Annual Financial Report

RNS Number : 7975P

JPMorgan Emerging Mkts Invest Trust

04 October 2013

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC

ANNOUNCEMENT OF FINAL RESULTS

The Directors of JPMorgan Emerging Markets Investment Trust plc announce the Company's results for the year ended 30th June 2013.

Chairman's Statement

I am very pleased to report that the Company performed strongly in the year to 30th June 2013, again outperforming its benchmark index, the MSCI Emerging Markets Index. As I have explained in previous years, following the successful issue of Subscription shares in 2009, we report our net asset value on a diluted basis to reflect the potential dilution to net asset value assuming full conversion of the Subscription shares to Ordinary shares. Until expiry of the Subscription shares in July 2014, this can give a somewhat misleading impression of the Company's underlying portfolio performance. Once again, I would emphasise that it is not the basis on which we judge the performance of the Manager, which we continue to do excluding the dilution effect of the Subscription shares, which was -1.6% during the year.

The Company's objective is to outperform the MSCI Emerging Markets Index in sterling terms over time on a total return basis. Our Manager delivers on this commitment by a particular focus on bottom-up stock selection rather than a top-down asset allocation across markets. I would characterise our Manager's investment style as one of quality growth investing, meaning he is looking for well managed companies with a good market position which are capable of positive cash flow generation and the ability to support rising dividend payments to shareholders over time. This means that he is likely to be underweight cyclical or resource stocks in favour of consumer growth stocks in the portfolio. Our longer term record suggests he has been successful in this approach.

Accordingly, I can report that the portfolio return net of fees and expenses was +11.6% before adjustments, against a return of +6.4% from the benchmark. Allowing for the dilution effect of those Subscription shares that were actually exercised in the year, this adjusts to a rise in net asset value of 10.0%. The return on a fully diluted basis was +12.0% (this apparently odd figure results from the fact that the potential dilution from the remaining shares is now less than the potential dilution at the end of the last financial year, because a significant proportion of the subscriptions shares were converted during the year).

This outperformance was driven by active stock selection, as the Manager details in his report, continuing the source of added value in the Manager's performance over many years. It also gives rise to a non-offsetable performance fee payment due to the Manager of £3.2 million; this sum, together with the non-offsetable fee of £1.8 million brought forward from the previous financial year, is now payable as there has been a positive movement in the net asset value over the financial year. Shareholders will recall that we only pay out when the net asset value of the Company is rising so as to align the interests of the Manager with shareholders.

We continue to monitor closely the share price and therefore the fluctuations in the discount of our share price to their diluted net asset value. The Ordinary share price rose 6.7% through the year, from 531.5p to 567.0p at the year end. The Subscription shares increased 2% over the year, from 75.0p to 76.5p. The discount on the Ordinary shares, calculated on the fully diluted net asset value, ranged between 6.5% and 12.2%, averaging 9.6% through the year. A total of 2,669,417 shares were repurchased into Treasury during the year and a further 56,705 shares have been repurchased since the year end. The discount has widened out over the summer as emerging markets have been out of favour and we have held off from intervening actively when markets are unfavourable, but there has been no change in our approach to managing the discount.

The Board's policy on discount management is that it is prepared to take action to ensure that the fully diluted discount does not touch or 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 of between 8% and 10% in order to achieve this, subject to those caveats.

Income after expenses rose by more than 15% and we are proposing to pay an increased dividend of 5.5p. Our investment policy is aimed at maximising capital growth and does not focus on income. We have however embarked on a more progressive approach to the dividend and are pleased to be able to raise it again which we hope recognises some shareholders' concerns. However, given that the Company's objective is to achieve capital growth, it remains the case that dividends may fluctuate from year to year according to our income position.

The Board continues to take seriously its governance obligations and we comply fully with the AIC Code of Corporate Governance and the UK Corporate Governance Code. During the year under review, the Board engaged an independent external consultant to conduct an evaluation of the Board, its committees and individual Directors. His report confirmed that the Board has an appropriate mix of skills and experience and that it functions well. It also made recommendations for succession planning.

