JPMorgan Global E.M. - Annual Financial Report
04/11/2024 07:00
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RNS Number : 7080K JPMorgan Global Emerging Mkts I.T. 04 November 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL EMERGING MARKETS INCOME TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31ST JULY 2024
Legal Entity Identifier: 549300OPJXU72JMCYU09
Information disclosed in accordance with the DTR 4.1.3
JPMorgan Global Emerging Markets Income Trust plc (the 'Company' or 'JEMI')
announces its financial results for the year ended 31st July 2024.
Highlights:
· Net asset total return of +6.3% for the financial year, closely
aligning with the Benchmark* total return of +6.4%. Share price return to
shareholders, including dividends, was +5.4%.
· The five year NAV total return to 31st July 2024 was +25.3%, ahead of
the Benchmark total return of +12.7%. Share price return to shareholders,
including dividends, was +15.5%.
· The total dividend for the financial year was 5.4p per share,
representing a yield of 4% based on the share price as at 31 July 2024, and a
modest increase from 5.3p in the previous year. The Company has paid three
interim dividends of 1.0p per share and a fourth interim dividend of 2.4p per
share.
· During the financial year, the Company repurchased 6,799,472
shares into Treasury, enhancing the NAV per share by approximately 1.1p or
0.8%.
Elisabeth Scott, Chair of the Board, commented: "The Board sees a host of
reasons to share the Portfolio Managers' excitement about the many investment
opportunities available in Emerging Markets. The Artificial Intelligence
('AI') revolution is likely to provide ongoing support for many Emerging
Market technology and other AI-related stocks for the foreseeable future. In
the Board's view, the potential rewards from Emerging Market investment are
significant, especially for those investors willing to take a long-term view
and tolerate a degree of volatility along the way. We remain confident that
the focused and disciplined stock selection process adopted by the Investment
Manager will maintain the Company's long track record of delivering attractive
long-term returns and dividend income to shareholders."
Omar Negyal and Isaac Thong, Portfolio Managers, noted: "Like their
counterparts in developed markets, the attention of investors in Emerging
Markets over the past year has been focused on AI and its potential to disrupt
and reshape business practices in many sectors. Companies will need to
increase capital expenditure to acquire and deploy new AI-driven technology
and to stay competitive. Given our bottom-up approach to building the
portfolio, we remain excited by the many opportunities we see across Emerging
Markets. Our principal focus is the same as it has been since the inception of
the Company: we seek out companies able to produce attractive returns on
equity, generate healthy free cash flow and pay shareholders reliable
dividends."
*the Company's benchmark is the MSCI Emerging Markets Index with net dividends
reinvested (in sterling terms).
CHAIR'S STATEMENT
Performance
I am pleased to report that the performance of both Emerging Markets and your
Company improved in the second half of the financial year ended 31st July
2024. After declining by 5.0% over the first half of the financial year, the
Company's benchmark index, the MSCI Emerging Markets Index with net dividends
reinvested (in sterling terms) (the 'Benchmark'), ended the year +6.4%,
narrowly ahead of the Company's total return on net assets of +6.3% over the
same period. The total return to shareholders (which includes both the share
price return and dividends) was +5.4%, which reflects a widening of the
discount to net asset value ('NAV') at which the Company's shares trade, from
9.3% at the end of the previous financial year end, to 10.5% at the end of
July 2024.
Excitement about artificial intelligence ('AI') was one of the main drivers of
global equities, including Emerging Markets, over the past year, and your
Company's returns were supported by the positive performance of a number of
AI-related positions in South Korea and Taiwan. The ongoing weakness in the
Chinese economy was another focus, and the decision not to own one of the
largest Chinese internet retailers (Alibaba) also enhanced relative returns.
The Indian market continued to strengthen, so the Company's underweight
position in this market detracted from overall performance. This underweight
is due in part to the fact that many Indian companies do not pay dividends and
are therefore excluded from the Portfolio Managers' universe of stocks. In
addition, the Portfolio Managers believe that valuations in the Indian market
are high, so companies that do pay dividends are too expensive to meet the
Investment Manager's valuation criteria. See the performance attribution table
below for details.
The Investment Manager's Report, which can be found in the full Annual Report,
reviews the market environment and the Company's performance over the
reporting period in more detail and comments on the investment strategy and
outlook for Emerging Markets.
The Company's positive, near-benchmark return over the past year is certainly
welcome. However, given the volatile nature of Emerging Markets, the Portfolio
Managers adopt a long-term approach, so it is more meaningful to consider
returns over longer time frames. I am pleased to note that the Company's NAV
total return on net assets over periods of three and five years and beyond is
significantly ahead of the Benchmark - testament to the skill and experience
of the Portfolio Managers, and the breadth and quality of the support from the
Investment Manager's extensive global Emerging Markets research team. Please
see the full Annual Report for the long-term performance figures.
Revenue and Dividends
The Company's gross revenue for the year amounted to £21.2 million (2023:
£20.8 million), with net revenue of £16.6 million (2023: £16.9 million).
Net revenue return per ordinary share for the year, calculated on the average
number of shares in issue, was 5.64p (2023: 5.70p).
During the financial year, the Board paid three interim dividends of 1.0p per
share and on 5th September 2024 it declared the payment of a fourth interim
dividend of 2.4p per share, which was paid on 18th October 2024. This brings
the total dividend for the financial year to 5.4p per share, a modest
increase from the previous year (2023: 5.3p per share).
The Board pays four interim dividends each year, reflecting the support we
have received from shareholders for a regular and timely income stream. We are
seeking shareholder authority to maintain this dividend payment policy at the
forthcoming Annual General Meeting.
The Board reviews dividend receipts at each of its meetings, given their
importance to the Company. The Board carefully considers the outlook for
dividend receipts with the Portfolio Managers on a regular basis, including a
sensitivity analysis of the impact of currency movements on revenue receipts.
As shareholders are aware, the Company receives dividends in the currencies of
developing countries and in US dollars but pays dividends in sterling. It has
not been the Company's policy to hedge currency risk, as this is expensive
and, for many currencies, impracticable. This policy inevitably means that the
Company's asset values, and cash flows, may be adversely affected in any given
period by adverse currency movements (if sterling strengthens), and flattered
by favourable moves (if sterling weakens) relative to Emerging Market
currencies and the US dollar. Your Board and the Investment Manager are of the
view that despite any such currency fluctuations, Emerging Markets offer
attractive income prospects, as well as the prospect of strong earnings
growth.
Loan Facilities and Gearing
The Board believes that gearing can be used to enhance long-term shareholder
returns. Gearing levels are discussed with the Portfolio Managers at each
Board meeting. Presently, the Company has a US Dollar 20 million two-year
revolving loan facility with Mizuho Bank Limited ('Mizuho'), which will be
repaid in November 2024. The Company also maintains a US Dollar 20 million
revolving loan facility with ING Bank ('ING'), which is repayable in October
2025, having been renewed during the reporting period at a competitive market
rate plus Secured Overnight Financing Rate ('SOFR').
