Half Yearly Report

RNS Number : 9874F

JPMorgan Emerging Mkts Invest Trust

26 February 2015

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN EMERGING MARKETS

INVESTMENT TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST DECEMBER 2014

Chairman's Statement

Performance

I am pleased to report that, following the underperformance in the year to 30th June 2014, the first half of the Company's financial year proved to be more positive, with the Company producing a strong outperformance of its benchmark index. The six months to 31st December 2014 was a relatively flat period for emerging markets, with the benchmark index, the MSCI Emerging Markets Index (in sterling terms) returning +1.1%. The Company produced a total return on net assets of +5.7%. Over the same period, the return to shareholders was +8.0%, as the discount on the Company's shares narrowed from 10.8% to 8.9%. 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 shares to their fully diluted net asset value ('NAV') ranged between 7.7% and 13.0%, averaging 10.1%. At the period end, the discount was 8.9%. As I have explained in previous reports, the Board is prepared to take action to ensure that the 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 675,193 shares into Treasury and since the period end has repurchased a further 30,803 shares. Those shares held in Treasury will only be reissued at a premium to net asset value.

The Board

In my statement in the last annual report, I advised that in order to ensure appropriate succession planning and continuity, we had commenced the search for a new Director. In fact, with Percy Mistry stepping down from the Board at the conclusion of the next AGM in November, we took the opportunity to recruit two new Directors. Richard Laing and Andrew Page were appointed to the Board with effect from 15th January 2015.

Richard worked for CDC Group plc from 2000 until 2012 where he was Chief Executive Officer having joined as Chief Financial Officer. Previously, he was Finance Director of De La Rue plc. He is a non-executive Director of Perpetual Income and Growth Investment Trust plc, Miro Forestry and Leeds Castle Foundation. He is also a trustee of Plan UK and the Overseas Development Institute. Previous non-executive appointments include Madagascar Oil Limited, the London Metal Exchange, Aureos Capital and the Emerging Markets Private Equity Association, where he was Chairman of the Advisory Council. He is a qualified accountant and has a degree from Cambridge University.

Andrew was, until 1st September 2014, the Chief Executive Officer of the Restaurant Group plc ('TRG'), a FTSE-250 company which operates 460 restaurants throughout the UK. He is a non-executive Director of Carpetright plc, Northgate plc, RPS Group plc and The Schroder UK Mid Cap Fund plc. Prior to joining TRG in 2001, Mr Page held a number of senior positions within the leisure and hospitality sector, including Senior Vice President with InterContinental Hotels. Before that he spent six years working in Kleinwort Benson's Corporate Finance department. Mr Page is a Chartered Accountant.

I am confident that both of our new Directors will add value to the Board's deliberations.

Subscription Shares

As I confirmed in my last annual statement, the Company's subscription shares expired on 31st July 2014 and were all converted to Ordinary shares.

Outlook

Emerging markets equities appear to be reasonable value compared with developed markets and a period of outperformance is due, but there are variations across markets and, as ever, our long term performance will be driven by our Investment Manager's stock picking ability.

Alan Saunders

Chairman                                                                                                                                             

26th February 2015

Investment Manager's Report

I am pleased to be able to report that investment performance has improved in the first half of the Company's financial year, though the general backdrop has been a dull one as far as stock market returns are concerned. During the six months to 31st December 2014, the total return on the net asset value per share was +5.7%; the share price return was +8.0% because the discount to NAV narrowed slightly; the benchmark index returned +1.1%. The Investment Manager contribution, which simply compares the investment return from the portfolio before costs relative to that delivered by the index, was +5.2%.

Although there have been very modest gains in markets, these subdued results mask busy, not to say challenging investment conditions during the period. Three significant factors have produced a marked impact on emerging markets: politics, the oil price and the strengthening US dollar. The busy electoral schedule of 2014 in emerging markets concluded with the re-election of the incumbent president in Brazil; markets were unimpressed with this apparent vote for the status quo in contrast to India's resounding vote for change earlier in the year. Meanwhile, colder political winds have been blowing in Eastern Europe, especially in the Ukraine; as tensions between Russia and the West increased, it became clear that Russia will pay some sort of economic cost for its involvement. The sharp fall in oil prices late in the year, though, will cost Russia even more, and weigh heavily on a number of oil-producing countries. Yet at the same time, there are economies dependent on imported oil, like Turkey and much of Asia, which will see an immediate benefit. As for the US dollar, its rise is good news, in general, for export-oriented companies. Perhaps the most difficult questions it poses are to the governments who have to decide whether to worry about currency stability, or inflation, or economic growth; none of these are new challenges, but a rising dollar puts them in sharper relief.

