JPMorgan Asia G&I - Annual Financial Report
13/12/2024 07:00
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RNS Number : 9415P JPMorgan Asia Growth & Income PLC 13 December 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN ASIA GROWTH & INCOME PLC
FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2024
Legal Entity Identifier: 5493006R7BNJSKCB17
Information disclosed in accordance with the DTR 4.1.3
JPMorgan Asia Growth & Income plc ('JAGI' or the 'Company') has today
announced its annual financial results for the year ending 30th September
2024.
Highlights:
· NAV total return of +14.8% compared with +17.3% for the MSCI AC Asia
ex Japan Index (the 'Benchmark'). Share price return of +12.7%.
· In the ten years ended 30th September 2024, NAV total return +145.3%
compared with +104.2% for the Benchmark and +152.5% on a share price basis.
The Company has outperformed the benchmark in seven of the last ten calendar
years.
· The Board is recommending an increase in the Company's enhanced
dividend from 1.0% to 1.5% per quarter, i.e. a notional yield of 6% per annum,
in order to differentiate JAGI further from its peers and lead to additional
demand for its shares.
The Chairman of JAGI, Sir Richard Stagg, commented:
"The global landscape is unpredictable and uncertain. However, the prospects
for Asian economies remain positive - particularly when compared to the
relatively lacklustre growth projections of developed markets. Several key
structural and social changes will continue to support Asian growth, and
equity markets, over the longer term. These include urbanisation, education
and the rapid development of artificial intelligence. In addition, a range of
shorter term factors should contribute to economic growth; monetary easing,
China's stimulus packages and corporate governance reform in a number of Asian
economies.
"All these factors suggest that Asian markets remain attractive in both
absolute and relative terms. The Board shares the Portfolio Managers'
excitement about the many opportunities, this rapidly expanding region is
generating to invest in innovative, often world-leading businesses. While the
geopolitical environment is more unstable than usual, the Portfolio Managers'
track record of outright gains and outperformance over the long term are
testament to their abilities and their strategy's effectiveness, regardless of
the challenges presented by the investment environment."
JAGI's Portfolio Managers commented:
"The long-term outlook for Asia remains highly favourable. The region's
ongoing structural transformations, including urbanisation, infrastructure
development, and the rise of the middle class, will continue to drive economic
growth. Additionally, Asia's leadership in innovative industries such as
technology, renewable energy, and healthcare will provide significant
investment opportunities. In this promising environment, we are
well-positioned to capitalise on the opportunities presented by Asia's dynamic
markets. Our deep expertise, local market presence, and rigorous stock
selection process will enable us to identify and invest in high-quality
companies with strong growth potential."
Enquiries:
JPMorgan Asia Growth & Income plc
Investor Relations - Alexandra Ellaby, JPMorgan Funds Limited
E-mail: alexandra.ellaby@jpmchase.com (mailto:alexandra.ellaby@jpmchase.com)
Telephone: 0800 20 40 20 or +44 1268 44 44 70
CHAIRMAN'S STATEMENT
Performance and Market Background
I am pleased to present the Company's annual results for the year ended 30th
September 2024. Your Company achieved a strong positive return on net assets
of +14.8%, and a total return to shareholders of +12.7% over the review
period. However, the Company underperformed its benchmark index, the MSCI AC
Asia ex Japan Index, which returned +17.3% over the period. The Portfolio
Managers' report provides more detail.
The Company's relative performance is disappointing, but the Portfolio
Managers invest for the long term, so it is more appropriate to consider this
year's performance on the same basis. The Company has outperformed its
benchmark in most years over the past decade, delivering a ten year cumulative
NAV total return of +145.3%, compared with the benchmark's cumulative total
return of +104.2% over the same period. In share price terms, the Company's
cumulative total return was +152.5% over the past ten years. These returns
have been achieved in a variety of challenging market conditions and attest to
the effectiveness and robustness of the Portfolio Managers' investment
strategy and process.
The Portfolio Managers' Report which follows includes a market review and
details of performance and portfolio positioning, together with an assessment
of the outlook for Asian equity markets.
Dividend Policy
Since 2016 the Company's dividend policy has been to pay a regular, quarterly
'enhanced dividend', i.e. one funded from a combination of revenue and capital
reserves, and this is one of the advantages of the investment trust structure.
Historically, this has been equivalent to 1% of the Company's NAV, based on
the NAV on the last business day of each financial quarter, being the end of
December, March, June and September. This policy was designed to increase the
appeal of the Company to investors who have an income requirement, while
avoiding placing any constraints on our Portfolio Managers in their pursuit of
companies that offer compelling, long-term growth prospects. For the year
ended 30th September 2024, dividends paid totalled 16.0 pence (2023: 15.7
pence).
The Board is conscious that this policy was established at a time when
interest rates were low and that a notional dividend yield of 4% per annum is
not necessarily as attractive today as it was eight years ago. Following a
review with its advisers, the Board is recommending an increase in the
enhanced dividend to 1.5% per quarter, i.e. a notional yield of 6%. The view
is that this will further differentiate the Company from its peers and lead to
additional demand for its shares. Over time, this should lead to a narrower
discount and therefore reduce the number of shares that are bought back in
order to meet the discount target.
The Company's shareholders will be able to vote on the level of the dividend
at the Annual General Meeting on Wednesday, 19th February 2025, assuming that
support is forthcoming and the new level of dividend is approved, it will be
effective from 31st March 2025 and the dividend will be set at 1.5% of the
Company's NAV for subsequent quarters, in the absence of unforeseen
developments. In the Board's view, calculating the dividend quantum each
quarter is a prudent way of delivering an income which tracks performance and
does not put the Company under strain.
