Annual Financial Report

NEW STAR INVESTMENT TRUST PLC

This announcement constitutes regulated information.

UNAUDITED RESULTS

FOR THE YEAR ENDED 30TH JUNE 2025

New Star Investment Trust plc (the ‘Company’), whose current objective is to achieve total return through capital growth and income, announces its results for the year ended 30th June 2025.

FINANCIAL HIGHLIGHTS

*After return of capital (B Shares)

** The total return figure for the Company represents the revenue and capital return shown in the Statement of Comprehensive Income before dividends paid, the B Share redemption payment and after deducting B Share issue costs, as a percentage of opening net assets.  The total return performance basis is the industry standard and is considered a more appropriate measure than just the revenue return.  This is an alternative performance measure.

CHAIRMAN’S STATEMENT

PERFORMANCE

Your Company’s generated a total return of 2.08% over the year to 30th June 2025, leaving the net asset value (NAV) per ordinary share at 170.56p. By comparison, the Investment Association’s Mixed Investment 40-85% Shares Index gained 5.57%. The MSCI AC World Total Return Index gained 7.64% in sterling while the MSCI UK All Cap Total Return Index rose 11.03%. Over the year, UK government bonds returned 1.42%. Further information is provided in the investment manager’s report.

Your Company made a revenue profit for the year of £3.02 million (2024: £2.88 million).

RETURN OF CAPITAL

Following an extraordinary general meeting in July 2024, £17 million was returned to shareholders in August by way of a “B” share issue and a subsequent redemption of the shares at a price of 24p per B share. Following the scheme, your Company’s total issued share capital and voting rights were unchanged. The scheme involved reducing your Company’s holdings across the board with a view broadly to maintaining in percentage terms the asset allocation, including the allocation to cash. As a result, the portfolio’s risk profile was broadly unchanged.

CHANGE OF INVESTMENT OBJECTIVE

At the annual meeting on 5th December, shareholders approved the proposal by your Board to change the investment objective from long-term capital growth to long-term total return through capital growth and income.

GEARINGS AND DIVIDEND

Your Company has no borrowings. It ended the year under review with cash representing 15% of its NAV and is likely to maintain a significant cash position. In respect of the financial year to 30th June 2025, your Directors recommend the payment of a final dividend of 1.85p per share, making a total for the year of 3.55p (2024: 3.4p).

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 regular review.

OUTLOOK

In the autumn of 2025, equity markets appeared likely to benefit overall from central bank monetary easing. The most attractive opportunities appeared to be among lowly valued large companies in the UK, Europe excluding the UK and some emerging markets. High US equity valuations, however, appeared vulnerable to disappointment after the strong rises of recent years driven by investor enthusiasm for technology in general and artificial intelligence advances in particular. Your Company’s cash and bond investments provide diversification should equity markets falter and as well as income to pay dividends.

NET ASSET VALUE

Your Company’s unaudited NAV at 30th September 2025 was 180.56p per share.

INVESTMENT MANAGER’S REPORT

MARKET REVIEW

Leading western central banks cut their policy interest rates over the year to 30 June 2025 in response to moderating inflation. The US Federal Reserve reduced its 5.25-5.5% rate by a half percentage point in September 2024 and then made quarter point cuts in November and December but then left the rate unchanged at 4.25-5% in response to near full employment and sticky inflation data. The Core Personal Consumption Expenditures Price Index, the Fed’s preferred inflation measure, rose from 2.63% in June 2024 to 2.9% in July 2025. Inflation may rise further because of President Trump’s immigration clampdown and import tariff increases. The President has criticised the Fed’s refusal to ease policy further because he wishes to stimulate economic growth and weaken the dollar. Investors are nervous about this challenge to central bank independence.

Eurozone interest rates have fallen more rapidly. The European Central Bank cut its key policy rate by a quarter point on seven occasions over the year under review in response to falling inflation, taking the rate from 3.75% to 2%. In September 2025, the latest date for which data are available, inflation was slightly above target at 2.2%. Donald Trump ended the Pax Americana era when he told Europe’s leaders they could no longer rely on the US for security. In Germany, the Chancellor, Friedrich Merz, announced welfare spending cuts while increasing infrastructure and defence spending.

Investors are concerned about high public sector borrowing and fiscal deficits in France, the UK and the US. Donald Trump’s “Big Beautiful Bill” passed in the Senate after the vice president, JD Vance, cast his swing vote in favour. The measure extended the President’s first term tax cuts, increased defence spending and cut benefits. The US trade deficit rose further but the President announced swingeing tariffs on US imports. Tariff revenues may benefit America’s fiscal deficit but dollar weakness indicates investor unease. The Moody’s credit ratings agency downgraded US government bonds although they remained amongst the safest investments according to the ratings.

UK policy interest rates reached a 5.25% cyclical peak in 2023 and were unchanged until August 2024 when the Bank of England announced the first of five quarter point cuts that in aggregate took the rate to 4% in September 2025. UK inflation rose from 2.0% in June 2024 to 3.8% in September 2025 as wage rises contributed to 4.7% services inflation and 2.8% goods inflation. The Bank eased policy despite above target inflation because economic activity levels were weak. Rachel Reeves, chancellor, faces tough decisions on taxes in her autumn Budget if she intends to narrow the budget deficit without further damaging economic activity.

