JPMorgan Emerg Mkts - Final Results to 30th June 2024
26/09/2024 07:00
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RNS Number : 7021F JPMorgan Emerging Mkts Invest Trust 26 September 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EMERGING MARKETS INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 30TH JUNE 2024
Legal Entity Identifier: 5493001VPQDYH1SSSR77
Information disclosed in accordance with the DTR 4.1.3
JPMorgan Emerging Markets Investment Trust plc ('JMG' or the 'Company') has
today announced its annual financial results for the year ending 30th June
2024.
Highlights
· Net Asset Value (NAV) total return of 7.2% compared with 13.2% total
return for the MSCI Emerging Markets Index (in Sterling terms) (the
'Benchmark'). Share price total return of 4.6%.
· For 10 years ended 30th June 2024, NAV total return of 121.1%
compared with 78.1% for the Benchmark and a total return to shareholders of
121.4%.
· Final dividend of 1.30 pence per share declared, taking the total
dividend for the year to 1.90 pence per share; a rise of 15.2% from the
previous year.
· 41.4 million shares repurchased in the year, equivalent to 3.6% of
the issued share capital (ex-treasury), at a cost of£42.8 million, adding
0.4% to performance.
· Material reduction in fees from 1st July 2023 resulting in a blended
management fee of 0.68%, one of the most competitive fee structures in the
Emerging Markets sector.
· Board focused on two priority areas: investment performance, and
measures to enhance demand for the Company's shares.
The Chair of JMG, Aidan Lisser, commented:
"Clearly the Company's performance over the past year is disappointing. To
understand why the portfolio underperformed and to scrutinise actions being
taken by the Manager to enhance investment performance going forward, the
Board conducted a 'deep dive' review in April, in conjunction with the
Manager.
Although short term performance has been disappointing, the Company's
long-term track record is testament to the effectiveness of the Managers'
approach, supported by JPMorgan's experienced and well-resourced Emerging
Markets team. Having undertaken a detailed review, the Board is confident that
the Company has the people, skills and resources to serve the long-term
investor and deliver on its investment objective and purpose.
The Board remains optimistic regarding the long-term case for investment in
emerging markets. Growth will be reinforced by advantageous demographics in
certain geographies, where rising incomes and the burgeoning middle classes
will remain powerful drivers of consumption. Additional opportunities will
develop with the onset of new technologies and the inputs and raw materials
that they require, such as AI-related chips. Most importantly, emerging
markets are home to many high-quality, innovative businesses and increasingly
with share price valuations more attractive than they have been for some time,
leading to a growth in potential investment propositions.
We welcome the Managers' ongoing efforts to identify such companies,
especially as they are likely to be the businesses best placed to survive and
grow, regardless of the macroeconomic or political environment at home, and
further afield."
JMG's Portfolio Managers, Austin Forey and John Citron, commented:
"The last few years have been challenging for emerging markets as a whole,
though it is notable that most have
navigated a reset of global interest rates better than many expected.
We currently find an encouraging number of potential opportunities to
command our attention, in all regions.
Even in China, a number of companies are likely to achieve all-time high
profits this year; and after four years of a bear market, valuations have come
down a very long way. With much higher dividend yields and other forms of
shareholder return slowly being implemented, the need for strong earnings
growth to drive equity returns is reducing."
CHAIR'S STATEMENT
Overview and Summary - Addressing challenges in a difficult year
In the year under review, while your Company achieved a positive return on net
assets of 7.2%, the total return to shareholders was lower, at 4.6%. In
contrast to the prior year, the Company underperformed its Benchmark index,
which returned 13.2% over the period.
Clearly the Company's performance over the past year is disappointing, and has
prompted the Board to focus on two main priorities:
First, to understand why the portfolio underperformed and to scrutinise
actions being taken by the Manager to enhance investment performance going
forward. This work culminated in a 'deep dive' review undertaken by the Board
in April, in conjunction with the Manager. I comment below on the results of
this and further detail is contained in the Portfolio Managers' Report.
The other priority has been to put in place a package of measures to enhance
demand for your Company's shares. This has consisted of:
- realising the first-year benefit of the material reduction in fees
that took place from 1st July 2023. As a result, with a blended management
fee of 0.68%, the Company now has one of the most competitive fee structures
in the Emerging Markets sector;
- enhancing the pace of share buybacks, noting the smoothing effect on
share price volatility, while also delivering an accretive benefit to the net
asset value for continuing shareholders, and signalling the Board's underlying
confidence in the portfolio;
- growing dividend distributions, with dividends in the last three years
rising by 12.1% on an annualised basis;
- utilising new marketing channels, to extend access to commentary and
views from our Portfolio Managers, Austin Forey and John Citron;
- introducing a five-year performance-related conditional tender offer
for up to 25% of the Company's outstanding share capital, commencing 1st July
2024.
The Board believes that taken together, these measures are significant and
notes that for most of the year, the Company's discount has traded in line
with or below its immediate peer group (see further discussion below).
I want to conclude this overview by restating our purpose as a Company - to
achieve superior long-term returns for shareholders, from investment in high
quality emerging market businesses across the market-cap spectrum. While more
recent results are not where we want them to be, the Company's long-term
performance track record remains healthy as demonstrated by the performance
charts on page 10 and 11 of the of the Company's Annual Report and Financial
Statements for the year ended 30th June 2024 ('2024 Annual Report').
Investment performance in-depth review
In conducting our in-depth review, the Board noted that, since the inception
of the Company in 1991, there have been several periods during which
performance over a three-year time frame has been negative. Almost all
followed strong periods of outperformance. Against this backdrop, the Board
and Manager reflected deeply on the fundamentals of the investment philosophy
and reaffirmed its continuing relevance.
Our investment philosophy can be summarised in simple terms - 'to take a
long-term view, to find great businesses, not to overpay for them and to hold
for as long as possible.' The focus is therefore less about 'value' or
'growth' and much more about 'quality'.
This focus on quality and valuation also underlies the Portfolio Managers'
approach with regard to India, which has had the most significant impact on
relative performance against the Benchmark over the year under review.
