Annual Financial Report

RNS Number : 2991T

JPMorgan Emerging Mkts Invest Trust

02 October 2014

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC

ANNOUNCEMENT OF FINAL RESULTS

The Directors of JPMorgan Emerging Markets Investment Trust plc announce the Company's results for the year ended 30th June 2014.

Chairman's Statement

Performance

In the year to 30th June 2014, the total return on the Company's portfolio, net of fees and expenses, was a negative 3.5%. This compares with the benchmark index, the MSCI Emerging Markets Index (in sterling terms), which returned +1.4%. The total return to ordinary shareholders was a negative 1.0%, reflecting the narrowing of the discount over the year, from 11.8% to 10.1%.

The Company's objective is to achieve capital growth from emerging markets worldwide and its performance is measured against the MSCI Emerging Markets Index, in sterling terms, on a total return basis. Whilst it is disappointing to report underperformance for the latest financial year, the Board judges performance over the long term and this was only the second year in the last ten financial years that our Investment Manager significantly underperformed the benchmark. Indeed, the Company is still just ahead of the benchmark over three years and significantly ahead over five and ten years, despite last year's slippage.

Our Manager's investment process focuses on bottom-up stock selection rather than a top-down asset allocation across markets. This has served the Company well over the long term but this did not add value during the year. The portfolio has had a traditional bias to high quality growth stocks which benefit directly from rising living standards in the countries we invest in rather than so-called value stocks with lower valuations. We did not get our stock and sector selection right last year as it turned out. In addition, currency factors were also a significant element of the portfolio's overall return over the twelve months, accounting not merely for an element of the underperformance directly, but also affecting stock selection in markets where currency effects were important drivers of relative stock returns. The Board supports the Investment Manager in placing importance on maintaining his investment discipline in identifying companies with superior earnings growth.

As I have explained previously, following the successful issue of Subscription shares in 2009, we report our net asset value on a diluted basis to reflect the potential dilution to net asset value assuming full conversion of the Subscription shares to Ordinary shares. This can give a somewhat misleading impression of the Company's underlying portfolio performance and, as I have stated in previous years, it is not the basis on which we judge the performance of the Manager, which we continue to do excluding the dilution effect. For the record, the fully diluted return on net assets was -3.2%, as against the -3.5% reported above, on an undiluted basis. The Subscription shares expired on 31st July 2014 and were all converted to Ordinary shares, hence this complication will not arise in future years.

Fees

The underperformance this year gives rise to a negative performance fee accrual of £3.6 million, which will be carried forward and has to be offset against any future outperformance before any performance fee becomes payable. In other words, the Manager has to overcome this underperformance before we start paying a performance fee again.

In the interim report, I indicated a change in our management fee arrangements with a move to a sliding scale. Our existing management fee was 1.0% of net assets which remains in place up to a value of £800 million, but for assets in excess of that level the fee now drops to a 0.75% of net assets.

The Board is aware of the pressure to lower fees in the industry and wishes to remain competitive. We intend to keep fee arrangements under review and to that end we will consider whether our performance fee arrangement with the Manager remains appropriate.

Discount Management

We continue to monitor closely the share price and therefore the discount of our share price to the diluted net asset value. The Ordinary share price fell 1.9% over the year, from 567.0p to 556.0p at the year end. The discount, calculated on the fully diluted net asset value, ranged between 8.1% and 11.9%, averaging 10.2% through the year. A total of 276,705 shares were repurchased into Treasury during the year and a further 510,887 shares have been repurchased since the year end.

The Board's policy on discount management remains unchanged - it is prepared to take action to ensure that the fully diluted discount does not exceed 10% for an extended period, but only if the discount is out of line with our peer group and market conditions are orderly. We are prepared to buy shares in at discounts of between 8% and 10% in order to achieve this, subject to those caveats. Over the year under review, whilst the average discount was marginally above 10%, we believe our actions were effective in reducing the volatility of the discount, though we did not quite succeed in keeping it below 10% and it remained wider than our immediate peers.

Now that the Subscription shares are fully exercised, we hope it will be easier to manage the discount. Unless market conditions are disorderly, the Board is keen to exercise its buyback powers to narrow the discount.

