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 31^ST 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.

 

END

 

 

IR PGUACWUPWGPQ