Interim Results

RNS Number : 3648B

JPMorgan American IT PLC

14 August 2008

 



STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN AMERICAN INVESTMENT TRUST PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 

30th JUNE 2008

Chairman's Statement

Performance

Equity investing proved difficult in the six months to 30th June 2008 as markets worldwide declined. The US market proved more resilient than many, with the S&P 500 Index falling by 12.0%, in total return terms, over the period. The Company continued its recent record of outperformance, recording an NAV total return of -10.8%. The share price fared better still, declining by 6.3% as the Company's discount, calculated with liabilities held at their fair value, narrowed from 8.4% to 4.5%. During the six months under review, the Company did not repurchase any of its ordinary shares. 

Gearing

The Company began the period with a net gearing position (offsetting cash and near cash against our debenture) of 97% of shareholders' funds. This level of gearing was increased to 104% to take advantage of the substantial market falls in February and March and ended the period at 105%.

Board Composition

Following the retirement of Dr George Greener at the Company's Annual General Meeting on 8th May 2008, the Board consists of five Directors. There are no plans to enlarge the Board at present.

Outlook

The Company's Managers believe that the falls witnessed in US equity markets over the last year have left equities looking attractively valued. The question remains, therefore, as to how that value can be translated into materially higher share prices. One pre-requisite is a stabilisation in the US housing market and the Housing Bill passed by Congress may help in that regard. However, in the likely absence of a significant monetary stimulus, markets are likely to remain volatile as investors continue to look for a catalyst for change.

Hamish Buchan

Chairman    

14th August 2008

Interim Management Report 

The Company is 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 31st December 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.

Hamish Buchan

Chairman    

14th August 2008

Investment Managers' Report

Market Review

The start of the year found global stock markets wavering as financial institutions worldwide revealed the extent of their exposure to US sub-prime housing loans and a full-blown credit crisis threatened. The crisis appeared to climax in late March, after the Federal Reserve ('Fed') intervened extensively in the credit markets and engineered the takeover of investment bank, Bear Stearns. The central bank also continued to lower its key interest rates, which ignited a rally in the equity markets over the following two months. 

The rally experienced in April and early May proved short-lived however. The surging prices of gasoline and food, along with constrained wages, a weakening jobs market, falling home values and harder access to credit, put pressure on consumers. Concerns over inflation risks from surging commodity prices raised speculation that the Fed might increase interest rates later in the year and the crisis surrounding the Federal National Mortgage Association ('Fannie Mae') and the Federal Home Loan Mortgage Corporation ('Freddie Mac') further unnerved the markets.

Overall, the second-quarter earnings expectations of S&P 500 companies are down 9% from a year earlier, hit, once again, by write-downs linked to sub-prime loans at financial firms. The start of the earnings season has offered lacklustre earnings results by financial and consumer discretionary companies in the current weak economic environment.

Performance

The Company's net asset value decreased by 10.8% in total return terms in the first six months of 2008, whilst the US Dollar strengthened fractionally against Sterling over the same period. There was a positive performance contribution of l.0% from the large cap portfolio. The key driver of this was particularly strong stock selection in the technology sector, where significant weightings in Mastercard and IBM proved beneficial. The portfolio's laggards included WellPoint and Valero, which detracted from performance. 

The composition of the portfolio has remained broadly unchanged, with the Company's exposure to small caps increasing marginally as they outperformed large caps on a relative basis. 

Market Outlook

As major equity indices flirt with their March lows, the question now is whether it is the end of the bad news and how much is discounted in the market. The outlook for the two principal areas depressing investor sentiment, financial sector loan value losses and rising oil prices, is difficult to forecast. 

Whilst company valuations have become more attractive as markets have fallen, reasonable valuations in themselves are not a catalyst for equities to move meaningfully higher and equities still desperately need some positive news. With inflation concerns still lingering, it is unlikely to come in the form of major monetary policy stimulus and neither does the US consumer outlook hold much promise, despite the fiscal stimulus cheques now in the pocketbooks of many American households. Many fundamental constraints still exist.

The possibility of an increasingly inflationary environment is an issue to which we have paid close attention since the beginning of the year and which has been an important consideration when constructing the portfolio. Rising commodity inflation, coupled with upside wage pressures in the emerging market economies, will, in our opinion, eventually have to be addressed. We are already seeing the demand response in the US to high Oil prices with record levels of mass transit ridership and a decline in miles driven for the first time in over 25 years.

