Half Yearly Report

RNS Number : 7038L

JPMorgan American IT PLC

03 August 2011

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

            JPMORGAN AMERICAN INVESTMENT TRUST PLC

         UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

30TH JUNE 2011

Chairman's Statement

Performance

I am pleased to report that the Company's net asset value in total return terms rose by 4.6% over the six months to 30th June 2011, outperforming the sterling total return of the S&P 500 Index which returned 3.3%. The share price total return was 7.6%.

US equity markets started the year strongly on the back of a good run of corporate results. Investor concerns over the potential economic effects of the 'Arab Spring' and the terrible events in Japan slowed the market somewhat in March and April. Recent events in Europe with regard to sovereign debt and the increasingly tense negotiations around the US debt ceiling have continued to make the US equity market volatile.

Sterling denominated returns were slightly reduced by the strength of sterling against the US dollar, the exchange rate rising from $1.57 to $1.61.

Discount Management

Over the course of the half year under review, the Company's shares have moved from a discount of 0.3%, calculated with liabilities held at their fair value and including current year income, to a premium of 2.0%.

During the period, the Company issued 2,053,098 shares at a small premium to NAV to satisfy demand from the market and raised in total £17.7 million (net of expenses).

Hedging Policy

In order to protect against currency fluctuations in respect of the Company's £50 million debenture, a currency hedge was put in place in 2001 at a $/£ rate of 1.46. This hedge expires on 5th October 2011 and it is the Board's intention to roll the hedge forward for as long as the debenture is outstanding.

Revenue and Dividends

Earnings per share for the six months to 30th June 2011 have fallen slightly to 5.33p from 5.51p for 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 the strong position of large US companies will encourage investors to hold equities and will ultimately outweigh the sovereign debt and deficit concerns. The Managers remain positive about the prospects for US equities over the medium term, although a more cautious stance has been adopted in the short term as reflected in the gearing position which was reduced to 98% as at the end of June.

Hamish Buchan

Chairman

3rd August 2011

Investment Managers' Report

Market Review

The US equity market performed positively over the six months under review, despite a number of economic and political concerns that continue to worry investors. The year started off strongly, with yet another quarter of solid results from US companies, including a 10% year-on-year increase in revenue and an eighth consecutive quarter of better than expected earnings. By March, investors were once again faced with rising uncertainty as various conflicts in the Middle East and North Africa pushed oil prices higher, followed by a devastating earthquake and subsequent tsunami in Japan. Following these events, the market sold off sharply and by the middle of March was down almost 7% from its February peak.

Some positive macro economic news in the US helped to restore investor confidence. GDP growth came in at 3.1% for the fourth quarter 2010, which puts the domestic economy back into expansion territory as all of the output lost during the recession has officially been recovered. As we moved into May the market again lost momentum as investors grappled with disappointing economic data, rising food and energy prices, increased concerns surrounding the Eurozone crisis and political grandstanding around the US debt ceiling. However, in late June, a better than expected manufacturing report, an encouraging rise in pending home sales and the approval of new austerity measures in Greece enabled the broad market index to recoup its losses and finish the six months up 5.0% in US$ terms.

Performance

The Company's net asset value rose by 4.6% in total return terms over the first six months of 2011 and outperformed its benchmark, the S&P 500 Index which rose by 3.3% in sterling terms. There was a positive performance contribution from the large cap portfolio, which was largely driven by strong stock selection in the technology and energy sectors. Within technology, an overweight position in IBM and a lack of exposure to Google proved beneficial. IBM's share price rose on news that the technology behemoth had raised its quarterly dividend by 15% and authorised $8 billion in additional funds for the company's stock repurchase plan. Within energy, our exposure to Williams and Exxon Mobil added value, as earnings surged in energy companies, thanks to higher oil prices and improved refining margins.

