TIDMJAGI
RNS Number : 7029W
JPMorgan Asia Growth & Income PLC
14 December 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN ASIA GROWTH & INCOME PLC
FINAL RESULTS FOR THE YEARED 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 Description Mitigating activities Movement from prior
risk year
Investment Poor implementation The Board manages these The risk remains high
Underperformance of the investment strategy, risks by diversification but unchanged from
for example as to thematic of investments and through 2022, due to the continuation
exposure, sector allocation, its investment restrictions of unfavourable economic
stock selection, undue and guidelines, which conditions (caused
concentration of holdings, are monitored and reported by factors such as
factor risk exposure on by the Manager. The the geopolitical crises
or the degree of total Manager provides the between Russia and
portfolio risk, may Directors with timely Ukraine and Israel
lead to failure to and accurate management and Gaza, high inflation
outperform the Company's information, including and interest rates)
benchmark index and performance data and faced by global equity
peer companies, resulting attribution analyses, markets, making investment
in the Company's shares revenue estimates, liquidity decisions more challenging
trading on a wider reports and shareholder for the Portfolio Managers.
discount. analyses. The Board
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 Historically, emerging The investment process The risk remains high
and Economic market companies (and incorporates non-financial but unchanged from
investments in their measures and risks in 2022. The Board has
shares) have shown the assessment of investee increasingly turned
greater volatility companies to allow the its attentions to the
and may be subject portfolio to adapt to heightened risks from
to certain political, changing competitive investing in China
geopolitical and corporate and political landscapes. specifically - see
governance risks which The Board regularly below.
are not typically associated reviews and discusses
with more developed with the Portfolio Managers
markets and economies. the portfolio, the Company's
Sustained underperformance investment performance
of emerging markets and the execution of
as an asset class may the investment policy
occur as a result of against the long-term
risks such as the imposition objectives of the Company.
of restrictions on The Manager's independent
the free movement of risk team performs systematic
capital or other government risk analysis, including
regulatory changes. country specific risk
monitoring, as well
as stress testing of
the portfolio's resilience.
------------------------------- ------------------------------- --------------------------------
Investing China offers some unique Unlike its passive The risk remains high
in China investment opportunities competitors, but unchanged from
and risks. On one hand, as an actively managed 2022.
it has provided faster fund the Portfolio Managers The Board specifically
growth than many other can adapt the portfolio discusses the risks
markets in the last to a changing environment associated with investing
few decades, but in and reduce both regulatory in China at each Board
recent years it has risk from, for example meeting.
been impacted by a export controls and
decline in trade, a reputational risk from,
slowdown in consumer for example human rights
spending, a crackdown transgressions.
on the private sector The Board has access
by the Chinese government to a range of expert
and US-led trade restrictions, resources and strategists
together with growing both within JPMAM and
concerns in relation externally, who can
to China's domestic provide long term insight
property market. and guidance on geopolitical
The country, together developments.
with Hong Kong, represents
just over 40% of the
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 A sudden departure The Manager takes steps The risk is medium
Investment of a portfolio manager to reduce the likelihood and remains unchanged
Team or or several members of such an event by from 2022. The investment
Portfolio of the investment management ensuring appropriate team is supported by
Manager team could result in succession planning significant resource.
a short-term deterioration and the adoption of
in investment performance. a team-based approach,
as well as special efforts
to retain key personnel.
------------------------------- ------------------------------- --------------------------------
Cyber Crime The threat of cyber The information technology The risk remains high
attack, in all its controls around the but unchanged from
guises, is regarded physical security of 2022.
as at least as important J.P. Morgan Chase & To date the Manager's
as more traditional Co's data centres, security cyber security arrangements
physical threats to of its networks and have proven robust
business continuity security of its trading and the Company has
and security. The Board, applications are tested not been impacted by
via its Manager, has by an independent third any cyber attacks threatening
received the cyber party and reported every its operations.
security policies for six months against the
its key third party AAF Standard.
service providers and
JPMF has assured Directors
that the Company benefits
directly or indirectly
from all elements of
J.P. Morgan Chase &
Co's Cyber Security
programme.