Some emerging market economies faced significant US tariff rises but may benefit from higher growth rates and lower public sector borrowing relative to gross domestic product. Dollar weakness may also prove a catalyst for investors to buy emerging market equities, which were trading on lower valuations at your Company’s year-end.

PORTFOLIO REVIEW

Your Company’s total return over the year under review was 2.08%. 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 5.57%. The MSCI AC World Total Return Index rose 7.64% in sterling while the MSCI UK All Cap Total Return Index rose 11.03%. Global bonds returned 0.46% in sterling while UK government bonds returned 1.42%.

During the year under review, Your Company’s performance was negatively affected by its relatively low allocation to US equities, which outperformed the benchmark, and from dollar weakness. By contrast, your Company’s equity investments in the UK and emerging markets were beneficial. In August 2024, £17 million was returned to shareholders via a B share issue and redemption. To fund this, your Company’s investments were sold on a broadly pro-rata basis to maintain the portfolio’s overall asset allocation.

US equities rose 6.23% in sterling over the year, with technology stocks marginally outperforming. DeepSeek, a Chinese artificial intelligence (AI) innovator, unveiled a large language model developed at a fraction of the cost of proprietary US AI models and made the source code freely available. This resulted in significant volatility for technology stocks as investors reassessed AI’s commercial potential. Polar Capital Global Technology, which has a bias towards AI beneficiaries, however, rose 11.61%, outperforming 6.74% return for US technology stocks in sterling.

Your Company started the year under review with a relatively low allocation to US stocks and the US weighting was further reduced in response to high valuations and the growing concentration risk caused by investor exuberance about AI. This drove the percentage of the US market represented by large technology companies to unprecedented levels. The holdings in Polar Capital Global Technology and the iShares Core S&P 500 exchange traded fund (ETF) were reduced as part of the return of capital to shareholders and the Polar Capital Global Technology holding was reduced by a further £3 million in October 2024.

Your Company benefited from strong performance by UK stocks, up 11.03% as investors bought into a market that was relatively lowly valued and yielded more than many overseas markets. This higher yield supports your Company’s ability to pay dividends. Man Income returned 14.16% while Chelverton UK Equity Income, a small company investment, returned 7.33%. Aberforth Geared Value & Income, the successor investment trust to Aberforth Split Level Income, was launched at the start of your Company’s financial year. Its shares fell 23.01% over the year as they traded at a discount to their net asset value. The fall came despite the 11.14% gain by UK smaller companies over the year.

Equities in Asia excluding Japan and emerging markets rose 8.38% and 6.98% respectively in sterling over the year despite the imposition of significant US tariffs on Chinese and Indian goods. Your Company’s holdings in the JP Morgan Global Emerging Markets Income investment trust and its related open ended fund gained 11.05% and 5.00% respectively as Asian technology stocks including Taiwan Semiconductor Manufacturing Company and Samsung Electronics were buoyed by investor enthusiasm. Prusik Asian Equity Income, which has a value investment style and holds high yielding stocks such as CK Hutchison and Jardine Matheson, gained 9.93%. A bias towards higher dividend payers also helped Schroder Oriental Income and Schroder Asian Income Maximiser return 9.29% and 3.51% respectively.

Indian equities fell 5.65% in sterling over the year as investors preferred more lowly valued emerging markets. Stewart Investors Indian Subcontinent, one of your Company’s largest investments, underperformed, falling 12.43%. Your Company’s emerging markets weighting increased through a £1.25 million investment in Cusana Emerging Markets Equities but it was later reduced through the sale of Polen Capital Asia Income following the departure of its manager to raise £3.4 million.

Your Company’s sterling hedged global bond investments made significant gains as global bonds rose 8.91% in dollar terms but just 0.46% in sterling because of the dollar’s 7.75% fall against the pound. The sterling hedged holdings in Franklin Templeton Emerging Market Bond and the iShares Treasury Bond 7-10 years exchange traded fund returned 14.75% and 5.17% respectively. Within the UK allocation, Schroder Strategic Credit returned 8.28%.  These investments combined with sterling and dollar cash provided diversification and income although the weak dollar hurt performance.

OUTLOOK

Your Company’s portfolio ended the year under review positioned positively because equity markets should benefit from monetary easing by the leading western central banks. US equities, which have led markets higher in recent years, appear priced for near perfection, however, with expected returns close to the returns offered by low risk investments such as 2 year US government bonds. This implies that investors are receiving little compensation for the additional risk inherent in investing in US equities. By contrast, larger companies in the UK, the eurozone and some emerging markets appeared to offer attractive returns relative to lower risk assets. Sterling and dollar deposits, bond investments and lower risk multi-asset investments provide diversification and some protection should equity markets fall overall as well as contributing to your Company’s ability to pay dividends.

SCHEDULE OF LARGEST HOLDINGS AT 30TH JUNE 2025