TIDMJCGI
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
ED 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 GBP60 million loan facility with The Bank Nova
Scotia. As at 31st March 2023, GBP52.7 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 (49) 23,702 23,653 (295) (142,707) (143,002) 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 Exercised Capital
up
share Share warrant redemption Other Capital Revenue
capital premium reserve reserve reserve(1) reserves(2) reserve(2) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP9,486,000 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
GBP'000 GBP'000 GBP'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, GBP52.6m (31st March 2022: GBP59.7m;
30th September 2022: GBP57.5m) was drawn down from the loan
facility.
(2) For the six months ended 31st March 2022, the dividend paid
of GBP9,486,000 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 Six months Year ended
ended ended
31st March 31st March 30th September
2023 2022(1) 2022(1)
GBP'000 GBP'000 GBP'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
GBP'000 GBP'000 GBP'000 GBP'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 Six months Year ended
ended ended
31st March 31st March 30th September
2023 2022 2022
GBP'000 GBP'000 GBP'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 Six months Year ended
ended ended
31st March 31st March 30th September
2023 2022 2022
GBP'000 GBP'000 GBP'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 (GBP'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
The Half Year Report will also shortly be available on the
Company's website at 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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END
IR FIFLTETIRFIV
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