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JPMorgan Progressive (PMSF)

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Thursday 29 January, 2009

JPMorgan Progressive

Final Results

RNS Number : 5003M
JPMorgan Progressive Multi-Strategy
29 January 2009
 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN PROGRESSIVE MULTI-STRATEGY FUND LIMITED

AUDITED FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2008


Chairman's Statement


I wrote in my last statement that as a Board we looked forward to seeing how the Company's strategy would perform under more normal market conditions. As shareholders will be only too aware, we have experienced anything but normal conditions and many of the world's major economies are now in a recession. However this disappointment can be tempered to some degree with continuing evidence that the Company is at least performing as designed, namely to outdo its benchmark, the MSCI World Index expressed in sterling terms, with lower volatility. Over the year to 30th September 2008, the Company produced a return on net assets of -9.6% compared with its benchmark which returned -23.8%. Volatility for the year, measured as standard deviation, was 9.38% compared with 17.23% for the benchmark.


That said, the performance of the Company's share price was undoubtedly disappointing, falling 24.1% over the year, which reflected a widening of the discount at which the Company's shares trade to their net asset value and the very difficult market conditions in the autumn of 2008. 


Of course no one can accurately predict when global economies and markets will recover, but the Company is well placed to benefit from a turn-round when it occurs. I look forward to presenting better news for shareholders when this

happens.


The Investment Manager's report provides an analysis of the Company's performance for the year, including the performance of some of the underlying investments held through the Luxembourg-based PM-S Fund. 


The Company was established with a half-yearly redemption facility under which, subject to certain limitations and at the Directors' discretion, shareholders may request the redemption of all or part of their holdings of shares for cash. On 1st September 2008, the Directors approved the redemption of 3,450,000 shares at a redemption price of 89.72p per share. Subsequent to the year end the Company has received requests for redemptions in relation to the February 2009 redemption date. Directors have approved the requests up to the value of 5,402,500 shares. When exercising their discretion in respect of redemptions, the Board tries to balance the interests of Shareholders and the requirements of the Company.


I look forward to welcoming shareholders to our second Annual General Meeting to be held on Thursday 19th March 2009 at Regency Court, Glategny Esplanade, St Peter Port, Guernsey GY1 3NQ.


Christopher Sherwell

Chairman

29th January 2009


Investment Manager's Report


Economic Background

The financial crisis caused by the 'credit crunch' that we referred to in the September 2007 Investment Manager's report has deepened into one of the most damaging events that financial markets have experienced in living memory. The last 12 months have caused rapid, mass financial destruction, wiping out 158 year-old Lehman Brothers and compelling the US Government to nationalise the world's largest insurance company, AIG. This occurred only a week after it had bailed out the two titans of the mortgage sector, Fannie Mae

and Freddie Mac. Merrill Lynch was forced to capitulate at a knockdown price to Bank of America. The two remaining investment banks, Goldman Sachs and Morgan Stanley hastily agreed to convert themselves into commercial banks in an attempt to avoid a similar fate. The decimated balance sheet of some UK banks forced them to go cap in hand to the government for fresh capital. 


Indeed, the crunch has been so ferocious that it has called into question the very creditworthiness of whole countries. Monetary authorities around the world continue to pump record amounts of liquidity into the system in an attempt to re-open the credit arteries. Meanwhile, plummeting property prices have exacerbated the already deteriorating finances of the hard-pressed consumer whose confidence in the financial system is fading rapidly.

Last year we highlighted the irrational price movements caused by hedge funds unwinding leveraged positions to meet margin calls. This selling pressure continued through 2008 and was exacerbated over the summer by a glut of forced selling from managers who were caught in a potentially life-threatening pincer of redemptions from clients and demands for more collateral from their bankers. Many of these

hedge funds have, or are in the process of, going out of business and are selling their remaining assets irrespective of price.


Global stock markets and property prices fell steeply in 2008, reflecting both the financial crisis caused by the credit crunch and the intense worries about what the knock-on effect of this will be for the wider economy. The decline in equities has continued, with the latter part of the year seeing a particularly savage sell-off. Government bonds have been perceived by many as one of the few safe havens for investors, and as a result, have performed reasonably well.


Investment Performance

The Company's objective is to provide an equity-like return over the long term with a lower level of volatility than that normally associated with equities. 


