Half Yearly Report

RNS Number : 4754F
JPMorgan Chinese Inv Tst PLC
23 May 2013
 



 

LONDON STOCK EXCHANGE ANNOUNCEMENT

 

JPMORGAN CHINESE INVESTMENT TRUST PLC

 

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED

31ST MARCH 2013

 

Chairman's Statement

 

Performance

Following shareholders' approval at the 2013 Annual General Meeting ('AGM') of the continuation of the Company as an investment trust for a further five years, I am pleased to report that during the six months to 31st March 2013, the Company's return on net assets with net dividends reinvested increased by 17.9%. This was ahead of the return of the Company's benchmark, the MSCI Golden Dragon Index, which increased by 13.0% (in sterling terms). The total return to shareholders was 19.3%. The Investment Managers' Report provides further comments on the Company's performance and portfolio and market developments.

 

Loan Facility and Gearing

On 24th January 2013 the Company renewed its £20 million multi-currency credit facility with Scotiabank for a further 364 days, and £18.1 million was drawn down on this facility as at 31st March 2013. The Board has given the Investment Managers the flexibility to manage the gearing tactically within a range set by the Board of 10% net cash to 15% geared. During the period the Company's gearing ranged from 10% to 14% geared, ending the half year at 14% geared.

 

Share Issues and Repurchases in the Period

During the six months ended, the Company issued 12,257 new Ordinary shares following the exercise of Subscription shares for a total consideration of £20,592.

 

The Company repurchased 121,443 shares during the period at prices below the prevailing net asset value per share and holds them in Treasury in accordance with the Board's policy. The Company will re-issue shares held in Treasury only at a premium to NAV.   At the time of writing, the Company's issued share capital consists of 76,375,132 Ordinary shares, excluding shares held in Treasury.

 

Subscription Shares

As at 31st March 2013 there were 12,717,293 outstanding subscription shares. From 31st March up to and including the final date for the exercise of Subscription Share Rights by Subscription Shareholders, which was 15th May 2013, holders of a further 33,850 subscription shares elected to exercise their Subscription Share Rights. However, since the subscription shares expired 'out of the money', the majority of holders did not convert and, consequently, there were 12,683,443 outstanding subscription shares following the Final Exercise Date. A Final Subscription Trustee ('Trustee') has been appointed to act on behalf of those Subscription Shareholders who have not exercised their Subscription Share Rights. In accordance with the Subscription Share terms, the Trustee will have to decide within 14 days of the Final Exercise Date, such period expiring at the latest at close of business on 29th May 2013, whether or not to exercise the outstanding Subscription Share Rights.

 

Board of Directors

Mr John Misselbrook was appointed by shareholders at the AGM, having previously been appointed by the Board of the Company in July 2012, and has now assumed the responsibility as Chairman of the Audit Committee. All remaining Directors were also re-appointed by shareholders at the 2013 AGM having stood for annual re‑appointment in accordance with good corporate governance practice.

 

Outlook

In so much as the growth rates in China inevitably have slowed, the rebalancing of the economy from investment to consumption, as referred to in my annual statement, remains at the forefront of government policy under the new leadership as it puts in place the building blocks for sustainable economic growth. A sharp crackdown on corruption practices, cooling the property sector and tackling the pollution problems are also planks of the policy. This should be positive for the investment environment in the long‑term.

 

Hong Kong, as China's principal off-shore financial services centre, benefits from the momentum and will continue to do so as the role of the renminbi in world trade strengthens and Hong Kong's position as a financial services entrepôt for the currency is enhanced. Your Investment Managers have referred to the stock picking opportunities in Taiwan. As Taiwan economically intertwines increasingly with mainland China, we continue to believe in the advantages to our investment performance of Taiwanese exposure.

 

William Knight

Chairman                                                                                                                                                          23rd May 2013

 



 

Investment Managers' Report

 

Over the six month period ended 31st March 2013, the Company achieved a total return on net assets of +17.9% (in sterling terms), outperforming the Company's benchmark return of +13.0% by 4.9%.

