overseas hy cover - j.p. morgan · 2017-02-03 · jpmorgan overseas investment trust plc. half year...

Half Year Report2013/14JPMorgan Overseas Investment Trust plc

Half Year Report & Accounts for the six months ended 31st December 2013

Features

Contents

About the Company

1 Half Year Performance2 Chairman’s Statement3 Investment Manager’s Report

Investment Review

6 List of Investments8 Portfolio Analysis

Accounts

9 Income Statement10 Reconciliation of Movements inShareholders’ Funds

11 Balance Sheet12 Cash Flow Statement13 Notes to the Accounts15 Interim Management Report

Shareholder Information

16 Subscription Shares17 Glossary of Terms and Definitions21 Information about the Company

Objective

Capital growth from world stockmarkets.

Investment Policies

To provide a diversified portfolio of approximately 70-90 stocks in which theinvestment manager has a high degree of conviction.

Investment Strategy

To provide superior long-term capital growth by investing in a high convictionportfolio of companies with strong valuation signals, significant profit growthpotential and an identifiable catalyst to unlock that potential, regardless of industry,region or size.

A significant, global commitment to proprietary research is essential in generatinginvestment ideas. A strong partnership between the investment manager andanalysts is key to understanding valuations and developing conviction.

Gearing

A £25 million borrowing facility is in place and available for the investment managerto utilise at times of low absolute valuation or for short term borrowing to financeinvestment decisions.

Benchmark

The Company’s benchmark is the MSCI All Countries World Index in sterling terms(total return with net dividends reinvested).

Capital Structure

At 31st December 2013, the Company’s issued share capital comprised 26,451,908Ordinary shares of 25p each, including 2,823,116 shares held in Treasury and4,529,192 Subscription shares of 1p each.

Share Repurchase and Issuance Policy

In order for the Company’s shares to trade at a relatively narrow discount, theCompany will repurchase its shares with the aim of maintaining an average discountof around 5% calculated with debt at par value. Any shares repurchased under thispolicy may be held in Treasury or cancelled. Shares held in Treasury and new shareswill only be reissued/issued at a premium to net asset value.

Management Company

The Company employs JPMorgan Asset Management (UK) Limited (‘JPMAM’ or‘the Manager’) to manage its assets.

JPMorgan Overseas Investment Trust plc. Half Year Report & Accounts 2013 1

Half Year PerformanceTotal returns (includes dividends reinvested)

+9.7%Return to shareholders1

+9.2%Undiluted return on net assets2

+6.0%Benchmark return3

Further analysis of these results is given in the table on page 2.

Financial Data31st December 30th June %

2013 2013 change

Shareholders’ funds (£’000) 239,420 221,145 +8.3

Number of shares in issue4 23,628,792 23,491,110 +0.6

Diluted net asset value per share with debt at par value 1,002.0p 934.4p +7.2

Undiluted net asset value per share with debt at par value 1,013.3p 941.4p +7.6

Diluted net asset value per share with debt at fair value 1,002.0p 934.6p +7.2

Undiluted net asset value per share with debt at fair value5 1,013.4p 941.6p +7.6

Share price 936.0p 867.0p +8.0

Subscription share price 53.0p 49.5 +7.1%

Subscription shares on issue 4,529,192 4,806,402

Gearing6 8.1% 6.9%

Share price discount to net asset value per share7 6.4% 5.8%

A glossary of terms and definitions is provided on page 17.1Source: Morningstar. Unit return 9.6%. A unit comprises five Ordinary shares and one Subscription share.2Return on net asset calculated using the undiluted net asset value, but excluding the dilutive impact of Subscription shares in issue at theperiod end. Diluted return was 8.8% (which assumes that all outstanding Subscriptions were converted into Ordinary shares at the periodend).

3Source: MSCI. The Company’s benchmark is the MSCI AC World Index in sterling terms (total return with net dividends reinvested).

4Excludes shares held in Treasury.

5The fair value of the £200,000 debenture issued by the Company has been calculated using discounted cash flow techniques using the yieldon a long dated gilt plus a margin based on the 5 year average for the AA Barclays Corporate Bond.

6Gearing represents the excess amount above shareholders’ funds of total assets expressed as a percentage of the shareholders’ funds.Total assets include total investments and net current assets/liabilities less cash/cash equivalents and excluding bank loans of less thanone year. If the amount calculated is negative, this is shown as a ‘net cash’ position.

7Ex-income. Source: Bloomberg.

JPMorgan Overseas Investment Trust plc. Half Year Report & Accounts 20132

Chairman’s Statement

As global equity markets continued to recover strongly during the first six monthsof the Company’s financial year against an improving economic backdrop andfalling uncertainty, the Company recorded an undiluted total return of +9.2%. Thefully diluted total return on net assets (which assumes that all of the Company’sSubscription shares outstanding at 31st December 2013 were all exercised at theprice of 943 pence per share) was +8.8%. The total return to Ordinary shareholdersduring the reporting period was +9.7%. All of these performance figures representan outperformance against the benchmark, the MSCI AC World Index (in sterlingterms), which returned +6.0%.

