Half-year Report

RNS Number : 2886F

JPMorgan Emerging Mkts Invest Trust

06 March 2020

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS Investment Trust plc

( the 'Company' )

Half Year Report & FINANCIAL STATEMENTS

 for the six months ended 31st DECEMBER 2019

Legal Entity Identifier: 5493001VPQDYH1SSSR77

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

 In the last annual report, I discussed the three key objectives that the Directors of the Company had set out at the beginning of the financial year to June 2019: 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. Having negotiated with the Manager a reduction in the management fee last year, I am very pleased to report that we have also continued to make progress on performance and on the discount.

Performance

During the first half of the Company's financial year, emerging markets produced a positive return for investors, as measured by the Company's benchmark index, the MSCI Emerging Markets Index (in sterling terms), which rose by 2.9% over the six months. In the same period the Company's return on net assets, at +4.2%, was again better than the benchmark. The return to shareholders was +7.2%, reflecting a narrowing of the discount to net asset value at which the Company's shares trade, from 6.9% at the previous financial year end to 4.3% at the half year end.

This continues the Company's outstanding record of long term performance, the net asset value and share price having both outperformed the benchmark index over one, two, three, five and ten years to 31st December 2019 and over five years the cumulative return to shareholders is 91.2%, against the benchmark return of 54.7%. I think it is worth re-stating that this sustained, long-term outperformance is a great credit to Austin Forey and the team at JPMorgan Asset Management and their focus on investing in long term winners with strong environmental, social and governance practices. This outperformance shows the significant benefits that can be achieved in the emerging markets area by active management compared with investments in either passive or exchange traded funds.

A review of the Company's performance for the first six months of this financial year and the outlook for the remainder of the year is provided in the Investment Manager's Report which follows.

Revenue and Dividends

In the first half of the Company's financial year, the portfolio generated earnings of 5.59 pence per share (2018: 4.70 pence). Last year, the Board declared an interim dividend for the first time, of 5.0 pence per share, in order to more closely reflect the receipt of income from the investment portfolio, and the Company paid a total dividend of 14.0 pence per share for the year. For the current financial year, the Board has declared an interim dividend of 5.2 pence per share, an increase of 4.0%, payable on 17th April 2020 to shareholders on the register as at 13th March 2020. The ex-dividend date will be 12th March 2020.

Share Repurchases and Discount

 The Board is very pleased that the discount on the Company's shares has continued to narrow over the first half of the financial year. It regularly considers the merits of buying back shares in order to manage the level and volatility of the discount. For some time, the Board's policy was to buy back shares if the discount was wider than 10% for an extended period, was out of line with the peer group and market conditions were orderly. This time last year we broadened the scope of this policy to allow the Company to buy back shares at a discount narrower than 10% if the Board believes this to be in shareholders' interests.

During the six months the Company was active in buying back shares, repurchasing a total of 1,412,278 shares into Treasury at an average discount of 8.2% and a total cost of £14.0 million. As shares are only bought back at a discount to the prevailing net asset value, share buybacks benefit shareholders as they increase the net asset value per share. Over the six months the discount (to the cum income net asset value) on the Company's shares ranged between 9.5% and 4.3%, averaging 7.8%. At the time of writing the discount is 8.8% as the response to coronavirus has caused stock markets to be extremely volatile and market movements in ADRs and Latin American markets after the Company's closing price on the London stock market have impacted the NAV on which the discount is calculated.

Marketing

The Board has agreed with the Manager an increased marketing and PR programme, to be part funded by the Company, with the aim of attracting new investors to the Company and thereby broadening the shareholder base. We believe this to be an important factor in helping to achieve our objective of reducing the level and volatility of the discount at which the Company's shares trade.

The Board encourages all shareholders to exercise their rights regarding voting, receiving Company documentation and attending the AGM so that we can receive feedback on the Company's progress. As the number of shareholders investing via specialist platforms has been increasing, the Board urges those shareholders to refer to their investment platforms or visit the website of the Association of Investment Companies for more details on how to vote their shares ahead of the Company's continuation vote in November 2020.

