JPMorgan Asia G&I - Final Results - Year ended 30 September 2023
14/12/2023 07:00
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RNS Number : 7029W JPMorgan Asia Growth & Income PLC 14 December 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN ASIA GROWTH & INCOME PLC
FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2023
Legal Entity Identifier: 5493006R74BNJSJKCB17
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Performance and market background
It has been a privilege to lead your Company in this, my first year as
Chairman of the Board. I am very pleased to be able to report a good
performance from the Company over this period, in both absolute terms and
relative to the benchmark. The Company's return on net assets (NAV) over the
12 months ended 30th September 2023 was 6.4% (in GBP terms), while the return
to Ordinary shareholders was 7.3%. This was significantly better than the
benchmark MSCI Asia ex-Japan Index, which returned 1.4%, and extends the
Company's long track record of outright gains and outperformance of the
market.
Asian equity markets delivered mixed performances over the year. In China,
initial excitement about the country's sudden re-opening faded in the second
half of the year, as the rebound lost momentum and demand for Chinese exports
declined. The resulting weakness in Chinese and Hong Kong stocks was more than
offset by strong performances from other markets, notably Taiwan and South
Korea, which benefited from the surge in demand for stocks with exposure to
artificial intelligence ('AI'). The Company's outperformance of the market was
the result of the Investment Managers' stock selections - the stocks they
hold, those they are over or underweight, and those they avoid.
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
In the absence of unforeseen developments, the Company's dividend policy aims
to pay regular, quarterly dividends, each 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. Dividends are funded
from a combination of revenue and capital reserves. 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.
In the Board's view, resetting the dividend quantum each quarter is a prudent
way of delivering an income which tracks performance and does not put the
Company under strain. For the year ended 30th September 2023, dividends paid
totalled 15.7 pence (2022: 16.5 pence).
Premium/discount and share capital management
The discount at which the Company's shares trade has narrowed slightly during
the review period, to 9.2% at end September 2023, from 9.6% at the end of the
previous financial year. Although this discount is broadly in line with the
discounts of the Company's immediate peers, the Board decided to utilise the
Company's buy back powers over the year, to manage the balance between supply
and demand for its shares. The Company repurchased a total of 5,731,497 shares
(representing 5.9% of share capital at the start of the year) and held them in
Treasury. Since the end of the financial year, the Company has repurchased a
further 1,755,002 shares.
Gearing
During the year the Company had in place a multi-currency loan facility with
Scotiabank. Such facilities can be utilised by the Portfolio Managers to gear
the portfolio during periods when they expect gearing to enhance performance.
The facility was not utilised during the reporting period and was retired in
early December 2023. When the timing is conducive the Board will look to
establish a similar loan facility.
Stewardship
Effective investment stewardship can materially contribute to the construction
of stronger portfolios over the long term, and therefore enhance returns. The
Company's Investment Manager has a well-established approach to investment
stewardship, designed both to understand how companies address issues related
to Environmental, Social and Governance ('ESG') factors and to seek to
influence their behaviour and encourage best practice. (See the ESG Report in
the Company's Annual Report & Financial Statements for the year ended 30th
September 2023 ('2023 Annual Report'). Regular engagement with investee
companies by JPMAM's portfolio managers, research analysts and investment
stewardship specialists is a vital component of JPMAM's active management. So
too is its practice of exercising its voice as a long-term investor through
proxy voting. The Board supports the Investment Manager's approach to
investment stewardship and its commitment to its stewardship responsibilities.
As part of the evolving regulatory environment within which JPMAM operates, it
has published its first Task Force on Climate-related Financial Disclosures
('TCFD') Report for the Company in respect of the 12 months ended 31st
December 2022. The report discloses the portfolio's climate-related risks and
opportunities according to the Financial Conduct Authority's ESG Sourcebook
and the TCFD Recommendations. The report is available on the Company's website
at www.jpmasiagrowthandincome.co.uk
This is the first report under the new guidelines and disclosure requirements,
and the Board will continue to monitor the situation as these requirements
evolve.
Board succession
The Board plans for succession to ensure it retains an appropriate balance of
skills, knowledge and diverse perspectives. To this end, the Board appointed
Diana Choyleva and Kathryn Matthews as Directors with effect from 1st March
and 1st June 2023 respectively.
