Last checked at 23 Oct 2018 16:58
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL EMERGING MARKETS INCOME TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31ST JULY 2018
Legal Entity Identifier: 549300OPJXU72JMCYU09
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Performance
For the year ended 31st July 2018, the Company recorded a total return on net assets of +6.6%. This compares with a return on the benchmark index, the MSCI Emerging Markets Index with net dividends reinvested (in sterling), of +4.9%. The total return to shareholders for the year including dividends was +3.5%, as the Company's share price discount to net asset value widened from 3.4% at the beginning of the financial year to 6.4% at 31st July 2018. Since year-end the share price has fallen to 119.0 pence per share at the time of writing.
While the first half of the fiscal year saw emerging markets continuing to make good progress, in the second half of the year markets have declined sharply due to a combination of factors including mounting trade tensions, a stronger US dollar and rising interest rates. In the six months to July the MSCI Emerging Markets Index produced a negative total return of 4.5%.
The Company's portfolio is very different to the composition of the benchmark index due to its income objective.
Since the Company was initially launched in 2010, the cumulative total return on net assets has been +89.5% compared to the total return of the benchmark index of +58.9%.
In their report, the Investment Managers have provided further detail on portfolio management, performance and attribution, together with a commentary on engagement on corporate governance issues and markets.
Stewardship features prominently in the Investment Managers' selection of holdings. While Environmental and Social factors are important, particular attention is paid to Governance. Governance standards range widely across these markets. However, there is a positive correlation between the better governed companies and consistent dividend payout policies. Consequently a focus on good governance is hard-wired into the portfolio.
Revenue and Dividends
Gross revenue for the year amounted to £21.4 million (2017: £19.9 million) with net revenue of £17.1 million (2017: £16.3 million). Net revenue return per ordinary share for the year, calculated on the average number of shares in issue, was 5.78p (2017: 5.54p).
In the current financial year, the Board paid three interim dividends of 1.0p per share and has announced the payment of a fourth interim dividend of 2.0p per share. This brings the total dividend for the year to 5.0p, a 2% increase from last year. The Board continues the approach of paying four interim dividends, reflecting the support we have received from shareholders for a regular and timely income stream.
As shareholders are aware, the Company receives dividends in the currencies of developing countries and US dollars, but pays dividends in sterling. It has not been the Company's policy to hedge currency risk as that is expensive and, for many currencies, impracticable. That policy inevitably means that the Company's asset values and cash flows will be buffeted by adverse currency movements and enhanced by favourable ones from time to time.
Share Capital
During the year, the share price traded occasionally at a premium to net asset value. Consequently, the Company reissued 150,000 shares from Treasury and issued 2,500,000 new shares for a total consideration of £3,638,000. The impact of the share issuances on the NAV was negligible. Since the year end, the Company has not issued any shares.
The Company did not carry out any share repurchases during the year nor since the year end.
The Board is seeking shareholder authority at the forthcoming Annual General Meeting ('AGM') to issue up to a further 10% of the Company's issued share capital. The intention is to use this authority to meet demand for the Company's shares when they trade at a premium to net asset value.
Key Performance Indicators ('KPIs')
The Board tracks a series of KPIs. Further details for the year ended 31st July 2018 may be found on page 16 of the Annual Report. The Board pays particular attention to performance, share price premium or discount to NAV, ongoing charges, income available to pay dividends and the investment risk of the portfolio.
Gearing
The Company replaced one of its US$20 million fixed rate loan facilities with National Australia Bank ('NAB') in November 2017 to secure a longer term facility at an attractive interest rate. The Company has two US $20 million fixed rate loan facilities with NAB, repayable in October 2020 (2.31% per annum) and November 2022 (3.28% per annum). As at 31st July 2018, gearing stood at 6.2% (2017: 6.8%).
Board of Directors and Corporate Governance
In February we welcomed Mark Edwards to the Board. A qualified Chartered Accountant, Mark has over 30 years' experience as an investment manager, including 20 years in Emerging Markets.
Having had the great pleasure of serving as a Director and the privilege of chairing the Board since the launch of the Company in 2010, I will be stepping down from the Board at the conclusion of the 2018 AGM. As previously reported, Sarah Fromson, who has been a Director since 2011 will succeed me as Chairman of the Board. Richard Robinson will assume the role of Senior Independent Director and Chairman of the Nomination Committee. Following the Board's annual evaluation, it is felt that given the recent refreshment of the Board, its composition and size following my retirement will be sufficient for the time being and no further changes are anticipated over the next 12 months.
