JPM Emerging Markets Income Fund

Transcription

1 Fund Annual Short Form Report 31 January Changes to the Registrar With effect from 7 December the ACD delegated registrar services for the Company to International Financial Data Services (UK) Limited ( IFDS ). The above changes were made because the company currently providing these services to the Company had decided to withdraw from this market. All costs associated with these changes were paid for by the ACD. Shareholders were initially notified of this in a letter sent in October. Changes to the Prospectus Shareholders were notified in half yearly statements sent in May that with effect from 1 June the Delivery versus Payment ( DvP ) exemption was reduced from 3 days to 1 day. This means that there is a 1 day period during which money held for the purposes of settling a transaction in shares is not treated as client money. With effect from 1 February the Prospectus was updated to state that clients placing straight through processing transactions would not have to comply with the Investment Minima restrictions for A, B and C share classes. With effect from 1 February currency management disclosures in the investment objective and policy of the Fund was amended for increased clarity. With effect from 1 February the Prospectus of Fund was updated to allow the Company to invest in China A-Shares through the Shanghai-Hong Kong Stock Connect programme. This programme is a securities trading and clearing linked programme developed by Hong Kong Exchanges and Clearing Limited, the Hong Kong Securities Clearing Company Limited, Shanghai Stock Exchange and China Securities Depositary and Clearing Corporation with an aim to achieve mutual stock market access between mainland China and Hong Kong. Investment objective and policy To provide a portfolio designed to achieve income by investing primarily in Equity and Equity-Linked Securities of Emerging Markets companies in any economic sector whilst participating in long-term capital growth. The Fund may also have exposure to Emerging Market fixed and floating rate Debt Securities, which includes Investment Grade, Non-Investment Grade and Unrated Bonds, by investing directly or indirectly through collective investment schemes. Emerging Markets companies are companies that are incorporated under the laws of, and have their registered office in, an Emerging Market country, or that derive the predominant part of their economic activity from Emerging Market countries, even if listed elsewhere. The Fund may invest in smaller companies and Participation Notes may be held on an ancillary basis. Other instruments as permitted in the stated investment and borrowing powers of the Company including, but not limited to, cash and cash equivalents may be held on an ancillary basis, as appropriate. Financial Derivative Instruments may be used for the purpose of Efficient Portfolio Management, including hedging, where appropriate (see section of the Prospectus for Risk Warnings on derivatives). Subject to at least 60 days notice to shareholders, the Fund may use derivatives for investment purposes which may change the risk profile of the Fund. The Fund may invest in China A-Shares via the Shanghai-Hong Kong Stock Connect program. The Fund may invest in assets denominated in any currency and non- Sterling currency exposure will not normally be hedged back to Sterling. Risk profile The value of your investment may fall as well as rise and you may get back less than you originally invested. The value of Equity and Equity-Linked Securities may fluctuate in response to the performance of individual companies and general market conditions. Furthermore, Participation Notes run the risk of counterparty default which may result in the loss of the full market value of the Note. Emerging Markets may be subject to increased political, regulatory and economic instability, less developed custody and settlement practices, poor transparency and greater financial risks. Emerging Market currencies may be subject to volatile price movements. Emerging Market securities may also be subject to higher volatility and be more difficult to sell than non-emerging Market securities. The value of Bonds and other Debt Securities may change significantly depending on market, economic and interest rate conditions as well as the creditworthiness of the issuer. Issuers of Bonds and other Debt Securities may fail to meet payment obligations (default) or the credit rating of Bonds and other Debt Securities may be downgraded. These risks are typically increased for Below Investment Grade and certain Unrated securities, which may also be subject to higher volatility and be more difficult to sell than Investment Grade securities. The Fund invests in securities of smaller companies which may be more difficult to sell, more volatile and tend to carry greater financial risk than securities of larger companies. As the portfolio of the Fund is primarily focused on generating income, it may bear little resemblance to the composition of its Benchmark. Movements in currency exchange rates can adversely affect the return of your investment. This Fund charges the annual fee of the Authorised Corporate Director (ACD) against capital, which will increase the amount of income available for distribution to Shareholders, but may constrain capital growth. It may also have tax implications for certain investors. The Fund may invest in Credit Linked Notes which involve the risk of the underlying credit instrument decreasing in value or defaulting and the risk of the issuer of the Credit Linked Note becoming insolvent. Please refer to Part 11 of the Prospectus for details of the general risk factors affecting this Fund in addition to the specific risk factors above. Market review marked the third consecutive year of decline for emerging markets (EM) equities. A sharp slowdown in the Chinese economy, a collapse in commodity prices and global trade, a stronger US Dollar, unexpected yuan devaluation, the Greek debt crisis, political instability, and higher US interest rates kept EM equities volatile for the entire period. Meanwhile, EM FX depreciated more than 10%, the worst drop since the 1997 Asian financial crisis. You should remember that past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested.

