LONDON STOCK EXCHANGE
ANNOUNCEMENT
JPMORGAN GLOBAL EMERGING
MARKETS INCOME TRUST PLC
FINAL RESULTS FOR THE YEAR
ENDED 31ST JULY 2024
Legal Entity
Identifier: 549300OPJXU72JMCYU09
Information disclosed in accordance
with the DTR 4.1.3
JPMorgan Global Emerging Markets
Income Trust plc (the 'Company' or 'JEMI') announces its financial
results for the year ended 31st July 2024.
Highlights:
·
Net asset total return of +6.3% for the financial
year, closely aligning with the Benchmark* total return of
+6.4%. Share price return to shareholders, including
dividends, was +5.4%.
·
The five year NAV total return to 31st July 2024
was +25.3%, ahead of the Benchmark total return of +12.7%. Share
price return to shareholders, including dividends, was
+15.5%.
· The
total dividend for the financial year was 5.4p per share,
representing a yield of 4% based on the share price as at 31 July
2024, and a modest increase from 5.3p in the previous year. The
Company has paid three interim dividends of 1.0p per share and a
fourth interim dividend of 2.4p per share.
· During
the financial year, the Company repurchased 6,799,472 shares into
Treasury, enhancing the NAV per share by approximately 1.1p or
0.8%.
Elisabeth Scott, Chair of the Board,
commented: "The Board sees a host of
reasons to share the Portfolio Managers' excitement about the many
investment opportunities available in Emerging Markets. The
Artificial Intelligence ('AI') revolution is likely to provide
ongoing support for many Emerging Market technology and other
AI-related stocks for the foreseeable future. In the Board's view,
the potential rewards from Emerging Market investment are
significant, especially for those investors willing to take a
long-term view and tolerate a degree of volatility along the way.
We remain confident that the focused and disciplined stock
selection process adopted by the Investment Manager will maintain
the Company's long track record of delivering attractive long-term
returns and dividend income to shareholders."
Omar Negyal and Isaac Thong, Portfolio Managers,
noted: "Like their
counterparts in developed markets, the attention of investors in
Emerging Markets over the past year has been focused on AI and its
potential to disrupt and reshape business practices in many
sectors. Companies will need to increase capital expenditure to
acquire and deploy new AI-driven technology and to stay
competitive. Given our bottom-up approach to building the
portfolio, we remain excited by the many opportunities we see
across Emerging Markets. Our principal focus is the same as it has
been since the inception of the Company: we seek out companies able
to produce attractive returns on equity, generate healthy free cash
flow and pay shareholders reliable dividends."
*the Company's benchmark is the MSCI Emerging Markets Index
with net dividends reinvested (in sterling
terms).
CHAIR'S STATEMENT
Performance
I am pleased to report that the
performance of both Emerging Markets and your Company improved in
the second half of the financial year ended 31st July 2024. After
declining by 5.0% over the first half of the financial year, the
Company's benchmark index, the MSCI Emerging Markets Index with net
dividends reinvested (in sterling terms) (the 'Benchmark'), ended
the year +6.4%, narrowly ahead of the Company's total return
on net assets of +6.3% over the same period. The total return to
shareholders (which includes both the share price return and
dividends) was +5.4%, which reflects a widening of the
discount to net asset value ('NAV') at which the Company's shares
trade, from 9.3% at the end of the previous financial year end, to
10.5% at the end of July 2024.
Excitement about artificial
intelligence ('AI') was one of the main drivers of global equities,
including Emerging Markets, over the past year, and your Company's
returns were supported by the positive performance of a number of
AI-related positions in South Korea and Taiwan. The ongoing
weakness in the Chinese economy was another focus, and the decision
not to own one of the largest Chinese internet retailers (Alibaba)
also enhanced relative returns. The Indian market continued to
strengthen, so the Company's underweight position in this market
detracted from overall performance. This underweight is due in part
to the fact that many Indian companies do not pay dividends and are
therefore excluded from the Portfolio Managers' universe of stocks.
In addition, the Portfolio Managers believe that valuations in the
Indian market are high, so companies that do pay dividends are too
expensive to meet the Investment Manager's valuation criteria. See
the performance attribution table below for details.
The Investment Manager's Report,
which can be found in the full Annual Report, reviews the market
environment and the Company's performance over the reporting period
in more detail and comments on the investment strategy and outlook
for Emerging Markets.
The Company's positive,
near-benchmark return over the past year is certainly welcome.
However, given the volatile nature of Emerging Markets, the
Portfolio Managers adopt a long-term approach, so it is more
meaningful to consider returns over longer time frames. I am
pleased to note that the Company's NAV total return on net assets
over periods of three and five years and beyond is significantly
ahead of the Benchmark - testament to the skill and experience of
the Portfolio Managers, and the breadth and quality of the support
from the Investment Manager's extensive global Emerging Markets
research team. Please see the full Annual Report for the long-term
performance figures.
Revenue and Dividends
The Company's gross revenue for the
year amounted to £21.2 million (2023: £20.8 million), with net
revenue of £16.6 million (2023: £16.9 million). Net revenue return
per ordinary share for the year, calculated on the average number
of shares in issue, was 5.64p (2023: 5.70p).
During the financial year, the Board
paid three interim dividends of 1.0p per share and on
5th September 2024 it declared the payment of a fourth interim
dividend of 2.4p per share, which was paid on 18th October 2024.
This brings the total dividend for the financial year to 5.4p per
share, a modest increase from the previous year (2023: 5.3p
per share).
The Board pays four interim
dividends each year, reflecting the support we have received from
shareholders for a regular and timely income stream. We are seeking
shareholder authority to maintain this dividend payment policy at
the forthcoming Annual General Meeting.
The Board reviews dividend receipts
at each of its meetings, given their importance to the Company. The
Board carefully considers the outlook for dividend receipts with
the Portfolio Managers on a regular basis, including a
sensitivity analysis of the impact of currency movements on revenue
receipts. As shareholders are aware, the Company receives dividends
in the currencies of developing countries and in US dollars but
pays dividends in sterling. It has not been the Company's policy to
hedge currency risk, as this is expensive and, for many currencies,
impracticable. This policy inevitably means that the Company's
asset values, and cash flows, may be adversely affected in any
given period by adverse currency movements (if sterling
strengthens), and flattered by favourable moves (if sterling
weakens) relative to Emerging Market currencies and the US dollar.
Your Board and the Investment Manager are of the view that despite
any such currency fluctuations, Emerging Markets offer attractive
income prospects, as well as the prospect of strong earnings
growth.
Loan Facilities and Gearing
The Board believes that gearing can
be used to enhance long-term shareholder returns. Gearing levels
are discussed with the Portfolio Managers at each Board meeting.
Presently, the Company has a US Dollar 20 million two-year
revolving loan facility with Mizuho Bank Limited ('Mizuho'), which
will be repaid in November 2024. The Company also maintains a US
Dollar 20 million revolving loan facility with ING Bank
('ING'), which is repayable in October 2025, having been renewed
during the reporting period at a competitive market rate plus
Secured Overnight Financing Rate ('SOFR').
In view of the pending maturity of
the Mizuho facility, your Board has been working closely with the
Manager to assess the Company's borrowing options. I am pleased to
report that the Company has negotiated a US Dollar 40 million
revolving credit facility, along with an additional US Dollar 20
million accordion, provided by Industrial and Commercial Bank of
China Limited (London) Plc ('ICBC') for two years, with two
one year extension options. As part of this refinancing, the
Company intends to make an early repayment of the ING facility as
well as repaying the Mizuho facility upon maturity in November
2024.
As at 31st July 2024, portfolio
gearing stood at 6.1% (31st July 2023: 5.7%).
