Half-year Report

RNS Number : 9292R

JPMorgan Emerging Mkts Invest Trust

06 March 2019

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS Investment Trust plc

(the 'Company')

Half Year Report & FINANCIAL STATEMENTS

 for the six months ended 31st DECEMBER 2018

Legal Entity Identifier: 5493001VPQDYH1SSSR77

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Performance

During the first half of the Company's financial year, emerging markets were volatile. Over the period, the Company's benchmark index, the MSCI Emerging Markets Index (in sterling terms), fell by 5.1%. In the same period the Company's performance, at -2.0%, was rather better than the benchmark. The return to shareholders was positive, at +3.1%, reflecting a significant narrowing of the discount at which the Company's shares trade, from 11.7% at the previous financial year end, to 8.1% at the half year end. Whilst it is disappointing to report a fall in the net asset value, it is pleasing that the return to shareholders was positive and the outperformance of the benchmark on both measures once again demonstrates the benefits of active management. The Company's net asset value and share price have both outperformed the benchmark index over the three, five and ten years to 31st December 2018.

This sustained, long-term outperformance is a great credit to Austin Forey and the team at JPMorgan Asset Management. Their focus on finding and investing in long-term winners across the emerging markets' spectrum, backed by the strong and experienced analytical resource of the investment team, has ensured that the Company has continued to outperform its benchmark consistently over the longer term.

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 4.70 pence per share (2017: 4.41 pence). Last year, the Company paid a final dividend of 12.5 pence per share and the Board has agreed that the Company now generates sufficient income to warrant the payment of an interim dividend each year. This will more closely reflect the receipt of income from the Company's portfolio. As a consequence the Board has declared an interim dividend of 5.0 pence per share, payable on 18th April 2019 to shareholders on the register at the close of business on 15th March 2019. The ex-dividend date will be 14th March 2019.

Share Repurchases and Discount

The Board is pleased that the discount on the Company's shares has narrowed in recent months. It regularly considers the merits of buying back shares when it believes this to be in shareholders' interest and in order to manage the discount. In particular, it will consider taking action to ensure the discount does not exceed 10% for an extended period, if the discount is out of line with the peer group and market conditions are orderly.

During the six months the Company was active in buying back shares and it repurchased a total of 817,015 shares into Treasury at an average discount of 11.3% and a total cost of £6.73 million. The buybacks have benefitted shareholders as they increase the net asset value per share. The discount on the Company's shares narrowed: over the period it ranged between 7.5% and 13.1%, averaging 11.1%. At the half year end, the discount was 8.1%.

The Board

Anatole Kaletsky retired at the conclusion of the Annual General Meeting ('AGM') held in November 2018, having served as a Director since 2003. On behalf of the Board, I would like to thank him for his service to the Company and its shareholders.

Aidan Lisser was appointed to the Board on 1st December 2018. Aidan is Head of Strategy at Investec Wealth & Investment Limited, where he was previously Chief Marketing Officer. He has broad senior level brand and marketing experience across consumer products, banking, asset and wealth management, having been Chief Marketing Officer at Allianz Global Investors and Head of Group Brand at Standard Chartered Bank plc. He previously held various positions at Unilever, including four years based in China and three years in Thailand. Mr Lisser is also a Non-Executive Director of Henderson International Income Trust plc.

Outlook

Stock markets have recovered from their lows in the fourth quarter of 2018 as some of the fears of rising interest rates, a stronger US dollar and a more aggressive US trade policy have receded. There are, however, still concerns that China and other major global economies are slowing down which may create some further headwinds and volatility going forward. Against this backdrop, emerging markets will continue to provide opportunities to invest in a number of quality companies with sustainable growth potential at reasonable valuations, which remains the focus of your Investment Manager.

Sarah Arkle

Chairman                                                                                                                         

6th March 2019

INVESTMENT MANAGER'S REPORT

The last six months have seen conditions, with more volatility and plenty of uncertainty, that are more familiar to investors in emerging markets than the smooth untroubled progress that equities enjoyed a year earlier. Why has this been the case? I highlighted three headwinds for markets in my commentary in the last annual report - a strong US dollar, economic sanctions imposed on certain countries by the US, and the trade disputes between the US and China. None of these were really resolved during the last six months, and the US/China trade issues in particular continued to bear negatively on share prices. As a result, markets declined in sterling terms, falling 5.1% during the period. The return on the Company's share price managed to stay in positive territory, at 3.1%. Most of this 8% difference was due to a narrowing of the discount to net asset value, which contributed about 5%; the remaining 3% was due to the underlying performance of the investment portfolio, measured as the return on net asset value, which was ahead of the index by 3.1%.

