JPMorgan Emerg Mkts - Final Results to 30th June 2023
27/09/2023 07:00
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RNS Number : 7361N JPMorgan Emerging Mkts Invest Trust 27 September 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 30TH JUNE 2023
Legal Entity Identifier: 5493001VPQDYH1SSSR77
Information disclosed in accordance with the DTR 4.1.3
JPMorgan Emerging Markets Investment Trust plc (the 'Company') has today
announced its annual financial results for the period ending 30th June 2023.
Highlights
· Net asset value ('NAV') per share on a total return basis was flat,
whilst total returns to shareholders grew by 0.8%. The Company outperformed
its benchmark, the MSCI Emerging Markets index, which fell 2.8%.
· In the twenty years ended 30th June 2023, the Company has generated
annualised excess returns of 4.0% relative to its benchmark.
· A final dividend of 1.07 pence per share has been declared, taking the
total dividend for the full year to 1.65 pence per share; a rise of 22.2%
compared to the previous year.
· The share price discount to NAV narrowed slightly, ending at 9.7%,
from 10.3%.
· With effect from 1st July 2023, the Company's management fee will be
calculated on a tiered basis of 0.75% per annum on the first £500 million of
net assets, 0.65% on net assets between £500 million and £1 billion, and
0.60% on net assets in excess of £1 billion. This compares with the flat fee
arrangement of 0.75% per annum on net assets which has been levied since 1st
July 2021.
Aidan Lisser, Chair, commented:
"This has been an uncertain and volatile time for investors. The Company has
not been immune to this volatility, although it is encouraging that
performance was ahead of the benchmark. It is also pleasing to note that long
term performance continues to be extremely robust, in both outright terms and
relative to the benchmark.
The new, tiered management fee is expected to further reduce the annual
ongoing charges ratio from its level of 0.85% at end June 2023, continuing the
steady reduction in the ongoing charge from its levels of 1.02% from five
years ago.
While China continues to face challenges, it is evident that many other
emerging markets have been doing well, and opportunities in these markets
will remain plentiful. The long-term case for emerging markets remains robust
thanks to superior economic growth, favourable demographics and the presence
of high-quality companies.
The Company's long-term performance record attests to the Portfolio Managers'
ability to identify the most compelling opportunities across emerging markets,
and to successfully navigate bouts of market turmoil. The Board is confident
that their experience and expertise will continue to serve shareholders well
going forward."
Austin Forey and John Citron, Portfolio Managers, commented:
"Emerging markets have not had a vintage year. But the overall outcome would
have been significantly more positive had it not been for the Chinese market,
whose decline both masked and offset the fact that many emerging markets
delivered healthy gains over the year.
Our approach to China will remain cautious, but other emerging markets offer
plenty of opportunities. We are especially optimistic about India's growth
prospects.
We remain committed to a long-term approach because we believe investment to
be a marathon rather than a sprint. We do not know what the future holds, but
we do believe that a consistent process, implemented with conviction, will
always reward investors in the long run."
Chair's Statement
Performance and Market Background
It has been a privilege to lead your Company in my first year as Chair of the
Board. I would like to begin this statement by thanking shareholders for their
patience, in what has been an uncertain and volatile time for investors. The
Company has not been immune to this volatility, although it is encouraging
that performance was ahead of the benchmark. For the year ending 30th June
2023, the net asset value ('NAV') total return was flat, while total returns
to shareholders grew by 0.8%. The Company outperformed its benchmark index,
which fell 2.8%, by 3.6%. Meanwhile it is pleasing to note that long term
performance continues to be extremely robust, in both outright terms and
relative to the benchmark.
In my half year statement, I noted the improvement in emerging markets
sentiment during the final quarter of 2022, which was driven by US dollar
weakness and by China's decision to abandon its stringent 'zero Covid'
policies. While the dollar has continued to weaken over the first half of
2023, other developments have been much less supportive of emerging markets.
Importantly, given China's sizeable position in the emerging market index, the
impact of the country's reopening post Covid has proved much less vigorous
than originally anticipated. The associated weakness in the Chinese market was
a significant drag on the index over the period, as the Portfolio Managers
discuss in detail in their report. Elsewhere, the US regional banking crisis
sparked jitters about the global financial system, while persistently high
inflation forced Central Banks in developed markets to keep tightening
monetary policy, to the extent that short term US borrowing costs now exceed
long-term bond yields. This so-called 'inverted yield' curve has historically
been a reliable indicator of an economic recession, and concerns about slower
global growth have mounted accordingly.
The Portfolio Managers' report below provides a clear and insightful review of
the market environment, the Company's performance, portfolio adjustments and
the outlook and strategy for the year ahead.
Purpose and Principles
Recent Annual Report statements highlight that the Company has maintained and
communicated a clear and consistent investment philosophy and process over
time. Such clarity of purpose is even more important during uncertain times,
so before reviewing some of the Company's key features, I think it is
worthwhile reiterating our core principles:
- the Company's purpose is to achieve superior long-term returns
for shareholders. The Board considers long term to be a period of at least
three to five years and evaluates the Manager on that basis.
- our Portfolio Managers are predominantly focused on stock
selection, taking a bottom-up approach to finding good businesses at
reasonable prices and owning them for as long as they keep performing in line
with expectations. Typically, these businesses are well-governed growth
companies, with strong 'quality' credentials, such as robust balance sheets
and management teams with deep experience through different economic cycles.
- high quality research and in-depth knowledge of local markets
are key components of the investment process, as is the intent to be a
responsible and engaged investor in the companies held in the portfolio.
- given this focus on high-quality growth companies with
sustainable business models, the portfolio will not outperform in all market
conditions and investment styles, and there may be periods when this approach
underperforms the benchmark. However, it is the Board's firm belief that this
strategy will continue to outperform over the longer term. The Company's
average annualised return over the ten and 20 years ended 30th June 2023 was
+7.2% and +14.0% per annum respectively on a NAV total return basis, both
returns outpacing the benchmark's return of +4.8% and +9.6% respectively. This
is a very creditable performance, delivered over a wide range of challenging
market conditions.
The Portfolio Managers' investment philosophy might thus be best summarised as
basing investment decisions on thorough fundamental research, maintaining a
long-term focus and having the conviction and patience to remain invested for
long periods of time, despite near-term challenges.
Share Price Rating to NAV per Share
Over the period, the discount at which the Company's shares trade versus its
NAV has narrowed slightly and ended the financial year at 9.7% (2022: 10.3%).
At the time of writing the Company's shares are trading on a discount of 9%.
This outcome is comparable with the experience of the Company's immediate
peers, and somewhat more positive versus investment trusts across differing
asset classes. Indeed, the Association of Investment Companies has recently
noted that discounts generally are at historically wide levels.
