Half Yearly Report

RNS Number : 4283I

JPMorgan Glb Emerging Mkts Inc Tst

25 March 2015

 

JPMORGAN GLOBAL EMERGING MARKETS INCOME TRUST PLC

LONDON STOCK EXCHANGE ANNOUNCEMENT

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31^ST JANUARY 2015

Chairman's Statement

Performance

For the six months ended 31st January 2015, the Company reported a 2.7% increase in net assets per share which compares with an increase of 2.2% from the MSCI Emerging Markets Index (in sterling, with dividends reinvested). The Investment Managers' Report reviews the Company's performance and comments on the investment strategy.

Dividends

In the Company's current financial year, the Board has declared first and second interim dividends of 1.0p each, in line with the same period last year.

As the Managers' report makes clear, companies held within the portfolio have been maintaining their dividends in local currency terms and in line with expectations. Currency exchange rates have fluctuated and are likely to continue to do so. For the first six months, the net impact on dividends received by the Company of exchange rate movements relative to sterling has been slightly negative. The Company does not hedge exposures to emerging market currencies.

Share Issuance

In the six months to 31st January 2015, the Company issued a total of 13.3 million new ordinary shares representing an increase of approximately 4.8%; and, since that date, a further 2.5 million new ordinary shares have been issued. In line with the share issuance policy, all new shares have been issued at a premium to the cum income net asset value, thereby enhancing the net asset value for continuing shareholders.

Appointment of New Director

The Board was delighted to welcome Caroline Gulliver as a Director from 1st January 2015. Ms Gulliver is a Chartered Accountant and was with Ernst & Young LLP until 2012. She has a background in Audit and a wealth of experience with investment trusts.

Outlook

The Company faces variable headwinds. Investing in emerging markets is never plain sailing and these current conditions are not unusual. For now, the macro-economic and political elements are not conducive to corporate confidence and dividend growth. However, the Board is pleased to see that the Managers continue to focus primarily on the individual companies in the portfolio and are finding interesting opportunities in several regions. Nobody knows how this current cycle will develop; but the strategy of owning well-managed, shareholder-friendly businesses continues to offer attractive longer term returns.

Andrew Hutton

Chairman

25th March 2015

Investment Managers' Report

Emerging markets faced a number of challenges during the first six months of the Company's financial year, characterised by significant declines in oil and commodity prices and continued weakness in the Chinese economy. Against this backdrop the Company modestly outperformed the MSCI Emerging Markets Index, with the NAV rising by 2.7% compared to an index return of 2.2%.

Performance

At a country level, being overweight Taiwan, Brazil, South Africa and Thailand and underweight South Korea generated a positive contribution to relative returns. Stock selection in Taiwan continued to focus on technology companies, which tend to have a strong dividend culture. An overweight position in Siliconware Precision Industries, the Taiwanese semiconductor company that provides packaging and testing services, made a big positive contribution. In Brazil, the focus on income-generating stocks protected the Company from the uncertainty associated with the elections that saw Dilma Rousseff re-elected as the country's president. A decision not to hold Petrobras, the Brazilian oil giant which suffered from weak oil prices and an emerging corruption scandal, added performance relative to the benchmark.

On the other hand, the exposure to China, in particular the holdings in Macau gaming stocks, the natural underweight exposure to India, where companies do not have a strong culture of paying dividends, and an overweight in Russia, detracted from performance. Russian stocks fell heavily as tensions intensified in eastern Ukraine, resulting in a ramping up of western sanctions on Moscow, while the sharp declines in the global oil price and the rouble also tempered returns. The overweight holding in Mobile Telesystems, Russia's largest mobile operator, was a sizeable detractor from the Company's relative performance. However, the impact of the weakness in Russia was mitigated by the portfolio's focus on companies with strong balance sheets that are able to maintain their dividend payouts.

Dividends

The Company's approach, which is to invest in a diversified portfolio of relatively high-yielding stocks to receive dividends from across sectors and countries, remained unchanged in the review period. However, the challenging environment for emerging market companies has been reflected in limited dividend growth - particularly in sterling terms due to emerging market currency weakness. However, none of the companies held in the portfolio disappointed in terms of their dividend payout announcements.

