Final Results

RNS Number : 5533K

JPMorgan Asian Investment Tst PLC

19 December 2008

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

AUDITED FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2008

Chairman's Statement

After the Company's excellent performance in 2007, in which it outperformed the benchmark by 10.1%, there is obviously some element of disappointment with this year's 5.4% underperformance. However, as I said in my last annual statement, we actively embraced a high conviction investment approach which would make it likely that we would see increased volatility and greater deviation in returns against the benchmark.

                   Performance

Against a backdrop of extreme volatility on the world's stock markets caused by global financial turmoil, the total return on net assets was -35.5%, compared with a return of -30.1% in our benchmark index. The Company's share price total return was slightly worse at -37.0%, reflecting a widening of the discount at the year end.

                  Revenue and Dividends

Revenue per share for the year amounted to 1.71p and the Directors are recommending a final dividend of 1.70p which, if approved by shareholders, will be payable on 13th February 2009 to shareholders on the register at the close of business on 9th January 2009.

                  Share Repurchases

Your Board has continued to monitor closely the level of discount at which the Company's shares trade to net asset value. Although no shares were bought back during the year, it is important that the Company retain the ability to be able to repurchase shares and, accordingly, a Resolution to renew this authority will be put to shareholders at the forthcoming Annual General Meeting.

                  Manager

The Board has carried out its formal review of the investment management, company secretarial and marketing services provided to the Company by JPMorgan Asset Management (UK) Limited ('JPMAM'). This review encompassed their performance record, management processes, investment style, resources and risk control mechanisms. After full consideration the Board concluded that the continued appointment of JPMAM for provision of these services on the terms agreed is in the interests of shareholders as a whole.

We are please to welcome Pauline Ng to the investment management team to replace Michael Koh, who has stepped down from the day to day management of the Company's portfolio. Pauline trained as a chartered accountant before embarking on a career in fund management and her background is reflected in her thorough company analytical approach, which complements Joshua Tay's extensive knowledge of Asian markets and stock selection skills.

                  Performance Fee

As the Company's NAV total return underperformed the benchmark, the entire amount of the performance fee deferred from 2007 has been written back in the Income Statement. Furthermore, a negative balance of £1.2m has to be covered by future out-performance before any further performance fee can be accrued or paid.

                  Subscription Share Issue

The Board recently announced that it was considering a bonus issue of subscription shares to shareholders. The Board believes that over the longer term investment in the Asian (ex-Japan) region will deliver strong capital growth and that subscription shares represent an attractive option for shareholders to subscribe in the future for further ordinary shares in the Company. Please refer to the Circular and Prospectus which will be sent with the annual report for further details of this bonus issue and the General Meeting to be held after the Annual General Meeting on 4th February 2009.

                 The Companies Act 2006 and New Articles of Association

At the forthcoming Annual General Meeting, it will be proposed that the Company adopts new Articles of Association in order to comply with the provisions of the Companies Act 2006 that have already been brought into effect. The new Act is being implemented in stages and some changes require alterations to the Company's Articles this year, while others will require further amendments in 2009.More details on the proposed changes to the Articles are given in the Directors' Report and the Appendix to the Notice of Meeting in the Company's Annual Report & Accounts.

                  Annual General Meeting

This year's Annual General Meeting will be held at The Salters' Hall, 4 Fore Street, London EC2Y 5DE on Wednesday, 4th February 2009 at 12.00 noon. In addition to the formal proceedings, there will be a presentation by Joshua Tay, one of your investment managers, who will also be available to respond to questions on the Company's portfolio and investment strategy. Following the Meeting there will be an opportunity for shareholders to meet the Board and the investment manager over a buffet lunch and I look forward to seeing as many of you as possible.

                  Outlook

The very large and rapid falls seen in Asian stock markets appear to have slowed and we are perhaps seeing some signs of consolidation. However, it is too early to be entirely confident - economic conditions remain challenging globally, given the combination of tightening credit, financial system de-leveraging and slowing growth. Greater visibility in economic data and the level of corporate earnings is required before we can be sure that we are through the worst. The recent appalling terrorist incident in Bombay may affect confidence in India, at least in the short term. What is clear, however, is that governments across the world are demonstrating through their actions that they are determined to stimulate economic growth. In this regard, it was pleasing to see China unveil a major fiscal package designed to stimulate its domestic economy: this can only be good news for the rest of Asia. In these uncertain times your Board still remains confident in the long term prospects for Asia and fully supports the investment managers in their investment style and conviction approach, which should deliver out-performance over the longer term.