The Investment Manager provides further comments on performance, marketdevelopments and the Company’s portfolio in his report.

During the six months to 31st December 2013, the Company has issued a total of277,210 Ordinary shares following the exercise of Subscription shares, amountingto proceeds of £2,495,000. Subscription shareholders are reminded that the nextopportunities to exercise their Subscription share rights will take effect on30th April 2014 and 31st October 2014. Further details of the Subscription sharescan be found on page 16 of this half year report and on the Company’s website atwww.jpmoverseas.co.uk.

In line with the Company’s discount management policy, we repurchased 139,528Ordinary shares at a cost of £1,298,000 during the six months period for holdinginto Treasury. The Board believes these actions have been successful in reducingthe volatility of the share price discount to net asset value. The Board continues tokeep the discount under review and will purchase shares, if appropriate, inaccordance with the Company’s discount management policy.

The Board regularly discusses gearing with the Investment Manager and continuesto believe that it serves as a valuable tool to enhance performance over time. TheCompany has a £25 million borrowing facility in place with Scotiabank until July2014, at which time it will be reviewed. This facility is flexible and gives theInvestment Manager the ability to gear tactically as opportunities presentthemselves. At 31st December 2013, the Company was 8.1% geared with £20 millionof the £25 million facility drawn down, a slight increase over the six month period.

Forecasts for global economic growth are being revised upwards and this shouldsupport equity markets in the second half of the Company’s financial year,although such growth may eventually lead to some tightening in monetaryconditions. The Board continues to have confidence in our Investment Manager’sinvestment process and ability to enhance returns.

For and on behalf of the BoardSimon DaviesChairman 19th February 2014

Performance attribution for the sixmonths ended 31st December 2013

% %

Contributions to total returns

Benchmark return 6.0

Asset allocation 0.9Stock selection 1.6Gearing/cash effect 1.1Currency 0.5

Investment managercontribution 4.1

Portfolio total return 10.1

Management fee/other expenses –0.3

Performance fee –0.6

Net asset value totalreturn – Undiluted 9.2

Structural effectDilution effect of potentialexercise of remainingsubscription shares –0.4

Net asset value totalreturn – Diluted 8.8

Ordinary share pricetotal return 9.7

‘Unit’ share pricetotal return 9.6

Source: Xamin/JPMAM and Morningstar.

All figures are on a total return basis.

Performance attribution analysis how theCompany achieved its recordedperformance relative to its benchmarkindex.

A glossary of terms and definitions isprovided on page 17.


Investment Manager’s Report

Market Environment

Global equity markets continued to perform strongly in the second half of 2013 withthe MSCI All Country World index rising 6% in sterling terms. Continental Europe wasthe best-performing market as the region broke out of its longest ever recession,early in the period. Improving economic data points and continued supportive policyfrom the European Central Bank helped to sustain the recovery. In the US, the FederalReserve announced a reduction in its pace of asset purchases by USD 10 billion permonth in December, further suggesting to investors that the world’s largest economycontinues to recover. In addition, economic data in Japan showed signs ofimprovement, while the latest consumer price index report confirmed the end ofdeflation. A weak yen, however, meant that returns in sterling terms for the Japanesemarket were more subdued. Emerging markets recorded positive returns, butcontinued to lag developed markets. Investors have become increasingly concernedover the growth outlook for emerging countries, despite many continuing to seemuch higher growth than in the developed world. This uncertainty, coupled withcurrency weakness and concerns over the banking system in China, led to furtherpoor relative performance.

The period under review saw a reversal in investor sentiment versus the first half of2013, which was marked by risk-aversion and therefore an outperformance ofdefensive sectors. This had proved to be a challenging environment for our strategy,given our focus on company fundamentals and the portfolio’s bias towards cyclicals.Moving into the second half of the year, investor attention turned back towardscompany fundamentals and relative valuations. As such, cyclical stocks (which hadreached extreme discounts relative to defensives) started to recover. This was a muchmore positive environment for our investment strategy.

Portfolio Review

In the second half of 2013, the portfolio outperformed the index by approximately4.1%. Stock selection was the key driver of outperformance. It was encouraging to seea turnaround in the performance of some of the cyclical sectors that had detractedearlier in the year, such as basic industries, autos and industrial cyclicals. Theseincluded holdings in Continental (German tyre and auto parts manufacturer), Fluor(US-listed plant engineering and construction) and UPM (Finnish paper companyexposed to a consolidating industry and an improving pulp market). Stock selectionin healthcare and retail also contributed positively, while energy and technologystocks detracted from returns. On a regional basis, stock selection was strong acrossmost regions, including Europe ex UK, North America and Pacific ex Japan.Our underweight exposure to emerging markets contributed positively as the regionsignificantly lagged developed markets.