Share Repurchases and Issuance
During the financial year ended 31st
July 2024, the Company's share price traded at an average discount
to NAV of 11.8%. The Board regularly considers the merits of buying
back shares to manage the level and volatility of the discount and
will buy back shares if it is considered to be in the best
interests of shareholders to do so. As shares are only bought back
at a discount to the prevailing NAV, share buybacks benefit
shareholders as they increase the NAV per share of the remaining
outstanding shares.
During the financial year, the
Company bought back 6,799,472 shares into Treasury for a total cost
of £9,033,000 at an average discount of 11.7%. It did not issue any
shares. These purchases were value accretive for shareholders,
increasing the NAV per share by approximately 1.1p, and they
underscore your Board's belief that the shares offer intrinsic
value at current levels.
At the forthcoming Annual General
Meeting, the Board will seek a renewal of shareholder authority to
issue up to a further 10% of the Company's issued share capital and
to buy back its own shares. It is the Board's intention to use the
repurchase and allotment authorities to manage imbalances between
the supply and demand of the Company's shares, thus reducing the
volatility of the discount or premium, in normal market conditions,
and meet demand for the Company's shares as and when they trade at
an appropriate premium to NAV.
At the time of writing, the discount
stands at 13.1%1. The Board will continue to actively
manage the Company's discount in its commitment to seek a stable
discount or premium over the longer-term, in recognition of the
Company's long-term consistent and strong investment performance,
and with the aim of enhancing NAV for shareholders. Between the end
of the financial year and 1st November 2024, the Company has bought
back an additional 2,400,000 shares into Treasury.
1 As at 30th October 2024.
Board Composition
As previously reported, Caroline
Gulliver will be retiring from the Board at the 2024 Annual General
Meeting and Ranjan Ramparia, who joined the Board on 1st March
2024, will take on the role of Chair of the Audit and Risk
Committee. On behalf of the Board, I would like to thank Caroline
for her extensive and important contribution to the Company over
her tenure.
The Board supports the annual
appointment/reappointment for all Directors, as recommended by the
Association of Investment Companies Code of Corporate Governance,
and therefore all Directors will stand for reappointment at the
forthcoming AGM, with the exception of Ranjan Ramparia, who will
stand for election for the first time, as this is the first Annual
General Meeting to be held since her appointment, and Caroline
Gulliver who is retiring from the Board.
Investment Management Fees
During the reporting period, as
previously announced, the Board agreed with the Manager that the
Company's investment management fees should be tiered.
With effect from 1st November 2023,
the investment management fee has been charged on a tiered basis at
an annual rate of 0.75% of the Company's net assets on the first
£500 million and at 0.65% of net assets above that amount. This
compared with the previous arrangement under which the management
fee was charged at an annual rate of 0.75% on net assets. The fee
is calculated and paid monthly.
Annual General Meeting
The Company's Annual General Meeting
('AGM') will be held at 60 Victoria Embankment, London EC4Y 0JP on
Wednesday, 27th November 2024 at 2.00 p.m. Full details of the
format and explanations of the business proposed at the AGM can be
found in the Notice of Meeting in the full Annual
Report.
We are delighted to invite
shareholders to join us in person for the Company's AGM. However,
those Shareholders wishing to follow the AGM proceedings without
attending in person will be able to view them live and ask
questions (but not vote) through conferencing software. Details on
how to register, together with access details, will be available
shortly on the Company's website at www.jpmglobalemergingmarketsincome.co.uk
or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com.
As is best practice, all voting on
the resolutions will be conducted on a poll. Shareholders who are
unable to attend the AGM in person are strongly encouraged to
submit their proxy votes in advance of the meeting, so that they
are registered and recorded at the AGM. Proxy votes can be lodged
in advance of the AGM either by post or electronically: detailed
instructions are included in the Notes to the Notice of Meeting in
the full Annual Report.
Shareholders are encouraged to send
any questions ahead of the AGM to the Board via the Company
Secretary at the email address above. We will endeavour to answer
relevant questions at the meeting or via the Company's website. My
fellow Board members, representatives of the Manager, the Portfolio
Managers, and I, look forward to the opportunity to meet and speak
with shareholders after the formalities of the meeting have been
concluded. We would also welcome comments and questions from
shareholders throughout the year - please use the same contact
details as above.
If there are any changes to the
above AGM arrangements, the Company will update shareholders
through an announcement to the London Stock Exchange and on the
Company's website.
Continuation Vote
In accordance with the Company's
Articles of Association, at the forthcoming AGM an ordinary
resolution will be put to shareholders that the Company continue in
existence as an investment trust for a further three-year
period.
The Board believes that the
long-term outlook for global Emerging Markets is favourable, and
that the Investment Manager has the resources and processes to
deliver good results for shareholders, as evidenced by the
Company's longer-term performance.
Accordingly, the Board believes that
the continuation of the Company is in the best interests of all
shareholders and strongly recommends that shareholders vote in
favour of the resolution.
Stay Informed
The Board believes that it is
important to keep shareholders well informed of developments within
the Company. To this end, the Company delivers email updates with
regular news and views, as well as the latest
performance.
If you have not already signed up to
receive these communications and you wish to do so, you can opt in
via https://tinyurl.com/JEMI-Sign-Up or by
scanning the QR code in the full Annual Report.
Outlook
The Board sees a host of reasons to
share the Portfolio Managers' excitement about the many investment
opportunities available in Emerging Markets. The AI revolution is
likely to provide ongoing support for many Emerging Market
technology and other AI-related stocks for the foreseeable future,
while the increasing focus on raising shareholder returns should
underpin share prices in South Korea and China, and in any other
markets that come to see the merit in returning excess cash to
shareholders. It is worth bearing in mind that while many investors
are disappointed in China's recent performance, it is one of the
world's fastest growing economies and this should translate into
earnings and profits growth and higher dividend payments over the
medium-term, which is expected to be assisted with the recent
stimulus measures announced by the Chinese government. This,
combined with more attractive valuations, is creating attractive
investment opportunities. In the US, the recent start of the
Federal Reserve's ('Fed') rate cutting cycle may provide fresh
impetus to global markets, provided it does not turn out to be too
little, too late to prevent a slowdown in US growth. Lower US
rates will also create leeway for emerging market central banks to
follow the Fed's lead and ease monetary policy, which will boost
growth in their economies.
As ever, there are risks associated
with investing in Emerging Markets, including political
instability, currency fluctuations, and regulatory challenges. In
coming months, the US Presidential election and its ramifications
for Sino/US relations could provide further challenges. However, in
the Board's view, the potential rewards from Emerging Market
investment are significant, especially for those investors willing
to take a long-term view and tolerate a degree of volatility along
the way. We remain confident that the focused and disciplined
stock selection process adopted by the Investment Manager will
maintain the Company's long track record of delivering attractive
long-term returns and dividend income to shareholders.
On behalf of the Board, I would like
to thank you for your ongoing support and commitment to the
Company.
Elisabeth Scott
Chair
1st November 2024
INVESTMENT MANAGER'S
REPORT
Introduction
For the year ended 31st July 2024,
the Company's total return on net assets, including dividends, was
+6.3%. This compares with our Benchmark, with dividends reinvested,
which returned +6.4%. The return on shares, including dividends,
was +5.4%. Over the three-and five-year periods to end July 2024,
the Company made annualised returns of +3.4% and +4.6% respectively
in NAV terms, comfortably ahead of respective Benchmark returns of
-0.1% and +2.4%. As highlighted in the full Annual Report,
cumulative returns for the Company have been positive and higher
than the Benchmark over the long term. The cumulative return on net
assets over 10 years was +87.5% compared to +70.3% for the
Benchmark.