Auditors

PricewaterhouseCoopers were auditors to the Company from its launch in 1991 until last year when, in accordance with the Audit Regulations and Guidance effective from April 2017, the Company was required to change its auditors. The Audit Committee undertook an auditor review and it was agreed to appoint BDO to succeed PricewaterhouseCoopers. Their appointment was confirmed by shareholders at the AGM held in November 2019.

Corporate Governance

In July 2018, the FRC issued the revised UK Corporate Governance Code and in February 2019, this was followed by the publication of the revised AIC Code of Corporate Governance (the 'AIC Code'). Last year and during the course of this current financial year, the Board has taken the appropriate steps to ensure that the Company is compliant with the AIC Code and further disclosures will be made in the annual report to be published later this year.

The Board

In the last annual report, I advised that the Board would look to recruit another Director before the November 2020 Annual General Meeting and intends to meet the Hampton-Alexander recommendation of having a minimum of 33% female representation on the Board in the medium term. The recruitment process will start shortly and an announcement will follow in due course.

Outlook

At the time of writing there are significant uncertainties surrounding the future direction of global economic growth and the potential impact from coronavirus, and the share price has fallen sharply from the highs reached in January 2020. The discount has also widened from the tight levels seen at the end of the half year. However, your Investment Manager invests for the long term and believes that emerging markets still provide interesting opportunities to invest in companies with sustainable profit growth on reasonable valuations. As we have said before, there may be short term periods when your Investment Manager's approach of focusing on sustainable high quality growth companies may not outperform the index but the Directors believe that over the longer term this strategy will outperform, as has been the case over a number of years.

Sarah Arkle

Chairman      

6th March 2020

INVESTMENT MANAGER'S REPORT

 Markets finished 2019 in relatively optimistic mood, though over the last six months as a whole our emerging markets benchmark returned a modest +2.9%. Your Company ended the period slightly ahead of the index, with the return on net assets +4.2%, while the return to shareholders was +7.2%, as the discount to NAV narrowed throughout December in particular.

In spite of plenty of political noise about trade, this was a relatively uneventful period, with few big market events to offer anomalous prices and hence opportunity. Nevertheless the companies owned in the Company's portfolio continued, in aggregate, to show solid growth in profits, even though corporate earnings in emerging markets as a whole were flat during the year. Against such a backdrop we have made few changes to the portfolio during the last six months, preferring instead to see the companies in the portfolio compounding their intrinsic value through their own efforts. The few transactions that we did make had the effect of tilting the mix of investments further towards Asia, and specifically towards China, but this continues a trend that has been in place for several years already, and which is likely to continue. The depth of investment opportunity in China in particular, combined with a level of entrepreneurial activity which is unmatched in other emerging markets, means that we are simply finding more interesting companies to look at there than elsewhere.

It is worth mentioning two other things. First, a few words about the coronavirus which is currently dominating news headlines. We fully recognise the seriousness and importance of this situation in everyday life for those directly affected, including our colleagues who are based in China; but as investors we also know that profits earned in the next few months account for a small part of any company's intrinsic value. We continue to focus on the potential of companies to generate cash flows many years into the future; it is the net present value of those cash flows which most reliably determines the value of any business, and we do not think that this is altered even by considerable uncertainty in the short term. There are a few companies in the portfolio whose business is being adversely affected right now; but we are confident that the businesses owned in your Company's portfolio are strongly positioned and able to ride out any short term difficulties; indeed, the best companies expand their competitive advantages most rapidly when times are tough. So despite the blanket news coverage, as investors we are trying to keep our eyes on the long term; in the past, events like the spread of a virus have generally faded in significance from an investment point of view when seen with the benefit of hindsight, and this seems likely to happen again in this instance.

The second issue we are regularly asked about is our view of the global economy, and especially whether the long economic cycle seen in the USA will come to an end. This is a question that has been confounding forecasters for several years already. It seems to us that interest rates are likely to remain low by historical standards, and that economic growth in emerging markets is also likely to continue to exceed that of developed countries, for a number of structural reasons. But it is also worth stressing that as investors, we do not base our decisions on this kind of macroeconomic view. We invest on your behalf in the shares of companies around the world, not in countries' GDP, and so we are far more interested in factors that are specific to a given company, especially its competitive strengths and weaknesses, and the extent to which it can earn a financial return from the skills it has; those skills include the ability to manage a business in a sustainable manner, something we pay ever more attention to in our research process. As I wrote a year ago, well run companies which can sustainably grow their share of the economic opportunity before them are what we are looking for, and that is not going to change; so you can expect that we will keep approaching investment decisions in the future in the same way that we have done in the past.