So far, the US economy has weathered a very powerful storm and there are several positive factors at work - exports are at record highs and companies have quickly responded to the slower growth which should help maintain profitability. While the current outlook looks dreary, the US has been in this situation before, and while the road ahead will be bumpy, we are confident that our portfolio companies will emerge stronger after this storm has passed. 

Garrett Fish 

Investment Manager

14th August 2008

For further information, please contact:

Andrew Norman

For and on behalf of

JPMorgan Asset Management (UK) Limited - Secretary

020 7742 6000

Income Statement

for the six months ended 30th June 2008

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th June 2008			30th June 2007			31st December 2007
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
(Losses)/gains from investments held at fair value through profit or loss	—	(37,843)	(37,843)	—	13,885	13,885	—	16,742	16,742
Net foreign currency (losses)/gains	—	(1,108)	(1,108)	—	6	6	—	(275)	(275)
Income from investments	3,498	—	3,498	3,407	—	3,407	7,098	—	7,098
Other interest receivable and similar income	170	—	170	395	—	395	968	—	968
Gross revenue and capital (losses)/gains	3,668	(38,951)	(35,283)	3,802	13,891	17,693	8,066	16,467	24,533
Management fee	(175)	(700)	(875)	(184)	(739)	(923)	(345)	(1,378)	(1,723)
Other administrative expenses	(189)	—	(189)	(182)	—	(182)	(450)	—	(450)
Net return/(loss) before finance costs and taxation	3,304	(39,651)	(36,347)	3,436	13,152	16,588	7,271	15,089	22,360
Finance costs	(346)	(1,385)	(1,731)	(347)	(1,389)	(1,736)	(692)	(2,768)	(3,460)
Net return/(loss) before taxation	2,958	(41,036)	(38,078)	3,089	11,763	14,852	6,579	12,321	18,900
Taxation	(843)	378	(465)	(861)	451	(410)	(1,974)	1,101	(873)
Net return/(loss) after taxation	2,115	(40,658)	(38,543)	2,228	12,214	14,442	4,605	13,422	18,027
Return/(loss) per share (note 3)	4.95p	(95.16)p	(90.21)p	5.15p	28.26p	33.41p	10.70p	31.18p	41.88p

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

for the six months ended 30th June 2008

					(Unaudited)
	Called up				Capital
	share	Share			redemption	Capital	Revenue
	Capital	premium			reserve	reserve	reserve	Total
Six months ended 30th June 2008	£'000	£'000			£'000	£'000	£'000	£'000
At 31st December 2007	10,682	18,906			8,151	269,020	14,711	321,470
Shares bought back and cancelled	-	-			-	(5)1	-	(5)
Net (loss)/return on ordinary activities	-	-			-	(40,658)	2,115	(38,543)
Dividends appropriated in the period	-	-			-	-	(4,700)	(4,700)
At 30th June 2008	10,682	18,906			8,151	228,357	12,126	278,222
1 Comprises stamp duty on the repurchase of ordinary shares in the previous financial year
					(Unaudited)
	Called up				Capital
	share	Share			redemption	Capital	Revenue
	Capital	premium			reserve	reserve	reserve	Total
Six months ended 30th June 2007	£'000	£'000			£'000	£'000	£'000	£'000
At 31st December 2006	10,820	18,906			8,013	259,381	14,867	311,987
Shares bought back and cancelled	(52)	-			52	(1,433)	-	(1,433)
Net return on ordinary activities	-	-			-	12,214	2,228	14,442
Dividends appropriated in the period	-	-			-	-	(4,761)	(4,761)
At 30th June 2007	10,768	18,906			8,065	270,162	12,334	320,235
				(Audited)
	Called up			Capital
	share	Share		redemption		Capital	Revenue
	Capital	premium		reserve		reserve	reserve	Total
Year ended 31st December 2007	£'000	£'000		£'000		£'000	£'000	£'000
At 31st December 2006	10,820	18,906		8,013		259,381	14,867	311,987
Shares bought back and cancelled	(138)	-		138		(3,783)	-	(3,783)
Net return on ordinary activities	-	-		-		13,422	4,605	18,027
Dividends appropriated in the year	-	-		-		-	(4,761)	(4,761)
At 31st December 2007	10,682	18,906		8,151		269,020	14,711	321,470

