JPMorgan Global Emerging Markets Income

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN GLOBAL EMERGING MARKETS INCOME TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31ST JANUARY 2021

Legal Entity Identifier: 549300OPJXU72JMCYU09

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Performance

During the six months to 31st January 2021, Emerging Markets delivered strong positive returns for investors with the Company's benchmark index, the MSCI Emerging Markets Index with net dividends reinvested (in sterling terms) rising 18.6%. In the same period the Company's total return on net assets was +23.7%. The total return to shareholders was +30.1%, reflecting a material narrowing of the discount to net asset value at which the Company's shares trade, from 8.8% at the previous financial year end to 4.3% at the half year end.

The principal reasons for the Company's outperformance against the benchmark index were stock selection in China and positive relative performance from the portfolio's exposures in Taiwan and India. As mentioned in my previous Statement in October 2020, the Company's income objective means that the composition of the portfolio is significantly different to the composition of the benchmark index, which further explains why returns may vary meaningfully from the benchmark index. The Investment Managers' Report reviews the Company's performance in more detail and comments on the investment strategy.

Dividends

In the Company's current financial year, the Board has declared two interim dividends of 1.0p each, in line with the same period last year.

In the last financial year, the Board paid total dividends of 5.1p per share, maintained at the same level as the year before. As I stated in my October 2020 report, although the revenues generated last financial year did not cover the dividends paid, the Board felt that it was appropriate to use revenue reserves to maintain the dividend payout. We recognise that dividend generation from the Company is important to our shareholders and it is a distinguishing feature of investment trusts that we are able to smooth the dividend stream in this way. We cannot guarantee that we will always be able to use revenue reserves to augment income received by the Company in any given year, but recognise that we currently have remaining revenue reserves after the payment of this year's second quarterly interim dividend of £7.6 million (July 2020: £8.9 million after accounting for the fourth quarterly interim dividend declared in 2020) or 50% (July 2020: 60%) of future annual dividends at the current annual level.

The Board continues to monitor dividend receipts recognising that some companies within your portfolio may continue to experience pressure maintaining historic dividend payout ratios in the short term. Over the longer term, both the Investment Manager and your Board remain of the view that Emerging Markets continue to offer long term growth potential with attractive income prospects. The Board carefully considers the outlook and potential sensitivities with the investment team on a regular basis, including the impact of currency movements on revenue receipts. As shareholders are aware, the Company receives dividends in the currencies of developing countries and US dollars, but pays dividends in sterling. It has not been the Company's policy to hedge currency risk as that is expensive and, for many currencies, impracticable. That policy inevitably means that the Company's asset values and cash flows will be buffeted by adverse currency movements (if sterling strengthens) and flattered by favourable moves (if sterling weakens relative to Emerging Market currencies and US dollars). More recently, the pound has been strengthening against Emerging Market currencies which acts to reduce revenues and total returns in sterling terms.

Gearing and Loan Facilities

The Board regularly discusses gearing with the Investment Managers who use it to enhance long-term shareholder returns. As at the beginning of the financial year, the Company had two US$20 million fixed rate loan facilities with National Australia Bank, repayable in October 2020 (2.31% per annum) and November 2022 (3.28% per annum). Upon maturity of the first loan facility on 8th October 2020, the Company entered into a three year US$20 million rolling interest loan facility with ING Bank, repayable in October 2023. This resulted in a lower blended interest rate for the Company. As at 31st January 2021, gearing stood at 4.7% (31st July 2020: 6.9%).

Share Repurchases and Issuance

During the six months to 31st January 2021, the Company's share price traded at an average discount to net asset value of 7.7%. The Company did not undertake any share repurchases, nor did it issue any shares during the reporting period.

Environmental, Social and Governance Issues

The Manager believes that sustainable investing delivers superior returns over the long term, and has followed this ethos since long before ESG issues gained prominence. The investment team has always incorporated ESG considerations into how it selects stocks in Emerging Market companies and, more recently, the integration of these processes has become formalised. The Board is aware of the ever-increasing focus by shareholders on sustainable and responsible investment and we welcome this interest. We published the Investment Managers' first ESG Report in our 2020 Annual Report and have recently released our first externally measured ESG Rating on our website, which gives the Company an 'A' rating and an impressive 96th percentile rank (100th being the highest) in the Equity Emerging Markets Global peer group. Further information on how ESG considerations are integrated into the investment process can be found in the Investment Manager's Report within the Half Year Report.