Investment Environment
Like their counterparts in developed
markets, the attention of investors in Emerging Markets over the
past year has been focused on Artificial Intelligence ('AI') and
its potential to disrupt and reshape business practices in many
sectors. Companies will need to increase capital expenditure to
acquire and deploy new AI-driven technology and to stay
competitive. Semiconductor manufacturers and related tech companies
are already benefiting from strong demand, and their resultant
share price gains have been a key driver for all markets. Within
Emerging Markets, this influence has been most important in South
Korea and Taiwan, which are home to many companies with exposure to
the AI boom.
The excitement about AI has spilled
over into other sectors of the market such as energy and materials.
AI-driven tools and their related storage and processing
requirements are energy hungry, and electricity companies and
energy infrastructure suppliers are perceived as major
beneficiaries. So too are the producers of commodities such as
copper, which is essential to the manufacture of semiconductors and
energy transmission systems.
Shareholder returns have been
another key theme in both South Korea and China over the past year.
In South Korea, the government launched a so-called 'Value-Up'
initiative, which aims to encourage corporate managers to enhance
shareholder value via increased dividend payments and share
buybacks. The intention is to replicate the success of similar
efforts by the Tokyo Stock Exchange, which have had a favourable
impact on Japanese share prices.
In China, we saw a brief rally going
into 2024, inspired by short-term government stimulus and
attractive valuations. However, structural issues remain, with
ongoing weakness in the property sector continuing to weigh on
consumer sentiment and hence on domestic demand, though the
government has recently announced stimulus measures which could
help improve this. As growth slows, investors' attention has
shifted to more yield focused names. Additionally, companies,
especially China's internet companies, are distributing more to
shareholders, rather than reinvesting for growth. Geopolitical
tensions between China and the US continue to simmer, creating a
further potential drag on growth, especially via increased US
sanctions and tariffs on Chinese electric vehicles and advanced
tech products.
The other predominant theme in
Emerging Markets over the past year was the ongoing interest in
India. The economy continues to grow at a fast pace, and optimism
in India's longer-term future is mounting amongst both domestic and
international investors. This has resulted in further stock market
gains.
Performance Attribution
for the year ended 31st July
2024
|
%
|
%
|
Contributions to total returns
|
|
|
Benchmark total return
|
|
6.4%
|
Asset allocation
|
-0.8%1
|
|
Stock selection
|
1.3%
|
|
Gearing/cash
|
0.3%
|
|
Investment manager contribution
|
|
0.8%
|
Portfolio total return
|
|
7.2%
|
Management fees and other
expenses
|
-1.0%
|
|
Impact of provision for capital
gains tax
|
-0.2%
|
|
Impact of finance costs
|
-0.5%
|
|
Share buy-backs
|
0.8%
|
|
Other effects
|
|
-0.9%
|
Cum
income net asset value total return
|
|
6.3%
|
Share price total return
|
|
5.4%
|
Source: JPMAM and Morningstar. All
figures are on a total return basis.
1 Based on Country
allocation.
Performance attribution analyses how
the Company achieved its recorded performance relative to its
Benchmark.
Performance Drivers
Top
Five Contributors
|
Top
Five Detractors
|
1. Alibaba (not owned)
|
1. B3 SA Brasil
|
2. Vanguard International
Semiconductor
|
2. Wuliangye
|
3. Shinhan Financial
|
3. Bank Rakyat
|
4. KB Financial
|
4. Kimberly Clark Mexico
|
5. Infosys
|
5. Hon Hai Precision Industry (not
owned)
|
The most significant positive
contributor to performance at the stock level over the past year
was our decision not to own Alibaba, a Chinese internet retailing
behemoth. China's property market slump and the more general
economic slowdown have put pressure on consumers. This has
adversely impacted internet retailers. To add to pressures on
Alibaba, the company is also facing greater competition, as
consumers are increasingly focused on value for money.
Interestingly, as the market has become more pessimistic on the
stock, we have in contrast become more interested, to the extent
that we initiated a new position for the portfolio after the
financial year end. It seems to us that the management team has
recognised its growth issues and is acting in a more rational way
to increase its ability to compete in this new environment (both in
terms of more focus on the key e-commerce business and reducing
emphasis on other non-core activities). In addition, the company
has improved its cash shareholder returns, initiating its inaugural
dividend last year and implementing share buybacks. This increased
shareholder return, combined with a lower valuation than in
previous years, made the stock look more attractive to us and
prompted the new position.
Vanguard International Semiconductor
was a strong contributor to performance. This
company operates semiconductor fabs, following the outsourcing
foundry model where it manufactures chips for other companies who
do not have a manufacturing capability. In the period, the company
announced plans to expand capacity by building a new semiconductor
plant, in a joint venture with NXP Semiconductor
(a US semiconductor company). This was well received by
markets as investors focused on the capacity increase in the long
term which could drive earnings for the company. However, this also
introduced potential downside risks to the nearer term earnings
outlook given the large capex that would be required. Given this
raised questions on the free cash flow profile of the company (and
therefore dividend growth), we trimmed our holding.
Within financials, two South Korean
names, KB Financial and
Shinhan Financial enhanced
returns. This was largely driven by the favourable impact of the
government's 'Value-Up' program, discussed above, which has seen
Korean banks announce measures to increase shareholder returns.
Their stocks have re-rated accordingly.
Infosys, an Indian IT services
company, was another contributor to performance over the past
12 months. Fears that generative AI would be able to replicate
the company's IT outsourcing services weighed on the stock price
during 2022. Infosys's management sought to assuage these fears,
claiming instead that AI will actually create more opportunities,
as has been the case in the last few technological cycles. The
stock has re-rated in recent months as investors' AI-related
concerns finally abated and the company's earnings outlook
improved.
Brazilian stock exchange operator
B3 SA Brasil was the
largest detractor from returns due to weaker than expected trading
volumes on the back of a challenging macro environment. The high
interest rate environment and uncertainty about future interest
rates particularly affected the cash equities business. However,
valuations are now at an attractive level, and it is well
positioned for when the macroeconomic environment improves. We also
like this quality business as it generates strong free cash flow,
has few competitors, and is making successful efforts to diversify
its revenue streams. Additionally, it boasts an attractive dividend
policy.
Within our holdings in consumer
staples, an overweight in Wuliangye, a baijiu (Chinese liquor)
producer, detracted from returns. The company's share price
declined due to concerns that the domestic economic slowdown would
damage future sales. With its strong brand and market position we
continue to see this company as a long term winner in the sector
and retain a position; for the overall portfolio we are continuing
to evaluate how best to position within the China consumer space,
considering the economic headwinds which exist.
Another detractor from performance
at the stock level over the review period was Indonesia's
Bank Rakyat, which suffered
a deterioration in asset quality in its key microfinance division,
with small borrowers incrementally less able to repay loans on
time. We believe this deterioration is cyclical, but market focus
on these near-term headwinds led to weakness in the share price. In
our view the investment thesis remains intact, and we continue to
hold the stock.
Another stock which detracted was
Kimberly Clark Mexico, a
Mexican consumer goods company. As discussed below, the
political situation in Mexico caused weakness for the entire market
which was unhelpful. In addition, the Mexican peso also weakened -
this was incrementally negative for the company's cost profile as
many of its raw materials are priced in US dollars, while it prices
its products in pesos. In a short term time-frame, it is difficult
for the company to reprice its products quickly with negative
consequences for the operating margin. In the long term we are
still confident on the pricing power and cost efficiency gains the
company can generate, and continue to hold our position.