Against this background, the Company's portfolio fared reasonably well. Our focus has always been on finding competitive businesses that can grow their profits; some of the largest contributions to the Company's investment results during the period came from companies in countries like India and South Africa which have done just that and enjoyed robust growth in earnings because they have been able to gain market share. We also managed to avoid some of the more difficult areas, with little exposure to Russia and no oil producers in the portfolio. In some ways, challenging conditions suit good businesses and in that respect, suit us as investors too. So while we may not feel unalloyed optimism about the asset class as a whole, we do feel positive about the prospects for individual companies. Finding and understanding more companies which exhibit the characteristics we look for, rather than worrying too much about macroeconomics or politics, is how we spend our time and how we will keep spending it in the future.

Austin Forey

Investment Manager                                                                                                                            

26th February 2015

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 2014.

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 2014, 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

Alan Saunders

Chairman                                                                                                                                   

26th February 2015

Income Statement

for the six months ended 31st December 2014

		(Unaudited)				(Unaudited)			(Audited)
		Six months ended				Six months ended			Year ended
		31st December 2014				31st December 2013			30th June 2014
	Revenue		Capital	Total	Revenue		Capital	Total	Revenue	Capital	Total
	£'000		£'000	£'000	£'000		£'000	£'000	£'000	£'000	£'000
Gains/(losses) from investments
held at fair value through
profit or loss	-		41,880	41,880	-		(46,232)	(46,232)	-	(32,118)	(32,118)
Net foreign currency gains/(losses)	-		133	133	-		(1,129)	(1,129)	-	(1,179)	(1,179)
Income from investments	8,361		-	8,361	7,984		-	7,984	16,067	-	16,067
Other interest receivable and
similar income	1		-	1	2		-	2	4	-	4
Gross return/(loss)	8,362		42,013	50,375	7,986		(47,361)	(39,375)	16,071	(33,297)	(17,226)
Management fee	(4,059)		-	(4,059)	(3,857)		-	(3,857)	(7,449)	-	(7,449)
Other administrative expenses	(667)		-	(667)	(580)		-	(580)	(1,235)	-	(1,235)
Net return/(loss) on ordinary
activities before finance costs
and taxation	3,636		42,013	45,649	3,549		(47,361)	(43,812)	7,387	(33,297)	(25,910)
Taxation (note 3)	(632)		-	(632)	(662)		-	(662)	(1,282)	-	(1,282)
Net return/(loss) on ordinary
activities after taxation	3,004		42,013	45,017	2,887		(47,361)	(44,474)	6,105	(33,297)	(27,192)
Return/(loss) per Ordinary share
(note 4)
Undiluted	2.37p		33.10p	35.47p	2.42p		(39.69)p	(37.27)p	5.12p	(27.93)p	(22.81)p
Diluted	2.37p		33.10p	35.47p	2.42p		(39.69)p	(37.27)p	5.12p	(27.90)p	(22.78)p

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 2014	capital	premium	reserve	reserve	reserves	reserve	Total
(Unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th June 2014	30,654	121,010	1,665	69,939	511,782	15,543	750,593
Exercise of Subscription shares into
Ordinary shares	(102)	102	-	-	-	-	-
Expenses in relation to exercise of
Subscription shares	-	(59)	-	-	-	-	(59)
Issue of Ordinary shares on exercise
of Subscription shares	2,539	52,605	-	-	-	-	55,144
Repurchase of shares into Treasury	-	-	-	-	(3,917)	-	(3,917)
Net return on ordinary activities	-	-	-	-	42,013	3,004	45,017
Dividends appropriated in the period	-	-	-	-	-	(7,078)	(7,078)
At 31st December 2014	33,091	173,658	1,665	69,939	549,878	11,469	839,700
	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
Issue of Ordinary shares on exercise
of Subscription shares	3	62	-	-	-	-	65
Repurchase of shares into Treasury	-	-	-	-	(605)	-	(605)
Net (loss)/return on ordinary activities	-	-	-	-	(47,361)	2,887	(44,474)
Dividends appropriated in the period	-	-	-	-	-	(6,562)	(6,562)
At 31st December 2013	30,653	120,995	1,665	69,939	498,625	12,325	734,202
	Called up		Capital
Year ended	share	Share	redemption	Other	Capital	Revenue
30th June 2014	capital	premium	reserve	reserve	reserves	reserve	Total
(Audited)	£'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
Issue of Ordinary shares on exercise of
Subscription shares	4	77	-	-	-	-	81
Repurchase of shares into Treasury	-	-	-	-	(1,512)	-	(1,512)
Net (loss)/return on ordinary activities	-	-	-	-	(33,297)	6,105	(27,192)
Dividends appropriated in the year	-	-	-	-	-	(6,562)	(6,562)
At 30th June 2014	30,654	121,010	1,665	69,939	511,782	15,543	750,593