Although our portfolio has performed respectably in terms of business results,
the Indian equity market as a whole, including a number of smaller companies
that we do not own, has risen considerably faster and is now very highly
valued. To a lesser extent, our Chinese holdings have also been a drag on
relative performance, partly due to the lacklustre economic environment and
persistently weak consumer confidence, which has led to intense competition in
a number of sectors. In retrospect it is clear that we overestimated growth
prospects and the stability of the operating environment. That said, China
remains home to a large number of globally competitive companies and it will
continue to play an important role in the portfolio.
The Portfolio Managers address these and other performance-related issues
candidly and in detail starting on page 17 of the 2024 Annual Report. The
Board also welcomes the Manager's efforts to strengthen its research teams in
China and India where the Company has some of its largest exposures. These
additional on the ground resources should assist the Portfolio Managers in
their quest to identify interesting, well-priced, quality businesses with
favourable long-term growth prospects.
Following the deep dive review, referred to above, and the evaluation of the
investment process and resources, the Board is confident that the Managers
remain well placed to meet the Company's performance objectives going forward.
Meanwhile it is pleasing to note that since the year end, relative performance
has improved and share price returns are ahead of the Benchmark.
Share price rating and proactive discount management
The Board continues to implement a programme of share buybacks to manage the
discount to net asset value. During the financial year, the Company's shares
traded at an average discount to NAV of 10.6%. The discount ranged between
13.1% and 6.8% and ended the financial year at 12.0% (2023: 9.7%). At the time
of writing, the Company's shares are trading on a discount of 12.8%.
This outcome is comparable to the experience of the Company's immediate peers,
and better than the performance of investment trust share prices across
differing asset classes. Indeed, the investment trust sector average discount
at 30th June 2024 stood at 14.5%.
The Board regularly reviews the merits of buying back shares, in line with the
Company's share buyback policy, in order to manage the absolute level and
volatility of the discount. The Board will consider buying back shares if it
is judged to be in the best interests of shareholders to do so. As mentioned
above, given that shares are only bought back at a discount to the prevailing
NAV, share buybacks benefit shareholders, as they increase the NAV per share.
Additionally, buybacks demonstrate the Board's confidence in the portfolio's
prospects over the long term. The Board closely monitors the discount and
market conditions and receives a weekly report from the Company's broker.
In the 12-month review period, the Company repurchased a total of 41,402,855
shares (3.6% of the issued share capital - excluding shares held in Treasury -
on 1st July 2023). These shares were purchased at a weighted average discount
to NAV of 11.4%, producing a modest uplift to the NAV for continuing
shareholders. The cost was £42.8 million and in aggregate the buybacks added
0.4% to performance. Shares repurchased are held in Treasury and such Treasury
shares (and any new ordinary shares) will only be sold or issued at a premium
to NAV. A further 10,575,000 shares have been repurchased since year end.
Continuation vote and Conditional Tender Offer
I am pleased to report that, at the Company's Annual General Meeting ('AGM')
held in November 2023, 99.97% of the shares voted at that meeting, voted in
favour of the Company's continuation as an investment trust for a further
three-year period. My fellow Board members and I thank shareholders for their
ongoing support.
As previously reported, the Board remains focused on ensuring high standards
of governance and operating in the interests of shareholders. It has noted the
increased incidence of tenders and other forms of redemption undertaken by
investment company peers to support their share prices and thereby assist with
discount management. Therefore, earlier this year, the Board decided that it
was an appropriate time to introduce a five-year performance-related
conditional tender offer. This will potentially allow shareholders to redeem a
portion of their shares at close to NAV, subject to the performance of the
Company over that period.
Under the mechanism, a tender offer will be made to shareholders for up to 25%
of the Company's outstanding share capital, at a price equal to the then
prevailing NAV less 2% if, over the period from 1st July 2024 to 30th June
2029, the Company's NAV total return does not exceed our Benchmark on a
cumulative basis.
If the tender offer is triggered, it will be subject to shareholder approval
at the relevant time and will also be conditional on shareholders approving
the Company's continuation votes at the respective AGMs in 2026 and 2029, and
would be held as soon as practicable following the conclusion of the 2029 AGM.
The introduction of the tender offer will not change the Board's current
approach to discount management which is outlined above. Nor will it affect
the Portfolio Managers' clear and consistent investment philosophy and
process.
Growing revenue supports dividend increase
The Company's primary focus is to generate a total return for shareholders, in
line with its investment objective, rather than targeting a particular level
of income. For any individual year, dividends received in sterling terms can
fluctuate according to the underlying earnings of the portfolio, as well as
changes in its composition, and, of course, currency movements. This means
that the level of dividends may vary from year to year. Net revenue after
taxation for the 12 months to 30th June 2024 was £24.0 million (2023:
£22.6 million) and earnings per share were 2.12 pence (2023: 1.94 pence).
The increase in revenue was principally due to higher dividend receipts from
the portfolio's investments, including some special dividends.
The Board is pleased to be in a position, again this year, to increase the
total dividend for the year. It is proposing a final dividend of 1.30 pence
per share, which, when added to the interim dividend of 0.60 pence paid in
April 2024, amounts to a total dividend of 1.90 pence per share for the full
year. This represents a 15.2 % increase on the total dividend of 1.65 pence
paid in respect of the 2023 financial year and will be fully 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
15th November 2024 to shareholders on the register at the close of business
on 11th October 2024.
Board Governance
The Board reviews its composition and succession plans on a regular basis,
taking into account the need to refresh membership and maintain diversity,
while also ensuring continuity of Board experience.
Andrew Page will retire from the Board at the conclusion of the 2024 AGM,
having served as a Director since 2015. Andrew is currently the Senior
Independent Director ('SID') and chairs the Remuneration Committee. He will be
succeeded in both roles by Helena Coles upon his retirement. On behalf of the
Board and shareholders, I would like to thank Andrew for his significant
contribution to the Company during his tenure, both as an outstanding SID and
for his wide-ranging expertise. We wish him all the best for the future and
congratulate Helena on her appointment.
The Board constructs detailed succession plans to ensure it retains an
appropriate balance of skills, experience and knowledge. With this in mind,
the Board, led by the Nomination Committee, has already commenced a formal
recruitment process for a new Non-executive Director. We expect to announce a
new appointment by the end of 2024.