The Directors recognise that it is important to shareholders that the
Company's share price does not diverge excessively from the underlying NAV,
and the Board monitors the discount and market conditions on at least a weekly
basis. The Board will consider buying back shares to manage the level and
volatility of the discount, if it is judged to be in the best interests of
shareholders to do so. In the 12-month review period, the Board utilised the
Company's authority to buy back shares, repurchasing a total of 19,882,865
shares (1.7% of the issued share capital - excluding shares held in Treasury -
on 1st July 2022). These shares were purchased at a weighted average discount
to NAV of 10.0%, producing a modest uplift to the NAV for continuing
shareholders, as buybacks increase the net asset value per share. The cost was
£21.2 million and in aggregate the buybacks added 0.2% to performance. A
further 3,349,772 shares have been bought back post the year end.
Revenue and Dividends
Whilst the Company's principal focus is capital growth, the Board recognises
that dividends form a welcome component of total shareholder returns. Net
revenue after taxation for the 12 months to 30th June 2023 was £22.6 million
(2022: £16.0 million) and earnings per share were 1.94 pence (2022:
1.36 pence). The significant increase in revenue was principally due to
higher dividend receipts from around a third of the portfolio's investments,
including some special dividends.
It is important to acknowledge that the level of dividends will vary year by
year, and may fluctuate in line with underlying earnings, currency movements
and changes in the portfolio. That said, the Board is pleased to be in a
position to increase the total dividend for this year. The Board is proposing
a final dividend of 1.07 pence per share, which, when added to the interim
dividend of 0.58 pence paid in April 2023, amounts to a total dividend of 1.65
pence per share for the full year. This represents a 22.2% increase on the
total dividend of 1.35 pence paid in 2022 and will be covered by this year's
revenues. Subject to approval by shareholders at the Company's forthcoming
Annual General Meeting ('AGM'), the final dividend will be paid on 10th
November 2023 to shareholders on the register at the close of business on 6th
October 2023.
Continuation Vote
Pursuant to the Company's Articles of Association, the Board is required to
put a triennial continuation vote to shareholders. As the last such vote took
place in 2020, a continuation vote will be put to shareholders at the
Company's forthcoming AGM. Given the long-term performance returns, your Board
has no hesitation in recommending to shareholders that they vote in favour of
the Company continuing as an investment trust for a further three-year period.
Environmental, Social and Governance Considerations/Task Force on
Climate-related Financial Disclosures
As long-term investors, the Investment Manager has always integrated
sustainability considerations into its assessment of individual businesses. In
the search for sustainable business models and long-lasting competitive
advantages, the Manager is concerned with the environmental, social and
governance ('ESG') aspects of both current and potential portfolio holdings.
Therefore, whilst the Company is not described as a sustainable fund,
incorporation of these factors is a natural consequence of its investment
process. In this context, it is notable for example that the profile of the
portfolio includes a very low carbon footprint compared against the benchmark.
Active engagement with investee companies is also an important part of this
process and you will find a series of case studies, concerning companies held
in the portfolio, in the ESG statement starting on page 28 of the 2023 Annual
Report. This report provides more detail on the Investment Manager's approach
as well as relevant metrics to assess progress, including the Company's proxy
voting record.
As a regulatory requirement for the Company's Manager, on 30th June 2023,
JPMAM published its first UK Task Force on Climate-related Financial
Disclosures ('TCFD') Report for the Company in respect of the calendar year
ended 31st December 2022. The report discloses estimates of the Company's
portfolio climate-related risks and opportunities according to the Financial
Conduct Authority ('FCA') Environmental, ESG Sourcebook and the TCFD. The
report is available on the Company's website under the ESG documents section
and can be found using this link:
https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/regional/en/regulatory/esg-information/jpm-emerging-markets-inv-trust-plc-fund-tcfd-report-uk-per.pdf.
Board Governance
Having served as a Director since 2015, Richard Laing will retire from the
Board in the first half of 2024. Richard currently chairs the Audit Committee
and he will be succeeded in this role by Zoe Clements at the conclusion of the
Company's forthcoming AGM. On behalf of the Board and shareholders, I would
like to thank Richard for the very substantial contribution that he has made
to the Company during his tenure, both as an outstanding Audit Chair and for
his wide-ranging expertise as a Director. We wish him all the best for the
future and congratulate Zoe on her new appointment.
The Board constructs detailed succession plans to ensure it retains an
appropriate balance of skills, experience and knowledge. To this end, the
Board, through the remit of the Nomination Committee, has appointed Sapphire
Partners to assist with the recruitment of a non-executive director. Following
the appointment of a new director, intended to be announced by the end of
2023, it is the clear expectation that the Board will meet the new FCA Listing
Rules targets in respect of gender. For more information on these targets and
the Board's explanation of the current position and future intentions, please
refer to page 36 of the Company's Annual Report & Financial Statements for
the year ended 30th June 2023 ('2023 Annual Report'). In addition and
consistent with previous disclosures, the Board remains committed to the FTSE
Women Leaders Review and its voluntary targets.
The Nomination Committee also conducted a detailed evaluation of Board and
Chair performance which is covered on pages 56 and 57 of the 2023 Annual
Report.
Evaluation of Manager and other Third Party Providers
During the year, the Board, through the remit of the Management Engagement
Committee ('MEC'), undertook a formal review of the Manager, facilitated by
Lintstock, an independent board evaluation firm. The review covered services
provided to the Company including the Manager's long-term investment
performance record, management processes, investment style, resources, risk
control mechanisms and administration, company secretarial and marketing
services. Following this review, the MEC concluded that overall the Company is
well served by JPMorgan and that the continued appointment of the Manager, on
the terms agreed, is in the interests of shareholders as a whole. Please refer
to page 57 of the 2023 Annual Report for full details of the MEC's remit.
The Directors also reviewed the other key third party providers, particularly
in terms of quality of service and fees and provided appropriate feedback on
their performance.
Revised Management Fee Arrangements
The Board believes your Company should demonstrably represent value for money
and that shareholders should benefit from the rewards of scale. To this end,
the Board has agreed with the Manager that, with effect from 1st July 2023,
the Company's management fee should be calculated on a tiered basis of 0.75%
per annum on the first £500 million of net assets, 0.65% on net assets
between £500 million and £1 billion and 0.60% on net assets in excess of
£1 billion. This compares with the flat fee arrangement of 0.75% on net
assets which has been levied since 1st July 2021.
For illustrative purposes, as at 30th June 2023, the Company's net assets
totalled £1.33 billion. The Company's current ongoing charges ratio is 0.85%.