In view of the pending maturity of the Mizuho facility, your Board has been
working closely with the Manager to assess the Company's borrowing options. I
am pleased to report that the Company has negotiated a US Dollar 40 million
revolving credit facility, along with an additional US Dollar 20 million
accordion, provided by Industrial and Commercial Bank of China Limited
(London) Plc ('ICBC') for two years, with two one year extension options. As
part of this refinancing, the Company intends to make an early repayment of
the ING facility as well as repaying the Mizuho facility upon maturity in
November 2024.
As at 31st July 2024, portfolio gearing stood at 6.1% (31st July 2023: 5.7%).
Share Repurchases and Issuance
During the financial year ended 31st July 2024, the Company's share price
traded at an average discount to NAV of 11.8%. The Board regularly considers
the merits of buying back shares to manage the level and volatility of the
discount and will buy back shares if it is considered to be in the best
interests of shareholders to do so. As shares are only bought back at a
discount to the prevailing NAV, share buybacks benefit shareholders as they
increase the NAV per share of the remaining outstanding shares.
During the financial year, the Company bought back 6,799,472 shares into
Treasury for a total cost of £9,033,000 at an average discount of 11.7%. It
did not issue any shares. These purchases were value accretive for
shareholders, increasing the NAV per share by approximately 1.1p, and they
underscore your Board's belief that the shares offer intrinsic value at
current levels.
At the forthcoming Annual General Meeting, the Board will seek a renewal of
shareholder authority to issue up to a further 10% of the Company's issued
share capital and to buy back its own shares. It is the Board's intention to
use the repurchase and allotment authorities to manage imbalances between the
supply and demand of the Company's shares, thus reducing the volatility of the
discount or premium, in normal market conditions, and meet demand for the
Company's shares as and when they trade at an appropriate premium to NAV.
At the time of writing, the discount stands at 13.1%(1). The Board will
continue to actively manage the Company's discount in its commitment to seek a
stable discount or premium over the longer-term, in recognition of the
Company's long-term consistent and strong investment performance, and with the
aim of enhancing NAV for shareholders. Between the end of the financial year
and 1st November 2024, the Company has bought back an additional 2,400,000
shares into Treasury.
(1) As at 30th October 2024.
Board Composition
As previously reported, Caroline Gulliver will be retiring from the Board at
the 2024 Annual General Meeting and Ranjan Ramparia, who joined the Board on
1st March 2024, will take on the role of Chair of the Audit and Risk
Committee. On behalf of the Board, I would like to thank Caroline for her
extensive and important contribution to the Company over her tenure.
The Board supports the annual appointment/reappointment for all Directors, as
recommended by the Association of Investment Companies Code of Corporate
Governance, and therefore all Directors will stand for reappointment at the
forthcoming AGM, with the exception of Ranjan Ramparia, who will stand for
election for the first time, as this is the first Annual General Meeting to be
held since her appointment, and Caroline Gulliver who is retiring from the
Board.
Investment Management Fees
During the reporting period, as previously announced, the Board agreed with
the Manager that the Company's investment management fees should be tiered.
With effect from 1st November 2023, the investment management fee has been
charged on a tiered basis at an annual rate of 0.75% of the Company's net
assets on the first £500 million and at 0.65% of net assets above that
amount. This compared with the previous arrangement under which the management
fee was charged at an annual rate of 0.75% on net assets. The fee is
calculated and paid monthly.
Annual General Meeting
The Company's Annual General Meeting ('AGM') will be held at 60 Victoria
Embankment, London EC4Y 0JP on Wednesday, 27th November 2024 at 2.00 p.m. Full
details of the format and explanations of the business proposed at the AGM can
be found in the Notice of Meeting in the full Annual Report.
We are delighted to invite shareholders to join us in person for the Company's
AGM. However, those Shareholders wishing to follow the AGM proceedings without
attending in person will be able to view them live and ask questions (but not
vote) through conferencing software. Details on how to register, together with
access details, will be available shortly on the Company's website at
www.jpmglobalemergingmarketsincome.co.uk or by contacting the Company
Secretary at invtrusts.cosec@jpmorgan.com.
As is best practice, all voting on the resolutions will be conducted on a
poll. Shareholders who are unable to attend the AGM in person are strongly
encouraged to submit their proxy votes in advance of the meeting, so that they
are registered and recorded at the AGM. Proxy votes can be lodged in advance
of the AGM either by post or electronically: detailed instructions are
included in the Notes to the Notice of Meeting in the full Annual Report.
Shareholders are encouraged to send any questions ahead of the AGM to the
Board via the Company Secretary at the email address above. We will endeavour
to answer relevant questions at the meeting or via the Company's website. My
fellow Board members, representatives of the Manager, the Portfolio Managers,
and I, look forward to the opportunity to meet and speak with shareholders
after the formalities of the meeting have been concluded. We would also
welcome comments and questions from shareholders throughout the year - please
use the same contact details as above.
If there are any changes to the above AGM arrangements, the Company will
update shareholders through an announcement to the London Stock Exchange and
on the Company's website.
Continuation Vote
In accordance with the Company's Articles of Association, at the forthcoming
AGM an ordinary resolution will be put to shareholders that the Company
continue in existence as an investment trust for a further three-year period.
The Board believes that the long-term outlook for global Emerging Markets is
favourable, and that the Investment Manager has the resources and processes to
deliver good results for shareholders, as evidenced by the Company's
longer-term performance.
Accordingly, the Board believes that the continuation of the Company is in the
best interests of all shareholders and strongly recommends that shareholders
vote in favour of the resolution.
Stay Informed
The Board believes that it is important to keep shareholders well informed of
developments within the Company. To this end, the Company delivers email
updates with regular news and views, as well as the latest performance.
If you have not already signed up to receive these communications and you wish
to do so, you can opt in via https://tinyurl.com/JEMI-Sign-Up or by scanning
the QR code in the full Annual Report.
Outlook
The Board sees a host of reasons to share the Portfolio Managers' excitement
about the many investment opportunities available in Emerging Markets. The AI
revolution is likely to provide ongoing support for many Emerging Market
technology and other AI-related stocks for the foreseeable future, while the
increasing focus on raising shareholder returns should underpin share prices
in South Korea and China, and in any other markets that come to see the merit
in returning excess cash to shareholders. It is worth bearing in mind that
while many investors are disappointed in China's recent performance, it is one
of the world's fastest growing economies and this should translate into
earnings and profits growth and higher dividend payments over the medium-term,
which is expected to be assisted with the recent stimulus measures announced
by the Chinese government. This, combined with more attractive valuations, is
creating attractive investment opportunities. In the US, the recent start of
the Federal Reserve's ('Fed') rate cutting cycle may provide fresh impetus to
global markets, provided it does not turn out to be too little, too late to
prevent a slowdown in US growth. Lower US rates will also create leeway for
emerging market central banks to follow the Fed's lead and ease monetary
policy, which will boost growth in their economies.