In the 12 months to September 2008, your Company's NAV outperformed the benchmark by 14.2%, falling 9.6% compared with its benchmark, the MSCI World Index hedged into GBP, which fell 23.8% over the same period. Over the same period the Company's volatility was 9.38%, nearly half that of the benchmark at 17.23%.


Looking at the individual asset classes of the underlying PM-S Fund, the performance reflects the experience of the broader markets. The Bond Beta components of the portfolio returned 3.87% giving a positive contribution for the year of 2%. The US and European bond exposure provided the best contributions to returns while the UK element detracted slightly.


Despite a difficult 12 months for the JPM European Equity Market Neutral Fund, the Pure Alpha component returned -3.7% for the year, contributing -0.85% to the total return of the fund. The Hybrid Alpha component of the portfolio returned

-16.4% over the year, detracting -3.9% from the overall return. The exposure to emerging markets, including Greater China and Korea, was a significant detractor to performance as those markets fell sharply over the quarter to September 2008. 


The Equity Beta and Property Beta components of the portfolio were the biggest detractors to performance returning -31.6% and -33.0% respectively, contributing -6.9% and -6.8% to the overall returns of the Company. Within the Equity Beta elements of the portfolio the European & Japanese fund selection were the biggest detractors, while the US funds held up relatively well in comparison.


Outlook

Despite the plethora of bad news, we are acutely aware that stockmarkets are a discounting mechanism and, having turned down before the global economies, they will certainly rally before global economies bottom. 


Your Company has behaved as we would expect over the last 12 months, in the most trying of circumstances, producing a better return than the MSCI World with nearly half the volatility. When markets recover, we would expect the portfolio to recover alongside them, and in the meantime our prudent assumptions regarding the construction of the portfolio should continue to benefit shareholders relative to global equities while exposing investors to less volatility.


Chris Complin

JPMorgan Asset Management (UK) Limited 

29th January 2009


For further information, please contact:

Alison Vincent

For and on behalf of

JPMorgan Asset Management (UK) Limited 

020 7742 6000


Dru Danford

Nominated Adviser

Shore Capital and Corporate Limited

0207 408 4090

  Consolidated Income Statement

for the year ended 30th September 2008




2008

20071



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Investment income 


179

-

179

159

-

159

Other income 


30

-

30

60

-

60

 


209

-

209

219 

-

219

(Losses)/gains on investments held at fair 








  value through profit or loss 


-

(5,777)

(5,777)

-

658

658

Net foreign exchange (losses)/gains 


-

(2,521)

(2,521)

-

174

174

Total income/(loss)


209

(8,298)

(8,089)

219 

832 

1,051 

Expenses








Management fees 


(344)

-

(344)

(133)

-

(133)

Other administrative expenses 


(398)

-

(398)

(105)

-

(105)

(Loss)/profit before finance costs 








  and taxation 


(533)

(8,298)

(8,831)

(19)

832 

813 

Finance costs 


(4)

-

(4)

(2)

-

(2)

(Loss)/profit before taxation 


(537)

(8,298)

(8,835)

(21)

832 

811 

Taxation 


(16)

-

(16)

(8)

-

(8)

Net (loss)/profit after taxation


(553)

(8,298)

(8,851)

 (29)

832 

803 

Attributable to: 








  Equity holders of the Company


(469)

(6,383)

(6,852)

(29)

815 

786 

  Minority interest 


(84)

(1,915)

(1,999)

-

17 

17 

 


(553)

(8,298)

(8,851)

 (29)

832 

803 

(Loss)/earnings per share 

4

(1.9)p

(25.8)p

(27.7)p

(0.1)p

3.2p

3.1p


1 for the period from 14th February 2007 to 30th September 2007.


The 'Total' column of this statement represents the Group's Income Statement, prepared in accordance with IFRS. The supplementary 'Revenue' and 'Capital' columns are prepared under guidance published by the Association of Investment Companies. 

All items in the above statement derive from continuing operations.


