REG - JPMorgan China G&I - Half-year Report
26/05/2023 09:30
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RNS Number : 8075A JPMorgan China Growth & Income PLC 26 May 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN CHINA GROWTH & INCOME TRUST PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS
ENDED 31ST MARCH 2023
Legal Entity Identifier: 549300S8M91P5FYONY25
Information disclosed in accordance with DTR 4.2.2
The Directors announce the Company's results for the six months ended 31st
March 2023.
Chairman's Statement
Performance
After a long challenging period, Chinese stock markets greeted with relief the
Chinese government's decision to reverse course in several key policy areas
during the six months ended 31st March 2023. The most prominent change was the
unexpected, immediate end of the government's Covid-zero policy. As a result,
the MSCI China Index rose, increasing 7.3% on a total return basis (in
sterling terms) during the period. Your Company's total return on net assets
(with net dividends reinvested) marginally outperformed this benchmark, rising
7.9% during the six months ended 31st March 2023. Over the same period, the
total return to shareholders was +9.7%, reflecting the narrowing of the
discount to net asset value ('NAV') at which the Company's shares trade, from
11.6% at the previous financial year end to 10.2% at the half year end.
The relative outperformance to the benchmark index is explained in the
Investment Managers' Report. This report provides a detailed commentary on the
portfolio positioning, the investment strategy and the outlook for investing
in China.
Loan Facility and Gearing
The Investment Managers have been given the flexibility by the Board to manage
gearing tactically within a range set by the Board of 10% net cash to 20%
geared. During the period, the Company's gearing ranged from 13.3% to 19.9%,
ending the half year at 15.8%.
The Company has a £60 million loan facility with The Bank Nova Scotia. As at
31st March 2023, £52.7 million of this facility was drawn down. As this
facility expires in July 2023, the Board is currently considering its renewal.
Our Dividend Policy
In the absence of unforeseen developments, the Company's dividend policy aims
to pay regular, quarterly dividends, equivalent in total to 4% of the
Company's NAV on the last business day of the preceding financial year, in
order to provide clarity to shareholders over the income stream they can
expect during the following 12 months. This is paid by way of four equal
interim dividends on the first business day in December, March, June and
September.
On 3rd October 2022, the Company announced that the cum income Net Asset Value
at the close of business on 30th September 2022 (the Company's year-end) was
341.62 pence per share. In line with the Company's distribution policy, the
Directors declared the first quarterly interim dividend of 3.42 pence per
share. Since then, two further dividend declarations have been made on 4th
January 2023 and 1st April 2023, both of 3.42 pence per share. With the
planned declaration of the final quarterly dividend of 3.42 pence per share on
3rd July 2023, the 2023 annual dividend will be 13.68 pence per share (2022:
22.8p).
Continuation Vote and Conditional Tender Offer
I am pleased to report that, at the Company's Annual General Meeting held in
February 2023, shareholders voted in favour of the Company's continuation
as an Investment Trust for a further five-year period. We thank shareholders
for their ongoing support. The next continuation vote will be held in early
2028.
The Company's previous conditional tender offer for the five years ended 30th
September 2022 was not triggered as the Company's NAV total return
significantly outperformed the benchmark total return during this five-year
period. Following careful consultation with the Company's largest shareholders
and its advisers, the Board has decided to renew the conditional tender offer
for up to 15% of the Company's issued share capital at a price equal to net
asset value less costs if, over the next five years (from the start of the
current financial year, being 1st October 2022), the NAV total return
underperforms the benchmark total return.
Share Issuance during the Period
At the time of writing, the Company's issued share capital consists of
83,202,465 Ordinary shares. The Company currently holds no shares in Treasury.
During the six-month reporting period, the Company did not repurchase or issue
any shares.
Changes to the Investment Management Team
As previously announced in April 2023, the Co-Investment Manager, Howard Wang,
has relocated from JPMorgan's Hong Kong office to its Taipei office. Due to
regulatory requirements, he is no longer listed as an Investment Manager of
the Company and instead is listed as an Investment Advisor. Based in Hong
Kong, Rebecca Jiang is now Lead Investment Manager of the Company. She has
managed the Company's investments with Howard for six years and is well known
to our shareholders via her AGM presentations to shareholders and her regular
webcasts. Li Tan, also based in Hong Kong, will be added as a named Investment
Manager of the Company alongside Rebecca. They will continue to work closely
with Simmy Qi, who is based in Shanghai.