Diana is a leading expert on China's economy and politics and is Chief
Economist at Enodo Economics, an independent macroeconomic and political
forecasting company. She is also a non-resident Senior Fellow on the Chinese
economy at the Asia Society Policy Institute's Center for China Analysis in
New York. Previously she worked at Lombard Street Research, most recently as
their Chief Economist and Head of Research.
Kathryn brings to the Board many years of experience in the investment company
sector, including directorships of a broad range of other Asia focused
investment companies. Previously, Kathryn worked for Fidelity International
where she was Chief Investment Officer, Asia Pacific (ex-Japan).
Having served as a Director since 2014, and as Audit Chairman and SID, Dean
Buckley will be retiring from the Board at the Company's forthcoming Annual
General Meeting, to be held in February 2024. On behalf of the Board, I would
like to thank Dean for the significant contribution he has made to the Company
and the wise counsel that he provided to the Board and its Committees during
his tenure. We wish him well for the future. June Aitken and Peter Moon will
succeed Dean in the roles of Audit Committee Chair and SID respectively.
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.
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 or by scanning the QR code in the 2023
Annual Report.
Annual general meeting
The Company's Annual General Meeting will be held on Thursday 15th February
2024 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.
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, or by contacting the Company
Secretary at 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
Developed economies are likely to face further challenges over the coming
year. Interest rates may now be at or near their peak in most countries and
inflation pressures are subsiding. However, the monetary tightening already in
place is yet to have its full effect on businesses and households. Recession
may be avoided in most countries, but growth is likely to remain below trend
in 2024.
The prospects for Asian economies seem brighter, both in the near and longer
term. While Chinese economic growth is expected to slow from its rapid,
pre-pandemic levels, GDP is still forecast to expand at a relatively strong
pace over coming years. It is encouraging to see indications that Chinese
government policy may be becoming more focused on growth at home and more open
to collaboration with the west. Other Asian countries can look forward to
years, if not decades, of strong growth and productivity increases thanks to
the structural and social changes (including digitalisation, urbanisation and
the expansion of the middle class) currently unfolding across the region.
The Board is conscious of the uncertain geopolitical environment in which
Asian economies (like others) have to operate. We share, however, the
Portfolio Managers' enthusiasm for the many opportunities which this rapidly
expanding region is generating. The Company has the chance to invest in
innovative, often world-leading businesses. With valuations across most of the
region at long-term lows relative to both historic levels and to the US and
Europe, now seems a particularly auspicious moment to be investing in Asia. We
are therefore confident of the Company's capacity 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
13th December 2023
PORTFOLIO MANAGERS' REPORT
Performance
Against a mixed and challenging backdrop, the Company outperformed its Index
over the period, returning 6.4% on a net asset value ('NAV') total return
basis (in GBP terms), and by 7.3% in share price terms. This extends the
Company's long, consistently good performance track record. The Company has
outperformed the benchmark in all but one 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 2023, it delivered an average annualised
return of 8.5% in NAV terms and 9.0% on a share price basis, well above the
benchmark's average return of 6.5%.
Performance attribution
30th September 2023
% %
Contributions to total returns
Benchmark return 1.4%
Stock selection 5.2%
Currency effect 0.0%
Gearing/(net cash) 0.2%
Investment Manager contribution 5.4%
Dividends/residual -0.3%
Portfolio return 6.5%
Management fee/Other expenses -0.7%
Share buy-back/issuance 0.6%
Return on net assets(APM) 6.4%
Effect of movement in discount over the year 0.9%
Return to shareholders(APM) 7.3%
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 in the 2023 Annual Report.
The market environment
China was the main focus of Asian markets over the past year. This time last
year China's unexpected and sudden decision to abandon its stringent
zero-Covid restrictions provided a significant boost to market sentiment
across the region. Strong Chinese export demand gave further impetus to the
market rebound. However, the rally lost momentum and returns lagged across
both China and Hong Kong from early 2023 as the economic recovery faltered
thanks to uncertain consumers, the ongoing property crisis, lower exports and
fresh geo-political concerns. The MSCI China Index declined 3.9% over the year
ended 30th September 2023. The Indonesian market also lagged. Indonesian GDP
growth is expected to remain strong, growing at around 5%, but the Rupiah
depreciated approximately 15% over the period, dragging the market in its
wake.
