JPMorgan Emerging Markets Investment Trust Regulatory News (JMG)

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC

(the 'Company')

FINAL RESULTS FOR THE YEAR ENDED 30TH JUNE 2019

Legal Entity Identifier: 5493001VPQDYH1SSSR77

Information disclosed in accordance with the DTR 4.1.3

CHAIRMAN'S STATEMENT

At the beginning of the financial year the Directors of the Company set out three key objectives. These were to continue the strong record of investment performance, to reduce the discount of our share price to the net asset value and to continue to offer a competitive proposition through a reduction in the management fee. I am pleased to say that we have made progress on all three fronts.

Investment Performance

Investment performance in the year to 30th June 2019 was strong in both absolute and relative terms. The return to shareholders was +21.5% over the year and the Company's return on net assets was +13.3%. This shows extremely favourable outperformance against the benchmark index (the MSCI Emerging Markets index with net dividends reinvested, in sterling terms) which returned 5.0% and is a great credit to Austin Forey and his team. This reflects their disciplined process of investing in companies which combine superior long-term prospects with rigorous environmental, social and government practices. This outperformance once again shows the benefits that can be achieved by active management in the emerging markets area against investments in either passive funds or exchange traded funds ('ETFs') and, given the Company's emphasis on sustainability, a further advantage is that the carbon footprint of the Company's investments is less than one twentieth of the carbon footprint of an ETF based on the same index.

Performance over the longer term is also very encouraging and is well ahead of benchmark over three, five and ten years. The Investment Manager's Report goes into more detail on the investment performance and how it was achieved.

Discount

For some time the Board's policy has been to buy back shares if the discount is wider than 10% for an extended period, is out of line with the peer group and market conditions are orderly. At the half year the Directors broadened the scope of this policy to allow the Company to buy back shares at a narrower discount if the Board believes this to be in the shareholders' interests.

Over the year the Directors have been looking to broaden the shareholder base to include more wealth managers and retail investors and reduce both the level and volatility of the discount. The Company's superior investment performance and the Investment Manager's distinctive investment process have enabled both JPMorgan and the Company's broker Stifel to promote the Company and attract new buyers.

The share price and the discount of our share price to the net asset value are closely monitored. The share price rose 18.9% over the year, from 843.0p to 1002.0p at the year end. The discount (calculated using the cum-income net asset value, on which the Board's share buyback programme is operated) ranged between 6.6% and 14.5%, averaging 10.6% through the year. The return to shareholders of +21.5% reflects a significant narrowing of the discount at which the Company's shares trade, from 12.9% at the previous year end to 6.9% on 30th June 2019. At the time of writing the discount is 8.5%, a modest widening since the Company's year end, which is consistent with trends in the peer group.

During the year, we repurchased a total of 1,496,110 shares into Treasury at an average discount of 9.7%. The Company's shares have traded consistently at a narrower discount than its two largest peer companies.

Management Fee

I am pleased to confirm that, as announced on 26th July 2019, following a review the Board reached agreement with JPMorgan Funds Limited to revise the Company's management fee. With effect from 1st July 2019, the management fee has been charged at the rate of 1% per annum on the value of the Company's portfolio up to £500 million (previously £800 million) and at the rate of 0.75% thereafter. This will bring the Company's ongoing charges ratio down to approximately 0.94%, which continues to be the lowest in the emerging markets investment trust sector and one of the lowest amongst emerging markets open ended investment companies (OEICs).

Revenue and Dividends

The revenue return per share increased again in the last financial year, allowing the Board to increase this year's total dividend by 12%, consistent with our commitment to increase the dividend over time, in line with an increase in the underlying companies' profits and the dividends they pay out. The revenue return per share for the year was 14.85p (2018: 13.40p). During the year, the Board agreed that the Company now generates sufficient income to warrant the payment of an interim dividend each year. This more closely reflects the receipt of income from the Company's portfolio and as a consequence an interim dividend of 5.0p per share was paid in April.