At the stock level, our holding in Sands China, the Hong Kong-listed operator ofcasinos and resorts in Macau, contributed positively to performance. The companyis benefiting from increasing sales at Macau casinos as operators continue to addrooms and entertainment in order to draw a growing number of affluent and middle


class customers. Sands China, along with several of its competitors, has beenaggressively expanding on the Cotai Strip — a piece of reclaimed land that in time isexpected to challenge Las Vegas as an international gaming and entertainmentdestination. Our holding in Airbus also performed well as the company is seeingstrong demand in an environment where air passenger traffic has remained robust,yet the supply of new aircraft has been limited. Associated British Foods benefitedfrom the continued expansion of the Primark store chain in Germany and Spain,where there remains scope to more than double the number of stores. The stock hasbeen a core holding in the portfolio for over a year and we recently took theopportunity to trim our position. Finally, our position in Onyx Pharmaceuticals, a firmspecialising in the development of oncology drugs, was positive as the share pricerallied by around 45% after Amgen announced a takeover bid. We subsequentlyclosed our position.

Our holding in InterOil, a company with Liquefied Natural Gas (LNG) assets in PapuaNew Guinea, was the largest detractor from performance. InterOil announced detailsaround a deal with Total to sell a 61.3% stake of its assets in Papua New Guinea (PNG),including the Elk/Antelope field. While a deal had been widely expected, the saleprice was below expectations but only at lower levels of LNG resources. The deal isstructured to reward higher certified volumes in a manner that is uncapped. At lowervolumes the price is undoubtedly low, but as volumes rise, so will the price. Havingrecently met with the company management team, we remain very positive aboutthe outlook for InterOil. We believe that the stock is significantly undervalued basedon existing resource estimates for Elk/Antelope and further exploration potentialin PNG, a region that is both geologically and geographically advantaged with regardto gas resources and proximity to key markets such as Japan. Given our highconviction and the de-risking that the deal with Total entails, we remain comfortablewith a significant position in this stock.

Portfolio positioning

We have not made any significant changes to the overall shape of the portfolio, andmaintain our overweight exposure to cyclicals. Geographically, our focus oncompanies that are attractively valued relative to global peers continues to lead ustowards Europe and the UK and away from North America. The valuation disparitybetween these two markets remains compelling. A large proportion of ourunderweight position in the US is due to our lack of exposure to certain extremelylarge consumer staple companies, which we believe are simply too expensive in theirglobal context. Holdings in companies such as SABMiller, Henkel and Japan Tobaccoprovide us with exposure to interesting themes in this sector at valuations that aremuch lower than those of their US peers.

Earlier in the year we reduced our position in emerging markets to approximately7% underweight at the end of June 2013. More recently, as valuations have continuedto decline, these regions have started to look increasingly attractive in a globalcontext. There remains, however, much uncertainty over the near-term outlook for

Investment Manager’s Reportcontinued


these economies and as such we believe that selectivity is key. We have increased ourposition, although we remain around 5% underweight relative to the index.Specifically, we initiated a position in Mr. Price, a South African low-cost retailer thatis winning market share in its domestic market with the potential for overseasexpansion through its online business. We also took a position in ICICI, the Indianbank. Banking penetration in India is amongst the lowest in the world, at a third ofthat of China and a fifth of the US, which presents a significant opportunity over thelong term. The presence of low-quality competitors in the form of the state banks,whose market share is being steadily eroded, creates a strong advantage for privatesector banks such as ICICI and Yes Bank, both of which are held in the portfolio.

Investment Outlook

While we are unlikely to see the dramatic outperformance in equity markets that wasexperienced in 2013, we remain positive in our outlook for equities. The key driversremain in place, namely improving global growth with quiescent inflation,accommodative monetary policy and still-supportive valuations. However, some newfragilities are emerging, with the resilience of the global economy in the face of risinginterest rates a concern.

Fundamentals remain supportive for equities. Valuations are attractive relativeto bonds. At worst they are neutral versus their own history, whilst certain parts ofEurope and emerging markets look attractive. Looking ahead, corporate earningsgrowth will be closely watched as a potential driver of further market expansion.There are encouraging signs that earnings expectations seem close to bottomingacross regions, although we are not there yet. An environment such as this wouldtypically be positive for more economically sensitive, cyclical areas of the market.

As the macro concerns subside, the emphasis on individual companies’ fundamentalsrelative to their competitors is becoming more prominent. We are very wellpositioned to benefit from this shift and our dedicated team of highly experiencedresearch analysts continues to identify attractive investment opportunities aroundthe world.