The Board recognises the value and importance of diversity in the boardroom
and is pleased to report that the Company meets the FCA Listing Rules targets
in respect of diversity and inclusion. We intend to continue meeting these
targets as future refreshment takes place. Further details are provided on
page 38 of the 2024 Annual Report.
The annual re-election for all Directors is supported by the Board, as
recommended by the Association of Investment Companies Code of Corporate
Governance, and therefore all Directors, except Andrew Page, will stand for
re-election at the forthcoming AGM.
During the year, the Nomination Committee conducted a detailed formal
evaluation of Board and Chair performance, facilitated by Lintstock, an
independent firm. I am pleased to report that in the key findings, they noted
improvements in a number of areas, whilst recognising the need to maintain a
strong focus on investment performance. Further details of the evaluation are
discussed on pages 59 and 60 of the 2024 Annual Report. As mentioned above,
the Board, through its Management Engagement Committee, also undertook a
formal evaluation of Manager performance. This review is covered on page 60 of
the 2024 Annual Report.
Promoting JMG and engaging with shareholders
The Board continues to focus on activities to engage existing shareholders and
attract new investor interest, including among individual investors. You may
have seen our online advertising campaigns which are a part of this programme.
The Company also was featured in several articles in mainstream and specialist
media throughout the year, including various video interviews and podcasts to
mark Austin's 30-year anniversary as manager of the Company's portfolio.
Recently the Board was delighted to see the company receive the AJ Bell
Investment Awards Winner 2024 in the category of 'Emerging Markets Equity
Active'.
In addition, the Company undertakes an active investor relations and marketing
programme aimed at wealth managers, institutions and other professional
investors. If at any time shareholders wish to communicate with the Board
directly, you can do so by contacting the Company Secretary at
invtrusts.cosec@jpmorgan.com
You can find useful information on the Company's website
www.jpmemergingmarkets.co.uk, including videos and sponsored research, and I
encourage both existing and potential shareholders to sign up to receive
quarterly email updates providing regular news and views, as well as the
latest performance information. Subscribe via the website by visiting
https://tinyurl.com/JMG-Sign-Up, or scan the QR code on page 15 of the 2024
Annual Report.
Annual General Meeting
The Company's 33rd AGM will be held at 60 Victoria Embankment, London EC4Y 0JP
on 7th November 2024 at 2.30 p.m.
Portfolio Managers Austin Forey and John Citron will give a presentation to
shareholders on the Company's recent performance, portfolio changes and their
views on the outlook for emerging markets. The meeting will be followed by
afternoon tea, which will provide shareholders with an opportunity to meet the
Directors and the Portfolio Managers. Shareholders wishing to follow the AGM
proceedings remotely will be able to view them live and ask questions (but not
vote) through conferencing software. Further details about the AGM are
provided on page 111 of the 2024 Annual Report.
Outlook - Investment proposition looks robust
In the short term there are some interesting potential tailwinds, given that
historically a lower interest rate environment in the US and a weaker dollar,
has heralded a favourable investment environment for emerging markets. In
addition the appeal of allocating towards emerging markets and away from the
US may be growing, given the more attractive macro fiscal context, future
earnings growth prospects and relative valuations.
Meanwhile the Board also remains optimistic regarding the long-term case for
investment in emerging markets. Growth will be reinforced by advantageous
demographics in certain geographies, where rising incomes and the burgeoning
middle classes remain powerful drivers of consumption. Additional
opportunities will develop with the onset of new technologies and the inputs
and raw materials that they require, such as AI-related chips. Most
importantly, emerging markets are home to many high-quality, innovative
businesses and increasingly with share price valuations more attractive than
they have been for some time. In turn this has led to a growth in potential
investment propositions, as Austin has remarked recently 'there are more ideas
on the slate than for a long time'.
We welcome the Managers' ongoing efforts to identify such companies,
especially as they are likely to be the businesses best placed to survive and
grow, regardless of the macroeconomic or political environment at home, and
further afield. Whilst the Board will continue to scrutinise performance
closely, we also acknowledge the Managers' willingness to explain recent
performance and to candidly review lessons learnt. Although short term
performance has been disappointing, the Company's long-term track record is
testament to the effectiveness of the Managers' approach, supported by
JPMorgan's experienced and well-resourced Emerging Markets team. The Board
therefore looks forward with confidence that the Company has the people,
skills and resources to serve the long-term investor and deliver on its
investment objective and purpose.
We would like to thank shareholders for their ongoing support.
Aidan Lisser
Chair
25th September 2024
PORTFOLIO MANAGERS' REPORT
Objectives and outcomes
Purpose and Approach
The words we used last year to summarise both our purpose and approach in
managing your Company's investment portfolio can be repeated verbatim this
year, as both remain unchanged. The primary purpose of your company is 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 widest 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, which also contains
examples of how we analyse and engage with investee companies with regards to
sustainability.
Investment results
After several years of challenging conditions, emerging market equities have
had a better year in the 12 months to June 2024; the total return from our
Benchmark index was +13.2% in sterling terms. The returns achieved by the
Company's portfolio, however, fell short of this number; the total return on
net asset value was +7.2%, while the share price return, at +4.6%, was lower
because the discount to net asset value widened slightly during the period. As
Portfolio Managers, we are very conscious that this is the second time in the
last three financial years that we have failed to keep pace with the index,
and also that this is the worst relative return we have reported in more than
20 years. Below we set out some of the reasons for this result, fully aware
that in periods of underperformance we risk appearing to offer excuses; we
hope that shareholders will understand that our commentary is offered entirely
in a spirit of explanation; as stewards of your assets, we have a duty not
just to present our results, but to explain them.