Shareholders are reminded that dividends are based on a percentage of net
assets, so the dividend paid to shareholders will reflect the Company's net
assets at each quarter end. Dividends will therefore be subject to market and
performance fluctuations and will vary from quarter to quarter, in line with
underlying earnings, currency movements and changes in the portfolio.
Premium/Discount and Share Capital Management
The discount at which the Company's shares trade has widened during the review
period, to 11.2% at 30th September 2024, from 9.2% at the end of the previous
financial year. This discount is broadly in line with the discounts of the
Company's immediate peers. The Board believes it is in shareholders' best
interests to limit the share price discount under normal market conditions and
has therefore used the Company's buy-back power over the year. The Company
repurchased a total of 12,156,156 shares (representing 13.4% of share capital
at the start of the year) and holds them in Treasury. Since the end of the
financial year, the Company has repurchased a further 3,596,249 shares. It is
important to note that such share buybacks are accretive to the NAV per share
of remaining shares in issue and added 5.1p per share to the NAV in the
financial year in question.
The Board is conscious that pursuing its existing discount policy through an
active buyback programme risks materially shrinking the size of the Company,
with implications for its ongoing costs and liquidity of its shares in the
secondary market. It believes that the proposed change to the level of
dividend will help to mitigate this risk.
As set out in the circular to shareholders dated 1st November, the Board and
the Investment Manager anticipated that, in the light of recent buy-back
activity, the Company's authority to repurchase Ordinary Shares granted at the
2024 Annual General Meeting would likely be fully utilised before it could be
refreshed at the Company's Annual General Meeting in 2025. In order to ensure
that the Company could continue to operate its discount management policy, on
18th November 2024 shareholders approved the early renewal of the Company's
authority to effectively repurchase up to 14.99% of its issued share capital
(such authority to expire at the conclusion of the 2025 Annual General
Meeting). Subsequent to this renewal, the Company has continued to use this
buy-back authority to ensure that, as far as possible, the Ordinary Shares
trade at a discount no wider than 8% to 10% relative to the underlying
cum-income net asset value per Ordinary Share.
Gearing
The Company currently has no loan facility in place. Its multi-currency loan
facility with ScotiaBank was retired in December 2023, as reported in the
Company's Half Year report. Considering the high levels of market volatility,
especially over recent months, the decision to avoid gearing the portfolio has
been appropriate. However, the Board continues to review actively the
Company's debt arrangements which includes the potential use of contracts for
difference (CFDs) for gearing. The Board regularly discusses gearing with the
Portfolio Managers, as it has the potential to enhance performance.
Environmental, Social and Governance (ESG) issues
The Company has not sought any sustainability label under the new
Sustainability Directive Regime. However, the Board has continued to engage
with the Investment Manager on the integration of ESG factors into its
investment process. The Board shares the Manager's view of the importance of
financially material ESG factors when making investments for the long term
and, in particular, the necessity of continued engagement with investee
companies throughout the duration of the investment. The Portfolio Managers'
ESG report, (see page 25 of the of the Company's Annual Report and Financial
Statements for the year ended 30th September 2024 -'2024 Annual Report')
describes the developments in the ESG process that have taken place during the
year together with examples of how these are implemented in practice.
Earlier this year, the Investment Manager published a document containing its
latest Investment Stewardship Priorities, which may be of interest to
shareholders. This can be found at:
https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/sustainable-investing/investment-stewardship-report.pdf
(https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/sustainable-investing/investment-stewardship-report.pdf)
Board Succession
The Board plans for succession to ensure it retains an appropriate balance of
skills, knowledge and diverse perspectives. As reported in the Half Year
Report, following Dean Buckley's retirement at the February 2024 Annual
General Meeting, June Aitken became the Chair of the Audit Committee, and
Peter Moon the Senior Independent Director.
The Board can confirm that its current composition is compliant with all
applicable diversity targets for UK companies listed on the London Stock
Exchange. It is the Board's intention that this will continue to be the case.
The Manager and Costs
Through the remit of the Management Engagement Committee ('MEC'), the Board
has reviewed the Manager's performance and its fee arrangements with the
Company. Based upon its performance record and taking all factors into
account, including other services provided to the Company and its
shareholders, the MEC and the Board are satisfied that JPMF should continue as
the Company's Manager, and that its ongoing appointment remains in the best
interests of shareholders.
Furthermore, the Board notes that, with a management fee equivalent to 0.6% of
the Company's market capitalisation and an ongoing charge of 0.78%, the
Company has one of the most competitive fee structures in the Asian Pacific
Equity Income sector.
Portfolio Management team
On 3rd December 2024 the Board announced that, after eight years as a
Portfolio Manager, Ayaz Ebrahim would be stepping down with immediate effect.
This followed his appointment as CEO for Singapore and South East Asia for
JPMorgan Asset Management earlier this year. The Board would like to thank
Ayaz for his significant contribution to the Company over the past eight years
and wish him every success in his future endeavours.
The Board is pleased to note that that the Company's portfolio will continue
to be managed by Robert Lloyd and Pauline Ng. Robert, who is based in Hong
Kong, has been the co-manager of the Company's portfolio for the last six
years. Pauline, who is based in Singapore, is a highly experienced investor,
with 23 years' industry experience and she has an excellent record of
investing in ASEAN equities. She was appointed as a Portfolio Manager to the
Company in August this year. The two portfolio managers have worked within
the same team for over 15 years.