However, it is estimated that had this new fee structure been in place for the
year ended 30th June 2023, the ongoing charges ratio would have been 0.78%,
significantly below the ongoing charges ratio of 1.02% from five years ago.
Your Company's fee arrangements therefore remain extremely competitive with
other comparable managed investment companies and similar savings products. On
behalf of the Board I would like to acknowledge the Manager's constructive
approach in engaging with this process.
Promotion and Shareholder Communication
As part of the strategy to reach private individual investors, your Company
has invested in a targeted marketing campaign, with the aim of generating
sustained new investor interest and demand. Shareholders may have already
noticed our online advertising campaigns which should generate demand for the
Company's shares, to the benefit of current shareholders. At the same time,
the Company continues its established investor relations and marketing
programme to wealth managers, institutions and private client stockbrokers.
These initiatives are implemented by JPMorgan but are regularly reviewed by
the Board, both in terms of effectiveness and cost.
All shareholders, both current and potential, will also find useful
information on the Company's website, including video content and sponsored
research.
The Board and the Manager are keen to increase dialogue with the Company's
existing shareholders wherever possible. Investors holding shares through
online platforms will shortly receive a letter inviting them to sign up to
receive email updates from the Company. These updates will deliver regular
news and views, as well as the latest performance statistics. Shareholders
wishing to receive these communications can subscribe now by visiting
https://tinyurl.com/JMG-Sign-Up or by scanning the QR code which can be found
on page 14 of the 2023 Annual Report. If at any time shareholders wish to
correspond with the Board directly, they can do so by contacting the Company
Secretary at invtrusts.cosec@jpmorgan.com.
AGM
The Company's thirty-second AGM will be held at 60 Victoria Embankment, London
EC4Y 0JP on 8th November 2023. Further to shareholder feedback received at
last year's AGM, the meeting will convene at the earlier time of 2.30 p.m.
Portfolio Managers Austin Forey and John Citron will give a presentation to
shareholders, reviewing the past year and outlining their view on the outlook
for emerging markets for the current year. The meeting will be followed by
afternoon tea, which will provide shareholders with the opportunity to meet
the Directors and the Portfolio Managers. Shareholders wishing to follow the
AGM proceedings, but who choose not to attend 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.jpmemergingmarkets.co.u
(http://www.jpmemergingmarkets.co.uk) k (http://www.jpmemergingmarkets.co.uk)
, or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com
(mailto:invtrusts.cosec@jpmorgan.com) .
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. If your shareholding is through the
Company's main register, proxy votes can be lodged in advance of the AGM
either by post or electronically, and detailed instructions are included in
the Notes to the Notice of AGM on pages 99 to 102 of the 2023 Annual Report.
If you hold your shares through an investment platform please refer to the
'Voting on Company Business and Attending the AGM' section on page 106 of the
2023 Annual Report.
Outlook
Developments in China were one of the main factors impacting emerging markets
over the past year. With demand for exports weakening and the heavily indebted
property market under severe pressure, near-term economic growth is likely to
remain well below pre-pandemic levels.
However, it is important to stress that our Portfolio Managers are focused on
the bottom-up fundamentals of the high-quality businesses that they own or
target, and the growth prospects of those companies over the long-term.
Whatever the country's near-term economic prospects, the Chinese market will
still offer appealing investment opportunities capable of generating excess
returns for the Company's shareholders. Furthermore, while the Chinese market
continues to face challenges over the coming year, it is evident that many
other emerging markets have done well - inflation pressures are less extreme,
their currencies have been strengthening and companies have performed
strongly. Opportunities in these markets will remain plentiful.
In addition, the long-term case for emerging markets remains robust - based on
superior economic growth, favourable demographics, increasing consumption and
the presence of high-quality companies and managements.
The Company's long-term record of outright gains and outperformance is
evidence that the Investment Manager's consistent, disciplined approach has
allowed them to identify the most compelling opportunities across emerging
markets, and to successfully navigate previous bouts of market turmoil and
uncertainty. The Board is confident that their experience and expertise,
alongside the principles set out at the beginning of this report, will
continue to serve shareholders well going forward.
Aidan Lisser
Chair
26th September 2023
Portfolio Managers' Report
Objectives & Outcomes
Purpose & Approach
The primary purpose of your Company remains unchanged: to achieve good
investment returns for you, its shareholders. As the Company's Portfolio
Managers, we seek to achieve this by taking a long-term approach to
investment, based on fundamental research, and focused on selecting stocks
rather than countries or industries. We continue to look for high quality
corporate franchises able to compound intrinsic value through economic cycles,
and when we find them we expect to own them for a long time.
We also strive to be a responsible and engaged investor in the companies in
which your portfolio is invested. As we have explained in previous years, a
long-term approach to investment leads naturally to a consideration of
sustainability in the broadest sense, and we have always sought to incorporate
this in our investment process. More details on how we think about
sustainability in investment, and on the characteristics your portfolio
exhibits as a result, can be found in our ESG Report on pages 28 to 33 of the
2023 Annual Report, which also contains examples of how we analyse and engage
with investee companies with regards to sustainability.
Returns for Shareholders
Emerging market equities have not had a vintage year. Our benchmark index,
which serves as an indication of the overall results of the asset class, fell
2.8% in sterling terms during the twelve months to June 2023. Your portfolio
fared better than this, but merely managed to maintain its value, delivering a
flat return on net asset value per share during the year. Beneath these
headline numbers lie a wide range of outcomes in different countries and
indeed between individual stocks. As we explain later, the overall outcome
would have been significantly more positive had it not been for the results
seen in the Chinese market, whose decline both masked and offset the fact that
many emerging markets delivered healthy positive gains over the year.
Active Management
As we noted last year, we are active managers and do not expect to replicate
index returns. Rather, by applying a consistent process as diligently as we
can, we seek to enhance them. In this latest twelve-month period, the
Investment Manager Contribution added 3.5% to your portfolio when compared to
the benchmark index as is set out in the below table.
Performance Attribution - Contributions to Total Returns
Contributions to total returns as at 30th June 2023
12 months to
30th June 2023
% %
Benchmark Total return -2.8
Asset allocation 2.1
Stock selection 4.0
Currency effect -2.8
Gearing/Cash 0.2
Investment Manager contribution 3.5
Portfolio total return 0.7
Management Fees/Other Expenses -0.9
Share Repurchases 0.2
Return on net assets(APM) 0.0
Return to shareholders(APM) 0.8
Source: JPMAM/Morningstar. All figures are on a total return basis.
Performance attribution analyses how the Company achieved its recorded
performance relative to its benchmark.
(APM) Alternative Performance Measure ('APM').
A list of APMs, with explanations and calculations, and a glossary of terms
are provided on pages 103 to 105 of the 2023 Annual Report.