Elsewhere in the region, developments were more positive. The launch of
Microsoft's ChatGPT, a chatbot powered by artificial intelligence ('AI'),
that uses natural language to conduct conversation and undertake simple
research tasks, captured the imagination of investors around the globe.
Speculation about the potential spread of AI tools into many facets of
commercial activity triggered a surge in the share prices of many tech
companies seen as beneficiaries of this new technology.
Both the Taiwanese and Korean markets performed strongly, despite a slowdown
in demand from consumer electronic goods such as mobile phones and personal
computers. The Indian market recovered sharply from March 2023 onwards as
economic growth remained robust and concerns about the broader market impact
of challenges faced by the Adani group of companies abated. Overall, the
benchmark MSCI Asia ex Japan Index rose 1.4% (in GBP terms) over the review
period.
In this report we review the Company's investment performance for the
12 months to 30th September 2023. We examine the market backdrop over this
period, and the factors that impacted performance. Finally, we consider the
outlook for Asian equities over the coming six months and beyond.
Major contributors and detractors to performance
The main contributors to relative performance at the stock level over the past
year - both from stocks we held and those we avoided - were predominantly IT
and consumer discretionary names, from a mix of countries. Our overweight to
SK Hynix, a Korean semiconductor manufacturer, was rewarded as the stock
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 Wiwynn, a
Taiwanese tech hardware company specialising in computer storage solutions and
cloud infrastructure. It outperformed on the back of growth in original design
manufacturer ('ODM') server orders. Overweights to India's Axis Bank and auto
producer Maruti Suzuki also enhanced returns, as did our underweights to
Chinese e-commerce names such as Meituan and JD.com. These names
underperformed because of heightened competition and weak consumer demand.
The largest detractors from returns included our overweight to Foshan Haitian,
a Chinese supplier of packaged foods. This stock underperformed due to the
sluggish post-pandemic recovery in demand, as restaurant customers have been
downtrading since the reopening. This position has now been sold. China's
Xinyi Solar, which produces solar glass, hurt returns as excess supply has led
to pricing pressure across the supply chain. Our underweight to Quanta
Computer, a Taiwanese manufacturer of notebook computers and communications
products, detracted as this company was an early mover into AI server ODM,
focusing on large cloud service providers, and the stock rose sharply in the
rush for AI exposure. Quanta's strong earnings were also supportive.
Portfolio activity and positioning
Over the period we took advantage of relatively low valuations to add several
new names to the portfolio. These included Mahindra & Mahindra, an Indian
conglomerate whose many businesses include a leading farm equipment maker with
upside from better capital allocation, and a successful autos business focused
on SUVs. We also opened a position in Hotel Shilla, Korea's leading duty-free
player with a strong brand offering. This name has been a beneficiary of the
resumption of Chinese outbound tourism to Korea. In addition, we topped up
existing holdings in Trip.com, SK Hynix and Taiwan Semiconductor Manufacturing
Company.
In terms of disposals, in addition to the sale of Foshan Haitian, we also
closed our out-of-index position in Han's Laser Technology Industry Group, a
Chinese producer of laser processing equipment. The company's growth
businesses in electric vehicle ('EV') components has not been able to offset
weakness in legacy segments such as industrial machinery and consumer
electronics. We also sold Sea Limited, a Singaporean internet retailer. This
business has faced increasing competition from private Chinese e-commerce
companies, resulting in worsening returns in key markets such as Indonesia.
We also trimmed and took profits in China Resources Land, KB Financial and
Bank Central Asia on the back of relative outperformance.
These transactions did not have a material impact on the structure of the
portfolio.
At the sector level, we maintained our overweight allocations to:
• Technology - with overweight allocations to market leaders
in key sectors including logic, DRAM and components;
• Financials - primarily thanks to an overweight in Indian and
Indonesia banks, which we view as world class, and stock exchanges across the
region. However, we do not hold any Chinese banks; and
• Consumer discretionary - includes vertically integrated
textile manufacturers in China, which we like because of their leadership in
sustainability initiatives and strong economies of scale. Indian auto
manufacturers set to benefit from continued growth in demand from India's
rapidly expanding middle class, and Yum China, the owner of restaurant
franchises including KFC and Pizza Hut.