2 Fund review The Fund underperformed the benchmark in this period. Stock selection in South Africa, China and Brazil has driven the weak performance: difficulties in China meant our underweight here contributed to relative returns; our overweight in Brazil was a negative, thanks to a weakening currency, continued political unrest, and a downgrade by S&P. South Africa was a significant detractor: markets reacted badly in December to the removal of the finance minister by President Jacob Zuma, causing both equities and the currency to collapse. The Taiwanese market remains our largest overweight position and this contributed, as did exposure to Hungary and Mexico along with investment ideas in Korea. We remain focused on dividend yield and dividend growth, sticking to our disciplined process and emphasising balance sheet strength. Market outlook Investor fears were realised when on the first trading day of the Shanghai market closed limit down, followed by the worst opening week in the history of the US market. In January, EM valuations dipped to as low as 1.2x book value, reflecting significant weakness in developed markets as well. We believe such valuations reflect the bulk of bad news confronting emerging markets, and would view additional bouts of weakness as opportunities to add exposure, not reduce it. 12 month performance^ to 31 January A-Class Acc -22.0% 17.1% -13.6% B-Class Inc -21.7% 17.7% -13.3% C-Class Acc -21.5% 17.9% X-Class Acc -20.9% 18.8% -12.4% Benchmark Index -16.3% 15.1% -13.3% Fund statistics Risk and Reward Profile 6 (6 at 31 July ) Fund size Benchmark Index 275.8m MSCI Emerging Markets Index (Net) Fund charges and expenses A-Class B-Class C-Class X-Class Initial charge (max.) 3.00% Nil Nil Nil Exit charge Nil Nil Nil Nil Ongoing charge (comprises) 1.68% 1.18% 0.93% 0.06% A Annual management fee 1.50% 1.00% 0.75% Fixed expenses 0.18% 0.18% 0.18% 0.06% Comparative tables A-Class Accumulation Shares Opening net asset value per share Return before operating charges* (11.88) (6.72) Operating charges (0.89) (1.68) (0.94) Return after operating charges* (12.77) 8.45 (7.66) Closing net asset value per share accumulation shares * after direct transaction costs of (0.10) (0.21) (0.14) % Return after operating charges (22.04)% 17.07% (13.40)% Closing net asset value ( 000) 6,922 17,969 23,751 Closing number of shares 15,319,859 31,008,740 47,976,636 % Operating charges 1.68% 1.68% 1.68% Highest share price Lowest share price A-Class Income Shares Opening net asset value per share Return before operating charges* (10.52) 8.78 (6.37) Operating charges (0.79) (0.86) (0.93) Return after operating charges* (11.31) 7.92 (7.30) Distributions on income shares (2.17) (2.05) (2.44) Closing net asset value per share * after direct transaction costs of (0.09) (0.11) (0.14) % Return after operating charges (21.45)% 16.91% (12.90)% Closing net asset value ( 000) 1,556 2,958 4,235 Closing number of shares 3,966,590 5,610,275 9,038,422 % Operating charges 1.68% 1.68% 1.68% Highest share price Lowest share price For specific risks, including the risk and reward profile, please refer to the Key Investor information Document (KIID) available on the following website ^ returns are calculated using the dealing prices of the accumulation shares (income shares are used if no accumulation share class exists) which are calculated using market prices and foreign exchange rates available at 12 noon. The benchmark returns, which are based on close of business prices, may reflect variances to the fund performance that are due to timing differences. returns are in Sterling. All equity indices stated as Net are calculated net of tax as per the standard published approach by the index vendor unless stated otherwise. Source: J.P. Morgan. A The ongoing charge will vary in accordance to the annual management fee which varies, as agreed from time to time between the ACD and the relevant JPMorgan Chase & Co. entity. Benchmark Source: MSCI. Neither MSCI nor any other party involved in or related to compiling, computing or creating the MSCI data makes any express of implied warranties or representations with respect to such data (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such data. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in or related to compiling computing or creating the data have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. No further distribution or dissemination of the MSCI data is permitted without MSCI s express written consent.

