Half Yearly Results

RNS Number : 6556B

JPMorgan Overseas IT PLC

22 February 2011

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN OVERSEAS INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2010

Chairman's Statement

This is my first report to you as Chairman following the retirement of George Paul after our Annual General Meeting last year.

I am pleased to report that, as equity markets continued to recover strongly during the first six months of the Company's financial year, the total return on the Company's net assets was +25.6%. This compares very positively to the return on our benchmark, the MSCI AC World Index (in sterling terms) of +18.8%. Our Investment Manager, Jeroen Huysinga, provides a detailed commentary on markets and the portfolio performance in his Report which also shows the performance attribution.

During the six month period, the return to shareholders was +17.3%. The lower return reflects the move in the Company's share price rating from a significant premium to net asset value of 5.9% at 30th June 2010 to a small discount to net asset value of 0.8% at 31st December 2010. At the time of writing the Company's shares have once again moved to trade at a modest premium to net asset value. This premium results from the demand for our shares following the strong performance of the Company's assets under Jeroen Huysinga who took over managing the portfolio on 1st October 2008. Since that point to 31st December 2010, the total return on net assets has been +67.6%, against the return on our benchmark of +34.6%. This premium enabled us, in February 2011 to reissue 45,000 shares from Treasury at a modest premium to net asset value. We believe that there are long-term advantages to growing the Company through the issue of shares at a premium. As a larger trust, we are likely to enjoy better liquidity for trading our shares. It will also help reduce our Total Expense Ratio as the Company's fixed costs will be spread over a larger asset base. Furthermore, issuing shares at a premium has a modest beneficial effect on the Company's net asset value.

Gearing levels increased slightly during the period from 6.1% at the start of the period to 6.8% at 31st December 2010 with £17.8 million of the Company's £20 million borrowing facility with ING drawn.

The Board's outlook for the second half of the Company's financial year remains favourable with the Company's portfolio maintaining its exposure to high quality companies, with significant earnings growth prospects and strong financial characteristics. Notwithstanding the potential challenges to global markets in 2011 arising from continuing economic and geopolitical issues, your Board believes the Company will continue to perform well as we have access to JPMorgan's best ideas in global equity markets.

for and on behalf of the Board

Simon Davies

Chairman

22nd February 2011

Investment Manager's Report

After a tepid first half, markets advanced materially during the second half of 2010. At the close, which was virtually at the high of the year, the MSCI All Country World Index was up 18.8% in sterling terms over the second half, up 16.2% over the year and up 71% from the lows in March 2009.

While macro issues such as sovereign debt, fiscal adjustment and Chinese deceleration dominated sentiment during the first half, advances in the second half were driven principally by exceptional growth in both corporate earnings and cashflows coupled with favourable valuation levels (particularly relative to bonds). In an environment of very loose monetary policy throughout most of the developed world, there has been increasing evidence of positive macro momentum.

Regionally the profile of returns has contrasted significantly from recent trends. Returns over the last six months have been led by the US and the UK. Emerging market returns have barely matched those of the index while returns in Asia and Continental Europe lagged quite significantly. Japan, once again, underperformed in local currency terms.

There was sharp divergence in performance between global sectors in the second half of 2010. Energy, Basic Industries and Autos all rose more than 40% in sterling terms. Two sectors, Banks and Property, declined slightly and the Semi Conductor sector was flat.

Performance within our portfolio was driven by successful stock selection within each of the three stronger sectors. Stocks which we have referenced in the past, including Rhodia and Lanxess, continued to perform well in the second half as earnings estimates were raised sharply and earnings sustainability was awarded a higher rating. Both GKN and Cookson (up 93% and 70% respectively) are very good examples of growth which has an Emerging Market source but which is accessible, at a more favourable valuation, in Developed Markets. Within Basic Industries, First Quantum has been an excellent vehicle for exposure to the copper market and in the Energy sector we benefited from holdings in Interoil, Schoeller-Bleckmann Oilfield Equipment and BP.

With the significant exception of North America, the portfolio outperformed across all the regions. Most of the poor performance in the US was driven by insufficient exposure to that market although poor stock selection, particularly Hewlett-Packard, Cisco and Abbott Laboratories also detracted.

Changes to the portfolio during the second half were stock specific and not driven by the imperatives of regional allocation. Key buys included Metlife in the US, Erste Bank in Austria and Associated British Foods in the UK. Significant disposals included Garanti Bank in Turkey, Telekom Indonesia and McDonald's in the US. We have continued to shift very gently away from Emerging Market stocks and we have increased our exposure to Japan.