As ever, there are risks associated with investing in Emerging Markets,
including political instability, currency fluctuations, and regulatory
challenges. In coming months, the US Presidential election and its
ramifications for Sino/US relations could provide further challenges. However,
in the Board's view, the potential rewards from Emerging Market investment are
significant, especially for those investors willing to take a long-term view
and tolerate a degree of volatility along the way. We remain confident that
the focused and disciplined stock selection process adopted by the Investment
Manager will maintain the Company's long track record of delivering attractive
long-term returns and dividend income to shareholders.
On behalf of the Board, I would like to thank you for your ongoing support and
commitment to the Company.
Elisabeth Scott
Chair
1st November 2024
INVESTMENT MANAGER'S REPORT
Introduction
For the year ended 31st July 2024, the Company's total return on net assets,
including dividends, was +6.3%. This compares with our Benchmark, with
dividends reinvested, which returned +6.4%. The return on shares, including
dividends, was +5.4%. Over the three-and five-year periods to end July 2024,
the Company made annualised returns of +3.4% and +4.6% respectively in NAV
terms, comfortably ahead of respective Benchmark returns of -0.1% and +2.4%.
As highlighted in the full Annual Report, cumulative returns for the Company
have been positive and higher than the Benchmark over the long term. The
cumulative return on net assets over 10 years was +87.5% compared to +70.3%
for the Benchmark.
Investment Environment
Like their counterparts in developed markets, the attention of investors in
Emerging Markets over the past year has been focused on Artificial
Intelligence ('AI') and its potential to disrupt and reshape business
practices in many sectors. Companies will need to increase capital expenditure
to acquire and deploy new AI-driven technology and to stay competitive.
Semiconductor manufacturers and related tech companies are already benefiting
from strong demand, and their resultant share price gains have been a key
driver for all markets. Within Emerging Markets, this influence has been most
important in South Korea and Taiwan, which are home to many companies with
exposure to the AI boom.
The excitement about AI has spilled over into other sectors of the market such
as energy and materials. AI-driven tools and their related storage and
processing requirements are energy hungry, and electricity companies and
energy infrastructure suppliers are perceived as major beneficiaries. So too
are the producers of commodities such as copper, which is essential to the
manufacture of semiconductors and energy transmission systems.
Shareholder returns have been another key theme in both South Korea and China
over the past year. In South Korea, the government launched a so-called
'Value-Up' initiative, which aims to encourage corporate managers to enhance
shareholder value via increased dividend payments and share buybacks. The
intention is to replicate the success of similar efforts by the Tokyo Stock
Exchange, which have had a favourable impact on Japanese share prices.
In China, we saw a brief rally going into 2024, inspired by short-term
government stimulus and attractive valuations. However, structural issues
remain, with ongoing weakness in the property sector continuing to weigh on
consumer sentiment and hence on domestic demand, though the government has
recently announced stimulus measures which could help improve this. As growth
slows, investors' attention has shifted to more yield focused names.
Additionally, companies, especially China's internet companies, are
distributing more to shareholders, rather than reinvesting for growth.
Geopolitical tensions between China and the US continue to simmer, creating a
further potential drag on growth, especially via increased US sanctions and
tariffs on Chinese electric vehicles and advanced tech products.
The other predominant theme in Emerging Markets over the past year was the
ongoing interest in India. The economy continues to grow at a fast pace, and
optimism in India's longer-term future is mounting amongst both domestic and
international investors. This has resulted in further stock market gains.
Performance Attribution
for the year ended 31st July 2024
% %
Contributions to total returns
Benchmark total return 6.4%
Asset allocation -0.8%1
Stock selection 1.3%
Gearing/cash 0.3%
Investment manager contribution 0.8%
Portfolio total return 7.2%
Management fees and other expenses -1.0%
Impact of provision for capital gains tax -0.2%
Impact of finance costs -0.5%
Share buy-backs 0.8%
Other effects -0.9%
Cum income net asset value total return 6.3%
Share price total return 5.4%
Source: JPMAM and Morningstar. All figures are on a total return basis.
(1) Based on Country allocation.
Performance attribution analyses how the Company achieved its recorded
performance relative to its Benchmark.
Performance Drivers
Top Five Contributors Top Five Detractors
1. Alibaba (not owned) 1. B3 SA Brasil
2. Vanguard International Semiconductor 2. Wuliangye
3. Shinhan Financial 3. Bank Rakyat
4. KB Financial 4. Kimberly Clark Mexico
5. Infosys 5. Hon Hai Precision Industry (not owned)
The most significant positive contributor to performance at the stock level
over the past year was our decision not to own Alibaba, a Chinese internet
retailing behemoth. China's property market slump and the more general
economic slowdown have put pressure on consumers. This has adversely impacted
internet retailers. To add to pressures on Alibaba, the company is also facing
greater competition, as consumers are increasingly focused on value for money.
Interestingly, as the market has become more pessimistic on the stock, we have
in contrast become more interested, to the extent that we initiated a new
position for the portfolio after the financial year end. It seems to us that
the management team has recognised its growth issues and is acting in a more
rational way to increase its ability to compete in this new environment (both
in terms of more focus on the key e-commerce business and reducing emphasis on
other non-core activities). In addition, the company has improved its cash
shareholder returns, initiating its inaugural dividend last year and
implementing share buybacks. This increased shareholder return, combined with
a lower valuation than in previous years, made the stock look more attractive
to us and prompted the new position.
Vanguard International Semiconductor was a strong contributor to performance.
This company operates semiconductor fabs, following the outsourcing foundry
model where it manufactures chips for other companies who do not have a
manufacturing capability. In the period, the company announced plans to expand
capacity by building a new semiconductor plant, in a joint venture with NXP
Semiconductor (a US semiconductor company). This was well received by
markets as investors focused on the capacity increase in the long term which
could drive earnings for the company. However, this also introduced potential
downside risks to the nearer term earnings outlook given the large capex that
would be required. Given this raised questions on the free cash flow profile
of the company (and therefore dividend growth), we trimmed our holding.
Within financials, two South Korean names, KB Financial and Shinhan Financial
enhanced returns. This was largely driven by the favourable impact of the
government's 'Value-Up' program, discussed above, which has seen Korean banks
announce measures to increase shareholder returns. Their stocks have re-rated
accordingly.
Infosys, an Indian IT services company, was another contributor to performance
over the past 12 months. Fears that generative AI would be able to replicate
the company's IT outsourcing services weighed on the stock price during 2022.
Infosys's management sought to assuage these fears, claiming instead that AI
will actually create more opportunities, as has been the case in the last few
technological cycles. The stock has re-rated in recent months as investors'
AI-related concerns finally abated and the company's earnings outlook
improved.