------------------------------- ------------------------------- --------------------------------
Discount Investment trust shares The Board monitors the The risk remains high
Control often trade at discounts premium/discount at but unchanged from
to their underlying which the Company's 2022.
NAVs; they can also share price trades relative The Board regularly
trade at a premium. to NAV on both an absolute reviews and monitors
Discounts and premiums level and in comparison the Company's objective
can fluctuate considerably to its peers and the and investment policy
leading to volatile wider investment trust and strategy, the investment
returns for shareholders. sector. portfolio and its performance,
The Board reviews sector the level of discount/premium
relative performance to net asset value
and sales and marketing at which the shares
activity (considered trade and movements
the primary drivers in the share register.
of the relative discount During the year the
level). The Company Company continued to
also has authority to conduct share buybacks.
repurchase its existing
shares to enhance the
NAV per share for remaining
shareholders and to
reduce the absolute
level of discount and
discount volatility.
------------------------------- ------------------------------- --------------------------------
Legal and The Company's business The Board receives regular The risk remains medium
Regulatory model could become reports from its broker, but unchanged from
Change non-viable as a result depositary, registrar 2022.
of new or revised rules and Manager as well Changes to the regulatory
or regulations arising as its legal advisers landscape are inevitable.
from, for example, and the Association
policy change or financial of Investment Companies
monitoring pressure. on changes to regulations
which could impact the
Company and its 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 GBP2,039,000 (2022: GBP2,155,000) of which
GBPnil (2022: GBPnil) was outstanding at the year end.
Safe custody fees amounting to GBP159,000 (2022: GBP169,000)
were payable to JPMorgan Chase Bank N.A. during the year of which
GBP67,000 (2022: GBP42,000) 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 GBP2,000 (2022: GBP7,000) of which GBPnil (2022:
GBPnil) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP28,000
(2022: GBP28,000) were payable to JPMorgan Chase Bank N.A. during
the year of which GBP12,000 (2022: GBP7,000) 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 GBP8,000 (2022: GBP9,000). Interest amounting to
GBP50,000 (2022: GBP10,000) was receivable during the year of which
GBPnil (2022: GBPnil) was outstanding at the year end.
Stock lending income amounting to GBP46,000 (2022: GBP92,000)
were receivable by the Company during the year. The Manager's
commissions in respect of such transactions amounted to GBP5,000
(2022: GBP10,000).
At the year end, the Company held cash of GBP207,000 and an
overdraft of GBP1,058,000, resulting in net overdrawn amount of
GBP854,000 (2022: cash held of GBP445,000 and GBPnil overdraft)
with JPMorgan Chase Bank N.A. A net amount of interest of GBP4,000
(2022: GBPnil) was receivable by the Company during the year of
which GBPnil (2022 GBPnil) 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP3,447,000 (2022: GBP 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 Exercised Capital
up
share Share warrant redemption Capital Revenue
capital premium reserve reserve reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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)
GBP'000 GBP'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 loss (16,289) 75,909
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 (1,058) -
in note 13 of the 2023 Annual Report)
---------------------------------------------------------- ----------- ----------
Total cash, cash equivalents and bank overdraft per
the Statement of Cash Flows (851) 454
---------------------------------------------------------- ----------- ----------
(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
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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 GBP206,474,000
(2022: GBP252,678,000).
2023 2022
GBP'000 GBP'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 GBP203,027,000 (2022:
GBP249,110,000).
4. Net asset value per share
2023 2022
--------------------------- ----------- ------------
Net assets (GBP'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
S
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
The 2023 Annual Report will shortly be available on the
Company's website at 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
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December 14, 2023 02:00 ET (07:00 GMT)
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