What did we do during the last six months? Activity in the portfolio was low, and for the most part we were content to continue holding the same companies; as long as they keep producing decent results while maintaining or growing their competitive strengths, we remain happy to leave them alone. The most notable change in markets was the decline in many Chinese stocks, but given where valuations were, this has not always been enough to produce compelling entry points; more, a reversion towards reasonable valuation levels. Elsewhere, Brazilian equities experienced a strong recovery after the presidential election there in October, as markets reacted with a degree of euphoria to the prospect of political change and economic reform. Experience suggests that such enthusiasm should be met with caution; the road to reform is rarely as smooth as it is portrayed to be during election campaigns.

Looking forward, what's on our minds? China is still the focus of a lot of our attention, though we really want to make changes only when the reasons to do so become compelling. People often assume that we spend our days looking for more and more new ideas to add to the portfolio; but if our strongest views are already in the portfolio, we are not interested in diversification for the sake of it. The number of holdings in the portfolio actually fell marginally during the last half year. Apart from China, we are spending a lot of our time looking at consumer sector companies in all emerging market regions; our positioning in the consumer sector has tended to be more diverse than in sectors like financial or information technology, but the more we can formulate strong opinions, the more we should be able to concentrate our views more sharply.

More generally, we can't help but be aware of what's going on in the global economy, and there, good signs are getting harder to find; but that's never been our starting point as investors, and it isn't today. Well managed companies, bought at sensible prices, which stay competitive and grow their share of the economic opportunity before them; that's been our bread and butter as investors, and will be in the future too.

Austin Forey

Investment Manager                                                                                                                           

6th March 2019

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 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 Annual Report and Financial Statements for the year ended 30th June 2018.

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 2018, 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 2019

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2018

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st December 2018			31st December 2017			30th June 2018
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments
held at fair value through
profit or loss	-	(28,351)	(28,351)	-	123,601	123,601	-	83,886	83,886
Net foreign currency
gains/(losses)	-	533	533	-	(446)	(446)	-	(796)	(796)
Income from investments	8,872	-	8,872	8,359	-	8,359	23,039	-	23,039
Interest receivable and
similar income	91	-	91	97	-	97	168	-	168
Gross return/(loss)	8,963	(27,818)	(18,855)	8,456	123,155	131,611	23,207	83,090	106,297
Management fee	(1,642)	(3,831)	(5,473)	(1,610)	(3,758)	(5,368)	(3,293)	(7,687)	(10,980)
Other administrative expenses	(638)	-	(638)	(610)	-	(610)	(1,294)	-	(1,294)
Net return/(loss) on ordinary
activities before taxation	6,683	(31,649)	(24,966)	6,236	119,397	125,633	18,620	75,403	94,023
Taxation	(885)	-	(885)	(773)	-	(773)	(2,044)	-	(2,044)
Net return/(loss) on ordinary
activities after taxation	5,798	(31,649)	(25,851)	5,463	119,397	124,860	16,576	75,403	91,979
Return/(loss) per share
(note 3)	4.70p	(25.64)p	(20.94)p	4.41p	96.47p	100.88p	13.40p	60.96p	74.36p

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

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.

The net return/(loss) on ordinary activities after taxation represents the profit/(loss) for the period and also the total comprehensive income.