In accordance with corporate governance best practice, all Directors except me will retire from the Board and will seek reappointment at this year's AGM. Shareholders who wish to contact the Chairman or other members of the Board may do so through the Company Secretary or the Company's website, details of which appear on page 77 of the Annual Report. Shareholders are assured that these communications are forwarded to the Chairman accordingly.
Annual General Meeting
The Annual General Meeting will be held on Tuesday, 27th November 2018 at 2.00 p.m. at 60 Victoria Embankment, London EC4Y 0JP. The meeting will include a presentation from the Investment Managers on investment policy and performance. There will also be an opportunity for shareholders to meet the Board and representatives of J.P.Morgan after the meeting. If you have any detailed or technical questions, please submit these in advance of the meeting in writing, or via the Company's website, to the Company Secretary whose contact details are shown on page 77 of the Annual Report. Shareholders who are unable to attend the AGM in person are encouraged to use their proxy votes. Proxy votes may be lodged electronically, whether shares are held through CREST or in certificate form and full details are set out on the form of proxy.
Continuation Vote
In accordance with the Company's Articles of Association, an ordinary resolution will be put to shareholders at the forthcoming Annual General Meeting that the Company continue in existence as an investment trust for a further three year period.
The Board believes that the long term outlook for global emerging markets remains favourable, despite the current headwinds. Equally, it believes that J.P.Morgan has the resources and process to deliver good results for shareholders. Accordingly, the Board believes that the continuation of the Company is in the best interests of all shareholders and strongly recommends that shareholders vote in favour of the resolution.
Outlook
The recent stream of negative news in emerging markets will understandably be of concern to shareholders. The Board fully recognises the many macroeconomic and political challenges facing businesses in these markets. However, the outlook for the Company is far from gloomy. The companies in the portfolio are well managed, have good growth prospects and healthy balance sheets. The Board therefore continues to have confidence in the ability of these businesses to generate attractive long term returns for shareholders.
Andrew Hutton
Chairman
23rd October 2018
INVESTMENT MANAGERS' REPORT
The year to 31st July 2018 has been 'a tale of two halves' for Emerging Markets. The first six months was a positive period for emerging markets equities. By contrast, the investment landscape was less benign in the second half of the year, with geopolitical issues, market volatility and rising inflation all making their presence felt. With this in mind, it would be unrealistic to expect the Company to deliver the double digit returns of the previous year, but we are pleased to have delivered positive relative performance: over the full year, the Company's Net Asset Value (NAV) return was +6.6%, outperforming its benchmark, the MSCI Emerging Markets Index (the 'Index'), which rose by +4.9% (on a total return, net basis, in sterling terms). The value of the Company's shares (including dividends) rose by 3.5% over the period. The use of gearing contributed positively to returns over the year.
In our interim update, covering the half year to 31st January 2018, we were upbeat as emerging markets' economies and companies were finally demonstrating an improvement in fundamentals after a difficult few years. We felt that valuations in the sector had reached a more neutral level and we were positive on the potential for long term dividend generation from the portfolio's stocks. We were also encouraged by the long-term opportunities we were identifying in the China A-share market and in consumer-focused companies.
Jumping forward six months, a plethora of risks increased volatility across markets. Perhaps the most unsettling factor was the protectionist trade tariffs introduced by the United States, which triggered (or threatened) 'tit-for-tat' retaliatory measures from Canada, Mexico, Europe and, in particular, China. At the time of writing, US-China trade tensions have ratcheted up further and, unless a solution can be found, there remains the very real possibility that all of China's exports to the US could become subject to new duties. In turn, the US could expose itself to damaging retaliatory measures. The International Monetary Fund has already warned that these trade tensions pose a very real threat to the global economy.
Sharper market moves have also been sparked by rising US bond yields and worries about the impact of rising inflation. Although headline projections for economic growth across Emerging Markets remain robust (certainly in comparison with those of developed markets) this masks issues that have affected specific emerging economies - such as rising interest rates and rising oil prices. We have also witnessed a general weakening across emerging markets currencies and a slump in some of them, off the back of political worries; the sharp decline of both the Argentine peso and the Turkish lira have been making headlines over the summer. Naturally, our optimism from six months ago has become more guarded but we are pleased that our stock picking has resulted in the Company outperforming the Index over the year.
