Circ re. share issue proposals & investment policy

RNS Number : 1340F

JPMorgan Glb Emerging Mkts Inc Tst

20 May 2013

 

JPMorgan Global Emerging Markets Income Trust plc

Publication of a circular

The Board has today published proposals to put in place a new Placing Programme to enable the Company to continue to issue further Shares after its existing Share allotment authorities have been exhausted.  The Share Issue Proposals would permit the Company to issue up to 67,265,831 Shares to investors without first having to offer them, pro rata, to Shareholders. 

The Board has also published its proposals to amend the Company's investment policy in order to allow the Company the flexibility to take advantage of the current low cost borrowing environment.  The Investment Policy Proposals would allow the Company to take out debt with longer maturities than is envisaged by the existing investment policy.

The Board and the Manager have also agreed in principle to amend the performance fee that can be earned by the Manager.

The Share Issue Proposals

The Company has issued a significant number of shares on a regular basis since its launch and continues to do so.  As a result, the Directors believe that taking authority to issue up to 30 per cent. of the Company's issued Share capital on a non pre-emptive basis is sensible.  It will allow the Board to continue to allot a significant number of Shares without having to convene regular Shareholder meetings to renew the authorities, each of which would incur cost to the Company.  Whilst such authorities are higher than would typically be seen in the investment company sector, the Directors believe that the benefits to the Company justify the size of the authority.  Any use of this authority will be accretive to the Net Asset Value per Share, although it will mean that Shareholders' voting rights are diluted.

The Company's existing prospectus expired on 14 May 2013.  Whilst the Company is able to issue up to 9.9 per cent. of its issued Share capital without a prospectus, the Directors have resolved to publish a new prospectus in order to obtain Admission to the Official List of any Shares issued pursuant to the authorities conferred by the Resolutions. The Directors will continue actively to consider opportunities to grow the Company through a placing of Shares and the new prospectus will provide the flexibility to undertake such a placing.  It is expected that the new prospectus will be published shortly after the General Meeting.

The authorities conferred by the relevant resolutions, if passed, will lapse at the conclusion of the next Annual General Meeting, expected to be held in November 2013. If the authorities conferred by the relevant resolutions are exhausted before the Company's 2013 Annual General Meeting, the Directors may seek  Shareholder authority to issue further Shares on a non-pre-emptive basis at one or more subsequent General Meetings prior to the 2013 Annual General Meeting.

Benefits of the Share Issue Proposals

The Directors believe that the Share Issue Proposals and any Share issuance pursuant to the authorities conferred by the relevant resolutions should yield the following principal benefits:

·     maintain the Company's ability to issue new Shares tactically, such as to better manage the premium at which the Shares trade to NAV per Share;

·     enhance the NAV per Share of existing Shares through new Share issuance at a premium to NAV per Share;

·     grow the Company, thereby spreading operating costs over a larger capital base which should reduce the Company's ongoing charges per Share; and

·     improve liquidity in the market for the Company's Shares.

The Investment Policy Proposals

The Company's existing investment policy contains the following description of the Company's gearing policy:

"The Company does not look to use bank debt to provide long-term structural gearing. The Company does, however, have power under its Articles to borrow up to an amount equal to 30 per cent. of its Net Assets at the time of the drawdown, although the Board intends only to utilise borrowings representing up to a maximum of 20 per cent. of Net Assets at the time of drawdown and only on a tactical basis on such occasions as the Manager believes that gearing will enhance returns to Shareholders."

The Board and the Manager consider the intention  regarding the Company's use of borrowings to be largely unchanged, namely to gear the portfolio only when the Board and the Manager expect investment returns to exceed the cost of debt. However, the continued low interest rate environment means that the Company is currently able to access longer-term debt funding on attractive terms.  As a result of these opportunities, the Board believes that the gearing policy should be amended to make it clear that, where the Manager believes that gearing will enhance returns to Shareholders, the Company is able to enter into longer-term loan facilities.

The Investment Policy Proposals would, if the relevant resolution is passed at the General Meeting, remove the existing gearing policy and replace it with the following text:

 "The Company has power under its Articles to borrow up to an amount equal to 30 per cent. of its Net Assets at the time of the drawdown, although the Board intends only to utilise borrowings representing up to a maximum of 20 per cent. of Net Assets at the time of drawdown and only on such occasions as the Manager believes that gearing will enhance returns to Shareholders."

The Directors believe that the Investment Policy Proposals should provide the Company with the flexibility to enter into gearing facilities with terms that are appropriate to the Company's circumstances at any given time and to take advantage of the current low interest rate environment by securing longer-term debt on attractive terms. Assuming the relevant resolution is passed by Shareholders, the Directors intend to consider with the Manager the options available for the Company to enter into a longer-term debt facility.

Amendment of performance fee

The Company is pleased to announce that the Board and the Manager have reached agreement in principle to amend the existing Investment Management Agreement with regards to the performance fee that can be earned by the Manager.  In general terms, under the current agreement the Manager earns a performance fee equal to 10 per cent. of the of the amount that the Company has outperformed the MSCI Emerging Markets Index. However the performance fee paid in any fiscal year is limited to 0.75 per cent. of the Company's average Net Asset Value. Under the current arrangements, any excess has been accrued and carried forward to be dealt with in future years. Under the proposed amendment the maximum performance fee that can be earned in in any year will be capped at 0.75 per cent. of Net Asset Value and no excess amount will be accrued.

The new performance fee arrangements are intended to come into effect on 1 August 2013. Any accrued but unpaid performance fee amounts remaining after the payment of any performance fee for the financial year ending 31 July 2013, which will also be capped at 0.75 per cent. of the Company's average Net Asset Value during the relevant period, will be waived by the Manager and written back to the Company's capital account. All other aspects of the performance and management fees will remain unchanged.

General Meeting

The General Meeting to consider and if appropriate, approve the Proposals has been convened for 9:00 am on Thursday 20 June 2013.

Terms used and not defined in this announcement bear the meaning given to them in the Circular dated 20 May 2013.

A copy of the Circular will shortly be submitted to the National Storage Mechanism and will shortly be available for inspection at http//:www.morningstar.co.uk/uk/NSM 

Enquiries:

James Saunders Watson, J.P. Morgan Asset Management: 020 7742 8504

Alex Blake, Winterflood Investment Trusts: 020 3100 0297

Monday 20 May 2013

 

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