David Gamble has indicated his intention to retire from the Board at the conclusion of the 2014 AGM. In order to ensure appropriate succession planning and continuity, Sarah Arkle was appointed a Director with effect from 1st September 2013. Sarah is a very experienced investment professional, having previously held a number of senior positions within Threadneedle Asset Management where she worked from 1983 until 2011. She is also is a Non-Executive Director of Foreign & Colonial Investment Trust plc, Henderson Group plc and a member of the Newnham College Cambridge Investment Committee.

We continue to monitor the performance of our Manager, JPMorgan Asset Management ('JPMAM'), through the Management Engagement Committee. We remain fully satisfied with the Manager's performance, not only in terms of investment performance but also in terms of risk management, administration, controls and compliance.

Significant regulatory change is currently taking place with the implementation of the Alternative Investment Fund Managers Directive ('AIFMD'). The Company must comply with the AIFMD no later than July 2014. We are taking advice on this matter, but the Board has agreed in principle to appoint JPMAM as its "AIFM". Existing Directors' duties will remain but there will be additional reporting requirements and the Company will be obliged to appoint a depositary to oversee the Company's custody and cash management operations. We will be in a position to give more information on this matter in the next half year report to be published in February 2014.

Emerging markets have had a difficult few months and their underperformance against developed markets has moved them to a valuation discount. Short term volatility may persist for a while but we are confident that the long term argument in favour of emerging markets remains intact and we continue to anticipate longer term outperformance.

Alan Saunders

Chairman                                                                                                                                                 

4th October 2013

Investment Manager's Report

Results

The investment outcomes experienced over the last year - moderate gains in the Company's share price and in the value of its portfolio - hint at subdued, even dull market conditions. But in emerging markets, this is never the case; as the commentary below explains, investor confidence ebbed and flowed with its usual vigour and markets rose and fell significantly during the year. As the investment manager, the decisions we make determine the gross return from the portfolio, which was 13.1%. Shareholders, of course, are likely to look primarily at the fully diluted return on net assets after costs (12.0%), and the return on the share price, which was lower, at 7.6%, because the discount to net asset value widened by several percentage points during the financial year; the emerging markets benchmark index returned 6.4% over the same period.

As in prior years, these results were the result of stock selection; our positioning at the country level contributed nothing, while cash detracted from returns during a year in which markets rose. Since we manage the portfolio by making decisions about individual securities rather than countries or industries, it is natural, but at the same time encouraging, to see that stock selection continues to be the main driver of investment performance.

Markets during the year

Investor sentiment can turn on a sixpence. Emerging markets rose consistently for the first seven months of the Company's financial year, but headed south in February and have barely paused since; by the end of June only modest gains remained. Since the end of the Company's financial year in June, markets have risen slightly in sterling terms, but remain lower than at the end of 2012. This may seem all the more surprising given the perky performance of developed equity markets, which have begun to anticipate a recovery, at last, from the economic downturn which began with the financial crisis five years ago.

Two broad themes underlay the recent weakness in emerging markets. In the first quarter of 2013 continued softness in some commodity prices had a meaningful effect on emerging markets, some of which are large producers of primary commodities. During the last year, almost 30% of the total corporate profits earned by companies in the MSCI index were generated in the energy and materials sectors; not surprisingly, therefore, weaker commodity prices provide a headwind for the overall growth of earnings in the asset class. We have argued for some time that producers of primary commodities were in that uncomfortable phase of the cycle in which revenues are flat or down, while costs continue to rise; as a result we held little exposure in the portfolio to these areas.

The second and more difficult trend for the asset class has been, paradoxically, that very sense of optimism and hope of recovery in the developed world (especially the United States) that has boosted stock markets there. Since the onset of the financial crisis in 2008, very low interest rates in Europe and the US have driven investors to pursue higher returns by moving away from the world's core markets to riskier places, including emerging markets. If economic recovery in the developed world really sets in, it must lead eventually to the gradual normalisation of interest rates. Once bond markets in the US offer a reasonable return, the incentive for investors to put money elsewhere will decline. Thinking ahead, one can see two ramifications for emerging markets; first, the cessation and perhaps reversal of those flows of capital. That will present a challenge for those countries which need to attract external capital to fund a current account deficit and so the second outcome will be that where capital is needed, better terms must be offered to attract it - either through increased interest rates, or an adjustment in the foreign exchange rate. This will have consequences for businesses in the real world, not just for the valuations of their shares.

