Half-year Report

RNS Number : 4546A

JPMorgan Asian Investment Tst PLC

29 May 2019

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31ST MARCH 2019

Legal Entity Identifier: 5493006R74BNJSJKCB17

Information disclosed in accordance with DTR 4.2.2

Chairman's Statement

I am delighted to report that in the six months to 31st March 2019 the Company's total return to shareholders was +7.1%, reflecting strong net asset growth ahead of the benchmark alongside a narrowing of the Company's discount which has accelerated subsequent to the period end. Perhaps the most pleasing aspect of the first half of the financial year was the total return on net assets of +5.1%, representing an outperformance of 3.2 percentage points over the benchmark, the MSCI All Countries Asia ex Japan Index, which returned +1.9% in sterling terms.

The principal reason for the Company's outperformance against the benchmark was the portfolio's stock selection with positions in China and Taiwan. Full detail of the Company's performance, together with a market review and outlook for the remainder of 2019 can be found in the Investment Managers' Report.

Dividend Policy and Discount Management

The Company's dividend policy aims to pay, in the absence of unforeseen circumstances, regular quarterly dividends funded from a combination of revenue and capital reserves equivalent to 1% of the Company's NAV on the last business day of each financial quarter, being the end of December, March, June and September.

For the year ended 30th September 2018 dividends paid totalled 15.7 pence. In respect of the quarters to 31st December 2018 and to 31st March 2019 dividends of 3.7 pence and 4.0 pence respectively were paid. Two further dividends will be declared on the first business day after 30th June and 30th September 2019. Shareholders are further reminded that the dividends are based upon a percentage of net assets, so the dividend paid to shareholders will reflect the Company's net assets at the particular quarter end and so will be subject to market fluctuations.

The excellent performance of the manager together with the high yield available to shareholders is continuing to drive the Company's discount to more appealing levels. Overall, the trend is encouraging with the Company's discount at the 31st March 2019 registering 10.6%, which compared to 12.1% at the end of the financial year on 30th September 2018. Since the period end the discount has tightened significantly and currently stands at 6.6%.

Gearing

The Company has in place a multi currency loan facility with Scotiabank. The Company did not employ any gearing over the period.

Fees

The Board continues to focus on costs incurred by the Company across all of its functions, with a view to enhancing shareholder value. The Board is pleased to note that the Company's 'Ongoing Charges' (representing the Company's management fee and all other operating expenses) are amongst the lowest within its comparable peer group of actively managed open and closed-ended investment vehicles at 0.75%, ensuring that the Company remains on a competitive footing.

Board of Directors

Having served on the Board since 2005, Ronald Gould retired as a Director and as Chairman of the Audit Committee at the conclusion of the Company's Annual General Meeting held in February 2019. Dean Buckley has succeeded Ronald in the role of Audit Committee Chairman and Senior Independent Director.

Outlook

The rebound in markets in early 2019 was boosted by the more accommodative stance of central banks, particularly the US Federal Reserve, and the measures taken by China to stimulate the economy. The recent economic data in China has been positive and this should ease investor fears about a slowdown in Asia's largest economy. The primary risks to Asian equities are the trade dispute between China and the US, and the strength of the US dollar. If the US dollar strengthens and/or the trade dispute intensifies and is protracted, it will impact growth and earnings. Our Investment Managers are monitoring this closely. It is worth noting that the Company has relatively little exposure to Chinese exporters and valuations in Asia are still below long-term averages.

Bronwyn Curtis OBE

Chairman

29th May 2019

INVESTMENT MANAGERS' REPORT

Summary

During the six month period under review, the Company's total return on net assets was +5.1%, outperforming Asian stock markets, as measured by the MSCI All Countries Asia ex Japan Index, which delivered a +1.9% total return in sterling terms. In this report, we discuss the market backdrop, examine the drivers of the Company's performance, and then consider the outlook for Asian stock markets for the rest of 2019.

Market Review

In the fourth quarter of 2018, Asian equities followed other global equity markets in falling sharply. This was in response to fears of moderating growth expectations in China and the United States (US), trade tensions, and a reduction in expected earnings in the technology hardware and internet sectors.

The oil price peaked at 85 US Dollars in early October and fell as much as 40% in the fourth quarter due to concerns over a slowing global economy and oversupply. The slowdown in China persisted throughout the quarter, and the government's attempt to stabilise the economy was more or less overshadowed by headline news of further weakness in economic data, as well as the failure to resolve US-China trade negotiations.