                  James Long

                  Chairman 19th December 2008

                 Investment Managers' Report

                 Market Review

A year ago, we spoke about the need to be prudent with respect to the asset bubble in China. We reiterated the need to invest in fundamentally sound companies so that we would not be 'caught naked when the tide receded'. We reduced our gearing to a net cash position and added index futures to hedge a portion of our investments. In short, we were cautious about a potential market correction.

While we were right to be cautious, we were wrong about the scale of the correction. Stock markets in Asia collapsed on the back of a global financial tsunami. The theory that Asian economies are now insulated from severe slowdowns in the United States ( 'decoupling') did not happen. Stronger balance sheets and higher economic growth in Asia did not provide the expected protection against the oncoming tide. It was global de-leveraging: from financial institutions, hedge funds, corporates and personal loans. US subprime mortgages might have started this crisis, but the pandemic disease spread widely across geographical borders and financial assets. At the peak of the crisis, many banks in the US and Europe had failed, which forced governments to step in and partially nationalize banking systems to prevent a systemic collapse.

Asia's economy was holding up relatively well until as late as the second quarter this year: China's GDP grew at more than 10% in the first half of the year. Likewise in India, corporate earnings were still seeing double digit returns as late as June. In fact, central Asian banks were more concerned by spiralling inflation, due to the continuing high commodity prices. Things reversed swiftly in July when China's retail sales started to show signs of slowing. The toy and electronics factories in Donguang in southern China started closing down one after another as it became apparent that there would be no Christmas orders from the US.

The economic downturn was not confined to exporters. As banks tightened credit, companies that relied on banks to provide working capital could not function normally. Ship owners could not find bank loans to fund new builds. Chinese steel companies could not import iron ore because the banks would not provide letter of credit. At one point, banks would not even lend to each other, causing a total seizure of credits globally. This was not resolved until governments stepped in to guarantee these inter-bank loans.

The deteriorating economic activity continued to weigh down on the already depressed sentiment in the financial world. In the third quarter alone, Asian stock markets fell 14%. Blue chip H-shares in China plummeted to levels not seen in recent memory, as bad news on the Chinese economy continued to hit investors. Selected Asian currencies were attacked during this period. The Korean Won fell 15% against the US Dollar as investors began to worry about the dollar debt of the banks.

                 Performance Review

Hence, while we were right about the need to turn cautious late in 2007, we were certainly not prepared for the global market collapse that hit us in 2008. Our portfolio performance suffered painful losses as a result and was down 35.5% over the year to 30th September 2008. It was also disappointing that relative performance was down 5.4% against the benchmark. This relative underperformance was largely the result of the higher beta stocks in the portfolio. Share prices of such stocks fell dramatically as investors reduced portfolio risk, and sold anything that was non core and non-benchmark. Nine Dragons is a case in point: the stock fell 95% from its peak because the company had high levels of debt and there were concerns about industry overcapacity. Olam suffered from a similar fate, as analysts suspected that the company's bankers would cut its credit lines even though this was not the case. Investors were happy to dismiss stocks on hearsay and rumours, irrespective of fundamentals or valuations. 

A move towards 'safety' stocks goes directly against our investment style. We look to buy stocks that deliver sustainable growth and returns to shareholders at a reasonable price. The principal parameters we use to measure risk are earnings volatility, business cycles, cashflow and solvency, management quality, and transparency (not necessary in order of importance).We place less emphasis on risks by virtue of geography, market capitalisations or benchmark weightings. Hence, our bottom-up stock picking approach has lead to severe underperformance versus the benchmark. Our investment philosophy and strategy (growth bias, non-benchmark, reasonable price, and high concentration bet) has not worked well in 2008, despite strong returns in 2007.

                  Outlook

Looking into 2009, we do expect the volatility seen in the last few months to abate. For the moment, the threat of a systemic collapse in the banking system has largely diminished. This will help stabilise interest rates and perhaps increase liquidity in the credit and bond markets. The easing of commodity prices has allowed central banks to be more aggressive on interest rate cuts. Meanwhile, we expect governments across the world to announce economic stimulus packages to boost economies.

While coordinated rate cuts and fiscal stimulus could bring stability in the financial markets, the global economy will definitely see a synchronised downturn in 2009. This is inevitable as the banking system continues to de-leverage. While growth rates in China and India are predicted to outpace the rest of the world, they will still be significantly lower than in 2007. That said, we believe Asian economies will weather this crisis much better than the rest of the world, due to their high cash savings at both corporate and government levels.