In contrast, the portfolio's consumer discretionary and utilities exposures detracted from relative performance. Within consumer discretionary, an overweight position in OfficeMax for some of the period proved disappointing. The office products retailer's share price tumbled after declining sales to large business customers and lower store traffic led to a much bigger-than-expected decline in its fiscal first-quarter profit. We sold our position during the period under review. As regards our utilities holdings, an overweight position in CenturyLink hindered performance. The company's first-quarter profit declined 16% as revenue dropped due to access line losses, although the company added more high-speed internet subscribers.

The Company's level of gearing was reduced from 104% at the start of year to 98% at 30th June, as we took a more cautious view of the equity market in the short term.

Market Outlook

We believe concerns that the US economy is headed for another recession have been overstated. The health of corporate America continues to be very strong with extremely high cash levels, near record margins, low debt levels and decent growth prospects. We are starting to see the impact of higher commodities costs subside and supply side disruptions from the Japanese earthquake are slowly fading away. Gasoline prices have fallen 11% from their May 2011 high, while corn prices have eased even further, falling by 19% from the highs reached in mid-June. Lower energy and food prices can only help consumer spending and ease pressure on corporate margins.

With the second quarter earnings season quickly approaching, we believe the market will once again focus on fundamentals. However, as we move into the latter months of the summer, the US debt ceiling debate will most certainly intensify. The market will be focusing on what the eventual agreement will look like in terms of its scope and the split between spending cuts and tax increases. This will influence the likelihood of continuing economic growth in the second half of 2011 and into 2012.

Garrett Fish

Investment Manager

3rd August 2011

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 the following broad categories: 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 31st December 2010.

Related Party 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 objective, 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 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 2011

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 2011

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th June 2011			30th June 2010			31st December 2010
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments
held at fair value through
profit or loss	-	12,126	12,126	-	(3,802)	(3,802)	-	57,239	57,239
Net foreign currency gains/(losses)	-	1,211	1,211	-	(3,450)	(3,450)	-	(1,136)	(1,136)
Income from investments	3,605	-	3,605	3,587	-	3,587	7,023	-	7,023
Other interest receivable
and similar income	7	-	7	14	-	14	14	-	14
Gross return/(loss)	3,612	13,337	16,949	3,601	(7,252)	(3,651)	7,037	56,103	63,140
Management fee	(217)	(869)	(1,086)	(193)	(773)	(966)	(379)	(1,516)	(1,895)
Performance fee (charge)/writeback	-	(674)	(674)	-	419	419	-	36	36
Other administrative expenses	(219)	-	(219)	(205)	-	(205)	(448)	-	(448)
Net return/(loss) on ordinary
activities before finance costs
and taxation	3,176	11,794	14,970	3,203	(7,606)	(4,403)	6,210	54,623	60,833
Finance costs	(347)	(1,388)	(1,735)	(348)	(1,395)	(1,743)	(697)	(2,789)	(3,486)
Net return/(loss) on ordinary
activities before taxation	2,829	10,406	13,235	2,855	(9,001)	(6,146)	5,513	51,834	57,347
Taxation	(505)	-	(505)	(502)	-	(502)	(996)	-	(996)
Net return /(loss) on ordinary
activities after taxation	2,324	10,406	12,730	2,353	(9,001)	(6,648)	4,517	51,834	56,351
Return/(loss) per share
(note 3)	5.33p	23.85p	29.18p	5.51p	(21.07)p	(15.56)p	10.56p	121.14p	131.70p

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 2011	capital	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2010	10,713	19,778	8,151	320,852	14,526	374,020
Issue of ordinary shares to the market	513	17,230	-	-	-	17,743
Net return on ordinary activities	-	-	-	10,406	2,324	12,730
Dividends appropriated in the period	-	-	-	-	(4,727)	(4,727)
At 30th June 2011	11,226	37,008	8,151	331,258	12,123	399,766
	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
Year ended	share	Share	redemption	Capital	Revenue
31st December 2010	capital	premium	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2009	10,682	18,906	8,151	269,018	14,709	321,466
Issue of ordinary shares to the market	31	872	-	-	-	903
Net return on ordinary activities	-	-	-	51,834	4,517	56,351
Dividends appropriated in the year	-	-	-	-	(4,700)	(4,700)
At 31st December 2010	10,713	19,778	8,151	320,852	14,526	374,020

