Half Yearly Report

RNS Number : 8867S

JPMorgan Asian Investment Tst PLC

27 May 2009

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 

31ST MARCH 2009

Chairman's Statement 

Performance

Our investment managers had to contend with another six month period of extreme volatility in Asian markets. In the first twenty seven days of October alone our benchmark (the MSCI AC Asia ex Japan Index in sterling terms) fell by more than 29% before rallying by month end to close 17% down. It then staged a number of sharp rallies and subsequent steep corrections before ending the reporting period with a modest negative total return of 1.8%. Against this backdrop the Company's net asset value total return declined by 1.7% as our investment managers held their nerve, maintaining their conviction approach to stock picking (which focuses the portfolio on companies they rate highly, regardless of their current benchmark weighting). The Company's share price performed better and, taking into account the benefit of a narrowing of the discount, the total return to shareholders in the period was +2.3%.

Subscription Shares

At the Company's General Meeting held on 4th February 2009, shareholders approved a bonus issue of Subscription shares to qualifying shareholders on the basis of one Subscription share for every five Ordinary shares held. Each Subscription share confers the right (but not the obligation) to subscribe for one Ordinary share at predetermined prices on any business day during the period from 1st April 2009 until 31st March 2014, after which the rights on the Subscription shares will lapse. It is pleasing that, at the time of writing, the Company's Ordinary share price is quoted at 158.5p, comfortably above the initial exercise price of 137p per Subscription share. The Subscription shares, which are separately quoted, are currently priced at 26.25p per share, which equates to a further 5.25p of value per Ordinary share for shareholders who qualified for the bonus issue. Further details on the Subscription shares, including their exercise prices, the apportionments for capital gains tax purposes and how they may be exercised, can be found on the Company's website at www.jpmasian.co.uk

Discount Volatility

The level of discount and demand for the Company's shares remained strong over the period and, accordingly, the Board did not buy back any shares. However, the Board continues closely to monitor the level of the discount and is prepared to use its authority to repurchase shares should it deem it necessary.

Gearing

Our investment managers did not gear the portfolio during the review period and actually held cash, which proved to be a wise investment decision. The Board has a policy of keeping gearing within the range of 90-120% invested and the Company has the facilities in place to enable the investment managers to re-gear the portfolio should buying opportunities present themselves. As markets have rallied over the past couple of months this policy has remained under close review and, indeed, in mid-April our investment managers decided to draw down on some of the Company's committed facilities.

Outlook

Asian markets have rallied strongly since the beginning of March. Despite some encouraging signs it is, however, too soon to say with confidence that the bear market is behind us. Investor sentiment is likely to remain fragile and stock markets susceptible to further setbacks for some time to come. Our investment managers, however, are well

prepared to take advantage of any opportunities. 

Despite the continued market uncertainty, your Board remains confident in the long term prospects for Asia and is fully supportive of our investment managers' style and approach which, we expect, should deliver out-performance over the longer term.

James M Long

Chairman

27th May 2009

Investment Managers' Report

Market Review

The past six months provided little respite from the highly volatile stock market conditions which had persisted throughout 2008. Asian markets continued to be impacted by the global slowdown, with investor confidence taking further batterings in the fallout from the Lehman Brothers bankruptcy, disappointing economic data and poor corporate earnings announcements. Pleasingly, many governments were aggressive in their response with interest rate cuts and large fiscal and monetary stimulus packages. By the end of the review period the results of these measures were beginning to have some visible impact, with newsflow becoming 'less bad'.

China proved to be the best performing market in the region over the six month reporting period whilst Indonesia, Singapore and Thailand performed poorly due to their high export exposure and reduced liquidity.

Performance

The Company delivered a total return on net assets (capital plus dividends re-invested) of -1.7% against the total return of our benchmark, the MSCI AC Asia ex Japan Index in sterling terms, of -1.8%. Throughout the period we did not employ any gearing and held, on average, 6% of the portfolio in cash. This decision contributed approximately 2.3% to total return while asset allocation and stock selection detracted from performance by 0.1% and 1.8% respectively.