The Board has been impressed with the nascent partnership between Robert and
Pauline and see it as hugely complementary given their locations and
experience. The Board believes that JPMorgan's extensive presence across the
region represents a significant advantage in the process of identifying
attractive investment opportunities in Asia.
Enhancements to the Investment Approach
The Board recognises the importance of the Company's core approach, which has
consistently outperformed its benchmark over five and ten years. That said,
the Board is conscious of the advantages of optimising the investment trust
structure as well as the flexibility the closed-end vehicle provides to
amplify returns over the longer term. As a result, the Board has encouraged
the Portfolio Managers to increase the active share on the portfolio and be
prepared to invest in off-benchmark positions and mid or small cap
opportunities. The Portfolio Managers are focused on generating outperformance
through consistent, positive stock selection rather than taking significant
over or underweight positions, by country or sector, compared with the
benchmark.
The Board has also approved amendments to the investment restriction
guidelines. These changes are not considered to be material and are made in
the best interests of the Company, enabling the Portfolio Managers maximum
permitted active exposure to each country of 15% above or below the benchmark
index weighting. Additionally, the Company will not invest materially more
than 10% of its gross assets or materially exceed a 3% active weight over the
benchmark (whichever is larger) in any one individual stock. The revised
Investment Policy is set out in full on page 29 of the 2024 Annual Report..
Stay Informed
The Company is committed to engaging with its shareholders and in particular
those with smaller holdings who invest via platforms. To support this goal,
the Company delivers email updates on the Company's progress with regular news
and views, as well as the latest performance data. 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/JAGI-Sign-Up (https://tinyurl.com/JAGI-Sign-Up)
or by scanning the QR code on page 14 of the 2024 Annual Report.
Annual General Meeting
The Company's Annual General Meeting (AGM) will be held on Wednesday, 19th
February 2025 at 11.00 a.m. at 60 Victoria Embankment, London EC4Y 0JP. The
Investment Managers will give a presentation to shareholders, reviewing the
past year and commenting on the outlook for the current year. The AGM will
provide an opportunity to introduce Pauline Ng, the new member of the
portfolio management team.
We look forward to seeing as many shareholders as possible at the AGM. For
shareholders wishing to follow the AGM proceedings, but choosing not to
attend, we will be able to welcome you through conferencing software. Details
on how to register, together with access details, will be available on the
Company's website: www.jpmasiagrowthandincome.co.uk
(http://www.jpmasiagrowthandincome.co.uk) , or by contacting the Company
Secretary at invtrusts.cosec@jpmorgan.com
(mailto:invtrusts.cosec@jpmorgan.com) .
As is normal practice, all voting on the resolutions will be conducted by a
poll. Shareholders viewing the meeting via conferencing software will not be
able to vote on the poll. We therefore strongly encourage all shareholders,
and particularly those who cannot physically attend, to exercise their votes
in advance of the meeting by completing and submitting their form of proxy.
If you have any detailed or technical questions, it would be helpful if you
could raise them in advance with the Company Secretary at 60 Victoria
Embankment, London EC4Y 0JP or via the 'Ask a Question' link on the Company's
website.
Outlook
The global landscape is currently marked by significant unpredictability. A
growing number of political leaders are moving away from the Bretton Woods
consensus and the belief that free trade is a key driver of global economic
growth. The President-elect of the United States has indicated plans to
implement a series of tariffs on imports, with a particular emphasis on China.
Meanwhile, the conflict in Ukraine persists and uncertainty in the Near East
has been further exacerbated by recent events in Syria (however potentially
welcome) , while recent developments in Korea caught markets unaware.
Additionally, President Xi's public declarations suggest a steadfast
commitment to the reunification of China and Taiwan, by any means deemed
necessary.
Nonetheless, I believe the prospects for Asian economies remain positive -
more so when compared to the relatively lacklustre growth projections of
developed markets. The Chinese government's autumn stimulus packages suggest
that it is becoming more serious about boosting consumer spending and
supporting the still ailing property sector. If these measures are effective,
they have the potential to provide fresh impetus to growth across the region.
So too does monetary easing by Asian central banks, which appears imminent.
The US Federal Reserve cut rates by more than expected in September, and
further cuts can be expected this year and in 2025. This would open the way
for Asian central banks to follow suit.
Elsewhere on the policy front, Korea's corporate governance reforms, which are
aimed at improving capital efficiency, are already lifting shareholder returns
via increased dividends and share buybacks albeit the recent political
turbulence there requires careful watching. The Chinese authorities have also
increased their focus on shareholder returns. If Japan's experience is any
indication, the favourable ramifications of these reforms for shareholder
returns will continue for years. Indeed, the early success of Korea's reforms,
and the Japanese market's impressive, dividend driven rebound over the past
year, are inspiring other Asian countries to focus on improving shareholder
returns in their markets. Several other key structural and social changes will
also continue to support Asian growth, and equity markets, over the longer
term. These include the rapid development of artificial intelligence and the
more general trend towards digitalisation, urbanisation, infrastructure
development and the expansion of the middle class.
All these factors suggest that Asian markets remain extremely attractive in
both absolute and relative terms. The Board shares the Portfolio Managers'
excitement about the many opportunities, this rapidly expanding region is
generating to invest in innovative, often world-leading businesses. While the
geopolitical environment is more unstable than usual, as evidenced by the
recent news from South Korea, the Portfolio Managers' track record of
outright gains and outperformance over the long term are testament to their
abilities and the strategy's effectiveness, regardless of the challenges
presented by the investment environment. My fellow Board members and I are
therefore confident in the Company's ability to continue delivering capital
gains and an attractive income to shareholders over the long term.
