Interim Results

JP Morgan Mid Cap Invest Trust PLC 18 February 2008 LONDON STOCK EXCHANGE ANNOUNCEMENT JPMORGAN MID CAP INVESTMENT TRUST PLC HALF YEAR RESULTS Chairman's Statement Performance In my year end statement I commented on the weakness and volatility of equities in the wake of the turmoil in global capital and credit markets. This weakness has been reflected in the performance of both the mid cap market and the Company over the half year to 31st December 2007. The Company achieved a negative total return on net assets per share of 14.0%, underperforming the benchmark's negative return of 7.5%. The Company's negative total return to shareholders (share price and net dividend) was 20.0%, reflecting a significant widening of the discount from 12.4% to 17.4%. After the strong gains witnessed over the previous four years, these results are disappointing and to some extent reflect a revaluation of mid cap stocks in relation to their larger cap counterparts. A more detailed review of the Company's performance is given in the Investment Manager's report below. Revenue and dividends Revenue after taxation for the six months to 31st December 2007 was £2,136,000 (2006: £2,106,000) and earnings per share, calculated on the average weekly number of shares in issue, were 7.65p (2006: 6.90p). The Board continues to recognise the importance of income to shareholders and, having increased the interim dividend by 33% and 25% in the last two years, proposes a further increase of 10% to 5.50p (2006: 5.00p) this year. The dividend will be paid on 23rd April 2008 to shareholders on the register at the close of business on 25th March 2008. Loan facilities and Gearing The Company's level of gearing began the period at around 111%, gradually increasing as the Managers identified stocks which they felt had been oversold, ending at 116%. The Company has a three year £45m revolving credit facility with the Bank of Ireland. Share Buybacks Over the course of the six months under review, the Company repurchased for cancellation 2,072,620 ordinary shares, representing 7.1% of its issued share capital. This added 0.9% to the net asset value of the remaining shares. Prospects Whilst further downgrades to profits and earnings forecasts for the mid cap market are to be expected, our Managers believe that such has been the fall in mid cap share prices that valuations now reflect much of the expected bad news. Mid cap stocks no longer trade at a premium to large caps and, although there will doubtless be further periods of nervousness, attractive value is returning and volatility should decline. The Board remains optimistic that, once the mid cap cycle has bottomed, the mid cap index and your Company will again enjoy periods of strong growth relative to the large cap indices and will more than justify its ongoing niche role as a specialist investment trust. Andrew Barker Chairman 15th February 2008 Investment Manager's Report Market Background 2007 turned out to be a disappointing year for mid cap investors, and a disappointing year for JPMorgan Mid Cap. For only the second year in the last nine, the mid cap market underperformed the headline FTSE 100 Index, and for the first calendar year since the end of the bear market of 2000 to 2002 in UK equities, the mid cap index declined in value. The vast majority of this fall in value of the FTSE 250 Index occurred from June 2007 onwards.Whilst in the last full year accounts, published in September 2007, we were able to report that the mid cap market had finished the year to 30th June close to the May 2007 all time highs, in the six months ended 31st December 2007 the mid cap market has declined steadily. Over the six months of the interim period, the FTSE 250 Index has declined from a starting level of 11528 to a period end level of 10658, a price fall of 7.5%. As the interim period unfolded, investor confidence in the UK economy, UK equities in general, and mid cap equities in particular, has steadily ebbed away. Investors are nervous that the UK economy is heading into recession, that the Northern Rock debacle has fundamentally damaged the British banking system, putting a squeeze on lending criteria to consumers and companies alike, that policy makers (the Bank of England and the Treasury) will be unable to do much to alleviate these developments, and that mid cap stocks in particular will suffer in this environment. These factors, coupled with the fact that most UK institutional investors and hedge funds are structurally overweight in mid cap equities and have been looking to reduce their exposures, have all put downward pressure on mid cap share prices in recent months. Portfolio It is our investment philosophy that cheap companies, and fast growing companies, with improving fundamentals, will outperform the overall market over the long term.We therefore aim to build consistently a portfolio for the Company that is overweight in both the best of value companies and the best of growth companies, whilst also ensuring that the management of the companies selected for your portfolio demonstrate capital discipline. Overall the portfolio should therefore be more lowly valued than the FTSE 250 Index, have more growth expected of it, and have better