Portfolio changes

Trading activity was fairly limited over the six months reflecting the investment approach, which is focused on holding stocks to accrue dividends over a long period of time. Portfolio turnover for the six months to 31st January 2015 was 14.0%, while active share (which measures the degree to which the portfolio's holdings differ from the benchmark) was high at 83.8%. The holding in Etihad Etisalat, the Saudi Arabian telecommunications company, was sold following a restatement of the prior year earnings which undermined any confidence that the company would be able to pay dividends in the future. In addition, the holdings in the Turkish oil refiner, Tupras, and the South African retail chain operator, Foschini, were sold as the valuations had become over-extended in spite of good dividend prospects. Purchases were made of the Taiwanese semiconductor company, MediaTek, the Russian mobile phone operator Megafon and China Resources Power, the Chinese utility company.

Outlook

Emerging market companies overall are finding it difficult to grow profits and dividends. Currency weakness has also added pressure from the perspective of a sterling investor. On a long term view, we believe that emerging market currencies are far from expensive at this point, given current valuations and the varied inflation conditions in different emerging market countries, however, the short term outlook remains uncertain.

The weakness of emerging market stocks over the past four years has been a reflection of the prolonged economic downturn, accompanied by disappointing profits growth from emerging market companies. The causes have been numerous and varied: China's decelerating economic growth, worries about the impact of Federal Reserve monetary policy normalisation (and particularly the prospect of rising US interest rates), a major decline in commodity prices and Russia's often tumultuous relations with its neighbouring states. To see a reversal of this trend, emerging market equities need to deliver a steady rise in profits and dividends. Although the outlook remains challenging, a number of emerging market central banks have begun to cut interest rates, with Turkey, India and China taking monetary policy action. This stimulus may help to provoke a reversal in the prolonged downturn.

In the meantime, there are a significant number of investment opportunities in companies with attractive dividend yields that have the ability to grow their payouts. Among these are Taiwanese electronics companies, South African industrials and Brazilian consumer companies. We are confident that, over the long term, these types of companies will deliver attractive returns for the Company's shareholders.

Richard Titherington

Investment Manager

Omar Negyal

Deputy Investment Manager                                                                                                                                                                   

25th March 2015

Interim Management Report

The Company is required to make the following disclosures in its interim 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 for the year ended 31st July 2014.

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 during the period.

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 financial statements.

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 state of the affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st January 2015, as required by the UK Listing Authority Disclosure and Transparency Rule 4.2.4R; and

(ii)  the interim management report includes a fair review of the information required by DTR 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

Andrew Hutton

Chairman                                                                                                                                                                                                 

25th March 2015

Income Statement

for the six months ended 31st January 2015

	(Unaudited)				(Unaudited)				(Audited)
	Six months ended				Six months ended				Year ended
	31st January 2015				31st January 2014				31st July 2014
	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	-	7,640	7,640	-		(42,323)	(42,323)	-	(9,342)	(9,342)
Net foreign currency (losses)/gains	-	(2,826)	(2,826)	-		1,995	1,995	-	2,617	2,617
Income from investments	6,988	-	6,988	6,485		-	6,485	17,359	-	17,359
Interest and similar income	1	-	1	1		-	1	2	-	2
Gross return/(loss)	6,989	4,814	11,803	6,486		(40,328)	(33,842)	17,361	(6,725)	10,636
Management fee	(507)	(1,184)	(1,691)	(436)		(1,016)	(1,452)	(878)	(2,048)	(2,926)
Other administrative expenses	(401)	-	(401)	(306)		-	(306)	(673)	-	(673)
Net return/(loss) on ordinary
activities before finance
costs and taxation	6,081	3,630	9,711	5,744		(41,344)	(35,600)	15,810	(8,773)	7,037
Finance costs	(114)	(267)	(381)	(167)		(389)	(556)	(246)	(573)	(819)
Net return/(loss) on ordinary
activities before taxation	5,967	3,363	9,330	5,577		(41,733)	(36,156)	15,564	(9,346)	6,218
Taxation	(582)	(75)	(657)	(610)		-	(610)	(1,622)	75	(1,547)
Net return/(loss) on ordinary
activities after taxation	5,385	3,288	8,673	4,967		(41,733)	(36,766)	13,942	(9,271)	4,671
Return/(loss) per share (note 4)	1.88p	1.15p	3.03p	1.99p		(16.76)p	(14.77)p	5.41p	(3.60)p	1.81p

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 AIC.