Jeroen HuysingaInvestment Manager 19th February 2014


ValuationCompany Sector £’000 %1

UPM-Kymmene (Finland) Continental Europe 7,427 3.1Google ‘A’ North America 6,778 2.8InterOil North America 6,488 2.7European Aeronautic Defence & Space (Netherlands) Continental Europe 5,975 2.5Bayer (Germany) Continental Europe 5,917 2.5Morgan Stanley North America 5,875 2.4Solvay (Belgium) Continental Europe 5,651 2.3Bank of America North America 5,567 2.3Intercontinental Hotels United Kingdom 5,348 2.2Schneider Electric (France) Continental Europe 5,284 2.2Fluor North America 5,279 2.2Sodexo (France) Continental Europe 5,247 2.2Bristol-Myers Squibb North America 4,838 2.0Time Warner North America 4,830 2.0TJX Companies North America 4,756 2.0SABMiller United Kingdom 4,727 2.0BG United Kingdom 4,653 1.9eBay North America 4,418 1.8Sands China (Hong Kong) Developed Asia 4,338 1.8Japan Tobacco Japan 4,307 1.8Daikin Industries Japan 4,249 1.8APR Energy United Kingdom 4,232 1.8United Health North America 4,099 1.7VF Corp North America 4,039 1.7Orix Japan 4,021 1.7Hitachi Japan 3,950 1.6JPMorgan Emerging Markets Investment Trust Emerging Markets 3,871 1.6Electrolux ‘B’ (Sweden) Continental Europe 3,798 1.6Autozone North America 3,793 1.6Amazon North America 3,777 1.6Petrofac United Kingdom 3,758 1.6Comcast ‘A’ North America 3,734 1.5HSBC United Kingdom 3,637 1.5First Quantum Minerals North America 3,597 1.5ASML (Netherlands) Continental Europe 3,544 1.5Compagnie de Saint-Gobain (France) Continental Europe 3,364 1.4Telenor (Norway) Continental Europe 3,271 1.4AXA (France) Continental Europe 3,245 1.3Lowes North America 3,109 1.3Prudential United Kingdom 3,087 1.3Shire United Kingdom 3,085 1.3Mitsubishi Gas Chemical Japan 3,073 1.3Associated British Foods United Kingdom 2,961 1.2

List of Investmentsat 31st December 2013


ValuationCompany Sector £’000 %1

Hutchinson Whampoa (Hong Kong) Developed Asia 2,908 1.2Nokian Renkaat (Finland) Continental Europe 2,777 1.2Humana North America 2,745 1.1Broadcom ‘A’ North America 2,722 1.1Continental (Germany) Continental Europe 2,696 1.1Paccar North America 2,676 1.1Liberty Global ‘A’ North America 2,620 1.1Allergan North America 2,489 1.0ICICI Bank Emerging Markets 2,455 1.0Tullow Oil United Kingdom 2,421 1.0ACE North America 2,379 1.0Masco North America 2,376 1.0Samsung Electronics Emerging Markets 2,319 1.0CVS Caremark North America 2,296 1.0Marathon Petroleum North America 2,293 1.0Siliconware Precision Industries Emerging Markets 2,215 0.9Stora Enso (Finland) Continental Europe 2,025 0.8Biogen Idec North America 2,018 0.8Daimler (Germany) Continental Europe 1,940 0.8Kingfisher United Kingdom 1,910 0.8Citrix Systems North America 1,843 0.8Unibail-Rodamco (France) Continental Europe 1,815 0.8Henkel (Germany) Continental Europe 1,686 0.7Outokumpu ‘A’ (Finland) Continental Europe 1,657 0.7TNT Express (Netherlands) Continental Europe 1,629 0.7Mr Price Emerging Markets 1,586 0.7Ericsson ‘B’ (Sweden) Continental Europe 1,562 0.6JPMorgan Indian Investment Trust Emerging Markets 1,538 0.6LinkedIn North America 1,531 0.6Cheniere Energy North America 1,522 0.6JPMorgan Japan Smaller Companies Trust Japan 1,447 0.6LAM Research North America 1,316 0.5Goodman (Australia) Developed Asia 1,111 0.5JPM Sterling Liquidity ‘X’ (Distribution) Liquidity Fund 1,500 0.6Net current liabilities (20,435) (8.5)

Total 240,585 100.0

1Based on total assets less current liabilities of £240.6m.


Portfolio Analysis

31st December 2013 30th June 2013Active Active

Portfolio Benchmark Position Portfolio Benchmark PositionGeographical Analysis %1 % % %1 % %

North America 43.8 52.3 (8.5) 39.6 52.2 (12.6)Continental Europe 29.4 16.8 12.6 27.1 15.7 11.4 United Kingdom 16.6 8.2 8.4 15.8 7.9 7.9 Japan 8.8 7.8 1.0 9.2 8.2 1.0 Emerging Markets 5.8 10.3 (4.5) 3.4 11.0 (7.6)Developed Asia 3.5 4.6 (1.1) 4.3 5.0 (0.7)

Total equities 107.9 100.0 99.4 100.0

Liquidity Fund 0.6 — 0.6 1.3 — 1.3Net current liabilities (8.5) — (8.5) (0.7) — (0.7)

Total 100.0 100.0 100.0 100.0

1Based on total assets less current liabilities of £240.6m (30th June 2013: £241.4m).