While we fully understand that shareholders will focus primarily on the
absolute returns they receive, we mention this number for two reasons. The
first is that we as Portfolio Managers determine this relative performance
(often known as 'alpha') with the decisions that we take. The broader market
return (or 'beta') of course matters to shareholders, but as Portfolio
Managers we cannot influence it. So alpha is the best way to consider whether
our active management of the portfolio is proving worthwhile and achieving its
goal of enhancing returns for shareholders.
The second reason we mention this number is to set it in a longer-term
context. In the 20 years ended 30th June 2023, the Company generated
annualised excess returns of +4.0%. This year, we added a little less alpha
than the long-run average. However, this serves as a reminder that we cannot
produce results which are totally consistent from year to year. There will be
years when we exceed our average, and others when we undershoot it. As always,
we hope that investors will assess us on the basis of our performance over the
long term, rather than with reference to one specific year.
The Year and the Portfolio
The Past Year
To observers of and participants in capital markets, every year feels full of
events and fluctuations. But this year has been especially notable for two
reasons. The first is the change, perhaps a sea change, in global financial
markets from an era of very low inflation and very low interest rates to one
in which both are considerably higher. This shift has, not surprisingly, left
some casualties in its wake, especially in the developed world's financial
sector. If anything we might be surprised that more businesses have not been
upended by such a significant change in market conditions. The second notable
factor which is particularly important for emerging markets has been the
gyrations of the Chinese equity market and, underneath it, the Chinese
economy. China makes up close to a third of the overall emerging market index,
and to put our earlier comments about its importance in more context it is
worth noting that when one third of the index falls by 20%, the rest of the
index rising by 10% will still leave the overall return at zero. In simple
terms, this is more or less what happened in the twelve months to June 2023.
So further comments below about China seem appropriate as well.
The Return of Interest Rates
Everybody knows that financial conditions have changed around the world, with
inflation eroding real incomes and higher interest rates raising the cost of
debt. With hindsight it is easy to understand why this has happened: first,
the huge financial stimulus launched by governments, especially in the West,
to counteract the economic effects of the pandemic had the effect of
increasing the amount of money in circulation sharply. That led first to a
rise in asset prices, including share prices. But after the Russian invasion
of Ukraine the consequent decline in energy supply to Western economies, in
spite of attempts to manage demand, saw energy prices rise steeply. Those
increased costs then passed through the economic chain and created broader
consumer price inflation, which was in turn met by the conventional monetary
response of higher interest rates in an attempt to slow economic conditions
and thus curb those inflationary pressures. So far, so unremarkable, you might
think. To those who remember economic cycles in the 1970s and 1980s, this may
seem like a normal pattern, potentially ending in a recession, financial
easing and an eventual recovery.
Refreshingly, central banks in emerging markets mostly responded well to this
cycle, taking quicker and more decisive steps to contain inflation and moving
more quickly through the cycle as a result. In countries like Brazil and
Mexico, an awareness of inflationary risks and how to deal with them never
really faded during the years since the financial crisis. As one senior Latin
American banker acerbically remarked at the collapse of Silicon Valley Bank in
the USA, 'any junior analyst' from Latin America would have known how to
manage the interest rate risk that ultimately proved fatal for that
institution.
Your Company's portfolio holdings are well positioned to face an era of higher
interest rates.
In the non-financial companies owned in the portfolio, balance sheets remain
strongly financed. While the average company in the emerging market index has
net debt equivalent to a quarter of its shareholders' funds, the non-financial
companies owned in the portfolio have on average, net cash equal to one tenth
of their equity. Not only does this protect them from higher interest costs,
but their cash generative characteristics mean that they retain control of
their own destiny. The message of Silicon Valley Bank, and indeed most other
corporate failures, is that liquidity and the ability to draw on cash when
needed is the key determinant of survival or failure through cycles. What of
the financial businesses we own? The first point to make is that higher
interest rates often translate into higher margins for banks, making them
beneficiaries rather than victims of the trend. But much more important in the
long run is the ability to manage credit risk, and to build capital strength.
The banks and other lending businesses owned in your portfolio exhibit
strongly capitalised balance sheets and a history of profitable operation
through past economic cycles, and we expect a similar outcome in this cycle.
If the underlying businesses owned in the portfolio appear well able to handle
this new era of higher interest rates, we should also acknowledge that higher
rates imply lower valuations for all financial assets. We comment below on the
impact of valuations on the results of the portfolio over the last year.
China
A lot has happened in the Chinese equity market in the last year. By the
summer of 2022 it was becoming clear that the government's 'zero Covid' policy
was having significant negative effects on the country's economy. In spite of
this, the government showed little sign of moderating its approach. By the
autumn, demonstrations and protests indicated the depth of public frustration
with the situation, and the stock market decline accelerated as company
results revealed the difficulties businesses were experiencing. With
valuations reaching new lows, the market began to recover from the beginning
of November, and then in December the government dropped most covid
restrictions virtually overnight. The stock market soared in response.
However, after rising by more than 50% in three months the market in China has
faced more economic challenges in 2023, challenges which lead many to argue
that China's turbo-charged economic growth is now permanently a thing of the
past.
We share that view. China's extraordinary economic growth over the last three
decades has been driven above all by two factors: huge growth in exports, and
a huge increase in fixed asset investment, especially residential property
construction. Neither of these are currently providing the stimulus that they
once did. On the export front, the weakness of developed world demand is
naturally providing a headwind; at the same time, increasing geo-political
sensitivity has led to direct interventions from Western governments,
especially the USA, to curb China's success in high tech industries in
particular. Meanwhile increased wages have rendered China less competitive
than some other emerging markets, particularly as a base for labour-intensive
manufacturing. It would be premature to argue that the Chinese export story is
over, but it will clearly have to depend more on higher value-added sectors
like medical equipment or electric vehicles; and even here, geo-political
issues may recur.
Meanwhile the Chinese property sector is in trouble, and has begun to see
large and high-profile bankruptcies. A spectacular construction boom saw
almost the whole housing stock of the country reconstructed in two decades;
but having done this, there is neither the need nor the demand to do it again.
For businesses like property developers that depend on the flow of
construction rather than the stock of completed buildings, this is bad news.
And the amount of debt attached to this sector makes it a broader economic
challenge for the country. Our expectation is that as the two principal
engines of past economic growth slow, China's GDP will expand at a much lower
rate than in the past, and this in turn will make life tougher for companies.
The winners will be those that offer a compelling price/value trade-off to
customers. Companies that are earning excess returns without justification
will find life much more difficult.
What does this mean for your portfolio? In any economy the best companies can
still create value for shareholders, and we have seen before that tough
economic environments can often increase the value of competitive advantage.