fundamentals. Over the latest financial half year the Company's net assets per share (NAV) fell from 799.3p to 670.6p, giving a total return with net income reinvested of -14.0%, which compared to a total return on the FTSE 250 ex IT Index of -7.5%. Over the same period the Company's shares fell from a mid price of 695.5p to 548.0p, and with dividends gave a total return to shareholders of -20.0%. The difference between the return to shareholders and the NAV return over the period was accounted for by a widening of the discount from 12.4% to 17.4%. The last six months has been a particularly challenging period for JPMorgan Mid Cap. Against a backdrop of a declining FTSE 250 Index benchmark, the companies we have invested in have not on the whole performed well, so that stock selection has reduced shareholders' returns by 6.7% in this period. In addition, our strategic and tactical decisions to be geared (which over the longer term have added a lot of value to shareholders) put an additional drag on returns in this period, of 1.6%. Share buy-backs and other effects were a small positive offset in the six months, adding 1.8% back to shareholders' returns.With hindsight, your managers took too sanguine a view about the growth prospects and likely sentiment for mid caps in the latest half year, and held the wrong stocks with the wrong level of tactical gearing as a result. For the six months under review, the five biggest positive contributors to portfolio performance among stocks held were Stagecoach, Game Group, Burren Energy, IG Group, and Petrofac; whilst the stocks held which detracted most from performance were Savills, Michael Page, SThree, FKI, and Morgan Crucible. Of the stocks adding the most to relative performance in the interim period, all were substantial overweight positions within the portfolio, each of which delivered a stock return of 23% or better. Trading updates from Stagecoach, Game Group, IG Group, and Petrofac during the period all beat market growth expectations, propelling the shares higher; whilst for Burren Energy, the on/off/on again courtship with the Italian oil major ENI was finally amicably concluded in an agreed all cash take-over. Of the detractors, all delivered negative stock returns of 35% or worse, and are all economically sensitive or cyclical companies, where market sentiment turned down savagely in the latest period. Of the companies, only FKI warned on profits prospects in this period, whilst both Savills and Morgan Crucible sounded cautious notes about 2008 in trading updates. For the staffing companies,Michael Page and SThree, trading updates remained robust - with strong growth reported - but market sentiment cared little, as the view formed that these companies would suffer profits disappointments in due course. All of the major detractors fell to very low valuation levels as a result of their poor share price performances. Future Outlook At the time of the last full year accounts, we suggested that the weakness that had been witnessed in the mid cap market over the summer months of 2007 had created a buying opportunity for our preferred mid cap stocks.We must now recognise that we were too early, and too optimistic, in trying to call a bottom in the sell off of mid cap stocks in the autumn of 2007. As autumn has given way to winter, so a much deeper gloom than we expected has settled over the mid cap market, with share price falls continuing into the first weeks of 2008. The market consensus is now largely that 2008 will be a year of less economic growth than 2007, as UK consumers continue to rein back their expenditure and as UK banks tighten their lending criteria to rebuild their battered balance sheets; and perhaps a year of no growth at all if the slowdown turns into a recession. Under these circumstances the received wisdom is that UK consumer stocks and sectors will face a tough time, as will companies that are highly indebted with short term debt. Stock broking analysts have already begun to trim their forecasts for profits, earnings, and dividend growth across the breadth of the UK mid cap market for 2008, in particular focusing on economically sensitive sectors such as general retailers, house builders, and leisure. The consensus for earnings growth for 2008 at the time of writing for the mid cap market is 9.5%, but most commentators believe this number will be revised downward steadily as we progress through the year.We agree that further downgrades to profits and earnings forecasts for the mid cap market as a whole should be expected, and that in some cases these downgrades will be accompanied by further share price falls. However we also feel that such has been the fall in prices for the mid cap market already, in advance of the yet to be reported downgrades, that mid cap valuations already reflect much of the bad news that is now expected. On consensus earnings expectations, the mid cap market is currently valued at a little over 11 times 2008 earnings, with a dividend yield of around 3%, a 20% reduction in the valuation over the last six months.Mid caps no longer trade on a valuation premium to large cap stocks.Whilst we expect that investors will remain nervous over the coming months, and that the mid cap market