The Board

While there has been no change to the composition of the Board during the period, on 3rd December 2020 your Board announced its intention to appoint Lucy Macdonald as a non-executive director of the Company with effect from 1st April 2021. Lucy Macdonald has over 30 years' experience in the asset management industry, most recently as CIO Global Equities at Allianz Global Investors. She was also Lead Portfolio Manager of Brunner Investment Trust, a global income and growth trust from 2016 until May 2020. Lucy is also on the CFA UK investor panel. This appointment, which is being made in anticipation of Richard Robinson stepping down from the Board at the conclusion of the Company's 2021 AGM, will further increase the Board's diversity of skills, experience and background and I have no doubt Lucy will make an invaluable contribution to your Company.

Outlook

Since the half year end to 31st March 2021, the net asset value per share increased by a further 1.6% and the discount stood at 6.4%. We stress that your Investment Managers invest for the long term and your Board believes that Emerging Markets continue to provide interesting opportunities to invest in companies with good long-term capital and dividend returns prospects.

Sarah Fromson

Chairman                                                                                                                                          6th April 2021

INVESTMENT MANAGERS' REPORT

Introduction

For the six-month period ended 31st January 2021, the Company's total return on net assets was +23.7% (in GBP). This compares to the benchmark (MSCI Emerging Markets Index) return of +18.6%. The outperformance in this period has helped longer-term performance.

Emerging markets did well during the half-year review period. The key driver was the arrival, in quick succession, of several proven COVID-19 vaccines, which were widely perceived as clearing the way for an easing of the severe restrictions on commercial and personal activities necessitated by the pandemic. Global financial markets quickly discounted a return to more normal economic conditions. Joe Biden's election to the US presidency also provided impetus to equity markets, in part because it is expected to improve trade relations between the US and China. While tensions between these two trading giants will persist over the long-term, relations are expected to proceed on a more predictable and less fractious basis than during the previous US administration. Biden's support for additional aggressive US fiscal stimulus provided a further boost to global equity markets, including Emerging Markets, in the closing months of 2020 and early 2021.

Spotlight on regions, stocks and sectors

Performance over the half-year period was assisted by the portfolio's exposure to Asian economies, which have been fastest to emerge from the coronavirus crisis. Fifty-five per cent of the portfolio is invested in China and Taiwan, where economic activity is largely back to normal in many sectors. The portfolio's exposure to these two markets contributed to relative performance, as did its exposure to India, although its South Korean exposure was a relative drag.

One of the most significant positive contributors was the portfolio's position in Chinese drinks company, Jiangsu Yanghe Brewery. This is a major baiju (Chinese liquor) producer that owns good brands in the mid- to high-end segment of the market. Yanghe Brewery performed well during the review period, partly due to a widespread recovery in Chinese consumer spending once the domestic economy re-opened. Stock-specific factors were also at play, as the company's efforts to improve its distribution channels have been well received by the market.

Our largest position, Taiwan Semiconductor Manufacturing (TSMC), a Taiwanese technology stock, was another notable contributor to performance over the review period. This company is the world leader in outsourcing semiconductor manufacturing. Surging demand for semiconductors for 5G mobile phone networks, high performance computing and artificial intelligence (AI) applications continue to support this stock. In TSMC's latest earnings call, management stressed their confidence in the company's ability to capitalise on the growth opportunities created by this strong demand, just as it did during 2010-2014, a previous period of high growth and heavy capital expenditure. We remain positive on the outlook for TSMC's earnings and cash flow growth, and we expect management to stand by its commitment to 'a sustainable and steadily increasing cash dividend'.

Conversely, Bid Corporation proved a drag on performance. This is a South African-listed food distribution company, with global operations supplying restaurants and other outlets. The business was hit hard in 2020 when COVID-19 restrictions forced its customers to cease or severely curtail trading. However, its long-term returns on equity, free cash flow generation and dividend policy underpin our view that Bid Corp remains a quality company and we continue to hold this stock, while monitoring its recovery potential.