Whilst the portfolio is underweight:
• Consumer staples - via underweights to a selection of
staples names in China and India, where we think valuations are expensive;
• Real-estate - due to the poor near-term outlook for real
estate developers across China and Hong Kong; and
• Energy - thanks mainly to our underweight to India's oil and
gas producer, Reliance, which we think is over-valued.
On a country basis, we are overweight Hong Kong, via positions in life insurer
AIA and Hong Kong Exchange. Both businesses are primarily driven by China.
However, our combined position in China and Hong Kong is more or less neutral.
The portfolio is also overweight Indonesia, thanks to our holdings in the
country's major quality banks. Excessive valuation are the motivation for our
underweights in India and Taiwan. Taiwanese tech stocks and consumer staples
are particularly expensive.
Outlook
Western economies have so far been surprisingly resilient to the high interest
rates imposed by central banks trying to quash persistent inflation. However,
financial conditions have changed around the world. Real incomes have been
eroded by inflation and higher rates have raised the cost of borrowing for
businesses and households. The full force of tighter monetary policy is
expected to increasingly register with consumers and homeowners. Growth in the
developed world is forecast to slow to around 1.5% and remain lacklustre in
2024.
Asia is set to fare better. The Chinese economy is expected to continue
slowing, realising growth of around 4% next year, but this is still an
enviable pace compared to western economies. And the Chinese government's more
pro-growth stance may see further efforts to reinvigorate the property market
and support household incomes. India looks set to maintain its current pace of
growth above 6% pa, consistent with the government's long-term target, and the
region as a whole, which accounts for 40% of the world's GDP, is projected to
grow at around 5% both this year and next.
The region's longer-term outlook is also very positive. Asian nations are
undergoing major structural and social changes such as rising incomes,
urbanisation, infrastructure investment and digitalisation, which will ensure
the region continues to grow rapidly, with domestic demand supported by the
increasing prosperity of Asia's burgeoning middle class. Furthermore, Asia is
home to many innovative and dynamic companies that are leading the world in a
wide range of industries, including semiconductor manufacturing, healthcare,
renewable energy, next generation automotive production and financials. This
provides us with many attractive long-term investment opportunities.
Current low valuations represent a great chance for us to invest in such
companies at compelling prices. The MSCI AC Asia ex Japan Index is trading at
a price to book ratio of 1.5x, below its long term average. Looking more
deeply into the Index's geographical constituents, valuations in China, Hong
Kong and South Korea are also either close to or below their historical lows
in price to book terms. India remains the sole market trading above its
ten-year historical average valuation levels. Valuations at such compelling
levels have already allowed us to add some new names to the portfolio at good
prices, and to top up some existing holdings, as discussed above, but there
are many other exciting opportunities still available to invest in companies
well-placed to benefit from Asia's exciting long term growth story.
For us, this is a most encouraging environment, and we remain confident that
our long experience, our presence on the ground in local markets and our focus
on the fundamental analysis of specific stocks, will allow us to keep
identifying the best investment opportunities on offer across the region,
ensuring the Company's portfolio continues to provide our investors with
attractive returns and outperformance over the long-term.
Ayaz Ebrahim
Robert Lloyd
Portfolio Managers
13th December 2023
PRINCIPAL & EMERGING RISKS AND UNCERTAINTIES
Principal risk Description Mitigating activities Movement from prior year
Investment Underperformance Poor implementation of the investment strategy, for example as to thematic The Board manages these risks by diversification of investments and through The risk remains high but unchanged from 2022, due to the continuation of
exposure, sector allocation, stock selection, undue concentration of holdings, its investment restrictions and guidelines, which are monitored and reported unfavourable economic conditions (caused by factors such as the geopolitical
factor risk exposure or the degree of total portfolio risk, may lead to on by the Manager. The Manager provides the Directors with timely and accurate crises between Russia and Ukraine and Israel and Gaza, high inflation and
failure to outperform the Company's benchmark index and peer companies, management information, including performance data and attribution analyses, interest rates) faced by global equity markets, making investment decisions
resulting in the Company's shares trading on a wider discount. revenue estimates, liquidity reports and shareholder analyses. The Board more challenging for the Portfolio Managers.
monitors the implementation and results of the investment process with the
Investment Manager, whose representatives attend all Board meetings, and
reviews data which show statistical measures of the Company's risk profile.