The Board proposes a final dividend of 9.0p per share, subject to shareholder approval at the forthcoming Annual General Meeting ('AGM'). This will increase the total dividend for the year from 12.5p to 14.0p. However, I would remind shareholders that for individual years dividends received in sterling terms may fluctuate in line with underlying earnings as well as currency movements and any changes in the portfolio, although the Board has the ability to use the Company's reserves to smooth dividends paid to shareholders from year to year.

The Board

Aidan Lisser was appointed to the Board on 1st December 2018, following the retirement of Anatole Kaletsky at the 2018 AGM. The Board will look to recruit another Director by the November 2020 Annual General Meeting and will aim to meet the Hampton-Alexander recommendation of having a minimum of 33% female representation on the Board in the medium term.

The Manager

The Board monitors the performance of our Manager through the Management Engagement Committee. It judges performance over the longer term and thus we remain pleased with the Manager's overall performance, not only in terms of investment performance but also in terms of risk management, administration, controls and compliance, where we continue to be well served by JPMorgan.

AGM

This year's AGM will be held at JPMorgan's office at 60 Victoria Embankment, London EC4Y 0JP on Wednesday, 13th November 2019 at 3.00 p.m. Austin Forey will give a presentation to shareholders, reviewing the past year and giving his view on the outlook for emerging markets for the current year. The meeting will be followed by afternoon tea, which will provide shareholders with the opportunity to meet the Directors and the Investment Manager. We look forward to seeing as many shareholders as possible at the AGM.

Outlook

There are still a number of uncertainties in global economies with continued worries over slowing economies and trade between the US and China, with many interest rates at historic lows (and in some cases negative levels). Uncertainty over Brexit has caused sterling to be weak over the financial year against most currencies, including emerging market currencies. This has boosted the absolute returns in sterling for our shareholders and, were there to be any reversal of sterling's weakness, this would, in contrast, detract from sterling share price returns. After a period of extremely positive relative performance it is important to point out that the Investment Manager's approach, focusing particularly on high quality growth companies, may in the future encounter periods when the Company does not outperform the benchmark index, as has happened in the past. However, valuations in the companies we own do not look overstretched and we believe that the focus on finding and investing in long term winners across the emerging markets' spectrum will continue to add value for our shareholders over the longer term.

Sarah Arkle

Chairman

2nd October 2019

INVESTMENT MANAGER'S REPORT

Objectives & outcomes

Perhaps a good place to start would be to revisit the key objectives with which we opened the Investment Manager's commentary in last year's annual report: how did we do against these?

Investment returns

The high level objective of the Company, stated once again on the first page of the annual report, is simply to maximise returns from a diversified portfolio of investments. As far as returns are concerned, this has been a reasonable year.

Over the financial year to June 2019, the return on net assets was over 13.3%, while the return to shareholders, which takes into account the change in the share price rather than the change in net asset value ('NAV'), was 21.5%. These are both above the long term average outcomes achieved by the Company in the past. In fact, since its formation 28 years ago, the total return on the Company's NAV per share, including dividends reinvested, has averaged 9.5% per annum in sterling terms, while the return on the share price has averaged 9.3% per annum.

Of course it's pleasing to be able to report on a better than average year, but this in itself is not terribly meaningful; absolute returns from markets account for much of the results accruing to shareholders, and there have been years when market returns have been very high, and the returns for the Company have also been high, regardless of whether we have managed to exceed the benchmark return from the asset class or not. But this has been a good year in two ways.

First, the margin of performance above the benchmark return has been unusually high: the 'investment manager contribution' was 9.2%, more than twice the long-run average. Or to put this another way, well over half the total return on net assets during this past year came from investment policy ('alpha') rather than from overall market returns ('beta'). While very welcome, this is also unusual, and I hope that it doesn't raise expectations too much as far as the future is concerned. As shareholders, please do not assume that the Investment Manager has been struck by sudden genius; we make investment decisions without knowing how long they will take to pay off, which means that the returns within any given year are unpredictable and contain elements of chance.