Portfolio changes

During the review period, much of our portfolio activity focused on China. We added to existing positions in several Chinese consumer-related stocks, including Tingyi, a food and beverage manufacturer, Topsports, a sports apparel retailer with strong ties to international brands such as Nike and Adidas, and Yum China, a restaurant operator with exclusive rights to run KFC and Pizza Hut outlets in China. We believe these companies are strong business franchises offering attractive long-term dividend streams, and all have exposure to Chinese consumer demand, which is projected to grow strongly over the medium-term.

The pandemic has provided us with a unique opportunity to observe companies' behaviour; not only the ways in which they have adapted their businesses in response to the crisis, but also how they treat their customers, workers and other stakeholders during a time of extreme and unprecedented pressures. This influenced our positioning, for example, in Yum China where we were impressed by the company's treatment of its workforce during the COVID crisis. The company honoured commitments for scheduled hours even as stores were closed and enhanced medical insurance for staff and their families. Yum China also provided free meals to hospitals and community health centres in 28 provinces across China. Examples such as this provide a view on how management treats social concerns, something we think can help with the long term duration of the business.

We also increased our holding in Infosys, the Indian IT services company that is benefiting from the acceleration in companies' digital transformation efforts. Infosys has begun to pay-out the bulk of its free cash flow via dividends and buybacks, and this has increased its attractiveness as a source of investment income.

One negative development, related to US-China political tensions, was the issuance of an Executive Order from the US which restricts US persons from investing in certain Chinese companies that were deemed to have military links. Following on from this we sold our positions in both CNOOC and China Overseas Land (COLI). In the latter case, COLI was not directly named in the list but we re-evaluated the position in light of increased risk of ownership, leading to the sale.

We sold Sands China, a Hong Kong listed resort and casino operator, due to increasing concerns about its dividend paying capacity. Revenues have been severely affected by COVID-19 restrictions and although we expect the company to begin to recover as the hospitality and tourism sector re-opens, the pace of recovery is likely to be hesitant and the management has adopted a conservative approach to balance sheet leverage. These factors suggest that dividend recovery is likely to be slow and limited.

We also took some profits on our position in Jiangsu Yanghe Brewery. As discussed above, this was one of the portfolio's strongest performers over the review period. Our decision to reduce exposure was prompted by the strong share price rally, which left valuation levels - including the dividend yield - looking less attractive. We believe this partial sale is a good illustration of the discipline inherent in our investment process, which uses yields as a guide that encourages us to hold stocks during tougher times, while acting as a signal to re-consider position sizing during good times.

Our engagement on Environmental, Social and Governance (ESG) issues

We believe that sound environmental, social and governance (ESG) practices are extremely important to the sustainability of business models and we welcome the fact that more Emerging Market companies are explicitly recognising this fact and improving their practices accordingly. ESG considerations are therefore integral to our investment process. When considering potential investments, our analysts assess each company on a list of relevant issues, including its carbon emissions, renewable energy and recycling policies, employment and diversity practices and 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 motivations behind any split between dividends and buybacks.

Walmex, a Mexican consumer retailer which we added to last year, provides an example and illustrates how we apply these insights in practice. Our assessment of Walmex's ESG credentials was already positive before the pandemic and its response to the COVID-19 crisis, combined with its latest sustainability statements, added to our positive view. The company's treatment of its workforce during the crisis has been particularly impressive. It changed its salary payments from fortnightly to weekly, provided transportation for employees with difficult commutes and placed older store packers on paid leave. On the matter of sustainable sourcing, we felt management needed to commit to clearer targets and Walmex's latest sustainability statement took meaningful steps in this direction. The company adopted a policy of zero tolerance of deforestation for palm oil production, ensuring that the brands it supplies use palm oil only from 100% sustainable sources by the end of 2020 (compared to 85% in 2019). The company also committed to buy 100% of its seafood from certified sustainable sources, or those endorsed by the Fishery Improvement Project, by 2025 (versus 30% in 2019).

