New Star Investment Trust PLC (NSI) New Star Investment Trust PLC: Annual Results for the year ended 30th June 2021 24-Sep-2021 / 07:00 GMT/BST Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.
NEW STAR INVESTMENT TRUST PLC
This announcement constitutes regulated information.
FOR THE YEAR ENDED 30TH JUNE 2021
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 2021.
30th June 30th June %
2021 2020 Change
Net assets (GBP '000) 138,132 113,885 21.3
Net asset value per Ordinary share 194.49p 160.35p 21.3
Mid-market price per Ordinary share 134.00p 106.00p 26.4
Discount of price to net asset value 31.1% 33.9% n/a
Total Return* 22.16% 0.80% n/a
IA Mixed Investment 40% - 85% Shares (total return) 17.48% (0.15)% n/a
MSCI AC World Index (total return, sterling adjusted) 25.10% 5.72% n/a
MSCI UK Index (total return) 17.46% (15.21)% n/a
1st July 2020 to 1st July 2019 to
30th June 2021 30th June 2020
Revenue return per Ordinary share 0.61p 1.87p
Capital return per share 34.93 p (0.59)p
Return per Ordinary share 35.54p 1.28p
TOTAL RETURN* 22.16% 0.80%
PROPOSED DIVIDEND PER ORDINARY SHARE 1.40p 1.40p
* 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.
Your Company generated a positive total return of 22.16% over the year to 30th June 2021, taking the net asset value (NAV) per ordinary share to 194.49p. By comparison, the Investment Association's Mixed Investment 40-85% Shares Index rose 17.48%. The MSCI AC World Total Return Index rose 25.10% in sterling while the MSCI UK Total Return Index rose 17.46%. Over the year, UK government bonds declined 6.48%. Further information is provided in the investment manager's report.
Your Company made a consolidated revenue profit for the year of GBP429,000 (2020: GBP1.32 million).
GEARINGS AND DIVIDEND
Your Company has no borrowings. It ended the year under review with cash representing 6.12% of its NAV and is likely to maintain a significant cash position. In respect of the financial year to 30th June 2021, your Directors recommend the payment of a dividend of 1.4p per share (2020: 1.4p). The level of future dividends may, in the short term, be adversely affected by Covid-19-related dividend cuts.
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.
Monetary and fiscal stimulus programmes, the roll-out of Covid-19 vaccination programmes, the restoration of dividends after cuts imposed during the pandemic lockdowns and economic recovery are likely to support equities over the coming months. Inflation may, however, rise further, raising the prospect of an earlier end to monetary easing than had previously been expected. This may put further pressure on government bonds after their price declines during the year under review.
NET ASSET VALUE
Your Company's unaudited NAV at 31st August 2021 was 199.81p.
INVESTMENT MANAGER'S REPORT
Global equities gained 39.87% in local currencies over the year to 30th June 2021 but only 25.10% in sterling due to the pound's strength while global bonds returned 2.63% in local currencies but fell 8.20% in sterling. Ultra-loose monetary policies, unprecedented fiscal stimulus programmes and some successful Covid-19 vaccination programmes led to a rebound in the world economy. The strength of sterling, up 15.02%, 11.80% and 5.89% respectively against the yen, dollar and euro, resulted from the European Union-UK trade agreement, which averted a hard Brexit. Gold and gold equities fell 14.07% and 14.01% respectively in sterling as investors favoured risky assets over some safe-havens such as gold.
Leading central banks eased monetary policies to support economic recovery and mitigate the impact of fresh waves of the pandemic. The Federal Reserve bought more than USD80 billion of treasury securities and USD40 billion of agency mortgage-backed securities per month in pursuit of its dual mandate to deliver maximum employment and price stability. In August 2020, in a significant policy shift, the Federal Reserve moved its inflation target from a fixed 2% to a 2% average. The move implies that inflation may exceed 2% for some time before monetary policy tightens.
In June and December 2020, the European Central Bank (ECB) increased its Pandemic Emergency Purchase Programme bond purchases by EUR600 billion and EUR500 billion respectively to increase the programme from EUR750 billion to EUR1,850 billion. Market purchases will continue at least until March 2022 and maturing principal payments will be reinvested until the end of 2023. In July 2021, the ECB followed the Fed's lead, shifting from a target to keep inflation "below but close to 2%" to a 2% average. The Bank of England remained dovish, fearing that "premature tightening" might undermine the UK's recovery. In August 2021, the Bank's monetary policy committee voted to maintain the total target stock of bond purchases at GBP895 billion.
Since the 2008 global financial crisis, central bankers have encouraged governments to support monetary easing with fiscal easing. Covid-19 lockdowns provided the catalyst for major stimulus programmes. By autumn 2021, fiscal measures were winding down in some countries but the new US president, Joe Biden, had introduced measures that emulated Roosevelt's New Deal in the 1930s in their scope. In November's elections, the Democrats gained control, albeit by a narrow margin, of both houses of Congress in addition to the presidency. The USD1.9 trillion American Rescue Plan was enacted in March 2021, resulting in cash distributions to households. In August 2021, agreement was reached on the USD1 trillion Bipartisan Infrastructure Investment and Jobs Act although its passage was delayed to allow debate over a potential USD3.5 trillion of additional measures.
Inflation, particularly in the US and UK, was stronger than anticipated over the year under review despite higher unemployment and lower workforce participation compared to pre-pandemic levels. Pent-up consumer demand, materials shortages and disrupted supply chains contributed to inflation rising above central bank targets. US headline inflation in July rose to 5.4% and the personal consumption expenditures index, the Fed's chosen inflation measure, reached 3.6%. UK headline inflation was 2.1% in July while the initial estimate for eurozone inflation in August was 3%. Jerome Powell, the Fed chairman, became more hawkish, suggesting higher inflation might prove "more persistent" rather than "transitory". Price pressures may ease as supply catches up with demand and reduced lockdown restrictions lead to higher demand for consumer services at the expense of consumer goods. Manufacturers may, however, retreat from globalisation policies and increase their resilience by increasing supplier numbers and holding higher stocks of raw materials and finished goods. Consumers are likely to face higher prices as companies move from "just in time" to higher-cost "just in case" manufacturing. Over the longer term, monetary easing, fiscal easing, demographics, as workforces shrink relative to ageing populations, and decarbonisation goals may all contribute to rising inflation.
Your company's total return over the year under review was 22.16%. By comparison, the Investment Association Mixed Investment 40-85% Shares Sector, a peer group of funds with a multi-asset approach to investing and a typical investment in global equities in the 40-85% range, rose 17.48%. The MSCI AC World Total Return Index rose 25.10% in sterling while the MSCI UK Total Return Index rose 17.46%. Your company benefited from its allocations to UK smaller companies and emerging markets but allocations to dollar cash and gold equities hurt performance. Income fell due to dividend cuts resulting from Covid-19 lockdowns. Such cuts are, however, likely to be temporary and further investments in equity income holdings were made during the year.
UK equities lagged foreign equities for two main reasons: the pound's strength and the bias of the London stockmarket towards cyclical companies, leading to larger dividend cuts than experienced by companies in Europe excluding the UK and the US. UK smaller companies outperformed, however, rising 49.77% as Britain's relatively successful vaccination programme led to the lifting of some lockdown restrictions, fuelling a domestic recovery that exceeded expectations. Aberforth Split Level Income, which has a bias towards UK smaller value stocks, was your Company's best performer, rising 97.66% as strong investment returns were magnified by the leverage provided by its split capital structure.
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