The second way in which the year has been unusual is in the difference between the return on net assets and the return to shareholders, which was higher; this reflects a narrowing of the share price discount to NAV by six percentage points during the financial year. As Investment Manager, I don't claim credit for this; it is a function of supply and demand for the Company's shares. We at JPMorgan have made a concerted collective effort to market the Company throughout the year, but it is hard to quantify the effect of this in creating new demand for the Company's shares. The share buyback policy laid out by the Board has certainly played an important part too. While it is of course pleasing to see the discount narrower, I would also urge shareholders to remember that such effects are finite rather than infinitely repeatable: the narrower the discount, the less there is to narrow in the future. All the same, it's very encouraging to see the value of the Company's portfolio more closely reflected in the share price, and the Investment Manager will continue to make the same efforts to maintain this.

Diversification

The second part of the Company's strategic objective refers to a diversified portfolio. At the end of the latest financial year, 30th June, the Company held 58 investments in its investment portfolio, two fewer than a year earlier. I do not consider this a meaningful change in diversification, especially given that one of the disposals, of a tiny Pakistani investment, accounted for a mere fraction of one percent of the total assets. Twenty years ago, in 1999, the portfolio was invested in 74 companies; ten years ago, in 2009, it owned shares in 76 separate companies. If anything, my inclination over recent years has been to hold fewer investments as time goes by.

But the number of holdings in itself is not the only measure of diversification; it is equally if not more important to think about whether investments have common factors which determine their prospects; a portfolio of oil companies spread across many countries might look diversified, but in reality, their values would all be strongly influenced by the global oil price. That is not the case with other kinds of business. In fact, the more domestic and localised a company's activity, the less it has in common with other similar companies around the world, so it is not a coincidence that almost two thirds of the overall portfolio is invested in domestically-oriented industries, especially in the consumer and financial sectors.

Yet there is an even better way of seeking diversification, and that is to make investments whose returns will in the long run be driven mostly by factors entirely specific to an individual company. This is one way of thinking about competitive advantage and corporate skill; what does a company have that its competitors cannot replicate? If that edge persists, it can translate into very sustained growth in market share at the expense of others; such idiosyncratic factors are perhaps the best way of ensuring diversification in any investment portfolio. It is again not a coincidence that the investments we like most, and tend also to keep for longest, are those where precisely these criteria apply. Examples include Taiwan Semiconductor, whose pioneering model for manufacturing chips to the designs of its customers (at prices and specifications other firms cannot match) has allowed it to grow for many years; similarly, Walmart Mexico has been able to expand its share of the Mexican market consistently by offering low prices and wide assortment through a range of retail formats. Provided that businesses like these are continually reinforcing their competitive strengths, and still have room to grow, they remain very diversifying elements within the overall portfolio.

If these were our high level objectives, what of the more specific tasks I outlined last year as part of the description of how we approach the management of the Company's investments?

Finding good businesses

Naturally, I hope that we have already found many of the good businesses out there, and own them in the portfolio. Most of the large positions have remained unchanged; nine of this year's top ten holdings appeared in last year's top ten as well, and the only change is due to share price movements rather than transactions. I would like to view such stability as a sign that it is hard to find lots of businesses to match those we already own. But this doesn't mean that we don't try; in fact we spend a lot of time searching for companies to add to our list of good businesses.