Brazilian stock exchange operator B3 SA Brasil was the largest detractor from
returns due to weaker than expected trading volumes on the back of a
challenging macro environment. The high interest rate environment and
uncertainty about future interest rates particularly affected the cash
equities business. However, valuations are now at an attractive level, and it
is well positioned for when the macroeconomic environment improves. We also
like this quality business as it generates strong free cash flow, has few
competitors, and is making successful efforts to diversify its revenue
streams. Additionally, it boasts an attractive dividend policy.
Within our holdings in consumer staples, an overweight in Wuliangye, a baijiu
(Chinese liquor) producer, detracted from returns. The company's share price
declined due to concerns that the domestic economic slowdown would damage
future sales. With its strong brand and market position we continue to see
this company as a long term winner in the sector and retain a position; for
the overall portfolio we are continuing to evaluate how best to position
within the China consumer space, considering the economic headwinds which
exist.
Another detractor from performance at the stock level over the review period
was Indonesia's Bank Rakyat, which suffered a deterioration in asset quality
in its key microfinance division, with small borrowers incrementally less able
to repay loans on time. We believe this deterioration is cyclical, but market
focus on these near-term headwinds led to weakness in the share price. In our
view the investment thesis remains intact, and we continue to hold the stock.
Another stock which detracted was Kimberly Clark Mexico, a Mexican consumer
goods company. As discussed below, the political situation in Mexico caused
weakness for the entire market which was unhelpful. In addition, the Mexican
peso also weakened - this was incrementally negative for the company's cost
profile as many of its raw materials are priced in US dollars, while it prices
its products in pesos. In a short term time-frame, it is difficult for the
company to reprice its products quickly with negative consequences for the
operating margin. In the long term we are still confident on the pricing power
and cost efficiency gains the company can generate, and continue to hold our
position.
Our decision not to own Hon Hai was relatively negative for our performance,
as the stock outperformed in the period. This Taiwanese downstream technology
manufacturer performed strongly as investors became more excited about its
prospects for earnings growth as AI demand increases. We prefer to gain
exposure to this area via other stocks such as Quanta which we see as better
positioned in terms of product exposure and where valuations (including yield)
look attractive.
Our country allocations had a negative impact on relative performance over the
year. Our overweight exposure to South Korea was the most important positive
contributor. This was entirely the result of successful stock selection. The
government's 'Value-Up' program has seen many companies announce plans to
distribute more cash to shareholders. Our holdings in financials have done
particularly well as a result, as mentioned above, and so too have our
positions in several auto manufacturers, SK Telecom and Samsung Electronics.
The excitement surrounding AI ensured that our overweight to Taiwan was
another notable contributor to performance. TSMC and other Taiwanese tech
companies are at the forefront of the AI revolution and our investments in
companies such as Wiwynn, a supplier of computer hardware and Quanta Computer,
a leader in hyper-scale servers, as well as in TSMC, did well over the past
year.
Despite the Chinese economic slowdown, our modest overweight to China had a
favourable impact on returns, thanks to our stock selection decisions. As
growth slows, investors typically value companies which offer income. This
aligns with our investment strategy and some of our holdings have benefited as
a result. Tencent, an internet company whose offerings include social
networking, e-commerce, mobile gaming and financial payments is one example.
This stock has only recently entered our investment universe, as it has
increased its shareholder returns. At the same time, the stock has become more
attractively priced, and our decision to open a position subsequently enhanced
returns.
Additionally, high yielding names such as Yangtze Power, China Construction
Bank, and Sinopec, an oil and gas producer, performed well. Lastly, with the
domestic economy slowing, we are increasingly interested in large exporters,
given their limited exposure to the domestic economy. Our holdings in Fuyao
Glass, an auto parts producer, Midea and Haier, both home appliance makers,
have all performed well thanks to export demand.
However, the favourable impact of these positions was not sufficient to fully
offset the adverse effect of our positioning in other markets. The Indian
market performed well, and our underweight relative to the Benchmark created a
drag on relative returns. It is difficult to find Indian stocks offering an
attractive yield, partly because India is more of a 'growth' market, and
because valuations are high, which means the yields on offer are
correspondingly low. As the valuations of Indian stocks are amongst the
highest across Emerging Markets, we typically find better value opportunities
elsewhere, notably in Taiwan, which offers high growth opportunities at a more
reasonable price.
Our overweight in Indonesia also detracted from returns due to political
concerns, as well as some short-term, stock specific issues with holdings
including Bank Rakyat, mentioned above. However, our conviction in the
long-term investment thesis for this and other names remains intact. Lastly,
our overweight in Mexico also detracted, due to political developments. The
new president's decision to push through judicial reform raised question marks
over the effectiveness of governance checks and balances in Mexico. Although
this spooked markets, her success does not fundamentally change our view on
the growth opportunities of the Mexican companies we own. In addition, the
Mexican economy is a major beneficiary of the trend towards nearshoring, as
global manufacturers shorten the supply chains for goods destined for the US
market.
Portfolio Positioning and Changes
We build our portfolio from the bottom up, selecting stocks based on their
sound fundamental qualities, strong balance sheets and capacity to pay
dividends over the long term. Naturally, some areas within Emerging Markets
offer more investment opportunities than others, and this results in portfolio
tilts towards some sectors and countries and a very active portfolio. From a
sectoral viewpoint, we tend to find the most attractive income opportunities
within Information Technology, Consumer Staples and Financials, so these are
the portfolio's three key sector overweights, while the portfolio is usually
underweight in Materials, Industrials, and Healthcare. Overall, the portfolio
has a high active share versus the Benchmark (74.8% at end of July 2024),
demonstrating that we have a differentiated approach compared to the broader
market.
At the country level, significant portfolio overweights include South Korea,
Indonesia and Mexico - as with our sector allocations, these country
weightings are driven by the many individual stock opportunities which we view
as attractive from an income investor's perspective. In contrast, our largest
country underweight is India. India's long-term growth prospects are very good
and investor interest in this market is high. However, as mentioned above,
this is reflected in valuations, which makes it difficult for us to find
attractive, income-paying stocks. The portfolio has a slightly overweight
position in China and Hong Kong combined. China faces some challenges,
including weak consumer demand, a stricken property market and a fractious
relationship with the US, as discussed above, but we think overall valuations
are more attractive after recent market weakness. The Chinese market's
dividend outlook is also becoming more positive.
The portfolio changes we have implemented over the past year have mainly been
motivated by individual stock considerations. Declines in valuations provided
opportunities for us to open new positions in a number of companies including
Tencent, as mentioned above. We expect this company to remain resilient due to
its leading position within its sector, and the prospect of higher cash
distributions to shareholders creates an attractive investment case. With
valuations in the company much lower after a significant and protracted
sell-off from their peak in early 2021, we took the opportunity to initiate a
position in this high-quality company at an attractive price. We also
purchased Quanta Computer, as demand for their hyper-scale servers is likely
to grow for many years, as the AI revolution broadens and deepens, and we
expect profitability to improve accordingly.
