Annual Financial Report

RNS Number : 7014L

JPMorgan Emerging Mkts Invest Trust

05 October 2016

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30th JUNE 2016

The Directors of JPMorgan Emerging Markets Investment Trust plc announce the Company's results for the year ended 30th June 2016.

Chairman's Statement

Performance

After a period of prolonged weakness, emerging markets rallied strongly from January onwards but were still down on the year in local currency terms. However, in sterling terms, investors received a positive return as a result of the sharp fall in sterling in the week after the UK's EU referendum. Taking account of those currency fluctuations, for the year to 30th June 2016, the Company produced a return on net assets of +12.7%. This compares very favourably with the benchmark index, the MSCI Emerging Markets Index (in sterling terms), which returned +3.5%. Stock selection was again the most significant positive factor, adding approximately 7% in relative performance over the past 12 months, thus further enhancing the Company's excellent long term performance record. The Company is significantly ahead of the benchmark over three, five and ten years. The return to ordinary shareholders was +9.3%, reflecting a widening of the discount over the year, from 10.7% to 13.2%. The post-referendum fall in sterling widened the discount out by increasing net assets in sterling terms. The share price tends to follow these fluctuations with a lag.

As I explained in the Company's half year report, the Board had always emphasised capital growth as its investment objective. Given that the benchmark we aim to beat is a total return benchmark (i.e. capital gains plus income reinvested), we restated that policy to a total return objective. I would reiterate that this has not, and will not, result in any change in the way in which the portfolio is managed.

Revenue and Dividends

Historically, the Company allocated 100% of its management fees and finance costs to the Company's revenue account. As disclosed in the half year report, the Board reconsidered this policy in the light of the investment returns from the Company's portfolio and the expected split of returns between capital and income in the coming years. As a result, it decided to charge 70% of the Company's management fees and finance expenses to capital with effect from 1st July 2015.

On this revised basis, the revenue return per share for the year was 9.49p (on the old basis it would have been 5.1p). This change in expense allocation will increase the potential for dividend increases over time, but of course dividends will still fluctuate in line with underlying earnings.

As a result of the increased earnings per share, we propose to increase the dividend from 6.0p to 9.0p. This is subject to shareholder approval at the forthcoming AGM. This increase reflects, on a one-off basis, the change in allocation policy. Our earnings are affected by currency fluctuations and future dividends will be in line with earnings.

Discount and Share Repurchases

We continue to monitor closely the share price and therefore the discount of our share price to the net asset value. The share price rose 5.6% over the year, from 587.0p to 635.0p at the year end. The discount ranged between 8.5% and 14.7%, averaging 11.4% through the year.

The Board's policy on discount management remains unchanged - it is prepared to take action to try to ensure that the 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. As we have done in the past, we are prepared to buy shares in at discounts of between 8% and 10% in order to achieve this, subject to those caveats.

During the first six months of the financial year, the Company repurchased a total of 200,000 shares into Treasury. However, as reported at the half year, volatility then picked up and sentiment deteriorated, markets were far from orderly and we stepped back from further purchases.

After the turn of the calendar year, the discount widened out some way further in volatile markets. As we indicated in the half year report, so that we did not drift too far away from our targeted discount range, the Board increased the amount of buy backs significantly in the second half of the year and 2,073,673 shares were bought back into Treasury. We had some success in narrowing the discount, but this was overwhelmed by the sharp rise in the net asset value in the last days of the financial year, caused solely by sterling's depreciation. Since the year end, the discount has started to narrow in again and we believe that our buyback policy has moderated the volatility of the discount, which shareholders have informed us is important.

The Board

Nigel Kenny will retire from the Board at the conclusion of the forthcoming AGM. He joined the Board in 2008 and, on behalf of the Board, I would like to thank him for his contribution, in particular in bringing his financial experience to bear in chairing the Audit Committee. Richard Laing will succeed Nigel as Chairman of the Audit Committee and Anatole Kaletsky will become Senior Independent Director.

I have indicated my intention to step down from the Board at the conclusion of the 2017 AGM. In order to plan for that and to ensure appropriate succession planning and continuity, the Board has engaged an independent third party, Trust Associates, to assist with the recruitment of a new director. We expect to make an appointment with effect from January 2017.

The Manager

The Board monitors the performance of our Manager through the Management Engagement Committee. Last year's performance continued the strong long term performance record. Thus 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 continue to be well served.