3 Comparative tables continued B-Class Accumulation Shares Opening net asset value per share Return before operating charges* (12.08) 9.45 (6.78) Operating charges (0.62) (0.67) (0.65) Return after operating charges* (12.70) 8.78 (7.43) Closing net asset value per share accumulation shares * after direct transaction costs of (0.10) (0.12) (0.14) C-Class Accumulation Shares Opening net asset value per share Return before operating charges* (12.09) 9.44 (2.58) Operating charges (0.49) (0.53) (0.48) Return after operating charges* (12.58) 8.91 (3.06) Closing net asset value per share accumulation shares * after direct transaction costs of (0.10) (0.12) (0.13) % Return after operating charges (21.68)% 17.63% (12.98)% % Return after operating charges (21.48)% 17.95% (5.81)% Closing net asset value ( 000) 16,280 19,890 7,801 Closing number of shares 35,472,714 33,948,671 15,661,883 % Operating charges 1.18% 1.18% 1.18% Closing net asset value ( 000) 40,475 37,867 9,926 Closing number of shares 88,023,840 64,669,064 19,991,135 % Operating charges 0.93% 0.93% 0.93% Highest share price Lowest share price Highest share price Lowest share price B-Class Income Shares Opening net asset value per share Return before operating charges* (21.47) (12.94) Operating charges (1.11) (1.23) (1.27) Return after operating charges* (22.58) (14.21) Distributions on income shares (4.36) (4.14) (4.89) Closing net asset value per share * after direct transaction costs of (0.18) (0.22) (0.27) C-Class Income Shares Opening net asset value per share Return before operating charges* (10.71) 8.84 (2.39) Operating charges (0.44) (0.49) (0.49) Return after operating charges* (11.15) 8.35 (2.88) Distributions on income shares (2.18) (2.06) (1.05) Closing net asset value per share * after direct transaction costs of (0.09) (0.11) (0.13) % Return after operating charges (21.14)% 17.52% (12.52)% % Return after operating charges (20.94)% 17.78% (5.66)% Closing net asset value ( 000) 42,288 56,904 36,001 Closing number of shares 52,954,513 53,298,206 38,136,316 % Operating charges 1.18% 1.18% 1.18% Closing net asset value ( 000) 168, ,550 25,731 Closing number of shares 421,255, ,944,116 54,782,099 % Operating charges 0.93% 0.93% 0.93% Highest share price Lowest share price Highest share price Lowest share price

4 Comparative tables continued X-Class Accumulation Shares Opening net asset value per share Return before operating charges* (21.83) (12.14) Operating charges (0.06) (0.06) (0.06) Return after operating charges* (21.89) (12.20) Closing net asset value per share accumulation shares * after direct transaction costs of (0.18) (0.21) (0.25) % Return after operating charges (20.93)% 18.86% (12.18)% Closing net asset value ( 000) Closing number of shares 113,060 87,012 1,000 % Operating charges 0.06% 0.06% 0.06% Highest share price Lowest share price The Operating charges are calculated on an accruals basis and as such may differ from the Ongoing charge figure where: (a) Changes to fee rates were made during the year and the ongoing charge figure has been amended to be future proofed for this change. (b) The Ongoing charge has been annualised for a share class that has not yet been open for a full year. returns are calculated using the net asset value per share from the financial statements as opposed to the dealing price for the last business day of the period. The different calculation basis may result in a variance in the returns published in the comparative tables versus those returns disclosed in the 12 month performance tables which use the dealing price. To calculate the performance for the Income shares the distributions declared for the financial period have been added to the closing net asset value per share. Ongoing charges A-Class Accumulation Shares % % A-Class Income