Half Year Results

RNS Number : 4584Q

JPMorgan American IT PLC

03 August 2010

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN AMERICAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

30TH JUNE 2010

Chairman's Statement

Performance

Despite starting the year positively, US equity markets fell over the first six months of 2010. Increasingly strong indications of a sustained economic recovery in the US and investor confidence that the global economy would avoid a 'double dip recession' had initially taken markets higher. However, the credit crisis that developed in much of Europe and fears for the prospects of reduced growth in China hit investor sentiment hard. In US dollar terms, the S&P 500 fell by 7.6% over the six months to

30th June, while in sterling total return terms the Company's net asset value fell by 0.8%, marginally underperforming the total return of 0.6% from the S&P 500 Index. Sterling denominated returns were boosted by the weakness of sterling, which fell from 1.61 against the US dollar to 1.50.

Discount Management

Over the course of the half year under review, the Company's shares have moved from a discount of 3.3%, calculated with liabilities held at their fair value and including current year income, to a premium of 3.5%.

After the end of the period, the Company issued 125,000 shares at a small premium to NAV to satisfy demand from the market.

Revenue and Dividends

At 5.51p (2009: 5.13p), earnings per share for the six months to 30th June 2010 have again increased modestly on the equivalent period in the previous year. The Company's policy has been to distribute all, or substantially all, of the available income in each year.

Shareholders should note that income streams can vary significantly and the Company's dividends are likely to reflect those variations.

Outlook

Our Managers believe that an economic recovery in the US is taking place and will continue. Macro uncertainties remain, but equity valuations appear attractive and corporate profits look set to continue their recovery. Whilst recognising the short term challenges facing the markets, the Managers remain positive about the prospects for US equities over the medium term.

Hamish Buchan

Chairman

3rd August 2010

Investment Managers' Report

Market Review

The US equity markets began the six-month period under review on a positive note, as strengthening economic data increased investor confidence that a 'double dip recession' might be averted. This positive sentiment evaporated in May as investors grew fearful that the potential credit crisis in Europe, as well as a slowdown in the Chinese economy, could impact the global economic recovery. Other notable news items unsettling the markets, included the uncertainty over the eventual outcome of US financial reform and the still uncontained oil spill in the Gulf of Mexico. The first half of 2010 showed the S&P 500 down 7.6% in US dollar terms, which is the worst start for the index since 2002, when it lost 13.8%.

The European sovereign debt crisis has dominated the financial headlines. In an effort to reduce their budget deficits several European governments are being forced into severe spending cuts, which, given the uncertainty over the sustainability of the economic recovery, could constitute a premature fiscal tightening. This could prove detrimental to economic growth at a time when it is needed most.

While Europe struggles, several US economic indicators point to continued recovery. Corporate profits continue to be resilient with 68% of companies reporting better than expected operating earnings. Though the improvement in corporate profits has been driven by aggressive cost-cutting efforts, what is most encouraging is that 71% of the companies reporting posted better than expected sales. On the negative side, doubts began to emerge about the recovery in US house prices. Investors believe the stabilisation of housing prices and the recently expired home-buyer tax credits have  been major factors in supporting house sales.

Performance

The Company's net asset value fell by 0.8% in sterling total return terms in the first six months of 2010. There was a negative contribution from the large cap portfolio which was predominantly driven by weak stock selection in the information technology and consumer staples sectors. Within technology, an overweight position in Microsoft proved detrimental as its share price declined in tandem with the large cap software sector on fears about the health of the global economy, particularly in European markets. Within consumer staples, our exposure to Walgreen detracted as the drugstore division reported a drop in quarterly profits due to higher costs. In contrast, the portfolio's consumer discretionary and materials exposures, particularly Marriott and Du Pont, aided relative performance over the period.

The Company's level of the gearing was reduced slightly during the first six months of the year. After starting the year at around 111%, gearing declined during the period to 109% as we took some money out of the market. The Company's share price has moved from a discount of 3.3% to a premium of 3.5%.

The composition of the portfolio changed slightly, as we reduced the exposure to small caps, due to the increasingly attractive outlook for larger cap companies.