Revenue and Dividends

Income after expenses fell by some 24% this year, but we are proposing to maintain the dividend at 5.5 pence. This fall in income was largely driven by negative exchange rate effects on income earned overseas. Our investment policy is aimed at maximising capital growth and does not focus on income. We have however embarked on a more progressive approach to the dividend and are pleased to be able to maintain it this year, by dipping into our substantial revenue reserve. However, given that the Company's objective is to achieve capital growth, it remains the case that dividends may fluctuate from year to year according to our income position.

The Board

David Gamble, the Company's Senior Independent Director, will retire from the Board at the conclusion of the 2014 AGM. He joined the Board in 2006 when the Company acquired the assets of F&C Emerging Markets Investment Trust plc and, on behalf of the Board, I would like to thank David for his contribution to the Company. Nigel Kenny will become our Senior Independent Director on David's retirement. Percy Mistry has indicated his intention to step down from the Board at the conclusion of the 2015 AGM.

In order to ensure appropriate succession planning and continuity, we have commenced the search for a new Director and are seeking to make an appointment in early 2015.

The Manager

The Board monitors the performance of our Manager through the Management Engagement Committee. While last year was something of a disappointment, we remain satisfied 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 believe we are well served.

As I have explained in previous statements, significant regulatory change was brought about with the implementation of the Alternative Investment Fund Managers Directive ('AIFMD') in July this year. In order to ensure compliance with the new regime, the Company entered into a new management agreement with JPMorgan Funds Limited, an affiliate of JPMorgan Asset Management (UK) Limited, and appointed Bank of New York Mellon as its depositary, with effect from 1st July 2014. There are some additional reporting and disclosure requirements as a result of the AIFMD, but in practical terms the way in which the Company is managed remains largely unchanged.

Continuation Vote

As shareholders will be aware, every three years the Company offers shareholders a Continuation Vote to determine whether the Company should continue in existence. Shareholders will be asked to vote on this in a resolution at the forthcoming AGM in November. The Board believes strongly that the Company should continue and it urges shareholders to support the Company by voting yes to the resolution.

Outlook

Emerging markets have had a troubled time but the situation seems to have stabilised. On a valuation basis, they are generally regarded as looking attractive despite the risks compared to developed markets. We are not out of the woods yet with regard to volatility in emerging markets but we appear to be moving in the right direction . We trust also that this will be enhanced by a return to our Manager's successful record of long term outperformance against the emerging markets benchmark.

Alan Saunders

Chairman                                                                                                                                                                               

2nd October 2014

Investment Manager's Report

Results

I am disappointed by the results we have achieved for shareholders this year: they failed to match the returns from the asset class as a whole. While the benchmark index gained 1.4% in sterling terms, the value of the portfolio after fees and expenses fell by 3.5%; the total return to ordinary shareholders, including the movement in the share price and dividends paid, was

-1.0%. Shareholders will, I am sure, also be disappointed by a year in which neither markets nor the manager produced results to shout about. I hope, however, that shareholders will also have the patience to consider this short term outcome in the context of longer term results which suggest that such patience has been rewarded in the past.

Markets during the year

Currencies and politics: these have been the dominant themes throughout the year. Will US interest rates ever rise? The mere hint of a move in this direction, as the US Federal Reserve moved to reduce the monetary stimulus applied by quantitative easing, was enough to cause considerable currency volatility in emerging markets in the second half of 2013, especially in India, which suffered a mini-crisis in the rupee. The thought that US interest rates might eventually increase led investors to shun other countries which need to fund deficits by attracting foreign capital, so significant currency weakness was also seen in Indonesia, South Africa, Turkey and Brazil.

It may seem strange, but I regard this weakening of currencies as a better outcome than the alternative route of adapting economic policies to maintain exchange rates. It means that the market is realigning prices to correct imbalances, and in the process forcing reform and change on governments which were trying to deny economic realities. No matter how difficult this may seem, it is almost certainly better than allowing the imbalances to build up for longer, which would make for more painful adjustments later. In the last twenty years I have seen two examples of economic policies based on fixed exchange rates, and thus forced the entire burden of adjustment onto domestic prices; the first in Asia in the 1990's, and the second in the Eurozone, where it still applies. Both led to debt-fuelled economic expansion and both ended in prolonged recessions, with a painful and very protracted recovery. A conventional economic cycle, of which India is a good current example, seems a lot better to me.