It is also worth noting that JPMorgan Asset Management received regulatory
approval earlier this year to complete the acquisition of China International
Fund Management, which has now been rebranded JPMorgan Asset Management China.
This provides our portfolio managers with additional, locally-based investment
resources.
Shareholders should note that there are no changes to the Company's investment
process nor to JPMorgan's Greater China team structure. Howard Wang continues
working with JPMorgan's research analysts and providing investment advice to
the named Investment Managers. He also remains in his role as Head of the
JPMorgan Greater China team, with ongoing responsibilities for the JPMorgan
Greater China Growth strategies with Rebecca Jiang and Li Tan supported by
Simmy Qi.
Reporting under the Task Force on Climate Related Financial Disclosures
In accordance with the requirements of the Taskforce on Climate Related
Financial Disclosures ('TCFD'), JPMorgan Asset Management will provide product
level reports for the investment trusts it manages in late June 2023 and
annually thereafter. The report for the Company will be made available on the
Company's website.
Outlook and Strategy
The ongoing conflict between Russia and the Ukraine and its broader impact
continues to overshadow global geopolitics, macroeconomics and stock markets.
Since March, Chinese stock markets have been volatile, buffeted by fragile
business and consumer confidence, global macroeconomic concerns and continuing
fundamental disagreements between China and the US. China's economic outlook,
however, is in sharp contrast to expectations for other major economies, with
inflation in China remaining low, interest rates trending down, and the
government forecasting 5% GDP growth in 2023. Our Investment Managers report
that valuation signals are attractive compared with historical averages and
suggest that a sustained recovery in Chinese equity prices is in prospect,
with the main driver of future stock performance likely to be renewed earnings
growth. Supported by a well-resourced research team in Hong Kong, Shanghai and
Taiwan, our Investment Managers continue to find well managed companies to
invest in that are consistent with the structural growth bias of the
investment strategy. We remain confident that our investment strategy,
combined with careful stock picking and supported by the depth of resources in
our investment team, will enable us to deliver superior long-term total
returns.
Alexandra Mackesy
Chairman
26th May 2023
INVESTMENT MANAGERS' REPORT
Introduction
During the six months to 31st March 2023, JCGI delivered a total return on net
assets of 7.9% (in sterling terms), compared to the benchmark return of 7.3%.
This positive performance follows a challenging time for the Company in the
last financial year ended 30th September 2022. However, in our view, it is
more meaningful to assess performance over longer timeframes. On this basis,
the Company has made positive absolute returns and outperformed the benchmark
over three, five and ten years. Over the ten years to end March 2023, it made
an average annualised return of 9.8%, versus a benchmark return of 5.7% on the
same basis.
Setting the scene
In the past six months, the Chinese government reversed course in several key
policy areas. The most prominent change was its surprisingly sudden exit from
its Covid-zero policy at the end of November 2022, when it removed all
domestic travel restrictions and lockdown requirements. Although Covid swept
rapidly through the population early in 2023, this has not derailed the
rebound in economic activity. The recovery in service sector activities such
as travel and dining out has been particularly notable.
The Chinese government also changed tack in its approach to the property
market, becoming more supportive of the sector, although it has not abandoned
its position that "properties are for living in, not for speculation". On the
supply side, developers' access to onshore credit and equity markets has
improved thanks to government guidance. On the demand side, mortgage rates are
near a 20-year low, while local governments removed certain purchase
restrictions in many Chinese cities. The sector still has legacy issues such
as unfinished new housing projects, which we do not expect to dissipate
quickly, but we are nonetheless pleased to see signs of a recovery in
transaction volumes. For example, total residential property sales in Q1 2023
rose 4% on a year-on-year basis. The recovery in activity has been
particularly strong in large cities such as Beijing and Shanghai. All this
suggests a significant reduction in systemic risk within the sector, although
we remain cautious about the long-term demand for housing in China.
As well as improved access to financing for property developers, there has
been a more general easing in credit provision during the review period.
China's Central Bank cut the reserve requirement ratio (RRR) for banks twice,
by a total of 50 basis points during the six months to end March 2023,
lowering it to a weighted average of 7.6% for financial institutions. As a
result, the so-called 'credit impulse' (defined as new credit flowing to the
economy, as a percentage of GDP) began to increase at the beginning of 2023.