The key issue facing investors today is how long will this recession last. There is certainly no scientific answer to this question. Looking at current valuations, Asian investors are probably expecting a recession similar to the currency crisis of 1997- 1998.While we remain confident that Asia today is very different from ten years ago, we do acknowledge that the world as a whole has changed dramatically from a year ago. Hence navigating through this turbulent and uncertain period demands a more conservative approach. The late Deng Xiaoping once described the development of China's economy as an old man crossing the river and feeling for stones as he went. There is no better analogy to describe where we are today. We have to take small steps along the way. But if we keep our bearings, composure and patience, we can be sure we will claw back the performance we have lost. 

                  Joshua Tay

                 Pauline Ng

                 Investment Managers 

                 19th December 2008

                  Principles Risks and Uncertainties

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

• Investment and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to under-performance against the Company's benchmark Index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported by the Manager JPMorgan Asset Management (UK) Limited ('JPMAM'). JPMAM provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and review data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing, within a strategic range set by the Board.

• Market: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by JPMAM. The Board monitors the implementation and results of the investment process with the Manager.

• Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 842 of the Income and Corporation Taxes Act 1988 ('Section 842'). Details of the Company's approval are given under 'Business of the Company' above. Were the Company to breach Section 842, it would lose its investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 842 qualification criteria are continually monitored by JPMAM and the results reported to the Board each month. The Company must also comply with the provisions of The Companies Acts and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules. A breach of the Companies Acts could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules could result in the Company's shares being suspended from listing which in turn would breach Section 842. The Board relies on the services of its Company Secretary, JPMAM to ensure compliance with The Companies Acts and the UKLA Listing Rules.

• Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report.

• Operational: Loss of key staff by JPMAM, such as the Investment Managers, could affect the performance of the Company. Disruption to, or failure of, JPMAM's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by JPMAM and its associates and the key elements designed to provide effective internal control are included with the Internal Control section of the Corporate Governance report.

• Financial: The financial risks faced by the Company include market price risk, interest rate risk, liability risk and credit risk. Additional disclosures are provided this year for the first time in accordance with IFRS7.

                  Directors' Responsibilities

                 The Directors each confirm to the best of their knowledge that: 

a)     the financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

b)     the Annual Report, to be published shortly, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

                   James Long

                  Chairman 19th December 2008

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

For further information please contact:

                 Alison Vincent

                For and on behalf of

                JPMorgan Asset Management (UK) Limited, Secretary

                020 7742 6000

JPMorgan Asian Investment Trust plc

Audited figures for the six months ended 30th September 2008

Income Statement 

	2008			2007
	Revenue £'000	Capital £'000	Total £'000	Revenue £'000	Capital £'000	Total £'000
Losses/gains from investments held at fair value through profit or loss	-	(137,354)	(137,354)	-	(137,955)	(137,955)
Net foreign currency gains	-	1,570	1,570	-	1,040	1,040
Income from investments	6,658	-	6,658	6,557	-	6,557
Other interest receivable and similar income	622	-	622	229	-	229
	_______	_______	_______	_______	________	_______
Gross Return/(loss)	7,280	(135,784)	(128,504)	6,786	138,995	145,781
Management fee Performance fee writeback/(charge)	(2,126) -	- 2,501	(2,126) 2,501	(1,799) -	- (4,893)	(1,799) (4,893
Other administrative expenses	(732)	-	(732)	(560)	-	(560)
	_______	_______	_______	_______	_______	_______
Net return/(loss) on ordinary activities before taxation	4,422	(133,283)	(128,861)	4,427	134,102	138,529
Finance costs	(1,067)	-	(1,067)	(1,526)	-	(1,526)
	_______	_______	_______	_______	_______	_______
Net return/(loss) on ordinary activities before taxation Taxation	3,355 (618)	(133,283) (168)	(129,928) (786)	22,901 (755)	134,102 317	137,003 (438)
Net return/(loss) on ordinary activities after taxation	2,737	(133,451)	(130,714)	2,146	134,419	136,565
Return/(loss) per share (note 2)	(1.71)p	(83.40)p	(81.69)p	(1.33)p	(83.40)p	(84.73)p

A final dividend of 1.70p per share (2007: 1.30p per share) is proposed in respect of the year ended 30th September 2008, costing £2,720,000 (2007: £2,080,000). 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. 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. 

