Annual Financial Report

RNS Number : 5093O

JPMorgan Glb Emerging Mkts Inc Tst

11 October 2012

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN GLOBAL EMERGING MARKETS INCOME TRUST PLC

ANNOUNCEMENT OF FINAL RESULTS

The Directors of JPMorgan Global Emerging Markets Income Trust plc announce the Company's results for the year ended 31st July 2012.

Chairman's Statement

Performance

I am pleased to report on another strong performance in the year to 31st July 2012. The Company recorded a total return on net assets of +4.0%, outperforming the benchmark index, the MSCI Emerging Markets Index with net dividends reinvested (in sterling terms), which produced a total return of -9.8%. The Investment Manager's Report reviews the Company's performance and gives details on the investment strategy and portfolio construction. The total return to shareholders was +5.7%, as the Company's share price increased from 112.25p to 114.25p over the year.

Revenue and Dividends

Gross revenue for the year amounted to £10.5 million (2011: £8.5 million) and net total revenue after finance costs, administrative expenses and taxation amounted to £8.5 million (2011: £6.9 million). Revenue return per Ordinary share for the year, calculated on the average number of shares in issue, was 5.41p (2011: 5.76p).

The Company targeted an initial gross dividend yield of at least 4% based on the initial issue price of 100p per share. In the period from launch until 31st July 2011, the Company paid a total dividend of 4.7p. In the current financial year the Board has moved to paying quarterly dividends and, to date, three payments of 0.9p per share have been paid. The Board is pleased to recommend a final dividend of 2.15p per share. Subject to shareholders' approval at the Annual General Meeting on 21st November 2012, the dividend will be paid on 28th November 2012 to shareholders on the register as at the close of business on 2nd November 2012. This will bring the total dividend for the year to 4.85p, an increase of 3.2%.

Gearing

The Company's assets have grown substantially since launch and in order to maintain the flexibility to use gearing appropriately, a second three year loan facility of US$20 million has been taken out and drawn down in full subsequent to the year end.

Share Capital

During the year, the Company issued a total of 31.1 million new shares at a premium to net asset value. On 10th May 2012, shareholders granted authority to issue up to a further 30% of the then issued share capital. This authority will expire at the forthcoming Annual General Meeting and the Board will seek shareholder approval for its renewal. However, in order to comply with the UKLA Listing Rules, the 30% limit will be reset to 10% of the issued share capital on 13th May 2013, when the prospectus issued on 14th May 2012 will expire. More details are given in the Annual Report.

The Board

On 1st August 2011 Pablo Forero resigned as a Director from the Company. On 1st December 2011, Richard Robinson was appointed a Director. He is Investment Director at the Paul Hamlyn Foundation and was previously Group Head of Charities & Foundations at Schroders plc. He had previously held a number of senior positions at Rothschild Asset Management and was formerly a director of Aurora Investment Trust plc.

In accordance with corporate governance best practice, all Directors will seek reappointment at this year's Annual General Meeting.

Annual General Meeting

The Annual General Meeting will be held at Holborn Bars, 138-142 Holborn, London EC1N 2NQ on Wednesday 21st November 2012 at 2.00 p.m. The meeting will include a presentation from the Investment Manager on investment policy and performance. There will also be an opportunity for shareholders to meet the Board and representatives of JPMorgan after the meeting.

It would be helpful if shareholders seeking answers to detailed questions put them in writing beforehand, addressed to the Company Secretary at Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ. Alternatively, questions may be submitted via the Company's website (www.jpmglobalemergingmarketsincome.co.uk). Shareholders who are unable to attend the AGM in person are encouraged to use their proxy votes. Proxy votes may be lodged electronically, whether shares are held through CREST or in certificate form and full details are set out on the form of proxy.