We expect monetary and fiscal policies to remain supportive for the rest of
this year, while the deployment of additional stimulus measures will depend on
the speed of the recovery.
There has also been a marked shift in government policies towards a more
pro-growth, pro-business stance. The central government has given guidance
intended to promote private enterprises and restore confidence after three
years of stringent Covid restrictions and sudden, harsh regulatory crackdowns
on certain sectors. For example, pressures on the internet services sector
have eased. Regulators concluded cyber-security reviews of Didi, a provider of
ride-hailing, e-bike and food delivery services, and two other internet
platform companies, allowing them to resume new user registrations. After an
eight-month hiatus, regulators recommenced the issuance of licences to gaming
companies in mid-2022, and the monthly approvals of new titles and related
content are now back at levels comparable to those seen before the August 2021
crackdown on on-line gaming. Within the public sector, new initiatives to
encourage reform amongst state owned enterprises include targets for return on
equity, operating margins and the use of leverage, which will, hopefully,
improve performance and returns over time.
There was also positive news regarding US investors' capacity to invest in
Chinese equities. American Depositary Receipts (ADRs) provide US investors
with the means to purchase otherwise inaccessible foreign equities. They trade
on US stock markets in the same manner as domestic shares. The market for
Chinese ADRs has been subject to significant uncertainty for some time, due to
China's reluctance to allow US regulators full access to the audit reports of
Chinese listed companies. Investors in both China and the US therefore
welcomed the news that China's financial regulators have agreed to grant US
regulators the audit access. Following the successful conclusion of an initial
round of audit inspections, it seems the risk that the US will de-list Chinese
ADRs has fallen significantly.
The past six months have also been very eventful on the political front. At
the Chinese Communist Party's 20th Congress, China's President Xi secured a
third term in office and ensured the new Politburo Standing Committee
consisted entirely of his supporters. However, we are pleased that all the top
economic policymaking positions were allotted to well-regarded technocrats.
The Congress highlighted several themes relevant to equity investors. Foremost
amongst these was an increased emphasis on national security, which stretched
beyond the traditional notion of territorial and sovereign security, to
encompass the need for self-sufficiency in the form of reliable supply chains
and the domestic technology advancement. As a result of this edict, we will be
especially watchful for opportunities to invest in companies that benefit from
increasing import substitution, and those businesses least susceptible to US
bans on the export of key technology to China. The Congress also emphasised
the importance of data collection and digitalisation. This theme was
underscored by the establishment of a new National Bureau of Data, whose
mandate includes strategic nationwide initiatives to encourage the development
of the digital economy. We expect the government to step up support for
related industries, including semiconductor production and enterprise
digitalisation. A further important outcome from the Congress was a
re-affirmation of the government's commitment to achieve carbon neutrality by
2060. Many of JCGI's holdings are already implementing strategies to ensure
their operations are consistent with this and related targets and this will
remain a key factor in our investment decisions going forward.
Performance commentary
During the six months to 31st March 2023, sector allocation contributed
negatively by 3.9%. This was offset by the collective positive attribution
from stock selection and gearing.
Information technology made the most positive attribution thanks to our
holdings in Chinese software names such as Beijing Kingsoft Office, Hundsun
Technologies, Shanghai Baosight and Glodon. The software sector and selected
hardware companies were perceived as large language model (LLM) beneficiaries.
Hundsun Technologies' outperformance can also be attributed to normalization
of on-site software implementation to the financial industries after
disruptions caused by the pandemic. Real estate also contributed positively
thanks to strong execution by China Resources Mixc Lifestyle during the
pandemic as well as KE Holdings thanks to low valuations, share buybacks and
the improved outlook for property transactions.
The biggest detractors unfortunately came from our positions in the consumer
discretionary sector. Our overweights in JD and Meituan hurt performance, as
both were subject to increasing competition post reopening which delayed the
track to higher profitability that we originally forecast. Our underweight
position in Alibaba also hurt. Communication services detracted due to our
structural underweight in Tencent (i.e. the benchmark's weighting is higher
than our own investment limit) and not owning Chinese telecom companies which
traded up on expectation of reforms within state owned enterprises (SOE) as
well as increasing data center and cloud consumption driven by LLM adoption.
Sector allocation and transactions
We maintained overweights in areas with the most favourable secular growth
prospects, notably information technology (IT) and healthcare, while
maintaining underweights to financials and consumer discretionary. However, we
did add some new names, and topped-up some existing positions, in response to
recent U-turns in the government's policies on internet companies, Covid
restrictions and the property sector.
