8th Oct 2014 16:23
LONDON (Alliance News) - JPMorgan Global Emerging Markets Income Trust PLC Wednesday said gross return rose in its last financial year, but return revenue per share fell and its net aset value total return underperformed its benchmark, and it said the outlook for its investments is "far from clear".
In a statement, the trust said its gross return from the year to July 31 was GBP17.4 million, up from GBP13.7 million in the previous 12 months, and net revenue return rose to GBP13.9 million, from GBP10.9 million. However, its net revenue return per share fell to 5.41 pence, from 5.45p, after it issued 44.1 million new shares during the year at a weighted average premium to the cum income net asset value of 1.7%.
Its total net asset value total return of 1.3% underperformed its benchmark, the MSCI Emerging Markets Index, which rose 3.6% in the year in sterling terms. Its strategy is to invest in companies in developing markets that are both willing and able to pay dividends.
"The board notes that some shareholders have voiced concern about the number of shares being issued by the company, the potential impact on the company's net asset value and on its ability to pay dividends," it said.
"The company issues shares only at a premium to the cum income net asset value. That premium, which is booked to the capital account, is designed to cover the costs of the issuance and the costs of investing the proceeds. For the year ended 31st July 2014, the impact of share issuance on the net asset value has been a positive +0.3%, which exceeds the minor dilution to earnings per share," it said.
"The company's shareholders include regular savers and holders who reinvest their dividends in new shares. The board believes that it is important not to allow the premium of the company's share price to net asset value to rise too high, as this adversely affects those shareholders," it added.
It has so far issued 6.4 million shares in the current financial year, and has paid three interim dividends of 1.0 pence a share and announced a fourth of 1.9p. The 4.9p dividend payout so far is flat on last year.
The trust said it is seeking shareholder authority at its forthcoming Annual General Meeting to issue a further 10% of the company's issued share capital. "The intention is to use this authority to meet the ongoing demand for the company's shares when they are trading at a premium to net asset value," it said.
The trust's investment manager said the fact it managed to maintain the total dividend in the last financial year was a "reasonable result" considering the downturn in profits and dividends experienced by many emerging market companies during the year.
"The outlook for the company's investments is far from clear. As the Investment Managers' report explains, the operating environment in emerging market economies is tough. The confluence of prospectively tighter US monetary policy, political developments and economic slowdown make it harder for companies to grow and even to maintain profits and dividends," the trust said in its statement.
"While the company has reported sufficient net income to maintain the amount of dividend paid for the year, the possibility that companies that are held in the portfolio cut their dividends should not be underestimated," it said.
"Currency movements also have a bearing on both the net asset value and earnings per share available for distribution. The Manager's forecasts indicate that the currencies in which the company's investments are denominated - and income is received - are about fairly valued against both the US dollar and pound sterling. It is not the Company's policy to hedge currency exposures; and, in most cases, the costs associated with any such hedging are prohibitive," it added.
"Inevitably, the company's income orientation leads to meaningful divergences of holdings and performance from a broad emerging market index. The strategy's inherent volatility, both in absolute terms and relative to the emerging market index, calls for patience and endurance, but the board believes that those virtues will, in time, be rewarded," it said.
The trust's shares closed down 0.6% at 119.75 pence on Wednesday.
By Steve McGrath; [email protected]; @stevemcgrath1
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