Market Outlook

The outlook for the third quarter will continue to be swayed by some of the larger macro issues which continue to dominate headlines and keep equity investors on the sidelines. However, our basic thesis, that equity valuations appear attractive and that the US economic recovery will continue, remains intact, despite the recent headwinds facing the market. The US equity market continues to look cheap based on estimates of 2011 earnings, and we are now seeing equity risk premiums versus US Treasuries and corporate bonds widen out to historical highs. It is our expectation that second quarter earnings season should provide the market with much needed insight into the outlook for demand and corporate profits over the next twelve months. Overall, we see attractive equity valuations and a corporate sector in robust financial health. The portfolio continues to have a tilt toward larger capitalisation, higher quality names. We have favoured stocks that are large and global in nature with strong balance sheets, but still look attractive based on valuation. These include Microsoft, Merck and Hewlett Packard. The largest companies have continued to fall under the weight of a weaker Euro, regulatory pressure and a general lack of investor interest, though we are adding on weakness.

We continue to believe in the self-sustainability of the global economic rebound. However, we do recognise the near-term concerns facing the market. We still remain somewhat cautious on the US consumer, waiting to see if there is improvement in unemployment and housing.

Garrett Fish

Investment Manager

3rd August 2010

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 seven broad categories: investment and strategy; market; accounting, legal and regulatory; corporate governance and shareholder relations; operational; financial; political and economic. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st December 2009.

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.

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 year 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.

For and on behalf of the Board

Hamish Buchan

Chairman

3rd August 2010

Hamish Buchan

Chairman

For further information, please contact:

Andrew Norman

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.jpmamerican.co.uk

Income Statement

for the six months ended 30th June 2010

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th June 2010			30th June 2009			31st December 2009
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments
held at fair value through
profit or loss	-	(3,802)	(3,802)	-	(40,071)	(40,071)	-	25,902	25,902
Net foreign currency (losses)/gains	-	(3,450)	(3,450)	-	6,889	6,889	-	5,955	5,955
Income from investments	3,587	-	3,587	3,711	-	3,711	7,072	-	7,072
Other interest receivable
and similar income	14	-	14	14	-	14	12	-	12
Gross return/(loss)	3,601	(7,252)	(3,651)	3,725	(33,182)	(29,457)	7,084	31,857	38,941
Management fee	(193)	(773)	(966)	(157)	(628)	(785)	(325)	(1,299)	(1,624)
Performance fee writeback	-	419	419	-	240	240	-	108	108
Other administrative expenses	(205)	-	(205)	(217)	-	(217)	(465)	-	(465)
Net return/(loss) on ordinary
activities before finance costs
and taxation	3,203	(7,606)	(4,403)	3,351	(33,570)	(30,219)	6,294	30,666	36,960
Finance costs	(348)	(1,395)	(1,743)	(347)	(1,389)	(1,736)	(694)	(2,775)	(3,469)
Net return/(loss) on ordinary
activities before taxation	2,855	(9,001)	(6,146)	3,004	(34,959)	(31,955)	5,600	27,891	33,491
Taxation	(502)	-	(502)	(810)	281	(529)	(1,060)	52	(1,008)
Net return /(loss) on ordinary
activities after taxation	2,353	(9,001)	(6,648)	2,194	(34,678)	(32,484)	4,540	27,943	32,483
Return/(loss) per share
(note 3)	5.51p	(21.07)p	(15.56)p	5.13p	(81.16)p	(76.03)p	10.63p	65.40p	76.03p

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	Share	redemption	Capital	Revenue
30th June 2010	capital	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2009	10,682	18,906	8,151	269,018	14,709	321,466
Net (loss)/return on ordinary activities	-	-	-	(9,001)	2,353	(6,648)
Dividends appropriated in the period	-	-	-	-	(4,700)	(4,700)
At 30th June 2010	10,682	18,906	8,151	260,017	12,362	310,118
	Called up		Capital
Six months ended	share	Share	redemption	Capital	Revenue
30th June 2009	capital	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2008	10,682	18,906	8,151	241,075	14,864	293,678
Net (loss)/return on ordinary activities	-	-	-	(34,678)	2,194	(32,484)
Dividends appropriated in the period	-	-	-	-	(4,700)	(4,700)
At 30th June 2009	10,682	18,906	8,151	206,397	12,358	256,494
	Called up		Capital
Year ended	share	Share	redemption	Capital	Revenue
31st December 2009	capital	premium	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2008	10,682	18,906	8,151	241,075	14,864	293,678
Net return on ordinary activities	-	-	-	27,943	4,540	32,483
Dividends appropriated in the year	-	-	-	-	(4,695)	(4,695)
At 31st December 2009	10,682	18,906	8,151	269,018	14,709	321,466