Before turning to the last year in more detail, however, we should perhaps set
these last 12 months in a longer-term context. As mentioned in the Chair's
Statement the board requested a 'deep dive' review of investment performance
over the last five years. As managers, we welcomed both this enhanced
scrutiny, and the choice of a longer time period in which to frame the
exercise. While we would like to beat the index in every year and in every
quarter, we know that we will not achieve this; like all investors, we will
experience periods of underperformance. In fact in the last 30 years,
portfolio returns have been behind the index in 10 financial years; in
20 years they have been ahead. While both John and I are jointly accountable
for your Company's recent results, responsibility for those earlier years of
lagging performance is mine alone. This simple balance of good and bad years
is not the whole story though, since the extent of underperformance and
outperformance can be different. In years of underperformance, the relative
shortfalls against the Benchmark averaged 4.4%; in years of investment
outperformance the average excess return was 7.4%. The resultant value added
before costs (the 'Manager contribution' in the table below) was 2.9%
annualised over the entire 30-year period. We cite this simply because it is
the cleanest measure of the effects of our investment decisions, before other
factors including fees, dilution and so on. It is worth noting that despite
the annual fluctuations in investment results, performance appears more
consistent when viewed over the longer term; the equivalent number for the
last 20 years is 3.7% per annum, for the last 10 years it is 3.2% per annum.
It is of course for others - the Board and you as shareholders - to judge
whether that has been a satisfactory outcome, not for us; as Portfolio
Managers we are committed to delivering the best results we can and continue
to work on your behalf to that end.
Performance Attribution - Contributions to Total Returns
Contributions to total returns as at 30th June 2024
12 months to
30th June 2024
% %
Benchmark Total return 13.2
Asset allocation 1.0
Stock selection -7.5
Currency effect 1.1
Gearing/Cash 0.0
Manager contribution -5.4
Portfolio total return 7.8
Management fees and other expenses -0.8
Share repurchases 0.4
Return on net assetsAPM 7.2
Return to shareholdersAPM 4.6
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 108 to 110 of the 2024 Annual Report.
The year and the portfolio
The past year
It has been a busy year in emerging equity markets, including a political
cycle which by the end of 2024 will have seen more than a quarter of the
world's population engaged in a democratic process, with elections already
conducted in South Africa, Mexico, Indonesia, South Korea and India, not to
mention the UK and France, with the USA to follow before the end of the year.
By and large emerging economies have navigated these political transitions
without significant financial or market stress, while also showing some
success in controlling inflation.
Equity market returns, however, have varied, as have the underlying causes. We
can pick out three areas in particular that have driven overall returns for
the asset class, as well as the results achieved by your portfolio. The first
is technology; the second is India; and the third is China. India and China in
particular require comment since they have been the main causes of the
portfolio's underperformance during the last 12 months.
Technology
As followers of the American market will know, this has been a remarkable year
for technology hardware as growing investments in artificial intelligence
('AI') have led to a surge in demand. If Nvidia is the company that has made
the most headlines, the supply chain that enables Nvidia lies predominantly in
North Asia, and technology stocks in Korea and Taiwan have also seen some
strong increases in value, reflecting growth in underlying revenues. These
have by no means been uniform, however; if we contrast the fortunes of the two
leading technology manufacturers in the region (both owned in the portfolio),
Taiwan Semiconductor Manufacturing ('TSMC') and Samsung Electronics, we see
very different outcomes: Samsung shares returned 10% in sterling over the
course of the last financial year; TSMC returned 76%. TSMC's revenues in the
latest quarter to June 2024 were 40% higher than a year earlier, which is a
remarkable rate of growth for a company of such scale, and reflects the
company's position as an indispensable part of the value chain for advanced
semiconductor production. Samsung is still growing too, but at a lower pace,
and currently with lower returns on capital; memory chip manufacturing is
still coming out of a recent cycle, and Samsung's heavy investment in new
business areas is also diluting its returns at present.
Given that each of these companies is by far the largest component of its
local equity market, it is not surprising that Taiwan has been an essential
market to own in the last 12 months, up over 40% and comfortably beating most
others. Our investments in Taiwan, which are dominated by electronic
manufacturers including TSMC, produced similar outcomes, also appreciating by
just over 40%.
In the case of Korea a separate impulse has also driven some domestic stocks
to some of their best returns for many years, as investors hoped that measures
taken to boost shareholder value in Japan (unbundling of cross-holdings,
increasing dividends, paying out idle cash and so on) might be repeated in
Korea. At present this focus on improved shareholder returns is more of an
ambition than a fact, which partly explains why the overall Korean market
slightly under-performed the broader emerging market index. But the key
conclusion one reaches by looking at both countries is that technology
hardware remains a sector in which emerging markets contain world-leading
companies, especially in the semiconductor manufacturing chain. When equity
valuations have risen steeply we have trimmed the portfolio's exposure,
including to TSMC, mindful that these companies operate in an intrinsically
cyclical industry; but throughout the last year technology has remained a
large and important part of your company's investments, and one which has
contributed strongly to returns.
India
The loss of an outright majority for the Modi government in this year's June
election failed to slow the long boom in Indian equities that has seen the
market rise at 25% per annum in sterling since the low mark during the
pandemic in March 2020. Can anything stop the upwards march of Indian
equities? India's economy continues to grow robustly, perhaps even above
trend, fuelled in particular by an upturn in capital investment in everything
from electricity generation to airports, while the equity market is being
helped on its way by strong domestic buying, especially from a growing number
of retail investors.
There are many reasons to be positive about the fundamental prospects for
Indian companies: India has an economic system in which corporate skill is
rewarded by the market and translated into value creation for shareholders;
and it has an economy which is growing faster than any other major country.
These two conditions will probably continue to apply for a long time. When you
add to that a large number of good management teams focused on shareholder
value, and a deep equity market with many investable companies, it is easy to
understand why your company's portfolio has been overweight in India for as
long as we can remember.
Our largest areas of investment have been IT services, where India has
produced large world-class companies, and financial services, especially
private sector banks. The IT services companies are export businesses selling
their services to companies around the world, and therefore are not sensitive
to the domestic economy of India, but to cycles in global corporate
expenditure. While their business results have been respectable, their shares
have recently failed to keep pace with an exuberant domestic market. Meanwhile
our banks' investments, have also performed disappointingly in spite of
continuing to grow assets and profits.