Balance Sheet

at 30th June 2011

	(Unaudited)	(Unaudited)	(Audited)
	30th June 2011	30th June 2010	31st December 2010
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	392,015	337,112	389,743
Investments in liquidity funds held at fair value through
profit or loss	34,766	21,380	29,831
Total investments	426,781	358,492	419,574
Current assets
Derivative instrument	4,550	1,268	3,314
Debtors	1,194	514	1,628
Cash and short term deposits	18,544	-	30
	24,288	1,782	4,972
Creditors: amounts falling due within one year	(1,057)	(388)	(744)
Net current assets	23,231	1,394	4,228
Total assets less current liabilities	450,012	359,886	423,802
Creditors: amounts falling due after more than one year	(49,797)	(49,768)	(49,782)
Provisions for liabilities and charges	(449)	-	-
Net assets	399,766	310,118	374,020
Capital and reserves
Called up share capital	11,226	10,682	10,713
Share premium	37,008	18,906	19,778
Capital redemption reserve	8,151	8,151	8,151
Capital reserves	331,258	260,017	320,852
Revenue reserve	12,123	12,362	14,526
Shareholders' funds	399,766	310,118	374,020
Net asset value per share (note 4)	890.3p	725.8p	872.8p

Cash Flow Statement

for the six months ended 30th June 2011

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2011	30th June 2010	31st December 2010
	£'000	£'000	£'000
Net cash inflow from operating activities	1,387	1,635	3,400
Returns on investments and servicing of finance
Interest paid	(1,719)	(1,719)	(3,438)
Capital expenditure and financial investment
Purchases of investments	(65,075)	(127,747)	(198,074)
Sales of investments	70,933	132,120	201,270
Other capital charges	(4)	-	(10)
Net cash inflow from capital expenditure
and financial investment	5,854	4,373	3,186
Dividends paid	(4,727)	(4,700)	(4,700)
Net cash inflow/(outflow) before financing	795	(411)	(1,552)
Financing
Issue of ordinary shares to the market	17,743	-	903
Increase/(decrease) in cash for the period	18,538	(411)	(649)
Reconciliation of net cash flow to movement in net debt
Net cash movement	18,538	(411)	(649)
Other movements	(14)	(14)	(29)
Exchange movements	(25)	(91)	178
Movement in net debt in the period	18,499	(516)	(500)
Net debt at the beginning of the period	(49,752)	(49,252)	(49,252)
Net debt at the end of the period	(31,253)	(49,768)	(49,752)
Represented by:
Cash and short term deposits	18,544	-	30
Debt falling due after more than one year	(49,797)	(49,768)	(49,782)
Net debt at the end of the period	(31,253)	(49,768)	(49,752)

Notes to the Accounts

for the six months ended 30th June 2011

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 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 ('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 2010.

3.             Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2011	30th June 2010	31st December 2010
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	2,324	2,353	4,517
Capital return/(loss)	10,406	(9,001)	51,834
Total return/(loss)	12,730	(6,648)	56,351
Weighted average number of shares in issue	43,623,338	42,725,949	42,788,449
Revenue return per share	5.33p	5.51p	10.56p
Capital return/(loss) per share	23.85p	(21.07)p	121.14p
Total return/(loss) per share	29.18p	(15.56)p	131.70p

4.             Derivative instrument

The Company has hedged against the currency risk arising from its £50 million debenture liability. The Company has purchased sterling against US$ for settlement on 5th October 2011, matching the principal amount but not the maturity date of the debenture.

5.             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 2011 of 44,904,047 (30^th June 2010: 42,725,949 and 31st December 2010: 42,850,949).

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.jpmamerican.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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