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2018

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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 on ordinary activities	-	-	-	-	(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
Six months ended 31st December 2017
(Unaudited)
At 30th June 2017	33,091	173,657	1,665	69,939	816,561	26,069	1,120,982
Repurchase of shares into Treasury	-	-	-	-	(2,488)	-	(2,488)
Net return on ordinary activities	-	-	-	-	119,397	5,463	124,860
Dividend paid in the period (note 4)	-	-	-	-	-	(13,616)	(13,616)
At 31st December 2017	33,091	173,657	1,665	69,939	933,470	17,916	1,229,738
Year ended 30th June 2018 (Audited)
At 30th June 2017	33,091	173,657	1,665	69,939	816,561	26,069	1,120,982
Repurchase of shares into Treasury	-	-	-	-	(2,490)	-	(2,490)
Net return on ordinary activities	-	-	-	-	75,403	16,576	91,979
Dividend paid in the period (note 4)	-	-	-	-	-	(13,616)	(13,616)
At 30th June 2018	33,091	173,657	1,665	69,939	889,474	29,029	1,196,855

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

STATEMENT OF FINANCIAL POSITION

AT 31ST DECEMBER 2018

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2018	2017	2018
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	1,137,562	1,227,205	1,189,079
Current assets
Derivative financial assets	-	-	1
Debtors	571	1,024	9,467
Cash and cash equivalents	10,905	2,184	1,023
	11,476	3,208	10,491
Current liabilities
Creditors: amounts falling due within one year	(205)	(675)	(2,711)
Derivative financial liabilities	-	-	(4)
Net current assets	11,271	2,533	7,776
Total assets less current liabilities	1,148,833	1,229,738	1,196,855
Net assets	1,148,833	1,229,738	1,196,855
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	851,106	933,470	889,474
Revenue reserve	19,375	17,916	29,029
Total shareholders' funds	1,148,833	1,229,738	1,196,855
Net asset value per share (note 5)	935.5p	994.8p	968.2p

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31ST DECEMBER 2018

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2018	31st December 2017	30th June 2018
	£'000	£'000	£'000
Net cash outflow from operations before
dividends and interest (note 6)	(5,964)	(6,374)	(12,752)
Dividends received	12,542	9,931	19,314
Interest received	93	90	166
Overseas tax recovered	(183)	(91)	-
Net cash inflow from operating activities	6,488	3,556	6,728
Purchases of investments	(8,553)	(32,859)	(82,163)
Sales of investments	33,930	38,877	84,070
Settlement of foreign currency contracts	189	(150)	(218)
Net cash inflow from investing activities	25,566	5,868	1,689
Dividend paid	(15,452)	(13,616)	(13,616)
Repurchase of shares into Treasury	(6,719)	(4,202)	(4,323)
Net cash outflow from financing activities	(22,171)	(17,818)	(17,939)
Increase/(decrease) in cash and cash equivalents	9,883	(8,394)	(9,522)
Cash and cash equivalents at start of period	1,023	10,580	10,580
Exchange movements	(1)	(2)	(35)
Cash and cash equivalents at end of period	10,905	2,184	1,023
Increase/(decrease) in cash and cash equivalents	9,883	(8,394)	(9,522)
Cash and cash equivalents consist of:
Cash and short term deposits	445	326	873
Cash held in JPMorgan US Dollar Liquidity Fund	10,460	1,858	150
Total	10,905	2,184	1,023

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 31st December 2018

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 2018 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 revised 'SORP') issued by the Association of Investment Companies in November 2014 and updated in February 2018.

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

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 2018.

3.       Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2018	31st December 2017	30th June 2018
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue return	5,798	5,463	16,576
Capital (loss)/return	(31,649)	119,397	75,403
Total (loss)/return	(25,851)	124,860	91,979
Weighted average number of Ordinary shares in issue (excluding shares held in
Treasury)	123,454,610	123,772,751	123,694,695
Revenue return per share	4.70p	4.41p	13.40p
Capital (loss)/return per share	(25.64)p	96.47p	60.96p
Total (loss)/return per share	(20.94)p	100.88p	74.36p

4.       Dividend paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2018	31st December 2017	30th June 2018
	£'000	£'000	£'000
2018 Final dividend of 12.50p (2017: 11.0p)	15,452	13,616	13,616
Total dividend paid in the period/year	15,452	13,616	13,616

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

An interim dividend of 5.0p (2017: nil) per share amounting to £6,140,000 (2017: £nil), has been declared payable in respect of the six months ended 31st December 2018.

5.       Net asset value per share

	(Unaudited)	(Unaudited)		(Audited)
	Six months ended	Six months ended		Year ended
	31st December 2018	31st December 2017		30th June 2018
Net assets (£'000)	1,148,833		1,229,738		1,196,855
Number of shares in issue	122,798,331		123,615,346		123,615,346
Net asset value per share	935.5p		994.8p		968.2p

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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