Spotlight on stocks, markets, countries and sectors
One of the key advantages of your Company is that it is actively managed and free to invest in any market, sector or country in the global Emerging Markets universe. There are no fixed limits on portfolio construction. In this section we highlight specific factors that have impacted portfolio performance (both positively and negatively) over the year. Not only do we look at specific stocks but broader geographical and sectoral issues too.
Al Rajhi Bank is the world's largest Islamic bank and one of the Company's largest holdings. It has been a strong performer over the year. The bank's February dividend announcement sent a very positive signal to shareholders and markets alike as it increased its 2017 dividend by 78%, reflecting the bank's strong capital position and management's confidence in its future. The share price has performed well as investors are continuing to focus on positive fundamentals, while the announcement from MSCI that Saudi Arabia will be reclassified as an emerging markets territory from 2019 added to the positive sentiment. During the period we added to our position given our increased conviction in the company's fundamentals.
Looking at the Company's geographical breakdown, China (including Hong Kong) remains our largest country exposure. The US economy may still be the world's biggest, but China is hot on its heels and growing at a much faster pace. However, the Chinese economy is not immune from global economic challenges and Chinese Premier Li Keqiang acknowledged difficulties in keeping its economy on track when he spoke at a World Economic Forum conference in mid-September. He has also stated his expectation that, looking ahead, the Chinese economy will deliver a more modest but also more sustainable growth rate.
Over the period, the contribution in aggregate from China was relatively flat. However, we continue to believe the China A-share market, and consumer-focused companies in particular, offers some interesting long-term opportunities and this year we have added further exposure to consumer and industrial companies.
Our holdings in China A-shares including Jiangsu Yanghe Brewery and electrical appliance manufacturer Midea Group made a positive contribution overall, but this was offset by the negative impact from not holding top performing e-commerce names Alibaba and Tencent, which offer no yield and as such do not fit our investment criteria.
The second half of the Company's financial year saw increased news flow surrounding Russia, where we are overweight because of our holdings in specific Russian stocks. The US government has imposed an array of economic penalties over recent years and the most recent sanctions have caused strong market reactions and precipitated weakness in the Russian rouble.
None of our Russian holdings were directly named in the sanctions although their performance was impacted by the broader market decline. We took the opportunity to rotate our exposure within the market, selling metals and mining company Norilsk Nickel, where we felt the risk-reward ratio had deteriorated. We increased our position in Russia's largest bank Sberbank. Further sanctions risk can never be ignored (though we think it is relatively low for Sberbank) but we also saw a significant valuation opportunity due to price weakness. During April, as scheduled, Sberbank announced its dividend and pleasingly, doubled it, despite the market noise; this was clearly a key positive indicator for us, although Sberbank's share price has remained volatile in recent months.
Looking at other geographical sectors, our exposure to markets such as Brazil had a negative impact on portfolio performance. As well as a general increase in market concerns over those emerging markets considered the most 'vulnerable', Brazil's economy was hit by a truckers' strike which damaged domestic confidence. Elsewhere, the portfolio has only modest exposure to Turkey, but this has been painful: the country appears to be in the midst of a true economic crisis, with inflation spiraling upwards and, as referenced earlier, the decline of the Turkish lira is well documented.
By sector, Financials is by far the Company's largest and provided the most positive material impact over the year. Information Technology is the portfolio's second largest sector and, despite the absence of Tencent and Alibaba, also made a positive contribution to performance. Our anti-cyclical exposure detracted moderately from performance, as did our underweight exposure to Materials and Energy, in the light of rising oil prices and a general strengthening of commodities over the period.
Identifying stocks that generate dividends
The Company's approach, which is to invest in a diversified portfolio of high yield and high profitability stocks to receive dividends from across sectors and countries, has not changed. We remain positive about the prospects for dividend generation from our stocks and this may present the opportunity to grow the Company's dividend in future. For this financial year, we saw a reasonable improvement in dividend receipts (as shown in the revenue numbers on page 44 of the Annual Report), with our positions being able to demonstrate some recovery in fundamental earnings and pay-outs after previous years of pressure in emerging markets. As discussed in the Chairman's Statement, this allowed for an increase in the dividend paid this year, as well as further increasing the Company's revenue reserves.