Our holding in the restaurant business Yum China increased noticeably in value
during the year as its strong balance sheet allowed it to improve its consumer
proposition at a time when competitors were unable to invest, something that
ultimately translated into higher revenues and profits for shareholders. More
broadly it is worth noting that China was in fact the largest single
contributor to your portfolio's outperformance of the index during the last
year, driven especially by stock selection within the market. Looking forward,
although we remain cautious about the broader outlook for the country, we
still see opportunities particularly in strongly positioned businesses able to
allocate capital well in a slower growth environment.
Portfolio Returns
Last year we wrote about the underlying performance of companies owned in your
portfolio, and how this had translated into portfolio outcomes. The same table
that we used last year, updated to reflect the twelve months to 30th June
2023, looks like this:
12 months to
30th June 2023
Earnings growth (local currency) +7.5%
Dividend yield +2.0%
Valuation change -2.4%
Foreign exchange valuations -7.1%
Total NAV return (GBP) 0.0%
Over the year as a whole, as the table above shows, underlying earnings from
portfolio companies grew by 7.5% in local currency. However, over the twelve
months sterling was relatively strong, appreciating against the basket of
emerging market currencies by 7.1%; a modest decline in valuations offset the
dividend component as well, to leave overall portfolio returns flat. Can we
argue that we are still finding businesses that can keep compounding? For the
most part, yes. If we break down the underlying profit progression of the
companies owned by industry, we see that the financial companies we own
delivered 10% growth in earnings per share; the consumer companies also saw
profits grow 10%, and the technology companies, where cyclical sensitivity to
the broader global economy is highest, saw earnings fall by 2%. We should not
be surprised by some cyclicality in earnings: a few of the businesses owned in
the portfolio are intrinsically cyclical. Samsung Electronics, for example,
saw its profits decline by 20%. That is not unusual for a company in a sector
like semiconductor manufacturing; yet in past cycles Samsung has maintained
its competitive advantages and emerged strongly into the next upturn, and we
expect the same to happen in the future. We should bear in mind too that
portfolio earnings growth of 7.5% was considerably better than that achieved
by the asset class as a whole, which saw corporate profits decline rather than
expand over the same period.
In addition, it is worth noting that the dividends paid by the companies owned
in your portfolio rose strongly; income received from dividends rose by 22% in
sterling compared to the previous financial year. Changes in portfolio weights
due to share price movements account for some of this, as do some special
dividends which should not be seen as recurring; but the overall message that
these dividend increases send is that the companies we own on your behalf are
in good shape and optimistic about the future.
Portfolio Changes
We never start a financial year aiming to change the portfolio dramatically;
rather, we try to react to market conditions when things become simply too
cheap to ignore, or too expensive to maintain the same position. During the
year we added marginally to some Chinese holdings as their share prices
declined, decisions that looked bad initially, but which certainly helped
performance when the Chinese market rebounded strongly late in 2022. This
included additional purchases of longstanding high conviction names like
Moutai, Netease and Midea.
We also invested for the first time in two new companies in India, Kotak
Mahindra Bank and Cyient, an IT services company specialising in engineering
design.
What Next?
China remains an important market as far as the wider prospects for emerging
markets are concerned. As we write, valuations are cheap in parts of the
Chinese market, and pessimism abounds: that in itself should make us
interested. But at the same time, our long-held scepticism about the
commitment of many Chinese companies to the optimisation of shareholder value
continues to give us pause. For many years, your portfolio had a lower
exposure to China than the benchmark index, though a combination of additional
investment and relative performance within the market has brought it closer to
the index weight more recently. Going forward our allocation to the country
will continue to be determined firstly by whether we find businesses with
sufficiently wide moats and strong management teams, and secondly whether we
find attractively valued opportunities within this subset of special
businesses.
But elsewhere in emerging markets, plenty of opportunities remain. Our
investments in places like Mexico have prospered over the last year and serve
as a reminder that for all the attention paid to China in news headlines, in
other countries many businesses have been quietly getting on with what they do
best, and seen their share prices evolve accordingly.
If there is one market that bears more comment, it is India, which has been
one of the most fertile breeding grounds for precisely the kind of company
that we like the most - one managed for the long term, with strong economics,
long duration and exemplary governance. In India we see two things happening
at the moment. The first is a degree of investor optimism which has pushed
share prices for some companies well above the levels we would be happy to
pay; we have reduced some of our exposure as a result. But in the real world,
India is emerging as one of the few credible alternatives to China for large
scale export manufacturing, and a round of inward investment adds to reasons
to be optimistic about the future of the Indian economy. The country remains
one of our largest allocations in your portfolio.
While economic conditions matter to companies, growth in earnings and
dividends per share are what matter most to us. The best companies combine
successful operations with judicious decisions about capital allocation,
paying out dividends when they cannot reinvest at acceptable returns. As an
illustration of what can be achieved, allow us to finish by writing about a
company that we first invested in almost twenty-five years ago, Housing
Development Finance Corporation ('HDFC'). This stock has been a constant in
your portfolio since 1998, but merged with its bank subsidiary in July this
year, and hence no longer appears in your portfolio in the same form. We first
bought the share at around 200 rupees, but subsequent stock splits mean that
number should be divided by 10 to give a price in today's terms of 20 rupees.
When the merger was finally concluded in July 2023, the last share price for
HDFC was 2,724 rupees. How is that possible? The answer is through the
continuous compounding of shareholder value. HDFC's profits grew 90-fold over
25 years, and its investments in new areas like banking, asset management and
insurance yielded further gains for shareholders. Its economics remained
impressively constant, with return on equity never falling below 13% in any
year. The point here is a simple one: outstanding management in front of a big
opportunity can, over time, create exceptional outcomes. Our task is to
unearth more companies in the future that can stand comparison to investments
like HDFC.
Closing Thoughts
Knowing what you are trying to do is the most critical thing for any investor,
for two reasons. The first, obviously, is that if you do not really understand
what you are trying to achieve, it is very unlikely that you will achieve it.
But knowing what you are trying to do has a second equally important function,
and that is to prevent the pressure of market cycles and performance
fluctuations from blowing you off course. It can be very tempting, when share
prices fall or performance is challenging, to go for the quick fix, to chase
performance and do things that you would not do in other circumstances.
As shareholders in this Company, you should neither expect that from your
Portfolio Managers, nor excuse it. We remain committed to a long-term approach
because we believe investment to be a marathon rather than a sprint. We do
not know what the future holds, but we do believe that a consistent process
implemented with conviction can always reward investors in the long run.