Our decision not to own Hon Hai was relatively negative for our
performance, as the stock outperformed in the period. This
Taiwanese downstream technology manufacturer performed strongly as
investors became more excited about its prospects for earnings
growth as AI demand increases. We prefer to gain exposure to this
area via other stocks such as Quanta which we see as better
positioned in terms of product exposure and where valuations
(including yield) look attractive.
Our country allocations had a
negative impact on relative performance over the year. Our
overweight exposure to South Korea was the most important positive
contributor. This was entirely the result of successful stock
selection. The government's 'Value-Up' program has seen many
companies announce plans to distribute more cash to shareholders.
Our holdings in financials have done particularly well as
a result, as mentioned above, and so too have our positions in
several auto manufacturers, SK
Telecom and Samsung
Electronics.
The excitement surrounding AI
ensured that our overweight to Taiwan was another notable
contributor to performance. TSMC and other Taiwanese tech companies
are at the forefront of the AI revolution and our investments in
companies such as Wiwynn, a
supplier of computer hardware and Quanta Computer, a leader in
hyper-scale servers, as well as in TSMC, did well over the past
year.
Despite the Chinese economic
slowdown, our modest overweight to China had a favourable impact on
returns, thanks to our stock selection decisions. As growth slows,
investors typically value companies which offer income. This aligns
with our investment strategy and some of our holdings have
benefited as a result. Tencent, an internet company whose offerings
include social networking, e-commerce, mobile gaming and financial
payments is one example. This stock has only recently entered our
investment universe, as it has increased its shareholder returns.
At the same time, the stock has become more attractively priced,
and our decision to open a position subsequently enhanced
returns.
Additionally, high yielding names
such as Yangtze Power, China
Construction Bank, and Sinopec, an oil and gas producer,
performed well. Lastly, with the domestic economy slowing, we are
increasingly interested in large exporters, given their limited
exposure to the domestic economy. Our holdings in Fuyao Glass, an auto parts producer,
Midea and Haier, both home appliance makers, have
all performed well thanks to export demand.
However, the favourable impact of
these positions was not sufficient to fully offset the adverse
effect of our positioning in other markets. The Indian market
performed well, and our underweight relative to the Benchmark
created a drag on relative returns. It is difficult to find Indian
stocks offering an attractive yield, partly because India is more
of a 'growth' market, and because valuations are high, which means
the yields on offer are correspondingly low. As the valuations of
Indian stocks are amongst the highest across Emerging Markets, we
typically find better value opportunities elsewhere, notably in
Taiwan, which offers high growth opportunities at a more reasonable
price.
Our overweight in Indonesia also
detracted from returns due to political concerns, as well as some
short-term, stock specific issues with holdings including Bank
Rakyat, mentioned above. However, our conviction in the long-term
investment thesis for this and other names remains intact. Lastly,
our overweight in Mexico also detracted, due to political
developments. The new president's decision to push through judicial
reform raised question marks over the effectiveness of governance
checks and balances in Mexico. Although this spooked markets, her
success does not fundamentally change our view on the growth
opportunities of the Mexican companies we own. In addition, the
Mexican economy is a major beneficiary of the trend towards
nearshoring, as global manufacturers shorten the supply chains for
goods destined for the US market.
Portfolio Positioning and Changes
We build our portfolio from the
bottom up, selecting stocks based on their sound fundamental
qualities, strong balance sheets and capacity to pay dividends over
the long term. Naturally, some areas within Emerging Markets offer
more investment opportunities than others, and this results in
portfolio tilts towards some sectors and countries and a very
active portfolio. From a sectoral viewpoint, we tend to find the
most attractive income opportunities within Information Technology,
Consumer Staples and Financials, so these are the portfolio's three
key sector overweights, while the portfolio is usually underweight
in Materials, Industrials, and Healthcare. Overall, the portfolio
has a high active share versus the Benchmark (74.8% at end of July
2024), demonstrating that we have a differentiated approach
compared to the broader market.
At the country level, significant
portfolio overweights include South Korea, Indonesia and Mexico -
as with our sector allocations, these country weightings are driven
by the many individual stock opportunities which we view as
attractive from an income investor's perspective. In contrast, our
largest country underweight is India. India's long-term growth
prospects are very good and investor interest in this market is
high. However, as mentioned above, this is reflected in valuations,
which makes it difficult for us to find attractive, income-paying
stocks. The portfolio has a slightly overweight position in China
and Hong Kong combined. China faces some challenges, including weak
consumer demand, a stricken property market and a fractious
relationship with the US, as discussed above, but we think overall
valuations are more attractive after recent market weakness. The
Chinese market's dividend outlook is also becoming more
positive.
The portfolio changes we have
implemented over the past year have mainly been motivated by
individual stock considerations. Declines in valuations provided
opportunities for us to open new positions in a number of
companies including Tencent, as mentioned above. We expect
this company to remain resilient due to its leading position within
its sector, and the prospect of higher cash distributions to
shareholders creates an attractive investment case. With valuations
in the company much lower after a significant and protracted
sell-off from their peak in early 2021, we took the opportunity to
initiate a position in this high-quality company at an attractive
price. We also purchased Quanta Computer, as demand for their
hyper-scale servers is likely to grow for many years, as the AI
revolution broadens and deepens, and we expect profitability to
improve accordingly.
We took advantage of more attractive
valuations and improved fundamentals to add to several existing
positions across markets and sectors. Examples include Realtek
Semiconductor, a Taiwanese semiconductor design company involved in
Wi-Fi and audio products, and Walmart de Mexico, a food, clothing,
and general merchandise retailer. Conversely, we trimmed positions
where we thought valuations were beginning to look stretched after
relatively strong performance. One such case was Southern Copper, a
mining company with operations in Peru and Mexico. This remains an
interesting investment given that long-term demand for copper is
likely to be strong, as discussed above. However, the stock's
performance has reduced its yield and inflated its valuation, so we
reduced our position size.
One notable disposal over the past
year was the closure of our position in Bid Corp, a South African
food distributor. This company has performed well over the years,
in line with our expectations, and with its valuation looking
toppy, we decided to take profits and rotate into other, more
attractive names, with greater potential upside. However, this is a
good example of a successful investment in a high-quality
company, and we would consider re-opening a position in Bid Corp if
valuations look more attractive or if the company shows potential
for further growth.
Our
Engagement on Environmental, Social and Governance
Issues
We believe that sound environmental,
social and governance ('ESG') practices are extremely important to
the resilience of business models, and we welcome signs that more
Emerging Market companies are explicitly recognising this and
improving their practices accordingly. Financially material ESG
considerations are therefore integral to our investment process
(please see the dedicated section in the full Annual Report). When
considering potential investments, our analysts assess each company
on a list of related factors, including its carbon emissions,
renewable energy and recycling policies, and employment and
diversity practices, along with its approach to corporate
governance.
We place particular emphasis on
governance, and we draw a direct link between a company's dividend
policy and the quality of its governance. In our view, a company's
willingness to return cash to shareholders is a tangible and
positive governance indicator. We have engaged with many companies
on this issue over time, to understand their motivations and
capital allocation objectives. We also discuss the magnitude of
returns to shareholders and the rationale behind any split between
dividends and buybacks.
Examples of recent ESG engagement
with portfolio companies can be seen in the ESG Report in the full
Annual Report.
Dividends
The Company's revenue return per
share during the financial year was 5.64p, which compares to 5.70p
in the prior financial year. As with previous years, the portfolio
generated dividend income from a diverse set of companies
across different countries and sectors. For example, the top three
dividend contributors in the year were OPAP (a Greek gaming
company), Tisco (a Thai consumer finance company) and Bank Rakyat
(an Indonesian bank).