The first quarter of 2019 saw markets, including Asian equities, rebound as investors' risk appetites improved. This reflected central banks, specifically the US Federal Reserve, becoming more accommodative, the implementation of an economic stimulus package by the Chinese government, and progress in trade negotiations between the Chinese and US governments. Markets reacted positively to dovish statements made by the head of the US Federal Reserve, Jerome Powell, indicating a more cautious stance towards future rate rises. Central banks in Europe (European Central Bank, ECB) and China (People's Bank of China, PBOC) also signaled accommodative monetary policies to support the economy. Trade negotiations between the Chinese and US governments resulted in the US government delaying the implementation of tariffs scheduled for 1st March 2019, which also boosted sentiment.

Falling oil price beneficiaries Indonesia, Philippines and Indonesia were among the top-performing markets over the review period. Currency was a positive tailwind for these markets, as was a benign inflation outlook and a moderating outlook for interest rate hikes.

Chinese equities outperformed the broader region, thanks to the strong rebound in the first quarter and fiscal stimulus (including a value-added tax rate cut), as well as MSCI's announcement of the further inclusion of China's domestic A-shares into regional and global indices. Hong Kong equities also outperformed the broader region, led by property developers and select Macau casino operators.

In contrast, export sensitive markets such as Korea and Taiwan lagged over the review period, driven by corporate earnings downgrades especially in the semiconductor and smartphone component segment of the market, while economic releases including export data and the purchasing managers' index suggested lackluster economic activity.

Malaysia and Thailand also underperformed the broader region. In Malaysia, the growth outlook for corporates remained underwhelming, compounded by the cancellation of contracts for several mega projects, soft commodity prices, and weakening business confidence. Thailand was dragged down by weak external demand, as well as uncertainties ahead of the much anticipated election which took place on 24th March which weighed on private and public investment activities.

Performance

Over the six months ended 31st March 2019, the portfolio outperformed its benchmark index. Positive relative performance came largely from stock selection, with positions in China and Taiwan being the standout contributors.

In China, property developers such as China Overseas Land & Investment, China Vanke and China Resources Land performed strongly on policy easing, including the delay of a nationwide real-estate tax. Healthcare stock Jiangsu Hengrui Medicine rebounded strongly this year, recovering from the broad-based sell-off in its sector which had been triggered by policy uncertainty in the previous quarter. In Taiwan, Delta Electronics outperformed as its business performance continues to improve, on the back of growth in new businesses such as electric vehicles, automation and power system, more than offsetting the decline in the legacy businesses of consumer power supply and networking products. Giant Manufacturing, a leading bicycle manufacture, also rose thanks to some signs of China demand may finally be improving, after declining for four successive years, while E-bike related growth remains strong.

Other notable contributors included HDFC Bank, a leading private sector bank in India, reflecting consistent management execution and earnings growth, as well as Astra International in Indonesia, driven by the auto sales recovery and by exceeding market earnings expectations. AIA Group in Hong Kong rose on strong results, as well as in response to the receipt of approval to set up sales and services centres in Tianjin and Shijiazhuang in China.

In terms of detractors from performance, Maruti Suzuki in India performed poorly on the back of weaker auto sales trends, however, we remain confident that the company is well positioned in the industry and expect market conditions to recover. In Korea, E-Mart, the largest hypermarket operator in the country, underperformed as continued offline weakness and increasing online competition weighted on the share price, while S-Oil, an oil refining company, fell on weak results as well as a dividend cut.

From the asset allocation perspective, the Company's zero exposure to Malaysia and the underweight position in Taiwan contributed, however, our off-benchmark exposure to Vietnam through the JPMorgan Vietnam Fund detracted from performance.

Outlook

The first quarter's impressive equity rebound received a powerful new catalyst in March: the Fed quite openly backed away from its rate tightening bias and moved to the sidelines. To global investors, this shift diminishes the risk of policy error and adds to the relative attractiveness of equities.

Specific to China, we are encouraged by the most recent macro data, which suggest a recovery in the economy. March PMI data surprised on the upside, and the cut in VAT rates taking effect on 1st April should provide an additional boost to industrial activity and consumption. These developments should also help ease investor concerns of a more pronounced slowdown in Asia's largest economy.

The combination of these factors leads us to remain positive on Asian equities, particularly in view of current valuations, which remain below long-term averages.