Statement of Total Recognised Gains and Losses

for the six months ended 31st January 2015

	(Unaudited)				(Unaudited)				(Audited)
	Six months ended				Six months ended				Year ended
	31st January 2015				31st January 2014				31st July 2014
	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	-	-	-	-		50	50	-	50	50
Net return/(loss) on ordinary
activities	5,385	3,288	8,673	4,967		(41,733)	(36,766)	13,942	(9,271)	4,671
Total recognised gains/(losses)
in the period	5,385	3,288	8,673	4,967		(41,683)	(36,716)	13,942	(9,221)	4,721

Reconciliation of Movements in Shareholders' Funds

	Called up	Capital
Six months ended	share	redemption	Share	Other	Capital	Revenue
31st January 2015	capital	reserve	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31st July 2014	2,785	13	199,593	101,276	21,229	7,321	332,217
Issue of ordinary shares	133	-	15,943	-	-	-	16,076
Share issue expenses	-	-	(46)	-	-	-	(46)
Net return on ordinary activities	-	-	-	-	3,288	5,385	8,673
Dividends appropriated in the period	-	-	-	-	-	(8,242)	(8,242)
At 31st January 2015	2,918	13	215,490	101,276	24,517	4,464	348,678
	Called up	Capital
Six months ended	share	redemption	Share	Other	Capital	Revenue
31st January 2014	capital	reserve	premium	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31st July 2013	2,344	13	148,189	101,276	30,450	6,255	288,527
Issue of ordinary shares	242	-	28,520	-	-	-	28,762
Share issue expenses	-	-	(88)	-	-	-	(88)
Movement in the fair value of the
cash flow hedge	-	-	-	-	50	-	50
Net (loss)/return on ordinary activities	-	-	-	-	(41,733)	4,967	(36,766)
Dividends appropriated in the period	-	-	-	-	-	(7,549)	(7,549)
At 31st January 2014	2,586	13	176,621	101,276	(11,233)	3,673	272,936
	Called up	Capital
Year ended	share	redemption	Share	Other	Capital	Revenue
31st July 2014	capital	reserve	premium	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31st July 2013	2,344	13	148,189	101,276	30,450	6,255	288,527
Issue of ordinary shares	441	-	51,554	-	-	-	51,995
Share issue expenses	-	-	(150)	-	-	-	(150)
Movement in fair value of the
cash flow hedge	-	-	-	-	50	-	50
Net (loss)/return on ordinary activities	-	-	-	-	(9,271)	13,942	4,671
Dividends appropriated in the year	-	-	-	-	-	(12,876)	(12,876)
At 31st July 2014	2,785	13	199,593	101,276	21,229	7,321	332,217

Balance Sheet

at 31st January 2015

	(Unaudited)	(Unaudited)	(Audited)
	31st January 2015	31st January 2014	31st July 2014
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	362,236	291,650	348,174
Investments in liquidity fund held at fair value
through profit or loss	8,087	3,590	136
Total investments	370,323	295,240	348,310
Current assets
Derivative financial assets	6	-	-
Debtors	1,524	1,446	2,830
Cash and short term deposits	4,295	823	5,559
	5,825	2,269	8,389
Creditors: amounts falling due within one year	(14,154)	(233)	(788)
Derivative financial liabilities	-	-	(1)
Net current (liabilities)/assets	(8,329)	2,036	7,600
Total assets less current liabilities	361,994	297,276	355,910
Creditors: amounts falling due after more than
one year	(13,316)	(24,340)	(23,693)
Net assets	348,678	272,936	332,217
Capital and reserves
Called up share capital	2,918	2,586	2,785
Capital redemption reserve	13	13	13
Share premium	215,490	176,621	199,593
Other reserve	101,276	101,276	101,276
Capital reserves	24,517	(11,233)	21,229
Revenue reserve	4,464	3,673	7,321
Total equity shareholders' funds	348,678	272,936	332,217
Net asset value per share (note 5)	119.5p	105.5p	119.3p

Company registration number: 7273382.