Balance Sheet

at 30th June 2010

	(Unaudited)	(Unaudited)	(Audited)
	30th June 2010	30th June 2009	31st December 2009
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	337,112	288,715	357,900
Investments in liquidity funds held at fair value through
profit or loss	21,380	10,713	8,745
Total investments	358,492	299,428	366,645
Current assets
Derivative instrument	1,268	5,494	4,628
Debtors	514	653	518
Cash and short term deposits	-	1,665	501
	1,782	7,812	5,647
Creditors: amounts falling due within one year	(388)	(410)	(654)
Net current assets	1,394	7,402	4,993
Total assets less current liabilities	359,886	306,830	371,638
Creditors: amounts falling due after more than one year	(49,768)	(49,738)	(49,753)
Provisions for liabilities and charges	-	(598)	(419)
Total net assets	310,118	256,494	321,466
Capital and reserves
Called up share capital	10,682	10,682	10,682
Share premium	18,906	18,906	18,906
Capital redemption reserve	8,151	8,151	8,151
Capital reserves	260,017	206,397	269,018
Revenue reserve	12,362	12,358	14,709
Shareholders' funds	310,118	256,494	321,466
Net asset value per share (note 4)	725.8p	600.3p	752.4p

Cash Flow Statement

for the six months ended 30th June 2010

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2010	30th June 2009	31st December 2009
	£'000	£'000	£'000
Net cash inflow from operating activities	1,635	1,874	3,582
Returns on investments and servicing of finance
Interest paid	(1,719)	(1,722)	(3,444)
Capital expenditure and financial investment
Purchases of investments	(127,747)	(52,369)	(140,798)
Sales of investments	132,120	56,615	143,965
Other capital charges	-	(8)	(16)
Net cash inflow from capital expenditure
and financial investment	4,373	4,238	3,151
Dividends paid	(4,700)	(4,700)	(4,695)
Net cash outflow before financing	(411)	(310)	(1,406)
Financing	-	-	-
Decrease in cash for the period	(411)	(310)	(1,406)
Reconciliation of net cash flow to movement in net debt
Net cash movement	(411)	(310)	(1,406)
Other movements	(14)	(14)	(29)
Exchange movements	(91)	(924)	(992)
Movement in net debt in the period	(516)	(1,248)	(2,427)
Net debt at the beginning of the period	(49,252)	(46,825)	(46,825)
Net debt at the end of the period	(49,768)	(48,073)	(49,252)
Represented by:
Cash and short term deposits	-	1,665	501
Debt falling due after more than one year	(49,768)	(49,738)	(49,753)
Net debt at the end of the period	(49,768)	(48,073)	(49,252)

Notes to the Accounts

for the six months ended 30th June 2010

1.             Financial statements

                The information contained within the financial statements 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 31st December 2009 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 and Venture Capital Trusts' issued in 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 31st December 2009.

3.             Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2010	30th June 2009	31st December 2009
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	2,353	2,194	4,540
Capital (loss)/return	(9,001)	(34,678)	27,943
Total (loss)/return	(6,648)	(32,484)	32,483
Weighted average number of shares in issue	42,725,949	42,725,949	42,725,949
Revenue return per share	5.51p	5.13p	10.63p
Capital (loss)/return per share	(21.07)p	(81.16)p	65.40p
Total (loss)/return per share	(15.56)p	(76.03)p	76.03p

4.             Net asset value per share

                Net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue at 30th June 2010 of 42,725,949 (30th June 2009: 42,725,949 and 31st December 2009: 42,725,949).

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

www.jpmamerican.co.uk

 

END

 

 

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