On the political front, it's been a very busy year in emerging markets. A number of elections in important countries cluster in 2014: India, Brazil, Indonesia, and South Africa, some already past and some yet to come. These events tend to punctuate market developments; before them, there is uncertainty; companies defer decisions to see how the result will fall, and stock market investors do the same. The BJP victory in India in May spurred a sharp rise in the Indian market, though in fact any result would probably have produced some positive outcome merely by removing the uncertainty; but investors also hope that more effective government, combined with an economic cycle that was already close to bottoming, may offer better conditions for both the economy and the stocks market than the recent past.

Most would probably see the greatest political risk today in Russia, not because of any election, but because of the country's newly belligerent foreign policy in Ukraine. As I write, the US and Europe are considering further sanctions, while one of the unintended consequences of Mr Putin's interventions has been to lend a new sense of purpose and solidarity to NATO. It is impossible, I suggest, to forecast what will happen in politics. Sometimes politicians can make very bad choices which appear irrational from almost any angle. But our job is to think about risk and reward as far as share prices are concerned; at some price, very bad things are already priced in, while the possibility of better outcomes is almost completely ignored by the market. At that point, we should get interested. I increased the portfolio's investments in India in the year to June 2013, not because I had any idea that Mr Modi would win the election in May 2014, but because good businesses were priced at levels which seemed to assume no economic recovery and no political improvement either. Today, if there is anywhere in the world where a similar opportunity is forming, it may be Russia, though good businesses are rather harder to find there than they are in India.

The portfolio

Our stock selection this past year has not been effective, though our choice of countries actually went well: selection of stocks within markets cost almost 5% compared to the index return and we recovered only 3% of this by having the portfolio tilted towards the right countries. In addition to this, currencies were a significant factor for the reasons explained above. Currency moves affect the portfolio's investments in a variety of ways, not all of which are captured by attribution analysis. The biggest single positive contributor to performance during the year was Tata Consultancy, an Indian IT services business whose revenues arise mostly in dollars and euros and whose costs accrue largely in Indian rupees. Companies like this reap a windfall, temporarily, when the rupee falls. On the other hand, a company like Shoprite, a South African supermarket operator, works predominantly in domestic currency; its profits therefore decline, in sterling terms, when the rand falls.

Over the year, the more successful stocks might appear to have little in common; in addition to Tata Consultancy, the portfolio benefitted from owning Cielo, a Brazilian credit card processor, Weg, a Brazilian company which manufactures and exports electric motors; Delta Electronics, a Taiwanese electronics and industrial automation business and International Personal Finance, a consumer credit company. In fact, several of the better investments are export-focused companies selling across the world and profiting from gradual recovery in Western economies, especially the USA. By contrast, our worst stocks were clustered in countries whose currencies declined: not just Shoprite, mentioned above, but also stocks like Garanti, a Turkish bank, Unilever Indonesia, and United Breweries, India's largest brewer.

While I will make more comments below about the outlook for the portfolio, I might conclude here by saying that I have always thought it very important to frame decisions consistently as an investor. Assets denominated in another currency can eventually recover their value, if you look from a sterling point of view; but this usually happens not because the nominal exchange rate recovers fully, but because prices in the other currency are increased by inflation. As long as we own companies that have pricing power and whose revenues can therefore capture inflation, losses in value (in sterling terms) due to currency declines can be recovered. So if we have bought such stocks on the basis of their long term ability to grow their real value, it would be very contradictory to sell them at the worst point in a currency cycle; we have just had the worst phase: the next phase should be better.

Looking forward (and back)

I first began to work for this investment trust in June 1994, so I have now had the responsibility and privilege of managing this Company's portfolio for twenty years. One of the consequences of such a long time in any role, as politicians very occasionally discover, is that there is nowhere to hide. I cannot plead inexperience, I cannot blame other people, I cannot claim that failures are down to bad luck. Many others have helped me, bringing me good ideas, and the occasional less good one, over the years; while they must take credit for the successes we have had as investors, the failures and mistakes are mine alone. I do not want to dwell at length on the statistical detail of past results - shareholders can read about those in the annual reports published over the years - but I would assert that the outcomes achieved should at least encourage us to keep working in the same way. This is an important point for the future, in my opinion: the things which worked before are likely to work again, and the things to avoid may well resemble the disappointments of the past.

