Half Year Results

RNS Number : 2141M

JPMorgan Asian Investment Tst PLC

19 May 2010

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST MARCH 2010

Chairman's Statement

Performance

Asian stock markets continued to advance in the six months to 31st March 2010. Against this backdrop the Company's portfolio returned 14.6%, net of management fees and expenses, outperforming our benchmark index (the MSCI  AC Asia Pacific ex Japan Index), which rose 13.8%. The Company's diluted net asset value total return (which assumes that the 27.5 million Subscription shares outstanding at 31st March 2010 were all exercised at 137p per share) was 13.1% and the return to Ordinary shareholders was 12.2%. A full review of portfolio performance is set out in the investment managers' report below.

Subscription Shares

The Company issued 32,000,805 Subscription shares as a bonus issue to qualifying shareholders on the basis of one Subscription share for every five Ordinary shares held in February 2009. Each Subscription share confers the right (but not the obligation) to subscribe for one Ordinary share at predetermined prices on any business day during the period from 1st April 2009 until 31st March 2014, after which the rights on the Subscription shares will lapse. Between 1st October 2009 and 31st March 2010, 4,081,760 Subscription shares were converted into Ordinary shares, raising proceeds of £5,592,000. As at the date of this Report, a further 15,545,805 Subscription shares have been converted, meaning that a total of £27,518,035 has been raised for investment by the Company since the Subscription shares were issued, with 63% of the original allotment of Subscription shares being converted.

From 1st April 2010, the initial exercise price of 137p per Subscription share increased to 176p per share. Following this increase, the Company's Ordinary share price, which is 200p at the time of writing, remains above the revised exercise price. The next and final step-up in exercise price, to 203p per share, takes place on 1st April 2012.

Further details on the Subscription shares, including their exercise prices, the apportionments for capital gains tax purposes and how they may be exercised, can be found on the Company's website at www.jpmasian.co.uk and in the Company's Half Year Report.

Discount Volatility

The Board continually monitors the discount at which the Company's Ordinary shares trade to their net asset value and uses the buyback powers granted by shareholders when it is deemed appropriate. Towards the end of the review period, and as the Subscription shares approached their exercise price step-up, the discount widened in absolute terms and relative to our immediate peer group and the Board responded by authorising the repurchase of 760,000 Ordinary shares. These shares were bought back and cancelled for a total consideration of £1,491,000 at an average weighted discount of 10.6%.

Gearing

Throughout the period the portfolio employed average gearing of approximately 106%, which proved to be a good investment decision in rising markets. The Board has a policy of keeping gearing within the range of 90-120% invested.

Outlook

In the first week of May we were reminded that Asian stock markets are not immune to the fallout from economic events in other parts of the world. Our benchmark index fell 4.4% in sterling and 5.9% in local terms as investors reacted to the developing Eurozone sovereign debt crisis. Markets rebounded immediately following the announcement of the EU's emergency loan package for Greece, but nevertheless remain volatile. Our investment managers, therefore, sound a somewhat cautious note, whilst continuing to pick individual companies that they believe have sound fundamentals in a region with good long term growth prospects.

James M Long

Chairman

19th May 2010

Investment Managers' Report

Market Review

The MSCI AC Asia ex Japan Index rose 13.8% in sterling terms in the six months ended 31st March 2010, although it was not all plain sailing. Concerns over the contagion effect of potential defaults from Dubai World and Greece, fears that Chinese policy tightening would hurt growth in the region and worries over rising inflation in Asia all dampened sentiment at various points during the review period. In addition, after the sharp rebound earlier in 2009, Asian markets were no longer as attractively valued compared with the start of 2009 and they were vulnerable to profit taking. Nevertheless, Asian markets recovered after each sell-off, thanks to a recovery in US consumption, signs of stabilisation of the global economy and continued strong growth in the region.

The top performing markets in Asia were Indonesia and Thailand. These markets were buoyed by strong foreign investment inflows and earnings upgrades in the stocks listed in these markets. India also performed well following a positive reaction to upgrades in GDP growth to 8.2% for the current fiscal year, on the back of robust industrial production numbers and improved crop yields. China underperformed the region due to concerns over monetary tightening, regulatory measures to control speculation in the property market and concerns over capital raising by the banking sector. The Taiwanese market was weighed down by the poor performance of its technology sector.

Performance

At portfolio level, the Company outperformed our benchmark index by 1.3%. Throughout the period we employed gearing of approximately 106%. This decision was a large contributor to outperformance. If we look at the underlying stock selection, the most significant contributor to performance over the period was the overweight position in Thailand's Banpu, a coal stock. Siam Cement, another Thai company also performed strongly over the period. These cyclical stocks were well placed to benefit from China's and India's increasing commodity demands. Within our Indonesian exposure, United Tractors, a construction machinery company and contract mining service, continued to support positive performance. This stock is held predominantly due to its solid growth prospects and leverage to increasing mining capital expenditure spending.