 

Stock selection across all three Greater China markets contributed to the majority of the outperformance and the average gearing level of 12.0% also added to returns. In Taiwan, stock selection was strong within the technology sector (e.g. smart-phone supply chain related stocks), whereas in Hong Kong/China most of the returns came from favourable stock selection in financials (e.g. Chinese property counters) and consumer names (e.g. Macau gaming).

 

China Review

Chinese equities rose in the fourth quarter of 2012, with the offshore-listed Chinese market (MSCI China) leading domestic A-shares (CSI 300) again. MSCI China rose 12.8% quarter-on-quarter, after troughing in early September. Three months of better than expected economic data finally started pushing up the CSI 300 in early December, up almost 11% quarter-on-quarter. Cyclicals such as financials, property, commodity, industrials and discretionary led the market recovery, while defensives such as staples, healthcare and telecommunications lagged. On the economic front, the risk premium came down on better than expected data as well as greater hopes for reforms that would spur on sustainable economic growth after the successful conclusion of the National People's Congress of China held in mid November.

 

However, Chinese equities corrected in the first quarter of 2013 after the strong rally, on concerns of incremental policy tightening in China and rising sovereign debt risks in Europe. The offshore-listed Chinese market (MSCI China) dropped 4.4%, while domestic A-shares (CSI 300) dropped 1.1%. The People's Bank of China started mopping up liquidity through open market operations in February, after very strong January Total Social Financing ('TSF') of Rmb2.5Trn (vs. Rmb0.98Trn in January 2012) was extended. The anti-corruption campaign by the new leadership negatively affected consumption, with retail sales in January to February at 12.3% coming in below expectations. Earnings revisions have finally turned neutral after a negative trend throughout 2012.

 

China Outlook

We expect a mild recovery for the rest of 2013. We believe the earlier than expected incremental policy adjustments are unlikely to derail the macro recovery. The renewed property tightening, combined with monetary policy fine tuning, should prevent property prices appreciating too fast. The structural shortage of property in tier one and selected tier two cities will likely keep property fixed asset investment ('FAI') growing at double digits. Infrastructure FAI should re-accelerate, as evidenced by medium/ long-term loans rising to 70% of total new loans in February (vs. around 30% in mid 2012).

 

Worsening pollution issues may restrain construction activities selectively. The new leadership's anti-corruption campaign is needed for longer term growth sustainability, despite the near term negative impact on consumption. The market is trading at 9.3x forward one year price/earnings with 12% consensus earnings growth, which is undemanding, and the recent market correction and continued attractive valuations should support a better market for the rest of the year.

 

Hong Kong Review

Like China, Hong Kong equities continued to move up in the fourth quarter of 2012 owing to continued loose liquidity conditions and improving economic momentum, although it no longer outperformed the region partially due to unprecedented property tightening measures. While further property measures were generally anticipated, including the increased stamp duties for short-term transactions, the so-called buyer's stamp duty for non-local and corporate buyers surprised the market. Macau shares continued their recent rally as growth figures continued to strengthen during the quarter and the market largely shrugged off broader concerns about potential anti-corruption measures in China affecting high-roller volumes.

 

The year 2013 began with a continuation of the year-end rally in Hong Kong, but most of those gains were eroded as there were renewed concerns over the Eurozone crisis and concerns over both monetary and property tightening, coupled with anti-corruption efforts which weighed on the market in China. The Hong Kong government implemented further measures to dampen the property market, including the doubling of stamp duties and mortgage tightening. Macau shares proved to be volatile, with initial concerns over a weak February, but investors' fears were overcome as March came in at record levels with strong year-on-year growth.

 

Retail sales in Hong Kong also picked up momentum, with combined January to February increasing 15.8% year-on-year, faster than the 9.1% and 9.4% growth achieved in November and December, respectively.

 

Hong Kong Outlook

Macro economic risks ranging from the Eurozone crisis to avian flu in China, to the North Korea situation are starting to dominate investor focus. The property market in Hong Kong continues to grind down, with likely price weakness in the near term. However, share valuations have largely reflected this price weakness, especially for property developers. Meanwhile, retail and office property trends remain resilient. Macau gaming revenue momentum remains positive, despite concerns over anti-corruption policies and avian flu. With no new supply additions in the near future, continued top-line growth should translate into strong earnings growth and cash flow generation.