By this I do not mean that the same stocks will always perform well, but rather that the way I have tried to work in the past may well be my best indicator for how to work in the future. The thoughts that go through an investor's mind are not always neatly ordered or linear, but if I were to draw out those that seem to have an enduring relevance for me, I would choose the following things that I keep coming back to when I think about businesses and investing:

•    Keep it simple: the financial world is in love with complexity, yet in the end it all boils down to two questions: will I lose money? will I make money? Everything else is just a subordinate clause in the attempt to reach an answer.

•    Be very wary of high levels of debt; just as cash provides you with choices, debt removes your freedom to act; in the long run, that is often fatal.

•    Do not be fooled by inflation: it is not worth anything. Inflation eases life for businesses and flatters their managers, but one should always try to look through the numbers to take out the effects of inflation, especially in businesses whose assets are replaced on long time cycles.

•    Understand why companies make money: otherwise you can't understand why they will cease to do so.

•    Think about the future, not the past; this is difficult, because it involves uncertainty not facts. Use your imagination, but do not let it run away with you.

•    Conviction is rare, and therefore very valuable. I should always ask myself: what do I know? and be honest enough to know when I am guessing instead.

•    Perhaps most of all, people make the difference. The longer time horizon one has, the more this is true; most of the time, when I meet companies, I want to form an impression of the people who run them. When we find a combination of good people in a fundamentally sound business, we want to own it for as long as possible.

•    Finally, think about businesses, not macroeconomics, and about what you would like to find, rather than what you see right in front of you. The index only tells you about the past, while one only has to look at China to understand that economic growth does not necessarily mean that you can make money in the stock market.

So when I look forward in emerging markets, what do I want to find? I wrote in last year's report about how returns can be broken down into their component parts - growth, dividends, change in valuation and currency. That framework, which I have always found useful but never precise, is really the second stage of what I think about. The first is more basic: I try to understand the true economics of a company (usually understandable as long as you can understand the differences between accounting and real life). By economics, I mean: does it make money for its shareholders, real cash, after everything. You would be surprised how many businesses do not really do this. Then, I try to think about its duration: whether it can go on doing this, and invest more money to make more profits, in the future. The longer I go on as an investor, the more significance I place on the strength of a company, because strong companies endure. And finally I think about governance, which in the end is all about people; do they look after our interests as shareholders and do they spend our money well in the business? If they do not, they destroy both the economics and the duration of the business sooner or later.

Most of the stocks we will own in the portfolio during the next few years are already in the portfolio: I own them on shareholders' behalf because I think they will continue to compound in value over time at a good rate, though never in a straight line. I own them because I believe that they are fundamentally sound businesses which meet the criteria I outlined in the previous paragraph. Sometimes, they are more highly valued than I would like; usually, until this gets to extremes, I ignore it. I would rather own an outstanding business that is a bit expensive than a poor company which is a bit cheap; in a few years' time, if their share prices do not change, the good company will look better value, while the poor one will look worse. My main intent, as I think about the prospects for the portfolio, is to find good companies which are strong enough to withstand competition, not just financially, but operationally.

Notwithstanding the subdued stock market returns of the last few years, the long term prospects for making money in emerging markets remain huge: how can there not be great investment opportunities in an asset class which covers most of the world's population and a large and rising share of the world economy? If one wanted to look for a reason to be cautious, one could ask: how can immature economies produce companies to compete with the world's best? Will that opportunity not be taken by companies from the developed world, rather than by indigenous firms? And yet this clearly can happen. The best firms in emerging markets are highly competitive in any context. This is evidently true of export-oriented businesses, which would not exist otherwise; but in domestic industries the same competitiveness can also be found. There are few businesses more localised than beer; and today, the two largest companies in the world in that industry, AB Inbev and SAB Miller, both grew from beginnings in emerging markets.