Balance Sheet

at 31st December 2014

	(Unaudited)	(Unaudited)	(Audited)
	31st December	31st December	30th June
	2014	2013	2014
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	820,643	707,305	714,278
Investments in liquidity funds held at fair value through
profit or loss	16,914	14,445	31,596
Total investments	837,557	721,750	745,874
Current assets
Financial assets: Derivative financial instruments	1	-	5
Debtors	1,858	687	2,177
Cash and short term deposits	1,162	12,020	2,792
	3,021	12,707	4,974
Creditors: amounts falling due within one year	(878)	(255)	(255)
Net current assets	2,143	12,452	4,719
Total assets less current liabilities	839,700	734,202	750,593
Net assets	839,700	734,202	750,593
Capital and reserves
Called up share capital	33,091	30,653	30,654
Share premium	173,658	120,995	121,010
Capital redemption reserve	1,665	1,665	1,665
Other reserve	69,939	69,939	69,939
Capital reserves	549,878	498,625	511,782
Revenue reserve	11,469	12,325	15,543
Total equity shareholders' funds	839,700	734,202	750,593
Net asset value per Ordinary share (note 5)
Undiluted	653.1p	615.6p	630.3p
Diluted	653.1p	609.9p	623.4p

Company registration number: 2618994

Cash Flow Statement

for the six months ended 31st December 2014

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2014	31st December 2013	30th June 2014
	£'000	£'000	£'000
Net cash inflow/(outflow) from operating
activities (note 6)	3,064	(875)	2,001
Tax recovered	58	77	149
Net cash (outflow)/inflow from capital expenditure
and financial investment	(48,965)	15,989	4,814
Dividend paid	(7,078)	(6,562)	(6,562)
Net cash (outflow)/inflow before financing	(52,921)	8,629	402
Net cash inflow/(outflow) from financing	51,170	(430)	(1,376)
Net (decrease)/increase in cash in the period	(1,751)	8,199	(974)
Reconciliation of net cash flow to movement in
net funds
Net cash movement	(1,751)	8,199	(974)
Exchange movements	121	(1,129)	(1,184)
Movement in net funds in the period	(1,630)	7,070	(2,158)
Net funds at the beginning of the period	2,792	4,950	4,950
Net funds at the end of the period	1,162	12,020	2,792
Represented by:
Cash and short term deposits	1,162	12,020	2,792

Notes to the Accounts

for the six months ended 31st December 2014

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 2014 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 half year accounts are consistent with those applied in the accounts for the year ended 30th June 2014.

3.   Taxation

      The taxation charge of £632,000 (31st December 2013: £662,000 and 30th June 2014: £1,282,000) comprises irrecoverable overseas withholding tax.

4.   Return/(loss) per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2014	31st December 2013	30th June 2014
	£'000	£'000	£'000
Return/(loss) per Ordinary share is based on the following:
Revenue return	3,004	2,887	6,105
Capital return/(loss)	42,013	(47,361)	(33,297)
Total return/(loss)	45,017	(44,474)	(27,192)
Weighted average number of Ordinary shares in issue
during the period used for the purpose of the
undiluted calculation	126,931,250	119,314,805	119,235,135
Weighted average number of Ordinary shares in issue
during the period used for the purpose of the
diluted calculation	126,931,250	119,314,805	119,340,784
Undiluted
Revenue return per share	2.37p	2.42p	5.12p
Capital return/(loss) per share	33.10p	(39.69)p	(27.93)p
Total return/(loss) per share	35.47p	(37.27)p	(22.81)p
Diluted1
Revenue return per share	2.37p	2.42p	5.12p
Capital return/(loss) per share	33.10p	(39.69)p	(27.90)p
Total return/(loss) per share	35.47p	(37.27)p	(22.78)p

      ¹The Company's Subscription shares expired and the rights lapsed on 31st July 2014.

      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 2014	31st December 2013	30th June 2014
Undiluted
Ordinary shareholders' funds (£'000)	839,700	734,202	750,593
Number of Ordinary shares in issue (excluding shares
held in Treasury)	128,572,210	119,259,129	119,091,971
Net asset value per Ordinary share (pence)	653.1	615.6	630.3
Diluted1
Ordinary shareholders' funds assuming exercise
of Subscription shares (£'000)	839,700	789,361	805,737
Number of potential Ordinary shares in issue	128,572,210	129,417,403	129,247,403
Net asset value per Ordinary share (pence)	653.1	609.9	623.4

      ¹The Company's Subscription shares expired and the rights lapsed on 31st July 2014.

      The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the period end.

6.   Reconciliation of total return/(loss) on ordinary activities before finance costs and taxation to net cash inflow/(outflow) from operating activities

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st December 2014	31st December 2013	30th June 2014
	£'000	£'000	£'000
Net return/(loss) on ordinary activities before finance
costs and taxation	45,649	(43,812)	(25,910)
(Less: capital return)/Add: capital loss on ordinary
activities before finance costs and taxation	(42,013)	47,361	33,297
Scrip dividends received as income	(196)	(94)	(94)
Decrease in net debtors and accrued income	278	1,378	1,129
Overseas withholding tax	(654)	(711)	(1,424)
Performance fee paid	-	(4,997)	(4,997)
Net cash inflow/(outflow) from operating activities	3,064	(875)	2,001

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 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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