Within IT, we continue to find plenty of opportunities to invest in companies
with very favourable long-term growth prospects. We added to existing
positions in Montage, a global leader in the production of specialist
semiconductors, and Hundsun Technologies, a software company serving financial
institutions in securities and asset management. These are now our two largest
IT positions. In the hardware space, we purchased BOE Technology, a leading
manufacturer of display panels. BOE's competitive landscape has improved, as
several other players exited the market during the downturn. We funded this
purchase by selling Advanced Micro Fabrication (AMF) and Mediatek. AMF is a
semiconductor equipment maker which we sold due to concerns that it may be
adversely impacted by US tech bans to its key clients. We exited Mediateck, a
chipmaker for Android phones, on lower valuation signals and poor demand for
Android phones. In the software sector, we sold cybersecurity company DBAPP
Security, due to concerns about its governance practices, and ZWSOFT, a
computer aided design (CAD) software provider that has disappointed us in its
execution. We also reduced our holding in Beijing Kingsoft Office, a producer
of office software, after a rally in its share price. We continue to like the
company as it is widely perceived as a beneficiary of LLM such as Open AI, as
better AI functions embedded in Kingsoft Office products can potentially
increase future customer paying ratios.
In the ecommerce space, we maintained significant positions in Tencent and
Netease, but reduced our exposure to Meituan and JD, due to concerns that
heightened competition and increasing promotions may slow progress towards
higher margins. We took some profits on our holding in e-commerce platform PDD
(formerly known as Pinduoduo) on valuation grounds, as the stock outperformed
in 2022. During the review period, we rebuilt a position in Alibaba. This
company is restructuring itself into six business units which, if floated
separately, may be value accretive for shareholders. However, we remain
underweight this stock due to our conservative view on Alibaba's ability to
regain growth momentum in its core ecommerce space as it has been losing
market share in ecommerce in the format of livestreaming and competitors like
PDD.
In healthcare, we maintained largest positions in Wuxi Biologics and Shenzhen
Mindray. We initiated a new position in Imeik Technology, a manufacturer of
aesthetics cosmetic fillers and botox products. We also added to our existing
position in Angelalign Technology, a manufacturer of transparent dental
alignment products. We expect both these companies to benefit from the
recovery in discretionary spending on healthcare services. In addition, we
foresee scope for both businesses to expand their product offering, which will
help them gain market share over the long term. On the other hand, we
streamlined our holdings in some healthcare names, exiting or reducing
positions where our level of conviction has decreased. This includes medical
device makers Broncus Holding, Kangji Medical Holdings and Venus Medtech
Hangzhou. We also took profit on Beigene, a cancer drug developer, after its
share price rose following China's re-opening.
In the broad universe of consumption-related companies, although we are
underweight consumer discretionary as a sector, Trip.com, China's largest
online travel agency (OTA), remains one of the Company's largest holdings. We
also initiated two new positions in Chinese liquor companies, Wuliangye and
Luzhou Laojiao. Both these businesses are positioned at the premium end of the
market and have incentive systems in place to encourage management to drive
their businesses forward in innovative ways. Another new position is
Jiumaoujiu International, a casual dining chain running three Chinese brands.
This company demonstrated great operational resilience during the pandemic and
is well-positioned to benefit now that restaurants have re-opened. We expect
its multi-brand strategy to drive mid- to long-term growth.
China's reopening also prompted us to add to several existing service sector
positions, including H World, the country's largest mid-priced hotel chain.
This company implemented cost savings during the pandemic and is now
experiencing a strong recovery in occupancy rates and revenues which should
boost bottom line growth. We also built a position in Focus Media, an
advertising agency specialising in lift spaces, as we expect the rebound in
activity to translate into larger marketing budgets later this year. Like H
World, Focus Media also underwent rigorous cost cutting during Covid. However,
we exited Chongqing Brewery and Proya Cosmetics as both outperformed in 2022
and we expect future returns to weaken. In the case of Chongqing Brewery,
there is also the risk of higher input price pressures this year.
The portfolio is modestly overweight real estate, and we maintained our key
holding in China Resources Mixc, and built a new position in KE Holdings. This
acquisition was motivated by our expectation that KE Holdings will benefit
from the recovery in property transactions, especially in the secondary
market. It is also likely to gain market share, as several smaller competitors
did not survive the property downturn. The company boasts a strong balance
sheet, good capital allocation and a lean cost structure.
