during the second half of your
Company's financial year. Global equities fell 25.33% in sterling from their
high on 20th February 2020 to their 16th March low. Global equities
recovered, however, during the final quarter, extending the 4.89% gain in
sterling at the interim stage to close the year up 5.72%. The announcements
by central banks and governments of large-scale monetary and fiscal stimulus
measures softened the impact of the lockdowns on businesses and households
and reassured investors.
..
Global bonds outperformed equities over the year, rising 7.35% in sterling
as leading central banks cut interest rates to near-zero and increased
quantitative easing. UK government bonds were particularly strong, returning
11.98%. Interest rates are likely to remain low for some time. In March, the
yield spreads of corporate and high-yield bonds widened over sovereign bond
yields as investors anticipated more businesses would default, particularly
in the hard-pressed energy, retail and travel and leisure sectors. The Fed
expanded its asset purchase programme to include corporate bonds, leading to
improved liquidity and lower yields overall. Sterling corporate and
high-yield bonds returned 6.52% and 0.62% respectively over the year.
US equities outperformed, returning 10.73% in sterling, buoyed by the 41.67%
rise by US technology stocks. Technology companies benefitted from their
strong balance sheets and an acceleration in the established trends towards
home working and online shopping and entertainment.
UK equities lagged, falling 15.21% as the London market's heavy weighting in
cyclical sectors such as energy, financials and industrials proved a
headwind. Uncertainty regarding European Union-UK trade negotiations also
weighed on stocks as the government allowed the 30th June deadline for a
request to extend the Brexit transition period to lapse. Sterling lost
2.92%, 2.78% and 1.57% respectively against the dollar, yen and euro.
Equities in Europe excluding the UK underperformed, falling 3.50% in
sterling on fears that fiscally-prudent northern countries might oppose an
EU rescue package that included grants rather than loans to heavily-indebted
southern countries. Such a deal was, however, agreed shortly after your
Company's year-end. Equities in Asia excluding Japan and emerging markets
also lagged, rising 5.03% and falling 0.14% respectively in sterling despite
a leading indicator suggesting China would emerge strongly from the crisis.
Sino-US relations deteriorated as Beijing passed a new security law
governing Hong Kong and the US retaliated by revoking Hong Kong's special
status under US law.
Oil prices fell 63.66% in sterling as lower demand during the lockdowns
compounded the impact of the Russo-Saudi oil price war. By contrast, gold
rose 29.44% in sterling, benefitting from safe-haven buying and the lower
opportunity cost of holding this nil-yielding asset in an environment of
near-zero interest rates.
PORTFOLIO REVIEW
Your Company's total return over the year under review was 1.34% before
performance fees and 0.80% 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, fell 0.15%. The MSCI AC World Total Return Index rose
5.72% in sterling while the MSCI UK Total Return Index fell 15.21%. Your
Company benefitted from strong performance by investments in technology and
gold mining.
Performance was, however, held back by poor performance by UK equities and a
relatively low investment in global bonds.
Polar Capital Global Technology made the biggest positive contribution to
your Company's performance, rising 39.78% over the year. The fund increased
in size from $3.4 billion to $5.8 billion, with inflows totalling $1.1
billion. In response, Polar Capital soft-closed the fund in July, with the
result that only existing investors such as your Company may add to their
holdings. Fundsmith Equity, your Company's largest investment, also
benefitted from the strong performance of technology stocks, which account
for a significant proportion of its portfolio, with Facebook and Microsoft
among its 10 largest holdings. At the year end, prospects for technology
companies remained bright although increasing regulatory pressures were a
potential headwind. In June, the European Commission opened two anti-trust
investigations into Apple; in July, the chief executives of Amazon, Apple,
Facebook and Google were invited to testify before Congress as part of an
anti-trust investigation.
Underperformance by UK equities detracted from performance. Investments in
UK equity income funds have contributed significantly to your Company's
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