All of the four new positions added to the Company's portfolio during the year were from China. They are: Kweichou Moutai, a spirits producer and owner of an iconic Chinese brand; Foshan Haitian, the largest producer of soy sauce in the world; Midea, one of the leading global producers of domestic appliances, and Yum China, the largest operator of fast food format restaurants in China. Are these good businesses? Well of course, we think so. I admit that few things grab my attention during a company meeting like the comment "we can trace our history back three hundred years". Already, such a sentence tells you a lot about a company's duration, and by extension, about the nature of the industry in which it operates. Two of our four new additions can boast such a pedigree. Longevity alone, though, does not make for a good business. The four companies we added in China also share certain economic characteristics: they all generate positive operating cash flows consistently; they have all shown sustained growth in dividends per share; they all generated returns on equity of 25% or more in their latest financial years, in three instances achieving this in spite of large cash piles on their balance sheet; and they are all leaders in their respective industries. We hope that they will prove to be worthy and profitable additions to the Company's collection.

Paying sensible prices

Are we paying sensible prices? That question is not getting any easier to answer. I say that not because the nature of equity investing is being radically altered, but because strange things have been happening to interest rates and bond markets, which have always been the bedrock on which valuation assessments have been based. Not many years ago, you could start from the 'risk free rate', add an equity risk premium and some adjustment for the individual company, and end up with a reasonable idea of an appropriate return for an equity investment. Now, governments and even some European companies are issuing bonds at negative yields; in buying these, investors are accepting from the outset that they will lose money. This doesn't feel like a healthy development to me. It also introduces a challenge when considering valuations. If a company can pay dividends and grow at all, then it is already offering a considerably better return than some bonds, no matter how high its valuation. Add to that the fact that if there is inflation in the future, some companies are going to offer much better protection than bonds, and the calculations get harder still.

It's probably more meaningful therefore to look at aggregate valuations and how they compare to the past, and also to consider how this connects to the underlying performance of the companies held in the portfolio. At the end of June this year, the portfolio was valued at 19.5 times forward earnings, and a dividend yield of 2.1%; a year before, in June 2018, it was priced at 18.9 times forward earnings and a dividend yield of 2.1%. So there has been a marginal increase in the multiple of earnings, and no change in the dividend yield. Dividends accrued by the portfolio rose by 8.4% compared to the previous year, while dividends actually received in cash during the year increased by 27%. Neither of these can be taken entirely at face value as an indicator of the change in intrinsic value of the portfolio's companies, as they are affected from year to year by fluctuations in exchange rates as well as by timing. Even so, I suggest that shareholders should take some comfort on this front from several considerations: first, valuations have barely changed for the portfolio; second, the companies it holds continue to grow their dividends healthily in aggregate; and third, the absolute valuation of the portfolio, while not extremely low, looks acceptable for a collection of competitive businesses with strong balance sheets and good cash generation; finally, of course, the discount to NAV means that shareholders are buying the portfolio at slightly lower valuations than those stated above.

Keeping investments for as long as possible

Turnover of investments was again kept to low levels during the last year; we made purchases equivalent to 5% of the Company's average portfolio, and sales close to 7%. As in previous years, this low level of activity is deliberate. I am often asked why we sell stocks, or more specifically, what our "sell discipline" is; the answer is that we set out intending to keep stocks, not to dispose of them; so we sell them either when the valuation has risen to such an extent that the forward returns look less appealing, or when the investment thesis has not worked. The smart follow up question, of course, asks why we don't sell before the thesis has failed; and the smart answer, naturally, is that we did not expect it to fail. I have long argued that failed investments are the necessary price we pay for the successes which we can only achieve by having an approach which leans heavily to the long term. If we kept stocks for only a year or two (which would already be longer than the average investor in many stock markets around the world), then we would never have successes like AIA, a leading life insurance company based in Hong Kong with operations covering most of Asia. We invested in this company at IPO in October 2010, at HKD 19.68 per share; almost nine years later, on the last trading day of June 2019, the share price closed at HKD 84.25, more than four times higher. This basically reflects the growth in the intrinsic value of the business over the years, for which perhaps the best proxy is simply dividends paid to shareholders. AIA has grown its dividend from 33 cents per share in 2011 to 114 cents per share in 2018, a rate of growth close to that of its share price. I believe that outcomes like this are simply not achievable if investments are approached with a finite short term mind set; and this matters because of the asymmetry inherent in equity investing. You can only ever lose what you invest; but your gains can be multiples of your initial outlay. It follows that a few large successes can more than outweigh a greater number of failures.