The most important risks to the Asian market remain disappointment on the growth front, no deal on trade between the US and China, and the persistent strength of the US dollar. The primary headwind to markets in recent months has been the rise in expectations of a global recession in the near term, with the Fed's dovishness helping push the Treasury curve close to inversion (a popular recession signal). We do not see a recession as likely in the next twelve months, with our base case being slower but still positive growth that should be supportive for Asian equities.

On the US-China trade issues, recent developments have increased the risk that there will be no short term resolution to the friction which if protracted will potentially lead to lower growth and earnings. While we do not expect some of the longer term issues inherent in such a global rivalry to be addressed in the near term, an agreement soon will remove a significant overhang and will have a positive impact on markets. Finally, the stubborn concerns around growth and weakness in Europe have kept the dollar near 18-month highs. Recession fears have helped the dollar, and we will not be surprised to see the dollar start to weaken, should those fears prove unfounded. That said, a breakout in other direction for the dollar, to multi-year highs could complicate the picture for Asian economies and their equity markets.

Ayaz Ebrahim

Robert Lloyd

Richard Titherington

Investment Managers

29th May 2019

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 have not changed since the Company's year end and 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 September 2018.

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, liquid 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 and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half yearly financial report. 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 FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st March 2019, as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; 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.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•      select suitable accounting policies and then apply them consistently;

•      make judgements and accounting estimates that are reasonable and prudent;

•      state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Bronwyn Curtis OBE
Chairman

29th May 2019

statement of comprehensive income

for the six months ended 31st March 2019

	(Unaudited) Six months ended 31st March 2019			(Unaudited) Six months ended 31st March 2018			(Audited) Year ended 30th September 2018
	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	-	17,642	17,642	-	22,124	22,124	-	21,033	21,033
Net foreign currency gain/(losses)	-	17	17	-	(327)	(327)	-	(159)	(159)
Income from investments	1,549	-	1,549	1,843	-	1,843	8,708	-	8,708
Interest receivable and similar income	28	-	28	28	-	28	84	-	84
Gross return	1,577	17,659	19,236	1,871	21,797	23,668	8,792	20,874	29,666
Management fee	(912)	-	(912)	(1,001)	-	(1,001)	(1,972)	-	(1,972)
Other administrative expenses	(400)	-	(400)	(416)	-	(416)	(820)	-	(820)
Net return on ordinary activities before finance costs and taxation	265	17,659	17,924	454	21,797	22,251	6,000	20,874	26,874
Finance costs	(24)	-	(24)	(82)	-	(82)	(138)	-	(138)
Net return on ordinary activities before taxation	241	17,659	17,900	372	21,797	22,169	5,862	20,874	26,736
Taxation charge	(88)	(133)	(221)	(41)	(210)	(251)	(711)	(210)	(921)
Net return on ordinary activities after taxation	153	17,526	17,679	331	21,587	21,918	5,151	20,664	25,815
Return per share (note 3)	0.16p	18.63p	18.79p	0.35p	22.95p	23.30p	5.48p	21.96p	27.44p

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 net return on ordinary activities after taxation represents the profit for the period and also the total comprehensive income.

statement of changes in equity

for the six months ended 31st March 2019

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserves1	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 31st March 2019 (Unaudited)
At 30th September 2018	23,762	31,646	977	25,121	282,800	-	364,306
Net return on ordinary activities	-	-	-	-	17,526	153	17,679
Dividends paid in the period (note 4)	-	-	-	-	(6,997)	(153)	(7,150)
At 31st March 2019	23,762	31,646	977	25,121	293,329	-	374,835
Six months ended 31st March 2018 (Unaudited)
At 30th September 2017	23,762	31,646	977	25,121	271,661	-	353,167
Net return on ordinary activities	-	-	-	-	21,587	331	21,918
Dividends paid in the period (note 4)	-	-	-	-	(7,007)	(331)	(7,338)
At 31st March 2018	23,762	31,646	977	25,121	286,241	-	367,747
Year ended 30th September 2018 (Audited)
At 30th September 2017	23,762	31,646	977	25,121	271,661	-	353,167
Net return on ordinary activities	-	-	-	-	20,664	5,151	25,815
Dividends paid in the year (note 4)	-	-	-	-	(9,525)	(5,151)	(14,676)
At 30th September 2018	23,762	31,646	977	25,121	282,800	-	364,306

¹  These reserves form the distributable reserves of the Company and may be used to fund distributions to investors via dividend payments.