In India our overweight positions in materials stocks such as Hindalco and Ambuja Cement also positively contributed to performance. These stocks rose strongly on the back of a recovery in industrial production and GDP growth in India. Furthermore our overweight position in Indian infrastructure related stocks, such as Mundra Port, assisted performance due to optimism over infrastructure roll-out plans in India. The portfolio's holdings exposed to strong consumption growth in China performed well over the period. This included pork distributor China Yurun Food Group, beverage company Yantai Changyu Pioneer Wine Co., and casino operators such as Wynn Macau and Sands China. By contrast, the major detractors to performance during the period were our overweight positions in Chinese property and materials stocks, which fell due to concerns over monetary tightening and over regulatory measures to control the property market. This included stocks such as Yanlord Land, China Resources Cement

and Aluminium Corp of China, which all corrected sharply and detracted from performance.

The portfolio's overweight position in Taiwanese financials such as Taishin Financial Holding Company, hurt performance as the sector was weighed down by concerns over asset quality and the delay in signing the Financial Memorandum of Understanding between China and Taiwan. Other asset plays such as Taiwan Fertilizer, also detracted from performance, as the stock suffered from profit taking after performing well earlier in 2009 on the back of strong expectations of asset reflation in Taiwan. In Korea, the portfolio performance was adversely affected by our overweight position in financials, such as Hana Financial Group, KB Financial Group and in insurance company Samsung Fire and Marine. After a strong third quarter in 2009, Korean financial stocks generally suffered from profit taking in the subsequent quarters. In addition, Korean banks were further affected due to concerns over the introduction of regulatory measures aimed to curb excessive lending in Korea.

Market Outlook

The recent sovereign debt concerns in Europe caused a significant correction in Asian equity markets, although they have recovered following the announcement of a rescue package for Greece, this issue highlights how Asian equity markets continue to be dependent on global risk appetite and capital flows. In the short-term, it would be difficult for Asian equities to register strong positive gains against a global backdrop of de-risking and rising risk aversion, and thus we would look to opportunistically lock in profit, lower gearing and/or raise cash if we believe that negative sentiment surrounding risk assets will persist. However, in terms of fundamentals, Asian corporates, and especially the stocks that we own in our portfolios, have very low levels of exposure to Greece, Portugal, Spain and other potentially vulnerable countries in the Eurozone. In addition, the sovereign debt concerns in Europe serve to highlight the strength of Asia's balance sheets, both at the sovereign and household levels. We believe that in the mid-long term, the balance sheet strength of Asia will be increasingly recognised and rewarded by investors.

Given global debt concerns, it is almost certain that liquidity will remain buoyant from a global perspective despite tightening moves underway by major central banks in China, India and Australia. This is ultimately positive in the mid-long term for Asian equities. We continue to expect a strengthening in macro data in both the US (underpinning export order books in Taiwan and China) and China (led by consumption), paired with continued economic and monetary policy normalisation across the region.

Valuations in Asia are acceptable; essentially the same as global emerging markets. The course of Asian equities in the second half of 2010 will be directed primarily by the trajectory of earnings growth estimates for the rest of this year and 2011. We remain optimistic about domestic consumption and infrastructure across Asia and the portfolio is consequently positioned to gain exposure to these longer-term trends. Importantly, we believe that India's role in driving commodity markets will increase as the momentum of infrastructure roll-out continues to accelerate. Valuations are now just under 2x Price/Book and 14x Price/Earnings for MSCI AC Asia ex-Japan. However, we are continuing to see earnings upgrades, providing some support for valuations.

Joshua Tay

Pauline Ng

Investment Managers

19th May 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 six broad categories: market; 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 30th September 2009.

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.

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.

James M Long

Chairman        

For further information, please contact:

Alison Vincent

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.jpmasian.co.uk

Income Statement

for the six months ended 31st March 2010

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st March 2010			31st March 2009			30th September 2009
	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	-	48,482	48,482	-	(9,617)	(9,617)	-	98,117	98,117
Net foreign currency (losses)/gains	-	(1,371)	(1,371)	-	2,449	2,449	-	1,723	1,723
Income from investments	1,390	-	1,390	1,696	-	1,696	5,306	-	5,306
Other interest receivable and
similar income	5	-	5	49	-	49	57	-	57
Gross return/(loss)	1,395	47,111	48,506	1,745	(7,168)	(5,423)	5,363	99,840	105,203
Management fee	(1,105)	-	(1,105)	(699)	-	(699)	(1,637)	-	(1,637)
Other administrative expenses	(358)	-	(358)	(650)	-	(650)	(607)	-	(607)
Net (loss)/return on ordinary
activities before finance costs
and taxation	(68)	47,111	47,043	396	(7,168)	(6,772)	3,119	99,840	102,959
Finance costs	(244)	-	(244)	(43)	-	(43)	(191)	-	(191)
Net (loss)/return on ordinary
activities before taxation	(312)	47,111	46,799	353	(7,168)	(6,815)	2,928	99,840	102,768
Taxation	(114)	-	(114)	(186)	-	(186)	(451)	-	(451)
Net (loss)/return on ordinary
activities after taxation	(426)	47,111	46,685	167	(7,168)	(7,001)	2,477	99,840	102,317
(Loss)/return per Ordinary
share - diluted (note 4)	(0.2)p	27.7p	27.5p	0.1p	(4.5)p	(4.4)p	1.5p	61.1p	62.6p
(Loss)/return per Ordinary
share - undiluted (note 4)	(0.3)p	29.0p	28.7p	0.1p	(4.5)p	(4.4)p	1.5p	62.4p	63.9p

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		Exercised	Capital
Six months ended	share	Share	warrant	redemption	Other	Capital	Revenue
31st March 2010	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2009	40,430	4,187	977	3,009	106,481	183,473	2,920	341,477
Repurchase of Ordinary shares for cancellation	(190)	-	-	190	-	(1,491)	-	(1,491)
Exercise of Subscription shares into Ordinary shares	(41)	41	-	-	-	-	-	-
Issue of Ordinary shares on exercise of  Subscription shares	1,021	4,571	-	-	-	-	-	5,592
Net return/(loss) on ordinary activities	-	-	-	-	-	47,111	(426)	46,685
Dividends appropriated in the period	-	-	-	-	-	-	(2,444)	(2,444)
At 31st March 2010	41,220	8,799	977	3,199	106,481	229,093	50	389,819
	Called up		Exercised	Capital
Six months ended	share	Share	warrant	redemption	Other	Capital	Revenue
31st March 2009	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2008	40,002	4,347	977	3,009	106,481	83,633	3,163	241,612
Net (loss)/return on ordinary activities	-	-	-	-	-	(7,168)	167	(7,001)
Dividends appropriated in the period	-	-	-	-	-	-	(2,720)	(2,720)
At 31st March 2009	40,002	4,347	977	3,009	106,481	76,465	610	231,891
	Called up		Exercised	Capital
Year ended	share	Share	warrant	redemption	Other	Capital	Revenue
30th September 2009	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2008	40,002	4,347	977	3,009	106,481	83,633	3,163	241,612
Bonus issue of Subscription shares	320	(320)	-	-	-	-	-	-
Subscription shares' issue costs	-	(352)	-	-	-	-	-	(352)
Exercise of Subscription shares into Ordinary shares	(5)	5	-	-	-	-	-	-
Issue of Ordinary shares on exercise of  Subscription shares	113	507	-	-	-	-	-	620
Net return on ordinary activities	-	-	-	-	-	99,840	2,477	102,317
Dividends appropriated in the year	-	-	-	-	-	-	(2,720)	(2,720)
At 30th September 2009	40,430	4,187	977	3,009	106,481	183,473	2,920	341,477

Balance Sheet

at 31st March 2010

	(Unaudited)	(Unaudited)	(Audited)
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	427,499	225,607	358,728
Current assets
Debtors	1,941	6,437	2,125
Cash and short term deposits	7,265	5,453	14,985
Derivative financial instruments	-	8	-
	9,206	11,898	17,110
Creditors: amounts falling due within one year
Bank loans	(13,185)	-	(13,185)
Other creditors	(7,330)	(5,543)	(3,098)
Derivative financial instruments	(1)	-	-
Net current (liabilities)/assets	(11,310)	6,355	7,759
Total assets less current liabilities	416,189	231,962	366,487
Creditors: amounts falling due after more than one year
Bank loans	(26,370)	-	(25,010)
Provisions for liabilities and charges
Deferred tax	-	(71)	-
Total net assets	389,819	231,891	341,477
Capital and reserves
Called up share capital	41,220	40,002	40,430
Share premium	8,799	4,347	4,187
Exercised warrant reserve	977	977	977
Capital redemption reserve	3,199	3,009	3,009
Other reserve	106,481	106,481	106,481
Capital reserves	229,093	76,465	183,473
Revenue reserve	50	610	2,920
Shareholders' funds	389,819	231,891	341,477
Net asset value per Ordinary
share - diluted (note 5)	223.5p	143.6p	200.4p
Net asset value per Ordinary
share - undiluted (note 5)	238.0p	144.9p	212.8p