The Board holds a separate meeting devoted to strategy each year.
Geopolitical and Economic Historically, emerging market companies (and investments in their shares) have The investment process incorporates non-financial measures and risks in the The risk remains high but unchanged from 2022. The Board has increasingly
shown greater volatility and may be subject to certain political, geopolitical assessment of investee companies to allow the portfolio to adapt to changing turned its attentions to the heightened risks from investing in China
and corporate governance risks which are not typically associated with more competitive and political landscapes. specifically - see below.
developed markets and economies. Sustained underperformance of emerging
markets as an asset class may occur as a result of risks such as the The Board regularly reviews and discusses with the Portfolio Managers the
imposition of restrictions on the free movement of capital or other government portfolio, the Company's investment performance and the execution of the
regulatory changes. investment policy against the long-term objectives of the Company. The
Manager's independent risk team performs systematic risk analysis, including
country specific risk monitoring, as well as stress testing of the portfolio's
resilience.
Investing in China China offers some unique investment opportunities and risks. On one hand, it Unlike its passive competitors, as an actively managed fund the Portfolio The risk remains high but unchanged from 2022.
has provided faster growth than many other markets in the last few decades, Managers can adapt the portfolio to a changing environment and reduce both
but in recent years it has been impacted by a decline in trade, a slowdown in regulatory risk from, for example export controls and reputational risk from, The Board specifically discusses the risks associated with investing in China
consumer spending, a crackdown on the private sector by the Chinese government for example human rights transgressions. at each Board meeting.
and US-led trade restrictions, together with growing concerns in relation to
China's domestic property market. The Board has access to a range of expert resources and strategists both
within JPMAM and externally, who can provide long term insight and guidance on
The country, together with Hong Kong, represents just over 40% of the geopolitical developments.
Company's benchmark index and thus represents a significant proportion of the
Company's portfolio.
The Board and Manager are aware of the risks associated with investing in
China but are cognisant that to not be invested in China would represent a
significant investment call, which could damage investor returns.
Loss of Investment Team or Portfolio Manager A sudden departure of a portfolio manager or several members of the investment The Manager takes steps to reduce the likelihood of such an event by ensuring The risk is medium and remains unchanged from 2022. The investment team is
management team could result in a short-term deterioration in investment appropriate succession planning and the adoption of a team-based approach, as supported by significant resource.
performance. well as special efforts to retain key personnel.
Cyber Crime The threat of cyber attack, in all its guises, is regarded as at least as The information technology controls around the physical security of J.P. The risk remains high but unchanged from 2022.
important as more traditional physical threats to business continuity and Morgan Chase & Co's data centres, security of its networks and security of
security. The Board, via its Manager, has received the cyber security policies its trading applications are tested by an independent third party and reported To date the Manager's cyber security arrangements have proven robust and the
for its key third party service providers and JPMF has assured Directors that every six months against the AAF Standard. Company has not been impacted by any cyber attacks threatening its operations.
the Company benefits directly or indirectly from all elements of J.P. Morgan
Chase & Co's Cyber Security programme.
Discount Control Investment trust shares often trade at discounts to their underlying NAVs; The Board monitors the premium/discount at which the Company's share price The risk remains high but unchanged from 2022.
they can also trade at a premium. Discounts and premiums can fluctuate trades relative to NAV on both an absolute level and in comparison to its
considerably leading to volatile returns for shareholders. peers and the wider investment trust sector. The Board regularly reviews and monitors the Company's objective and
investment policy and strategy, the investment portfolio and its performance,
The Board reviews sector relative performance and sales and marketing activity the level of discount/premium to net asset value at which the shares trade and
(considered the primary drivers of the relative discount level). The Company movements in the share register. During the year the Company continued to
also has authority to repurchase its existing shares to enhance the NAV per conduct share buybacks.
share for remaining shareholders and to reduce the absolute level of discount
and discount volatility.
Legal and Regulatory Change The Company's business model could become non-viable as a result of new or The Board receives regular reports from its broker, depositary, registrar and The risk remains medium but unchanged from 2022.
revised rules or regulations arising from, for example, policy change or Manager as well as its legal advisers and the Association of Investment
financial monitoring pressure. Companies on changes to regulations which could impact the Company and its Changes to the regulatory landscape are inevitable.
industry. The Company monitors events and relies on the Manager and its other
key third party providers to manage this risk by preparing for any changes,
adverse or otherwise.