Outlook

History tells us that when price-to-book ratios of companies in emerging markets stand at levels of 1.5x to 1.6x, as they do now, future returns tend to be quite good. All else being equal, one might feel very optimistic about the prospects for these markets. But all else is not equal. The trajectory of the Chinese economy is not at all clear; and the outturn for China will materially influence profits and dividends for many companies. Coupled with a global economic malaise, currency tensions and an unstable political landscape, the investment outlook for emerging equity markets is even foggier than usual. That being said, the valuation data are comforting. Dividend yields are attractive relative to many other asset classes and long term growth prospects remain superior.

Andrew Hutton

Chairman, 11th October 2012

Investment Manager's Report

During its second year, it is pleasing that the Company has again achieved its income target as well as producing a rise in net asset value of 4.0%, outperforming the benchmark, the MSCI Emerging Markets Index, which fell by 9.8%, all this despite very volatile market conditions. The Company has followed on from last year, delivering a steady income stream from a diversified portfolio of high quality companies and despite the difficult market conditions, we continue to find attractive ideas.

Excess returns have come largely from stock selection, with the Thai mobile phone service provider Advanced Info Service being the single largest stock level contributor, along with significant contributions from Brazilian IT company Cielo and Turkish bank Arcelik, more than countering underperformers such as KT Corporation, Asia Cement and Oriflame Cosmetics.

Over the year, currency has boosted performance to a small degree. By continuing to have a broad range of exposure at a country level, this diversifies our currency exposure across the asset class and across the two groups of emerging market currencies: those which are producers of raw materials, and therefore have currencies affected by commodity prices, and those of consumer-led markets. We expect that although emerging market currencies will remain volatile, the overall trend against sterling will remain positive.

Portfolio changes over the year have been modest, with overall turnover of close to 30%. This is consistent with our desire to be a long term investor and benefit from the compound growth of dividends, which is expected to average over 10-12% per annum in coming years.

The emphasis of the portfolio, favouring stable growth in sectors such as consumer, telecommunications and utilities over the cyclicality of natural resources, has remained constant. Diversification by stock, country and sector is an important part of the portfolio and the Company is expected to continue to hold 60-70 individual holdings over the coming year.

Disappointments, of which there were few, tended to be stock specific. For instance, we sold out of a position in an Indian auto-manufacturer during the year when they cut their dividend, not through anything company specific, but due to the management's view that they were paying more than their peers. Understandably, this affected our confidence in the company and the level of transparency behind the dividend policy. We believe it is critical to understand the difference between a value trap, whose profitability is deteriorating for structural reasons, and a value opportunity whose long term prospects are obscured by cyclical issues, and that this will continue to be the key to adding performance through stock selection.

Our customary emerging markets valuation metric, the price-to-book ratio, remains in the 1.5x to 1.6x range, sitting at the lower end of its historical trading range of 1.5x to 2.5x. This is partly due to the risk aversion of investors, which stems from macro economic uncertainties. It may also be attributable to the double dip in earnings due to cost pressures, which resulted in earnings expectations being cut for both 2012 and 2013. We believe we are at the tail end of this cycle and, given the supportive liquidity backdrop, that emerging markets equity valuations look to be at relatively attractive levels.

Richard Titherington

Investment Manager, 11th October 2012

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 and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may 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 through its investment restrictions and guidelines, which are monitored and reported on. JPMAM provides the Directors with timely and accurate management information, including performance data and attribution analysis, 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. The Investment Manager is free to employ the Company's gearing tactically, within a strategic range set by the Board.

•     Foreign Currency: Certain of the Company's assets, liabilities and income are denominated in currencies other than sterling (the Company's functional currency and the currency in which it reports). As a result, movements in exchange rates may affect the sterling value of these items.

•     Financial: The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Further details are disclosed in note 23 of the Company's Annual Report.

•     Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with 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 could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by JPMAM 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, JPMAM to ensure compliance with the Companies Act 2006 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 Annual Report.

•     Operations: Disruption to, or failure of, JPMAM'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 JPMAM 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.