31st December 2013 30th June 2013Active Active

Portfolio Benchmark Position Portfolio Benchmark PositionSector Analysis %1 % % %1 % %

Consumer Discretionary 25.1 12.0 13.1 19.7 11.6 8.1 Financials 15.6 21.5 (5.9) 15.9 21.6 (5.7)Industrials 14.0 11.0 3.0 17.3 10.5 6.8 Information Technology 13.4 12.5 0.9 10.3 12.0 (1.7)Health Care 10.5 10.3 0.2 9.6 10.2 (0.6)Materials 9.7 6.1 3.6 7.1 6.1 1.0 Energy 8.8 9.6 (0.8) 8.0 9.9 (1.9)Consumer Staples 6.6 9.8 (3.2) 7.3 10.5 (3.2)Investment Companies 2.8 — 2.8 2.9 — 2.9 Telecommunication Services 1.4 4.1 (2.7) 1.3 4.2 (2.9)Utilities — 3.1 (3.1) — 3.4 (3.4)Liquidity Fund 0.6 — 0.6 1.3 — 1.3 Net current liabilities (8.5) — (8.5) (0.7) — (0.7)

Total 100.0 100.0 100.0 100.0

1Based on total assets less current liabilities of £240.6m (30th June 2013: £241.4m).


Income Statementfor the six months ended 31st December 2013

(Unaudited) (Unaudited) (Audited)Six months ended Six months ended Year ended31st December 2013 31st December 2012 30th June 2013

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 — 23,737 23,737 — 12,784 12,784 — 37,692 37,692

Net foreign currency losses — (2,092) (2,092) — (904) (904) — (1,421) (1,421)Income from investments 1,282 — 1,282 2,042 — 2,042 5,329 — 5,329Other interest receivable and

similar income 4 — 4 79 — 79 179 — 179

Gross return 1,286 21,645 22,931 2,121 11,880 14,001 5,508 36,271 41,779Management fee (247) (247) (494) (207) (207) (414) (440) (440) (880)Performance fee (charge)/writeback — (1,287) (1,287) — (785) (785) — 26 26Other administrative expenses (201) — (201) (209) — (209) (491) — (491)

Net return on ordinary activities before finance costs and taxation 838 20,111 20,949 1,705 10,888 12,593 4,577 35,857 40,434

Finance costs (108) (108) (216) (68) (68) (136) (169) (169) (338)

Net return on ordinary activities before taxation 730 20,003 20,733 1,637 10,820 12,457 4,408 35,688 40,096

Taxation (note 3) (95) — (95) (154) — (154) (398) — (398)

Net return on ordinary activities after taxation 635 20,003 20,638 1,483 10,820 12,303 4,010 35,688 39,698

Return per share (note 4)– undiluted 2.70p 85.12p 87.82p 6.02p 43.95p 49.97p 16.56p 147.39p 163.95p– diluted 2.69p 84.67p 87.36p n/a n/a n/a 16.56p 147.39p 163.95p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired ordiscontinued in the period.

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columnsrepresent supplementary information prepared under guidance issued by The Association of Investment Companies. The Totalcolumn 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 inShareholders’ Funds

Called up CapitalSix months ended share Share redemption Capital Revenue31st December 2013 capital premium reserve reserves reserve Total(Unaudited) £’000 £’000 £’000 £’000 £’000 £’000

At 30th June 2013 6,592 734 27,401 167,955 18,463 221,145Repurchase of shares into Treasury — — — (1,302) — (1,302)Exercise of Subscription shares into

Ordinary shares (3) 3 — — — —Issue of Ordinary shares on exercise of

Subscription shares 69 2,426 — — — 2,495Net return on ordinary activities — — — 20,003 635 20,638Dividend appropriated in the period — — — — (3,556) (3,556)

At 31st December 2013 6,658 3,163 27,401 186,656 15,542 239,420

Called up CapitalSix months ended share Share redemption Capital Revenue31st December 2012 capital premium reserve reserves reserve Total(Unaudited) £’000 £’000 £’000 £’000 £’000 £’000

At 30th June 2012 6,544 1,015 27,401 147,241 17,738 199,939Repurchase of shares into Treasury — — — (10,084) — (10,084)Net return on ordinary activities — — — 10,820 1,483 12,303Dividend appropriated in the period — — — — (3,288) (3,288)

At 31st December 2012 6,544 1,015 27,401 147,977 15,933 198,870

Called up CapitalYear ended share Share redemption Capital Revenue30th June 2013 capital premium reserve reserves reserve Total(Audited) £’000 £’000 £’000 £’000 £’000 £’000

At 30th June 2012 6,544 1,015 27,401 147,241 17,738 199,939Repurchase of shares into Treasury — — — (14,974) — (14,974)Bonus issue of Subscription shares 48 (48) — — — —Subscription shares issue costs — (233) — — — (233)Net return on ordinary activities — — — 35,688 4,010 39,698Dividend appropriated in the year — — — — (3,285) (3,285)

At 30th June 2013 6,592 734 27,401 167,955 18,463 221,145


Balance Sheetat 31st December 2013

(Unaudited) (Unaudited) (Audited)31st December 2013 31st December 2012 30th June 2013