In reality, no normalisation of interest rates has even begun yet; but the mere hint from the US Federal Reserve that this might occur eventually was enough to send emerging markets into a decline, with exchange rates acting as the main mechanism for adjustment. Meaningful currency devaluations have been seen in countries like India, South Africa, Brazil, and Turkey, while the most immune to these risks have been Asian economies with large external surpluses: Taiwan, China and Korea. Strange though it may seem, this currency weakness appears to me a much better path than that which emerging markets travelled almost 20 years ago in the build-up to the Asian crisis, when there were some clear similarities to today's situation. In the mid-1990s, fixed and therefore inflexible exchange rates extended the cycle for several more years, precisely because markets could not adjust. Without market forces acting to price money effectively, firms allowed debt to build up further, often in foreign currencies; and so the crunch, when it came, was far worse. Today, companies in emerging markets are better financed and overall dependency on foreign capital is much lower, while the ability to adjust through floating exchange rates is more widespread. Taken together, this suggests that emerging markets are rather less at risk than was the case then. And finally and importantly, valuations are much lower; so markets have already made a much greater allowance for risks in the price of stocks.

The portfolio

We had a mix of successes and failures this year. I look at the impact that individual stocks have on the value of the portfolio (both positive and negative) in two ways. First, there is the actual return from the investment; but its effect on the portfolio is also a function of how much money we had invested in it to begin with; I care more about the return, since this is what we are always trying to assess in the first place, though of course it is also good if we can maximise the effect of our best ideas. The three top contributors to performance this year (International Personal Finance, Magnit and Mahindra & Mahindra Financial Services) all doubled in value and I regard these as successes, though none were the result of decisions initiated this year; the Company already owned all these stocks a year ago. The worst stock (African Bank Investments) fell 60%, because it became evident that the business had misread the credit cycle in South Africa and profits declined sharply under the impact of rising bad debt; we misjudged this, and did not see the problems coming, though we believe that there is scope for recovery in the future. Apart from this, though, we had few outcomes that could be categorised as extreme; our investment in Wumart Stores, for example, which hurt performance this year, fell in value by 4%, yet because it was a reasonably large investment it still featured as one of the bigger negatives. To my mind, this is an example of noise rather than anything more meaningful; stocks do not proceed in a smooth linear manner and it would be very unusual for us to react to this kind of outcome unless our view of the business and its strengths and opportunities had changed very significantly.

Readers of past reports will know that it takes a lot to make us change the portfolio significantly; a long term outlook, with its inevitable result of low turnover, remains the basis of our investment approach. This year we changed roughly 15% of the portfolio by value, a rate of change which, while occasionally mistaken for inactivity, has nevertheless produced results over the long term. If you look at the new stocks which we bought this year, you might be forgiven for seeing no obvious pattern at work, though in reality we are always looking for strong well-managed businesses with a good opportunity ahead of them. We added very few new stocks this year, but they included Lojas Renner, a Brazilian fashion retailer, ITC, the dominant tobacco company in India, Holcim Indonesia, the locally listed subsidiary of the Swiss cement producer and Tata Consultancy Services, India's biggest provider of software services. Most of the changes to the portfolio, though, were increases and decreases in the size of positions already in the portfolio.

Looking forward

Given that our approach is driven by consideration of individual stocks and takes a long term view, macroeconomic considerations are often secondary in our assessment of investments. Yet most of the questions we receive about the asset class start from a broad economic and financial perspective. In view of this, it seems appropriate to conclude by offering some thoughts about the general outlook for emerging markets. We customarily consider prospective returns by isolating individual components of return: profit growth, dividends, valuation change and currency change. As noted above, valuations should be a source of comfort when considering what may happen in the future; emerging markets stocks are not expensively priced relative to profits or book value; if anything, the risk may be that valuations increase, so this is a positive factor when we look ahead. As mentioned above, emerging market currencies have weakened this year; and this must reduce the risk of this factor being a big negative in the future. That leaves earnings and dividends. While these are influenced by economic cycles, there is no evidence that GDP growth per se determines equity returns; much more important is the return on capital in real terms that companies can produce and the rate at which they increase that capital. This is so obviously an individual outcome in each company that it becomes somewhat meaningless to talk about aggregate numbers embracing a huge variety of industries and countries. One could go further and assert that all we really care about, as managers of the portfolio, is what happens to the earnings, dividends and valuations of the stocks that it owns and whether, collectively, they produce an outcome that is both satisfactory in absolute terms and better than the average outcome for the asset class. To do that, we need to think about what companies can achieve in future and try to consider all the risks which might diminish their value.