statement of financial position

at 31st March 2019

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2019	31st March 2018	30th September 2018
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	371,869	364,531	363,154
Current assets
Derivative financial assets	1	1	-
Debtors	3,516	4,524	787
Cash and cash equivalents	1,207	2,927	1,337
	4,724	7,452	2,124
Creditors: amounts falling due within one year	(1,757)	(4,234)	(972)
Derivative financial liabilities	(1)	(2)	-
Net current assets	2,966	3,216	1,152
Total assets less current liabilities	374,835	367,747	364,306
Net assets	374,835	367,747	364,306
Capital and reserves
Called up share capital	23,762	23,762	23,762
Share premium	31,646	31,646	31,646
Exercised warrant reserve	977	977	977
Capital redemption reserve	25,121	25,121	25,121
Capital reserves	293,329	286,241	282,800
Total shareholders' funds	374,835	367,747	364,306
Net asset value per share (note 5)	398.4p	390.9p	387.2p

statement of cash flows

for the six months ended 31st March 2019

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2019	31st March 2018	30th September 2018
	£'000	£'000	£'000
Net cash outflow from operations before dividends and interest	(1,405)	(1,850)	(2,778)
Dividends received	845	734	7,522
Interest received	18	14	33
Interest paid	(23)	(128)	(187)
Net cash (outflow)/inflow from operating activities	(565)	(1,230)	4,590
Purchases of investments	(71,700)	(120,004)	(244,896)
Sales of investments	79,247	126,834	251,805
Settlement of forward currency contracts	33	(22)	(179)
Net cash inflow from investing activities	7,580	6,808	6,730
Dividends paid	(7,150)	(7,338)	(14,676)
Net cash outflow from financing activities	(7,150)	(7,338)	(14,676)
Decrease in cash and cash equivalents	(135)	(1,760)	(3,356)
Cash and cash equivalents at start of period/year	1,337	4,687	4,687
Exchange movements	5	-	6
Cash and cash equivalents at end of period/year	1,207	2,927	1,337
Decrease in cash and cash equivalents	(135)	(1,760)	(3,356)
Cash and cash equivalents consist of:
Cash and short term deposits	1,207	2,927	1,337
Total	1,207	2,927	1,337

Notes to the financial statements

for the six months ended 31st March 2019

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 30th September 2018 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and include 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

Basis of accounting

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the 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' (the 'SORP') issued by the Association of Investment Companies in November 2014 and updated in February 2018.

FRS 104, 'Interim Financial Reporting', issued by the FRC in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 31st March 2019.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th September 2018.

3.     Return per share

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st March 2019	31st March 2018	30th September 2018
		£'000	£'000	£'000
	Return per share is based on the following:
	Revenue return	153	331	5,151
	Capital return	17,526	21,587	20,664
	Total return	17,679	21,918	25,815
	Weighted average number of shares in issue	94,081,493	94,081,493	94,081,493
	Revenue return per share	0.16p	0.35p	5.48p
	Capital return per share	18.63p	22.95p	21.96p
	Total return per share	18.79p	23.30p	27.44p

4.     Dividends

		(Unaudited)	(Unaudited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st March 2019	31st March 2018	30th September 2018
		£'000	£'000	£'000
	Dividends paid
	2018 fourth quarterly dividend of 3.9p (2017: 3.8p)	3,669	3,575	3,575
	2019 first quarterly dividend of 3.7p (2018: 4.0p)	3,481	3,763	3,763
	2018 second quarterly dividend of 3.9p	-	-	3,669
	2018 third quarterly dividend of 3.9p	-	-	3,669
	Total dividends paid in the period/year	7,150	7,338	14,676

A second interim dividend of 4.0p has been declared for payment on 9th May 2019 for the financial year ending 30th September 2019.

Dividend payments in excess of the revenue amount will be paid out of the Company's distributable capital reserve.

5.     Net asset value per share

		(Unaudited)	(Audited)	(Audited)
		Six months ended	Six months ended	Year ended
		31st March 2019	31st March 2018	30th September 2018
	Net assets (£'000)	374,835	367,747	364,306
	Number of shares in issue	94,081,493	94,081,493	94,081,493
	Net asset value per share	398.4p	390.9p	387.2p

JPMORGAN FUNDS LIMITED

29th May 2019

For further information, please contact:

Alison Vincent

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

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.

ENDS

A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

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