Portfolio changes
Portfolio changes over the year have been modest, consistent with our policy to invest for the long term and benefit from the continued dividend streams of the companies we hold. Although it has been a challenging time for yield investors in emerging markets, we continue to find a significant number of stocks that look attractive from a dividend perspective.
Of note, we initiated positions in Chinese insurers, China Pacific Insurance and China Life. Dividend yields look attractive while we see strong dividend growth potential from the sector. For Chinese financials in general, we feel risks have diminished due to tighter regulation of non-banks outside the regular Chinese banking system that have been conducting banking-like activity (shadow banking) and a crackdown on debt-like savings products that have driven up leverage to unprecedented levels.
We continue to invest in a diversified portfolio of relatively high-yielding stocks that generate dividends across sectors and countries. Stock turnover has been consistent with this theme; buying or adding to positions where the yield looks attractive and where opportunities have increased, and generally selling those stocks where valuations have become more stretched. A good example of this was the purchase of Banco Itaú in Brazil, following a positive meeting where management emphasised its commitment to balancing pay-outs and growth reinvestment. At the same time, we trimmed holdings such as President Chain Store (Taiwan) and Lukoil (Russia) on valuation grounds.
One point to highlight was a rare dividend disappointment for the Company relating to Smiles, the Brazilian airline loyalty programme company. Smiles' dividend for 2017 was in line with expectations but this year it announced plans to cut its 2018 dividend (to be paid in 2019) to the minimum 25% of the level of profits. This was due to the management wanting to invest in a few different projects to accelerate growth, rather than sticking with the 'steady' trajectory they had previously discussed. As part of our process discipline, and as a direct result of this pay-out disappointment, we sold the stock.
One advantage of an investment trust is the ability to buy attractive stocks which are less liquid and so would not be suitable for open ended vehicles. The Company has historically taken advantage of this with a single digit exposure to such stocks. During 2018 we agreed with the Board to increase this proportion if we saw opportunities available. The recent market turbulence has led to valuations improving for specific stocks in the less liquid space and we have taken advantage of this to increase the 'less liquid' proportion of the portfolio to 14%.
Our engagement on Environmental, Social and Governance (ESG) issues
We pay particular attention to issues that could affect the prospects for stocks within the Company's portfolio. We believe strongly that ESG considerations (particularly Governance) need to be a foundation of any investment process supporting long-term investing and that corporate policies at odds with environmental and social issues are not sustainable in the long run. We incorporate ESG into our stock selection, firstly via our Risk Profile Analysis: questions which our analysts answer about the 1,000+ companies that we cover within the Emerging Markets universe. Of the 98 questions in the Risk Profile Analysis, 74 are directly related to ESG matters. Our analysts and portfolio managers hold over 5,000 company meetings per year, in which we usually discuss relevant ESG topics with management. From a portfolio viewpoint, one result can be seen in the positive tilt towards stocks that we classify as 'Premium' or 'Quality' - these tend to be stocks which score well on the Risk Profile (and so generally have better ESG characteristics). At the end of the financial year, the portfolio had 69% invested in Premium or Quality stocks, a healthy number especially in comparison to Emerging Markets overall where the equivalent proportion is around 30%.
We draw a direct link between the dividend policies of companies and our views on governance, i.e. a direct demonstration of a desire to return cash to shareholders is a tangible and positive governance indicator. We have engaged with many companies on this issue over time - good examples would include our discussions with many Korean corporates which typically have relatively low payout ratios compared with those of other Emerging Markets. These discussions continue and we look for incremental positive change, though for the moment we have generally held a lower weight in Korean equities due to our current views on governance and payouts.
We have also engaged with management teams of investee companies on a variety of other ESG issues, e.g. discussions with China National Offshore Oil Corporation (CNOOC) relating to the environmental impact of its operations, how to reduce risks around pipeline failures and other safety issues. In this instance, we were pleased to see the company undertaking operational and management change to improve practices.
Outlook
Looking forward, we believe that valuations in emerging markets are now at a more neutral level, having been more clearly cheap in 2016 and 2017. This partly reflects the improvement in fundamentals after what has been a difficult few years for emerging economies and companies. We continue to think there is room for emerging markets companies to demonstrate improving results going forward. On a multi-year view we think profitability (return on capital) for the asset class should rise further from current levels, which should, in turn, ultimately drive up dividends and share prices.