It seems axiomatic to me that the benchmark should not be the place to start from when thinking about this: the index shows how the world was yesterday and if one looks at the index as it was constituted ten years ago, it was clearly not a good guide to the best investments over the ensuing decade; the same will be true for the next decade. We are not seeking to invest in today's opportunity, but in tomorrow's.

Today, the portfolio contains some very large companies which are prominent in the benchmark, but only because they are highly competitive businesses whose shares stand at prices that we think will allow a good return in the future; in some industries, scale is a major determinant of competitive advantage and so big companies can also give the best returns: a business like Taiwan Semiconductor is not easily replicated, as various unsuccessful attempts to do so indicate. In other instances, size need not be an indicator of maturity; AIA is one of the biggest insurance companies in Asia, with strong market positions in many countries, but it operates in an industry that still has enormous long term potential for growth; the protection gap for health insurance alone in Asia is estimated to exceed USD 100 billion over the remainder of this decade, and AIA is well placed to serve this rapidly growing market.

Alongside such large industry leaders, however, the portfolio also has the flexibility to invest in small businesses where we see real potential. International Personal Finance, first purchased in the depths of the financial crisis early in 2009, was one of the smallest companies by value that I have bought in the last few years; yet it was also the largest individual contributor to investment performance in the portfolio over the last four years. Other examples of stocks that have given a good return irrespective of their size as businesses include Cafe de Coral, the leading fast food business in Hong Kong, or Convenience Retail Asia, which is one of the less liquid positions in the portfolio, but has doubled in value since we acquired it. Looking even further back, I can think of several investments made between ten and fifteen years ago in companies whose market value at the time was less than a billion pounds; the important point is that they were not originally important benchmark constituents, even if they subsequently became such. So we will continue to think about investments from the perspective of potential reward and the risks that go with that, rather than start from the benchmark.

Our objective remains a simple one: to find businesses that can grow and translate that growth into appreciation in the value of the portfolio. The effort and skill of our investment team is concentrated on this goal for one simple reason: in the long term, the value of the Company's portfolio will be driven by the growth of the businesses it owns and especially by the growth in their profits and dividends. The ten year record summarised on page 10 provides an interesting historical perspective on how we have fared in the past. It shows how the revenue received by the portfolio (the dividends paid by companies in the portfolio, plus some interest on cash) has developed; it has increased approximately six times over the decade. Because the number of shares issued by the Company has increased, the revenue received for each individual share in the Company has increased at a slower rate, but has still grown over five times; the net asset value per share reflects this growth closely and has increased by a similar rate over the decade. During the last ten years, dividends for the index as a whole grew less than four times. Simply put, the outperformance achieved by the portfolio during the last decade is attributable to the fact that the companies we have invested in have, collectively, grown faster than the asset class as a whole.

In the future, our challenge is to repeat the trend of the last decade by finding investments that can do the same again. I am confident that the resources applied to the management of the Company's portfolio today are larger and better than they were ten years ago; with markets at reasonable valuations and the whole gamut of the developing world to look at, I believe that we can continue to meet this challenge as before.

Austin Forey

Investment Manager                                                                                                                                

4th October 2013

Principal Risks

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

•   Investment Underperformance: An inappropriate investment strategy, for example asset allocation, the level of gearing or the degree of portfolio risk, could lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments and through a set of investment restrictions and guidelines which are monitored and reported on by the Manager. JPMorgan Asset Management (UK) Limited ('JPMAM') provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Manager, who attends all Board meetings, and reviews data which show statistical measures of the Company's risk profile.

•   Political, Economic and Governance: Administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

•   Loss of Investment Team or Investment Manager: A sudden departure of the investment manager or several members of the investment management team could result in a short-term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel.