will remain volatile, we also believe that some bargain basement opportunities are also emerging within the mid cap market, which over a medium term horizon will be handsomely rewarded. Later in 2008, when the effects of lower interest rates are beginning to be felt, overall mid cap market volatility should also abate, and allow the mid cap index to regain some of the recently lost ground. Jeremy Wells Christopher Llewelyn Investment Managers 15th February 2008 For further information, please contact: Andrew Norman For and on behalf of JPMorgan Asset Management (UK) Limited - Secretary 020 7742 6000 JPMorgan Mid Cap Investment Trust plc Unaudited figures for the six months ended 31st December 2007 Income Statement (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December 2007 31st December 2006 30th June 2007 Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 (Loss)/gains from investments held at fair value through profit or loss - (36,494 (36,494) - 46,617 46,617 - 46,400 46,400 Income from investments 2,833 - 2,833 2,761 - 2,761 5,984 - 5,984 Other interest receivable and similar income 7 - 7 13 - 13 19 - 19 _______ ________ _______ _______ ________ _______ _______ _______ _______ Gross return/(loss) 2,840 (36,494) (33,654) 2,774 46,617 49,391 6,003 46,400 52,403 Management fee (160) (375) (535) (169) (395) (564) (360) (840) (1,200) Other administrative expenses (163) - (163) (163) - (163) (298) - (298) _______ _______ _______ _______ _______ _______ _______ _______ _______ Net return/(loss) on ordinary activities before finance costs and taxation 2,517 (36,869) (34,352) 2,442 46,222 48,664 5,345 45,560 50,905 Finance costs (381) (889) (1,270) (336) (785) (1,121) (656) (1,530) (2,186) _______ _______ _______ _______ _______ _______ _______ _______ _______ Net return/(loss) on ordinary activities before taxation 2,136 (37,758) (35,622) 2,106 45,437 47,543 4,689 44,030 48,719 Taxation - - - - - - - - - ______ _______ _______ ______ _______ _______ _______ _______ _______ Net return/(loss) on ordinary activities after taxation 2,136 (37,758) (35,622) 2,106 45,437 47,543 4,689 44,030 48,719 ===== ===== ===== ===== ===== ===== ===== ===== ===== Return/(loss) per share (note 4) 7.65p (135.23)p (127.58)p 6.90p 148.82p 155.72p 15.53p 145.85p 161.38p 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. JPMorgan Mid Cap Investment Trust plc Reconciliation of Movements in Shareholders' Funds (Unaudited) Unaudited figures for the six months ended 31st December 2007 Called up Capital redemption Share Capital Revenue capital reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 At 30th June 2007 7,308 2,223 215,810 7,841 233,651 Shares bought back and cancelled (518) 518 (13,244) - (13,244) Net (loss)/return on ordinary activities - - (37,758) 2,136 (35,622) Dividends appropriated in the period - - - (2,643) (2,643) _______ ________ _______ _______ ________ At 31st December 2007 6,790 3,210 164,808 7,334 182,142 ===== ===== ===== ===== ===== Unaudited figures for the six months ended 31st December 2006 Called up Capital redemption Share Capital Revenue capital reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 At 30th June 2006 7,777 2,223 184,165 7,231 201,396 Shares bought back and cancelled (206) 206 (4,806) - (4,806) Net return on ordinary activities - - 45,437 2,106 47,543 Dividends appropriated in the period - - - (2,587) (2,587) _______ ________ _______ _______ ________ At 31st December 2006 7,571 2,429 224,796 6,750 241,546 ===== ===== ===== ===== ===== Audited figures for the year ended 30th June 2007 Called up Capital redemption Share Capital Revenue capital reserve reserve reserve Total £'000 £'000 £'000 £'000 £'000 At 30th June 2006 7,777 2,223 184,165 7,231 201,396 Shares bought back and cancelled (469) 469 (12,385) - (12,385) Net return on ordinary activities - - 44,030 4,689 48,719 Dividends appropriated in the year - - - (4,079) (4,079) _______ ________ _______ _______ ________ At 30th June 2007 7,308 2,692 215,810 7,841 233,651 ===== ===== ===== ===== ===== JPMorgan Mid Cap Investment Trust plc Unaudited figures for the six months ended 31st December 2007 Balance Sheet (Unaudited) (Unaudited) (Audited) 31st December 2007 31st December 2006 30th June 2007 £'000 £'000 £'000 Fixed assets Investments at fair value through profit or loss 213,022 270,130 263,923 Current assets Debtors 294 453 983 Cash and short term deposits 223 244 292 _______ _______ _______ 517 697 1,275 Creditors : amounts falling due within one year (21,927) (19,819) (22,081) _______ _______ _______ Net current liabilities (21,410) (19,122) (20,806) _______ _______ _______ Total assets less current liabilities 191,612 251,008 243,117 Creditors : amounts falling due after more than one year (9,470) (9,462) (9,466) _______ _______ _______ Total net assets 182,142 241,546 233,651 ===== ===== ===== Capital and reserves Called up share capital 6,790 7,571 7,308 Capital redemption reserve 3,210 2,429 2,692 Capital reserve 164,808 224,796 215,810 Revenue reserve 7,334 6,750 7,841 _______ _______ _______ Shareholders' funds 182,142 241,546 233,651 ===== ===== ===== Net asset value per share (note 5) 670.6p 797.6p 799.3p JPMorgan Mid Cap Investment Trust plc Unaudited figures for the six