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:
Climate change
Investors can no longer ignore the consequences that the world's changing
climate will have on their portfolios, with the impact of climate change on
returns now potentially significant. However, the transition to a low-carbon
economy across the globe may also provide attractive investment opportunities.
The Manager's investment process integrates consideration of environmental,
social and governance factors into decisions on which stocks to buy, hold or
sell. This includes the approach investee companies take to recognising and
mitigating climate change risks.
In the Company's and Manager's view, companies that successfully manage
climate change risks will perform better in the long-term. Consideration of
climate change risks and opportunities is an integral part of the investment
process.
Rising competition between China and western economies
Since the end of the Second World War, the world has enjoyed a technology and
economic hegemony with the US at its core. With the development of China as a
political, cultural, technological and economic rival, there is the risk that
alongside the trade and technology tensions we have seen in recent years,
there may develop a rival technology, economic and financial infrastructure
separating western economies from China.
Economic contraction
A long term reduction in returns available from investments as a result of
recession, stagnation, inflation or other extended exogenous factors which may
render the Company's investment objectives and policies unattractive or
unachievable.
Artificial intelligence ('AI')
While it might be deemed a great opportunity and force for good, there is an
increasing risk to business and society more widely from AI. Advances in
computing power means that AI has become a powerful tool that will impact a
huge range of areas and with a wide range of applications that include the
potential to disrupt and even to harm. In addition the use of AI could be
a significant disrupter leading to added uncertainty in corporate valuations.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report in the
2023 Annual Report. The management fee payable to the Manager for the year was
£2,039,000 (2022: £2,155,000) of which £nil (2022: £nil) was outstanding
at the year end.
Safe custody fees amounting to £159,000 (2022: £169,000) were payable to
JPMorgan Chase Bank N.A. during the year of which £67,000 (2022: £42,000)
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 £2,000
(2022: £7,000) of which £nil (2022: £nil) was outstanding at the year end.
Handling charges on dealing transactions amounting to £28,000 (2022:
£28,000) were payable to JPMorgan Chase Bank N.A. during the year of which
£12,000 (2022: £7,000) was outstanding at the year end.
During the year the Company held cash in the JPMorgan US Dollar Liquidity
Fund, which is managed by JPMorgan. At the year end this was valued at £8,000
(2022: £9,000). Interest amounting to £50,000 (2022: £10,000) was
receivable during the year of which £nil (2022: £nil) was outstanding at the
year end.
Stock lending income amounting to £46,000 (2022: £92,000) were receivable by
the Company during the year. The Manager's commissions in respect of such
transactions amounted to £5,000 (2022: £10,000).
At the year end, the Company held cash of £207,000 and an overdraft of
£1,058,000, resulting in net overdrawn amount of £854,000 (2022: cash held
of £445,000 and £nil overdraft) with JPMorgan Chase Bank N.A. A net amount
of interest of £4,000 (2022: £nil) was receivable by the Company during the
year of which £nil (2022 £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found in the
2023 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 Companies Act 2006.
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 Directors' 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 Directors consider 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
13th December 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30th September 2023
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments held at fair value
through profit or loss - 16,289 16,289 - (75,909) (75,909)
Net foreign currency gains - 114 114 - 220 220
Income from investments 8,304 - 8,304 7,882 - 7,882
Interest receivable and similar income 100 - 100 102 - 102
Gross return/(loss) 8,404 16,403 24,807 7,984 (75,689) (67,705)
Management fee (2,039) - (2,039) (2,155) - (2,155)
Other administrative expenses (827) - (827) (698) - (698)
Net return/(loss) before finance costs and taxation 5,538 16,403 21,941 5,131 (75,689) (70,558)
Finance costs (52) - (52) (43) - (43)
Net return/(loss) before taxation 5,486 16,403 21,889 5,088 (75,689) (70,601)
Taxation (846) (219) (1,065) (125) (389) (514)
Net return/(loss) after taxation 4,640 16,184 20,824 4,963 (76,078) (71,115)
Return/(loss) per share 4.94p 17.22p 22.16p 5.09p (77.95)p (72.86)p
A fourth quarterly dividend of 3.8p (2022: 3.7p) per share has been declared
in respect of the year ended 30th September 2023, totalling £3,447,000 (2022:
£ 3,569,000). Further details are given in note 10 of the 2023 Annual Report.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies.