 

Taiwan Review

In the last three months of 2012 the TWSE Index edged down slightly, finishing the quarter down 0.2% in Taiwanese dollars. The Taiwanese market fell, initially driven by disappointment in the sales outlook for both Apple and Windows 8 related products. The PC and handset sectors saw downward revisions in guidance. The market managed to claw back most of the losses, cheered by optimism that the US fiscal cliff could be averted and suggestions by the Taiwanese government regarding stimulus measures to revive the market.

 

The Taiex was largely flat in USD terms in the first quarter of 2013, led by non-technology and financial sectors, while technology remained muted and underperformed slightly. With an improving demand/supply situation, commodity technology sectors like DRAM, TFT and LED performed well this quarter. Stocks within the low-end smart-phone supply chain continued to perform well. The rotational buying within non-technology sub-sectors remained solid with financials taking the spotlight. In anticipation of financial deregulation, momentum in the financial sector was led by a strong rally in insurance companies which also benefit from yield recovery and asset appreciation themes. However, concerns over China's cooling measures have weakened stocks in the steel, machinery, cement and property sectors over the quarter.

 

Taiwan Outlook

The Taiwanese market could be volatile in the near term, given new developments surrounding Korea, China's new leadership and avian flu. However, any pull back is likely to be mild as the market has yet to price in a potentially stronger outlook in the latter part of 2013. The Taiwanese economy should have troughed in the fourth quarter of 2012, while most technology companies should see revenues and earnings trough in the first quarter of 2013. Thus, any irrational correction would be a good buying opportunity. While technology should bottom in first quarter of 2013 on a seasonal basis, we believe the bulk of the technology recovery will occur in the latter part of 2013. Thus, interest in the technology sector is likely to be selective and in areas where visibility of earnings growth is clearer. The non-technology space has been seeing positive earnings revisions.

 

Summary

While the policy environment in all three markets remains in flux, we believe that the global economy will continue its recovery, while closer to home, China has already reached its inflection point in both fiscal and monetary policy. The 'bad news' of the earnings season is completed and as a result, we remain constructive on equity markets in Greater China.

 

Howard Wang

Emerson Yip

William Tong-

Shumin Huang-

Investment Managers                                                                                                                              23rd May 2013

 

 

 

 

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 and fall into the following broad categories: investment underperformance; loss of investment team; discount; market; political and economic; 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 2012.

 

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 objectives, 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 sufficient 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 half year 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

 

William Knight

Chairman                                                                                                                                              23rd May 2013

 

For further information, please contact:

Lucy Dina

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 4000

 

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.jpmchinese.co.uk



 

Income Statement

for the six months ended 31st March 2013

 


(Unaudited)

Six months ended

31st March 2013

(Unaudited)

Six months ended

31st March 2012

(Audited)

Year ended

30th September 2012




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

-

22,765

22,765

-

14,095

14,095

-

12,133

12,133

Net foreign currency (losses)/gains

-

(1,010)

(1,010)

-

104

104

-

244

244

Income from investments

143

-

143

171

-

171

3,431

-

3,431

Gross return

143

21,755

21,898

171

14,199

14,370

3,431

12,377

15,808

Management fee

(629)

-

(629)

(539)

-

(539)

(1,095)

-

(1,095)

Performance fee writeback

-

(1,052)

(1,052)

-

-

-

-

-

-

Other administrative expenses

(267)

-

(267)

(232)

-

(232)

(451)

-

(451)

Net (loss)/return on ordinary activities before finance costs and taxation

(753)

20,703

19,950

(600)

14,199

13,599

1,885

12,377

14,262

Finance costs

(109)

-

(109)

(123)

-

(123)

(214)

-

(214)

Net (loss)/return on ordinary activities before taxation

(862)

20,703

19,841

(723)

14,199

13,476

1,671

12,377

14,048

Taxation

-

-

-

(1)

-

(1)

(358)

-

(358)

Net (loss)/return on ordinary activities after taxation

(862)

20,703

19,841

(724)

14,199

13,475

1,313

12,377

13,690

(Loss)/return per Ordinary share (note 4)

(1.13)p

27.04p

25.91p

(0.93)p

18.24p

17.31p

1.69p

15.90p

17.59p

 

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.