months ended 31st December 2007 Cash Flow Statement (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December 31st December 30th June 2007 2006 2007 £'000 £'000 £'000 Net cash inflow from operating activities (note 6) 2,239 2,365 4,890 Net cash outflow from returns on investments and servicing of finance (1,242) (1,090) (2,214) Net cash inflow from capital expenditure and financial investment 14,673 5,564 11,288 Dividends paid (2,643) (2,587) (4,079) Net cash outflow from financing (13,096) (5,806) (11,391) _______ _______ ______ Decrease in cash for the period (69) (1,554) (1,506) ===== ===== ==== Reconciliation of net cash flow to movement in net debt Decrease in cash for the period (69) (1,554) (1,506) Cash (inflow)/outflow from changes in debt (700) 1,000 (300) _______ _______ ______ Changes in net debt arising from cash flows (769) (554) (1,806) Net debt at the beginning of the period (29,974) (28,161) (28,161) Amortisation of issue expenses (4) (3) (7) _______ _______ ______ Net debt at the end of the period (30,747) (28,718) (29,974) ===== ===== ==== Represented by: Cash and short term deposits 223 244 292 Debt due within one year (21,500) (19,500) (20,800) Debt due after five years (9,470) (9,462) (9,466) _______ _______ ______ Net debt (30,747) (28,718) (29,974) ===== ===== ==== Notes to the Accounts 1. Financial Statements The information contained within the financial statements in this preliminary announcement has not been audited or reviewed by the Company's auditors. 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' dated 31st December 2005. All of the Company's operations are of a continuing nature. The accounting policies applied to these interim accounts are consistent with those applied in the accounts for the year ended 30th June 2007. 3. Dividends (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December 2007 31st December 2006 30th June 2007 £'000 £'000 £'000 2,643 2,587 2,587 N/a N/a 1,492 _______ _______ ______ 2,643 2,587 4,079 ====== ====== ===== Final dividend in respect of the year ended 30th June 2007 of 9.5p (2006: 8.5p)1 Interim dividend in respect of the six months ended 31st December 2006 of 5.0p An interim dividend of 5.5p has been declared in respect of the six months ended 31st December 2007 costing £1,494,000. 1 The Company declared a dividend of £2,777,000 (2006: £2,644,000) but the dividend paid amounted to £2,643,000 (2006: £2,587,000) as a result of share buybacks after the year end but prior to the record date. 4. Return/ (loss) per share (Unaudited) (Unaudited) (Audited) Six months ended Six months ended Year ended 31st December 2007 31st December 2006 30th June 2007 £'000 £'000 £'000 2,136 2,106 4,689 (37,758) 45,437 44,030 _______ _______ ______ (35,622) 47,543 48,719 ====== ====== ===== 27,921,446 30,530,923 30,188,673 7.65p 6.90p 15.53p (135.23)p 148.82p 145.85p _______ _______ ______ (127.58)p 155.72p 161.38p ====== ====== ===== Return / (loss) per share is based on the following: Revenue return Capital (loss)/return Total (loss)/return Weighted average number of shares in issue Revenue return per share Capital (loss)/return per share Total (loss)/return per share 5. Net asset value per share Net asset value per share is calculated by dividing shareholders funds by the number of ordinary shares in issue at 31st December 2007 of 27,159,380 (31st December 2006: 30,285,000 and 30th June 2007: 29,232,000). 6. Reconciliation of operating revenue to net cash inflow (Unaudited) (Unaudited) (Audited) from operating activities Six months ended Six months ended Year ended 31st December 2007 31st December 2006 30th June 2007 £'000 £'000 £'000 Net (loss)/return before finance costs and taxation (34,352) 48,664 50,905 Capital loss/(return) before finance costs and taxation 36,869 (46,222) (45,560) Decrease in accrued income 428 314 57 Increase in other debtors (5) (11) (18) (Increase)/decrease in accrued expenses (100) 15 346 Expenses charged to capital (601) (395) (840) _______ _______ ______ Net cash inflow from operating activities 2,239 2,365 4,890 ===== ===== ==== 7. Accounts for the year ended 30th June 2007 The figures and financial information for the year ended the 30th June 2007 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 237(2) or 237 (3) of the Companies Act 1985. Interim Management Report The Company is now required to make the following disclosures in its half year report. Principal Risks and Uncertainites The principal risks and uncertainties faced by the Company fall into five broad categories: investment and strategy; accounting, legal and regulatory; corporate governance and shareholder relations; operational and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th June 2007. 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. Directors' Reponsibilities The Board of Directors confirms that, to the best of its knowledge: (i) the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports'; and (ii) the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules. For and on behalf of the Board Andrew Barker Chairman JPMORGAN ASSET MANAGEMENT (UK) LIMITED This information is provided by RNS The company news service from the London Stock Exchange

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