The past year in markets

The section above has already covered a lot of the issues specific to the Company's performance, so I shall limit comments in this part to more general reflections on what has been happening in emerging markets.

As always, there have been plenty of ups and downs; this year, more of them than usual can be ascribed to politics. Several emerging markets have been through their own political cycles: the election of a new president in Brazil in the autumn of 2018 at least brought some resolution to the uncertainty that had dogged that market in the months leading up to the election, and instilled some hope that Brazil's dire economic performance of recent years might be improved by some economic reforms. The stock market responded enthusiastically, though the old adage about it being better to travel hopefully than to arrive should not be set aside yet. Elsewhere in Latin America, a new president in Mexico surprised markets by actually doing some of the things promised during the election campaign. Meanwhile, although it is not a country we invest in, it is worth mentioning Venezuela: a rich country brought to penury by a combination of populism, autocracy and incompetence in government. It should serve as a salutary reminder of the value of good institutions and effective democratic processes, and of their fragility.

Other notable political developments include the re-election in the spring of this year of the Indian prime minister (in the world's largest exercise in democracy), and also the confirmation of a new president in South Africa. Both have much to do. While it has been a busy year in politics simply because of local electoral cycles, the other recurrent theme has been the ongoing trade dispute between the USA and China which has resulted in rising tariffs on an increasing number of products. Most economists see this as unambiguously bad, and probably as bad politics too; stocks market reactions over the year would suggest that most investors share this view. If anything, markets may eventually become desensitised by the incessant gyrations of politicians, but a lot of volatility has resulted in the last twelve months, bringing share prices in China down significantly in late 2018, and leading to an equally strong rebound in the opening months of 2019.

Political risks are not going away, as the current protests in Hong Kong remind us. But other longer term forces are also playing a part in equity markets. Global bond markets are beginning to warn of recessionary risks, and it seems likely that interest rates and inflation will remain low. I can see two big reasons for this. The first is demographics; as populations age, the impact is naturally deflationary, as the Japanese experience shows. All other things being equal, this implies that interest rates will be low. But to this we need to add the policy of low rates itself, put in place after the financial crisis a decade ago. Indirectly, this has led to the emergence of businesses with deflationary effects, like Uber: investors have been prepared to fund such companies in the hope of a large profit far in the future; that profit, when discounted back to the present at very low rates, is worth enough to justify participation. If discounted at the rates which applied before the financial crisis, the investment might look unappealing, funding might not be forthcoming, and the business might not develop in the same way; so paradoxically, low interest rates themselves may have reinforced the case for low interest rates. That was probably not what central banks intended a decade ago.

This produces challenges for financial markets, as mentioned above. Emerging markets, though, are probably further removed from this than other areas. While some countries in Asia are now facing subdued growth and very low inflation, most emerging markets remain quite inflationary, and have interest rates which reflect that. Of course this means that their currencies will tend to weaken over the long run, but it does make economic policy a lot easier to pursue in conventional ways, and it also makes businesses easier to manage. We spend a considerable amount of time exploring "what if" scenarios for the companies in the portfolio, especially those financial companies whose business models are sensitive to the interest rate environment, and we mustn't become complacent about the extent to which economic conditions can change. Again, a set of investments in companies with enduring competitive advantages is likely to be as good a place to be as any, in my opinion.

More generally, the portfolio continues to exhibit characteristics which I believe demonstrate that we are broadly achieving our objective of finding and investing in good businesses on shareholders' behalf. Returns on capital for the underlying investee companies are well above the average for the asset class and their balance sheets are strong. Finally, the portfolio continues to exhibit a significantly better carbon footprint than the benchmark index, something which will only become more important as a measure of corporate quality and sustainability. Details of this can be seen on page 22 of the annual report to be published shortly, following the disclosure on Greenhouse Gas Emissions; I will simply point out here that if, instead of owning shares in this Company, shareholders used their savings to buy a passive fund replicating our benchmark index, the carbon output from the underlying investments you made would be more than twenty times higher.