In terms of general stock selection, the biggest detractor from performance was the portfolio's exposure to small to mid cap stocks. Our investments in IndoFood, United Tractors, China National Building Materials, China Hongxing Sports and Digitech Systems lost significant value, both on an absolute and relative basis. While this has been painful, we will continue to invest in such stocks where we believe they will deliver value and performance over a longer term period.

Our strategy to be overweight in China and Hong Kong yielded positive results, delivering in aggregate 110 basis points of relative out performance. Whilst 2008 was extremely difficult for China's economy, its substantial firepower, illustrated by its four trillion renminbi fiscal stimulus package, reignited economic growth back on to an 8% rate and, at the same time, provided strong support to Hong Kong. At the stock level our positions in China Mobile, China Construction Bank, Huabao International and selected property stocks contributed positively to relative performance.

In disappointing contrast, Taiwan was a big detractor from portfolio performance. We were wrong to underweight this market and also wrong to avoid the Taiwanese technology sector. This market rallied very strongly in the first quarter of 2009 on the back of improved cross-strait relations with China, strong liquidity flows from local investors and a significant increase in orders to replenish depleted global inventories which benefited technology stocks. While the portfolio was underweight technology, we were able to generate positive returns from our position in Asia Cement which has significant operations in China. Similarly, the defensive nature of Chunghwa Telecom protected value during the sell-off in October 2008.

Our bullish position on Singapore did not reward us. We took the view that countries with strong fiscal and corporate balance sheets, such as Singapore, would be a relatively safe haven at a time when banks globally were in turmoil. Whilst that was true, investors chose instead to focus on Singapore's relatively high leverage to global trade and, as a result, it was the worst performing market in the Asia ex-Japan region during the period. The main detractors to performance were our holdings of Keppel Corp and City Development. Conversely CapitaLand, which we purchased at a good price at the end of 2008, and Wilmar International were both material positive contributors to performance.

Market Outlook

At the time of writing, Asian markets are showing healthy returns year to date as sentiment has shifted from ultra bearish to optimistic. We continue, however, to remain cautious and believe that the recent upturn represents no more than a bear market rally at this stage. High cash levels have exacerbated this rally as investors chase performance, but we would stress that, whilst credit markets have recently eased, concerns over the financial sector remain. Unemployment also continues to rise and private sector spending is falling and, whilst valuations in Asia are still relatively inexpensive, significant pressure on corporate earnings remains, as does political risk from protectionism and forthcoming elections.

China will again hold the key to Asian stock market performance. Weaker-than-expected Chinese growth in 2009 would come as a big shock to investors. But China's healthy public debt/GDP ratio allows scope for more fiscal stimulus if needed while China is a clear beneficiary of lower commodity prices, unlike Latin America. The effects of the fiscal stimulus package are already visibly impacting domestic demand and we believe that China will perform strongly relative to its BRIC rivals and to the advanced economies. Within the portfolio we remain overweight in China, India and Singapore and underweight in Taiwan, Korea and Hong Kong.

Joshua Tay

Pauline Ng

Investment Managers

27th May 2009

Interim Management Report 

The Company is required to make the following disclosures in its half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company fall into six broad categories: market; investment and strategy; accounting, legal and regulatory; corporate governance and shareholder relations; operational; and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th September 2008.

During the market turmoil in the latter part of 2008, JPMAM reacted with heightened management scrutiny of counterparty risk. In addition, reviews were initiated of exposures, policies, procedures and legal arrangements applicable to the major sources of counterparty exposure.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)    the condensed set of financial statements contained within the half yearly 
       financial report has been prepared in accordance with the Accounting Standards 
       Board's Statement 'Half-Yearly Financial Reports'; and

(ii)   the interim management report includes a fair review of the information required 
        by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency 
        Rules.

