Half Yearly Report

RNS Number : 9045A
JPMorgan Glb Emerging Mkts Inc Tst
26 March 2013
 

JPMORGAN GLOBAL EMERGING MARKETS INCOME TRUST PLC

LONDON STOCK EXCHANGE ANNOUNCEMENT

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31ST JANUARY 2013

 

Chairman's Statement

Performance

I am pleased to report that, for the six months ended 31st January 2013, the Company recorded a total return on net assets of 14.3%. This compares with a return of 11.8% (in sterling terms, with dividends reinvested) for the MSCI Emerging Markets Index. The total return to shareholders was 14.1%. The Investment Manager's Report reviews the Company's performance and comments on the investment strategy.

Dividends

For the year ended to 31st July 2012, the total dividend paid was 4.85p per share, an increase of 3.2% on dividends payable in the prior year.

The Company pays quarterly dividends. A first interim dividend of 0.9p per share was paid to shareholders on 16th January 2013. On 28th February 2013, the Board declared a second interim dividend of 0.9p per share to be paid on 16th April 2013 to shareholders on the register as at 15th March 2013 (ex-dividend date 13th March 2013), giving a total of 1.8p per share for the first six months (2012: 1.8p).

The Company invests globally, receiving dividends in the currencies of developing countries and US dollars, but is priced and pays dividends in sterling. As such, the value of dividends payable by the Company will fluctuate with exchange rates. Since January, the relative weakness in sterling has been favourable for the Company. However, this will not always be the case and the trend may reverse.

Share Issuance

In the six months to 31st January 2013, the Company issued a total of 26,700,000 new ordinary shares; and, since that date, a further 14,800,000 new ordinary shares have been issued. In line with the share issuance policy, all new shares have been issued at a premium to net asset value, thereby enhancing the net asset value for continuing shareholders.

Deputy Portfolio Manager

In November 2012, the Board was pleased to welcome Omar Negyal as Deputy Portfolio Manager for the Company, to work alongside Richard Titherington. Mr Negyal joined the Emerging Markets Equity Team in 2012 and has 14 years' experience in Emerging Markets.

Outlook

As the Investment Manager's report makes clear, valuations of these markets remain attractive. We remain confident that the companies in the portfolio are capable of delivering long term growth in earnings and dividends. However, equity markets worldwide have risen sharply in recent months and that causes the Manager, rightly, to temper his optimism.

The Company does not attempt to time markets or play the 'risk-on/risk-off' game. The Company's strategy is to acquire at attractive valuations the securities of good companies that pay dividends out of sustainable cash flows - and then to be an engaged, watchful and patient shareholder.

 

Andrew Hutton

Chairman                                                                                                                                                                                                 26th March 2013

 

Investment Manager's Report

Performance

The six month period to 31st January 2013 was positive for emerging markets, with the Company's benchmark index, the MSCI Emerging Markets Index, increasing 11.8% (in sterling terms, with dividends reinvested). It was pleasing to see the Company's performance strongly ahead of the benchmark, achieving a positive total return on net assets of 14.3%. Underlying data show that stock selection accounted for the majority of performance. From a sector perspective, investments in the consumer discretionary, industrials and energy sectors contributed positively to returns, whilst positions in the information technology and utilities sectors detracted from returns. On a country basis, stock selection in Korea was the single largest contributor to outperformance, because names in which we held an underweight position lagged over the period. The portfolio benefited from stock selection in Poland, Turkey and China. Exposure to Mexico and Malaysia also had a positive impact on returns. In contrast, stock selection in Saudi Arabia, South Africa and Taiwan and having even minimal cash holdings in a rising market detracted from performance.

Given the rising market environment, our gearing augmented returns over the period. We are comfortable that the current gearing level of 8.2% is appropriate and intend to retain the debt facility.

Market Review

The six month period to 31st January 2013 was a strong period for emerging markets, rising close to 12% in sterling terms. Two major worries that had dominated the investment landscape receded, namely the Eurozone debt crisis and the fear of a prolonged period of low growth for the Chinese economy. Going into 2013, commodity prices rallied while the trade-weighted dollar declined, and investors continued to pour new money into emerging market equities. Since the middle of September, emerging market equity funds have experienced 20 consecutive weeks of inflows. By country, Brazil continued to struggle, as concerns about government intervention in regulated sectors weigh on the market. Russia lagged in 2012 but has regained some lost ground in 2013, benefiting from higher oil prices and from resilience in consumer spending.

