Presentation Transcript

1. The Mercantile Investment Trust plcAGM

   23rd May 2012
2. Agenda Introduction Performance Attribution Stock examples Current Portfolio Outlook
3. The Mercantile Investment Trust Mercantile provides exposure to a diversified portfolio of UK companies Investment Objective Long term capital growthfrom aportfolio of UK small and mid cap companies Performance Benchmark FTSE All-Share Index excluding FTSE-100 and Investment Trusts Dividend Total dividend for the year maintained at 36p Doubled over the past 10 years More than quadrupled over 20 years Revenue reserves of 15.8p per share Source: J.P. Morgan Asset Management as at May 2012
4. Long Term Performance – Net Asset Value Fund Benchmark -30.21% -29.10% +67.50% +57.35% +21.82% +20.40% +33.01% +28.78% +30.22% +24.31% -16.14% -12.66% -39.26% -36.24% +58.31%¹ +57.62% +28.28%² +26.59% -6.81%³ -4.08% Source: J.P. Morgan Asset Management, BNY Mellon , MorningstarNAV Net of fees as at 14/05/12 ¹ Adjusted +2.0% for payment of dividend out of reserves, ² Adjusted +0.9% for payment of dividend out of reserves, ³ Adjusted +0.3% for payment of dividend out of reserves Past performance is not an indication of future performance.
5. Long Term Performance – Share Price +132% +129% +57% Source: DataStream as at 14/05/12 NAV net of fees, net dividend reinvested. For illustrative purposes only. Past performance is not an indication of future performance.
6. Market Themes - Style Performance 12 months to 31st December 2011 GARP: Growth at reasonable price Source: Citi Investment Research and Analysis, IBES, Worldscope, FTSE and MSCI For illustrative purposes only. Past performance is not an indication of future performance.
7. Fund Attribution – Sector 12 month attribution to 31 January 2012 Top 5 Bottom 5 Source: Factset (o)denotes overweight, (u) denotes underweight. For illustrative purposes only . Past performance is not an indication of future performance. Relative Contribution % Attributions may not match official returns due to differences in systems rounding.
8. Fund Attribution – Stock 12 month attribution to 31 January 2012 Top 10 Bottom 10 Source: Factset. Past performance is not an indication of future performance. * Not held Relative Contribution % The companies/securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. J.P. Morgan Asset Management may or may not buy positions on behalf of its clients in any or all of the aforementioned securities. Attributions may not match official returns due to differences in systems rounding.
9. Stock Example Cable & Wireless Worldwide: Market Cap £570m; Turnover £2,257m; EBITDA £442m (as at 31/01/12) Asset Backed 6,300 employees connecting over 150 countries by cable and satellite 425,000km International cable network, including interests in 60 global cable systems 20,500km UK fibre network - the UK’s largest fibre network dedicated to business users Unbundled exchanges covering 56% of the UK 7 data centres with 11MW of capacity Capital allowances of £3bn and tax losses of £16bn (£5bn UK, £11bn overseas) Major Contracts Multi Service Platform serves over 300 major customers in the UK, Europe, ME, Asia and US and over 6,000 organisations in total Key customers include: - Aviva - Next - United Utilities - Boots - Ryanair - Foreign & Commonwealth Office - National Grid - Tesco - UK Police Service Company Meetings to Address Issues December 2010 & May 2011 – Meet management/ discuss trading July 2011 – John Barton (New Chairman) November 2011 - Ian Gibson (New FD) November 2011 - John Barton (Chairman) November 2011 & March 2012 - Gavin Darby (New CEO) Source: Company data as at 14/05/12 Source: Datastream as at 14/05/12 The information in this case study is intended as an example only and should not be construed as advice, it may not be suitable for your particular circumstances and if you are unsure of the suitability of any investment you should seek financial advice. Past performance is not a guarantee of the future. Any opinions and views expressed here are those held by the author as at date of this document, which are subject to change and are not to be taken as or construed as investment advice. J.P. Morgan Asset Management may or may not hold positions on behalf its clients in any or all of the aforementioned securities. EBITDA means earnings before interest, taxation, depreciation and amortization.
