Half Yearly Report

RNS Number : 8045A

JPMorgan Emerging Mkts Invest Trust

24 February 2014

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS

INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2013

Chairman's Statement

Performance

Following the strong positive returns enjoyed in the previous financial year to 30th June 2013, the first half of the Company's financial year was a difficult period for emerging markets and your Company underperformed its benchmark index. In the six months to 31st December 2013, the portfolio return net of fees and expenses was

- 5.7%, as compared to the total return from our benchmark index, the MSCI Emerging Markets Index (in sterling terms) of -1.4%. The fully diluted total return on net assets, which assumes that all of the Company's Subscription shares were exercised at the price of 543 pence per share, was -5.3%. Over the same period, the return to Ordinary shareholders was -2.9%. Whilst this is disappointing, the Company's long term record remains very strong. A review of the Company's performance for the first six months and the outlook for the remainder of the year is provided in the Investment Manager's Report.

Discount

During the first six months of this financial year, the discount on the Company's Ordinary shares to their fully diluted net asset value ('NAV') ranged between 8.1% and 11.6%, averaging 9.8%. At the period end, the discount was 10.3%. As I have explained in previous reports, the Board is prepared to take action to ensure that the fully diluted discount does not exceed 10% for an extended period, but only if the discount is out of line with our peer group and market conditions are orderly. We are prepared to buy shares in at discounts wider than 8% in order to achieve this, subject to those caveats, and have done so during the period. During the six months the Company repurchased a total of 106,705 Ordinary shares into Treasury at an average 10.3% discount to NAV. Shares will only be reissued from Treasury at a premium to net asset value.

Subscription shares

During the six months to 31st December 2013 and up to the date of this report, the Company has issued a total of 12,348 Ordinary shares following the exercise of Subscription shares, amounting to proceeds of £67,050. Further details of the Subscription shares can be found in the half year report to be published shortly and on the Company's website at www.jpmemergingmarkets.co.uk but I would remind Subscription shareholders that the final opportunity to convert their Subscription shares into Ordinary shares at a price of 543p per share is on 31st July 2014, after which they will expire.

The Alternative Investment Fund Managers Directive ('AIFMD')

As I reported at the last year end, the AIFMD represents new regulation for investment trust companies and the Company must comply by 22nd July 2014. The Board is taking independent legal advice on this matter, but has agreed to appoint JPMorgan as its AIFM and Bank of New York ('BoNY') as its depositary under the new regime. JPMorgan has submitted its application to be authorised as an AIFM which it expects to be confirmed in the coming weeks, at which time the Company will enter into a new management agreement with JPMorgan Funds Limited and a depositary agreement with BoNY. Whilst compliance with the new regime will entail some additional disclosure, it is not expected to change materially the manner in which the Company is managed and will not impact the independence of the Board.

Management Fee

The Company's management fee is currently charged at the rate of 1.0% per annum of total assets less current liabilities. The Board has agreed with JPMAM that, with effect form 1st July 2014, a sliding scale will apply to the management fee such that the charge will be reduced to 0.75% on assets above £800 million.

Outlook

The difficulties experienced by emerging markets in recent months may continue in the short term, but lower valuations offer opportunities and we are confident in our Manager's ability to identify and exploit those opportunities to generate outperformance and continue the Company's excellent long term record.

Alan Saunders

Chairman, 24th February 2014

Investment Manager's Report

It has been a challenging six months for emerging markets and for the manager. Although markets declined only modestly (-1.4%), we failed to keep pace with the benchmark and the fully diluted net asset value per share of the portfolio fell by 5.3% over the same period; this effectively cancelled out the outperformance of the first six months of 2013. The principal causes of this disappointing outcome were currency weakness during the late summer, especially in India, where we had a large exposure and some individual effects in stock selection. As we head in to 2014, market conditions are not recovering and currency weakness in emerging markets has again moved to centre stage.

After two already dull years for emerging markets, this is not cheery news for us to report; but it should not hugely surprise us that as developed economies recover, the flow of money seeking returns should change direction. At such a time, it is especially important to be careful about balance sheets and to think carefully about how well placed businesses are to take advantage of more challenging conditions. The non-financial investments in the portfolio conform very much to this line of thinking. Financial self-reliance may prove very important in an era in which the cost of money is rising.

Looking forward, we see continuing headwinds from the recovery of the developed world and the likely eventual increase in interest rates; but it is encouraging that exchange rates are already acting as an adjustment mechanism. Not only is this much less damaging than a system which puts all the stress on adjustment of internal prices in an economy (as was seen in the Asian crisis in 1998, and in Eurozone countries like Greece after the financial crisis); but it also means that stocks are getting cheaper. Low valuations must mitigate a lot of the current pessimism about emerging markets and one thing we know from the past is that the world does not end when gloom and pessimism are widespread; instead, it offers better value; and currencies will revert to the mean, in real terms, in the long run. While it may be too early to call a definitive upturn in the asset class, we are seeing increasing numbers of interesting opportunities at the stock level, which has always been our principal focus as investors.