The Portfolio

The Company's portfolio is intended to have low turnover, allowing it to benefit from the attractive compound growth in emerging markets and specifically the compound growth of dividends. Consequently, sales of securities will be limited to situations where either an investment appears to be overvalued, or the fundamentals of a company are not as originally anticipated, or when a significant corporate action occurs.

During the period, we sold CP Foods where a combination of corporate governance concerns and negative free cash flow did not seem to be compensated by valuation levels; and we reduced the Company's holding in Bangkok Expressway. These actions led to a reduction in the country weighting to Thailand. At the same time, we also reduced our positions in Mexico, which now appears expensive.

During this period, exposure to South Africa was increased significantly, through the purchase of Imperial and Sasol, and increased holdings in Brazil, a market which we consider to be undervalued. Favoured countries remain Taiwan, Turkey and South Africa, rather than India and Korea where dividend yields are less attractive.

In terms of sector exposures, we have moved from an underweight to an overweight position in energy, whilst reducing the position in telecommunications. In addition, we have rotated slightly from investment in consumer staples into consumer discretionary stocks.

Outlook

The improvement in sentiment around emerging markets continues to find support in economic data and in macro policy. Recent purchasing managers' index data in China confirm that the rebound in activity remains on track and we see meaningful room for additional monetary accommodation. India's central bank, too, demonstrated its commitment to a more pro-growth stance in January, cutting benchmark rates and raising expectations for additional cuts this year. The successful avoidance of the worst-case fiscal cliff and debt ceiling scenarios in the US has also helped sentiment, and this was a major contributor to the recent resumption of flows into both developed and emerging market equities. Valuations in emerging markets remain relatively attractive, and we are comfortable with a bullish medium-term view on these equities. However, considering the strength of the rebound over the past few months, we are sensitive to the potential for a market pause in coming weeks.

Richard Titherington

Investment Manager                                                                                                                                                                                26th March 2013

 

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 and fall into the following broad categories:

investment and strategy; foreign currency; financial; accounting, legal and regulatory; corporate governance and shareholder relations; and operations. Information on each of these areas is given in the Business Review within the Company's Annual Report and Accounts for the period ended 31st July 2012.

 

Related Parties' Transactions

During 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 foreseeable future. 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 the Accounting Standards Board's Statement 'Half-Yearly Financial Reports' and gives a true and fair view of the assets, liabilities, financial position and net return of the Company 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.

 

For and on behalf of the Board

Andrew Hutton

Chairman

26th March 2013

 

 

For further information, please contact:

Rebecca Burtonwood

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 4000

 

Income Statement

for the six months ended 31st January 2013


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


31st January 2013

31st January 2012

31st July 2012


Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Gains on investments held at fair










  value through profit or loss

-

28,454

28,454

-

18

18

-

4,496

4,496

Income from investments

3,480

-

3,480

3,199

-

3,199

10,530

-

10,530

Net foreign currency gains/(losses)

-

33

33

-

(619)

(619)

-

(1,035)

(1,035)

Other interest and similar










   income

2

-

2

1

-

1

2

-

2

Gross return/(loss)

3,482

28,487

31,969

3,200

(601)

2,599

10,532

3,461

13,993

Management fee

(307)

(716)

(1,023)

(229)

(534)

(763)

(501)

(1,170)

(1,671)

Performance fee

-

(693)

(693)

-

(1,041)

(1,041)

-

(2,838)

(2,838)

Other administrative expenses

(263)

-

(263)

(179)

-

(179)

(450)

-

(450)

Net return/(loss) on ordinary










  activities before finance costs










  and taxation

2,912

27,078

29,990

2,792

(2,176)

616

9,581

(547)

9,034

Finance costs

(109)

(255)

(364)

(64)

(149)

(213)

(128)

(298)

(426)

Net return/(loss) on ordinary










  activities before taxation

2,803

26,823

29,626

2,728

(2,325)

403

9,453

(845)

8,608

Taxation

(344)

-

(344)

(244)

-

(244)

(971)

-

(971)

Net return/(loss) on ordinary










  activities after taxation

2,459

26,823

29,282

2,484

(2,325)

159

8,482

(845)

7,637

Return/(loss) per share (note 4)

1.35p

14.74p

16.09p

1.67p

(1.56)p

0.11p

5.41p

(0.54)p

4.87p

               

All revenue and capital items in the above statement derive from continuing operations.