£’000 £’000 £’000

Fixed assetsEquity investments held at fair value through

profit or loss 259,520 220,403 240,016Investments in liquidity funds held at fair value

through profit or loss 1,500 — 3,000

Total investments 261,020 220,403 243,016

Current assetsFinancial assets: derivative financial instruments 1,955 568 938Debtors 372 659 2,443Cash and short term deposits 230 45 1,966

2,557 1,272 5,347Creditors: amounts falling due within one year (20,591) (581) (5,504)Financial liabilities: derivative financial instruments (2,401) (1,153) (1,455)

Net current liabilities (20,435) (462) (1,612)

Total assets less current liabilities 240,585 219,941 241,404

Creditors: amounts falling due after more than one year (200) (20,200) (20,200)

Provisions for liabilities and chargesPerformance fee (965) (871) (59)

Net assets 239,420 198,870 221,145

Capital and reservesCalled up share capital 6,658 6,544 6,592Share premium 3,163 1,015 734Capital redemption reserve 27,401 27,401 27,401Capital reserves 186,656 147,977 167,955Revenue reserve 15,542 15,933 18,463

Total equity shareholders’ funds 239,420 198,870 221,145

Net assetvalue per share (note5)– undiluted 1,013.3p 826.9p 941.4p– diluted 1,002.0p n/a 934.4p

Company registration number: 24299.


Cash Flow Statementfor the six months ended 31st December 2013

(Unaudited) (Unaudited) (Audited)Six months ended Six months ended Year ended

31st December 2013 31st December 2012 30th June 2013£’000 £’000 £’000

Net cash inflow from operating activities (note 6) 460 1,224 3,510Net cash outflow from returns on investments

and servicing of finance (214) (149) (352)Taxation recovered 46 3 40Net cash inflow/(outflow) from capital expenditure

and financial investment 3,013 (9,327) (4,212)Dividend paid (3,556) (3,288) (3,285)Net cash inflow from financing 678 9,545 4,813

Increase/(decrease) in cash for the period 427 (1,992) 514

Reconciliation of net cash flow to movement in net debt

Net cash movement 427 (1,992) 514Loans drawn down in the period — (20,000) (20,000)Exchange movements (2,163) 690 105

Movement in net debt in the period (1,736) (21,302) (19,381)Net (debt)/funds at beginning of the period (18,234) 1,147 1,147

Net debt at the end of the period (19,970) (20,155) (18,234)

Represented by:Cash and short term deposits 230 45 1,966Debt falling due within one year (20,000) — —Debt falling due in more than one year but

not more than five years — (20,000) (20,000)Debt falling due after more than five years (200) (200) (200)

Total (19,970) (20,155) (18,234)


Notes to the Accountsfor the six months ended 31st December 2013

1. Financial statements

The information contained within the accounts in this half year report has not been audited or reviewed by the Company’sauditors.

The figures and financial information for the year ended 30th June 2013 are extracted from the latest published accounts ofthe Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar ofCompanies and included the report of the auditors which was unqualified and did not contain a statement under eithersection 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 and with theStatement of Recommended Practice ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ datedJanuary 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 yearended 30th June 2013.

3. Taxation

The taxation charge of £95,000 (31st December 2012: £154,000 and 30th June 2013: £398,000) comprises irrecoverableoverseas withholding tax.

4. Return per share



Return per share is based on the following:Revenue return 635 1,483 4,010Capital return 20,003 10,820 35,688

Total return 20,638 12,303 39,698

Weighted average number of Ordinary shares in issue during the period used for the purpose of the undiluted calculation 23,499,110 24,622,969 24,212,969

Weighted average number of Ordinary shares in issue during the period used for the purpose of the diluted calculation 23,623,703 n/a 24,212,969

UndilutedRevenue return per share 2.70p 6.02p 16.56pCapital return per share 85.12p 43.95p 147.39p

Total return per share 87.82p 49.97p 163.95p

DilutedRevenue return per share 2.69p n/a 16.56pCapital return per share 84.67p n/a 147.39p

Total return per share 87.36p n/a 163.95p


5. Net asset value per share


31st December 2013 31st December 2012 30th June 2013

Undiluted:Ordinary shareholders’ funds (£’000) 239,420 198,870 221,145Number of Ordinary shares in issue 23,628,792 24,051,044 23,491,110Net asset value per Ordinary share (pence) 1,013.3 826.9 941.4

Diluted:Ordinary shareholders’ funds assuming exercise of

Subscription shares (£’000) 282,130 n/a 264,402Number of potential Ordinary shares in issue 28,157,984 n/a 28,297,512Net asset value per Ordinary share (pence) 1,001.9 n/a 934.4

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



Net return on ordinary activities before finance costs and taxation 20,949 12,593 40,434

Less capital return before finance costs and taxation (20,111) (10,888) (35,857)Scrip dividends received as income (28) (32) (51)Net movement in debtors and accruals 17 3 (15)Overseas withholding tax (120) (141) (457)Management fee charged to capital (247) (207) (440)Performance fee paid — (104) (104)

Net cash inflow from operating activities 460 1,224 3,510

Notes to the Accounts continuedfor the six months ended 31st December 2013


Interim Management Report

The Company is required to make the following disclosures inits half year report.