As a reminder, the Company receives
dividends from portfolio companies in local currencies and pays out
dividends in sterling. Currency movements therefore have an impact
on revenue receipts year-on-year. All else being equal, a falling
pound increases revenue receipts from Emerging Markets, and vice
versa.
Other factors aside from currency
will also impact near term dividend receipts. We would consider
issues such as the possibility of a US recession weighing on
Emerging Markets earnings, China's relatively slow growth (which
affects many other Emerging Markets), and the outlook for
technology which still looks relatively favourable.
Outlook
Emerging Markets are subject to
multiple influences, both positive and negative. Export-oriented
economies such as South Korea and Taiwan will continue to benefit
from the surge in global demand for AI-driven tools. However, the
risk of a US economic slowdown is increasing, as shown by the
US Federal Reserve cutting interest rates. Yet with US
interest rates set to decline, individual Emerging Markets such as
Indonesia, South Africa and Mexico may have more scope to follow
their own monetary easing cycles, which could be supportive for
domestic demand in these economies. Meanwhile, the Indian economy
continues to forge ahead, but as value investors, we still view
valuations as relatively unattractive.
In contrast to India and several
other emerging economies, China's economy is sluggish, but we are
seeing increasing evidence that policymakers are acting with a
higher sense of urgency to improve economic conditions and,
crucially, to help consumer confidence to improve. Easing measures
announced so far are mainly monetary policy focused and we suspect
we need to see more fiscal tools being used for there to be more
traction in terms of stimulus - but the higher degree of policy
coordination is a positive and is being taken well by markets. Our
constructive case for China is more based on the micro than the
macro, i.e., we see attractive opportunities at the stock level
driven by increasing focus on cash returns to shareholders via both
dividends and buybacks. We continue to see improvement here,
however, the desire to return cash to shareholders should always be
balanced against the need to invest for future growth.
Given our bottom-up approach to
building the portfolio, we remain excited by the many opportunities
we see across Emerging Markets. Our principal focus is the same as
it has been since the inception of the Company: we seek out
companies able to produce attractive returns on equity, generate
healthy free cash flow and pay shareholders reliable dividends. By
identifying stocks with these characteristics, and buying them at
attractive valuation levels, we can construct a portfolio with both
value and quality attributes, that generates an attractive yield
for shareholders, as well as allowing them to participate in
Emerging Markets growth.
Omar
Negyal
Isaac Thong
Portfolio Managers
JPMorgan Asset Management
1st November 2024
PRINCIPAL RISKS AND
UNCERTAINTIES
The Board has overall responsibility
for reviewing the effectiveness of the Company's system of risk
management and internal control. The Board is supported by the
Audit and Risk Committee in the management of risk. The risk
management process is designed to identify, evaluate, manage, and
mitigate risks faced. Although the Board believes that it has a
robust framework of internal controls in place this can provide
only reasonable, and not absolute, assurance against material
financial misstatement or loss and is designed to manage, not
eliminate, risk.
The Directors confirm that they have
carried out a robust assessment of the principal risks and
uncertainties facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity. With the assistance of the Manager, the Audit and Risk
Committee has drawn up a risk matrix, which identifies the
principal risks and uncertainties, and the emerging risks to the
Company and the ways in which these risks are managed or mitigated.
These are reviewed and noted by the Board through the Audit and
Risk Committee. The Audit and Risk Committee has agreed to hold a
third meeting every year dedicated to the review of the Company's
risk matrix.
The principal risks fall broadly
under the following categories: investment; strategy; political and
economic; financial; operational and cybercrime; accounting, legal
and regulatory; and ESG.
The Board, through the Audit and
Risk Committee, considers that the risks detailed below are the
principal risks facing the Company currently, along with the
financial risks detailed in note 22 of the full Annual Report.
These are the risks that could affect the ability of the Company to
deliver its strategy.
|
|
|
Movement in
risk
|
|
|
|
status in year
to
|
Principal risk
|
Description
|
Mitigation/Control
|
31st July
2024
|
Investment performance
|
Inappropriate investment decisions,
for example poor stock selection or asset allocation may lead to
underperformance against the Company's Benchmark index and peer
companies.
|
The Board manages this risk by
diversification of investments through its investment restrictions
and guidelines which are monitored and reported by the Manager. The
Investment Manager provides the Directors with timely and accurate
management information, including performance data and attribution
analyses, revenue estimates, currency performance, liquidity
reports and peer group analyses. The Board monitors the
implementation and results of the investment process with the
Portfolio Managers, who attend Board meetings, and reviews data
which show statistical measures of the Company's risk
profile.
The Board holds a separate meeting
devoted to strategy each year.
|
Risk remained stable from the prior
year. The Company continued to pursue its investment objective in
accordance with the agreed strategy.
The Board continued to monitor the
performance of the portfolio over the financial year. Whilst
performance slightly lagged the Benchmark, the Board took comfort
in the longer-term performance. See the full Annual
Report.
|
Income
|
There is the risk that the Company
may underperform resulting in insufficient local currency
generation, reducing the income available to pay dividends to
shareholders.
|
The Investment Manager has an
investment process which is designed to maximise the performance of
the portfolio in meeting the investment objective and delivery of
income. The Board regularly reviews investment and financial
reports, including revenue estimates, to monitor the effectiveness
of the investment process.
|
Whilst macroeconomic conditions have
been challenging, this risk has remained stable during the year and
the Company continued to generate income.
Given the level of income, the Board
has modestly increased the dividend for the financial year, which
was wholly funded by the revenue earned in the year.
|
Strategy
|
If the Company's business objective
and strategy is no longer appropriate, it may lead to a lack of
investor demand. This may result in the Company's shares trading at
a narrower premium or a wider discount.
A widening discount out of line with
the industry may lead to hostile action by shareholders or
arbitrageurs.
An inappropriate gearing strategy
may lead to suboptimal returns; poor performance if over-geared in
weak markets or performance foregone if under-geared in strong
markets.
|
The Board holds a separate meeting
devoted to strategy each year.
The Board seeks to narrow the
discount by undertaking measured buybacks of the Company's shares.
The Company has authority to buy back its existing shares to
enhance the NAV per share for its shareholders and to reduce the
absolute level of discount and discount volatility.
The Company and Manager work with
the Corporate Broker to seek to increase demand for the Company's
shares.
The Board has set a gearing range
within which the Investment Managers employ the Company's gearing
on a strategic basis.
Gearing levels are detailed in the
monthly Portfolio restrictions and guidelines report provided to
the Board and the level of gearing is discussed at each Board
meeting.
|
Risk has remained stable.
The Board continued to monitor the
performance of the portfolio over the financial year. The total
return on NAV for the year was marginally behind the Benchmark.
However, over the longer term, the Company continues to provide
good investment performance against the Benchmark.
The Board has increased the number
of buybacks of the Company's own shares during the year, particular
from the prior year. The Company's discount has remained relatively
stable as a result of these buybacks.
Emerging Markets remained resilient
in the face of a challenging external backdrop and monetary
conditions. Inflation in Emerging Markets has fallen over the
latter half of the financial year, and a weaker US dollar has
provided a tailwind.
|
Political and Economic
|
The Company's returns, both capital
and revenue, are affected by changes in the economic, political and
corporate conditions, which can cause market and exchange rate
fluctuations. Sustained underperformance of Emerging Markets as an
asset class may result from risks such as the imposition of
restrictions on the free movement of capital, ability to pay
corporate dividends and change in legislation. Economic, political
and ultimately military conflicts between nations, regions and
trading blocks are an ever present reality. So too are the risks of
social dislocation or civil unrest within countries. These bring
with them risks to economic growth, to investors' risk appetites
and, consequently, to the valuations and distributions of companies
in the portfolio.
|
This risk is managed to some extent
by diversification of investments both by geography and sector, and
by regular communication with the Investment Managers on matters of
investment strategy and portfolio construction which will directly
or indirectly include an assessment of these risks.