We acknowledge that, in the short term, uncertainty may prevail. Recently we have seen more evidence of risks that could interrupt the positive trajectory we have outlined above. These risks include the impact from rising bond yields globally and the risk of 'trade wars' affecting corporate sales and profits which have paused the earnings improvement momentum of emerging markets companies in the near term.
We have a positive view about the long-term prospects for dividend generation from the stocks held in the portfolio. As a reminder, the company receives dividends in local currencies and US dollars but pays dividends in sterling; therefore, movements in sterling have an impact on the value of dividend payments.
We adopt a long-term view in analysing dividends and profitability drivers and the portfolio is positioned to capture this. The return on equity premium of the portfolio versus the market remains high and consistent, which means that the Company invests in stocks that can generate earnings and cash flow to pay out dividends and also to reinvest in the future of their own businesses.
In uncertain times and despite the economic, market and political 'road blocks' that could impede progress in the short-term, we remain focused on investing in sound businesses with good prospects that have the potential to deliver income and capital returns. Our aim is that the Company should continue to have a balanced risk profile that will deliver good returns and reward shareholders willing to invest for the long term.
Omar Negyal
Jeffrey Roskell
Amit Mehta
Investment Managers
23rd October 2018
Principal Risks
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.
With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. In assessing the risks and how they can be mitigated, the Board has given particular attention to those issues that threaten the viability of the Company. These key risks fall broadly under the following categories:
• Investment and Strategy:
an inappropriate investment strategy, for example asset allocation or the level of gearing or foreign exchange weakness, may lead to underperformance against the Company's benchmark index and peer companies. This may result in the Company's shares trading on a narrower premium or a wider discount or insufficient local currency income generation which may lead to a cut in the dividend. The Board manages these risks by diversification of investments through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, currency performance, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing strategically, within a range set by the Board.
• Financial
the financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Further details are disclosed in note 22 on pages 59 to 64 of the Annual Report.
• Corporate Governance and Shareholder Relations
Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report on pages 25 to 28.
• Operational
Loss of key staff by the Manager, such as the Investment Managers, could affect the performance of the Company. Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. This includes the risk of cybercrime and consequent potential threat to security and business continuity. Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included in the Risk Management and Internal Control section of the Corporate Governance report on pages 27 to 28.
• Accounting, Legal and Regulatory
in order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under 'Business of the Company' above. Were the Company to breach Section 1158, it would lose its investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Prospectus Rules, Listing Rules and Disclosure, Guidance & Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, the Manager and its professional advisers to ensure compliance with the Companies Act 2006, the UKLA Prospectus Rules, Listing Rules, DTRs and the Alternative Investment Fund Managers Directive.
Transactions with the Manager and related parties
Details of the management contract are set out in the Directors' Report on page 23 of the Annual Report. The management fee payable to the Manager for the year was £4,269,000 (2017: £3,957,000) of which £nil (2017: £nil) was outstanding at the year end.
During the year £9,000 was refunded by (2017: £42,000 was paid to) the Manager for the administration of savings scheme products, of which £4,000 (2017: £13,000) was outstanding at the year end.
Included in administration expenses in note 6 on page 51 of the Annual Report are safe custody fees amounting to £269,000 (2017: £227,000) payable to JPMorgan Chase Bank N.A. of which £48,000 (2017: £39,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions through its group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £1,000 (2017: £2,000) of which £nil (2017: £nil) was outstanding at the year end.
The Company also holds cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMF. At the year end this was valued at £2,213,000 (2017: £nil). Income amounting to £54,000 (2017: £84,000) was receivable during the year of which £nil (2017: £nil) was outstanding at the year end.
Stock lending income amounting to £3,000 (2017: £nil) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £1,000 (2017: £nil).
Handling charges on dealing transactions amounting to £28,000 (2017: £41,000) were payable to JPMorgan Chase Bank N.A. during the year of which £2,000 (2017: £5,000) was outstanding at the year end.