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 six months ended 31st January 2013


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


31st January 2013

31st January 2012

31st July 2012


Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Movement in the fair value of 










  the cash flow hedge during










  the period

-

15

15

-

(11)

(11)

-

19

19

Net return/(loss) on ordinary










  activities

2,459

26,823

29,282

2,484

(2,325)

159

8,482

(845)

7,637

Total recognised gains/(losses) 










  in the period

2,459

26,838

29,297

2,484

(2,336)

148

8,482

(826)

7,656

               



 

Reconciliation of Movements in Shareholders' Funds


Called up

Capital






Six months ended

share

redemption

Share

Other

Capital

Revenue


31st January 2013

capital

reserve

premium

reserve

reserves

reserve

Total

(Unaudited)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 31st July 2012

1,737

13

74,011

101,276

12,613

5,001

194,651

Issue of ordinary shares

267

-

31,368

-

-

-

31,635

Share issue expenses

-

-

(60)

-

-

-

(60)

Movement in the fair value of the








  cash flow hedge

-

-

-

-

15

-

15

Net return on ordinary activities

-

-

-

-

26,823

2,459

29,282

Dividends appropriated in the period

-

-

-

-

-

(5,492)

(5,492)

At 31st January 2013

2,004

13

105,319

101,276

39,451

1,968

250,031

 


Called up

Capital






Six months ended

share

redemption

Share

Other

Capital

Revenue


31st January 2012

capital

reserve

premium

reserve

reserves

reserve

Total

(Unaudited)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 31st July 2011

1,426

13

40,561

101,276

13,439

3,065

159,780

Issue of ordinary shares

110

-

11,194

-

-

-

11,304

Share issue expenses

-

-

(73)

-

-

-

(73)

Movement in the fair value of the








  cash flow hedge

-

-

-

-

(11)

-

(11)

Net (loss)/return on ordinary activities

-

-

-

-

(2,325)

2,484

159

Dividends appropriated in the period

-

-

-

-

-

(3,578)

(3,578)

At 31st January 2012

1,536

13

51,682

101,276

11,103

1,971

167,581

 


Called up

Capital






Year ended

share

redemption

Share

Other

Capital

Revenue


31st July 2012

capital

reserve

premium

reserve

reserves

reserve

Total

(Audited)

£'000

£'000

£'000

£'000

£'000

£'000

£'000

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)

Movement in the fair value of the








  cash flow hedge

-

-

-

-

19

-

19

Net (loss)/return on ordinary activities

-

-

-

-

(845)

8,482

7,637

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

 

 



 

Balance Sheet

at 31st January 2013


(Unaudited)

(Unaudited)

(Audited)


31st January 2013

31st January 2012

31st July 2012


£'000

£'000

£'000

Fixed assets




Investments held at fair value through profit or loss

274,160

177,615

207,152

Investments in liquidity fund held at fair value




  through profit or loss

4,194

697

2,904

Total investments

278,354

178,312

210,056

Current assets




Derivative financial instrument

21

-

-

Debtors

2,407

6,457

1,830

Cash and short term deposits

3,183

198

729


5,611

6,655

2,559

Creditors: amounts falling due within one year

(20,855)

(3,550)

(3,649)

Derivative financial instruments

(90)

(132)

(102)

Net current (liabilities)/assets

(15,334)

2,973

(1,192)

Total assets less current liabilities

263,020

181,285

208,864

Creditors: amounts falling due after more than




  one year

(12,615)

(12,663)

(12,757)

Provisions for liabilities and charges




Performance fee

(374)

(1,041)

(1,456)

Net assets

250,031

167,581

194,651

Capital and reserves




Called up share capital

2,004

1,536

1,737

Capital redemption reserve

13

13

13

Share premium

105,319

51,682

74,011

Other reserve

101,276

101,276

101,276

Capital reserves

39,451

11,103

12,613

Revenue reserve

1,968

1,971

5,001

Total equity shareholders' funds

250,031

167,581

194,651

Net asset value per share (note 5)

124.8p

109.1p

112.0p

               

 

 

Company registration number: 7273382.