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Companyhave not changed and fall into the following broadcategories: investment and strategy; market; accounting,legal and regulatory; corporate governance and shareholderrelations; operational; and financial. Information on each ofthese areas is given in the Business Review within the AnnualReport and Accounts for the year ended 30th June 2013.

Related Parties Transactions

During the first six months of the current financial year, notransactions with related parties have taken place which havematerially affected the financial position or the performance ofthe Company.

Going Concern

The Directors believe, having considered the Company’sinvestment objectives, risk management policies, capitalmanagement policies and procedures, nature of the portfolioand expenditure projections, that the Company has adequateresources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future. For these reasons, theyconsider there is reasonable evidence to continue to adopt thegoing concern basis in preparing the accounts.

Directors’ Responsibilities

The Board of Directors confirms that, to the best of itsknowledge:

(i) the condensed set of financial statements contained withinthe half yearly financial report has been prepared inaccordance with the Accounting Standards Board’sStatement ‘Half Yearly Financial Reports’ and gives a trueand fair view of the state of affairs of the Company and ofthe assets, liabilities, financial position and net return of theCompany, as at 31st December 2013, as required by the UKListing Authority Disclosure and Transparency Rules 4.2.4R;and

(ii) the interim management report includes a fair review ofthe information required by 4.2.7R and 4.2.8R of the UKListing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing thesefinancial statements, the Directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and accounting estimates that arereasonable and prudent;

• state whether applicable UK Accounting Standards havebeen followed, subject to any material departures disclosedand explained in the financial statements; and

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Simon DaviesChairman 19th February 2014


Subscription Shares

On 15th January 2013 the Company issued Subscription sharesas a bonus issue to the Ordinary shareholders on the basis ofone Subscription share for every five Ordinary shares held.Each Subscription share confers the right (but not theobligation) to subscribe for one Ordinary share to have effecton 31st October 2013, 30th April 2014, 31st October 2014,30th April 2015 or 30th October 2015, after which the rights onthe Subscription shares will lapse.

Future exercise prices have been determined as follows:

(a) If exercised to have effect on 31st October 2013 –900 pence;

(b) If exercised to have effect on 30th April 2014 or31st October 2014 – 943 pence.

(c) If exercised to have effect on 30th April 2015 or30th October 2015 – 986 pence.

To be exercised, a notice of exercise must be received by theRegistrar no later than 10 days before the relevant exercisedate and no earlier than 30 business days before the relevantexercise date.

For the purposes of UK taxation, the issue of Subscriptionshares is treated as a reorganisation of the Company’s sharecapital. Whereas such reorganisations do not trigger achargeable disposal for the purposes of the taxation of capitalgains, they do require shareholders to reallocate the base costsof their Ordinary shares between Ordinary shares andSubscription shares received.

At the close of business on 15th January 2013 the middlemarket prices of the Company’s Ordinary shares andSubscription shares were as follows:

Ordinary shares: 803pSubscription shares: 27p

Accordingly an individual investor who on 11th January 2013held five Ordinary shares (or a multiple thereof) would havereceived a bonus issue of one Subscription share (or therelevant multiple thereof) and would apportion the base cost ofsuch holding 99.33% to the five Ordinary shares and 0.67% tothe Subscription share.


Glossary of Terms and Definitions

Return to Ordinary shareholders/Unit holdersTotal return to the Ordinary shareholder, or Unit holder, on amid-market price to mid-market price basis, assuming that alldividends received were reinvested, without transaction costs,in the Ordinary shares of the Company at the time the shareswere quoted ex-dividend.

Diluted net asset value (‘NAV’) per Ordinary shareThe NAV per Ordinary share assuming that all outstandingSubscription shares were converted into Ordinary shares at theyear end.

Diluted return on net assetsReturn on the diluted net asset value (‘NAV’) per share, on a bidvalue to bid value basis, assuming that all dividends paid outby the Company were reinvested in the shares of the Companyat the NAV per share at the time the shares were quotedex-dividend.

In accordance with industry practice, dividends payable whichhave been declared but which are unpaid at the balance sheetdate are deducted from the diluted NAV per share whencalculating the diluted return on net assets.

Undiluted return on net assetsReturn on the undiluted net asset value (‘NAV’) per share, ona bid value to bid value basis, assuming that all dividends paidout by the Company were reinvested in the shares of theCompany at the NAV per share at the time the shares werequoted ex-dividend.

In accordance with industry practice, dividends payable whichhave been declared but which are unpaid at the balance sheetdate are deducted from the undiluted NAV per share whencalculating the undiluted return on net assets.

Benchmark return Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested into the shares of the underlying companiesat the time the shares were quoted ex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the Company’sinvestment universe. The Company’s investment strategy doesnot ‘track’ this index and consequently, there may be somedivergence between the Company’s performance and that ofthe benchmark.