We took advantage of more attractive valuations and improved fundamentals to
add to several existing positions across markets and sectors. Examples include
Realtek Semiconductor, a Taiwanese semiconductor design company involved in
Wi-Fi and audio products, and Walmart de Mexico, a food, clothing, and general
merchandise retailer. Conversely, we trimmed positions where we thought
valuations were beginning to look stretched after relatively strong
performance. One such case was Southern Copper, a mining company with
operations in Peru and Mexico. This remains an interesting investment given
that long-term demand for copper is likely to be strong, as discussed above.
However, the stock's performance has reduced its yield and inflated its
valuation, so we reduced our position size.
One notable disposal over the past year was the closure of our position in Bid
Corp, a South African food distributor. This company has performed well over
the years, in line with our expectations, and with its valuation looking
toppy, we decided to take profits and rotate into other, more attractive
names, with greater potential upside. However, this is a good example of a
successful investment in a high-quality company, and we would consider
re-opening a position in Bid Corp if valuations look more attractive or if the
company shows potential for further growth.
Our Engagement on Environmental, Social and Governance Issues
We believe that sound environmental, social and governance ('ESG') practices
are extremely important to the resilience of business models, and we welcome
signs that more Emerging Market companies are explicitly recognising this and
improving their practices accordingly. Financially material ESG considerations
are therefore integral to our investment process (please see the dedicated
section in the full Annual Report). When considering potential investments,
our analysts assess each company on a list of related factors, including its
carbon emissions, renewable energy and recycling policies, and employment and
diversity practices, along with its approach to corporate governance.
We place particular emphasis on governance, and we draw a direct link between
a company's dividend policy and the quality of its governance. In our view, a
company's willingness to return cash to shareholders is a tangible and
positive governance indicator. We have engaged with many companies on this
issue over time, to understand their motivations and capital allocation
objectives. We also discuss the magnitude of returns to shareholders and the
rationale behind any split between dividends and buybacks.
Examples of recent ESG engagement with portfolio companies can be seen in the
ESG Report in the full Annual Report.
Dividends
The Company's revenue return per share during the financial year was 5.64p,
which compares to 5.70p in the prior financial year. As with previous years,
the portfolio generated dividend income from a diverse set of companies
across different countries and sectors. For example, the top three dividend
contributors in the year were OPAP (a Greek gaming company), Tisco (a Thai
consumer finance company) and Bank Rakyat (an Indonesian bank).
As a reminder, the Company receives dividends from portfolio companies in
local currencies and pays out dividends in sterling. Currency movements
therefore have an impact on revenue receipts year-on-year. All else being
equal, a falling pound increases revenue receipts from Emerging Markets, and
vice versa.
Other factors aside from currency will also impact near term dividend
receipts. We would consider issues such as the possibility of a US recession
weighing on Emerging Markets earnings, China's relatively slow growth (which
affects many other Emerging Markets), and the outlook for technology which
still looks relatively favourable.
Outlook
Emerging Markets are subject to multiple influences, both positive and
negative. Export-oriented economies such as South Korea and Taiwan will
continue to benefit from the surge in global demand for AI-driven tools.
However, the risk of a US economic slowdown is increasing, as shown by the
US Federal Reserve cutting interest rates. Yet with US interest rates set to
decline, individual Emerging Markets such as Indonesia, South Africa and
Mexico may have more scope to follow their own monetary easing cycles, which
could be supportive for domestic demand in these economies. Meanwhile, the
Indian economy continues to forge ahead, but as value investors, we still view
valuations as relatively unattractive.
In contrast to India and several other emerging economies, China's economy is
sluggish, but we are seeing increasing evidence that policymakers are acting
with a higher sense of urgency to improve economic conditions and, crucially,
to help consumer confidence to improve. Easing measures announced so far are
mainly monetary policy focused and we suspect we need to see more fiscal tools
being used for there to be more traction in terms of stimulus - but the higher
degree of policy coordination is a positive and is being taken well by
markets. Our constructive case for China is more based on the micro than the
macro, i.e., we see attractive opportunities at the stock level driven by
increasing focus on cash returns to shareholders via both dividends and
buybacks. We continue to see improvement here, however, the desire to return
cash to shareholders should always be balanced against the need to invest for
future growth.
Given our bottom-up approach to building the portfolio, we remain excited by
the many opportunities we see across Emerging Markets. Our principal focus is
the same as it has been since the inception of the Company: we seek out
companies able to produce attractive returns on equity, generate healthy free
cash flow and pay shareholders reliable dividends. By identifying stocks with
these characteristics, and buying them at attractive valuation levels, we can
construct a portfolio with both value and quality attributes, that generates
an attractive yield for shareholders, as well as allowing them to participate
in Emerging Markets growth.
Omar Negyal
Isaac Thong
Portfolio Managers
JPMorgan Asset Management
1st November 2024
PRINCIPAL RISKS AND UNCERTAINTIES
The Board has overall responsibility for reviewing the effectiveness of the
Company's system of risk management and internal control. The Board is
supported by the Audit and Risk Committee in the management of risk. The risk
management process is designed to identify, evaluate, manage, and mitigate
risks faced. Although the Board believes that it has a robust framework of
internal controls in place this can provide only reasonable, and not absolute,
assurance against material financial misstatement or loss and is designed to
manage, not eliminate, risk.
The Directors confirm that they have carried out a robust assessment of the
principal risks and uncertainties facing the Company, including those that
would threaten its business model, future performance, solvency or liquidity.
With the assistance of the Manager, the Audit and Risk Committee has drawn up
a risk matrix, which identifies the principal risks and uncertainties, and
the emerging risks to the Company and the ways in which these risks are
managed or mitigated. These are reviewed and noted by the Board through the
Audit and Risk Committee. The Audit and Risk Committee has agreed to hold a
third meeting every year dedicated to the review of the Company's risk matrix.
The principal risks fall broadly under the following categories: investment;
strategy; political and economic; financial; operational and cybercrime;
accounting, legal and regulatory; and ESG.
The Board, through the Audit and Risk Committee, considers that the risks
detailed below are the principal risks facing the Company currently, along
with the financial risks detailed in note 22 of the full Annual Report. These
are the risks that could affect the ability of the Company to deliver its
strategy.