Finally, we continue to like electric vehicles (EVs) and renewables, but we
made some changes to our holdings in these sectors. We sold Contemporary
Amperex Technology (CATL), a producer of batteries for EVs and other uses. EV
manufacturers are cutting their prices aggressively and we were concerned that
this will adversely impact CATL's returns as auto manufacturers seek to reduce
the cost of their inputs to help compensate for lower vehicle prices. We also
disposed of Xpeng, an EV car manufacturer, as our conviction in this company
diminished. These sales were used to fund the acquisition of Ningbo Tuopu, an
auto component maker seeing strong demand from Tesla. In the renewable energy
space, we have large holdings in Suzhou Maxwell and Zhejiang Jingsheng. Both
these companies are solar equipment makers with high technical barriers to
entry. We expect both to benefit from ongoing technological improvements and
greater production capacity.
Performance attribution
For the six months ended 31st March 2023
% %
Contributions to total returns
Benchmark Return 7.3
Sector allocation -3.9
Stock allocation 1.9
Currency effect 1.3
Gearing/Cash 2.2
Investment manager contribution 1.5
Dividends/residual -0.4
Portfolio return 8.4
Management fee/other expenses -0.5
Return on net assets(A) 7.9
Impact of change in discount 1.8
Return to shareholders(A) 9.7
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.
(A) Alternative Performance Measure ('APM').
Outlook
The global economy is facing ongoing challenges - record inflation, high, and
possibly still rising, interest rates, and a resultant slowdown in growth,
which may drift into recession in some countries. This is in sharp contrast to
China's economic outlook, where inflation measured by CPI is 1.3% for 1Q 2023,
the five year loan primary rate is down 4.3% from 4.6% a year ago, and the
government is targeting GDP growth of around 5% during 2023. This is
considered conservative by some market observers, but in our view, it is a
reasonable goal given the headwinds faced by developed economies and the
impact this will have on demand for Chinese exports. We expect consumption to
be the main driver of Chinese GDP growth. Service sector activity is already
rebounding strongly and certain industry data, such as trips made by
high-speed rail, have surpassed their pre-pandemic levels.
However, the recovery in demand for big-ticket household items and cars is
likely to be more gradual, as the property market remains lukewarm, the labour
market is still slack and the demand for vehicles was front-loaded into 2022
thanks to government subsidies. The contribution from investment is also
likely to be modest, as it is coming off a high base following last year's
surge in public infrastructure investment, which was intended to support
growth. In addition, new home starts will be slow to increase as developers
are still repairing their balance sheets. The official GDP growth target may
also assume a decline in net exports, as growth slows in many developed
markets, but the severity and duration of this adverse influence is difficult
to forecast.
On the global stage, fundamental disagreements between China and the US
persist and there seems little prospect of near-term reproachment. For
instance, the US continues its efforts to limit China's access to cutting-edge
technologies. However, it is extremely difficult for the world's two largest
economies to decouple, and it is in neither's economic interests to do so.
This mutual self-interest should serve to encourage ongoing dialogue and
co-operation in some spheres. Since the country exited its zero-Covid policy,
government and business leaders have been keen to rebuild international
relationships, which, if successful, should help the economy regain momentum.
In this persistently uncertain climate, it may take time for business and
consumer confidence to recover from the past three, very difficult years, but
the recent, much more pro-growth, pro-business tone of government policy
announcements should lay the base for a multi-year recovery.
We remain equally optimistic about the longer-term prospects for Chinese
equities. Despite the market rally triggered by China's re-opening, valuation
signals remain attractive compared to historical averages. Our proprietary,
five-year expected return model, as well as familiar measures such as
price-to-book (P/B) and Price Earnings (P/E) ratios, remain near long-term
lows, suggesting a sustained recovery in Chinese equity prices is in
prospect. The main driver of future stock performance is likely to be renewed
earnings growth. While some industries operating at the cutting-edge of
technology will remain susceptible to geopolitical risks, elsewhere we see
ample opportunities to invest in companies benefiting from structural trends
such as the growth in China's middle class, import substitution,
digitalisation and the transition to carbon neutrality.