Gearing/(net cash)Gearing represents the excess amount above shareholders’funds of total assets expressed as a percentage of the

shareholders’ funds. Total assets include total investments andnet current assets/liabilities less cash/cash equivalents andexcluding bank loans of less than one year. If the amountcalculated is negative, this is shown as a ‘net cash’ position.

Share price discount/premium to net asset value (‘NAV’) per shareIf the share price of an investment trust is lower than theNAV per share, the shares are said to be trading at a discount.The discount is shown as a percentage of the NAV per share.The opposite of a discount is a premium. It is more commonfor an investment trust’s shares to trade at a discount than ata premium.

Active position The active position shows the difference between theCompany’s holding of an individual stock or sector comparedwith the stock or sector’s weighting in the Company’sbenchmark. A positive number indicates an active decision bythe Manager to own more of (i.e. be overweight) a particularstock or sector versus the benchmark and a negative numberindicates a decision to hold less of (i.e. be underweight) aparticular stock or sector versus the benchmark.

Performance attribution definitions:

Asset allocation Measures the impact of allocating assets differently from thosein the benchmark, via the portfolio’s weighting in differentcountries, sectors or asset types.

Stock selection Measures the effect of investing in securities to a greater orlesser extent than their weighting in the benchmark, or ofinvesting in securities which are not included in thebenchmark.

Gearing/cash effect Measures the impact on returns of borrowings or cashbalances on the Company’s relative performance.

Currency Measures the impact of investing in different currencies on theperformance which is measured in sterling terms.

Management fee/other expenses The payment of fees and expenses reduces the level of totalassets, and therefore has a negative effect on relativeperformance.

Performance feeMeasures the effect of a performance fee charge or writeback.


Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

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Beware of share fraud

How to avoid share fraud

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In association with:

Financial Conduct Authority


Notes

HistoryThe Company was formed in 1887. The Company was a general investment trustuntil 1982, when it adopted its current objective. The current name was adoptedin 2006.

The Company is managed by JPMorgan Asset Management (UK) Limited, and thepresent named investment manager, Jeroen Huysinga, is responsible for theportfolio.

DirectorsSimon Davies (Chairman)Jonathan CareyGay CollinsNigel Wightman

Company NumbersCompany registration number: 24299Stock Exchange SEDOL Number: 0914327Bloomberg Code: JMO LNReuters Code: JMO.L

Market InformationThe Company’s net asset value (‘NAV’) per share is published daily, via the LondonStock Exchange. The Company’s shares are listed on the London Stock Exchangeand the New Zealand Stock Exchange.

The Company’s shares may be dealt in directly through a stockbroker orprofessional adviser acting on an investor’s behalf. They may also be purchasedand held through the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan SIPP. These products are all available on the online wealth managerservice, J.P. Morgan WealthManager+ available atwww.jpmorganwealthmanagerplus.co.uk

Websitewww.jpmoverseas.co.uk

Share TransactionsThe Company’s shares may be dealt in directly through a stockbroker orprofessional adviser acting on an investor’s behalf. They may also be purchasedand held through the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan SIPP. These products are all available on the online wealth managerservice, J.P. Morgan WealthManager+ available atwww.jpmorganwealthmanagerplus.co.uk

Manager and Company SecretaryJPMorgan Asset Management (UK) Limited

Company’s Registered OfficeFinsbury Dials20 Finsbury StreetLondon EC2Y 9AQTelephone number: 020 7742 4000

For company secretarial and administrative matters, please contact Divya Amin.

CustodianJPMorgan Chase Bank, N.A.25 Bank StreetCanary WharfLondon E14 5JP

UK RegistrarsEquiniti LimitedReference 1103, Aspect House Spencer Road Lancing West Sussex BN99 6DA Telephone: 0871 384 2330 Overseas helpline: +44 121 415 7047

Notifications of changes of address and enquiries regarding share certificates ordividend cheques should be made in writing to the Registrar quoting reference1103. Registered shareholders can obtain further details on individual holdings onthe internet by visiting www.shareview.co.uk.

New Zealand Registrars Computershare Investor Services Limited Private Bag 92119 Auckland 1020 Level 2 159 Hurstmere Road Takapuna North Shore City New Zealand. Telephone: 09 522 0022

Notifications of changes of address and enquiries regarding certificates ordividend cheques should be made in writing to the Registrars.

Independent AuditorsPricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

UK Brokers Winterflood Securities LimitedThe Atrium Building Cannon Bridge 25 Dowgate Hill London EC4R 2GA Telephone: 020 3100 0000

New Zealand Brokers First NZ Capital Securities P.O. Box 396 Wellington New Zealand Telephone: 0800 800 968 (NZ Toll Free) Please contact Peter Irwin

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan SIPP, see contact details on the back cover of this report.

Information about the Company

Financial CalendarFinancial year end 30th JuneHalf year results announced FebruaryFinal results announced SeptemberFinal dividend on shares NovemberInterest payment on 4.5% perpetual debenture stock 1st January, 1st JulyAnnual General Meeting NovemberInterim Management Statements May and November

A member of the AIC


J.P. Morgan HelplineFreephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security

www.jpmoverseas.co.uk

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