To give a bit more detail, our four largest investments in India have seen
reasonable operating performances: in sterling terms, our two large IT
services investments, Infosys and Tata Consultancy, both grew their profits in
spite of a well-understood industry cycle, and their shares both returned
around 20% in sterling over the year to June. But this was not enough to match
the overall Indian market, which rose by a remarkable 35%. Meanwhile the share
prices of our banks holdings, HDFC Bank and Kotak Mahendra Bank, declined
slightly by 1% and 3% respectively, even though their earnings per share over
their latest financial year grew by 9% and 22% respectively. As a result, the
valuations of the two banks are now as low as they have been in more than a
decade.
This is in marked contrast to the market as a whole. If one wanted a negative
to set against the obvious positives for India, it is simply valuations. The
overall market is priced at the highest valuation it has reached in two
decades, while smaller companies are now at twice their long-term average
valuation multiples. Experience tells us that when valuations are high, future
returns are very likely to be lower than before. Even if corporate earnings
continue to grow, which they probably will, valuations cannot rise forever,
and rising valuations have been a significant driver of overall returns in
India in recent years. A benign outcome would see companies gradually grow
into their current valuations, which would imply modest returns for share
prices, below underlying earnings growth. We have seen this pattern already
for several companies in the last few years in India, and one might expect it
to be repeated more widely in the market in the years ahead.
Why do we still retain a large allocation to India? For two simple reasons.
The first is that some of our positions, as explained above, have become
cheaper while the market has become more expensive; we should feel more
enthusiastic about these investments, not less, even if they have been a drag
on portfolio returns in the last year. The second is that in a deep and
diverse market with thousands of listed companies, we have still been able to
find companies we like at valuations that make sense to us given the
opportunity ahead of them. An example at the smaller end of the market is Praj
Industries, an engineering company with a strong position in biofuels
production, whose profits have been expanding at over 20% a year. We were able
to complement our core research by visiting the Praj Industries' headquarters
in Pune together with your Company's Board earlier this year, and our
conversation with the founder led directly to the stock's addition to your
portfolio. Perhaps more than in any other market, the breadth of opportunity
in India should offer investment possibilities for us, so even though we have
made some reductions in specific Indian names in response to ever-higher
valuations, we have been able to find new and interesting companies to
partially replace them. Our overweight to India has come down, but
nevertheless continues to be one of the larger investment allocations in your
portfolio.
China
China requires a separate comment, as both the single biggest market (still)
in our investment universe, and as one of the larger contributors to the
portfolio's underperformance during the last year.
What has happened in China? The once rapid levels of economic growth have
slowed dramatically; consumer confidence has slumped as a result of a serious
downturn in the property sector; and the government's response seems stuck in
the same supply-side groove as before, looking to boost investment in
manufacturing rather than act to improve consumer demand. It is telling that
in the latest credit data, loans to manufacturers continue to grow at over
20%; yet overcapacity already plagues many industries and is exerting notable
deflationary pressure on the economy. More investment is going to make that
problem worse not better.
In this environment corporate profit growth requires an ability to grow market
share inside or outside China; some companies have been able to achieve this,
but many are finding growth a challenge. Life is particularly tough in the
consumer sector, where consumers are looking for value and low prices, and
even the best managed businesses have to work very hard to move forwards; we
have reduced some of our exposure to consumer stocks in China during the year,
but it has still been a significant drag on performance; it is clear with
hindsight that we underestimated just how severe the slowdown in consumption
would be, and how unrealistic corporate and market expectations would prove.
If there is a silver lining to this macroeconomic cloud, it is that as growth
slows, companies across the Chinese market are looking for ways to return more
of their profits to shareholders, through a combination of higher dividends
and buying back shares to reduce the share count (and hence boost earnings and
dividends per share). The better companies, including businesses owned in the
portfolio like Tencent, NetEase or Midea, have the ability and intention to
return as much as 5-7% of their market value annually via dividends and
buybacks, which gives a base level of return that could be enhanced by growth
as well. So in a mirror image of India, valuations are the positive in China,
while the operating outlook remains challenging. Our response is to look for
companies with demonstrable competitive advantages which should be able to
grow in spite of the broader economic headwinds. Some Chinese companies are
highly competitive at a global level. Midea, mentioned above, is the largest
producer of domestic appliances in the world; China also boasts a very
competitive manufacturing sector, including the world's leading producer of
batteries for electric vehicles (CATL), as well as the biggest producer of
electric vehicles (BYD), whose volumes now comfortably surpass those of Tesla.
Subject to valuations, we would like to have more focus in the portfolio in
China's competitive export sector, but we also have to take into account the
geopolitical risks that exporters face. Some will be shut out of the most
lucrative developed markets, especially the US, by tariffs or even sanctions;
navigating that minefield is a tricky task for investors, and one which
suggests that we should be cautious in terms of the valuations we are prepared
to pay.
Portfolio changes and new opportunities
A high-level view of the changes we made to the portfolio during the year is
shown in the table of purchases and sales on page 26 of the 2024 Annual
Report. Broadly speaking, we took money out of Asia, especially India, China
and Taiwan, and invested more in Latin America and Europe. The motivations
behind these changes varied, however. Our reductions in India were largely
driven simply by ever-higher valuations, while the sales we made in China
stemmed from a fundamental change of view about companies' prospects in a much
lower-growth economic environment. In a broad sense, we sought to preserve the
portfolio's characteristics, including superior underlying earnings growth,
while at the same time reducing its aggregate valuation.
Among the new stocks added to this end were OTP, a Hungarian bank which
operates across Eastern Europe, and Banco Bilbao, a company which, in spite of
being headquartered and listed in Spain, derives most of its profits from
emerging markets, notably from Mexico, where it owns the country's leading
bank, and also from Turkey. Both these companies were trading at around book
value, while earning returns on equity well into double digits, enabling them
to pay healthy dividends while still accumulating capital to support growth.
Notwithstanding some changes to individual stocks, the overall profile of the
portfolio has remained broadly consistent, with a large allocation to India, a
lower exposure to China than the Benchmark index, and a tilt towards Latin
America, where interest rates remain high, but therefore have considerable
scope to fall, especially if US interest rates decline. On a sector basis,
technology, consumer and financial services are the largest exposures.