  Company Income Statement

for the year ended 30th September 2008




2008

20071



Revenue

Capital

Total

Revenue

Capital

Total


Notes

£'000

£'000

£'000

£'000

£'000

£'000

Investment income 


12

-

12

52

-

52

Other income 


9

-

9

12

-

12

 


21

-

21

64 

-

64 

Losses on investments held at fair value through








  profit or loss 


-

(951)

(951)

-

(727)

(727)

Net foreign exchange (losses)/gains 


-

(2,497)

(2,497)

-

783 

783 

Total income/(loss)


21

(3,448)

(3,427)

64 

56 

120 

Expenses








Management fees 


-

-

-

-

-

-

Other administrative expenses 


(310)

-

(310)

(91)

-

(91)

(Loss)/profit before finance costs and taxation 


(289)

(3,448)

(3,737)

(27)

56 

29 

Finance costs 


(4)

-

(4)

(1)

-

(1)

(Loss)/profit before taxation 


(293)

(3,448)

(3,741)

(28)

56 

28 

Taxation 


-

-

-

-

-

-

Net (loss)/profit after taxation


(293)

(3,448)

(3,741)

(28)

56 

28 

(Loss)/earnings per share 

(1.2)p

(13.9)p

(15.1)p

(0.1)p

0.2p

0.1p


1 for the period from 14th February 2007 to 30th September 2007.


The 'Total' column of this statement represents the Company's Income Statement, prepared in accordance with IFRS. The supplementary 'Revenue' and 'Capital' columns are prepared under guidance published by the Association of Investment Companies. 

All items in the above statement derive from continuing operations.


  Consolidated Statement of Changes in Equity 

for the year ended 30th September 2008



Attributable to equity holders





Other






Share 

Share 

Other 

capital 

Revenue 


Minority

Total


capital 

premium 

reserve1

reserves 

reserve 

Total

interest

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 30th September 2007 

-

-

24,614 

(282)

(29)

24,303

11,199

35,502

Shares subscribed

-

-

-

-

-

-

375

375

Shares redeemed

-

-

(3,095)

-

-

(3,095)

(67)

(3,162)

Exchange gain on translation 

-

-

-

4,587

-

4,587

-

4,587

Loss for the year 

-

-

-

-

(6,852)

(6,852)

(1,999)

(8,851)

Transfer of loss to other capital reserve

-

-

-

(6,383)

6,383

-

-

-

Balance at 30th September 2008 

-

-

21,519

(2,078)

(498)

18,943

9,508

28,451


for the period from 14th February 2007 to 30th September 2007



Attributable to equity holders







Other






Share 

Share 

Other 

capital 

Revenue 


Minority

Total


capital 

premium 

reserve1

reserves 

reserve 

Total

interest

equity


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Proceeds of share placing

-

25,060

-

-

-

25,060

-

25,060

Costs of share placing

-

(446)

-

-

-

(446)

-

(446)

Minority interest on acquisition 









  of subsidiary

-

-

-

-

-

-

11,182

11,182

Cancellation of share premium

-

(24,614)

24,614

-

-

-

-

-

Exchange loss on translation

-

-

-

(1,097)

-

(1,097)

-

(1,097)

Profit for the period

-

-

-

-

786

786

17

803

Transfer of profit to other capital reserve

-

-

-

815

(815)

-

-

-

Balance at 30th September 2007 

-

-

24,614

(282)

(29)

24,303

11,199

35,502


1Share premium has been cancelled and the 'Other reserve' created for the purposes of financing share buybacks.


  Company Statement of Changes in Equity 

for the year ended 30th September 2008






Other




Share 

Share 

Other 

capital 

Revenue 



capital 

premium 

reserve1 

reserves 

reserve 

Total 


£'000

£'000

£'000

£'000

£'000

£'000

Balance at 30th September 2007 

-

-

24,614 

56 

(28)

24,642 

Shares redeemed

-

-

(3,095)

-

-

(3,095)

Loss for the year 

-

-

-

-

(3,741)

(3,741)

Transfer of loss to other capital reserve

-

-

-

(3,448)

3,448

-

Balance at 30th September 2008 

-

-

21,519

(3,392)

(321)

17,806


for the period from 14th February 2007 to 30th September 2007






Other




Share 

Share 

Other 

capital 

Revenue 



capital 

premium 

reserve1 

reserves 

reserve 

Total 


£'000

£'000

£'000

£'000

£'000

£'000

Proceeds of share placing

-

25,060

-

-

-

25,060

Costs of share placing

-

(446)

-

-

-

(446)

Cancellation of share premium

-

(24,614)

24,614

-

-

-

Profit for the period 

-

-

-

-

28

28

Transfer of profit to other capital reserve

-

-

-

56

(56)

-

Balance at 30th September 2007 

-

-

24,614

56

(28)

24,642


1Share premium has been cancelled and the 'Other reserve' created for the purpose of financing share buybacks.