AGM

This year's AGM will be held at JPMorgan's office at 60 Victoria Embankment, London EC4Y 0JP on Wednesday 16th November 2016 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

As our Investment Manager indicates in his report, some of the downward forces affecting emerging markets over the last two or three years appear to be moderating. Sentiment is no longer one way and some flows are going back into emerging markets. The economic fundamentals in Asia appear to be improving but that is not always the case elsewhere. Much will depend upon what happens in the developed world where economic growth is still below trend, but the period of underperformance of emerging markets seems to be near its end. Given that we still expect superior long term results in the emerging world, that provides some reason for optimism. Volatility will remain, of course, but the Company, with its excellent long term record, will be well placed to take advantage of the opportunities ahead.

Alan Saunders

Chairman                                                                                                                                                 

4th October 2016

Investment Managers' Report

Results

In June, with a week to go until the end of the Company's financial year end, I was preparing to write a report explaining why emerging markets had been a tough place to be invested, for anyone who measures returns in sterling. But the referendum on the UK's EU membership led to a sharp fall in the pound, so all foreign assets became suddenly more valuable; in the end emerging markets finished the twelve months to 30th June 2016 with a modest gain, the benchmark index producing a return of +3.5%.

By comparison, the Company's total return on net assets was +12.7%. The total return on the share price was a little less, at +9.3%, because the discount to NAV widened during the year, in spite of periodic repurchases of shares. The 'investment manager contribution', which describes the return from the portfolio before all costs relative to the return of the benchmark index, was +10.2%. This is a good result from our perspective. More than two thirds of this difference in returns came from our choices of individual stocks within countries. Some of those companies in banking and IT services which I highlighted in last year's report were among the contributors to this year's performance, but other good outcomes came from a diverse range of investments in companies engaged in activities from fuel distribution in Brazil to the production of shampoo and washing powder in Indonesia, with many other things in between.

The past year

This was a year with plenty of macroeconomic noise, but few consistent trends. Commodity prices fell and then later rallied; the Chinese stock market, which had soared in the first half of 2015, fell sharply from the summer onwards; the US raised interest rates, but only once and only by a little; emerging market currencies weakened and then recovered. If I were a football commentator I might say that it has been a year of two halves. The first six months were marked by ever-increasing gloom about the prospects for emerging markets, for reasons which I set out in the interim report written at the half-year stage. And yet as so often, the more pessimistic everyone becomes, the more the markets already reflect their fears, so any change for the better immediately drives prices higher. From their low point in mid-January, emerging markets rose by more than 30% in sterling by the end of June. Admittedly this was partly due to the decline of sterling, but other things gradually improved: commodity prices stopped falling; emerging market currencies recovered; even in the political arena, things began to shift and change in countries like Argentina and Brazil. China remained something of a laggard during this rebound, but some Chinese companies have seen their share prices reach all-time highs in the last few months and the general divergence between 'new' industries like internet services and 'old' industries like cement and construction has become ever more marked.

Against this background the results from the portfolio were really too diverse to capture succinctly. Good companies often prosper when times are difficult and many of the businesses owned in the portfolio reported excellent results during the last year regardless of the general economic context in which they operated. This is exactly what we had hoped for, so it was encouraging to see it playing out in practice. We like investments that are very specific stories, where our investment case rests on a belief that a company enjoys a sustainable advantage over its competitors and can grow its intrinsic value over time by outperforming or displacing others. Such opportunities exist in many industries and many countries, but to capture them we need a particular mind-set, which prioritises certain factors in the decision-making process; and we also need to keep explaining what we do, which is the subject of the next part of this commentary.

What you can expect

Our clients cannot choose the products that suit them unless we can tell them, before they make their choice, what to expect. I hope that shareholders are familiar with the investment approach that we have applied to the Company's portfolio, but even so, it is worth restating very simply three things that they can expect from the portfolio that we manage on their behalf.

First, they can expect low turnover of investments; we do not trade the portfolio aggressively and we own the same stocks for long periods of time. I think this approach makes sense for two reasons. The first reason is that all transactions carry a cost, so the more we change the portfolio, the bigger the drag on investment returns and in the long run this really matters: I do not think that passing ever-greater amounts of money to intermediaries is in their interests as shareholders. The second and more positive reason is that we want to capture the power of compounding, which in the long run dwarfs everything; so we have to stay invested in companies long enough to benefit from it: this means years and sometimes even decades, not months or weeks. I never start the year with a level of investment turnover in mind and I do not expect it to be the same every year either; this past year the portfolio was very stable, even by our past standards.