All this, combined with the size of the Chinese economy, suggests to us that
Chinese equities demand a meaningful allocation within any fully diversified
global portfolio. Historically low valuations suggest now may be a
particularly good time to invest. For those who agree, JCGI offers an
appealing, low-cost means of accessing this vibrant market. The Company's
positive long track record illustrates the advantages of being on the ground
in China and the effectiveness of our bottom-up investment process. We are
confident that our focus on attractively priced, quality companies, that offer
sustainable long-term growth, will continue to deliver superior capital gains
and reliable and rising income to investors willing to look beyond near-term
uncertainties.
We thank you for your ongoing support.
Rebecca Jiang
Howard Wang
Li Tan
Investment
Team
26th May 2023
Interim Management Report
The Company is required to make the following disclosures in its half year
report:
Principal and Emerging Risks and Uncertainties
Supported by a detailed risk matrix, the Board has identified the principal
risks and uncertainties which face the Company. These risks fall into the
following broad categories: geopolitical; investment underperformance;
strategy and business management; loss of Investment Team or Investment
Manager; share price discount; corporate governance; shareholder relations;
financial; cybercrime; fraud/other operating failures or weaknesses; legal and
regulatory; global pandemics; and climate change. While these categories have
not changed from those reported in the Strategic Report within the Annual
Report and Financial Statements for the year ended 30th September 2022, the
Board considers that some uncertainties within these categories have increased
in risk since the year end and are monitoring them carefully. These include
the continuing conflict between Russia and the Ukraine, heightened tensions
between the US and China, the introduction of trade-related sanctions by both
the US and China, and fragile consumer demand in China. Last year, the Board
identified social unrest within China as an Emerging Risk. Subsequent to the
year end, the Board also identified Artificial Intelligence as an Emerging
Risk.
Related Parties Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Company during the period.
Going Concern
The Directors believe, having considered the Company's investment objectives,
risk management policies, capital management policies and procedures, nature
of the portfolio and expenditure projections, that the Company has adequate
resources, an appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the foreseeable
future and, more specifically, that there are no material uncertainties
pertaining to the Company that would prevent its ability to continue in such
operational existence for at least 12 months from the date of the approval of
this half yearly financial report. In reaching that view, the Directors have
considered the impact of the ongoing Russia-Ukraine conflict and the increase
in US-China tensions on the Company's financial, operational position and
market conditions. For these reasons, they consider there is reasonable
evidence to continue to adopt the going concern basis in preparing the
accounts.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the half
yearly financial report has been prepared in accordance with FRS 104 'Interim
Financial Reporting' and gives a true and fair view of the state of affairs of
the Company and of the assets, liabilities, financial position and net return
of the Company, as at 31st March 2023, as required by the UK Listing Authority
Disclosure and Transparency Rule ('DTR') 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by DTR 4.2.7R and DTR 4.2.8R of the UK Listing Authority
Disclosure and Transparency Rules.
In order to provide these confirmations, and in preparing these financial
statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business;
and the Directors confirm that they have done so.
For and on behalf of the Board
Alexandra Mackesy
Chairman
26th May 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2023 31st March 2022 30th September 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments
held at fair value
through profit or loss - 20,148 20,148 - (139,922) (139,922) - (158,974) (158,974)
Net foreign currency
gains/(losses) - 4,542 4,542 - (1,335) (1,335) - (10,027) (10,027)
Income from investments 270 - 270 283 - 283 3,693 - 3,693
Interest receivable and
similar income(1) 290 - 290 225 - 225 493 - 493
Gross return/(loss) 560 24,690 25,250 508 (141,257) (140,749) 4,186 (169,001) (164,815)
Management fee (329) (988) (1,317) (483) (1,450) (1,933) (850) (2,549) (3,399)
Other administrative expenses
(280) - (280) (320) - (320) (605) - (605)
Net return/(loss) before
finance costs and taxation (143,002)
(49) 23,702 23,653 (295) (142,707) 2,731 (171,550) (168,819)
Finance costs (363) (1,088) (1,451) (89) (268) (357) (281) (845) (1,126)
Net return/(loss) before
taxation (412) 22,614 22,202 (384) (142,975) (143,359) 2,450 (172,395) (169,945)
Taxation (8) - (8) - - - (199) - (199)
Net return/(loss) after
taxation (420) 22,614 22,194 (384) (142,975) (143,359) 2,251 (172,395) (170,144)
Return/(loss)
per share (note 3) (0.50)p 27.18p 26.68p (0.46)p (171.84)p (172.30)p 2.71p (207.20)p (204.49)p
(1) Includes income from securities lending.