It is going to be very important, as competition continues to intensify, to think about how resilient businesses really are, in order understand what they are really worth. I am confident that an approach to investment which has always concentrated on the strength of the businesses owned as well as on their price, can continue to deliver returns to investors in the future, regardless of the uncertainty that the future always holds.

Austin Forey

Investment Manager                                                                                                                     

2nd October 2014

Principal Risks

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

•   Investment Underperformance: An inappropriate investment strategy, for example asset allocation, 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.

•   Political, Economic and Governance: Administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

•   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.

•   Discount: A disproportionate widening of the 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.

•   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'). Were the Company to 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 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 section of the annual report.

•   Operational: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. 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 within the Internal Control section of the Corporate Governance 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 22 of the Annual Report.

Related Parties Transactions

During the financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the year.

Directors' Responsibilities

Each of the Directors confirmsthat, to the best of their knowledge the financial statements, which have been prepared inaccordance 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 or loss of the Company.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

For and on behalf of the Board

Alan Saunders

Chairman

2nd October 2014

Income Statement

for the year ended 30th June 2014

		2014			2013
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at fair
value through profit or loss		-	(32,118)	(32,118)	-	76,287	76,287
Net foreign currency (losses)/gains		-	(1,179)	(1,179)	-	191	191
Income from investments		16,067	-	16,067	18,484	-	18,484
Other interest receivable and
similar income		4	-	4	3	-	3
Gross return/(loss)		16,071	(33,297)	(17,226)	18,487	76,478	94,965
Management fee		(7,449)	-	(7,449)	(7,835)	-	(7,835)
Performance fee		-	-	-	-	(3,211)	(3,211)
Other administrative expenses		(1,235)	-	(1,235)	(1,140)	-	(1,140)
Net return/(loss) on ordinary activities
before taxation		7,387	(33,297)	(25,910)	9,512	73,267	82,779
Taxation		(1,282)	-	(1,282)	(1,375)	-	(1,375)
Net return/(loss) on ordinary activities
after taxation		6,105	(33,297)	(27,192)	8,137	73,267	81,404
Return/(loss) per Ordinary share -
undiluted (note 3)		5.12p	(27.93)p	(22.81)p	6.77p	60.93p	67.70p
Return/(loss) per Ordinary share -
diluted (note 3)		5.12p	(27.90)p	(22.78)p	6.73p	60.59p	67.32p

A dividend of 5.5p (2013: 5.5p) per Ordinary share has been proposed in respect of the year ended 30th June 2014, totalling £6,550,000 (2013: £6,564,000).

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The 'Total' column of this statement is the Profit and Loss Account of the Company, and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movement in Shareholders' Funds

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2012	28,907	89,252	1,665	69,939	488,820	13,348	691,931
Repurchase of shares into Treasury	-	-	-	-	(15,496)	-	(15,496)
Exercise of Subscription shares into
Ordinary shares	(72)	72	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares	1,815	31,609	-	-	-	-	33,424
Net return on ordinary activities	-	-	-	-	73,267	8,137	81,404
Dividends appropriated in the year	-	-	-	-	-	(5,485)	(5,485)
At 30th June 2013	30,650	120,933	1,665	69,939	546,591	16,000	785,778
Repurchase of shares into Treasury	-	-	-	-	(1,512)	-	(1,512)
Issue of Ordinary shares on exercise
of Subscription shares	4	77	-	-	-	-	81
Net (loss)/return on ordinary activities	-	-	-	-	(33,297)	6,105	(27,192)
Dividends appropriated in the year	-	-	-	-	-	(6,562)	(6,562)
At 30th June 2014	30,654	121,010	1,665	69,939	511,782	15,543	750,593

Balance Sheet

at 30th June 2014

	2014	2013
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	714,278	755,653
Investment in liquidity fund held at fair value through profit or loss	31,596	28,222
Total investments	745,874	783,875
Current assets
Financial assets: derivative financial instruments	5	-
Debtors	2,177	2,181
Cash and short term deposits	2,792	4,950
	4,974	7,131
Creditors: amounts falling due within one year	(255)	(5,228)
Net current assets	4,719	1,903
Total assets less current liabilities	750,593	785,778
Provision for liabilities and charges
Performance fees	-	-
Net assets	750,593	785,778
Capital and reserves
Called up share capital	30,654	30,650
Share premium	121,010	120,933
Capital redemption reserve	1,665	1,665
Other reserve	69,939	69,939
Capital reserves	511,782	546,591
Revenue reserve	15,543	16,000
Total shareholders' funds	750,593	785,778
Net asset value per Ordinary share (note 4)
Undiluted	630.3p	658.4p
Diluted	623.4p	649.3p

Company registration number: 2618994.