 



 

Reconciliation of Movements in Shareholders' Funds


Called up


Exercised

Capital





Six months ended

share

Share

warrant

redemption

Other

Capital

Revenue


31st March 2013

capital

premium

reserve

reserve

reserve

reserves

reserve

Total

(Unaudited)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 30th September 2012

19,595

13,129

3

581

37,392

39,709

1,811

112,220

Issue of Ordinary shares on exercise of Subscription shares

3

18

-

-

-

-

-

21

Repurchase of Ordinary shares into Treasury

-

-

-

-

-

(163)

-

(163)

Net return/(loss) on ordinary activities

-

-

-

-

-

20,703

(862)

19,841

Dividends appropriated in the period

-

-

-

-

-

-

(1,225)

(1,225)

At 31st March 2013

19,598

13,147

3

581

37,392

60,249

(276)

130,694

 


Called up


Exercised

Capital





Six months ended

share

Share

warrant

redemption

Other

Capital

Revenue


31st March 2012

capital

premium

reserve

reserve

reserve

reserves

reserve

Total

(Unaudited)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 30th September 2011

19,594

13,123

3

581

37,392

28,867

1,510

101,070

Issue of Ordinary shares on exercise of Subscription shares

-

4

-

-

-

-

-

4

Net return/(loss) on ordinary activities

-

-

-

-

-

14,199

(724)

13,475

Dividends appropriated in the period

-

-

-

-

-

-

(1,012)

(1,012)

At 31st March 2012

19,594

13,127

3

581

37,392

43,066

(226)

113,537

 


Called up


Exercised

Capital





Year ended

share

Share

warrant

redemption

Other

Capital

Revenue


30th September 2012

capital

premium

reserve

reserve

reserve

reserves

reserve

Total

(Audited)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 30th September 2011

19,594

13,123

3

581

37,392

28,867

1,510

101,070

Issue of Ordinary shares on exercise of Subscription shares

1

6

-

-

-

-

-

7

Repurchase of Ordinary shares into Treasury

-

-

-

-

-

(1,535)

-

(1,535)

Net return on ordinary activities

-

-

-

-

-

12,377

1,313

13,690

Dividends appropriated in the year

-

-

-

-

-

-

(1,012)

(1,012)

At 30th September 2012

19,595

13,129

3

581

37,392

39,709

1,811

112,220

 



 

Balance Sheet

at 31st March 2013


(Unaudited)

(Unaudited)

(Audited)


31st March 2013

31st March 2012

30th September 2012


£'000

£'000

£'000

Fixed assets




Investments held at fair value through profit or loss:




China

78,141

69,251

65,652

Taiwan

37,233

32,347

30,435

Hong Kong

34,798

22,756

29,107

Total investments

150,172

124,354

125,194

Current assets




Debtors

372

633

138

Cash and short term deposits

83

522

691


455

1,155

829

Creditors: amounts falling due within one year

(18,600)

(11,972)

(13,803)

Bank overdraft

(281)

-

-

Net current liabilities

(18,426)

(10,817)

(12,974)

Total assets less current liabilities

131,746

113,537

112,220

Provision for liabilities and charges




Performance fees

(1,052)

-

-

Net assets

130,694

113,537

112,220

Capital and reserves




Called up share capital

19,598

19,594

19,595

Share premium

13,147

13,127

13,129

Exercised warrant reserve

3

3

3

Capital redemption reserve

581

581

581

Other reserve

37,392

37,392

37,392

Capital reserves

60,249

43,066

39,709

Revenue reserve

(276)

(226)

1,811

Total equity shareholders' funds

130,694

113,537

112,220

Net asset value per Ordinary share - undiluted (note 5)

170.8p

145.8p

146.4p

Net asset value per Ordinary share - diluted (note 5)

170.4p

145.8p

146.4p

 



 

Cash Flow Statement

for the six months ended 31st March 2013


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year

ended


31st March 2013

31st March 2012

30th September 2012


£'000

£'000

£'000

Net cash (outflow)/inflow from operating activities (note 6)