On behalf of the Board, I would like to thank you for your continuing support.
Sir Richard Stagg
Chairman
12th December 2024
PORTFOLIO MANAGERS' REPORT
The Market Environment in 2024
Market returns were strong for the fiscal year, with the Company's benchmark
index returning +17.3%. However, there was a considerable dispersion in the
performance by country, with four regions seeing gains of more than 20%
(Taiwan, India, Malaysia and Singapore), while Indonesia and Korea were the
only two markets that finished in negative territory for the year.
China remained a focal point for Asian markets throughout 2024. The previous
year's economic challenges persisted, with the ongoing property crisis, lower
exports, and fresh geopolitical concerns continuing to weigh on market
sentiment. Despite these headwinds, there were signs of stabilisation in the
latter half of the year as government stimulus measures began to take effect.
The MSCI China Index rose by 12.7%, however Hong Kong's market performance
remained subdued, reflecting broader uncertainties in the region.
Indonesia's market faced mixed fortunes in 2024. While GDP growth continued at
a robust pace of around 5%, the Rupiah's depreciation slowed to approximately
8%, providing some relief to the market. The Indonesian stock market managed
to post a slight gain, buoyed by strong domestic consumption and
infrastructure investments.
The continued evolution and integration of artificial intelligence (AI)
technologies, spearheaded by advances in Microsoft's ChatGPT and other AI
tools, sustained investor interest. The potential for AI to revolutionise
various sectors kept tech stocks in the spotlight. The Taiwan market continued
to perform well, driven by strong demand in the semiconductor sector, despite
ongoing challenges in the consumer electronics market.
Returns in Korea were also mixed, with a strong start to similar trends as
Taiwan and the government's initiative to improve governance in the corporate
sector. However, Samsung Electronics, in particular, faced temporary
challenges in their memory business where they have missed out on some of the
positive trends driven by AI.
Malaysia saw broad based growth in manufacturing and construction, driving GDP
upgrades through 2024. Increased foreign direct investment (FDI) for data
centres and plans for a special economic zone in Johor, jointly with
Singapore, also spurred a return of foreign investors to Malaysian equities.
Singapore's strong performance was mainly driven by the recovery in Sea
Limited's share price, which more than doubled in US dollar terms on the back
of improving competitiveness, while index heavyweights like Singtel and DBS
also delivered better than expected capital returns to shareholders.
India's market experienced a robust year, with economic growth remaining
strong and investor confidence bolstered by positive reforms and
infrastructure projects.
Performance
The Company underperformed its benchmark over the period, returning +14.8% on
a net asset value ('NAV') total return basis (in Sterling terms), compared
with a return for the benchmark of +17.3%. The Company has outperformed the
benchmark in all but three of the last ten calendar years, a long span of time
over which market conditions have fluctuated widely. In the ten years ended
30th September 2024, the Company has delivered a cumulative total return of
+145.3% in NAV terms and +152.5% on a share price basis, well above the
benchmark's cumulative total return of +104.2%. On an annualised returns
basis, these equate to +9.4% in NAV terms, 9.7% on share price and +7.4% for
the benchmark.
Performance attribution
30th September 2024
% %
Contributions to total returns
Benchmark return 17.3
Stock selection -2.2
Currency effect 0.1
Gearing/(net cash) -0.3
Investment Manager contribution -2.4
Portfolio return 14.9
Management fee and other expenses -0.8
Impact of the provision for Indian capital gains tax -0.7
Share buyback 1.4
Return on net assets(APM) 14.8
Effect of movement in discount over the year 2.1
Return to shareholders(APM) 12.7
Source: FactSet, JPMAM and Morningstar. All figures are on a total return
basis.
Performance attribution analyses how the Company achieved its recorded
performance relative to its benchmark index.
(APM ) Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on pages 103 to 105 of the 2024
Annual Report.
Attribution
The largest detractor to the fund's performance over the fiscal year was
Meituan, China's leading food delivery platform. Increased scrutiny and
regulatory actions from the Chinese authorities impacted the company's
operations and investor confidence. This included tighter regulations on data
privacy, antitrust measures, and labour practices affecting gig economy
workers. Additionally, the broader economic slowdown in China affected
consumer spending and overall market sentiment. This had a direct impact on
Meituan's core businesses, such as food delivery and travel services. Other
detractors included HDFC Bank, India's largest private bank. The company's
post-merger operations have suffered slow deposit growth and tight system
liquidity, resulting in very little earnings growth during the year.
Positive contributors included overweights in the technology sector such as SK
Hynix, a Korean semiconductor manufacturer, which outperformed on the back of
their leadership in high bandwidth memory chips used in AI servers. Sales of
these chips accounted for roughly 15% of total dynamic random-access memory
(DRAM) chip sales in the first half of the calendar year. Demand for
AI-powered processes also supported Foxconn Industrial, a Chinese company that
benefitted from rising orders for data centre assembly.
Portfolio Activity
Significant transactions for the Company over the fiscal year included the
purchase and overweighting of Alibaba from a zero weight. Alibaba is a leading
Chinese multinational conglomerate specialising in e-commerce, retail,
internet, and technology. It operates various platforms, including Taobao and
Tmall, which connect consumers and businesses for online shopping.
Additionally, Alibaba provides cloud computing services, digital media, and
entertainment, expanding its influence across multiple sectors globally. The
fund also purchased an off benchmark position in Telstra, Australia's largest
telecommunications company, providing a wide range of services including
mobile, internet, and pay television. It also offers network services and
solutions for businesses, leveraging its extensive infrastructure and
technology expertise.