Cash Flow Statement

for the year ended 30th June 2014

	2014	2013
	£'000	£'000
Net cash inflow from operating activities	2,001	6,774
Taxation
Taxation recovered	149	110
Capital expenditure and financial investment
Purchases of investments	(177,973)	(211,639)
Sales of investments	182,803	194,603
Other capital charges	(16)	(24)
Net cash inflow/(outflow) from capital expenditure and
financial investment	4,814	(17,060)
Dividend paid	(6,562)	(5,485)
Net cash inflow/(outflow) before financing	402	(15,661)
Financing
Issue of Ordinary shares on exercise of Subscription shares	81	33,424
Repurchase of shares into Treasury	(1,457)	(15,496)
Net cash (outflow)/inflow from financing	(1,376)	17,928
(Decrease)/increase in cash in the year	(974)	2,267

Notes to the Accounts

for the year ended 30th June 2014

1.  Accounting policies

(a) Basis of accounting

     The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP') 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 January 2009.

     All of the Company's operations are of a continuing nature.

     The accounts have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of investments at fair value through profit or loss.

     The policies applied in these accounts are consistent with those applied in the preceding year.

2.  Dividends

	2014	2013
	£'000	£'000
Dividends paid and proposed
Dividend paid
2013 Final dividend of 5.5p (2012: 4.5p)1	6,562	5,485
Dividend proposed
2014 Final dividend proposed of 5.5p (2013: 5.5p)	6,550	6,564

     ¹The final dividend declared in respect of the year ended 30th June 2013 amounted to £6,564,000 (2012: £5,164,000). However, the amount paid amounted to £6,562,000 (2012: £5,485,000) due to shares repurchased after the balance sheet date but prior to the share register record date.

The final dividend proposed in respect of the year ended 30th June 2014 is subject to approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 30th June 2015.

3. Return/(loss) per Ordinary share

	2014	2013
	£'000	£'000
Return/(loss) per Ordinary share is based on the following:
Revenue return	6,105	8,137
Capital (loss)/return	(33,297)	73,267
Total (loss)/return	(27,192)	81,404
Weighted average number of Ordinary shares in issue during the year
used for the purpose of the undiluted calculation	119,235,135	120,244,581
Weighted average number of Ordinary shares in issue during the year
used for the purpose of the diluted calculation	119,340,784	120,915,895
Undiluted
Revenue return per share	5.12p	6.77p
Capital (loss)/return per share	(27.93)p	60.93p
Total (loss)/return per share	(22.81)p	67.70p
Diluted
Revenue return per share	5.12p	6.73p
Capital (loss)/return per share	(27.90)p	60.59p
Total (loss)/return per share	(22.78)p	67.32p

     The diluted return per Ordinary share represents the return on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the year as adjusted in accordance with the requirements of Financial Reporting Standard 22 'Earnings per share'.

4. Net asset value per Ordinary share

	2014	2013
Undiluted
Ordinary shareholders funds (£'000)	750,593	785,778
Number of Ordinary shares in issue	119,091,971	119,353,816
Net asset value per Ordinary share (pence)	630.3	658.4
Diluted
Ordinary shareholders funds assuming exercise of Subscription shares (£'000)	805,737	841,003
Number of potential Ordinary shares in issue	129,247,403	129,524,108
Net asset value per Ordinary share (pence)	623.4	649.3

     The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the prevailing price of 543p at the year end.

5. Status of results announcement

2013 Financial Information

The figures and financial information for 2013 are extracted from the published Annual Report and Accounts for the year ended 30th June 2013 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.

2014 Financial Information

The figures and financial information for 2014 are extracted from the Annual Report and Accounts for the year ended 30th June 2014 and do not constitute the statutory accounts for the year.  The Annual Report and Accounts include 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 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

 

END

 

 

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