10. Sector Example - Biotechs Renovo – Market Cap £30m Leader in the discovery and development of drugs to reduce scarring, improve wound healing and enhance tissue registration In June 2007 Shire Pharmaceuticals bought the rights to Juvista, making an initial payment of $25m, with up to $700m of milestone payments to follow and bought a 7% stake in Renovo at 200p per share In February 2011 the Phase III trial for Juvista did not meet its primary or secondary endpoints The company now has no remaining employees; is buying back shares and is seeking to realise additional value from selling its clinical and preclinical portfolio and intellectual property Market capitalisation £30m, net cash £35m, evaluating acquisition candidates Buying Source: Datastream as at 14/05/12 The information in this case study is intended as an example only and should not be construed as advice, it may not be suitable for your particular circumstances and if you are unsure of the suitability of any investment you should seek financial advice. Past performance is not a guarantee of the future. Any opinions and views expressed here are those held by the author as at date of this document, which are subject to change and are not to be taken as or construed as investment advice. J.P. Morgan Asset Management may or may not hold positions on behalf its clients in any or all of the aforementioned securities.
11. Sector Example - Biotechs Vectura Biocompatibles International Selling Develops inhaled therapies for the treatment of respiratory diseases Collaborations with Novartis and GSK Market capitalisation £186m, net cash £80m Specialises in products for the treatment of liver, metastatic and prostate cancers, strokes, diabetes and obesity Sell Takeover by BTG Buying Buying Buy Buying Source: Datastream as at 14/05/12 Source: Datastream as at 14/05/12 Antisoma Vernalis Oxford Biomedica Buying Sold Buying Buying Buying Buy Buy Buying Selling Source: Datastream as at 14/05/12 Source: Datastream as at 14/05/12 Source: Datastream as at 14/05/12 Specialise in the development of gene based therapeutics License deals with GSK, Merck & Co and Pfizer Market capitalisation £51m, net cash £20m Develops neurological and CNS products In February 2012 raised £66m for a development & marketing deal for US cough medicines Market capitalisation £106m, net cash £84m In January 2011, the phase III trial of the Company's key cancer drug showed no benefit Market capitalisation £10m, net cash £10m The information in this case study is intended as an example only and should not be construed as advice, it may not be suitable for your particular circumstances and if you are unsure of the suitability of any investment you should seek financial advice. Past performance is not a guarantee of the future. Any opinions and views expressed here are those held by the author as at date of this document, which are subject to change and are not to be taken as or construed as investment advice. J.P. Morgan Asset Management may or may not hold positions on behalf its clients in any or all of the aforementioned securities.
12. Stock Example Northumbrian Water Group: Taken over for £2.4bn; Turnover £738m; PBT £181m A regulated UK water and sewage business operating 26,000km water mains,16,000km sewers and serving 4.5m people under the Northumbrian Water and Essex & Suffolk Water trading names Regulated revenue base set by reference to the rate of inflation, measured by the Retail Price Index (RPI), as well as an adjustment factor based on efficiency savings and capital expenditure Demonstrated attractive characteristics in an inflationary environment Had grown dividends at 3% above inflation each year since 2005 and had pledged to continue this level of growth over the next regulatory period Had just completed the first year of the 5 year regulatory cycle, giving good visibility over 5 year earnings (2010-2015) Acquired by Cheung Kong Infrastructure Holdings (CKI) for 465p per share Source: Datastream as at 14/05/12 The information in this case study is intended as an example only and should not be construed as advice, it may not be suitable for your particular circumstances and if you are unsure of the suitability of any investment you should seek financial advice. Past performance is not a guarantee of the future. Any opinions and views expressed here are those held by the author as at date of this document, which are subject to change and are not to be taken as or construed as investment advice. J.P. Morgan Asset Management may or may not hold positions on behalf its clients in any or all of the aforementioned securities.