At the year end, total cash of £2,062,000 (2017: £1,605,000) was held with JPMorgan Chase Bank N.A. A net amount of interest of £4,000 (2017: £7,000) was receivable by the Company during the year from JPMorgan Chase Bank N.A. of which £nil (2017: £1,000) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on page 33 and in note 6 on page 51 of the Annual Report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law) including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under Company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and financial statements are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements are published on the www.jpmglobalemergingmarketsincome.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. The financial statements are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Strategic Report and Directors' Remuneration Report that comply with that law and those regulations.
Each of the Directors, whose names and functions are listed on page 21 of the Annual Report confirm that, to the best of their knowledge:
• the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and return of the Company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
The Board confirms that it is satisfied that the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For and on behalf of the BoardSarah FromsonDirector
23rd October 2018
statement of comprehensive income
For the year ended 31st July 2018
2018 | 2017 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Gains on investments held at fair value through profit or loss | - | 12,019 | 12,019 | - | 42,158 | 42,158 |
Net foreign currency (losses)/gains | - | (674) | (674) | - | 374 | 374 |
Income from investments | 21,358 | - | 21,358 | 19,763 | - | 19,763 |
Interest receivable and similar income | 61 | - | 61 | 91 | - | 91 |
Gross return | 21,419 | 11,345 | 32,764 | 19,854 | 42,532 | 62,386 |
Management fee | (1,281) | (2,988) | (4,269) | (1,187) | (2,770) | (3,957) |
Other administrative expenses | (740) | - | (740) | (840) | - | (840) |
Net return on ordinary activities before finance costs and taxation | 19,398 | 8,357 | 27,755 | 17,827 | 39,762 | 57,589 |
Finance costs | (231) | (537) | (768) | (264) | (617) | (881) |
Net return on ordinary activities before taxation | 19,167 | 7,820 | 26,987 | 17,563 | 39,145 | 56,708 |
Taxation | (2,073) | - | (2,073) | (1,272) | - | (1,272) |
Net return on ordinary activities after taxation | 17,094 | 7,820 | 24,914 | 16,291 | 39,145 | 55,436 |
Return per share | 5.78p | 2.64p | 8.42p | 5.54p | 13.31p | 18.85p |
statement of changes in equity
For the year ended 31st July 2018
Called up | Capital | ||||||
share | redemption | Share | Other | Capital | Revenue | ||
capital | reserve | premium | reserve | reserves | reserve1 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 31st July 2016 | 2,943 | 13 | 218,497 | 101,113 | 12,009 | 9,848 | 344,423 |