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
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 return/(loss) for the
period and also the total comprehensive income.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Called up Exercised Capital
share Share warrant redemption Other Capital Revenue
capital premium reserve reserve reserve(1) reserves(2) reserve(2) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Six months ended 31st March 2023
(Unaudited)
At 30th September 2022
20,803 80,951 3 581 37,392 144,556 - 284,286
Net return/(loss) - - - - - 22,614 (420) 22,194
Dividend paid in the period (note 4)
- - - - - (5,692) - (5,692)
At 31st March 2023 20,803 80,951 3 581 37,392 161,478 (420) 300,788
Six months ended 31st March 2022
(Unaudited)
At 30th September 2021 20,803 80,951 3 581 37,392 333,672 - 473,402
Net loss - - - - - (142,975) (384) (143,359)
Dividends paid in the period (note 4)
- - - - (9,486)(3) - - (9,486)
At 31st March 2022(3) 20,803 80,951 3 581 27,906 190,697 (384) 320,557
Year ended 30th September 2022
(Audited)
At 30th September 2021 20,803 80,951 3 581 37,392 333,672 - 473,402
Net (loss)/return - - - - - (172,395) 2,251 (170,144)
Dividend paid in the year (note 4)
- - - - - (16,721)(3) (2,251) (18,972)
At 30th September 2022 20,803 80,951 3 581 37,392 144,556 - 284,286
(1) Created during the year ended 30th September 1999, following a
cancellation of the share premium account.
(2) These reserves form the distributable reserves of the Company and may be
used to fund distribution to investors.
(3) For the six months ended 31st March 2022, the dividend paid of
£9,486,000 was initially recognised in other reserve and subsequently
reallocated to capital reserves for the year ended 30th September 2022. The
other reserve and capital reserves as at 31st March 2022 have not been
adjusted for this reallocation. As at 30th September 2022, all the dividends
paid in the year were allocated to capital reserves.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
At At At
31st March 31st March 30th September
2023 2022 2022
£'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss
348,361 377,680 333,206
Current assets
Debtors 954 888 1,997
Cash and cash equivalents 7,798 1,895 10,950
8,752 2,783 12,947
Current liabilities
Creditors: amounts falling due within one year(1) (56,325) (248) (61,867)
Net current (liabilities)/assets (47,573) 2,535 (48,920)
Total assets less current liabilities 300,788 380,215 284,286
Creditors: amounts falling due after more than one year(1)
- (59,658) -
Net assets 300,788 320,557 284,286
Capital and reserves
Called up share capital 20,803 20,803 20,803
Share premium 80,951 80,951 80,951
Exercised warrant reserve 3 3 3
Capital redemption reserve 581 581 581
Other reserve 37,392 27,906(2) 37,392
Capital reserves 161,478 190,697(2) 144,556
Revenue reserve (420) (384) -
Total shareholders' funds 300,788 320,557 284,286
Net asset value per share (note 5) 361.5p 385.3p 341.7p
(1) As at 31st March 2023, £52.6m (31st March 2022: £59.7m; 30th September
2022: £57.5m) was drawn down from the loan facility.
(2) For the six months ended 31st March 2022, the dividend paid of
£9,486,000 was initially recognised in other reserve and subsequently
reallocated to capital reserves for the year ended 30th September 2022. The
other reserve and capital reserves as at 31st March 2022 have not been
adjusted for this reallocation. As at 30th September 2022, all the dividends
paid in the year were allocated to capital reserves.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 31st March 30th September
2023 2022(1) 2022(1)
£'000 £'000 £'000
Cash flows from operating activities
Net return/(loss) before finance costs and taxation 23,653 (143,002) (168,819)
Adjustment for:
Net (gains)/losses on investments held at fair value through
profit or loss (20,148) 139,922 158,974
Net foreign currency (gains)/losses (4,542) 1,335 10,027
Dividend income (270) (283) (3,693)
Interest income (117) (1) (59)
Realised gains on foreign exchange transactions (809) (496) (776)
Realised exchange (gains)/losses on the Liquidity Fund (310) 51 1,089
Increase in accrued income and other debtors (12) (27) (17)
(Decrease)/increase in accrued expenses (24) (78) 6
Net cash used in operating activities (2,579) (2,579) (3,268)
Dividends received 310 237 3,412
Interest received 117 1 59
Net cash (outflow)/inflow from operating activities (2,152) (2,341) 203
Purchases of investments and derivatives (122,398) (156,164) (233,601)
Sales of investments and derivatives 127,557 159,858 265,482
Settlement of foreign currency contracts - (147) (129)
Net cash inflow from investing activities 5,159 3,547 31,752
Equity dividends paid (5,692) (9,486) (18,972)
Repayment of loan (4,317) - (12,470)
Drawdown of loan 4,723 9,995 9,995
Utilisation of bank overdraft - (124) (124)
Interest paid (1,187) (327) (920)
Net cash (outflow)/inflow from financing activities (6,473) 58 (22,491)
(Decrease)/increase in cash and cash equivalents (3,466) 1,264 9,464
Cash and cash equivalents at start of period/year 10,950 36 36
Unrealised gains on foreign currency cash and
cash equivalents 314 595 1,450
Cash and cash equivalents at end of period/year 7,798 1,895 10,950
Cash and cash equivalents consist of:
Cash and short term deposits 272 1,516 2,865
Cash held in JPMorgan US Dollar Liquidity Fund 7,526 379 8,085
Total 7,798 1,895 10,950
(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 used in
operating activities' on the face of the Cash Flow Statement. Previously, this
was shown by way of note. 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.
