LONDON STOCK EXCHANGE
ANNOUNCEMENT
JPMORGAN CHINA GROWTH &
INCOME TRUST PLC
UNAUDITED HALF YEAR RESULTS
FOR THE SIX MONTHS
ENDED 31ST MARCH
2024
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 2024.
Chairman's
Statement
Introduction
During the six months to 31st March
2024, the extreme volatility that has battered Chinese stock
markets since March 2023 continued to overshadow market
performance. Sentiment remained depressed, impacted by concerns
about fragile domestic consumer confidence, the significant
challenges facing the Chinese property and regional financial
sectors, global macroeconomic concerns and continued geopolitical
tensions, particularly between the US and China. Against this
difficult backdrop, Chinese growth stocks, which have long been the
focus of our disciplined Portfolio Managers, remained out of
favour, and the Company's performance suffered
accordingly.
Performance
Faced with this market volatility
and these challenges, the Company's total return on net assets
(with net dividends reinvested) fell 13.1% over the six months
ended 31st March 2024, underperforming the MSCI China Index, which
declined 9.5%. Over the same period, the total return to
shareholders declined 11.9%, reflecting the narrowing of the
discount to net asset value ('NAV') at which the Company's shares
trade, from -11.5% at the previous financial year end to -10.4% at
the half year end.
While this short-term performance is
disappointing, we are mindful of the Company's 30 year track record
as a listed entity, and the importance of taking a long-term view.
We are encouraged that over the longer term, our Company has made
positive absolute returns, comfortably outperforming the benchmark
over ten years. The relative underperformance to the benchmark
index is explained in the Investment Manager's Report in the Half
Year 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 Portfolio 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 3.8% to 15.6%,
ending the half year at 4.3%.
During the reporting period, the
Company continued to utilise its facility agreement with Industrial
and Commercial Bank of China Limited, London Branch (ICBC), in
respect of a revolving loan facility of up to £60.0 million to
maintain a meaningful but modest level of gearing. Due to market
movements and after discussions with ICBC, the Company's loan
agreement was amended on 28th March 2024 and the facility was
reduced to a commitment of up to £30.0 million. Some changes were
also made to certain financial covenants.
There is currently £9.2 million
drawn down on the existing loan facility, which expires in July
2025.
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 2nd October 2023, the Company
announced that the cum income Net Asset Value at the close of
business on 30th September 2023 (the Company's year-end) was 276.05
pence per share. In line with the Company's distribution policy,
the Directors declared the first quarterly interim dividend of
2.76 pence per share. Since then, two further dividend
declarations have been made on 2nd January 2024 and 2nd April 2024,
both of 2.76 pence per share. With the planned declaration of the
final quarterly dividend of 2.76 pence per share on 1st July 2024,
in the absence of unforeseen circumstances, the annual dividend for
the year ending 30th September 2024 will be 11.04 pence per
share (2023: 13.68 pence).
Share Capital
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.
Stay Informed
The Company delivers email updates
with regular news and views, as well as the latest performance. 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/JCGI-Sign-Up or by scanning the QR code in the
front of the Half Year Report.
Outlook
China stock markets have stabilised
since January, as concerns about the Chinese property market and
the broader economy eased. Investors have also been encouraged by
the Chinese government's indications of a planned economic stimulus
programme and continued evidence of companies raising dividend
payouts and buying back shares. Reflecting this, the Company's
share price has risen to 236.5p on 27th May 2024, climbing 12.6%
since 31st March 2024, with the discount to NAV narrowing from
10.4% to 9.3% over the same period.
As a Board, we are mindful that
challenges remain. While the Chinese government has recently
confirmed its GDP forecast of 5% for 2024, domestic consumer demand
is still subdued. While recent talks between China and US have been
encouraging, an escalation in anti-Chinese rhetoric ahead of this
year's US presidential election cannot be ruled out. Concerns also
remain about shifting patterns in global supply chains and the
ongoing conflicts in Ukraine and the Middle East, which may also
dampen market sentiment in the short term. That said, our Portfolio
Managers are increasingly optimistic about the prospects for
Chinese equities over the coming year. Determined to recover lost
performance, they are using the opportunities offered by current
low valuations to build up positions in quality companies that
offer robust long-term growth. As a Board, we share our Managers'
optimism. We remain confident that their disciplined investment
strategy, combined with the skills and experience of the
well-resourced investment team, will enable the Company to deliver
superior long-term returns.
Alexandra Mackesy
Chairman
29th May 2024
INVESTMENT MANAGER'S
REPORT
Introduction
During the six months ended 31st
March 2024, the Company's total return on net assets declined
13.1% (in sterling terms), compared to a benchmark decline of
9.5%. However, the Company's long-term track record of outright
gains and outperformance remains intact. In the ten years ended
March 2024, the portfolio outperformed its benchmark by a total of
23.4 percentage points.