Second, shareholders can expect that we will often own the same kinds of businesses. Because we are always looking for the same attributes in our investments, we tend to find them repeatedly in some areas and rarely if ever in others. We like companies with good economics (return on capital, cash generation), good duration (strong competitive position, low risk of obsolescence) and good governance (good capital allocation, protective of shareholders' interests). More simply, you could say that we want be able to answer 'yes' to three questions: does a company generate value? can it go on generating value? and will the value accrue to the shareholders? Because we are always looking for these characteristics, the portfolio has had very persistent biases towards certain industries and countries, and is likely to do so in the future. I comment in more detail below about the kinds of investments we typically like.

Third, and perhaps most important, shareholders can expect that the portfolio's results will not be the same as the benchmark index. Sometimes they will be worse; but we cannot take a long term view of investments while simultaneously worrying about the short term and we are always going to choose the long term over the short term, because we think that in the end we will provide better outcomes this way. I believe we should always reiterate this point, and the most important time to communicate it is not when performance has been bad, but when it has been good. So although it is great to be able to report a year of solid outperformance, shareholders should not expect that we can match the last year's relative performance every year, though of course we will do our best; and we will not change our approach when short term performance is more difficult, any more than we would when it is going well.

What we have invested in

In last year's commentary I wrote about some of the clusters of investments that we have in the portfolio, including IT services and certain bank shares. There are other similar exposures that form important parts of the portfolio: we have roughly a quarter of the portfolio invested in the consumer sector, mostly in companies producing or selling staple products like food and beverages. Successful consumer brand companies are one of the best fits against our investment criteria: they tend to be cash generative, they tend to last a long time and they are relatively immune both to inflation and to interference by governments. It is not an accident that in both the developed world and in emerging markets, consumer staples as a sector has consistently delivered better results than broader market indices and you can expect that we will continue to have plenty of money invested in this area. Of course no industry stands still and the companies we invest in have to adapt to the effects of technology and competition; but the ability to create brand value and produce pricing power is an unusual and valuable feature in a business and the portfolio contains several investments with dominant market positions and long brand heritage which should be able to translate these strengths into cash flows for many years to come. Among other things, the portfolio holds shares in the leading beer companies in both Latin America and India; both Ambev and United Breweries can trace their roots back to the nineteenth century, a good sign of corporate durability. They also both have a market share in their home country which is bigger than all their competitors combined. In both cases, management still needs to deliver and stay ahead of the pack; but companies like these have a formidably strong base from which to face the future.

While the future looks good for consumer product companies, life is becoming more complicated for retail companies; over the years we have successfully owned retail businesses in several countries - including Mexico, South Africa and Turkey - where the formal retail industry has emerged over the last couple of decades to dominate a previously informal and highly fragmented retail landscape. But the internet is opening up new ways of delivering products as well as services and we can expect more change to come. For some kinds of retail business this is not a serious threat; the basis of a convenience store business is convenience: consumers who need to pick up a couple of items on the way home are not going to order a pint of milk or a loaf of bread online for delivery later. We have been invested for several years in the leading convenience store operators in Taiwan (President Chain Store) and Russia (Magnit), believing them to be very cash-generative and stable businesses with large and growing competitive advantages. Fast food chains (the portfolio owns shares in the leading companies in both Hong Kong and the Philippines) are also relatively resilient, but there are other parts of the retail industry where the challenges will be harder to deal with; so it would not be surprising in the long run to see our consumer exposure more heavily slanted towards products rather than services.

What we are thinking about

There are also areas we are very interested in but which do not feature heavily in the portfolio today: one obvious example is healthcare. This is an industry which, like consumer staples, has delivered much better returns over the long run than overall equity markets, whether you look at the developed world or at emerging markets. Given demographic trends and ageing populations, demand growth seems very likely to continue for a long time; the challenge for us is only at the individual stock level - can we find businesses making good returns and can we navigate the policy uncertainty and political sensitivities which beset the industry in many countries? Nowhere is this more relevant than in China, where fundamental reforms of the healthcare system are required, which may create both big winners and big losers; at the moment, most companies in the Chinese healthcare sector combine significant policy risk with relatively high valuations, but this can always change. Innovation continues to change the landscape of the pharmaceutical industry too and countries like Korea are becoming serious players in the biotechnology industry, with a lot of entrepreneurial activity evident. So there is plenty to interest us here and if we can find compelling individual stocks, we could have significantly more exposure to this industry in the future.