  Consolidated Balance Sheet

at 30th September 2008




2008

2007


Notes

£'000

£'000

Non current assets 




Investments held at fair value through profit or loss 


29,221

35,096 

Current assets 




Other receivables 


46

51 

Derivative financial instruments at fair value through profit or loss


782

205 

Cash and cash equivalents 


676

740 

 


1,504

996 

Current liabilities 




Other payables 


(116)

(140)

Bank overdrafts 


(1,597)

-

Derivative financial instruments at fair value through profit or loss


(561)

(450)

Net current (liabilities)/assets 


(770)

406 

Net assets 


28,451

35,502 

Equity attributable to equity holders 




Called up share capital 


-

-

Other reserve 


21,519

24,614 

Capital reserves 


(2,078)

(282)

Revenue reserve 


(498)

(29)

Equity attributable to equity holders of the Company 


18,943

24,303 

Minority interest 


9,508

11,199 

Total equity 


28,451

35,502 

Net asset value per share 

5

87.7p

97.0p


  Company Balance Sheet

at 30th September 2008




2008

2007


Notes

£'000

£'000

Non current assets 




Investments held at fair value through profit or loss 


-

436 

Investment in subsidiary undertaking


19,652

23,877 

 


19,652

24,313

Current assets 




Other receivables 


6

14

Derivative financial instruments at fair value through profit or loss


33

205 

Cash and cash equivalents 


2

202

 


41

421

Current liabilities




Other payables 


(87)

(92)

Bank overdrafts 


(1,597)

-

Derivative financial instruments at fair value through profit or loss


(203)

-

Net current (liabilities)/assets 


(1,846)

329

Net assets 


17,806

24,642

Equity attributable to equity holders 




Called up share capital 


-

-

Other reserve 


21,519

24,614 

Capital reserves 


(3,392)

56

Revenue reserve 


(321)

(28)

Total equity 


17,806

24,642 

Net asset value per share 

5

82.4p

98.3p


  Consolidated Cash Flow Statement

for the year ended 30th September 2008




2008

20071



£'000

£'000

Operating activities




(Loss)/profit before taxation


(8,835)

811 

Add back interest


4

Add back losses/(gains) on investments held at fair value through profit or loss


5,777

(658)

(Decrease)/increase of foreign exchange contracts


(426)

205 

Net sales/(purchases) of investments held at fair value through profit or loss


3,750

(11,405)

Decrease/(increase) in other receivables


5

(51)

(Decrease)/increase in other payables


(24)

134 

Net cash inflow/(outflow) from operating activities before interest payable and taxation 


251

(10,962) 

Interest paid


-

(2)

Tax paid


(16)

(8)

Net cash inflow/(outflow) from operating activities


235

(10,972) 

Investing activities




Acquisition of subsidiary


-

(12,763)

Net cash outflow from investing activities


-

(12,763)

Financing activities




Proceeds of share subscriptions


375

-

Cost of shares redeemed


(3,162)

-

Net proceeds from Share Placing


-

24,620 

Net cash (outflow)/inflow from financing activities


(2,787)

24,620 

(Decrease)/increase in cash and cash equivalents


(2,552)

885 

Cash and cash equivalents at start of the year


740

-

Effect of foreign exchange translation


891

(145)

Cash and cash equivalents at the end of the year (including bank overdrafts)


(921)

740 





1 for the period from 14th February 2007 to 30th September 2007.