Having finished 2010 on a very confident note, it was inevitable that strong momentum would spill into 2011. At these levels, however, markets will become more demanding. It is already obvious that lofty earnings expectations must at least be achieved in order for sharp setbacks to be avoided in individual stocks. Rising material costs will pose a mounting challenge to the preservation of corporate margins. Having not really worried about inflation since the collapse of 2008 this has obviously become a serious issue for policy makers particularly in China and other major Asia economies but also in the UK. Probably the most significant threat to markets in 2011 lies in the manner in which Europe deals with its sovereign issues which are now focussed around Spain.

Our opportunities continue to stem from our ability to look through any short-term market volatility, focussing on the long term valuations and earnings prospects of the many companies which comprise our research universe. We continue to draw on the expertise of our career research analysts based around the world, focusing on investing in companies which are cheap relative to global peers based on a long term valuation methodology, companies for which we forecast significant earnings growth and companies with sufficient catalysts to ensure that our insight is rewarded within an acceptable period of time.

Jeroen Huysinga

Investment Manager

22nd February 2011

Interim Management Report

The Company is now 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 the following broad categories: Investment and Strategy; Market; 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 June 2010.

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.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections; that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

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 half year management report includes a fair review of the information required by DTR 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

For and on behalf of the Board

Simon Davies

Chairman

For further information, please contact:

Divya Amin

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 6000

Income Statement

for the six months ended 31st December 2010

	(Unaudited) Six months ended 31st December 2010			(Unaudited) Six months ended 31st December 2009			(Audited) Year ended 30th June 2010
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	44,611	44,611	-	49,383	49,383	-	41,974	41,974
Net foreign currency (losses)/gains	-	(1,158)	(1,158)	-	576	576	-	5,282	5,282
Income from investments	2,320	-	2,320	1,833	-	1,833	3,927	-	3,927
Other interest receivable and similar income	17	-	17	8	-	8	35	-	35
Gross return	2,337	43,453	45,790	1,841	49,959	51,800	3,962	47,256	51,218
Management fee	(215)	(215)	(430)	(165)	(165)	(330)	(362)	(362)	(724)
Performance fee	-	(1,377)	(1,377)	-	(2,603)	(2,603)	-	(2,540)	(2,540)
Other administrative expenses	(187)	-	(187)	(209)	-	(209)	(458)	-	(458)
Net return on ordinary activities before finance costs and taxation	1,935	41,861	43,796	1,467	47,191	48,658	3,142	44,354	47,496
Finance costs	(111)	(111)	(222)	(32)	(32)	(64)	(93)	(93)	(186)
Net return on ordinary activities before taxation	1,824	41,750	43,574	1,435	47,159	48,594	3,049	44,261	47,310
Taxation (note 3)	(165)	-	(165)	(90)	-	(90)	(298)	-	(298)
Net return on ordinary activities after taxation	1,659	41,750	43,409	1,345	47,159	48,504	2,751	44,261	47,012
Return per share (note 4)	6.45p	162.28p	168.73p	5.18p	181.70p	186.88p	10.65p	171.28p	181.93p

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

	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2010	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2010	6,544	27,401	135,383	17,585	186,913
Net return on ordinary activities	-	-	41,750	1,659	43,409
Dividends appropriated in the period	-	-	-	(3,345)	(3,345)
At 31st December 2010	6,544	27,401	177,133	15,899	226,977

	Called up	Capital
Six months ended	share	redemption	Capital	Revenue
31st December 2009	capital	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2009	6,544	27,401	93,721	17,804	145,470
Repurchase of shares into Treasury	-	-	(2,597)	-	(2,597)
Net return on ordinary activities	-	-	47,159	1,345	48,504
Dividends appropriated in the period	-	-	-	(2,979)	(2,979)
At 31st December 2009	6,544	27,401	138,283	16,170	188,398

	Called up	Capital
Year ended	share	redemption	Capital	Revenue
30th June 2010	capital	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000
At 30th June 2009	6,544	27,401	93,721	17,804	145,470
Repurchase of shares into Treasury	-	-	(2,599)	-	(2,599)
Net return on ordinary activities	-	-	44,261	2,751	47,012
Dividends appropriated in the year	-	-	-	(2,970)	(2,970)
At 30th June 2010	6,544	27,401	135,383	17,585	186,913