Setting the scene
China's economic recovery remained
relatively tepid during the period under review, registering GDP
growth of 5.2% in real terms. The key reason for this is that it is
taking time for the economy to work through the challenges it
faces, including the bursting of the property sector bubble and
high local government indebtedness.
Domestic policy makers remain
responsive but are reluctant to launch large scale stimulus
packages, as China did in 2008 in the wake of the global financial
crisis, mainly because of concerns about local government debt
levels. In the National People's Congress meeting in March 2024,
the Premier announced that the authorities are targeting GDP growth
of 5% (in real terms) and a government deficit of 3% of GDP. He
also indicated plans to issue USD1.0 trillion of ultra-long dated
treasury bonds to support fiscal spending in regions where local
governments are subject to austerity measures. These announcements
aligned with matched expectations of modest fiscal expansion. The
People's Bank of China (PBoC) continues to ease monetary policy via
cuts in the reserve ratio and the loan prime rate. However, the
PBoC wants to limit the exchange rate impact of monetary easing, so
its scope to loosen monetary settings further is being constrained
by stickier than expected US inflation, which is likely to prevent
the Fed from cutting rates as quickly as many hoped.
Turning to developments in specific
industries, property sales and investment in new development
projects continued to decline in the first quarter of 2024 on a
year-on-year basis. However, we saw more measures intended to
stimulate demand in the property sector. On the demand side, we saw
reductions in down payment requirements and mortgage rates, and the
removal of purchase restrictions in almost all but the largest
cities. On the supply side, the government is calling on banks and
local governments to make a coordinated effort to prevent key
developers from defaulting. Elsewhere, in an attempt to boost weak
consumer confidence, central and local governments launched
stimulatory measures such as subsidies for scrapped vehicles and
home appliances. To support business confidence, governments
promised fiscal support for investment in technological development
and equipment upgrades, with details yet to be
disclosed.
Thanks at least in part to all these
measures, the Chinese economy started to show some signs of
recovery during the first quarter of 2024. The purchasing managers
index (PMI), which is a forward indicator of activity in the
manufacturing sector, returned to 50.8% meaning the manufacturing
sectors are growing compared to the previous month, and inflation
turned positive in February 2024. Investors welcomed
industry-specific stimulus policies, and stock market sentiment
began to improve from a very low level, assisted by state-owned
investment funds, which began buying domestic stock ETFs. This
buying sent a very strong signal of the government's willingness to
support capital markets.
Valuations remain very attractive
compared with both long-term historic levels and other major stock
markets, especially given the authorities' recent efforts to
improve shareholder returns. Returns on equity (ROE) and dividend
payout ratios have become important key performance indicators
(KPIs) for managers of state-owned enterprises (SOEs), and they are
being urged to increase dividend payouts and become more
shareholder friendly. In addition, the security market regulator,
the China Securities Regulatory Commission (CSRC), pledged to
improve shareholder returns and to crack down on capital market
misconduct. These policy initiatives are widely regarded as signals
of a shift in the authorities' mindset, from viewing the equity
market as a tool to fund economic growth to seeing it as the means
of wealth creation for shareholders. With the economy stabilising,
valuations attractively low and shareholder returns increasing,
international investors are once again focusing their attention on
Chinese stock markets.
The external environment still
presents challenges, but we believe tensions between China and the
US have eased significantly, following a series of high-level
engagements, including a Biden-Xi summit, and visits by the US
Secretary of State and Treasury Secretary to meet their Chinese
counterparts. As President Biden says, the US wants competition,
not confrontation, with China.
Performance commentary
Investing in Chinese equities has
been especially challenging during the past three years. Some of
the risks encountered were completely unanticipated and beyond the
control of companies and investors. Many of the growth companies we
favour failed to meet their forecasts, and valuations came under
pressure from rising interest rates relevant to international
investors. In addition, the decline in domestic interest rates
increased the attraction of high dividend yielding stocks, creating
another style headwind for the company.
Our style bias in favour of growth
stocks remained a drag on performance over the past six months. The
MSCI China Growth Index declined by 11.6% (in GBP terms), lagging
the MSCI China Value Index, which fell by only 4.8%. The value
sectors that we tend to underweight, including Financials, Energy
and Materials, outperformed the benchmark. Amongst our more
growth-oriented holdings, sector allocation and stock selection in
healthcare were the biggest detractors, along with stock selection
in industrials.
Within Financials, large SOE banks such as
China Construction Bank and
Bank of China outperformed
our holdings of more market-oriented banks such as China Merchants Bank, which we believe
possess better long-term growth prospects. The main reasons for the
SOEs' outperformance are attractive high single digit dividend
yields as a result of low valuations; and investors generally
assume dividends will not be reduced as the dividend stream is an
important source of revenue for the central government. Despite
China Merchants Bank's recent underperformance, we have retained
our long-term holding. We believe it is still the best managed
Chinese bank, and its healthy ROE and capitalisation make it one of
the few Chinese banks with real scope to increase dividend payouts.