As the Chair has noted in his statement, we currently find an encouraging
number of potential opportunities to command our attention, in all regions.
Even in China, a number of companies are likely to achieve all-time high
profits this year; and after four years of a bear market, valuations have come
down a very long way. With much higher dividend yields and other forms of
shareholder return slowly being implemented, the need for strong earnings
growth to drive equity returns is reducing. Corporate quality remains
frustratingly uneven in China, but entrepreneurial drive is not in short
supply. We are selectively interested in a number of companies there,
especially those with demonstrable industry leadership and the scope for
further growth in market share both at home and abroad. Meanwhile our expanded
research efforts in India continue to yield interesting names; Praj
Industries, mentioned earlier, was an example from this past year, but there
are more that we are working on. Elsewhere, there are various possibilities
that merit investigation, whether it is the potential for greater shareholder
returns from Korean companies, or purely individual stock stories in Latin
America and Emerging Europe. So overall we remain constructive about the
opportunities we see ahead.
What next?
The last few years have been challenging ones for emerging markets as a whole,
though it is notable that most have navigated a reset of global interest rates
better than many might have expected. As discussed in last year's report as
well, China has been the biggest drag on the overall asset class, but the
issues the Chinese economy faces are predominantly internal ones, and any
solutions will have to be produced domestically. In some other countries,
however, the outlook is improving; interest rates should come down and
economic growth accelerate. In a very diverse set of geographies, it is always
difficult to make general observations, but the good news is that there are
always plenty of places to look for good investments, and for us this must
always mean a compelling corporate opportunity. Most people would not
associate Latin America with export manufacturing or software, but our
investments in Globant, an Argentine IT services firm, and WEG, a Brazilian
producer of electric motors, have been notable contributors to the Company's
results in the last few years. What do these companies have in common? A clear
focus on an area of expertise, an ability to differentiate their customer
propositions, and crucially, a management team which converts this focus into
a clear understanding of how to create value for customers, and hence for
shareholders. Businesses that can do this will produce good economics, have
long duration, and with good governance, will translate these characteristics
into shareholder value for their owners.
These two companies, WEG and Globant, also serve as a good illustration of
what we are trying to achieve as investors: to identify and own (at the right
price) strong businesses with a long runway of opportunity ahead of them. If
we can keep finding such opportunities, we can hope to continue adding value
for the company's shareholders in the future, as in the past.
Austin Forey
John Citron
Portfolio
Managers
25th September 2024
PRINCIPAL AND EMERGING RISKS
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 and during the year an Audit
Committee meeting was dedicated to reviewing risk and included presentations
from JPMAM personnel and external speakers. This enabled a more in-depth
review and discussion of a number of risks. These risks fall broadly into the
following categories:
Principal risk Description Mitigating activities Movement from prior year
Investment Underperformance Performance of the Company's investment portfolio is fundamental to the The Board manages these risks by diversification of investments and through The risk remains high.
success of the company. Prolonged and substantial underperformance of emerging its investment restrictions and guidelines, which are monitored and reported
markets as an asset class or of the Company resulting from various risks, on by the Manager. The Manager provides the Directors with timely and accurate Whilst emerging markets equities performance improved, in the year, the
including restrictions on the free movement of capital, sanctions or management information, including performance data and attribution analyses, Company underperformed the Benchmark. Further discussion on this is included
restrictions imposed by the UK or other governments on overseas investments, revenue estimates, liquidity reports and shareholder analyses. in both the Chair's Statement and Portfolio Managers' Report.
exchange controls, taxation issues, or geopolitical tensions causing
disruptions. As discussed in the Chair Statement, this year the Board has undertaken a
'deep dive' exercise to understand performance over the last five years and
scrutinise actions being taken.
Geopolitical and 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.
shown greater volatility and may be subject to certain political, geopolitical in the assessment of investee companies to allow the portfolio to adapt to
Economic and corporate governance risks which are not typically associated with more changing competitive and political landscapes. There is little direct control of risk possible. The Company addresses these
developed markets and economies. Sustained underperformance of emerging
global developments in regular questioning of the Manager and with external
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 expertise and continues to monitor these issues, should they develop.
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 The Board has increasingly turned its attentions to the increased risks from
Manager's independent risk team performs systematic risk analysis, including investing in China specifically - see below.
There is an increasing risk to market stability and investment opportunities country specific risk monitoring, as well as stress testing of the portfolio's
from geo-political conflicts, such as between Russia and Ukraine, South and resilience.
North Korea, China and Taiwan and ongoing conflict in the Middle East.
This year the Board invited an external expert to present their views on
geopolitical and economic issues particularly relevant to the Company.
Investing in China China offers some unique investment opportunities and risks. On one hand, it The Board has access to a range of expert resources and strategists both The risk remains high.
has provided faster growth than many other markets in the last few decades, within JPMAM and externally, who can provide long term insight and guidance on
but in recent years it has been impacted by a decline in trade, a slowdown in geopolitical developments likely to impact investments in China. There is little direct control of risk possible. The Board specifically
consumer spending, a crackdown on the private sector by the Chinese government
discusses the risks associated with investing in China at each Board meeting
and U.S. led trade restrictions, together with growing concerns in relation to Unlike its passive competitors, as an actively managed fund the Portfolio and monitors the position.
China's domestic property market. Managers can adapt the portfolio to a changing regulatory environment and
reduce both regulatory risk from, for example export controls and reputational The Manager regularly provides updates on regulatory and political
Actions taken by the Chinese government or international tensions may lead risk from, for example human rights transgressions. developments as necessary.
investors to reduce or completely withdraw their investments in China.
The Portfolio Managers incorporate global market data, economic insights, and
The introduction of new policies and regulations can result in increased pertinent political analysis in their quarterly reports to the Board.
oversight and restrictions on the free movement of assets, including American
Depositary Receipts (ADRs), Special Purpose Vehicles (SPVs), and A-Shares.
Fluctuations in economic growth or slowdown can significantly impact China,
the broader Asian region, and global economies and stock markets.