(818)

(730)

1,256

Net cash outflow from returns on investments and servicing of finance

(103)

(123)

(215)

Net cash outflow from capital expenditure and financial investment

(2,419)

(3,439)

(5,163)

Dividend paid

(1,225)

(1,012)

(1,012)

Net cash inflow from financing

3,653

3,162

3,166

Decrease in cash for the period

(912)

(2,142)

(1,968)

Reconciliation of net cash flow to movement in net debt




Net cash movement

(912)

(2,142)

(1,968)

Loans drawn down in the period

(5,249)

(3,158)

(3,239)

Exchange rate movements

(1,010)

105

244

Movement in net debt in the period

(7,171)

(5,195)

(4,963)

Net debt at the beginning of the period

(11,137)

(6,174)

(6,174)

Net debt at the end of the period

(18,308)

(11,369)

(11,137)

 

Represented by:

Cash and short term deposits

Bank overdraft

83

(281)

522

-

691

-

Debt falling due within one year

 (18,110)

(11,891)

(11,828)

Net debt at the end of the period

(18,308)

(11,369)

(11,137)

 

 



 

Notes to the Accounts

for the six months ended 31st March 2013

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 2012 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 30th September 2012.

3.  Dividend



(Unaudited)

(Unaudited)

(Audited)



Six months ended

Six months ended

Year ended



31st March 2013

31st March 2012

30th September 2012



£'000

£'000

£'000


Final dividend paid in respect of the year ended 30th September 2012 of 1.6p (2011: 1.3p)

1,225

1,012

1,226

 

     No interim dividend has been declared in respect of the six months ended 31st March 2013 (2012: nil).

4.  (Loss)/return per Ordinary share



(Unaudited)

(Unaudited)

(Audited)



Six months ended

Six months ended

Year ended



31st March 2013

31st March 2012

30th September 2012



£'000

£'000

£'000


(Loss)/return per Ordinary share is based on the following:





Revenue (loss)/return

(862)

(724)

1,313


Capital return

20,703

14,199

12,377


Total return

19,841

13,475

13,690


Weighted average number of Ordinary shares in issue during the period

76,569,011

77,865,142

77,848,220


Revenue (loss)/return per Ordinary share

(1.13)p

(0.93)p

1.69p


Capital return per Ordinary share

27.04p

18.24p

15.90p


Total return per Ordinary share

25.91p

17.31p

17.59p

 

     The Subscription shares in issue have no dilutive effect on the above losses/returns per Ordinary share, as calculated 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 2013

31st March 2012

30th September 2012

Undiluted




Ordinary shareholders funds (£'000)

130,694

113,537

112,220

Number of Ordinary shares in issue

76,534,334

77,867,026

76,643,520

Net asset value per Ordinary share (pence)

170.8

145.8

146.4

Diluted




Ordinary shareholders funds assuming exercise of Subscription shares (£'000)

152,060

113,537

112,220

Number of Ordinary shares in issue

89,251,627

77,867,026

76,643,520

Net asset value per Ordinary share (pence)

170.4

145.8

146.4

 

     The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end. There was no dilution to the net asset value per Ordinary share at 31st March 2012 or 30th September 2012 as the net asset value per Ordinary shares as at these dates did not exceed the Subscription share exercise price of 168 pence per share.

 

6.  Reconciliation of net return 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 2013

31st March 2012

30th September 2012



£'000

£'000

£'000


Total return on ordinary activities before finance costs and taxation

19,950

13,599

14,262


Less capital return before finance costs and taxation

(20,703)

(14,199)

(12,377)


Scrip dividends received as income

-

-

(221)


Decrease in accrued income

84

97

5


(Increase)/decrease in other debtors

(21)

(16)

5


(Decrease)/increase in accrued expenses

(128)

(56)

94


Performance fee paid

-

(141)

(141)


Overseas taxation

-

(14)

(371)


Net cash (outflow)/inflow from operating activities

(818)

(730)

1,256

 

 

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

 

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

 

ENDS

 

A copy of the half yearly report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

 

The half yearly report will also be available on the Company's website at www.jpmchinese.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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