Outright sales included two names in China. Firstly, Baidu, which is a leading
Chinese technology company specialising in internet-related services and
products, including its popular search engine, artificial intelligence, and
cloud computing. The outlook for the company to monetise its internal large
language model (LLM) model, which is called ErnieBot, deteriorated as
competition led management to reduce pricing. Despite having excess cash on
the balance sheet, management have not outlined plans to pay this out to
minority shareholders. Secondly, was the sale of Foxconn International, which
specialises in designing, developing, and assembling a wide range of
electronic products, including smartphones and other consumer electronics for
major global brands. Foxconn is a subsidiary of Hon Hai Precision Industry
Co. Ltd., a leading electronics manufacturing services provider. The shares
performed well during the fiscal period, primarily due to increased orders for
AI server assembly.
Outlook for 2025
Western economies may begin to stabilise as tighter monetary policies take
effect and inflationary pressures ease. Growth in developed markets is
expected to remain modest, with projections around 1.5% to 2%. Structural
challenges, such as ageing population and high debt levels, may continue to
constrain more robust growth.
In contrast, Asia is poised to maintain its growth trajectory. The Chinese
economy is expected to stabilise, with growth rates of around 4% to 4.5%,
supported by ongoing government initiatives to boost domestic consumption and
investment in key sectors. India is likely to continue its strong performance,
with growth rates above 6%, driven by structural reforms, digitalisation, and
a young, dynamic workforce. The broader Asian region is projected to grow at
around 5%, benefiting from increased intra-regional trade, technological
advancements, and rising consumer demand.
The long-term outlook for Asia remains highly favourable. The region's ongoing
structural transformations, including urbanisation, infrastructure
development, and the rise of the middle class, will continue to drive economic
growth. Additionally, Asia's leadership in innovative industries such as
technology, renewable energy, and healthcare will provide significant
investment opportunities. The MSCI AC Asia ex Japan Index is expected to
reflect these positive trends, with valuations potentially rising as investor
confidence grows.
In this promising environment, we are well-positioned to capitalise on the
opportunities presented by Asia's dynamic markets. Our deep expertise, local
market presence, and rigorous stock selection process will enable us to
identify and invest in high-quality companies with strong growth potential. We
remain committed to delivering attractive returns and long-term outperformance
for our investors by leveraging our insights and experience in the region.
Robert Lloyd
Pauline Ng
Ayaz Ebrahim
Portfolio Managers
12th December 2024
PRINCIPAL & EMERGING RISKS AND UNCERTAINTIES
The Directors confirm that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. The risks
identified and the ways in which they are managed or mitigated are summarised
below. With the assistance of JPMF, the Audit Committee has drawn up a risk
matrix, which identifies the principal risks to the Company. These are
reviewed and discussed on a regular basis by the Board. The identified risks,
their categories, and the strategies for managing or mitigating them are
summarised below. The AIC Code of Corporate Governance requires the Board, via
the Audit Committee, to put in place procedures to identify and manage
emerging risks. Emerging risks, which are not deemed to represent an immediate
threat, are considered by Audit Committee as they come into view and are
incorporated into the existing review of the Company's risk register. However,
since emerging risks are likely to be more dynamic in nature, they are
considered on a more frequent basis, through the remit of Board when the Audit
Committee does not meet. The key principal and emerging risks identified are
summarised below.
Principal risk Description Mitigating activities Movement from prior year
Investment Strategy and Process An inappropriate investment strategy, or one that is poorly implemented, may The Board mitigates this risk through its investment policy and guidelines, The risk remains high but unchanged from 2023.
lead to underperformance against the Company's benchmark index and peer which are monitored and reported on regularly by the Manager. The Board
companies, resulting in the Company's shares trading on a wider discount. monitors the implementation and results of the investment process with the
Prolonged and substantial underperformance of significant markets such as Portfolio Managers and reviews data which details the portfolio's holdings and
China and India may result from various risks including restrictions on the risk profile. The Board holds a meeting specifically on strategy annually.
free movement of capital, sanctions or other restrictions imposed by the UK or
other governments.
Geopolitical and Geopolitical risk is the potential for political, socio-economic and cultural There is little direct control of the risks from the interconnected nature of The risk remains high.
events and developments to have an adverse effect on the value of the political, economic, and social factors that can impact the investment
Economic Company's assets. There appears to be an increasing risk to market stability environment. However, it can be managed to some extent by diversification of There is little direct control of risk possible. The Company addresses these
and investment opportunities from the increasing number of worldwide investments, active monitoring, flexible investment strategies and robust due global developments in regular questioning of the Manager and with external
geopolitical conflicts. The Company and its assets may be impacted by diligence on investee companies. This is aided by regular communication with expertise and continues to monitor these issues, should they develop.
geopolitical instability, in particular concerns over global economic growth, the Investment Manager about in-house research, matters of investment strategy
rising political turbulence and in particular the heightened threat of tariffs and portfolio construction, which will directly or indirectly include an
on exported goods. assessment of these risks to navigate the complexities of the global
landscape, position the Company for long-term success and protect shareholder
value.
Investing in China Investing in China exposes the Company to idiosyncratic country risk and The Board has access to a range of expert resources and strategists both The risk remains high.
actions taken by the Chinese government, such as changes to regulation, or within JPMAM and externally, who can provide long term insight and guidance on
international tensions which may lead investors to reduce or completely geopolitical developments likely to impact investments in China. In addition, There is little direct control of risk possible. The Board specifically
withdraw their investments in China. In addition, the introduction of new unlike its passive competitors, as an actively managed fund the Portfolio discusses the risks associated with investing in China at each Board meeting
policies and regulations could result in increased oversight and restrictions Managers can adapt the portfolio to a changing regulatory environment. The and monitors the position.
over the free movement of assets, including American Depositary Receipts Manager regularly provides updates on regulatory and political developments as
(ADRs), Variable Interest Entity Structures (VIEs), and A-Shares. necessary. The Manager regularly provides updates on regulatory and political
developments as necessary.