Operational and Counterparty Failure Disruption to, or failure of, the Manager's accounting, dealing or payments The information technology controls around the physical security of the The risk remains high.
systems or the custodian's or depositary's records could prevent accurate Manager's data centres, security of its networks and security of its trading
reporting and monitoring of the Company's financial position. applications are tested by independent reporting accountants and reported The Board receives updates from JPMF's information security manager.
every six months against the AAF Standard.
The threat of cyber attack, in all its guises such as hacking, malware,
To date the Manager's cyber security arrangements have proven robust and the
phishing (social engineering), disrupted-denial-of-service attacks, etc., is The Manager has procedures in place to maintain the best practices in the Company has not been impacted by any cyber attacks threatening its operations.
regarded as at least as important as more traditional physical threats to fight against cybercrime. The Manager ensures all third party providers have
reputation, business continuity and security. The Investment Manager has appropriate cyber protection in place.
received and reviewed the cyber security policies for its key third party
service providers and JPMF has assured the Directors that the Company benefits
directly or indirectly from all elements of J.P. Morgan Chase & Co's
comprehensive Cyber Security programme.
Strategy and Discount Management The Company's current business or investment strategy may become outdated or The Board considers at regular intervals if the rationale for the Company This is a broader Principal Risk this year incorporating both Discount
no longer appropriate. Although it may outperform the Benchmark, increasing remains appropriate along with the position of competitors and feedback from Management and Strategy. The risk is high.
competition and the promotion of other competing JPMorgan or third-party major shareholders.
products, such as OEICs and ETFs, could lead to diminished investor demand for
The Board can, with shareholder approval, look to amend the investment policy
the Company's shares. The Board regularly reviews and monitors the Company's objective and and objectives of the Company to avoid exposure to, or mitigate, these risks.
investment policy and strategy, the investment portfolio and its performance.
Poor implementation of the investment strategy, for example as to thematic
The Board continually monitors, with assistance from the Manager and its
exposure, sector allocation, stock selection, undue concentration of holdings, The Board monitors the implementation and results of the investment process brokers, the level of discount/premium to net asset value at which the shares
factor risk exposure or the degree of total portfolio risk, may lead to with the Investment Manager, whose representatives attend all Board meetings, trade and movements in the share register. During the year, the Company
failure to outperform the Company's Benchmark index and peer companies, and reviews data which show statistical measures of the Company's risk continued to conduct share buybacks at an enhanced pace versus the prior year.
resulting in the Company's shares trading on a wider discount. profile. The Board holds a separate meeting devoted to strategy each year.
Investment trust shares often trade at discounts to their underlying NAVs; The Board monitors the Company's premium/discount at which the share price
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 reviews sector relative performance and sales and marketing activity
(considered the primary drivers of the relative discount level). The Company
also has authority to buy back its existing shares to enhance the NAV per
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.
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 emerging and western economies
Since the end of the Second World War, the world has enjoyed a technology and
economic harmony with the US at its core. With the development of emerging
nations as political, cultural, technological and economic rivals, 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 and
emerging economies. The Board notes the increasing use of tariffs and domestic
regulations that make global trade more complex.
Economic Contraction
A long-term reduction in returns available from investments as a result of
recession, stagnation, inflation or other 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.
Pandemic
A new infectious disease could spread across a large region and/or globally
causing human suffering and severe economic consequences.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report on
page 55 of the 2024 Annual Report. The management fee payable to the Manager
for the year was £8,866,000 (2023: £10,272,000) of which £nil (2023: £nil)
was outstanding at the year end.
Safe custody fees amounting to £484,000 (2023: £497,000) were payable during
the year to JPMorgan Chase N.A. of which £160,000 (2023: £212,000) 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
(2023: £nil) 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 JPMF. At the year end this was valued at £4,844,000 (2023:
£24,129,000). Interest amounting to £1,078,000 (2023: £2,296,000) was
received during the year of which £nil (2023: £nil) was outstanding at the
year end.
Handling charges on dealing transactions amounting to £36,000 (2023:
£25,000) were payable to JPMorgan Chase N.A. during the year of which
£16,000 (2023: £6,000) was outstanding at the year end.
At the year end, total cash of £679,000 (2023: £737,000) was held with
JPMorgan Chase. A net amount of interest of £30,002 (2023: £3,497) was
receivable by the Company during the year from JPMorgan Chase of which £nil
(2023: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on
pages 66 to 68 of the 2024 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 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
25th September 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30th June
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value
through profit or loss - 72,311 72,311 - (10,303) (10,303)
Foreign currency gains/(loss) - 1,316 1,316 - (2,310) (2,310)
Income from investments 29,861 95 29,956 28,130 - 28,130
Interest receivable 1,108 - 1,108 2,299 - 2,299
Gross return/(loss) 30,969 73,722 104,691 30,429 (12,613) 17,816
Management fee (2,660) (6,206) (8,866) (3,082) (7,190) (10,272)
Other administrative expenses (1,563) - (1,563) (1,456) - (1,456)
Net return/(loss) before finance costs and taxation 26,746 67,516 94,262 25,891 (19,803) 6,088
Finance costs (1) - (1) - - -
Net return/(loss) before taxation 26,745 67,516 94,261 25,891 (19,803) 6,088
Taxation (2,708) (6,586) (9,294) (3,294) (4,708) (8,002)
Net return/(loss) after taxation 24,037 60,930 84,967 22,597 (24,511) (1,914)
Return/(loss) per share 2.12p 5.37p 7.49p 1.94p (2.11)p (0.17)p
A final dividend of 1.30p (2023: 1.07p) per Ordinary share has been proposed
in respect of the year ended 30th June 2024, totalling £14.4 million (2023:
£12.3 million). Further details are given in note 9 on page 88 of the 2024
Annual Report.
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.
The notes on pages 83 to 99 of the 2024 Annual Report form an integral part of
these financial statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 30th June 2024
Called up Capital
share Share redemption Other Capital Revenue
capital premium reserve reserves reserves reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
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 2) - - - - - (16,417) (16,417)
At 30th June 2023 33,091 173,631 1,665 69,939 1,027,276 24,220 1,329,822
Repurchase of shares into Treasury - - - - (43,014) - (43,014)
Proceeds from share forfeiture(2) - - - - 1,119 - 1,119
Net return - - - - 60,930 24,037 84,967
Dividends paid in the year (note 2) - - - - - (19,024) (19,024)
Forfeiture of unclaimed dividends(2) (note 2) - - - - - 159 159
At 30th June 2024 33,091 173,631 1,665 69,939 1,046,311 29,392 1,354,029
(1) This reserve forms the distributable reserve of the Company and is
used to fund distributions to investors.