PERFORMANCE ATTRIBUTION

YEAR ENDED 30TH JUNE 2019

Source: JPMAM/Morningstar.

All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark.

A Alternative Performance Measure ('APM').

A glossary of terms and APMs is provided on pages 76 and 77 of the annual report.

Looking forwards

Does a career in equity investment change the way you see the world? I sometimes wonder. It has always seemed to me prudent to think at the outset about why an investment might fail: a pre mortem analysis, if you will. But an investor must not be paralysed by uncertainty; the future is always uncertain, and often beyond our ability to imagine. Who could have seen, ten years ago as the financial crisis began to subside, how much the corporate landscape might change, or what investment opportunities might arise? Of the top ten holdings in the portfolio at June 2019, three were not even listed in June 2009. Equally, the idea of an emerging market company reaching a market value of 500 billion dollars would have seemed incredible, yet more than one has touched that mark in the last couple of years.

We often view the present through the lens of the past, anchoring to prices or normalities from our own experience; this makes the present look odd, and the future unimaginable. Yet how can there not be opportunities ahead? As we look forwards, we need the ability to imagine things which seem strange today; and we cannot guess in advance what opportunities may arise. My point is that while prudence and a sober approach to taking risks is a valuable trait for investors, this needs to be balanced by a streak of optimism. What matters is the ability to set out, even without knowing where the road ends. As J.P. Morgan himself advised: "go as far as you can see; when you get there, you will be able to see farther."

Austin Forey

Investment Manager

2nd October 2019

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 Underperformance

An inappropriate investment strategy, for example poor stock selection, the level of gearing or the degree of portfolio risk, could lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments and through a set of 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, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Manager, who attends all Board meetings, and reviews data which show statistical measures of the Company's risk profile.

• Loss of Investment Team or Investment Manager

A sudden departure of the investment manager or several members of the investment management team could result in a short-term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel.

• Political and Economic

Sustained underperformance of emerging markets as an asset class as a result of risks such as the imposition of restrictions on the free movement of capital. Currently, there are UK-related risks due to the uncertain outcome of the 'Brexit' process and a possible change of Government. These risks are discussed by the Board on a regular basis.

• Strategy/Business Management

An inappropriate corporate initiative, for example a takeover of another company or an issue of new capital; misuse of the investment trust structure, for example inappropriate gearing; or if the Company's business strategy is no longer appropriate, may lead to a lack of investor demand. The Board discusses these risks regularly and takes advice from the Manager and its professional advisers.

• Operational and Counterparty Failure

Disruption to, or failure of, the Manager's or a counterparty's accounting, dealing or payments systems or the Depositary or Custodian's records may prevent accurate reporting and monitoring of the Company's financial position. Under the terms of its agreement, the Depositary has strict liability for the loss or misappropriation of assets held in custody. See note 20(c) for further details on the responsibilities of the Depositary. Details of how the Board monitors the services provided by JPMF and its associates and the key elements designed to provide effective risk management and internal controls are included within the Risk Management and Internal Controls section of the Corporate Governance Statement on pages 31 and 32 of the annual report to be published shortly.

• Cyber Crime

The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. The Board has received the cyber security policies for its key third party service providers and JPMF has assured Directors that the Company benefits directly or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by an independent third party and reported every six months against the AAF Standard.

• Share Price Discount

A disproportionate widening of the share price discount relative to the Company's peers could result in loss of value for shareholders. The Board regularly discusses discount policy and has set parameters for the Manager and the Company's broker to follow.

• Change of Corporate Control of the Manager

The Board holds regular meetings with senior representatives of JPMF in order to obtain assurance that the Manager continues to demonstrate a high degree of commitment to its investment trusts business through the provision of significant resources.