The Portfolio Managers incorporate market data, economic insights, and
pertinent political analysis in their quarterly reports to the Board.
Investment Team The departure of or a failure to replace adequately a portfolio manager or The Manager has a depth of experienced investment resources and takes steps to The risk remains medium.
several members of the investment management team could result in a reduce the consequences of such an event by ensuring appropriate succession
deterioration in investment performance. planning and the adoption of a team-based approach. The Board is comfortable with the process around changes to the investment
team.
Operational Resilience and Security The Company is dependent on third parties for the provision of all of its The Board will regularly review the Business Continuity Plans ('BCP') for the The risk remains high.
services and systems, especially those of the Manager, the Administrator, the Manager, Depositary and Registrar. The Managers' BCP is designed to
Depositary and the Registrar. Improper access, disruption to, failure of or accommodate potential threats and are regularly updated, tested, monitored and The Board receives updates from JPMF's information security manager.
inadequate service levels of these parties' accounting, dealing or payments reported to the Board. The Manager has assured the Board that the Company
systems or the custodian's, depositary's or registrar's records could prevent benefits directly or indirectly from all elements of JPMorgan's Cyber Security To date the Manager's cyber security arrangements have proven robust and the
accurate reporting and monitoring of the Company's financial position or loss programme. Company has not been impacted by any cyber attacks threatening its operations.
of confidential data.
Share Price Relative to Net Asset Value The shares trading at an excessive discount or premium to Net Asset Value can The Board monitors the Company's premium/discount level and is committed to The risk remains high.
negatively impact shareholders, while fluctuations in the rating can lead to defend a share price discount to NAV of between 8% and 10% in normal market
volatile returns for shareholders. circumstances through the use of buybacks. The Board regularly reviews and monitors the Company's objective and
investment policy and strategy, the investment portfolio and its performance,
the level of discount/premium to net asset value at which the shares trade and
movements in the share register. During the year the Company continued to
conduct share buybacks.
Accounting, Legal and Regulatory A breach of regulatory rules or a failure to maintain accurate accounting Accounting, legal and regulatory compliance are continually monitored by the The risk remains medium.
records could result in loss of investment trust status, reputational damage, Manager and the Auditors and the results reported to the Board. In addition,
financial penalties, suspension of the Company's listing or a qualified audit the Board, the Manager and its professional advisers monitor changes in Changes to the regulatory landscape are inevitable.
report. legislation which may have an impact on the Company.
Viability of Company in terms of size As a result of the existing discount target, pursued through buybacks, and The Manager and Broker provide regular updates on how the Company is perceived This risk has increased as a result of the level of share buybacks over the
market moves, the size of the Company falls below a level that is deemed by investors, while the Directors consider the viability of the Company over a last year.
viable, with a reduction in liquidity of its shares and an increasing cost five-year period annually as part of the going concern review. In addition,
base. This would reduce the attractiveness of the Company to investors, the discount target and buyback policy is reviewed annually.
particularly the largest wealth managers who require greater liquidity.
Maintaining Effective and Appropriate Controls The Company has no employees and is therefore dependent on the services of The Company operates through contractual agreements with its service The risk remained stable during the year.
third-party providers. Failure to maintain effective and appropriate controls providers, which the Manager is also party to. The Board receives regular
could result in reputational damage, interruption to operations or financial internal controls reports and monitors and evaluates the performance of the
loss. Company's service providers, with the assistance of the Manager, and ensures
that any material non-compliance or weaknesses in the controls are reported
to the Board.
Widespread Social and Economic Disruption Recent examples such as the Global Financial Crisis or the Covid-19 pandemic The Board will monitor the resilience of service providers' Business The risk remains medium.
may have ended or abated, but disruption may reoccur for several reasons. Continuity Plans. The Board also reviews reports on the Company's 'Going
Concern' status in stress test scenarios.
Climate Change Climate change could present a material risk to the value of investee The Manager's investment process integrates considerations of environmental, The risk remained stable during the year.
companies and the operations of the Company and its service providers. social and governance ("ESG") risk factors, including climate change, into its
approach to assess the potential impact on investee companies.
The Manager and other third-party providers incorporate consideration of the
impacts of climate change into their Business Continuity Plans ('BCP's').
EMERGING RISKS
The Board has considered and kept under review emerging risks, including but
not limited to the impact of climate change, geopolitical conflict,
inflationary pressures, social dislocation and conflict and technological
advances. The key emerging risks identified are as follows:
State-backed Cyber Security Attack
A State-backed cyber security attack could result in widespread disruption to
the financial system and markets leading to financial loss, loss of
confidential data, or disruption to the Company's operations and its service
providers.
Artificial Intelligence ('AI')
Advances in computing power mean that AI has become a powerful tool that will
impact a wide range of applications with potential to disrupt the Company's
operations and investments. The Board will monitor developments in this area
carefully both in conjunction with the Manager and other external experts when
appropriate and consider how this risk might threaten the Company's
activities.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report on
pages 46 and 47 of the 2024 Annual Report.. The management fee payable to the
Manager for the year was £1,736,000 (2023: £2,039,000) of which £nil (2023:
£nil) was outstanding at the year end.