Austin Forey

Investment Manager  

6th March 2020

 

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its half year report:

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed from those reported in the Annual Report and Financial Statements for the year ended 30th June 2019 ('AFRS') and fall into the following broad categories: investment underperformance; political and economic; loss of investment team or investment manager; strategy/business management; operational and cyber crime; share price discount; change of corporate control of the manager; legal and regulatory; corporate governance and shareholder relations; and financial. Information on each of these areas is given in the Business Review within the AFRS.

Related Parties Transactions

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

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the forseeable future and more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half year financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)  the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st December 2019 as required by the UK Listing Authority Disclosure and Transparency Rules 4.2.4R; and

(ii)  the interim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting 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.

For and on behalf of the Board

Sarah Arkle

Chairman     

6th March 2020

 

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2019

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st December 2019			31st December 2018			30th June 2019
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments
held at fair value through
profit or loss	-	49,725	49,725	-	(28,351)	(28,351)	-	141,133	141,133
Net foreign currency
(losses)/gains	-	(48)	(48)	-	533	533	-	100	100
Income from investments	9,742	-	9,742	8,872	-	8,872	24,975	-	24,975
Interest receivable	109	-	109	91	-	91	187	-	187
Gross return/(loss)	9,851	49,677	59,528	8,963	(27,818)	(18,855)	25,162	141,233	166,395
Management fee	(1,670)	(3,896)	(5,566)	(1,642)	(3,831)	(5,473)	(3,316)	(7,738)	(11,054)
Other administrative expenses	(714)	-	(714)	(638)	-	(638)	(1,305)	-	(1,305)
Net return/(loss) before
taxation	7,467	45,781	53,248	6,683	(31,649)	(24,966)	20,541	133,495	154,036
Taxation	(679)	-	(679)	(885)	-	(885)	(2,269)	-	(2,269)
Net return/(loss) after
taxation	6,788	45,781	52,569	5,798	(31,649)	(25,851)	18,272	133,495	151,767
Return/(loss) per share
(note 3)	5.59p	37.71p	43.30p	4.70p	(25.64)p	(20.94)p	14.85p	108.50p	123.35p

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2019

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserves	Reserve 1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 31st December 2019
(Unaudited)
At 30th June 2019	33,091	173,657	1,665	69,939	1,009,708	25,709	1,313,769
Repurchase of shares into Treasury	-	-	-	-	(14,041)	-	(14,041)
Net return	-	-	-	-	45,781	6,788	52,569
Dividend paid in the period (note 4)	-	-	-	-	-	(10,895)	(10,895)
At 31st December 2019	33,091	173,657	1,665	69,939	1,041,448	21,602	1,341,402
Six months ended 31st December 2018
(Unaudited)
At 30th June 2018	33,091	173,657	1,665	69,939	889,474	29,029	1,196,855
Repurchase of shares into Treasury	-	-	-	-	(6,719)	-	(6,719)
Net (loss)/return	-	-	-	-	(31,649)	5,798	(25,851)
Dividend paid in the period (note 4)	-	-	-	-	-	(15,452)	(15,452)
At 31st December 2018	33,091	173,657	1,665	69,939	851,106	19,375	1,148,833
Year ended 30th June 2019 (Audited)
At 30th June 2018	33,091	173,657	1,665	69,939	889,474	29,029	1,196,855
Repurchase of shares into Treasury	-	-	-	-	(13,261)	-	(13,261)
Net return	-	-	-	-	133,495	18,272	151,767
Dividend paid in the period (note 4)	-	-	-	-	-	(21,592)	(21,592)
At 30th June 2019	33,091	173,657	1,665	69,939	1,009,708	25,709	1,313,769

¹ This reserve forms the distributable reserve of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION

AT 31ST DECEMBER 2019

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2019	2018	2019
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	1,338,466	1,137,562	1,305,035
Current assets
Debtors	1,335	571	3,102
Cash and cash equivalents	3,862	10,905	5,947
	5,197	11,476	9,049
Current liabilities
Creditors: amounts falling due within one year	(2,260)	(205)	(315)
Derivative financial liabilities	(1)	-	-
Net current assets	2,936	11,271	8,734
Total assets less current liabilities	1,341,402	1,148,833	1,313,769
Net assets	1,341,402	1,148,833	1,313,769
Capital and reserves
Called up share capital	33,091	33,091	33,091
Share premium	173,657	173,657	173,657
Capital redemption reserve	1,665	1,665	1,665
Other reserve	69,939	69,939	69,939
Capital reserves	1,041,448	851,106	1,009,708
Revenue reserve	21,602	19,375	25,709
Total shareholders' funds	1,341,402	1,148,833	1,313,769
Net asset value per share (note 5)	1,111.3p	935.5p	1,075.8p

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2019

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2019	31st December 2018	30th June 2019
	£'000	£'000	£'000
Net cash outflow from operations before
dividends and interest	(6,486)	(5,964)	(12,591)
Dividends received	10,688	12,542	24,552
Interest received	111	93	187
Overseas tax recovered/(paid)	87	(183)	-
Net cash inflow from operating activities	4,400	6,488	12,148
Purchases of investments	(60,303)	(8,553)	(59,437)
Sales of investments	78,669	33,930	86,841
Settlement of foreign currency contracts	88	189	220
Net cash inflow from investing activities	18,454	25,566	27,624
Dividend paid	(10,895)	(15,452)	(21,592)
Repurchase of shares into Treasury	(14,041)	(6,719)	(13,261)
Net cash outflow from financing activities	(24,936)	(22,171)	(34,853)
(Decrease)/increase in cash and cash equivalents	(2,082)	9,883	4,919
Cash and cash equivalents at start of period	5,947	1,023	1,023
Exchange movements	(3)	(1)	5
Cash and cash equivalents at end of period	3,862	10,905	5,947
(Decrease)/increase in cash and cash equivalents	(2,082)	9,883	4,919
Cash and cash equivalents consist of:
Cash and short term deposits	390	445	5,327
Cash held in JPMorgan US Dollar Liquidity Fund	3,472	10,460	620
Total	3,862	10,905	5,947

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31ST DECEMBER 2019

1.  Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 30th June 2019 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and including the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

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 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 October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015, and updated in March 2018 has been applied in preparing this condensed set of financial statements for the six months ended 31st December 2019.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th June 2019.

3.  Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2019	31st December 2018	30th June 2019
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	6,788	5,798	18,272
Capital return/(loss)	45,781	(31,649)	133,495
Total return/(loss)	52,569	(25,851)	151,767
Weighted average number of shares in issue (excluding shares held in Treasury)	121,393,043	123,454,610	123,040,936
Revenue return per share	5.59p	4.70p	14.85p
Capital return/(loss) per share	37.71p	(25.64)p	108.50p
Total return/(loss) per share	43.30p	(20.94)p	123.35p

 

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2019	31st December 2018	30th June 2019
	£'000	£'000	£'000
2019 final dividend of 9.0p (2018: 12.5p)	10,895	15,452	15,452
2020 interim dividend of 5.0p (2019: 5.0p)	6,023	n/a	6,140
Total dividends paid in the period/year	10,895	15,542	21,592

All dividends paid in the period have been funded from the revenue reserve.

An interim dividend of 5.0p (2019: 5.0p) per share amounting to £6,023,000 (2019: £6,140,000), has been declared payable in respect of the six months ended 31st December 2019.

5.  Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2019	31st December 2018	30th June 2019
Net assets (£'000)	1,341,402	1,148,833	1,313,769
Number of shares in issue	120,706,958	122,798,331	122,119,236
Net asset value per share	1,111.3p	935.5p	1,075.8p

For further information, please contact:

Jonathan Latter

For and on behalf of JPMorgan Funds Limited, Company Secretary 020 7742 4000

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 half year will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

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

 

END

 

 

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