Austin Forey

Investment Manager, 24th February 2014

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; discount; change of corporate control of the manager; accounting, legal and regulatory; corporate governance and shareholder relations; operational and financial. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 30th June 2013.

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 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 state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st December 2013, as required by the UK Listing AuthorityDisclosure and Transparency Rules 4.2.4R; and

(ii)      theinterim management report includes a fair review of the information required by 4.2.7R and 4.2.8R of the UK Listing AuthorityDisclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•        select suitable accountingpolicies 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

Alan Saunders                                                                                        

Chairman, 24th February 2014

Income Statement

for the six months ended 31st December 2013

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st December 2013			31st December 2012			30th June 2013
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains from investments
held at fair value through
profit or loss	-	(46,232)	(46,232)	-	75,370	75,370	-	76,287	76,287
Net foreign currency (losses)/gains	-	(1,129)	(1,129)	-	135	135	-	191	191
Income from investments	7,984	-	7,984	7,469	-	7,469	18,484	-	18,484
Other interest receivable and
similar income	2	-	2	2	-	2	3	-	3
Gross return/(loss)	7,986	(47,361)	(39,375)	7,471	75,505	82,976	18,487	76,478	94,965
Management fee	(3,857)	-	(3,857)	(3,679)	-	(3,679)	(7,835)	-	(7,835)
Performance fee	-	-	-	-	-	-	-	(3,211)	(3,211)
Other administrative expenses	(581)	-	(581)	(546)	-	(546)	(1,140)	-	(1,140)
Net return/(loss) on ordinary
activities before taxation	3,548	(47,361)	(43,813)	3,246	75,505	78,751	9,512	73,267	82,779
Taxation (note 3)	(662)	-	(662)	(578)	-	(578)	(1,375)	-	(1,375)
Net return/(loss) on ordinary
activities after taxation	2,886	(47,361)	(44,475)	2,668	75,505	78,173	8,137	73,267	81,404
Return/(loss) per Ordinary share
(note 4)
Undiluted	2.42p	(39.69)p	(37.27)p	2.22p	62.74p	64.96p	6.77p	60.93p	67.70p
Diluted	2.42p	(39.69)p	(37.27)p	2.21p	62.65p	64.86p	6.73p	60.59p	67.32p

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 Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up		Capital
Six months ended	share	Share	redemption	Other	Capital	Revenue
31st December 2013	capital	premium	reserve	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2013	30,650	120,933	1,665	69,939	546,591	16,000	785,778
Exercise of Subscription shares into
Ordinary shares	-	-	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares	3	62	-	-	-	-	65
Repurchase of shares into Treasury	-	-	-	-	(605)	-	(605)
Net return on ordinary activities	-	-	-	-	(47,361)	2,886	(44,475)
Dividends appropriated in the period	-	-	-	-	-	(6,561)	(6,561)
At 31st December 2013	30,653	120,995	1,665	69,939	498,625	12,325	734,202
	Called up		Capital
Six months ended	share	Share	redemption	Other	Capital	Revenue
31st December 2012	capital	premium	reserve	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2012	28,907	89,252	1,665	69,939	488,820	13,348	691,931
Repurchase of shares into Treasury	-	-	-	-	(9,678)	-	(9,678)
Exercise of Subscription shares into
Ordinary shares	(72)	72	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares	1,809	31,482	-	-	-	-	33,291
Net return on ordinary activities	-	-	-	-	75,505	2,668	78,173
Dividends appropriated in the period	-	-	-	-	-	(5,486)	(5,486)
At 31st December 2012	30,644	120,806	1,665	69,939	554,647	10,530	788,231
	Called up		Capital
Year ended	share	Share	redemption	Other	Capital	Revenue
30th June 2013	capital	premium	reserve	reserve	reserves	reserve	Total
(Audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2012	28,907	89,252	1,665	69,939	488,820	13,348	691,931
Repurchase of shares into Treasury	-	-	-	-	(15,496)	-	(15,496)
Exercise of Subscription shares into
Ordinary shares	(72)	72	-	-	-	-	-
Issue of Ordinary shares on exercise of
Subscription shares	1,815	31,609	-	-	-	-	33,424
Net return on ordinary activities	-	-	-	-	73,267	8,137	81,404
Dividends appropriated in the year	-	-	-	-	-	(5,485)	(5,485)
At 30th June 2013	30,650	120,933	1,665	69,939	546,591	16,000	785,778