Movement in risk
status in year to
Principal risk Description Mitigation/Control 31st July 2024
Investment performance Inappropriate investment decisions, for example poor stock selection or asset The Board manages this risk by diversification of investments through its Risk remained stable from the prior year. The Company continued to pursue its
allocation may lead to underperformance against the Company's Benchmark index investment restrictions and guidelines which are monitored and reported by the investment objective in accordance with the agreed strategy.
and peer companies. Manager. The Investment Manager provides the Directors with timely and
accurate management information, including performance data and attribution The Board continued to monitor the performance of the portfolio over the
analyses, revenue estimates, currency performance, liquidity reports and peer financial year. Whilst performance slightly lagged the Benchmark, the Board
group analyses. The Board monitors the implementation and results of the took comfort in the longer-term performance. See the full Annual Report.
investment process with the Portfolio Managers, who attend Board meetings, and
reviews data which show statistical measures of the Company's risk profile.
The Board holds a separate meeting devoted to strategy each year.
Income There is the risk that the Company may underperform resulting in insufficient The Investment Manager has an investment process which is designed to maximise Whilst macroeconomic conditions have been challenging, this risk has remained
local currency generation, reducing the income available to pay dividends to the performance of the portfolio in meeting the investment objective and stable during the year and the Company continued to generate income.
shareholders. delivery of income. The Board regularly reviews investment and financial
reports, including revenue estimates, to monitor the effectiveness of the Given the level of income, the Board has modestly increased the dividend for
investment process. the financial year, which was wholly funded by the revenue earned in the year.
Strategy If the Company's business objective and strategy is no longer appropriate, it The Board holds a separate meeting devoted to strategy each year. Risk has remained stable.
may lead to a lack of investor demand. This may result in the Company's shares
trading at a narrower premium or a wider discount. The Board seeks to narrow the discount by undertaking measured buybacks of the The Board continued to monitor the performance of the portfolio over the
Company's shares. The Company has authority to buy back its existing shares to financial year. The total return on NAV for the year was marginally behind the
A widening discount out of line with the industry may lead to hostile action enhance the NAV per share for its shareholders and to reduce the absolute Benchmark. However, over the longer term, the Company continues to provide
by shareholders or arbitrageurs. level of discount and discount volatility. good investment performance against the Benchmark.
An inappropriate gearing strategy may lead to suboptimal returns; poor The Company and Manager work with the Corporate Broker to seek to increase The Board has increased the number of buybacks of the Company's own shares
performance if over-geared in weak markets or performance foregone if demand for the Company's shares. during the year, particular from the prior year. The Company's discount has
under-geared in strong markets.
remained relatively stable as a result of these buybacks.
The Board has set a gearing range within which the Investment Managers employ
the Company's gearing on a strategic basis. Emerging Markets remained resilient in the face of a challenging external
backdrop and monetary conditions. Inflation in Emerging Markets has fallen
Gearing levels are detailed in the monthly Portfolio restrictions and over the latter half of the financial year, and a weaker US dollar has
guidelines report provided to the Board and the level of gearing is discussed provided a tailwind.
at each Board meeting.
Political and Economic The Company's returns, both capital and revenue, are affected by changes in This risk is managed to some extent by diversification of investments both by Although political and economic risks have always been part of the investment
the economic, political and corporate conditions, which can cause market and geography and sector, and by regular communication with the Investment process, the risk has been heightened to reflect the number of elections
exchange rate fluctuations. Sustained underperformance of Emerging Markets as Managers on matters of investment strategy and portfolio construction which taking place in 2024 and growing geopolitical tensions and conflicts around
an asset class may result from risks such as the imposition of restrictions on will directly or indirectly include an assessment of these risks. the world, as well as concerns about the resiliency of democracy. These risks
the free movement of capital, ability to pay corporate dividends and change in
can significantly impact global markets, including Emerging Markets, investor
legislation. Economic, political and ultimately military conflicts between The Board receives regular reports from the Manager and Corporate Broker sentiment, and economic stability.
nations, regions and trading blocks are an ever present reality. So too are regarding market outlook and considers thematic and factor risks, stock
the risks of social dislocation or civil unrest within countries. These bring selection and levels of gearing on a regular basis.
with them risks to economic growth, to investors' risk appetites and,
consequently, to the valuations and distributions of companies in the
portfolio.
Financial The financial risks faced by the Company include market price risk, interest Further details are disclosed in note 22 in the full Annual Report. Risk has remained stable over the year as Emerging Markets remained resilient,
rate risk, liquidity risk and credit risk. despite continued volatility in global macroeconomic conditions.
Operational and cybercrime The Company is dependent on third parties for the provision of services and The Board keeps the services of the Manager and third-party service providers Risk remained stable during the year.
systems. Disruption to, or failure of, the Manager's accounting, dealing or under continuous review, and the Management Engagement Committee undertakes a
payments systems or the depositary's or custodian's records could prevent formal evaluation of performance on an annual basis. The Manager has in place The Board continues to monitor the outsourced services and an annual appraisal
accurate reporting and monitoring of the Company's financial position. There service level agreements with its service providers that are attested to on an of the performance, and ongoing appointment, of the Manager and the Company's
is also the potential for fraud, errors or control failures at the Company's annual basis. third-party service providers is undertaken by the Management Engagement
Manager and or third party service providers, which could result in damage to
Committee.
the Company's reputation or result in losses. Details of how the Board monitors the services provided by the Manager and its
associates and the key elements designed to provide effective internal control To date the Manager's cyber security arrangements have proven robust and the
The threat of a cyber-attack is regarded as at least as important as more are included within the Risk Management and Internal Control section of the Company has not been impacted by any cyber attacks threatening its operations.
traditional physical threats to business continuity and security. In addition Corporate Governance Report. The Audit and Risk Committee regularly reviews
to threatening the Company's operations, such an attack is likely to raise statements on internal controls and procedures from the Company's Manager. The
reputational issues which may damage the Company's share price and reduce Audit and Risk Committee also reviews a summary of annual controls reports
demand for its shares. from the Manager, with exceptions found in its control environment highlighted
to the Audit and Risk Committee. The Company is subject to an annual external
audit. The Company's service providers have robust business continuity plans.
The Board works closely with the Investment Manager in identifying these
threats and, in addition, monitors the strategies of its service providers.
The Company benefits directly and/or indirectly from all elements of
JPMorgan's Cyber Security programme. The information technology controls
around the physical security of JPMorgan's data centres, security of its
networks and security of its trading applications are tested by independent
auditors and reported every six months against the AAF Standard.
Accounting, Legal and Regulatory Loss of its investment trust status and, as a consequence, gains within the The Section 1158 qualification criteria are continuously monitored by the Risk remained stable during the year.
Company's portfolio could be subject to UK Capital Gains Tax. Manager and the results reported to the Board at each Board meeting.
The Board is comfortable that the Manager continuously monitors the Company's
A breach of the UK Companies Act 2006 could result in the Company and/or the The Board relies on the services of its Company Secretary, the Manager and its compliance with the Section 1158 qualification criteria.
Directors being fined or the subject of criminal proceedings. professional advisers to ensure compliance with the UK Companies Act 2006, the
Listing Rules, DTRs and the Alternative Investment Fund Managers' Directive.