13. Current Portfolio – Gearing & Size Stratification Portfolio size £1,294 million Mercantile by Market Capitalisation Equities 105% Cash 11% Borrowings (16)% 100% Source: J.P. Morgan Asset Management. Data as at 14/05/12. The above portfolio characteristics are shown for illustrative purposes only and are subject to change without notice.
14. Current Portfolio – Sectors % Source: J.P. Morgan Asset Management. Data as at 14/05/12. The fund is an actively managed portfolio; holdings, sector weights, allocations and leverage , as applicable are subject to change at the discretion of the Investment Manager without notice.
15. Current Portfolio – Top Ten Ten largest investments at 31st April 2012 Holding (%) 12m forward P/E 12m forward Yield Cable & Wireless Worldwide Persimmon Jardine Lloyd Thompson Cable & Wireless Communications Bovis Homes Pennon Group Wood (John) Group Phoenix Group Travis Perkins Hiscox Total 3.1 2.9 2.8 2.2 2.1 2.1 2.0 1.8 1.8 1.6 1.2% 8.6% 3.7% 8.0% 2.0% 3.8% 1.6% 8.5% 2.8% 4.9% 13.0x 11.6x 13.0x 8.0x 14.5x 16.0x 13.2x 4.1x 9.9x 9.5x 22.4 Source: Bloomberg The holdings represent the current holdings of the fund. However, it cannot be assumed that these types of investments will be available to or will be selected by the fund in the future.
16. Current Portfolio – Geographic Revenue Exposures FTSE 100 Mercantile FTSE 250 ex ITs Source: Company annual reports, UBS, Bloomberg Based on benchmark weightings as at 3 January 2012 N.B. RoW category may include NA, CE or UK in cases of limited disclosure Source: Company annual reports Based on Mercantile portfolio as at 3 January 2012 N.B. RoW category may include NA, CE or UK in cases of limited disclosure The above portfolio characteristics are shown for illustrative purposes only and are subject to change without notice.
17. Outlook At the macro level… Global growth slowing Uncertain political response to budget deficits continues to worry investors Consumer and investor confidence low But at the stock level… Listed companies have improved their balance sheets since the credit crisis Dividend outlook still good M&A and share buy backs to continue Smaller companies remain the growth engine of the UK economy Valuations of many mid & small cap stocks attractive on a medium term view The opinions and views expressed here are those held by the author as at 14/05/2012, which are subject to change and are not to be taken as or construed as investment advice
18. J.P. Morgan Asset Management Contact: Martin Hudson, European Equity Group (44) 020 7742 8509 / Fax (44) 020 7742 8645 martin.j.hudson@jpmorgan.com Anthony Lynch, European Equity Group (44) 020 7742 2403 / Fax (44) 020 7742 8645 anthony.lynch@jpmorgan.com Any forecasts or opinions expressed are J.P. Morgan’s own at the date of this document and may be subject to change. The value of investments and the income from them may fluctuate and your investment is not guaranteed and investors may not get back the full amount invested. Past performance is not a guide to future performance. Exchange rates may cause the value of underlying overseas investments to go down or up. Investments in smaller companies may involve a higher degree of risk as they are usually more sensitive to market movements. Also, the economic and political situations may be more volatile than in established economies and these may adversely influence the value of investments made. Investment trusts may utilise gearing which will exaggerate market movements both down and up which could mean sudden and large falls in value. For further details, please refer to the trust’s annual report and accounts. Telephone lines are recorded and may be monitored for security and training purposes. Issued by JPMorgan Asset Management Marketing Limited which is authorised and regulated in the UK by the Financial Services Authority. Registered in England No. 288553. Registered office: 125 London Wall, London EC2Y 5AJ.