JPMorgan Emerg Mkts

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 toshareholders 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 bothoutperformed 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 5.0pence 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 817,015shares 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.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
 
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