•   Discount: A disproportionate widening of the discount relative to the Company's peers could result in loss of value for shareholders. The Board regularly discusses discount policy and has set parameters for the Manager and the Company's broker to follow.

•   Change of Corporate Control of the Manager: The Board holds regular meetings with senior representatives of JPMAM in order to obtain assurance that the Manager continues to demonstrate a high degree of commitment to its investment trusts business through the provision of significant resources.

•   Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by JPMAM and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure and Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, JPMAM, and its professional advisers to ensure compliance with the Companies Act and the UKLA Listing Rules and DTRs.

•   Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance section of the annual report.

•   Operational: Disruption to, or failure of, JPMAM's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by JPMAM and its associates and the key elements designed to provide effective internal control are included within the Internal Control section of the Corporate Governance report.

•   Financial: The financial risks faced by the Company include market price risk, interest rate risk and credit risk. Further details are disclosed in note 22 of the annual report.

Related Parties Transactions

During the 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 year.

Directors' Responsibilities

The Directors each confirm to the best of their knowledge that:

a)         the financial statements have been prepared in accordance with applicable UK accounting standards, and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

b)         the Annual Report, to be published shortly, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that they face.

For and on behalf of the Board

Alan Saunders

Chairman

4th October 2013

Income Statement

for the year ended 30th June 2013

		2013			2012
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at fair
value through profit or loss		-	76,287	76,287	-	(95,669)	(95,669)
Net foreign currency gains/(losses)		-	191	191	-	(673)	(673)
Income from investments		18,484	-	18,484	16,477	-	16,477
Other interest receivable and
similar income		3	-	3	3	-	3
Gross return/(loss)		18,487	76,478	94,965	16,480	(96,342)	(79,862)
Management fee		(7,835)	-	(7,835)	(7,070)	-	(7,070)
Performance fee		-	(3,211)	(3,211)	-	(1,786)	(1,786)
Other administrative expenses		(1,140)	-	(1,140)	(1,164)	-	(1,164)
Net return/(loss) on ordinary activities
before finance costs and taxation		9,512	73,267	82,779	8,246	(98,128)	(89,882)
Finance costs		-	-	-	(3)	-	(3)
Net return/(loss) on ordinary activities
before taxation		9,512	73,267	82,779	8,243	(98,128)	(89,885)
Taxation		(1,375)	-	(1,375)	(970)	-	(970)
Net return/(loss) on ordinary activities
after taxation		8,137	73,267	81,404	7,273	(98,128)	(90,855)
Return/(loss) per Ordinary share -
undiluted (note 3)		6.77p	60.93p	67.70p	6.36p	(85.77)p	(79.41)p
Return/(loss) per Ordinary share -
diluted (note 3)		6.73p	60.59p	67.32p	6.22p	(83.94)p	(77.72)p

A dividend of 5.5p (2012: 4.5p) per Ordinary share has been proposed in respect of the year ended 30th June 2013, totalling £6,564,000 (2012: £5,164,000). Further details are given in note 2.

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

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
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2011	28,771	86,781	1,665	69,939	587,825	10,079	785,060
Repurchase of shares into Treasury	-	-	-	-	(877)	-	(877)
Exercise of Subscription shares into
Ordinary shares	(6)	6	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares	142	2,465	-	-	-	-	2,607
Net (loss)/return on ordinary activities	-	-	-	-	(98,128)	7,273	(90,855)
Dividends appropriated in the year	-	-	-	-	-	(4,004)	(4,004)
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 30th June 2013

	2013	2012
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	755,653	664,803
Investment in liquidity fund held at fair value through profit or loss	28,222	25,200
Total investments	783,875	690,003
Current assets
Debtors	2,181	1,674
Cash and short term deposits	4,950	2,492
	7,131	4,166
Creditors: amounts falling due within one year	(5,228)	(452)
Net current assets	1,903	3,714
Total assets less current liabilities	785,778	693,717
Provision for liabilities and charges
Performance fees	-	(1,786)
Net assets	785,778	691,931
Capital and reserves
Called up share capital	30,650	28,907
Share premium	120,933	89,252
Capital redemption reserve	1,665	1,665
Other reserve	69,939	69,939
Capital reserves	546,591	488,820
Revenue reserve	16,000	13,348
Total shareholders' funds	785,778	691,931
Net asset value per Ordinary share (note 4)
Undiluted	658.4p	602.9p
Diluted	649.3p	584.1p

Company registration number: 2618994.