  Company Cash Flow Statement

for the year ended 30th September 2008




2008

20071



£'000

£'000

Operating activities




(Loss)/profit before taxation


(3,741)

28

Add back interest


4

1

Add back losses on investments held at fair value through profit or loss


951

727

(Decrease)/increase on foreign exchange contracts


375

(205)

Net sales/(purchases) of investments held at fair value through profit or loss


436

(441)

Decrease/(increase) in other receivables


8

(14)

(Decrease)/increase in other payables


(5)

86

Net cash (outflow)/inflow from operating activities before interest payable and taxation 


(1,972)

182

Interest paid


-

(1)

Tax paid


-

-

Net cash (outflow)/inflow from operating activities


(1,972)

181

Investing activities




Disposal/(acquisition) of shares in subsidiary


3,270

(24,599)

Net cash inflow/(outflow) from investing activities


3,270

(24,599)

Financing activities




Cost of shares redeemed


(3,095)

-

Net proceeds from Share Placing


-

24,620 

Net cash (outflow)/inflow from financing activities


(3,095)

24,620 

(Decrease)/increase in cash and cash equivalents


(1,797)

202 

Cash and cash equivalents at start of the year


202

-

Cash and cash equivalents at the end of the year (including bank overdrafts)


(1,595)

202 


1 for the period from 14th February 2007 to 30th September 2007.


Notes to the Financial Statements


1.

Principal activity


The principal activity of JPMorgan Progressive Multi-Strategy Fund Limited (the 'Company') is that of an investment company, incorporated and domiciled in Guernsey. The principal activity of its 'subsidiary', JPMorgan Progressive Multi-Strategy Fund ('PM-S Fund') a sub-fund of JPMorgan Portfolio Strategies Funds II (a Luxembourg SICAV), is also that of an investment company.


The Group comprises the Company and PM-S Fund.



2.

Comparative accounting period


The comparative financial statements cover the period from the date of incorporation of the Company on 14th February 2007 to 30th September 2007. The proceeds of the share placing were received by the Company on 15th May 2007. The comparative consolidated financial statements include the results of the Company and the PM-S Fund from 1st June 2007, which is the date control commenced, to 30th September 2007.



3.

Accounting policies


The financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS'), which comprise standards and interpretations approved by the International Accounting Standards Board ('IASB') and

International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ('IASC') that remain in effect. The financial statements have been prepared in accordance with The Companies (Guernsey) Law, 1994.


The principal accounting policies adopted are set out below. Where presentational guidance set out in the Statement of

Recommended Practice ('SORP') for investment trusts issued by the Association of Investment Companies ('AIC') in

December 2005 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.


The financial statements have been prepared on a going concern basis and under the historical cost basis of accounting

except for the measurement at fair value of certain financial assets and financial liabilities.





Group

4.


Revenue

Capital

Total

Revenue

Capital

Total



£'000

£'000

£'000

£'000

£'000

£'000


(Loss)/earnings per share

(469)

(6,383)

(6,852)

(29) 

815 

786


(Loss)/earnings attributable to equity shareholders

(1.9)p

(25.8)p

(27.7)p

(0.1)p

3.2p

3.1p


(Loss)/earnings per share

















Company



Revenue

Capital

Total

Revenue

Capital

Total



£'000

£'000

£'000

£'000

£'000

£'000


(Loss)/ earnings attributable to equity shareholders


(293)


(3,448)


(3,741)

(28)

56

28


(Loss)/earnings per share

(1.2)p

(13.9)p

(15.12)p

(0.1)p

0.2p

0.1p










The (loss)/earnings per share is based on the (loss)/profit for the year after taxation and on the weighted average number of shares in issue during the year of 24, 734,528 (period ended 30th September 2007: 25,060,000). 


 

5.

Net asset value per share


The net asset values per share of the Group and Company are based on the net assets attributable to shareholders of

£18,943,000 (2007: £24,303,000) and £17,806,000 (2007: £24,642,000) respectively and on the 21,610,000 (2007:

25,060,000) shares in issue at the year end.


The Company has no securities in issue that could dilute the net asset value per share.



6.

Status of preliminary announcement


The financial information set out in this preliminary announcement does not constitute the Company's statutory accounts for year ended 30th September 2008. The statutory accounts for the year ended 30th September 2008 will be finalised on the basis of the information presented by the Directors in this preliminary announcement and will be delivered to members following the approval of the accounts by the Board of directors.



7.

The Company's statutory accounts for the year to 30th September 2008 will be posted to shareholders and will be available on the Company's website on 30th January 2009 at www.jpmprogressivemultistrategy.co.uk.  







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