• Legal and Regulatory

In order to qualify as an investment trust, the Company must comply with Section 1158. Details of the Company's approval are given under 'Structure and Objective of the Company' on page 20 of the annual report. Should the Company breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio would 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 Listing Rules and Disclosure Guidance and 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 and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules and DTRs.

• 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 Statement on pages 29 to 32 of the annual report.

• Financial

The financial risks faced by the Company include market price risk, interest rate risk and credit risk. Further details are disclosed in note 20 on pages 62 to 67 of the annual report.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contract are set out in the Directors' Report on page 27 of the annual report. The management fee payable to the Manager for the year was £11,054,000 (2018: £10,980,000) of which £nil (2018: £nil) was outstanding at the year end.

During the year £79,000 (2018: £35,000), including VAT, was payable to the Manager for the administration of savings scheme products, of which £36,000 (2018: £44,000) was outstanding at the year end.

Safe custody fees amounting to £529,000 (2018: £571,000) were payable during the year to JPMorgan Chase N.A. of which £138,000 (2018: £229,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £3,000 (2018: £nil) of which £nil (2018: £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 £0.6 million (2018: £0.2 million). Interest amounting to £183,000 (2018: £137,000) was received during the year of which £1,000 (2018: £2,000) was outstanding at the year end.

Handling charges on dealing transactions amounting to £44,000 (2018: £21,000) were payable to JPMorgan Chase N.A. during the year of which £16,000 (2018: £2,000) was outstanding at the year end.

At the year end, total cash of £5,327,000 (2018: £873,000) was held with JPMorgan Chase. A net amount of interest of £4,000 (2018: £31,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2018: £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found on page 36 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 regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and prudent; 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 adequate 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 enable them to ensure that the financial statements and the Directors' Remuneration Report 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 accounts are published on the www.jpmemergingmarkets.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 auditors accept no responsibility for any changes that have occurred to the Annual Report since they were initially presented on the website. The Annual Report is 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 Strategic Report, a Directors' Report and Directors' Remuneration Report that comply with the law and those regulations.

Each of the Directors, whose names and functions are listed in Directors' Report confirm that, to the best of their knowledge:

• the Company's financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

• the Directors' 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 Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

For and on behalf of the Board

Sarah Arkle, Chairman

2nd October 2019

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30TH JUNE 2019

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30TH JUNE 2019

1 This reserve forms the distributable reserve of the Company band is used to fund distributions to investors via dividend payments.

STATEMENT OF FINANCIAL POSITION

AT 30TH JUNE 2019

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30TH JUNE 2019

NOTES TO THE FINANCIAL STATEMENTS

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 disclosure on going concern on page 33 of the Directors' Report within 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.

2. Return per share

3. Dividends

(a) Dividends paid and proposed

All dividends paid and proposed in the year have been funded from the revenue reserve.

The dividend proposed in respect of the year ended 30th June 2019 is subject to shareholder approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 30th June 2020.

(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')

The requirements of Section 1158 are considered on the basis of the dividend proposed in respect of the financial year, shown below.

The revenue available for distribution by way of dividend for the year is £18,272,000 (2018: £16,576,000). The revenue reserve after payment of the final dividend will amount to £14,718,000 (2018: £13,577,000).

4. Net asset value per share

5. Status of results announcement

2018 Financial Information

The figures and financial information for 2018 are extracted from the Annual Report and Accounts for the year ended 30th June 2018 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include 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.

2019 Financial Information

The figures and financial information for 2019 are extracted from the published Annual Report and Accounts for the year ended 30th June 2019 and do not constitute the statutory accounts for that year. The Annual Report and Accounts include 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. The Annual Report and Accounts will be delivered to the Register 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

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 shortly be available on the Company's website at www.jpmemergingmarkets.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

JPMORGAN FUNDS LIMITED