Austin Forey
John Citron
Portfolio Managers
26th September 2023
Principal & Emerging Risks and Uncertainties
The Directors confirm that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. The risks
identified and the ways in which they are managed or mitigated are summarised
below. With the assistance of JPMF, the Audit Committee has drawn up a risk
matrix, which identifies the principal risks to the Company. These are
reviewed and discussed on a regular basis by the Board. These risks fall
broadly into the following categories:
Principal risk Description Mitigating activities Movement from prior year
Investment Underperformance Poor implementation of the investment strategy, for example as to thematic The Board manages these risks by diversification of investments and through The risk remains high but unchanged from 2022, due to the continuation of
exposure, sector allocation, stock selection, undue concentration of holdings, its investment restrictions and guidelines, which are monitored and reported unfavourable economic conditions (caused by factors such as the geopolitical
factor risk exposure or the degree of total portfolio risk, may lead to on by the Manager. The Manager provides the Directors with timely and accurate crisis between Russia and Ukraine, high inflation and interest rates) faced by
failure to outperform the Company's benchmark index and peer companies, management information, including performance data and attribution analyses, global equity markets, making investment decisions more challenging for the
resulting in the Company's shares trading on a wider discount. revenue estimates, liquidity reports and shareholder analyses. The Board Portfolio Managers.
monitors the implementation and results of the investment process with the
Investment Manager, whose representatives attend all 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.
Geopolitical and Economic Historically, emerging market companies (and investments in their shares) have The Manager's investment process incorporates non-financial measures and risks The risk remains high but unchanged from 2022. The Board has increasingly
shown greater volatility and may be subject to certain political, geopolitical in the assessment of investee companies to allow the portfolio to adapt to turned its attentions to the increased risks from investing in China
and corporate governance risks which are not typically associated with more changing competitive and political landscapes. specifically - see below.
developed markets and economies. Sustained underperformance of emerging
markets as an asset class may occur as a result of risks such as the The Board regularly reviews and discusses with the Portfolio Managers the
imposition of restrictions on the free movement of capital or other government portfolio, the Company's investment performance and the execution of the
regulatory changes. investment policy against the long-term objectives of the Company. The
Manager's independent risk team performs systematic risk analysis, including
country specific risk monitoring, as well as stress testing of the portfolio's
resilience.
Investing in China China offers some unique investment opportunities and risks. On one hand, it Unlike its passive competitors, as an actively managed fund the Portfolio The risk remains high but unchanged from 2022.
has provided faster growth than many other markets in the last few decades, Managers can adapt the portfolio to a changing regulatory environment and
but in recent years it has been impacted by a decline in trade, a slowdown in reduce both regulatory risk from, for example export controls and reputational The Board specifically discusses the risks associated with investing in China
consumer spending, a crackdown on the private sector by the Chinese government risk from, for example human rights transgressions. at each Board meeting and received a presentation from an expert in the field
and U.S. led trade restrictions, together with growing concerns in relation to
at its 2023 Strategy meeting.
China's domestic property market. The Board has access to a range of expert resources and strategists both
within JPMAM and externally, who can provide long term insight and guidance on
The country, which together with Hong Kong, represents just under 30% of the geopolitical developments.
Company's benchmark index and thus represents a significant proportion of the
Company's portfolio.
The Board and Manager are aware of the risks associated with investing in
China but are cognisant that to not be invested in China would represent a
significant investment call, which could damage investor returns.
Loss of Investment Team or Portfolio Manager A sudden departure of a portfolio manager or several members of the investment The Manager takes steps to reduce the likelihood of such an event by ensuring The risk is medium and remains unchanged from 2022. John Citron has been a
management team could result in a short-term deterioration in investment appropriate succession planning and the adoption of a team-based approach, as key member of the investment team since 2021. The investment team is supported
performance. well as special efforts to retain key personnel. by significant resource.
Cyber Crime The threat of cyber attack, in all its guises, is regarded as at least as The information technology controls around the physical security of J.P. The risk remains high but unchanged from 2022.
important as more traditional physical threats to business continuity and Morgan Chase & Co's data centres, security of its networks and security of
security. The Board has received the cyber security policies for its key third its trading applications are tested by an independent third party and reported To date the Manager's cyber security arrangements have proven robust and the
party service providers and JPMF has assured Directors that the Company every six months against the AAF Standard. Company has not been impacted by any cyber attacks threatening its operations.
benefits directly or indirectly from all elements of J.P. Morgan Chase &
Co's Cyber Security programme.
Discount Control Investment trust shares often trade at discounts to their underlying NAVs; The Board monitors the Company's premium/discount at which the share price The risk remains high but unchanged from 2022.
they can also trade at a premium. Discounts and premiums can fluctuate trades to NAV on both an absolute level and relative to its peers and the
considerably leading to volatile returns for shareholders. wider investment trust sector. The Board regularly reviews and monitors the Company's objective and
investment policy and strategy, the investment portfolio and its performance,
The Board reviews sector relative performance and sales and marketing activity the level of discount/premium to net asset value at which the shares trade and
(considered the primary drivers of the relative discount level). The Company movements in the share register. During the year the Company continued to
also has authority to buy back its existing shares to enhance the NAV per conduct share buybacks.
share for remaining shareholders and to reduce the absolute level of discount
and discount volatility.
Legal and Regulatory Change The Company's business model could become non-viable as a result of new or The Board receives regular reports from its broker, depositary, registrar and The risk remains medium but unchanged from 2022.
revised rules or regulations arising from, for example, policy change or Manager as well as its legal advisers and the Association of Investment
financial monitoring pressure. Companies on changes to regulations which could impact the Company and its Changes to the regulatory landscape are inevitable.
industry. The Company monitors events and relies on the Manager and its other
key third party providers to manage this risk by preparing for any changes,
adverse or otherwise.
Emerging Risks
The Board has considered and kept under review emerging risks, including but
not limited to the impact of climate change, geopolitical conflict,
inflationary pressures, social dislocation and conflict and technological
advances. The key emerging risks identified are as follows:
Climate change
Investors can no longer ignore the impact that the world's changing climate
will have on their portfolios, with the impact of climate change on returns
now potentially significant. However, the transition to a low-carbon economy
across the globe may also provide attractive investment opportunities. The
Board receives ESG reports from the Manager on the portfolio and the way ESG
considerations are integrated into the investment decision-making, so as to
mitigate risk at the level of stock selection and portfolio construction.
Rising competition between China and western economies
Since the end of the Second World War, the world has enjoyed a technology and
economic hegemony with the US at its core. With the development of China as a
political, cultural, technological and economic rival, there is the risk that
alongside the trade tensions we have seen in recent years, there may develop a
rival technology and economic infrastructure between western economies and
China. The Board notes that in August 2023, the Biden administration unveiled
a new executive order banning certain US investment into China's quantum
computing, advanced chip and artificial intelligence sectors.