Breach of the UK Listing Rules or Disclosure, Guidance and Transparency Rules
('DTRs') could result in the Company's shares being suspended from listing
which in turn would breach Section 1158 of the Corporation Tax Act 2010.
Environmental, Social and Governance The Board acknowledges that there are risks associated with investments in The Manager has integrated the consideration of financially material ESG Risk remained stable during the year.
companies which fail to conduct business in a responsible manner. Insufficient factors into the Company's investment process. Further details are set out in
consideration given to financially material ESG factors may lead to poor the ESG report in the full Annual Report. The Board is comfortable that the Investment Manager has integrated
performance, and a reduction in demand for the Company's shares as investors
financially material ESG considerations into its investment process.
seek greater ESG oversight in their portfolios. The Board is also considering the threat posed by the direct impact of climate
change on the operations of the Manager and other key service providers.
Climate change may have a disruptive effect on the business models and
profitability of individual investee companies, and indeed, whole sectors.
EMERGING RISKS
The AIC Code of Corporate Governance requires the Audit and Risk Committee to
put in place procedures to identify emerging risks facing the Company.
Emerging risks, which are not deemed to represent an immediate threat, are
considered by the Audit and Risk Committee as they come into view and are
incorporated into the existing review of the Company's risk matrix. However,
since emerging risks are likely to be more dynamic in nature, they are
considered on a more frequent basis, through the remit of the Board when the
Audit and Risk Committee does not meet. The Board, through the Audit and Risk
Committee, considers that the following is an emerging risk facing the
Company:
Artificial Intelligence - While it might equally be deemed a great opportunity
and force for good, there appears also to be an increasing risk to business
and society more widely from Artificial Intelligence ('AI').
The use of AI could be a significant disrupter to business models and whole
companies, leading to added uncertainty in company valuations. Equally,
embracing AI with strategies and proactive measures can gain advantages for
companies and failing to seize the AI opportunity could lead to a risk of
losing competitiveness.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report in the
full Annual Report. The management fee payable to the Manager for the year was
£3,208,000 (2023: £3,121,000) of which £nil (2023: nil) was outstanding at
the year end.
Included in administration expenses in note 6 in the full Annual Report are
safe custody fees amounting to £246,000 (2023: £205,000) payable to JPMorgan
Chase Bank, N.A. of which £102,000 (2023: £86,000) was outstanding at the
year end.
The Manager may carry out some of its dealing transactions through its group
subsidiaries. These transactions are carried out at arm's length. The
commission payable to JPMorgan Securities Limited for the year was £7,000
(2023: £5,000) of which £nil (2023: £nil) was outstanding at the year end.
The Company also holds cash in the JPMorgan USD Liquidity Fund, which is
managed by the Manager. At the year end this was valued at £2,459,000 (2023:
£2,184,000). Income amounting to £199,000 (2023: £212,000) was receivable
during the year of which £nil (2023: £nil) was outstanding at the year end.
Stock lending income amounting to £18,000 (2023: £20,000) was receivable by
the Company during the year. The commissions in respect of such transactions
amounted to £2,000 (2023: £2,000) payable to the lending agent, JPMorgan
Chase Bank, N.A.
Handling charges on dealing transactions amounting to £40,000 (2023:
£20,000) were payable to JPMorgan Chase Bank, N.A. during the year of which
£11,000 (2023: £5,000) was outstanding at the year end.
At the year end, total cash of £701,000 (2023: £1,291,000) was held with
JPMorgan Chase Bank, N.A. A net amount of interest of £10,000 (2023: £4,000)
was receivable by the Company during the year from JPMorgan Chase Bank, N.A.
of which £nil (2023: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found in note
6 in the full Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law)
including FRS 102 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland'. Under Company law the Directors must not approve the
financial statements unless they are satisfied that, taken as a whole, the
annual report and financial statements are fair, balanced and understandable,
provide the information necessary for shareholders to assess the Company's
performance, business model and strategy and that they give a true and fair
view of the state of affairs of the Company and of the total return or loss of
the Company for that period. 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 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.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the UK
Companies Act 2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The financial statements are published on the
www.jpmglobalemergingmarketsincome.co.uk website, which is maintained by the
Company's Manager. The maintenance and integrity of the website maintained by
the Manager is, so far as it relates to the Company, the responsibility of the
Manager. The work carried out by the Auditor does not involve consideration of
the maintenance and integrity of this website and, accordingly, the Auditor
accepts no responsibility for any changes that have occurred to the financial
statements since they were initially presented on the website. The financial
statements are prepared in accordance with UK legislation, which may differ
from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for
preparing a Directors' Report, Strategic Report and Directors' Remuneration
Report that comply with that law and those regulations.
Each of the Directors, whose names and functions are listed in the full Annual
Report confirm that, to the best of their knowledge:
• the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), give a true and fair view of
the assets, liabilities, financial position and return of the Company; and
• the Strategic Report 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 it
faces.
The Board confirms that it is satisfied that the annual report and financial
statements taken as a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's position
and performance, business model and strategy.