Related Parties Transactions

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

Directors' Responsibilities

The Directors each confirm to the best of their knowledge that:

a)         the financial statements have been prepared in accordance with applicable UK accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

b)         the Annual Report, to be published shortly, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

Andrew Hutton

Chairman

11th October 2012

Income Statement

for the year ended 31st July 2012

	2012			20111
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	4,496	4,496	-	13,520	13,520
Net foreign currency (losses)/gains	-	(1,035)	(1,035)	-	500	500
Income from investments	10,530	-	10,530	8,459	-	8,459
Other interest receivable and similar income	2	-	2	8	-	8
Gross return	10,532	3,461	13,993	8,467	14,020	22,487
Management fee	(501)	(1,170)	(1,671)	(398)	(928)	(1,326)
Performance fee	-	(2,838)	(2,838)	-	(897)	(897)
Other administrative expenses	(450)	-	(450)	(398)	-	(398)
Net return/(loss) on ordinary activities before finance costs and taxation	9,581	(547)	9,034	7,671	12,195	19,866
Finance costs	(128)	(298)	(426)	(102)	(149)	(251)
Net return/(loss) on ordinary activities before taxation	9,453	(845)	8,608	7,569	12,046	19,615
Taxation	(971)	-	(971)	(706)	-	(706)
Net return/(loss) on ordinary activities after taxation	8,482	(845)	7,637	6,863	12,046	18,909
Return/(loss) per share (note 3)	5.41p	(0.54)p	4.87p	5.76p	10.11p	15.87p

¹     For the period from incorporation on 4th June 2010 to 31st July 2011.

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

Statement of Total Recognised Gains and Losses

for the year ended 31st July 2012

	2012			20111
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Movement in fair value of the cash flow hedge	-	19	19	-	(121)	(121)
Net return/(loss) on ordinary activities	8,482	(845)	7,637	6,863	12,046	18,909
Total recognised gains/(losses) for the year	8,482	(826)	7,656	6,863	11,925	18,788

¹     For the period from incorporation on 4th June 2010 to 31st July 2011.

Reconciliation of Movements in Shareholders' Funds

for the year ended 31st July 2012

	Called up	Capital
	share	redemption	Share	Other	Capital	Revenue
	capital	reserve	premium	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 4th June 20101	-	-	-	-	-	-	-
Issue of Management shares	13	-	-	-	-	-	13
Repurchase and cancellation of Management shares	(13)	13	-	-	(13)	-	(13)
Issue of Ordinary shares following placing and offer for subscription	1,040	-	102,960	-	-	-	104,000
Expenses of placing and offer for subscription	-	-	(1,712)	-	-	-	(1,712)
Issue of Ordinary shares	156	-	17,137	-	-	-	17,293
Additional share issue expenses	-	-	(310)	-	-	-	(310)
Redesignation of share premium	-	-	(101,276)	101,276	-	-	-
Issue of Ordinary shares on conversion of 'C' shares	230	-	23,762	-	1,527	-	25,519
Movement in fair value of the cash flow hedge	-	-	-	-	(121)	-	(121)
Net return on ordinary activities	-	-	-	-	12,046	6,863	18,909
Dividends appropriated in the period	-	-	-	-	-	(3,798)	(3,798)
At 31st July 2011	1,426	13	40,561	101,276	13,439	3,065	159,780
Issue of Ordinary shares	311	-	33,748	-	-	-	34,059
Expenses of new share issue	-	-	(298)	-	-	-	(298)
Net (loss)/return from ordinary activities	-	-	-	-	(845)	8,482	7,637
Movement in fair value of the cash flow hedge	-	-	-	-	19	-	19
Dividends appropriated in the year	-	-	-	-	-	(6,546)	(6,546)
At 31st July 2012	1,737	13	74,011	101,276	12,613	5,001	194,651

¹     Date of incorporation.