  Balance Sheet

as at 30th June 2008

	(Unaudited)	(Unaudited)	(Audited)
	30th June	30th June	31st December
	2008	2007	2007
	£’000	£’000	£’000
Fixed assets
Investments at fair value through profit or loss	308,196	346,268	334,223
Current assets
Derivative instrument (note 4)	10,672	12,417	11,863
Debtors	1,282	3,503	2,393
Cash and short term deposits	8,880	10,701	23,748
	20,834	26,621	38,004
Creditors: amounts falling due within one year	(1,098)	(2,973)	(1,062)
Net current assets	19,736	23,648	36,942
Total assets less current liabilities	327,932	369,916	371,165
Creditors: amounts falling due after more than one year	(49,710)	(49,681)	(49,695)
Total net assets	278,222	320,235	321,470
Capital and reserves
Called up share capital	10,682	10,768	10,682
Share premium	18,906	18,906	18,906
Capital redemption reserve	8,151	8,065	8,151
Capital reserve	228,357	270,162	269,020
Revenue reserve	12,126	12,334	14,711
Shareholders’ funds	278,222	320,235	321,470
Net asset value per share (note 5)	651.2p	743.5p	752.4p

  Cash Flow Statement

for the six months ended 30th June 2008

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June	30th June	31st December
	2008	2007	2007
	£’000	£’000	£’000
Net cash inflow from operating activities	2,189	2,826	5,008
Returns on investments and servicing of finance
Interest paid	(1,716)	(1,723)	(3,452)
Capital expenditure and financial investment
Purchases of investments	(49,186)	(47,045)	(84,586)
Sales of investments	39,131	61,282	113,299
Other capital charges	—	(14)	(26)
Net cash (outflow)/inflow from capital expenditure
and financial investment	(10,055)	14,223	28,687
Dividends paid	(4,700)	(4,761)	(4,761)
Net cash (outflow)/inflow before financing	(14,282)	10,565	(25,482)
Financing
Repurchase and cancellation of the Company’s shares	(671)	(974)	(3,117)
Net cash outflow from financing	(671)	(974)	(3,117)
(Decrease)/increase in cash for the period	(14,953)	9,591	22,365
Reconciliation of net cash flow to movement in net debt
Net cash movement	(14,953)	9,591	22,365
Other movements	(14)	(14)	(29)
Exchange movements	84	(238)	36
Movement in net debt in the period	(14,883)	9,339	22,372
Net debt at the beginning of the period	(25,947)	(48,319)	(48,319)
Net debt at the end of the period	(40,830)	(38,980	(25,947)
Represented by:
Cash at bank and in hand	8,880	10,701	23,748
Debt falling due after more than five years	(49,710)	(49,681)	(49,695)
Net debt at the end of the period	(40,830)	(38,980)	(25,947)

  Notes to the Accounts

for the six months ended 30th June 2008

1. Financial Statements

The information contained within the financial statements in this half-yearly report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st December 2007 are extracted from the latest published accounts of the Company and do not constitute statutory accounts (as defined in section 434(3) of the Companies Act 2006)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 (as amended).

2. Accounting policies

The accounts have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice 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 31st December 2007.

3. Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June 2008	30th June 2007	31st December 2007
	£’000	£’000	£’000
Return/(Loss) per share is based on the following:
Revenue return	2,115	2,228	4,605
Capital (loss)/return	(40,658)	12,214	13,422
Total (loss)/return	(38,543)	14,442	18,027
Weighted average number of shares in issue	42,725,949	43,224,757	43,043,333
Revenue return per share	4.95p	5.15p	10.70p
Capital (loss)/return per share	(95.16)p	28.26p	31.18p
Total (loss)/return per share	(90.21)p	33.41p	41.88p

4. Derivative instrument

The Company has hedged against the currency risk arising from its £50m debenture liability.     The Company has purchased Sterling against US$ for settlement on 5th October 2011, matching the principal amount but not the maturity date of the debenture.

5. Net asset value per share

Net asset value per share is calculated by dividing shareholders' funds by the number of shares in issue at 30th June 2008 of 42,725,949 (30th June 2007: 43,070,949 and 31st December 2007: 42,725,949).

  Notes to the Accounts continued

for the six months ended 30th June 2008

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

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th June	30th June	31st December
	2008	2007	2007
	£’000	£’000	£’000
Total (loss)/return on ordinary activities before finance costs and taxation	(36,347)	16,588	22,360
Capital loss/(return) before finance costs and taxation	39,651	(13,152)	(15,089)
Decrease in net debtors and accrued income	79	571	19
Expenses charged to capital	(700)	(739)	(1,378)
Discount on debt security allocated to income	(29)	(32)	(31)
Overseas taxation	(465)	(410)	(873)
Net cash inflow from operating activities	2,189	2,826	5,008

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

14TH AUGUST 2008 

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmamerican.co.uk.

 

END

 

 

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