Reconciliation of net debt
As at Other As at
30th September non-cash 31st March
2022 Cash flows charges 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash 2,865 (3,290) 697 272
Cash equivalents 8,085 (176) (383) 7,526
10,950 (3,466) 314 7,798
Borrowings
Bank loan (57,511) (406) 5,347 (52,570)
(57,511) (406) 5,347 (52,570)
Net debt (46,561) (3,872) 5,661 (44,772)
Notes to the financial statements
for the six months ended 31st March 2023
1. Financial statements
The information contained within the condensed financial statements in this
half year report has not been audited or reviewed by the Company's auditors.
The figures and financial information for the year ended 30th September 2022
are extracted from the latest published financial statements of the Company
and do not constitute statutory accounts for that year. Those financial
statements have been delivered to the Registrar of Companies and included the
report of the auditors which was unqualified and did not contain a statement
under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The financial statements are prepared in accordance with the Companies Act
2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP')
including FRS 102 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland' and with the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital Trusts' (the
'SORP') issued by the Association of Investment Companies in July 2022.
FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting
Council ('FRC') in March 2015, has been applied in preparing this condensed
set of financial statements for the six months ended 31st March 2023.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of financial statements
are consistent with those applied in the financial statements for the year
ended 30th September 2022.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2023 31st March 2022 30th September 2022
£'000 £'000 £'000
Return/(loss) per share is based on the following:
Revenue (loss)/return (420) (384) 2,251
Capital return/(loss) 22,614 (142,975) (172,395)
Total return/(loss) 22,194 (143,359) (170,144)
Weighted average number of shares in
issue during the period/year 83,202,465 83,202,465 83,202,465
Revenue (loss)/return per share (0.50)p (0.46)p 2.71p
Capital return/(loss) per share 27.18p (171.84)p (207.20)p
Total return/(loss) per share 26.68p (172.30)p (204.49)p
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2023 31st March 2022 30th September 2022
£'000 £'000 £'000
2023 first quarterly interim dividend of 3.42p (2022: 5.7p)
2,846 4,743 4,743
2023 second quarterly interim dividend of 3.42p (2022: 5.7p)
2,846 4,743 4,743
2022 third quarterly interim dividend of 5.7p
- - 4,743
2022 fourth quarterly interim dividend of 5.7p
- - 4,743
Total dividends paid 5,692 9,486 18,972
A third quarterly dividend of 3.42p has been declared for payment on 1st June
2023 for the financial year ending 30th September 2023.
Dividend payments in excess of the revenue amount will be paid out of the
Company's distributable reserves.
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2023 31st March 2022 30th September 2022
Net assets (£'000) 300,788 320,557 284,286
Number of shares in issue 83,202,465 83,202,465 83,202,465
Net asset value per share 361.5p 385.3p 341.7p
JPMORGAN FUNDS LIMITED
26th May 2023
For further information, please contact:
Lucy Dina
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
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 2023 Half Year Report will shortly be submitted to the FCA's
National Storage Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Half Year Report will also shortly be available on the Company's website
at www.jpmchinagrowthandincome.co.uk
(http://www.jpmchinagrowthandincome.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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