For and on behalf of the Board
Elisabeth Scott
Chair
1st November 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st July 2024
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments held at fair value through
profit or loss - 13,406 13,406 - 21,726 21,726
Net foreign currency (losses)/gains - (76) (76) - 1,845 1,845
Income from investments 20,948 275 21,223 20,604 348 20,952
Interest receivable and similar income 227 - 227 236 - 236
Gross return 21,175 13,605 34,780 20,840 23,919 44,759
Management fee (962) (2,246) (3,208) (936) (2,185) (3,121)
Other administrative expenses (895) - (895) (735) - (735)
Net return before finance costs and taxation 19,318 11,359 30,677 19,169 21,734 40,903
Finance costs (696) (1,623) (2,319) (582) (1,356) (1,938)
Net return before taxation 18,622 9,736 28,358 18,587 20,378 38,965
Taxation (2,036) (896) (2,932) (1,679) (99) (1,778)
Net return after taxation 16,586 8,840 25,426 16,908 20,279 37,187
Return per share 5.64p 3.01p 8.65p 5.70p 6.84p 12.54p
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. The net return after taxation represents
the profit for the year and also the total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
Called up Capital
share Share redemption Other Capital Revenue
capital premium reserve reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 31st July 2022 2,973 222,582 13 100,092 73,210 17,665 416,535
Repurchase of shares into Treasury - - - (448) - - (448)
Net return - - - - 20,279 16,908 37,187
Dividends paid in the year (note 2) - - - - - (15,428) (15,428)
At 31st July 2023 2,973 222,582 13 99,644 93,489 19,145 437,846
Repurchase of shares into Treasury - - - (9,033) - - (9,033)
Net return - - - - 8,840 16,586 25,426
Dividends paid in the year (note 2) - - - - - (15,615) (15,615)
At 31st July 2024 2,973 222,582 13 90,611 102,329 20,116 438,624
STATEMENT OF FINANCIAL POSITION
At 31st July 2024
2024 2023
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 465,364 462,662
Current assets
Debtors 2,804 3,392
Cash and cash equivalents 3,160 3,475
5,964 6,867
Current liabilities
Creditors: amounts falling due within one year (16,110) (31,559)
Net current liabilities (10,146) (24,692)
Total assets less current liabilities 455,218 437,970
Creditors: amounts falling due after more than one year (15,571) -
Provision for capital gains tax (1,023) (124)
Net assets 438,624 437,846
Capital and reserves
Called up share capital 2,973 2,973
Share premium 222,582 222,582
Capital redemption reserve 13 13
Other reserve 90,611 99,644
Capital reserve 102,329 93,489
Revenue reserve 20,116 19,145
Total equity shareholders' funds 438,624 437,846
Net asset value per share 151.4p 147.7p
STATEMENT OF CASH FLOWS
For the year ended 31st July 2024
2024 2023
£'000 £'000
Cash flows from operating activities before finance costs and taxation
Total return on ordinary activities 30,677 40,903
Adjustment for:
Net gains on investments held at fair value through profit or loss (13,406) (21,726)
Net foreign currency losses/(gains) 76 (1,845)
Dividend income (21,221) (20,943)
Interest income (209) (216)
Scrip dividends received as income (2) (9)
Realised (losses)/gains on foreign exchange transactions (239) 4
Realised exchange gains on USD Liquidity Fund 191 70
Decrease/(increase) in accrued income and other debtors 30 (7)
Decrease in accrued expenses (2) (221)
Net cash outflow from operations before dividends and interest (4,105) (3,990)
Dividends received 19,310 20,571
Interest received 209 222
Overseas withholding tax recovered 51 -
Indian capital gains tax recovered/(paid) 3 (56)
Net cash inflow from operating activities 15,468 16,747
Purchases of investments (124,379) (117,620)
Sales of investments 135,473 117,735
Net cash inflow from investing activities 11,094 115
Dividends paid (15,615) (15,428)
Repurchase of shares into Treasury (9,032) (448)
Repayment of loan - (16,613)
Drawdown of loan - 16,613
Interest paid (2,256) (1,786)
Net cash outflow from financing activities (26,903) (17,662)
Decrease in cash and cash equivalents (341) (800)
Cash and cash equivalents at start of year 3,475 4,287
Exchange movements 26 (12)
Cash and cash equivalents at end of year 3,160 3,475
Cash and cash equivalents consist of:
Cash and short term deposits 701 1,291
Cash held in JPMorgan USD Liquidity Fund 2,459 2,184
Total 3,160 3,475
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared under the historical cost convention,
modified to include fixed asset investments at fair value, and in accordance
with the UK 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 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 July 2022.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. In
forming this opinion, the Directors have considered the impact of continued
market volatility and economic uncertainty resulting from ongoing geopolitical
tensions and conflicts, including the war in Ukraine, ongoing tensions between
China and the US and escalating conflict in the Middle East, and in particular
the impact of these geopolitical risks, as well as climate change, on the
going concern and viability of the Company. In making their assessment, the
Directors have reviewed income and expense projections and the liquidity of
the investment portfolio, and considered the mitigation measures which key
service providers, including the Manager, have in place to maintain
operational resilience. The Directors have also reviewed the Company's
compliance with debt covenants in respect of its loans with ING and
Mizuho Bank, taking into consideration that the loan with Mizuho Bank will be
repaid in November 2024. The Board has considered communications with key
shareholders in respect of the continuation vote at the AGM in November 2024
in assessing the going concern and viability of the Company. In light of
these factors, the Company's cash balances, and the liquidity position, the
Directors consider that the Company has adequate financial resources to enable
it to continue in operational existence for at least 12 months.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Dividends
(a) Dividends paid and declared
2024 2023
Pence £'000 Pence £'000
Dividends paid
Fourth interim dividend in respect of prior year 2.30 6,813 2.20 6,530
First interim dividend paid 1.00 2,955 1.00 2,966
Second interim dividend paid 1.00 2,944 1.00 2,966
Third interim dividend paid 1.00 2,903 1.00 2,966
Total dividends paid in the year 5.30 15,615 5.20 15,428
Dividends declared
Fourth interim dividend declared 2.40 6,930 2.30 6,819
The fourth interim dividend proposed in respect of the year ended 31st July
2023 amounted to £6,819,000. However, the amount paid amounted to £6,813,000
due to ordinary shares repurchased after the balance sheet date but prior to
the record date.
(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act
2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of dividends
declared in respect of the financial year, shown below.
2024 2023
Pence £'000 Pence £'000
First interim dividend 1.00 2,955 1.00 2,966
Second interim dividend 1.00 2,944 1.00 2,966
Third interim dividend 1.00 2,903 1.00 2,966
Fourth interim dividend 2.40 6,930 2.30 6,819
Total dividends for Section 1158 purposes 5.40 15,732 5.30 15,717
The revenue available for distribution by way of dividend for the year is
£16,586,000 (2023: £16,908,000). The revenue reserve after payment of the
fourth interim dividend will amount to £13,186,000 (2023: £12,326,000).
3. Return per share(A)
The Revenue, Capital and Total return shown below, is the Net return after
taxation in the Statement of Comprehensive Income in the full Annual Report.
2024 2023
£'000 £'000
Revenue return 16,586 16,908
Capital return 8,840 20,279
Total return 25,426 37,187
Weighted average number of shares in issue during the year 294,183,867 296,678,384
Revenue return per share(A) 5.64p 5.70p
Capital return per share(A) 3.01p 6.84p
Total return per share(A) 8.65p 12.54p
(A) Alternative Performance Measure (APM).
4. Net asset value per share(A)
2024 2023
Net assets (£'000) 438,624 437,846
Number of shares in issue 289,682,588 296,482,060
Net asset value per share 151.4p 147.7p
( A) Alternative Performance Measure (APM).
5. Status of announcement
2023 Financial Information
The figures and financial information for 2023 are extracted from
the Annual Report and Accounts for the year ended 31st July 2023 and do not
constitute the statutory accounts for that year. The Annual Report and
Accounts includes the Report of the Independent Auditor 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 has been delivered
to the Registrar of Companies.
2024 Financial Information
The figures and financial information for 2024 are extracted from
the Annual Report and Accounts for the year ended 31st July 2024 and do not
constitute the statutory accounts for that year. The Annual Report and
Accounts includes the Report of the Independent Auditor 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 Registrar of Companies in due course.
JPMORGAN FUNDS LIMITED
4 November 2024
For further information, please contact:
Emma Lamb
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or or +44 1268 44 44 70
E-mail: invtrusts.cosec@jpmorgan.com
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.
ENDS
A copy of the Annual Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Annual Report will also shortly be available on the Company's website at
www.jpmglobalemergingmarketsincome.co.uk
(http://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.
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. END FR FLFITLSLLIIS