The Board receives regular reports
from the Manager and Corporate Broker regarding market outlook and
considers thematic and factor risks, stock selection and levels of
gearing on a regular basis.
|
Although political and economic
risks have always been part of the investment process, the risk has
been heightened to reflect the number of elections taking place in
2024 and growing geopolitical tensions and conflicts around the
world, as well as concerns about the resiliency of democracy. These
risks can significantly impact global markets, including Emerging
Markets, investor sentiment, and economic stability.
|
Financial
|
The financial risks faced by the
Company include market price risk, interest rate risk, liquidity
risk and credit risk.
|
Further details are disclosed in
note 22 in the full Annual Report.
|
Risk has remained stable over the
year as Emerging Markets remained resilient, despite continued
volatility in global macroeconomic conditions.
|
Operational and
cybercrime
|
The Company is dependent on third
parties for the provision of services and systems. Disruption to,
or failure of, the Manager's accounting, dealing or payments
systems or the depositary's or custodian's records could prevent
accurate reporting and monitoring of the Company's financial
position. There is also the potential for fraud, errors or control
failures at the Company's Manager and or third party service
providers, which could result in damage to the Company's reputation
or result in losses.
The threat of a cyber-attack is
regarded as at least as important as more traditional physical
threats to business continuity and security. In addition to
threatening the Company's operations, such an attack is likely to
raise reputational issues which may damage the Company's share
price and reduce demand for its shares.
|
The Board keeps the services of the
Manager and third-party service providers under continuous review,
and the Management Engagement Committee undertakes a formal
evaluation of performance on an annual basis. The Manager has in
place service level agreements with its service providers that are
attested to on an annual basis.
Details of how the Board monitors
the services provided by the Manager and its associates and the key
elements designed to provide effective internal control are
included within the Risk Management and Internal Control section of
the Corporate Governance Report. The Audit and Risk Committee
regularly reviews statements on internal controls and procedures
from the Company's Manager. The Audit and Risk Committee also
reviews a summary of annual controls reports from the Manager, with
exceptions found in its control environment highlighted to the
Audit and Risk Committee. The Company is subject to an annual
external audit. The Company's service providers have robust
business continuity plans.
The Board works closely with the
Investment Manager in identifying these threats and, in addition,
monitors the strategies of its service providers.
The Company benefits directly and/or
indirectly from all elements of JPMorgan's Cyber Security
programme. The information technology controls around the physical
security of JPMorgan's data centres, security of its networks and
security of its trading applications are tested by independent
auditors and reported every six months against the AAF
Standard.
|
Risk remained stable during the
year.
The Board continues to monitor the
outsourced services and an annual appraisal of the performance, and
ongoing appointment, of the Manager and the Company's third-party
service providers is undertaken by the Management Engagement
Committee.
To date the Manager's cyber security
arrangements have proven robust and the Company has not been
impacted by any cyber attacks threatening its
operations.
|
Accounting, Legal and
Regulatory
|
Loss of its investment trust status
and, as a consequence, gains within the Company's portfolio could
be subject to UK Capital Gains Tax.
A breach of the UK Companies Act
2006 could result in the Company and/or the Directors being fined
or the subject of criminal proceedings.
Breach of the UK Listing Rules or
Disclosure, Guidance and Transparency Rules ('DTRs') could result
in the Company's shares being suspended from listing which in turn
would breach Section 1158 of the Corporation Tax Act
2010.
|
The Section 1158 qualification
criteria are continuously monitored by the Manager and the results
reported to the Board at each Board meeting.
The Board relies on the services of
its Company Secretary, the Manager and its professional advisers to
ensure compliance with the UK Companies Act 2006, the Listing
Rules, DTRs and the Alternative Investment Fund Managers'
Directive.
|
Risk remained stable during the
year.
The Board is comfortable that the
Manager continuously monitors the Company's compliance with the
Section 1158 qualification criteria.
|
Environmental, Social and
Governance
|
The Board acknowledges that there
are risks associated with investments in companies which fail to
conduct business in a responsible manner. Insufficient
consideration given to financially material ESG factors may lead to
poor performance, and a reduction in demand for the Company's
shares as investors seek greater ESG oversight in their
portfolios.
Climate change may have a disruptive
effect on the business models and profitability of individual
investee companies, and indeed, whole sectors.
|
The Manager has integrated the
consideration of financially material ESG factors into the
Company's investment process. Further details are set out in the
ESG report in the full Annual Report.
The Board is also considering the
threat posed by the direct impact of climate change on the
operations of the Manager and other key service
providers.
|
Risk remained stable during the
year.
The Board is comfortable that the
Investment Manager has integrated financially material ESG
considerations into its investment process.
|
EMERGING RISKS
The AIC Code of Corporate Governance
requires the Audit and Risk Committee to put in place procedures to
identify emerging risks facing the Company. Emerging risks, which
are not deemed to represent an immediate threat, are considered by
the Audit and Risk Committee as they come into view and are
incorporated into the existing review of the Company's risk matrix.
However, since emerging risks are likely to be more dynamic in
nature, they are considered on a more frequent basis, through the
remit of the Board when the Audit and Risk Committee does not meet.
The Board, through the Audit and Risk Committee, considers that the
following is an emerging risk facing the Company:
Artificial Intelligence - While
it might equally be deemed a great opportunity and force for good,
there appears also to be an increasing risk to business and society
more widely from Artificial Intelligence ('AI').
The use of AI could be a significant
disrupter to business models and whole companies, leading to added
uncertainty in company valuations. Equally, embracing AI with
strategies and proactive measures can gain advantages for companies
and failing to seize the AI opportunity could lead to a risk of
losing competitiveness.
TRANSACTIONS WITH THE MANAGER AND
RELATED PARTIES
Details of the management contract
are set out in the Directors' Report in the full Annual Report. The
management fee payable to the Manager for the year was £3,208,000
(2023: £3,121,000) of which £nil (2023: nil) was outstanding at the
year end.
Included in administration expenses
in note 6 in the full Annual Report are safe custody fees amounting
to £246,000 (2023: £205,000) payable to JPMorgan Chase Bank, N.A.
of which £102,000 (2023: £86,000) was outstanding at the year
end.
The Manager may carry out some of
its dealing transactions through its group subsidiaries. These
transactions are carried out at arm's length. The commission
payable to JPMorgan Securities Limited for the year was £7,000
(2023: £5,000) of which £nil (2023: £nil) was outstanding at the
year end.
The Company also holds cash in the
JPMorgan USD Liquidity Fund, which is managed by the Manager. At
the year end this was valued at £2,459,000 (2023: £2,184,000).
Income amounting to £199,000 (2023: £212,000) was receivable during
the year of which £nil (2023: £nil) was outstanding at the year
end.
Stock lending income amounting to
£18,000 (2023: £20,000) was receivable by the Company during the
year. The commissions in respect of such transactions amounted to
£2,000 (2023: £2,000) payable to the lending agent, JPMorgan Chase
Bank, N.A.
Handling charges on dealing
transactions amounting to £40,000 (2023: £20,000) were payable to
JPMorgan Chase Bank, N.A. during the year of which £11,000 (2023:
£5,000) was outstanding at the year end.
At the year end, total cash of
£701,000 (2023: £1,291,000) was held with JPMorgan Chase Bank, N.A.
A net amount of interest of £10,000 (2023: £4,000) was receivable
by the Company during the year from JPMorgan Chase Bank, N.A. of
which £nil (2023: £nil) was outstanding at the year end.