Entrepreneurial activity in the biotech sector brings me to the last thing that I want to mention, which is the need to make sure that we have exposure to entrepreneurial value creation in the portfolio. Entrepreneurs build businesses and entrepreneurial wealth creation is different from the activity of maintaining and developing an existing franchise: it involves more risk; almost by definition it rejects the existing consensus; it is often the product of a single dominant personality. These things usually make me instinctively cautious as an investor; over-confidence is a common trap to fall into and the benefit of hindsight can easily distort one's view of the likely chances of success. Nevertheless, some of the portfolio's big successes in the past have come from backing entrepreneurs and when the risk/reward payoff looks very interesting, we will continue to do this. One of the most difficult things in making investment decisions of all kinds, I think, is to frame the decision clearly in the first place, and then to hold on to the original premise at times when it is not working. The more volatile and unpredictable the business, the harder this is to do and this applies especially to the most entrepreneurial businesses, so we need to be really clear about what our view is based on. When we invest in entrepreneurial businesses - and the internet sector is an obvious example of this, though not the only one - we will not always know what the final outcome looks like; often, we are taking a view based mostly on people, in conjunction with a promising opportunity to do something better than the existing players. But as J.P. Morgan himself is said to have remarked (in a phrase which nicely summarises the tension between risk and opportunity that exists in every investment), 'go as far as you can see; when you get there, you will be able to see farther'.

The year ahead

I am often asked about my view of 'emerging markets' and while I usually manage some response, in truth I find this an impossibly broad question: it is rather like being asked for my view of the world. Taking this down to the level of individual countries does not help much, because even unappealing countries can have some big winners at the corporate level, while the most successful economies will always have their share of outright failures.

So the best answer that I can offer is that I am optimistic about the future because there is always opportunity; all we need to do is to see it. Sometimes this appears relatively difficult, at other times it can seem easier. From my perspective, all the important judgements are made about individual companies. I meet corporate managers and owners regularly and am often impressed by what they achieve, sometimes working in more challenging and difficult business environments than we can easily imagine. I am also fortunate to have the resources of a large organisation and a large team to help me. Opportunities, like buses, tend to arrive in groups and when I do not see any coming, I tend to leave the portfolio more or less unchanged; but in the long run, there will always be winners as well as losers, which is really all that we require in order to look positively at the future.

Austin Forey

Investment Manager                                                                                                                                

4th October 2016

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 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.

•   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' in 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 report within the annual report.

•   Operational and Cyber Crime: Loss of key staff by the Manager, such as the Investment Manager, could affect the performance of the Company. Disruption to, or failure of, the Manager'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. Note 20(c) within the annual report gives further details on the responsibilities of the Depositary. Details of how the Board monitors the services provided by JPMorgan 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. 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 Deloitte and reported every six months against the AAF Standard.

•   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 in 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.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the annual report and the accounts 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). 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 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 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 accounts since they were initially presented on the website. The accounts 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 Strategic Report, a Directors' Report and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in the Directors' 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 or loss of the Company.

The Board confirms that it is satisfied 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 position and performance, business model and strategy.

For and on behalf of the Board

Alan Saunders

Chairman

4th October 2016

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30TH JUNE 2016

		2016			2015
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair
value through profit or loss		-	91,226	91,226	-	48,807	48,807
Net foreign currency gains		-	4,723	4,723	-	1,447	1,447
Income from investments		16,978	-	16,978	19,760	-	19,760
Interest receivable		141	-	141	45	-	45
Gross return		17,119	95,949	113,068	19,805	50,254	70,059
Management fee		(2,406)	(5,613)	(8,019)	(8,372)	-	(8,372)
Other administrative expenses		(1,326)	-	(1,326)	(1,368)	-	(1,368)
Net return on ordinary activities
before taxation		13,387	90,336	103,723	10,065	50,254	60,319
Taxation		(1,251)	-	(1,251)	(1,538)	-	(1,538)
Net return on ordinary activities
after taxation		12,136	90,336	102,472	8,527	50,254	58,781
Return per share1		9.49p	70.63p	80.12p	6.68p	39.35p	46.03p

¹     Under the new expense allocation methodology, returns per share for the prior year would have been: revenue 11.26p, capital 34.77p. Further details are disclosed in the Chairman's Statement.

A dividend of 9.0p (2015: 6.0p) per Ordinary share has been proposed in respect of the year ended 30th June 2016, totalling £11.4 million (2015: £7.7 million).