Safe custody fees amounting to £152,000 (2023: £159,000) were payable to
JPMorgan Chase Bank N.A. during the year of which £39,000 (2023: £67,000)
was outstanding at the year end.
The Manager may carry out some of its dealing transactions through group
subsidiaries. These transactions are carried out at arm's length. The
commission payable to JPMorgan Securities Limited for the year was £nil
(2023: £2,000) of which £nil (2023: £nil) was outstanding at the year end.
Handling charges on dealing transactions amounting to £36,000 (2023:
£28,000) were payable to JPMorgan Chase Bank N.A. during the year of which
£10,000 (2023: £12,000) was outstanding at the year end.
During the year the Company held cash in the JPMorgan USD Liquidity Fund,
which is managed by JPMorgan. At the year end this was valued at £1,171,000
(2023: £8,000). Interest amounting to £92,000 (2023: £50,000) was
receivable during the year of which £nil (2023: £nil) was outstanding at the
year end.
Stock lending income amounting to £28,000 (2023: £46,000) were receivable by
the Company during the year. The Manager's commissions in respect of such
transactions amounted to £3,000 (2023: £5,000).
At the year end, the Company held cash of £2,350,000 (2023: cash of £199,000
and an overdraft of £1,058,000) with JPMorgan Chase Bank N.A. A net amount of
interest of £6,000 (2023: £4,000) was receivable by the Company during the
year of which £nil (2023: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on
pages 59 to 61 and in note 6 on page 80 of the 2024 Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of Ireland' and
applicable law). Under company law the Directors must not approve the
financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing the financial statements, the Directors
are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable United Kingdom Accounting Standards,
comprising FRS 102, have been followed, subject to any material departures
disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and
prudent; and
• prepare the financial statements on the going concern basis, unless it
is inappropriate to presume that the Company will continue in business, and
the Directors confirm that they have done so.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements and the Directors'
Remuneration Report comply with the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2013.
The Directors 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 Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.
Under applicable law and regulations the Directors are also responsible for
preparing a Strategic Report, a Directors' Report and Directors' Remuneration
Report that comply with the law and those regulations.
Each of the Directors, whose names and functions are listed in the Directors'
Report confirm that, to the best of their knowledge:
• the Company's financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland', and applicable law),
give a true and fair view of the assets, liabilities, financial position and
profit of the Company; and
• the 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 & Financial
Statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company's
performance, business model and strategy.
For and on behalf of the Board
Sir Richard Stagg
Chairman
12th December 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30th September 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 - 39,462 39,462 - 16,289 16,289
Net foreign currency (losses)/gains - (415) (415) - 114 114
Income from investments 7,000 - 7,000 8,304 - 8,304
Interest receivable and similar income 126 - 126 100 - 100
Gross return 7,126 39,047 46,173 8,404 16,403 24,807
Management fee (1,736) - (1,736) (2,039) - (2,039)
Other administrative expenses (821) - (821) (827) - (827)
Net return before finance costs and taxation 4,569 39,047 43,616 5,538 16,403 21,941
Finance costs (20) - (20) (52) - (52)
Net return before taxation 4,549 39,047 43,596 5,486 16,403 21,889
Taxation (692) (2,507) (3,199) (846) (219) (1,065)
Net return after taxation 3,857 36,540 40,397 4,640 16,184 20,824
Return per share 4.51p 42.75p 47.26p 4.94p 17.22p 22.16p
STATEMENT OF CHANGES IN EQUITY
For the year ended 30th September 2024
Called up Exercised Capital
share Share warrant redemption Capital Revenue
capital premium reserve reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30th September 2022 24,449 46,705 977 25,121 261,308 - 358,560
Repurchase of shares into Treasury - - - - (19,801) - (19,801)
Net return - - - - 16,184 4,640 20,824
Dividends paid in the year (note 10) - - - - (10,114) (4,640) (14,754)
At 30th September 2023 24,449 46,705 977 25,121 247,577 - 344,829
Repurchase of shares into Treasury - - - - (42,765) - (42,765)
Proceeds from share forfeiture(2) - - - - 426 - 426
Net return - - - - 36,540 3,857 40,397
Dividends paid in the year (note 10) - - - - (9,403) (4,067) (13,470)
Forfeiture of unclaimed dividends (note 10)(2) - - - - - 210 210
At 30th September 2024 24,449 46,705 977 25,121 232,375 - 329,627
(1) These reserves form the distributable reserves of the Company and
may be used to fund distributions to investors.
(2) During the period, the Company undertook an Asset Reunification
Program to reunite inactive shareholders with their shares and unclaimed
dividends. Pursuant to the Company's Articles of Association, the Company has
exercised its right to reclaim the shares of shareholders whom the Company,
through its previous Registrar, has been unable to locate for a period of 12
years or more. These forfeited shares were sold in the open market by the
Registrar and the proceeds, net of costs, were returned to the Company. In
addition, any unclaimed dividends older than 12 years from the date of payment
of such dividends were also forfeited and returned to the Company.