JPMorgan Asian Investment Trust plc

Aaudited figures for the year ended 30th September 2008

Reconciliation of Movements in Shareholders' Funds

	Called up share capital £'000	Share premium £'000	Exercise warrant reserve £'000	Capital redemption reserve £'000	Other reserve £'000	Capital reserve £'000	Revenue reserve £'000	Total £'000
At 30th September 2006	40,364	4,347	977	2,647	108,902	82,665	2,378	242,280
Repurchase and cancellation of shares	(362)	-	-	362	(2,421)	-	-	(2,421)
Net return from ordinary activities	-	-	-	-	-	134,419	2,146	136,565
Dividends appropriated in the year	-	-	-	-	-	-	(2,018)	(2,018)
At 30th September 2007	40,002	4,347	977	3,009	106,481	217,084	2,506	374,406
Net (loss)/return from 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

JPMorgan Asian Investment Trust plc

Audited figures for the year ended 30th September 2008

Balance Sheet	£'000	£'000
Fixed assets
Investment at fair value through profit or loss	225,104	407,137
Current assets
Debtors	681	644
Cash at bank and in hand	17,702	20,283
	18,383	20,927
Creditors: amounts falling due within one year	(1,823)	(26,447)
Derivative financial instruments	-	(1)
Net current assets/(liabilities)	16,560	(5,521)
Total assets less current liabilities	241,664	401,616
Creditors: amounts falling due after more than one year
Bank loans	-	(24,709)
Provisions for liabilities and charges		-
Deferred tax	(52)
Performance fee	-	(2,501)
Total net assets	241,612	374,406
Capital and reserves
Called up share capital	40,002	40,002
Share premium	4,347	4,347
Exercised warrant reserve	977	977
Capital redemption reserve	3,009	3,009
Other reserve	106,481	106,481
Capital reserve	83,633	217,084
Revenue reserve	3,163	2,506
Shareholders' funds	241,612	374,406
	-----------	-----------
	_______	_______
Net asset value per share	151.0p	234.0p
	=====	=====

JPMorgan Asian Investment Trust plc

Audited figures for the year ended 30th September 2008

CASH FLOW STATEMENT
	£'000	£'000
Net cash inflow from operating activities	1,802	3,474
Returns on investments and servicing of finance
Interest paid	(1,118)	(1,500)
Taxation recovered	-	195
Capital expenditure and financial investment
Purchases of investments	(369,117)	(333,863)
Sales of investments	406,820	325,133
Settlement of futures contracts	500	-
Other capital charges	(23)	(25)
Net cash inflow/(outflow) from capital expenditure and financial investment	38,180	(8,755)
Dividend paid	(2,080)	(2,018)
Net cash inflow/(outflow) before financing	36,784	(8,604)
Repurchase of ordinary shares for cancellation	-	(2,421)
Bank loan (repayment)/drawn down	(42,725)	30,790
Net cash (outflow)/inflow from financing	(42,725)	28,369
(Decrease)/increase in cash in the year	(5,941)	19,765

    Notes to the Accounts

        1. Accounting Policies

        The accounts are prepared in accordance with the Companies Act 1985, United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (the 'SORP') issued by the AIC in December 2005. All of the Company's operations are of a continuing nature.

    2. Return per ordinary share

	(Audited) 30th September 2008	(Audited) 30th September 2007
	£'000	£'000
Return per share is based on the following:
Revenue return	2,737	2,146
Capital (loss)/return	(133,451)	134,419
Total (loss)/return	(130,714)	136,565
Weighted average number of shares in issue	160,007,154	161,181,192
Revenue return per ordinary share	1.71p	1.33p
Capital (loss)/return per ordinary share	(83.40)p	83.40p
Total (loss)/return per ordinary share	(81.69)p	84.73p

3. Net asset value per ordinary share

The net asset value per share is based on the net funds attributable to ordinary shareholders of £241,612,000 (2007: £374,406,000) and on the 160,007,154 (2007: 160,007,154) shares in issue at the year end.

4. Status of announcement

The above financial information does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The comparative financial information is an extract from the statutory accounts for the year ended 30th September 2007. Those accounts, upon which the auditors issued an unqualified opinion and which contained no statement under section 237(2) and Section 237(3) of the Companies Act 1985, have been delivered to the Registrar of Companies.  The accounts for the year ended 30th September 2008 will be delivered to the Registrar of Companies in due course.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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