Full details of Directors'
remuneration and shareholdings can be found in note 6 in the full
Annual Report.
STATEMENT OF DIRECTORS'
RESPONSIBILITIES
The Directors are responsible for
preparing the annual report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors
to prepare financial statements for each financial year. Under that
law, the Directors have elected to prepare the financial statements
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law)
including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland'. Under Company law the Directors
must not approve the financial statements unless they are satisfied
that, taken as a whole, the annual report and financial statements
are fair, balanced and understandable, provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy and that they give a true and
fair view of the state of affairs of the Company and of the total
return or loss of the Company for that period. In order to provide
these confirmations, and in preparing these financial statements,
the Directors are required to:
• select suitable
accounting policies and then apply them consistently;
• make judgements
and estimates that are reasonable and prudent;
• state whether
applicable UK Accounting Standards have been followed, subject to
any material departures disclosed and explained in the financial
statements; and
• prepare the
financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business,
and the Directors confirm that they
have done so.
The Directors are responsible for
keeping proper accounting records that are sufficient to show and
explain the Company's transactions and disclose with reasonable
accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the
UK Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
The financial statements are
published on the www.jpmglobalemergingmarketsincome.co.uk
website, which is maintained by the Company's Manager. The
maintenance and integrity of the website maintained by the Manager
is, so far as it relates to the Company, the responsibility of the
Manager. The work carried out by the Auditor does not involve
consideration of the maintenance and integrity of this website and,
accordingly, the Auditor accepts no responsibility for any changes
that have occurred to the financial statements since they were
initially presented on the website. The financial statements are
prepared in accordance with UK legislation, which may differ from
legislation in other jurisdictions.
Under applicable law and regulations
the Directors are also responsible for preparing a Directors'
Report, Strategic Report and Directors' Remuneration Report that
comply with that law and those regulations.
Each of the Directors, whose names
and functions are listed in the full Annual Report confirm that, to
the best of their knowledge:
• the financial
statements, which have been prepared in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law), give a true and fair view
of the assets, liabilities, financial position and return of the
Company; and
• the Strategic
Report includes a fair review of the development and performance of
the business and the position of the Company, together with a
description of the principal risks and uncertainties that it
faces.
The Board confirms that it is
satisfied that the annual report and financial statements taken as
a whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
For and on behalf of the
Board
Elisabeth Scott
Chair
1st November 2024
STATEMENT OF COMPREHENSIVE
INCOME
For
the year ended 31st July 2024
|
2024
|
2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Gains on investments held at fair
value through
|
|
|
|
|
|
|
profit or loss
|
-
|
13,406
|
13,406
|
-
|
21,726
|
21,726
|
Net foreign currency
(losses)/gains
|
-
|
(76)
|
(76)
|
-
|
1,845
|
1,845
|
Income from investments
|
20,948
|
275
|
21,223
|
20,604
|
348
|
20,952
|
Interest receivable and similar
income
|
227
|
-
|
227
|
236
|
-
|
236
|
Gross return
|
21,175
|
13,605
|
34,780
|
20,840
|
23,919
|
44,759
|
Management fee
|
(962)
|
(2,246)
|
(3,208)
|
(936)
|
(2,185)
|
(3,121)
|
Other administrative
expenses
|
(895)
|
-
|
(895)
|
(735)
|
-
|
(735)
|
Net
return before finance costs and taxation
|
19,318
|
11,359
|
30,677
|
19,169
|
21,734
|
40,903
|
Finance costs
|
(696)
|
(1,623)
|
(2,319)
|
(582)
|
(1,356)
|
(1,938)
|
Net
return before taxation
|
18,622
|
9,736
|
28,358
|
18,587
|
20,378
|
38,965
|
Taxation
|
(2,036)
|
(896)
|
(2,932)
|
(1,679)
|
(99)
|
(1,778)
|
Net
return after taxation
|
16,586
|
8,840
|
25,426
|
16,908
|
20,279
|
37,187
|
Return per share
|
5.64p
|
3.01p
|
8.65p
|
5.70p
|
6.84p
|
12.54p
|
All revenue and capital items in the
above statement derive from continuing operations.
The 'Total' column of this statement
is the profit and loss account of the Company and the 'Revenue' and
'Capital' columns
represent supplementary information
prepared under guidance issued by the Association of Investment
Companies. The net return after taxation represents the profit for
the year and also the total comprehensive income.
STATEMENT OF CHANGES IN
EQUITY
|
Called up
|
|
Capital
|
|
|
|
|
|
share
|
Share
|
redemption
|
Other
|
Capital
|
Revenue
|
|
|
capital
|
premium
|
reserve
|
reserve
|
reserve
|
reserve
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
At
31st July 2022
|
2,973
|
222,582
|
13
|
100,092
|
73,210
|
17,665
|
416,535
|
Repurchase of shares into
Treasury
|
-
|
-
|
-
|
(448)
|
-
|
-
|
(448)
|
Net return
|
-
|
-
|
-
|
-
|
20,279
|
16,908
|
37,187
|
Dividends paid in the year (note
2)
|
-
|
-
|
-
|
-
|
-
|
(15,428)
|
(15,428)
|
At
31st July 2023
|
2,973
|
222,582
|
13
|
99,644
|
93,489
|
19,145
|
437,846
|
Repurchase of shares into
Treasury
|
-
|
-
|
-
|
(9,033)
|
-
|
-
|
(9,033)
|
Net return
|
-
|
-
|
-
|
-
|
8,840
|
16,586
|
25,426
|
Dividends paid in the year (note
2)
|
-
|
-
|
-
|
-
|
-
|
(15,615)
|
(15,615)
|
At
31st July 2024
|
2,973
|
222,582
|
13
|
90,611
|
102,329
|
20,116
|
438,624
|
STATEMENT OF FINANCIAL
POSITION
At
31st July 2024
|
2024
|
2023
|
|
£'000
|
£'000
|
Fixed assets
|
|
|
Investments held at fair value through profit or
loss
|
465,364
|
462,662
|
Current assets
|
|
|
Debtors
|
2,804
|
3,392
|
Cash and cash equivalents
|
3,160
|
3,475
|
|
5,964
|
6,867
|
Current liabilities
|
|
|
Creditors: amounts falling due
within one year
|
(16,110)
|
(31,559)
|
Net
current liabilities
|
(10,146)
|
(24,692)
|
Total assets less current liabilities
|
455,218
|
437,970
|
Creditors: amounts falling due
after more than one year
|
(15,571)
|
-
|
Provision for capital gains
tax
|
(1,023)
|
(124)
|
Net
assets
|
438,624
|
437,846
|
Capital and reserves
|
|
|
Called up share capital
|
2,973
|
2,973
|
Share premium
|
222,582
|
222,582
|
Capital redemption reserve
|
13
|
13
|
Other reserve
|
90,611
|
99,644
|
Capital reserve
|
102,329
|
93,489
|
Revenue reserve
|
20,116
|
19,145
|
Total equity shareholders' funds
|
438,624
|
437,846
|
Net
asset value per share
|
151.4p
|
147.7p
|
STATEMENT OF CASH FLOWS
For
the year ended 31st July 2024
|
2024
|
2023
|
|
£'000
|
£'000
|
Cash
flows from operating activities before finance costs and
taxation
|
|
|
Total return on ordinary
activities
|
30,677
|
40,903
|
Adjustment for:
|
|
|
Net gains on investments held at
fair value through profit or loss
|
(13,406)
|
(21,726)
|
Net foreign currency
losses/(gains)
|
76
|
(1,845)
|
Dividend income
|
(21,221)
|
(20,943)
|
Interest income
|
(209)
|
(216)
|
Scrip dividends received as
income
|
(2)
|
(9)
|
Realised (losses)/gains on foreign
exchange transactions
|
(239)
|
4
|
Realised exchange gains on USD
Liquidity Fund
|
191
|
70
|
Decrease/(increase) in accrued income
and other debtors
|
30
|
(7)
|
Decrease in accrued
expenses
|
(2)
|
(221)
|
Net
cash outflow from operations before dividends and
interest
|
(4,105)
|
(3,990)
|
Dividends received
|
19,310
|
20,571
|
Interest received
|
209
|
222
|
Overseas withholding tax
recovered
|
51
|
-
|
Indian capital gains tax
recovered/(paid)
|
3
|
(56)
|
Net
cash inflow from operating activities
|
15,468
|
16,747
|
Purchases of investments
|
(124,379)
|
(117,620)
|
Sales of investments
|
135,473
|
117,735
|
Net
cash inflow from investing activities
|
11,094
|
115
|
Dividends paid
|
(15,615)
|
(15,428)
|
Repurchase of shares into
Treasury
|
(9,032)
|
(448)
|
Repayment of loan
|
-
|
(16,613)
|
Drawdown of loan
|
-
|
16,613
|
Interest paid
|
(2,256)
|
(1,786)
|
Net
cash outflow from financing activities
|
(26,903)
|
(17,662)
|
Decrease in cash and cash equivalents
|
(341)
|
(800)
|
Cash and cash equivalents at start of
year
|
3,475
|
4,287
|
Exchange movements
|
26
|
(12)
|
Cash
and cash equivalents at end of year
|
3,160
|
3,475
|
Cash
and cash equivalents consist of:
|
|
|
Cash and short term
deposits
|
701
|
1,291
|
Cash held in JPMorgan USD Liquidity
Fund
|
2,459
|
2,184
|
Total
|
3,160
|
3,475
|
NOTES TO THE FINANCIAL
STATEMENTS
1. Accounting
policies
(a) Basis of
accounting
The financial statements are
prepared under the historical cost convention, modified to include
fixed asset investments at fair value, and in accordance with the
UK Companies Act 2006, United Kingdom Generally Accepted Accounting
Practice ('UK GAAP'), including FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland'
and with the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' (the 'SORP') issued by the Association of Investment
Companies in July 2022.