Economic Contraction
A long-term reduction in returns available from investments as a result of
recession, stagnation, inflation or other extended exogenous factors which may
render the Company's investment objectives and policies unattractive or
unachievable.
Artificial Intelligence ('AI')
While it might be deemed a great opportunity and force for good, there is an
increasing risk to business and society more widely from AI. Advances in
computing power means that AI has become a powerful tool that will impact a
huge range of areas and with a wide range of applications that include the
potential to disrupt and even to harm. In addition the use of AI could be
a significant disrupter to business processes and whole companies leading to
added uncertainty in corporate valuations.
Structural Changes
The attractiveness of investment vehicles, to include investment trusts, could
be impacted by structural changes to the way investors access the market,
including changes within the platform channels.
Transactions with the Manager and related parties
Details of the management contract are set out in the Directors' Report on
page 52 of the 2023 Annual Report. The management fee payable to the Manager
for the year was £10,272,000 (2022: £11,789,000) of which £nil (2022:
£nil) was outstanding at the year end.
Safe custody fees amounting to £497,000 (2022: £465,000) were payable during
the year to JPMorgan Chase N.A. of which £212,000 (2022: £81,000) was
outstanding at the year end.
The Manager may carry out some of its dealing transactions through group
subsidiaries. These transactions are carried out at arm's length. The
commission payable to JPMorgan Securities Limited for the year was £nil
(2022: £5,000) of which £nil (2022: £nil) was outstanding at the year end.
The Company also holds cash in the JPMorgan US Dollar Liquidity Fund, which is
managed by JPMF. At the year end this was valued at £24.1 million (2022:
£57.2 million). Interest amounting to £2,296,000 (2022: £158,000) was
received during the year of which £nil (2022: £nil) was outstanding at the
year end.
Handling charges on dealing transactions amounting to £25,000 (2022:
£49,000) were payable to JPMorgan Chase N.A. during the year of which £6,000
(2022: £2,000) was outstanding at the year end.
At the year end, total cash of £737,000 (2022: £487,000) was held with
JPMorgan Chase. A net amount of interest of £3,497 (2022: £220) was
receivable by the Company during the year from JPMorgan Chase of which £nil
(2022: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on
pages 63 to 65 of the 2023 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 regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of Ireland' and
applicable law). Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing the financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable United Kingdom Accounting Standards, comprising
FRS 102, have been followed, subject to any material departures disclosed and
explained in the financial statements;
• make judgements and accounting estimates that are reasonable and
prudent; 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 adequate 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
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the 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 accounts are published on the Company's website:
www.jpmemergingmarkets.co.uk, 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
Directors are responsible for the maintenance and integrity of the corporate
and financial information on the Company's website. Legislation in the United
Kingdom governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for
preparing a Strategic Report, a Directors' Report and Directors' Remuneration
Report that comply with the law and those regulations.
Each of the Directors, whose names and functions are listed in Directors'
Report confirm that, to the best of their knowledge:
• the Company's financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland', and applicable law),
give a true and fair view of the assets, liabilities, financial position and
profit of the Company; and
• the Directors' 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 Directors consider that the annual report and accounts, 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
Aidan Lisser
Chair
26th September 2023
Statement of Comprehensive Income
For the year ended 30th June
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Loss on investments held at fair value through profit or loss - (10,303) (10,303) - (300,802) (300,802)
Foreign currency (loss)/gains - (2,310) (2,310) - 6,561 6,561
Income from investments 28,130 - 28,130 23,043 - 23,043
Interest receivable 2,299 - 2,299 158 - 158
Gross return/(loss) 30,429 (12,613) 17,816 23,201 (294,241) (271,040)
Management fee (3,082) (7,190) (10,272) (3,537) (8,252) (11,789)
Other administrative expenses (1,456) - (1,456) (1,346) - (1,346)
Net return/(loss) before taxation 25,891 (19,803) 6,088 18,318 (302,493) (284,175)
Taxation (3,294) (4,708) (8,002) (2,326) (5,420) (7,746)
Net return/(loss) after taxation 22,597 (24,511) (1,914) 15,992 (307,913) (291,921)
Return/(loss) per share 1.94p (2.11)p (0.17)p 1.36p (26.13)p (24.77)p
A final dividend of 1.07p (2022: 0.83p) per Ordinary share has been proposed
in respect of the year ended 30th June 2023, totalling £12.3 million (2022:
£9.7 million).
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The 'Total' column of this statement is the profit and loss account of the
Company, and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies. Net return/(loss) after taxation represents the profit/(loss) for
the year and also Total Comprehensive Income.
Statement of Changes in Equity
For the year ended 30th June 2023
Called up Capital
share Share redemption Other Capital Revenue
capital premium reserve reserves reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30th June 2021 33,091 173,631 1,665 69,939 1,401,743 17,974 1,698,043
Repurchase of shares into Treasury - - - - (20,890) - (20,890)
Net (loss)/return - - - - (307,913) 15,992 (291,921)
Dividend paid in the year (note 3) - - - - - (15,926) (15,926)
At 30th June 2022 33,091 173,631 1,665 69,939 1,072,940 18,040 1,369,306
Repurchase of shares into Treasury - - - - (21,153) - (21,153)
Net (loss)/return - - - - (24,511) 22,597 (1,914)
Dividend paid in the year (note 3) - - - - - (16,417) (16,417)
At 30th June 2023 33,091 173,631 1,665 69,939 1,027,276 24,220 1,329,822
(1) This reserve forms the distributable reserve of the Company and is used
to fund distributions to investors.
Statement of Financial Position
At 30th June
2023 2022
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 1,311,009 1,313,276
Current assets
Debtors 5,074 4,203
Cash and cash equivalents 24,866 57,700
29,940 61,903
Current liabilities
Creditors: amounts falling due within one year (999) (453)
Net current assets 28,941 61,450
Total assets less current liabilities 1,339,950 1,374,726
Non current liabilities
Provision for capital gains tax (10,128) (5,420)
Net assets 1,329,822 1,369,306
Capital and reserves
Called up share capital 33,091 33,091
Share premium 173,631 173,631
Capital redemption reserve 1,665 1,665
Other reserve 69,939 69,939
Capital reserves 1,027,276 1,072,940
Revenue reserve 24,220 18,040
Total shareholders' funds 1,329,822 1,369,306
Net asset value per share 115.6p 117.0p
The Company is registered in England and Wales.