The net return/(loss) after taxation represents the profit/(loss) for the year
and also the total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
For the year ended 30th September 2023
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 2021 24,449 46,705 977 25,121 352,948 - 450,200
Repurchase of shares into Treasury - - - - (3,534) - (3,534)
Net (loss)/return - - - - (76,078) 4,963 (71,115)
Dividends paid in the year (note 3) - - - - (12,028) (4,963) (16,991)
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 3) - - - - (10,114) (4,640) (14,754)
At 30th September 2023 24,449 46,705 977 25,121 247,577 - 344,829
(1) These reserves form the distributable reserves of the Company and
may be used to fund distributions to investors.
STATEMENT OF FINANCIAL POSITION
At 30th September 2023
2023 2022
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 342,829 358,303
Current assets
Derivative financial assets - 2
Debtors 3,680 587
Cash and cash equivalents 207 454
3,887 1,043
Current liabilities
Creditors: amounts falling due within one year (1,641) (786)
Net current assets 2,246 257
Total assets less current liabilities 345,075 358,560
Provision for capital gains tax (246) -
Net assets 344,829 358,560
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 247,577 261,308
Total equity shareholders' funds 344,829 358,560
Net asset value per share 378.8p 370.6p
STATEMENT OF CASH FLOWS
For the year ended 30th September 2023
2023 2022(1)
£'000 £'000
Cash flows from operating activities
Net return/(loss) before finance costs and taxation 21,941 (70,558)
Adjustment for:
Net (gains)/losses on investments held at fair value through profit or (16,289) 75,909
loss
Net foreign currency gains (114) (220)
Dividend income (8,289) (7,882)
Interest income (54) (10)
Scrip dividends received as income (15) -
Realised (gain)/loss on foreign exchange transactions 232 (166)
Realised exchange gains on JPMorgan US Dollar Liquidity Fund 125 197
Increase in accrued income and other debtors (7) (5)
Increase/(decrease) in accrued expenses 68 (26)
Net cash outflow from operations before dividends and interest (2,402) (2,761)
Dividends received 7,444 7,007
Interest received 54 10
Overseas withholding tax recovered - 272
Capital gains tax recovered 27 -
Net cash inflow from operating activities 5,123 4,528
Purchases of investments (178,025) (196,879)
Sales of investments 206,375 211,835
Settlement of foreign currency contracts - (4)
Net cash inflow from investing activities 28,350 14,952
Dividends paid (14,754) (16,991)
Repurchase of shares into Treasury (19,731) (3,679)
Interest paid (52) (43)
Net cash outflow from financing activities (34,537) (20,713)
Decrease in cash and cash equivalents (1,064) (1,233)
Cash and cash equivalents at start of year 454 1,496
Exchange movements (241) 191
Cash and cash equivalents at end of year (851) 454
Cash and cash equivalents consist of:
Cash and short term deposits 199 445
Money market fund - JPMorgan US Dollar Liquidity Fund 8 9
Cash and cash equivalents per the Statement of Financial Position 207 454
Bank overdraft (included as part of current liabilities in note 13 of the 2023 (1,058) -
Annual Report)
Total cash, cash equivalents and bank overdraft per the Statement of Cash (851) 454
Flows
(1) The presentation of the Cash Flow Statement, as permitted under
FRS 102, has been changed so as to present the reconciliation of 'net
return/(loss) before finance costs and taxation' to 'net cash inflow from
operating activities' on the face of the Statement of Cash Flows. Previously,
this was shown by way of note. Interest paid has also been reclassified to
financing activities, previously shown under operating activities, as this
relates to bank overdraft. Other than consequential changes in presentation of
the certain cash flow items, there is no change to the cash flows as presented
in previous periods. Cash and cash equivalents include bank overdraft
repayable on demand that form an integral part of an entity's cash management.