All of the Company's operations are
of a continuing nature.
The financial statements have been
prepared on a going concern basis. In forming this opinion, the
Directors have considered the impact of continued market volatility
and economic uncertainty resulting from ongoing geopolitical
tensions and conflicts, including the war in Ukraine, ongoing
tensions between China and the US and escalating conflict in the
Middle East, and in particular the impact of these geopolitical
risks, as well as climate change, on the going concern and
viability of the Company. In making their assessment, the Directors
have reviewed income and expense projections and the liquidity of
the investment portfolio, and considered the mitigation measures
which key service providers, including the Manager, have in place
to maintain operational resilience. The Directors have also
reviewed the Company's compliance with debt covenants in respect of
its loans with ING and Mizuho Bank, taking into consideration
that the loan with Mizuho Bank will be repaid in November 2024. The
Board has considered communications with key shareholders in
respect of the continuation vote at the AGM in November 2024 in
assessing the going concern and viability of the Company.
In light of these factors, the Company's cash balances, and
the liquidity position, the Directors consider that the Company has
adequate financial resources to enable it to continue in
operational existence for at least 12 months.
The policies applied in these
financial statements are consistent with those applied in the
preceding year.
2.
Dividends
(a) Dividends paid and
declared
|
2024
|
2023
|
|
Pence
|
£'000
|
Pence
|
£'000
|
Dividends paid
|
|
|
|
|
Fourth interim dividend in respect of
prior year
|
2.30
|
6,813
|
2.20
|
6,530
|
First interim dividend
paid
|
1.00
|
2,955
|
1.00
|
2,966
|
Second interim dividend
paid
|
1.00
|
2,944
|
1.00
|
2,966
|
Third interim dividend
paid
|
1.00
|
2,903
|
1.00
|
2,966
|
Total dividends paid in the year
|
5.30
|
15,615
|
5.20
|
15,428
|
Dividends declared
|
|
|
|
|
Fourth interim dividend
declared
|
2.40
|
6,930
|
2.30
|
6,819
|
The fourth interim dividend proposed
in respect of the year ended 31st July 2023 amounted to £6,819,000.
However, the amount paid amounted to £6,813,000 due to ordinary
shares repurchased after the balance sheet date but prior to the
record date.
(b) Dividend for the purposes of Section
1158 of the Corporation Tax Act 2010 ('Section
1158')
The requirements of Section 1158 are
considered on the basis of dividends declared in respect of the
financial year, shown below.
|
2024
|
2023
|
|
Pence
|
£'000
|
Pence
|
£'000
|
First interim dividend
|
1.00
|
2,955
|
1.00
|
2,966
|
Second interim dividend
|
1.00
|
2,944
|
1.00
|
2,966
|
Third interim dividend
|
1.00
|
2,903
|
1.00
|
2,966
|
Fourth interim dividend
|
2.40
|
6,930
|
2.30
|
6,819
|
Total dividends for Section 1158 purposes
|
5.40
|
15,732
|
5.30
|
15,717
|
The revenue available for
distribution by way of dividend for the year is £16,586,000 (2023:
£16,908,000). The revenue reserve after payment of the fourth
interim dividend will amount to £13,186,000 (2023:
£12,326,000).
3. Return per
shareA
The Revenue, Capital and Total
return shown below, is the Net return after taxation in the
Statement of Comprehensive Income in the full Annual
Report.
|
2024
|
2023
|
|
£'000
|
£'000
|
Revenue return
|
16,586
|
16,908
|
Capital return
|
8,840
|
20,279
|
Total return
|
25,426
|
37,187
|
Weighted average number of shares in
issue during the year
|
294,183,867
|
296,678,384
|
Revenue return per
shareA
|
5.64p
|
5.70p
|
Capital return per
shareA
|
3.01p
|
6.84p
|
Total return per shareA
|
8.65p
|
12.54p
|
A Alternative Performance Measure
(APM).
4. Net asset value per
shareA
|
2024
|
2023
|
Net assets (£'000)
|
438,624
|
437,846
|
Number of shares in issue
|
289,682,588
|
296,482,060
|
Net
asset value per share
|
151.4p
|
147.7p
|
A
Alternative Performance Measure (APM).
5. Status of
announcement
2023 Financial Information
The
figures and financial information for 2023 are extracted from the
Annual Report and Accounts for the year ended 31st July 2023 and do
not constitute the statutory accounts for that year. The Annual
Report and Accounts includes the Report of the Independent Auditor
which is unqualified and does not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006. The
Annual Report and Accounts has been delivered to the Registrar of
Companies.
2024 Financial Information
The
figures and financial information for 2024 are extracted from the
Annual Report and Accounts for the year ended 31st July 2024 and do
not constitute the statutory accounts for that year. The Annual
Report and Accounts includes the Report of the Independent Auditor
which is unqualified and does not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006. The
Annual Report and Accounts will be delivered to the Registrar of
Companies in due course.
JPMORGAN FUNDS LIMITED
4 November 2024
For further information, please
contact:
Emma Lamb
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or
or +44 1268 44 44 70
E-mail:
invtrusts.cosec@jpmorgan.com
Neither the contents of the
Company's website nor the contents of any website accessible from
hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
ENDS
A copy of the Annual Report will be
submitted to the National Storage Mechanism and will shortly be
available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report will also shortly
be available on the Company's website at www.jpmglobalemergingmarketsincome.co.uk
where up to date information on the Company,
including daily NAV and share prices, factsheets and portfolio
information can also be found.
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