James M Long

Chairman    

For further information, please contact:

Alison Vincent

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmasian.co.uk

Income Statement

for the six months ended 31st March 2009

	(Unaudited) Six months ended 31st March 2009			(Unaudited) Six months ended 31st March 2008				(Audited) Year ended 30th September 2008
	Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000		Revenue £'000	Capital £'000	Total £'000
Losses from investments held at fair value through profit or loss	-	(9,617)	(9,617)		-	(56,472)	(56,472)		-	(137,354)	(137,354)
Net foreign currency gains	-	2,449	2,449		-	1,253	1,253		-	1,570	1,570
Income from investments	1,696	-	1,696		1,877	-	1,877		6,658	-	6,658
Other interest receivable and similar income	49	-	49		397	-	397		622	-	622
Gross return/(loss)	1,745	(7,168)	(5,423)		2,274	(55,219)	(52,945)		7,280	(135,784)	(128,504)
Management fee	(699)	-	(699)		(1,163)	-	(1,163)		(2,126)	-	(2,126)
Performance fee writeback	-	-	-		-	2,501	2,501		-	2,501	2,501
Other administrative expenses	(650)	-	(650)		(313)	-	(313)		(732)	-	(732)
Net return/(loss) on ordinary activities before finance costs and taxation	396	(7,168)	(6,772)		798	(52,718)	(51,920)		4,422	(133,283)	(128,861)
Finance costs	(43)	-	(43)		(803)	-	(803)		(1,067)	-	(1,067)
Net return/(loss) on ordinary activities before taxation	353	(7,168)	(6,815)		(5)	(52,718)	(52,723)		3,355	(133,283)	(129,928)
Taxation	(186)	-	(186)		(127)	-	(127)		(618)	(168)	(786)
Net return/(loss) on ordinary activities after taxation	167	(7,168)	(7,001)		(132)	(52,718)	(52,850)		2,737	(133,451)	(130,714)
Return/(loss) per share   (note 4)	0.1p	(4.5)p	(4.4)p		(0.1)p	(32.9)p	(33.0)p		1.7p	(83.4)p	(81.7)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the period.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a 'Statement of Total Recognised Gains and Losses' ('STRGL'). 

For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

Six months ended 31st March 2009 (unaudited)

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2008	40,002	4,347	977	3,009	106,481	83,633	3,163	241,612
Net (loss)/return on ordinary activities	-	-	-	-	-	(7,168)	167	(7,001)
Dividends appropriated in the period	-	-	-	-	-	-	(2,720)	(2,720)
At 31st March 2009	40,002	4,347	977	3,009	106,481	76,465	610	231,891
Six months ended 31st March 2008 (unaudited)
	Called up		Exercised	Capital
	share	Share	warrant	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2007	40,002	4,347	977	3,009	106,481	217,084	2,506	374,406
Net loss on ordinary activities	-	-	-	-	-	(52,718)	(132)	(52,850)
Dividends appropriated in the period	-	-	-	-	-	-	(2,080)	(2,080)
At 31st March 2008	40,002	4,347	977	3,009	106,481	164,366	294	319,476
Year ended 30th September 2008 (Audited)
	Called up		Exercised	Capital
	share	Share	warrant	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2007	40,002	4,347	977	3,009	106,481	217,084	2,506	374,406
Net (loss)/return on ordinary  activities	-	-	-	-	-	(133,451)	2,737	(130,714)
Dividends appropriated in the year	-	-	-	-	-	-	(2,080)	(2,080)
At 30th September 2008	40,002	4,347	977	3,009	106,481	83,633	3,163	241,612

Balance Sheet
as at 31st March 2009

	(Unaudited) 31st March 2009 £'000		(Unaudited) 31st March 2008 £'000	(Audited) 30th September 2008 £'000
Fixed assets
Investments at fair value through profit or loss		225,607	308,556	225,104
Current assets
Debtors		6,437	612	681
Cash at bank and in hand		5,453	41,134	17,702
Derivative financial instruments		8	1	-
		11,898	41,747	18,363
Creditors: amounts falling due within one year:		(5,543)	(5,670)	(1,823)
Net current assets		6,355	36,077	16,560
Total assets less current liabilities		231,962	344,633	241,664
Creditors: amounts falling due after  more than one year:  Bank loans		-	(25,157)	-
Provisions for liabilities and charges
Deferred tax		(71)	-	(52)
Total net assets		231,891	319,476	241,612
Capital and reserves
Called up share capital		40,002	40,002	40,002
Share premium		4,347	4,347	4,347
Exercised warrant reserve		977	977	977
Capital redemption reserve		3,009	3,009	3,009
Other reserve		106,481	106,481	106,481
Capital reserve		76,465	164,366	83,633
Revenue reserve		610	294	3,163
Shareholders' funds		231,891	319,476	241,612
Net asset value per share (note 5)		144.9p	199.7p	151.0p