(2) During the period, the Company undertook an Asset Reunification
Program to reunite inactive shareholders with their shares and unclaimed
dividends. In accordance with the Company's Articles of Association, the
Company exercised its right to forfeit the shares belonging to untraced
shareholders for a period of 12 years or more. These shares were sold in the
open market and the net proceeds returned to the Company. In addition, any
unclaimed dividend older than 12 years from the date of payment of such
dividend were forfeited and returned to the Company.
STATEMENT OF FINANCIAL POSITION
At 30th June
2024 2023
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 1,356,705 1,311,009
Current assets
Debtors 5,337 5,074
Cash and cash equivalents 5,523 24,866
10,860 29,940
Current liabilities
Creditors: amounts falling due within one year (1,004) (999)
Net current assets 9,856 28,941
Total assets less current liabilities 1,366,561 1,339,950
Provision for capital gains tax (12,532) (10,128)
Net assets 1,354,029 1,329,822
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 1,046,311 1,027,276
Revenue reserve 29,392 24,220
Total shareholders' funds 1,354,029 1,329,822
Net asset value per share 122.1p 115.6p
STATEMENT OF CASH FLOWS
For the year ended 30th June
2024 2023
£'000 £'000
Cash flows from operating activities
Net return before taxation 94,261 6,088
Adjustment for:
Net (gains)/losses on investments held at fair value through profit or (72,311) 10,303
loss
Net foreign currency (gains)/losses (1,316) 2,310
Dividend income (29,878) (28,130)
Interest income (1,108) (2,299)
Scrip dividends received as income (78) -
Realised (loss)/gain on foreign exchange transactions (180) 123
Realised exchange gains on JPMorgan USD Liquidity Fund 1,055 2,795
Decrease/(increase) in accrued income and other debtors 22 (15)
(Decrease)/increase in accrued expenses (218) 289
Net cash outflow from operating activities before dividends, interest and (9,751) (8,536)
taxation
Dividends received 26,535 23,963
Interest received 1,108 2,299
Overseas tax recovered 351 16
Capital gains tax paid (4,182) -
Net cash inflow from operating activities 14,061 17,742
Purchases of investments (161,350) (64,572)
Sales of investments 188,054 56,540
Net cash inflow/(outflow) from investing activities 26,704 (8,032)
Dividends paid (19,024) (16,417)
Repurchase of shares into Treasury (42,802) (20,899)
Proceeds from share forfeiture 1,119 -
Forfeiture of unclaimed dividends 159 -
Interest paid (1) -
Net cash outflow from financing activities (60,549) (37,316)
Decrease in cash and cash equivalents (19,784) (27,606)
Cash and cash equivalents at start of year 24,866 57,700
Unrealised loss on foreign currency cash and cash equivalents 441 (5,228)
Cash and cash equivalents at end of year 5,523 24,866
Cash and cash equivalents consist of:
Cash and short-term deposits 679 737
Cash held in JPMorgan USD Liquidity Fund 4,844 24,129
Total 5,523 24,866
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30th June 2024
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 (see page 36 of the 2024 Annual Report ), risk management policies
(see pages 93 to 98 of the 2024 Annual Report), capital management policies
and procedures (see page 98 of the 2024 Annual Report), 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. 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. Dividends
(a) Dividends paid and proposed
2024 2023
Pence £'000 Pence £'000
Distributions paid
Final dividend in respect of prior year 1.07 12,265 0.83 9,683
Interim dividend 0.60 6,759 0.58 6,734
Total dividends paid in the year 1.67 19,024 1.41 16,417
Forfeiture of unclaimed dividends over
12 years old(1) - (159) - -
Net dividends 1.67 18,865 1.41 16,417
Distributions proposed
Final dividend proposed 1.30 14,420 1.07 12,312
(1) As a result of the Asset Reunification Program to reunite inactive
shareholders with their shares and unclaimed dividends, any unclaimed
dividends older than 12 years from the date of payment of such dividend were
forfeited and returned to the Company.
All final 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 2024 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 2025. The
amount payable will be subject to change based on the number of shares
outstanding on the record date, taking into account any shares repurchased
after the year end.
(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
£24,037,000 (2023: £22,597,000). The revenue reserve after payment of the
final dividend will amount to £14,972,000 (2023: £11,908,000)
2024 2023
Pence £'000 Pence £'000
Interim dividend 0.60 6,759 0.58 6,734
Final dividend proposed 1.30 14,420 1.07 12,312
Total 1.90 21,179 1.65 19,046
3. Return/(loss) per share
2024 2023
£'000 £'000
Revenue return 24,037 22,597
Capital return/(loss) 60,930 (24,511)
Total return/(loss) 84,967 (1,914)
Weighted average number of shares in issue during the year 1,133,870,299 1,162,832,611
Revenue return per share 2.12p 1.94p
Capital return/(loss) per share 5.37p (2.11)p
Total return/(loss) per share 7.49p (0.17)p
4. Net asset value per share
2024 2023
Net assets (£'000) 1,354,029 1,329,822
Number of shares in issue 1,109,226,510 1,150,629,365
Net asset value per share 122.1p 115.6p
5. Status of results announcement
2023 Financial Information
The figures and financial information for 2023 are extracted from the Annual
Report and Accounts for the year ended 30th June 2023 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.
2024 Financial Information
The figures and financial information for 2024 are extracted from the
published Annual Report and Accounts for the year ended 30th June 2024 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.
25th September 2024
For further information:
Company Secretary
JPMorgan Funds Limited
E-mail: invtrusts.cosec@jpmorgan.com
(mailto:invtrusts.cosec@jpmorgan.com)
Tel: 0800 20 40 20 or +44 1268 44 44 70
ENDS
A copy of the 2024 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 2024 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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JPMORGAN FUNDS LIMITED
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