Shares % % B-Class Accumulation Shares % % B-Class Income Shares % % C-Class Accumulation Shares % % C-Class Income Shares % % X-Class Accumulation Shares % % Top ten holdings (excluding Liquidity Funds) % Taiwan Semiconductor Manufacturing Co. Ltd., ADR 2.99 Vanguard International Semiconductor Corp Kimberly-Clark de Mexico SAB de CV A 2.86 Komercni banka AS 2.72 Bidvest Group Ltd. (The) 2.51 Banco Santander Chile, ADR 2.50 Delta Electronics, Inc ITC Ltd Ambev SA 2.24 Sands China Ltd Geographical breakdown % Taiwan South Africa China Brazil 7.78 Russia 6.91 South Korea 5.17 India 4.10 Liquidity Funds 3.01 Turkey 2.93 Mexico 2.86 Czech Republic 2.72 Hong Kong 2.54 Chile 2.50 Hungary 1.92 Thailand 1.53 Poland 1.50 United Arab Emirates 1.42 Saudi Arabia 1.17 Singapore 0.77 Indonesia 0.53 Net other assets 0.11 Portfolio turnover rate % % The portfolio turnover rate (PTR) reflects the total of security purchases and sales (excluding Liquidity funds), less the total of share issues and cancellations, expressed as a percentage of the average daily net asset values over the year. The Ongoing charges takes into account the ACD fee, the fixed expenses and any expenses paid to an affiliate in respect of stock lending activities, expressed as a percentage of the average daily net asset values over the year.

5 These are short form accounts, the full accounts can be obtained using the contact details below. The Fund is a sub-fund of JPMorgan Fund ICVC. JPMorgan Fund ICVC is an Open-Ended Investment Company ( Company ) with variable capital, authorised under Regulation 12 of the OEIC Regulations by the Financial Conduct Authority on 6 October The Company was launched as a UCITS Scheme on 16 November 2001 and acts as an umbrella company comprising 32 sub-funds. Its registration number is IC00005 and its registered address is 60 Victoria Embankment, London, EC4Y 0JP. Authorised Corporate Director: JPMorgan Funds Limited, 3 Lochside View, Edinburgh Park, Edinburgh, EH12 9DH. Custodian and Bankers: Depositary: Independent Auditors: Investment Adviser: Registrar: JPMorgan Chase Bank, N.A. London Branch 25 Bank Street, Canary Wharf, London, E14 5JP. (Authorised and regulated by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) National Westminster Bank plc, 135 Bishopsgate, London, EC2M 3UR. (Authorised and regulated by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority) PricewaterhouseCoopers LLP, Atria One, 144 Morrison Street, Edinburgh, EH3 8EX. JPMorgan Asset Management (UK) Limited, 25 Bank Street, Canary Wharf, London, E14 5JP. International Financial Data Services Limited IFDS House, Saint Nicholas Lane Basildon, Essex, SS15 5FS. For up-to-date performance information please contact your J.P. Morgan Asset Management representative. Intermediaries on Clients investing direct contact your financial adviser or call Telephone lines are open 9.00am to 5.30pm Monday to Friday. Telephone lines are recorded to ensure compliance with our legal and regulatory obligations and internal policies. This material should not be relied on as including sufficient information to support an investment decision. The opinions and views expressed in this document are those held by J.P. Morgan Asset Management as at 9 May, which are subject to change and are not to be taken as or construed as investment advice. The level of tax benefits and liabilities will depend on individual circumstances and may change in the future. The information in this document is based on our understanding of law, regulation and HM Revenue & Customs practice as at 9 May. J.P. Morgan Asset Management is a trading name of JPMorgan Asset Management Marketing Limited, which is authorised and regulated by the Financial Conduct Authority and is part of JPMorgan Asset Management marketing group.