Cash Flow Statement
for the six months ended 31st March 2009

	(Unaudited) Six months ended 31st March 2009 £'000	(Unaudited) Six months ended 31st March 2008 £'000	(Audited) Year ended 30th September 2008 £'000
Net cash inflow/(outflow) from operating activities (note 6)	229	(1,824)	1,802
Net cash outflow from return on investments and servicing of finance
	(43)	(807)	(1,118)
Net cash (outflow)/inflow from capital  expenditure and financial investment
	(12,156)	40,089	38,180
Dividends paid	(2,720)	(2,080)	(2,080)
Net cash outflow from financing	-	(16,393)	(42,725)
(Decrease)/increase in cash for the period	(14,690)	18,985	(5,941)
Reconciliation of net cash flow to movement in  net funds/debt
Net cash movement	(14,690)	18,985	(5,941)
Loans repaid in the period	-	-	42,725
Exchange movements	2,441	1,866	1,570
Changes in net funds/debt arising from cash flows	(12,249)	20,851	38,354
Net funds/(debt) at the beginning of the period	17,702	20,283	(20,652)
Net funds at the end of the period	5,453	41,134	17,702
Represented by: Cash at bank and in hand	5,453	41,134	17,702

Notes to the Accounts
for the six months ended 31st March 2009

1.    Financial Statements

The information contained within the Financial Statements in this half-yearly report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 30th September 2008 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498 (2) or 498 (3) of the Companies act 2006.

2.    Accounting Policies

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' issued in January 2009.

                All of the Company's operations are of a continuing nature.

The accounting policies applied to these interim accounts are consistent with those applied in the accounts for the year ended 30th September 2008.

3.    Dividends

	(Unaudited) Six months ended 31st March 2009 £'000	(Unaudited) Six months ended 31st March 2008 £'000	(Audited) Year ended 30th September 2008 £'000
Final dividend in respect of the year ended 30th September 2008 of 1.70p (2007: 1.30p)	2,720	2,080	2,080

No interim dividend has been declared in respect of the six months ended 31st March 2009 (2008: nil)

4.    Return/(loss) per share

		(Unaudited) Six months ended 31st March 2009 £'000	(Unaudited) Six months ended 31st March 2008 £'000	(Audited) Year ended 30th September 2008 £'000
Return/(loss) per share is based on the following:
Revenue return/(loss)		167	(132)	2,737
Capital Loss		(7,168)	(52,718)	(133,451)
Total Loss		(7,001)	(52,850)	(130,714)
Weighted average number of shares in issue		160,007,154	160,007,154	160,007,154
Revenue return/(loss) per share		0.1p	(0.1)p	1.7p
Capital Loss per share		(4.5)p	(32.9)p	(83.4)p
Total Loss per share		(4.4)p	(33.0)p	(81.7)p

5.    Net asset value per share

Net asset value per share is based on the net assets attributable to Ordinary shareholders of £231,891,000 (31st March 2008: £319,476,000 and 30th September 2008: £241,612,000) and on the 160,007,154 (31st March 2008: 160,007,154 and 30th September 2008: 160,007,154) shares in issue at the period end.

6.    Reconciliation of net loss on ordinary activities before finance costs and taxation to net cash inflow/(outflow) 
from operating activities

	(Unaudited) Six months ended 31st March 2009 £'000	(Unaudited) Six months ended 31st March 2008 £'000	(Audited) Year ended 30th September 2008 £'000
Net loss on ordinary activities before finance costs and taxation	(6,772)	(51,920)	(128,861)
Add back capital loss before finance costs and taxation	7,168	52,718	133,283
Scrip dividends received as income	(6)	(84)	(166)
(Increase)/decrease in accrued income	(207)	(44)	301
(Increase)/decrease in other debtors	(3)	76	4
Increase/(decrease) in accrued expenses	195	(51)	26
Overseas taxation	(146)	(127)	(393)
Performance fee	-	(2,392)	(2,392)
Net cash inflow/(outflow) from operating activities	229	(1,824)	1,802

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

www.jpmasian.co.uk

 

END

 

 

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