 

Cash Flow Statement

for the six months ended 31st January 2013


(Unaudited)

(Unaudited)

(Audited)


Six months ended

Six months ended

Year ended


31st January 2013

31st January 2012

31st July 2012


£'000

£'000

£'000

Net cash inflow from operating activities (note 6)

1,930

2,019

6,084

Net cash outflow from servicing of finance

(349)

(208)

(419)

Overseas tax recovered

16

-

19

Net cash outflow from capital expenditure and




  financial investment

(36,680)

(11,256)

(33,719)

Dividends paid

(5,492)

(3,578)

(6,546)

Net cash inflow from financing

42,942

11,231

33,647

Increase/(decrease) in cash in the period

2,367

(1,792)

(934)

Reconciliation of net cash flow to movement in




  net debt




Net cash movement

2,367

(1,792)

(934)

Drawdown of short term loan

(12,393)

-

-

Exchange movements

15

(619)

(1,035)

Other movements

(3)

(1)

(6)

Movement in net debt in the period

(10,014)

(2,412)

(1,975)

Net debt at the beginning of the period

(12,028)

(10,053)

(10,053)

Net debt at the end of the period

(22,042)

(12,465)

(12,028)

Represented by:




Cash and short term deposits

3,183

198

729

Foreign currency bank loan falling due within one year

(12,610)

-

-

Foreign currency bank loan falling due after more




  than one year

(12,615)

(12,663)

(12,757)

Net debt

(22,042)

(12,465)

(12,028)

               



 

Notes to the Accounts

for the six months ended 31st January 2013

1.             Financial statements

                The information contained within the Financial Statements in this interim report has not been audited or reviewed by the Company's auditors.

2.             Accounting policies

                The accounts have been prepared in accordance with 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' 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.

3.             Dividends



(Unaudited)

(Unaudited)

(Audited)



Six months ended

Six months ended

Year ended



31st January 2013

31st January 2012

31st July 2012



£'000

£'000

£'000


2012 final dividend of 2.15p (2011: 1.45p)

3,760

2,198

2,198


First interim dividend paid of 0.90p (2012: 0.90p)

1,732

1,380

1,380


Second interim dividend paid of 0.90p (2012: 0.90p)

n/a

n/a

1,449


Third interim dividend paid of 0.90p (2012: 0.90p)

n/a

n/a

1,519


Total dividends paid in the period

5,492

3,578

6,546

 

                A second interim dividend of 0.9p per share, amounting to £1,909,000 has been declared payable in respect of the six months ended 31st January 2013.

4.             Return/(loss) per share



(Unaudited)

(Unaudited)

(Audited)



Six months ended

Six months ended

Year ended



31st January 2013

31st January 2012

31st July 2012



£'000

£'000

£'000


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





Revenue return

2,459

2,484

8,482


Capital return/(loss)

26,823

(2,325)

(845)


Total return

29,282

159

7,637


Weighted average number of shares in issue during





  the period

182,033,568

148,898,353

156,827,362


Revenue return per share

1.35p

1.67p

5.41p


Capital return/(loss) per share

14.74p

(1.56)p

(0.54)p


Total return per share

16.09p

0.11p

4.87p

               

5.             Net asset value per share



(Unaudited)

(Unaudited)

(Audited)



31st January 2013

31st January 2012

31st July 2012


Funds attributable to ordinary shareholders (£'000)

250,031

167,581

194,651


Number of ordinary shares in issue

200,419,438

153,635,853

173,719,438


Net asset value per ordinary share

124.8p

109.1p

112.0p

               



 

6.             Reconciliation of total return on ordinary activities before finance costs and taxation to net cash inflow from operating activities



(Unaudited)

(Unaudited)

(Audited)



Six months ended

Six months ended

Year ended



31st January 2013

31st January 2012

31st July 2012



£'000

£'000

£'000


Total return on ordinary activities before finance costs





  and taxation

29,990

616

9,034


Less: capital (return)/loss on ordinary activities





  before finance costs and taxation

(27,078)

2,176

547


Scrip dividends received as income

-

(13)

(13)


Decrease/(increase) in accrued income

1,339

823

(570)


(Increase)/decrease in other debtors

(20)

103

110


Increase/(decrease) in accrued expenses

21

(11)

38


Management fee charged to capital

(583)

(534)

(1,170)


Overseas withholding tax

(357)

(244)

(995)


Performance fee paid

(1,382)

(897)

(897)


Net cash inflow from operating activities

1,930

2,019

6,084

 

 

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.morningstar.co.uk/uk/NSM

 

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.

 


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