Balance Sheet

at 31st December 2013

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2013	2012	2013
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	707,305	761,151	755,653
Investments in liquidity funds held at fair value through
profit or loss	14,445	25,257	28,222
Total investments	721,750	786,408	783,875
Current assets
Debtors	687	2,254	2,181
Cash and short term deposits	12,020	1,808	4,950
	12,707	4,062	7,131
Creditors: amounts falling due within one year	(255)	(453)	(5,228)
Net current assets	12,452	3,609	1,903
Total assets less current liabilities	734,202	790,017	785,778
Performance fees	-	(1,786)	-
Net assets	734,202	788,231	785,778
Capital and reserves
Called up share capital	30,653	30,644	30,650
Share premium	120,995	120,806	120,933
Capital redemption reserve	1,665	1,665	1,665
Other reserve	69,939	69,939	69,939
Capital reserves	498,625	554,647	546,591
Revenue reserve	12,325	10,530	16,000
Total equity shareholders' funds	734,202	788,231	785,778
Net asset value per Ordinary share (note 5)
Undiluted	615.6p	655.4p	658.4p
Diluted	609.9p	646.6p	649.3p

Company registration number: 2618994

Cash Flow Statement

for the six months ended 31st December 2013

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2013	31st December 2012	30th June 2013
	£'000	£'000	£'000
Net cash (outflow)/inflow from operating
activities (note 6)	(876)	2,890	6,774
Tax recovered	77	57	110
Net cash inflow/(outflow) from capital expenditure
and financial investment	15,989	(21,893)	(17,060)
Dividend paid	(6,561)	(5,486)	(5,485)
Net cash inflow/(outflow) before financing	8,629	(24,432)	(15,661)
Net cash (outflow)/inflow from financing	(430)	23,613	17,928
Net increase/(decrease) in cash in the period	8,199	(819)	2,267
Reconciliation of net cash flow to movement in
net funds
Net cash movement	8,199	(819)	2,267
Exchange movements	(1,129)	135	191
Movement in net funds in the period	7,070	(684)	2,458
Net funds at the beginning of the period	4,950	2,492	2,492
Net funds at the end of the period	12,020	1,808	4,950
Represented by:
Cash and short term deposits	12,020	1,808	4,950

Notes to the Accounts

for the six months ended 31st December 2013

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 2013 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for that year. Those accounts have been delivered to the Registrar of Companies and included 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 accounts 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 in January 2009.

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

      The accounting policies applied to these interim accounts are consistent with those applied in the accounts for the year ended 30th June 2013.

3.   Taxation

      The taxation charge of £662,000 (31st December 2012: £578,000 and 30th June 2013: £1,375,000) comprises irrecoverable overseas withholding tax.

4.   Return/(loss) per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2013	31st December 2012	30th June 2013
	£'000	£'000	£'000
Return/(loss) per Ordinary share is based on the following:
Revenue return	2,886	2,668	8,137
Capital (loss)/return	(47,361)	75,505	73,267
Total (loss)/return	(44,475)	78,173	81,404
Weighted average number of Ordinary shares in issue
during the period used for the purpose of the
undiluted calculation	119,314,805	120,344,237	120,244,581
Weighted average number of Ordinary shares in issue
during the period used for the purpose of the
diluted calculation	119,314,805	120,525,572	120,915,895
Undiluted
Revenue return per share	2.42p	2.22p	6.77p
Capital (loss)/return per share	(39.69)p	62.74p	60.93p
Total (loss)/return per share	(37.27)p	64.96p	67.70p
Diluted1
Revenue return per share	2.42p	2.21p	6.73p
Capital (loss)/return per share	(39.69)p	62.65p	60.59p
Total (loss)/return per share	(37.27)p	64.86p	67.32p

¹The diluted (loss)/return per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end. The Company will only re-issue shares held in Treasury at a premium and therefore these shares have no dilutive potential.

      The diluted return/(loss) per Ordinary share represents the return/(loss) on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the period as adjusted in accordance with the requirements of Financial Reporting Standard 22 'Earnings per share'.

5.   Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	31st December 2013	31st December 2012	30th June 2013
Undiluted
Ordinary shareholders' funds (£'000)	734,202	788,231	785,778
Number of Ordinary shares in issue (excluding shares
held in Treasury)	119,259,129	120,275,887	119,353,816
Net asset value per Ordinary share (pence)	615.6	655.4	658.4
Diluted
Ordinary shareholders' funds assuming exercise
of Subscription shares (£'000)	789,361	843,588	841,003
Number of potential Ordinary shares in issue	129,417,403	130,470,596	129,524,108
Net asset value per Ordinary share (pence)	609.9	646.6	649.3

      The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end. The Company will only re-issue shares held in Treasury at a premium and therefore, these shares have no dilutive potential.

6.   Reconciliation of total (loss)/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 December 2013	31st December 2012	30th June 2013
	£'000	£'000	£'000
Net (loss)/return on ordinary activities before finance
costs and taxation	(43,813)	78,751	82,779
Less capital loss/(return) on ordinary activities before
finance costs and taxation	47,361	(75,505)	(73,267)
Scrip dividends received as income	(94)	(385)	(583)
Decrease/(increase) in net debtors and accrued income	1,378	648	(624)
Overseas withholding tax	(711)	(619)	(1,531)
Performance fee paid	(4,997)	-	-
Net cash (outflow)/inflow from operating activities	(876)	2,890	6,774

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

The half year report will also be available shortly on the Company's website at www.jpmemergingmarkets.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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