Balance Sheet

at 31st December 2010

	(Unaudited)	(Unaudited)	(Audited)
	31st December 2010	31st December 2009	30th June 2010
	£'000	£'000	£'000
Fixed assets
Equity investments held at fair value through profit or loss	242,410	200,289	198,288
Investments in liquidity funds held at fair value through profit or loss	4,740	-	1,100
Total investments	247,150	200,289	199,388
Current assets
Financial assets: Derivative financial instruments	3,590	3,471	4,126
Debtors	397	361	1,204
Cash and short term deposits	74	679	637
	4,061	4,511	5,967
Creditors: amounts falling due within one year	(19,515)	(11,301)	(12,824)
Financial liabilities: Derivative financial instruments	(1,799)	(2,007)	(2,571)
Net current liabilities	(17,253)	(8,797)	(9,428)
Total assets less current liabilities	229,897	191,492	189,960
Creditors: amounts falling due after more than one year	(200)	(200)	(200)
Provisions for liabilities and charges
Performance fees	(2,720)	(2,894)	(2,847)
Total net assets	226,977	188,398	186,913
Capital and reserves
Called up share capital	6,544	6,544	6,544
Capital redemption reserve	27,401	27,401	27,401
Capital reserves	177,133	138,283	135,383
Revenue reserve	15,899	16,170	17,585
Shareholders' funds	226,977	188,398	186,913
Net asset value per share (note 5)	882.3p	732.3p	726.5p

Cash Flow Statement

for the six months ended 31st December 2010

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2010	31st December 2009	30th June 2010
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	647	369	1,215
Net cash outflow from returns on investments and servicing of finance	(136)	(64)	(113)
Taxation recovered	44	30	83
Net cash (outflow)/inflow from capital expenditure and financial investment	(4,180)	6,941	1,487
Dividends paid	(3,345)	(2,979)	(2,970)
Net cash inflow/(outflow) from financing	7,800	(2,537)	(2,599)
Increase/(decrease) in cash for the period	830	1,760	(2,897)
Reconciliation of net cash flow to movement in net debt
Net cash movement	830	1,760	(2,897)
Loans drawn down in the period	(7,800)	-	-
Exchange movements	(1,393)	(1,789)	2,826
Movement in net debt in the period	(8,363)	(29)	(71)
Net debt at the beginning of the period	(9,563)	(9,492)	(9,492)
Net debt at the end of the period	(17,926)	(9,521)	(9,563)
Represented by:
Cash and short term deposits	74	679	637
Debt falling due within one year	(17,800)	(10,000)	(10,000)
Debt falling due after more than five years	(200)	(200)	(200)
Total	(17,926)	(9,521)	(9,563)

Notes to the Accounts

for the six months ended 31st December 2010

1.    Financial statements

      The information contained within the accounts in this half year report has not been audited or reviewed by the Company's auditors.

      The figures and financial information for the year ended 30th June 2010 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 and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' dated January 2009.

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

      The accounting policies applied to these half year accounts are consistent with those applied in the accounts for the year ended 30th June 2010.

3.   Taxation

      The taxation charge of £165,000 (31st December 2009: £90,000 and 30th June 2010: £298,000) relates to irrecoverable overseas withholding tax.

4.   Return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2010	31st December 2009	30th June 2010
	£'000	£'000	£'000
Return per share is based on the following:
Revenue return	1,659	1,345	2,751
Capital return	41,750	47,159	44,261
Total return	43,409	48,504	47,012
Weighted average number of shares in issue	25,726,732	25,954,521	25,840,791
Revenue return per share	6.45p	5.18p	10.65p
Capital return per share	162.28p	181.70p	171.28p
Total return per share	168.73p	186.88p	181.93p

5.   Net asset value per share

      Net asset value per share is calculated by dividing the funds attributable to ordinary shareholders by the number of ordinary shares in issue at 31st December 2010 of 25,726,732 (31st December 2009: 25,726,732 and 30th June 2010: 25,726,732), excluding shares held in Treasury.

6.   Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2010	31st December 2009	30th June 2010
	£'000	£'000	£'000
Total return on ordinary activities before finance costs and taxation	43,796	48,658	47,496
Add back capital return before finance costs and taxation	(41,861)	(47,191)	(44,354)
Scrip dividends received as income	(24)	(2)	(2)
Net movement in debtors and accruals	340	186	(195)
Overseas withholding tax	(229)	(99)	(350)
Expenses charged to capital	(215)	(165)	(362)
Performance fee paid	(1,160)	(1,018)	(1,018)
Net cash inflow from operating activities	647	369	1,215

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

A copy of the half year has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.hemscott.com/nsm.do

The half year will also shortly be available on the Company's website at www.jpmoverseas.co.uk 

where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END

 

 

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