Outlook - Remaining cautious on dividends in the near term

The arrival of several effective vaccines and their relatively quick roll-out around the world has transformed the economic and financial market landscape. Economies should begin to recover, and although the pace of recovery remains uncertain, the long term outlook for sales, profits and cash flow have all improved.

Markets will discount this improvement before we see evidence of a rise in corporate earnings, and the recovery in dividends will, in turn, lag earnings increases, due to reporting timetables. We will therefore remain relatively cautious about dividend announcements across Emerging Markets in the near term. However, looking further ahead, we are confident about the earnings and dividend payment power of our portfolio companies. In our view, Emerging Markets continue to offer the potential for long term growth, and pay-out ratios should generally remain relatively steady, at around 35%.

As a reminder, we receive dividends from portfolio companies in local currencies and pay out dividends in sterling. Currency movements therefore have an impact on revenue receipts year-by-year. (All else being equal, a rising pound puts pressure on revenue receipts from Emerging Markets).

Across Emerging Markets, opportunities to invest in sound companies paying attractive dividends tend to cluster, resulting in portfolio tilts towards certain countries and sectors. This accounts for our significant overweight positions in Taiwan, Russia and Mexico. On a sectoral basis, we find many appealing income opportunities within Financials, Consumer Staples and Technology, so we are materially overweight these three sectors. It is worth noting that the performance of companies within these three key sectors is not uniformly reliant on the post-pandemic recovery, with many expected to benefit from longer-term structural changes.

We will remain focused on our long-term aim of investing in sound businesses, selecting stocks on the basis of their fundamental qualities, strong balance sheets and sustainable dividend policies. We believe this focus on quality businesses puts the Company's portfolio in a good position to successfully navigate current market conditions and we remain confident in its potential to deliver dividends and capital returns to shareholders with a long-term perspective.

Omar Negyal

Jeffrey Roskell

Isaac Thong

Investment Managers                                                                                                                           6th April 2021

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its interim report.

Principal Risks and Uncertainties

The principal and emerging risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment; strategy; financial; corporate governance and shareholder relations; operational and cybercrime; accounting, legal and regulatory; political and economic; environmental, social and governance; and climate change and global pandemics. Information on each of these areas is given in the Business Review within the Company's Annual Report for the year ended 31st July 2020.

Related Parties Transactions

During the first six months of the current financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least twelve months from the date of the approval of this half yearly financial report. In reaching that view, the Directors have considered the impact of the current Covid-19 pandemic on the Company's financial and operational position. With regard to the forthcoming continuation vote, the Directors have taken into account the continuation vote at the 2018 AGM which was strongly supported with 100% of votes cast in favour and expect a successful continuation vote to be passed at the 2021 AGM. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the financial statements.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)      the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reports' and gives a true and fair view of the state of the affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st January 2021, as required by the UK Listing Authority Disclosure Guidance and Transparency Rules ('DTR') 4.2.4R; and

(ii)     the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R.

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 accounting 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.

For and on behalf of the Board

Sarah Fromson

Chairman                                                                                                                                          6th April 2021

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST JANUARY 2021

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31^ST JANUARY 2021

¹     The balance of the share premium was cancelled on 20th October 2010 and transferred to the 'other reserve'.

²     These reserves form the distributable reserve of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION AT 31ST JANUARY 2021

Company registration number: 7273382

STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31ST JANUARY 2021

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31^ST JANUARY 2021

1.       Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st July 2020 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.       Accounting policies

The financial statements are prepared 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 October 2019.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015, and updated in March 2018, has been applied in preparing this condensed set of financial statements for the six months ended 31st January 2021.

All of the Company's operations are of a continuing nature.

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st July 2020.

3.       Return/(loss) per share

4.       Dividends paid

All dividends paid and declared in the six months period to 31st January 2021 have been funded from the revenue reserve.

A second interim dividend of 1.0p per share, amounting to £2,973,000 has been declared payable on 23rd April 2021 in respect of the year ending 31st July 2021.

5.       Net asset value per share

JPMORGAN FUNDS LIMITED

6th April 2021

For further information, please contact:

Robert King

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

ENDS

A copy of the 2021 Half Year 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 

The half year 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.