Cash Flow Statement

for the six months ended 31st January 2015

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st January 2015	31st January 2014	31st July 2014
	£'000	£'000	£'000
Net cash inflow from operating activities (note 6)	5,830	2,669	8,860
Net cash outflow from servicing of finance	(390)	(513)	(873)
Overseas tax recovered	82	64	94
Net cash outflow from capital expenditure and
financial investment	(15,062)	(26,041)	(45,526)
Dividends paid	(8,242)	(7,549)	(12,876)
Net cash inflow from financing	16,400	28,510	52,221
(Decrease)/increase in cash in the period	(1,382)	(2,860)	1,900
Reconciliation of net cash flow to movement in
net debt
Net cash movement	(1,382)	(2,860)	1,900
Net drawdown of short term loan	-	(141)	(141)
Exchange movements	(2,821)	1,996	2,617
Other movements	-	(2)	-
Movement in net (debts)/funds in
the period	(4,203)	(1,007)	4,376
Net debt at the beginning of the period	(18,134)	(22,510)	(22,510)
Net debt at the end of the period	(22,337)	(23,517)	(18,134)
Represented by:
Cash and short term deposits	4,295	823	5,559
Foreign currency bank loan falling due within one year	(13,316)	-	-
Foreign currency bank loan falling due after more
than one year	-	(12,170)	(11,846)
Debt falling due in more than two years but not
more than five years	(13,316)	(12,170)	(11,847)
Net debt	(22,337)	(23,517)	(18,134)

Notes to the Financial Statements

for the six months ended 31st January 2015

1.    Financial statements

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

2.   Accounting policies

      The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice 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 financial statements have been prepared on a going concern basis.

3.   Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st January 2015	31st January 2014	31st July 2014
	£'000	£'000	£'000
2014 fourth interim dividend of 1.90p (2013 final: 2.10p)	5,324	5,005	5,005
First interim dividend paid of 1.00p (2014: 1.00p)	2,918	2,544	2,544
Second interim dividend paid of n/a (2014: 1.00p)	n/a	n/a	2,603
Third interim dividend paid of n/a (2014: 1.00p)	n/a	n/a	2,724
Total dividends paid in the period	8,242	7,549	12,876

      A second interim dividend of 1.00p per share, amounting to £2,918,000 has been declared payable in respect of the six months ended 31st January 2015.

4.   Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st January 2015	31st January 2014	31st July 2014
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	5,385	4,967	13,942
Capital return/(loss)	3,288	(41,733)	(9,271)
Total return/(loss)	8,673	(36,766)	4,671
Weighted average number of shares in issue during
the period	286,613,345	249,014,927	257,623,359
Revenue return per share	1.88p	1.99p	5.41p
Capital return/(loss) per share	1.15p	(16.76)p	(3.60)p
Total return/(loss) per share	3.03p	(14.77)p	1.81p

5.   Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	31st January 2015	31st January 2014	31st July 2014
Net assets attributable to ordinary shareholders (£'000)	348,678	272,936	332,217
Number of ordinary shares in issue	291,839,438	258,604,438	278,514,438
Net asset value per ordinary share (pence)	119.5	105.5	119.3

6.   Reconciliation of total return/(loss) 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 2015	31st January 2014	31st July 2014
	£'000	£'000	£'000
Net return/(loss) on ordinary activities before finance
costs and taxation	9,711	(35,600)	7,037
(Less: capital return)/Add: capital loss on ordinary activities
before finance costs and taxation	(3,630)	41,344	8,773
Decrease/(increase) in accrued income	1,659	657	(1,252)
(Increase)/decrease in other debtors	(1)	8	25
Increase/(decrease) in accrued expenses	6	(58)	(7)
Overseas withholding tax	(731)	(613)	(1,615)
Management fee charged to capital	(1,184)	(1,016)	(2,048)
Performance fee paid	-	(2,053)	(2,053)
Net cash inflow from operating activities	5,830	2,669	8,860

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

The interim 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.

 

END

 

 

IR PGUBUWUPAGGA