Balance Sheet

at 31st July 2012

	2012	2011
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	207,152	169,227
Investment in liquidity fund held at fair value through profit or loss	2,904	579
Total investments	210,056	169,806
Current assets
Debtors	1,830	1,235
Cash and short term deposits	729	2,117
	2,559	3,352
Creditors: amounts falling due within one year	(3,649)	(1,087)
Financial liability: derivative financial instrument	(102)	(121)
Net current (liabilities)/assets	(1,192)	2,144
Total assets less current liabilities	208,864	171,950
Creditors: amounts falling due after more than one year	(12,757)	(12,170)
Provision for liabilities and charges
Performance fees	(1,456)	-
Net assets	194,651	159,780
Capital and reserves
Called up share capital	1,737	1,426
Capital redemption reserve	13	13
Share premium	74,011	40,561
Other reserve	101,276	101,276
Capital reserves	12,613	13,439
Revenue reserve	5,001	3,065
Total equity shareholders' funds	194,651	159,780
Net asset value per share (note 4)	112.0p	112.0p

Company registration number: 7273382

Cash Flow Statement

for the year ended 31st July 2012

	2012	20111
	£'000	£'000
Net cash inflow from operating activities	6,084	4,876
Returns on investments and servicing of finance
Interest paid	(419)	(250)
Finance costs paid relating to 'C' shares	-	(795)
Net cash outflow from returns on investments and servicing of finance	(419)	(1,045)
Taxation
Overseas tax recovered	19	-
Total tax recovered	19	-
Capital expenditure and financial investment
Purchases of investments	(130,736)	(223,292)
Sales of investments	97,035	67,342
Other capital charges	(18)	(305)
Net cash outflow from capital expenditure and financial investment	(33,719)	(156,255)
Dividends paid	(6,546)	(3,798)
Net cash outflow before financing	(34,581)	(156,222)
Financing
Proceeds of placing and offer for subscription	-	104,000
Expenses of placing and offer for subscription	-	(1,712)
Proceeds of issue of ordinary shares	33,945	17,293
Costs of subsequent issue of ordinary shares	(298)	(310)
Drawdown of loan	-	12,562
Loan arrangement fees paid	-	(18)
Gross proceeds of 'C' share issue	-	26,402
Net cash inflow from financing	33,647	158,217
(Decrease)/increase in cash for the year	(934)	1,995

¹     For the period from incorporation on 4th June 2010 to 31st July 2011.

Notes to the Accounts

for the year ended 31st July 2012

1.    Accounting policies

      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 AIC in January 2009.

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

      The accounts have been prepared on a going concern basis.

2.   Dividends

      Dividends paid and proposed

		2012	2011
		£'000	£'000
	2011 Final dividend paid of 1.45p	2,198	-
	First interim dividend paid of 0.90p (2011: 1.00p)	1,380	1,164
	Second interim dividend paid of 0.90p (2011: 2.25p)	1,449	2,634
	Third interim dividend paid of 0.90p (2011: Nil)	1,519	-
	Total dividends paid in the year	6,546	3,798
	Final dividend proposed of 2.15p (2011: 1.45p)	3,735	2,069

3.   Return/(loss) per share

      Return/(loss) per share is based on the following:

		2012	2011
		£'000	£'000
	Revenue return	8,482	6,863
	Capital (loss)/return	(845)	12,046
	Total return	7,637	18,909
	Weighted average number of Ordinary shares in issue during the year	156,827,362	119,152,531
	Revenue return per share	5.41p	5.76p
	Capital (loss)/return per share	(0.54)p	10.11p
	Total return per share	4.87p	15.87p

4.   Net asset value per share

      The net asset value per share is based on the net assets attributable to the ordinary shareholders of £194,651,000 (2011: £159,780,000) and on the 173,719,438 (2011: 142,655,853) ordinary shares outstanding at 31st July 2012.

5.   Status of results announcement

2011 Financial Information

The figures and financial information for 2011 are extracted from the published Annual Report and Accounts for the period ended 31st July 2011 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.

2012 Financial Information

     The figures and financial information for 2012 are extracted from the Annual Report and Accounts for the year ended 31st July 2012 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 ASSET MANAGEMENT (UK) 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.hemscott.com/nsm.do

The annual report will also shortly be available on the Company's website at www.jpmglobalemergingmarketsincome.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 ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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