Company registration number: 2618994
Statement of Cash Flows
For the year ended 30th June
2023 2022
£'000 £'000
Cash flows from operating activities
Net return/(loss) before taxation 6,088 (284,175)
Adjustment for:
Net losses on investments held at fair value through profit or loss 10,303 300,802
Net foreign currency loss/(gains) 2,310 (6,561)
Dividend income (28,130) (23,043)
Interest income (2,299) (158)
Realised gain on foreign exchange transactions 123 163
Realised exchange gains on Liquidity 2,795 1,482
(Increase)/decrease in accrued income and other debtors (15) 11
Increase/(decrease) in accrued expenses 289 (129)
(8,536) (11,608)
Dividends received 23,963 18,579
Interest received 2,299 158
Overseas tax recovered 16 93
Net cash inflow from operating activities 17,742 7,222
Purchases of investments (64,572) (109,362)
Sales of investments 56,540 192,011
Settlement of forward currency contracts - 98
Net cash (outflow)/inflow from investing activities (8,032) 82,747
Dividend paid (16,417) (15,926)
Repurchase of shares into Treasury (20,899) (21,670)
Net cash outflow from financing activities (37,316) (37,596)
(Decrease)/increase in cash and cash equivalents (27,606) 52,373
Cash and cash equivalents at start of year 57,700 510
Unrealised (loss)/gain on foreign currency cash and cash equivalents (5,228) 4,817
Cash and cash equivalents at end of year 24,866 57,700
Cash and cash equivalents consist of:
Cash and short term deposits 737 487
Cash held in JPMorgan US Dollar Liquidity Fund 24,129 57,213
Total 24,866 57,700
The presentation of the Cash Flow Statement, as permitted under FRS102, has
been changed so as to present the 'reconciliation of net return before finance
costs and taxation' to 'cash inflow from operating activities' on the face of
the Cash Flow Statement. Previously, this was shown by way of note to the Cash
Flow Statement. Other than consequential changes in the presentation of
certain cash flow items, there is no change to the cash flows as presented in
previous periods.
Reconciliation of net cash
As at Other non-cash As at
30th June 2022 Cash flows charges 30th June 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash 487 254 (4) 737
Cash equivalents 57,213 (27,860) (5,224) 24,129
Net cash 57,700 (27,606) (5,228) 24,866
Notes to the Financial Statements
For the year ended 30th June 2023
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 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 Directors believe that having considered the Company's investment
objective, risk management policies, capital management policies and
procedures, the nature of the portfolio and expenditure projections, the
Company has adequate resources, an appropriate financial structure and
suitable management arrangements in place to continue in operational existence
for the foreseeable future. The Board has also taken into account the fact
that the Company has a continuation vote to be considered by shareholders at
the Company's 2023 Annual General Meeting and the likelihood of shareholders
voting in favour of continuation. Having consulted the Company's major
shareholders through the remit of its advisers, the Directors have a
reasonable belief that the continuation vote will be supported by the majority
of shareholders. For these reasons, they consider that there is reasonable
evidence to continue to adopt the going concern basis in preparing the
financial statements. They have not identified any material uncertainties to
the Company's ability to continue to do so over a period of at least twelve
months from the date of these financial statements.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Return/(loss) per share
2023 2022
£'000 £'000
Revenue return 22,597 15,992
Capital loss (24,511) (307,913)
Total loss (1,914) (291,921)
Weighted average number of shares in issue during the year 1,162,832,611 1,178,582,565
Revenue return per share 1.94p 1.36p
Capital loss per share (2.11)p (26.13)p
Total loss per share (0.17)p (24.77)p
3. Dividends
(a) Dividends paid and proposed
2023 2022
£'000 £'000
Distributions paid
Unclaimed dividends refunded to the Company - (1)
2022 final dividend of 0.83p (2021: 0.83p) per share 9,683 9,813
2023 interim dividend of 0.58p (2022: 0.52p) per share 6,734 6,114
Total dividends paid in the year 16,417 15,926
Distributions proposed
2023 final dividend proposed of 1.07p (2022: 0.83p) per share 12,312 9,715
All dividends paid and proposed in the year have been funded from the revenue
reserve.
The dividend proposed in respect of the year ended 30th June 2023 is subject
to shareholder approval at the forthcoming Annual General Meeting. In
accordance with the accounting policy of the Company, this dividend will be
reflected in the financial statements for the year ending 30th June 2024.
(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 the dividend
proposed in respect of the financial year, shown below.
The revenue available for distribution by way of dividend for the year is
£22,597,000 (2022: £15,992,000). The revenue reserve after payment of the
final dividend will amount to £11,908,000 (2022: £8,323,000).
2023 2022
£'000 £'000
2023 interim dividend of 0.58p (2022: 0.52p) per share 6,734 6,114
2023 final dividend proposed of 1.07p (2022: 0.83p) per share 12,312 9,715
19,046 15,829
4. Net asset value per share
2023 2022
Net assets (£'000) 1,329,822 1,369,306
Number of shares in issue 1,150,629,365 1,170,512,230
Net asset value per share 115.6p 117.0p
5. Status of results announcement
2022 Financial Information
The figures and financial information for 2022 are extracted from the Annual
Report and Accounts for the year ended 30th June 2022 and do not constitute
the statutory accounts for the year. The Annual Report and Accounts include
the Report of the Independent Auditors which is unqualified and does not
contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The Annual Report and Accounts will be delivered to the
Register of Companies in due course.
2023 Financial Information
The Figures and financial information for 2023 are extracted from the
published Annual Report and Accounts for the year ended 30th June 2022 and do
not constitute the statutory accounts for that year. The Annual Report and
Accounts has been delivered to the Registrar of Companies and included the
Report of the Independent Auditors which was unqualified and did not contain a
statement under either section 498(2) or section 498(3) of the Companies Act
2006.
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.
27th September 2023
For further information:
Alison Vincent,
JPMorgan Funds Limited
0800 20 40 20 or +44 1268 44 44 70
ENDS
A copy of the 2023 Annual Report will shortly be submitted to the FCA's
National Storage Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://secureweb.jpmchase.net/readonly/https:/lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDIsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDA0MDUuMTk3NzA4MDEiLCJ1cmwiOiJodHRwczovL2RhdGEuZmNhLm9yZy51ay8jL25zbS9uYXRpb25hbHN0b3JhZ2VtZWNoYW5pc20ifQ.b7Q7NXHGRA8MjB_Ugl8Tv4JxhiU28TbcoNb04FTTMiY/br/77057565556-l)
The 2023 Annual Report will shortly be available on the Company's website at
www.jpmemergingmarkets.co.uk (http://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.
Stay Informed
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and views, as well as performance updates, you can sign up and 'keep in the
know', by opting in here: https://tinyurl.com/JMG-Sign-Up
(https://tinyurl.com/JMG-Sign-Up)
JPMORGAN FUNDS LIMITED
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