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. Net return on ordinary activities after taxation represents the profit for the year and also Total Comprehensive Income.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30TH JUNE 2016

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserves	reserves	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2014	30,654	121,010	1,665	69,939	511,782	15,543	750,593
Repurchase of shares into Treasury	-	-	-	-	(4,691)	-	(4,691)
Exercise of Subscription shares into
Ordinary shares	(102)	102	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares	2,539	52,605	-	-	-	-	55,144
Costs in relation to issue of shares	-	(60)	-	-	-	-	(60)
Net return on ordinary activities	-	-	-	-	50,254	8,527	58,781
Dividend paid in the year	-	-	-	-	-	(7,078)	(7,078)
At 30th June 2015	33,091	173,657	1,665	69,939	557,345	16,992	852,689
Repurchase of shares into Treasury	-	-	-	-	(12,812)	-	(12,812)
Net return on ordinary activities	-	-	-	-	90,336	12,136	102,472
Dividend paid in the year	-	-	-	-	-	(7,707)	(7,707)
At 30th June 2016	33,091	173,657	1,665	69,939	634,869	21,421	934,642

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 30TH JUNE 2016

		2016	2015
		£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		901,025	822,495
Current assets
Debtors		2,771	5,063
Cash and cash equivalents1		31,052	32,219
		33,823	37,282
Current liabilities
Creditors: amounts falling due within one year		(206)	(7,088)
Net current assets		33,617	30,194
Total assets less current liabilities		934,642	852,689
Net assets		934,642	852,689
Capital and reserves
Called up share capital		33,091	33,091
Share premium		173,657	173,657
Capital redemption reserve		1,665	1,665
Other reserves		69,939	69,939
Capital reserves		634,869	557,345
Revenue reserve		21,421	16,992
Total shareholders' funds		934,642	852,689
Net asset value per share		740.8p	663.8p

¹     This line item combines the two lines of 'Investment in liquidity fund held at fair value through profit or loss' and 'Cash and short term deposits' in the financial statements for the year ended 30th June 2015 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes.

Company registration number: 2618994.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH JUNE 2016

		2016	2015
		£'000	£'000
Net cash outflow from operations before dividends and interest		(4,648)	(8,140)
Dividends received		15,694	16,082
Interest received		141	41
Overseas tax recovered		57	154
Net cash inflow from operating activities		11,244	8,137
Purchases of investments		(20,794)	(134,764)
Sales of investments		28,918	81,295
Settlement of forward currency contracts		(37)	(94)
Net cash inflow/(outflow) from investing activities		8,087	(53,563)
Issue of Ordinary shares on exercise of Subscription shares		-	55,144
Repurchase of shares into Treasury		(12,812)	(4,746)
Dividend paid		(7,707)	(7,078)
Costs in relation to issue of shares		-	(60)
Net cash (outflow)/inflow from financing activities		(20,519)	43,260
Decrease in cash and cash equivalents		(1,188)	(2,166)
Cash and cash equivalents at start of year		32,219	34,388
Exchange movements		21	(3)
Cash and cash equivalents at end of year		31,052	32,219
Decrease in cash and cash equivalents		(1,188)	(2,166)
Cash and cash equivalents consist of:
Cash and short term deposits		697	2,205
Cash held in JPMorgan US Dollar Liquidity Fund		30,355	30,014
Total		31,052	32,219

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2016

1.    Accounting policies

(a) Basis of accounting

The financial statements are prepared 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.

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

The financial statements have been prepared on a going concern basis.

2.   Dividends

(a) Dividends paid and proposed

	2016	2015
	£'000	£'000
Dividend paid
2015 Final dividend of 6.0p (2014: 5.5p ) per share	7,707	7,078
Dividend proposed
2016 Final dividend proposed of 9.0p (2015: 6.0p) per share	11,356	7,707

The dividend proposed in respect of the year ended 30th June 2016 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 2017.

(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 £12,136,000 (2015: £8,527,000).

	2016	2015
	£'000	£'000
Final dividend proposed of 9.0p (2015: 6.0p)	11,356	7,707

3.   Return per share

	2016	2015
	£'000	£'000
Revenue return	12,136	8,527
Capital return	90,336	50,254
Total return	102,472	58,781
Weighted average number of shares in issue during the year	127,893,440	127,724,204
Revenue return per share	9.49p	6.68p
Capital return per share	70.63p	39.35p
Total return per share	80.12p	46.03p

4.   Net asset value per share

	2016	2015
Net assets (£'000)	934,642	852,689
Number of shares in issue	126,174,703	128,448,376
Net asset value per share	740.8p	663.8p

5.   Status of results announcement

2015 Financial Information

The figures and financial information for 2015 are extracted from the published Annual Report and Accounts for the year ended 30th June 2015 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.

2016 Financial Information

The figures and financial information for 2016 are extracted from the Annual Report and Accounts for the year ended 30th June 2016 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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