Analysis of change in net cash/(debt)
As at Other As at
30th September non-cash 30th September
2022 Cash flows charges 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash 445 (5) (241) 199
Money market fund - JPMorgan US Dollar Liquidity Fund 9 (1) - 8
Bank overdraft - (1,058) - (1,058)
Net cash/(debt) 454 (1,064) (241) (851)
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 current market and
economic conditions, the direct and indirect consequences arising from the
Russian invasion of Ukraine, the geopolitical uncertainty in China and more
recently the conflict in Gaza on the going concern and viability of the
Company. 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 at the Company's 2023 Annual General Meeting and the next
continuation vote will be considered at the Annual General Meeting in 2026.
The disclosures on going concern in the Directors' Report of the 2023 Annual
Report form part of these financial statements.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Return/(loss) per share
2023 2022
£'000 £'000
Revenue return 4,640 4,963
Capital return/(loss) 16,184 (76,078)
Total return/(loss) 20,824 (71,115)
Weighted average number of shares in issue during the year 93,970,338 97,596,359
Revenue return per share 4.94p 5.09p
Capital return/(loss) per share 17.22p (77.95)p
Total return/(loss) per share 22.16p (72.86)p
3. Dividends
(a) Dividends paid and declared
2023 2022
£'000 £'000
Dividends paid
2022 fourth quarterly dividend of 3.7p (2021: 4.6p) 3,569 4,494
First quarterly dividend of 4.0p (2022: 4.5p) 3,789 4,396
Second quarterly dividend of 4.0p (2022: 4.2p) 3,771 4,103
Third quarterly dividend of 3.9p (2022: 4.1p) 3,625 3,998
Total dividends paid in the period 14,754 16,991
Dividend declared
Fourth quarterly dividend declared of 3.8p (2022: 3.7p) per share 3,447 3,569
A fourth quarterly dividend of 3.8p has been declared and was paid on 23rd
November 2023 for the financial year ended 30th September 2023.
In accordance with the accounting policy of the Company, this dividend will be
reflected in the financial statements for the year ending 30th September 2024.
(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 £206,474,000 (2022:
£252,678,000).
2023 2022
£'000 £'000
First quarterly dividend of 4.0p (2022: 4.5p) 3,789 4,396
Second quarterly dividend of 4.0p (2022: 4.2p) 3,771 4,103
Third quarterly dividend of 3.9p (2022: 4.1p) 3,625 3,998
Fourth quarterly dividend declared of 3.8p (2022: 3.7p) 3,447 3,569
Total dividends for Section 1158 purposes 14,632 16,066
The aggregate of the distributable reserves after the payment of the final
dividend will amount to £203,027,000 (2022: £249,110,000).
4. Net asset value per share
2023 2022
Net assets (£'000) 344,829 358,560
Number of shares in issue 91,024,771 96,756,268
Net asset value per share 378.8p 370.6p
5. Status of results announcement
2023 Financial Information
The figures and financial information for 2023 are extracted from the Annual
Report and Financial Statements for the year ended 30th September 2022 and do
not constitute the statutory accounts for the year. The Annual Report and
Financial Statements for the year ended 30th September 2023 include the Report
of the Independent Auditors which is unqualified and does not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The Annual Report and Financial Statements for the year
ended 30th September 2023 will be delivered to the Register of Companies in
due course.
2022 Financial Information
The figures and financial information for 2022 are extracted from the
published Annual Report and Financial Statements for the year ended
30th September 2022 and do not constitute the statutory accounts for that
year. The Annual Report and Financial Statements for the year ended 30th
September 2021 has been delivered to the Registrar of Companies and
included the Report of the Independent Auditors which was unqualified and did
not contain a statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
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.
13th December 2023
For further information:
Alison Vincent
JPMorgan Funds Limited
0800 20 40 20
ENDS
A copy of the 2023 Annual 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
(https://secureweb.jpmchase.net/readonly/https:/lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDIsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDA0MDUuMTk3NzA4MDEiLCJ1cmwiOiJodHRwczovL2RhdGEuZmNhLm9yZy51ay8jL25zbS9uYXRpb25hbHN0b3JhZ2VtZWNoYW5pc20ifQ.b7Q7NXHGRA8MjB_Ugl8Tv4JxhiU28TbcoNb04FTTMiY/br/77057565556-l)
The 2023 Annual Report will 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.
JPMORGAN FUNDS LIMITED
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. END FR UOUBROVUUAAA