Net return on ordinary activities | - | - | - | - | 39,145 | 16,291 | 55,436 |
Dividends paid in the year (note 3) | - | - | - | - | - | (14,412) | (14,412) |
At 31st July 2017 | 2,943 | 13 | 218,497 | 101,113 | 51,154 | 11,727 | 385,447 |
Shares reissued from Treasury | - | - | 81 | - | 122 | - | 203 |
Issue of ordinary shares | 25 | - | 3,410 | - | - | - | 3,435 |
Net return on ordinary activities | - | - | - | - | 7,820 | 17,094 | 24,914 |
Dividends paid in the year (note 3) | - | - | - | - | - | (14,485) | (14,485) |
At 31st July 2018 | 2,968 | 13 | 221,988 | 101,113 | 59,096 | 14,336 | 399,514 |
1 This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.
statement of financial position
At 31st July 2018
2018 | 2017 | |
£'000 | £'000 | |
Fixed assets | ||
Investments held at fair value through profit or loss | 424,209 | 411,548 |
Current assets | ||
Derivative financial assets | 8 | 7 |
Debtors | 2,760 | 2,848 |
Cash and cash equivalents | 4,275 | 1,605 |
7,043 | 4,460 | |
Current liabilities | ||
Creditors: amounts falling due within one year | (1,244) | (220) |
Derivative financial liabilities | - | (1) |
Net current assets | 5,799 | 4,239 |
Total assets less current liabilities | 430,008 | 415,787 |
Creditors: amounts falling due after more than one year | (30,494) | (30,340) |
Net assets | 399,514 | 385,447 |
Capital and reserves | ||
Called up share capital | 2,968 | 2,943 |
Capital redemption reserve | 13 | 13 |
Share premium | 221,988 | 218,497 |
Other reserve | 101,113 | 101,113 |
Capital reserves | 59,096 | 51,154 |
Revenue reserve | 14,336 | 11,727 |
Total shareholders' funds | 399,514 | 385,447 |
Net asset value per share | 134.6p | 131.0p |
statement of cash flows
For the year ended 31st July 2018
2018 | 2017 | |
£'000 | £'000 | |
Net cash outflow from operations before dividends and interest | (5,515) | (4,004) |
Dividends received | 18,467 | 19,352 |
Interest received | 59 | 96 |
Overseas tax recovered | 28 | 471 |
Interest paid | (768) | (885) |
Net cash inflow from operating activities | 12,271 | 15,030 |
Purchases of investments | (150,252) | (116,949) |
Sales of investments | 151,535 | 106,440 |
Settlement of foreign currency contracts | (29) | (159) |
Net cash inflow/(outflow) from investing activities | 1,254 | (10,668) |
Dividends paid | (14,485) | (14,412) |
Shares reissued from Treasury | 203 | - |
Issue of shares | 3,435 | - |
Repayment of bank loans | (14,994) | - |
Drawdown of bank loans | 14,994 | - |
Net cash outflow from financing activities | (10,847) | (14,412) |
Increase/(decrease) in cash and cash equivalents | 2,678 | (10,050) |
Cash and cash equivalents at start of year | 1,605 | 11,663 |
Exchange movements | (8) | (8) |
Cash and cash equivalents at end of year | 4,275 | 1,605 |
Increase/(decrease) in cash and cash equivalents | 2,678 | (10,050) |
Cash and cash equivalents consist of: | ||
Cash and short term deposits | 2,062 | 1,605 |
Cash held in JPMorgan US Dollar Liquidity Fund | 2,213 | - |
Total | 4,275 | 1,605 |
Notes to the financial statements
For the year ended 31st July 2018
1. Accounting policies
Basis of accounting
The financial statements are prepared under the historical cost convention, modified to include fixed asset investments at fair value, and in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in November 2014 and updated in February 2018.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 29 of the Annual Report form part of these financial statements.
The policies applied in these financial statements are consistent with those applied in the preceding year.
In the previous year, the Company elected not to prepare a Statement of Cash Flows, applying the exemption from disclosure available under FRS 102 Section 7.1A(c). The Company has since reviewed the application of the exemption and has resolved not to apply it this year as the inclusion of the Statement of Cash Flows supports fuller financial analysis for the benefit of all shareholders.
2. Return per share
2018 | 2017 | ||
£'000 | £'000 | ||
Revenue return | 17,094 | 16,291 | |
Capital return | 7,820 | 39,145 | |
Total return | 24,914 | 55,436 | |
Weighted average number of shares in issue during the year | 295,938,380 | 294,140,161 | |
Revenue return per share | 5.78p | 5.54p | |
Capital return per share | 2.64p | 13.31p | |
Total return per share | 8.42p | 18.85p |
3. Dividends
Dividends paid and declared
2018 | 2017 | ||
£'000 | £'000 | ||
Dividend paid | |||
2017 Fourth interim dividend paid of 1.9p (2016: 1.9p) | 5,589 | 5,589 | |
First interim dividend paid of 1.0p (2017: 1.0p) | 2,960 | 2,941 | |
Second interim dividend paid of 1.0p (2017: 1.0p) | 2,968 | 2,941 | |
Third interim dividend paid of 1.0p (2017: 1.0p) | 2,968 | 2,941 | |
Total dividends paid in the year | 14,485 | 14,412 | |
Dividend declared | |||
Fourth interim dividend declared of 2.0p (2017: 1.9p) | 5,936 | 5,589 |
4. Net asset value per share
2018 | 2017 | ||
Net assets (£'000) | 399,514 | 385,447 | |
Number of shares in issue | 296,790,161 | 294,140,161 | |
Net asset value per share | 134.6p | 131.0p |
5. Status of announcement
2017 Financial Information
The figures and financial information for 2017 are extracted from the Annual Report and Accounts for the year ended 31st July 2017 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
2018 Financial Information
The figures and financial information for 2018 are extracted from the Annual Report and Accounts for the year ended 31st July 2018 and do not constitute the statutory accounts for that year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
JPMORGAN FUNDS LIMITED
23rd October 2018
For further information please contact:
Divya Amin
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the Annual Report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM The Annual Report will also be available on the Company's website at www.jpmorganglobalemergingmarkets.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.