Cash Flow Statement

for the six months ended 31st March 2010

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
Net cash (outflow)/inflow from operating
activities (note 6)	(532)	229	2,797
Net cash outflow from returns on investments
and servicing of finance	(229)	(43)	(180)
Taxation paid	(58)	-	(341)
Net cash outflow from capital expenditure
and financial investment	(15,480)	(12,156)	(35,527)
Dividends paid	(2,444)	(2,720)	(2,720)
Net cash inflow from financing	10,737	-	32,196
Decrease in cash for the period	(8,006)	(14,690)	(3,775)
Reconciliation of net cash flow to movement in
net funds/debt
Net cash movement	(8,006)	(14,690)	(3,775)
Loans drawn down	(6,636)	-	(31,928)
Exchange movements	(1,369)	2,441	1,723
Changes in net funds/debt arising from cash flows	(16,011)	(12,249)	(33,980)
Net (debt)/funds at the beginning of the period	(16,278)	17,702	17,702
Net (debt)/funds at the end of the period	(32,289)	5,453	(16,278)
Represented by:
Cash and short term deposits	7,265	5,453	14,985
Bank loans	(39,554)	-	(31,263)
Net (debt)/funds at the end of the period	(32,289)	5,453	(16,278)

Notes to the Accounts

for the six months ended 31st March 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 30th September 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' issued in January 2009.

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

The accounting policies applied in these Half Year Accounts are consistent with those applied in the Accounts for the year ended 30th September 2009.

3.             Dividends

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
Final dividend paid in respect of the year ended
30th September 2009 of 1.50p (2008: 1.70p)	2,444	2,720	2,720

No interim dividend has been declared in respect of the six months ended 31st March 2010 (2009: nil).

4.             (Loss)/return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
(Loss)/return per share is based on the following:
Revenue (loss)/return	(426)	167	2,477
Capital return/(loss)	47,111	(7,168)	99,840
Total return/(loss)	46,685	(7,001)	102,317
Weighted average number of Ordinary shares in issue during the period used for the purpose of the diluted calculation	169,930,441	160,007,154	163,311,137
Weighted average number of Ordinary shares in issue during the period used for the purpose of the undiluted calculation	162,727,424	160,007,154	160,122,194
Diluted
Revenue (loss)/return per Ordinary share	(0.2)p	0.1p	1.5p
Capital return/(loss) per Ordinary share	27.7p	(4.5)p	61.1p
Total return/(loss) per Ordinary share	27.5p	(4.4)p	62.6p
Undiluted
Revenue (loss)/return per Ordinary share	(0.3)p	0.1p	1.5p
Capital return/(loss) per Ordinary share	29.0p	(4.5)p	62.4p
Total return/(loss) per Ordinary share	28.7p	(4.4)p	63.9p

The diluted (loss)/return per Ordinary share represents the (loss)/return on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the period as adjusted in accordance with the requirements of Financial Reporting Standard 22: 'Earnings per share'.

5.             Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
Diluted
Ordinary shareholders' funds assuming exercise of
Subscription shares (£'000)	427,448	275,732	384,698
Number of potential Ordinary shares in issue	191,247,959	192,007,959	192,007,959
Net asset value per Ordinary share (pence)	223.5	143.6	200.4
Undiluted
Ordinary shareholders' funds (£'000)	389,819	231,891	341,477
Number of Ordinary shares in issue	163,781,834	160,007,154	160,460,074
Net asset value per Ordinary share (pence)	238.0	144.9	212.8

The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end.

6.             Reconciliation of net return/(loss) on ordinary activities before finance costs and taxation to net cash (outflow)/inflow from operating activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2010	31st March 2009	30th September 2009
	£'000	£'000	£'000
Net return/(loss) on ordinary activities before finance costs
and taxation	47,043	(6,772)	102,959
Add back capital (return)/loss before finance costs
and taxation	(47,111)	7,168	(99,840)
Scrip dividends received as income	-	(6)	(133)
Increase in accrued income	(260)	(207)	(5)
(Increase)/decrease in other debtors	(8)	(3)	61
(Decrease)/increase in accrued expenses	(82)	195	25
Overseas taxation	(114)	(146)	(270)
Net cash (outflow)/inflow from operating activities	(532)	229	2,797

7.             Post balance sheet event

At the end of the period, notice was received from the holders of 15,525,881 Subscription shares who wished to exercise their rights to subscribe for Ordinary shares at a price of 137 pence per share. The new Ordinary shares were duly allotted in two tranches on 9th April 2010 (CREST holders) and 16th April 2010 (certificated holders) and therefore this transaction has not been included in these accounts prepared as at 31st March 2010.

From 1st April 2010 the conversion price of the Subscription shares increased to 176 pence per share. If the above transaction had been brought into account and assuming the remaining Subscription shares were converted into Ordinary shares at the new price of 176p, the diluted NAV per share would be 225.9p share, compared with the diluted NAV of 223.5p per share disclosed in these accounts.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

www.jpmasian.co.uk

 

END

 

 

IR BSGDUDGBBGGC