Cash Flow Statement

for the year ended 30th June 2013

	2013	2012
	£'000	£'000
Net cash inflow from operating activities	6,774	5,916
Returns on investments and servicing of finance
Interest paid	-	(3)
Net cash outflow from returns on investments and servicing
of finance	-	(3)
Taxation
Taxation recovered	110	8
Capital expenditure and financial investment
Purchases of investments	(211,639)	(162,438)
Sales of investments	194,603	143,692
Other capital charges	(24)	(86)
Net cash outflow from capital expenditure and
financial investment	(17,060)	(18,832)
Dividend paid	(5,485)	(4,004)
Net cash outflow before financing	(15,661)	(16,915)
Financing
Issue of Ordinary shares on exercise of Subscription shares	33,424	2,607
Repurchase of shares into Treasury	(15,496)	(877)
Net cash inflow from financing	17,928	1,730
Increase/(decrease) in cash in the year	2,267	(15,185)

Notes to the Accounts

for the year ended 30th June 2013

1.  Accounting policies

(a) Basis of accounting

     The accounts are prepared in accordance with the Companies Act 2006, 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' (the 'SORP') issued by the Association of Investment Companies in January 2009.

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

     The accounts have been prepared on a going concern basis under the historical cost convention as modified by the revaluation of investments at fair value through profit or loss.

     The policies applied in these accounts are consistent with those applied in the preceding year.

2.  Dividends	2013	2012
	£'000	£'000
(a) Dividends paid and proposed
Dividend paid
2012 Final dividend of 4.5p (2011: 3.5p)1	5,485	4,004
Dividend proposed
Final dividend proposed of 5.5p (2012: 4.5p)	6,564	5,164

     ¹The final dividend declared in respect of the year ended 30th June 2012 amounted to £5,164,000 (2012: £4,003,000). However, the amount paid amounted to £5,485,000 (2012: £4,004,000) due to shares issued after the balance sheet date but prior to the share register record date.

The final dividend proposed in respect of the year ended 30th June 2013 is subject to approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 30th June 2014.

3. Return/(loss) per Ordinary share

	2013	2012
	£'000	£'000
Return/(loss) per Ordinary share is based on the following:
Revenue return	8,137	7,273
Capital return/(loss)	73,267	(98,128)
Total return/(loss)	81,404	(90,855)
Weighted average number of Ordinary shares in issue during the year
used for the purpose of the undiluted calculation	120,244,581	114,405,899
Weighted average number of Ordinary shares in issue during the year
used for the purpose of the diluted calculation	120,915,895	116,905,369
Undiluted
Revenue return per share	6.77p	6.36p
Capital return/(loss) per share	60.93p	(85.77)p
Total return/(loss) per share	67.70p	(79.41)p
Diluted
Revenue return per share	6.73p	6.22p
Capital return/(loss) per share	60.59p	(83.94)p
Total return/(loss) per share	67.32p	(77.72)p

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

4. Net asset value per Ordinary share

	2013	2012
Undiluted
Ordinary shareholders funds (£'000)	785,778	691,931
Number of Ordinary shares in issue	119,353,816	114,762,153
Net asset value per Ordinary share (pence)	658.4	602.9
Diluted
Ordinary shareholders funds assuming exercise of Subscription shares (£'000)	841,003	772,115
Number of potential Ordinary shares in issue	129,524,108	132,193,525
Net asset value per Ordinary share (pence)	649.3	584.1

     The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the prevailing price of 543p at the year end.

5. Status of results announcement

2012 Financial Information

The figures and financial information for 2012 are extracted from the published Annual Report and Accounts for the year ended 30th June 2012 and do not constitute the statutory accounts for that year.  The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2013 Financial Information

The figures and financial information for 2013 are extracted from the Annual Report and Accounts for the year ended 30th June 2013 and do not constitute the statutory accounts for the year.  The Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.

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 shortly be available 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.

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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