STATEMENT OF FINANCIAL POSITION
At 30th September 2024
2024 2023
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 332,252 342,829
Current assets
Debtors 2,948 3,680
Cash and cash equivalents 3,521 207
6,469 3,887
Current liabilities
Creditors: amounts falling due within one year (6,613) (1,641)
Net current (liabilities)/assets (144) 2,246
Total assets less current liabilities 332,108 345,075
Provision: Indian capital gains tax (2,481) (246)
Net assets 329,627 344,829
Capital and reserves
Called up share capital 24,449 24,449
Share premium 46,705 46,705
Exercised warrant reserve 977 977
Capital redemption reserve 25,121 25,121
Capital reserves 232,375 247,577
Total equity shareholders' funds 329,627 344,829
Net asset value per share 417.9p 378.8p
STATEMENT OF CASH FLOWS
For the year ended 30th September 2024
2024 2023
£'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 43,616 21,941
Adjustment for:
Net gains on investments held at fair value through profit or loss (39,462) (16,289)
Net foreign currency losses/(gains) 415 (114)
Dividend income (6,852) (8,289)
Interest income (98) (54)
Scrip dividends received as income (148) (15)
Realised (gains)/losses on foreign exchange transactions (195) 232
Realised exchange (losses)/gains on USD Liquidity Fund (178) 125
Increase in accrued income and other debtors (11) (7)
(Decrease)/increase in accrued expenses (17) 68
Net cash outflow from operations before dividends, interest and taxation (2,930) (2,402)
Dividends received 6,182 7,444
Interest received 98 54
Overseas withholding tax recovered 21 -
Indian capital gains tax (paid)/recovered (272) 27
Net cash inflow from operating activities 3,099 5,123
Purchases of investments (216,601) (178,025)
Sales of investments 273,018 206,375
Net cash inflow from investing activities 56,417 28,350
Dividends paid (13,470) (14,754)
Repurchase of shares into Treasury (42,245) (19,731)
Proceeds from share forfeiture 426 -
Forfeiture of unclaimed dividends 210 -
Interest paid (23) (52)
Net cash outflow from financing activities (55,102) (34,537)
Increase/(decrease) in cash and cash equivalents 4,414 (1,064)
Cash and cash equivalents at start of year (851) 454
Exchange movements (42) (241)
Cash and cash equivalents at end of year 3,521 (851)
Cash and cash equivalents consist of:
Cash and short term deposits 2,350 199
Money market fund - JPMorgan USD Liquidity Fund 1,171 8
Cash and cash equivalents per the Statement of Financial Position 3,521 207
Bank overdraft (included as part of current liabilities) - (1,058)
Total cash, cash equivalents and bank overdraft per the Statement of Cash 3,521 (851)
Flows
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 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 compliance with
debt covenants in assessing the going concern and viability of the Company.
The Directors have also reviewed income and expense projections and the
liquidity of the investment portfolio in making their assessment. The Company
passed its continuation vote at the Company's 2024 Annual General Meeting and
the next continuation vote will be considered at the Annual General Meeting in
2026. The disclosures on going concern on page 55 of the Directors' Report in
the 2024 Annual Report form part of these financial statements. 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 quarterly dividend in respect of prior year 3.8 3,450 3.7 3,569
First quarterly dividend 3.7 3,270 4.0 3,789
Second quarterly dividend 3.9 3,312 4.0 3,771
Third quarterly dividend 4.2 3,438 3.9 3,625
Total dividends paid in the year 15.6 13,470 15.6 14,754
Forfeiture of unclaimed dividends over
12 years old1 - (210) - -
Net dividends paid 15.6 13,260 15.6 14,754
Dividends declared
Fourth quarterly dividend declared 4.2 3,288 3.8 3,447
(1) The unclaimed dividends were forfeited following an extensive
exercise which attempted to reunite the dividends with owners.
The fourth interim dividend proposed in respect of the year ended 30th
September 2023 amounted to £3,447,000. However, the amount paid amounted to
£3,450,000 due to ordinary shares repurchased after the balance sheet date
but prior to the record date.
A fourth quarterly dividend of 4.2p has been declared and was paid on 22nd
November 2024 for the financial year ended 30th September 2024.
In accordance with the accounting policy of the Company, this dividend will be
reflected in the financial statements for the year ending 30th September 2025.
(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act
2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of the dividend
proposed in respect of the financial year, shown below.
The aggregate of the distributable reserves is £163,613,000 (2023:
£206,474,000).
2024 2023
Pence £'000 Pence £'000
First quarterly dividend paid 3.7 3,270 4.0 3,789
Second quarterly dividend paid 3.9 3,312 4.0 3,771
Third quarterly dividend paid 4.2 3,438 3.9 3,625
Fourth quarterly dividend paid 4.2 3,288 3.8 3,447
Total dividends for Section 1158 purposes 16.0 13,308 15.7 14,632
The aggregate of the distributable reserves after the payment of the final
dividend will amount to £160,325,000 (2023: £203,027,000).
3. Return per share(A)
The Revenue, Capital and Total return shown below, is the Net return after
taxation in the Statement of Comprehensive Income on page 81 of the 2024
Annual Report.
2024 2023
£'000 £'000
Revenue return 3,857 4,640
Capital return 36,540 16,184
Total return 40,397 20,824
Weighted average number of shares in issue during the year 85,475,668 93,970,338
Revenue return per share(A) 4.51p 4.94p
Capital return per share(A) 42.75p 17.22p
Total return per share 47.26p 22.16p
(A) Alternative Performance Measure (APM).
4. Net asset value per share
2024 2023
Net assets (£'000) 329,627 344,829
Number of shares in issue 78,868,615 91,024,771
Net asset value per share 417.9p 378.8p
JPMORGAN FUNDS LIMITED
12th December 2024
For further information, please contact:
Anmol Dhillon
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or or +44 1268 44 44 70
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 2024 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
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The 2024 Annual Report will also shortly be available on the Company's
website at www.jpmasiagrowthandincome.co.uk
(http://www.jpmasiagrowthandincome.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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. END FR TTBPTMTBBBTI