Elsewhere in the financial sector, life insurers, including
China Pacific Insurance
which we hold, underperformed the sector on concerns about downward
pressure on premiums and returns, after regulators banned the sales
of certain investment products.
Energy outperformed, lead by
petroleum and coal companies, primarily due to their high dividend
yields. We are zero-weighted in this sector, as we struggle to find
companies with repeatable growth, and we think the high dividend
yields are not sufficient to offset the inherent volatility of
these businesses. We also avoid petroleum and coal companies due to
the high carbon intensity of their products. Materials also outperformed as demand
for copper and aluminum was better than expected, and the supply
side responded to cyclical low demand for aluminium by cutting
capacity. However, the high growth
companies making innovative materials that we hold, such as Sunresin New
Material, a supplier of specialist industrial resins,
underperformed. The decline in Sunresin's valuation provided us
with the opportunity to top up our position at an attractive level.
Within this sector, we also like companies producing materials such
as copper and lithium, that play an important role in the
production and supply of renewable energy.
Our stock selection in Health Care and Industrials contributed negatively to
our performance. Wuxi Biologics and Asymchem, our holdings in the contract
development & manufacturing organisation (CDMO) sector, which
conducts R&D on a contract basis, saw their share prices
plummet after the US House of Representatives sought to pass
the Biosecure Act, which would prevent US federally funded projects
from employing Chinese CDMOs on national security grounds.
Investors also worried that the Act, if passed, may also adversely
impact the willingness of US pharmaceutical companies to use
Chinese CDMOs, even though these commercial projects are not funded
by the US government. We are retaining our position in Wuxi
Biologics because its valuation is attractive after the share price
fall, even allowing for geopolitical risks. In addition, this
company's fundamental businesses are resilient, and it has been
building global capacity during the past few years in response to
client demand. Some of its European factories are becoming
profitable, in part due to strong order growth from European
pharmaceutical companies. Asymchem, although not specifically
mentioned in the Biosecure Act, also saw its valuation drop due to
the same concerns. In addition, the company suffered from temporary
capacity underutilization after the collapse in demand for
COVID-related drugs.
Our holdings in several industrial
names derated on concerns about sluggish fixed asset investment and
oversupply in the solar and electric vehicle sectors. Affected
holdings included Shanghai
Liangxin Electricals, which specialises in low voltage
electrical apparatus, Hongfa
Technology, which produces electrical appliances and
equipment, and Jiangsu Hengli
Hydraulic, which supplies hydraulic pumps and electric
motors for construction and other heavy machinery. We cannot
dismiss the adverse impact of macroeconomic cyclicality on our
industrial holdings, but there are lots of positive idiosyncratic
factors in play, such as market share gains, growing export demand
and new product launches, that we expect to support their
outperformance over time. We made small adjustments to some
position sizes but maintain our positive long-term assessment of
our industrial holdings.
On the positive side, stock
selection in some sectors has resulted in positive returns. At the
sectoral level, our exposure to Consumer Discretionary contributed the
most. Holdings in travel related names such as Trip.com, an online travel agency, and
hotelier H World
outperformed as leisure travel remained strong. Competition in this
industry is benign and both companies executed really well. In the
auto sector, we prefer to gain exposure to the rising penetration
of electrical vehicles (EVs) globally through component makers such
as Fuyao Glass, an auto
glass maker, and Hongfa
Technology, a high voltage relay maker, rather than via
original equipment makers (OEM), which use those components to
manufacturer equipment for use in EVs. Our decision not to own
several EV OEMs, namely Xpeng,
Nio, Li Auto and BYD, collectively contributed to
relative returns. Despite exciting model launches, profitability in
this industry struggles due to fierce competition between
traditional auto OEMs and new entrants. In Communication Services, there was a
positive contribution from Kanzhun, which operates Boss Zhipin,
the largest online job matching platform in China. Boss Zhipin
continues to gain market share and revenues. Judging from leading
indicators on its platform, the overall employment market is
recovering, which bodes well for future demand for its services.
Not owning Baidu, the largest search engine, and Kuaishou, a short
video social media platform, also contributed positively, as these
companies are losing market share in their core businesses of
online advertising and short video social media due to increased
pressure from competitors.
Performance attribution
For the six months ended 31st March
2024
|
%
|
%
|
Contributions to total returns
|
|
|
Benchmark Return
|
|
-9.5
|
Sector allocation
|
1.0
|
|
Stock allocation
|
-3.5
|
|
Currency effect
|
0.1
|
|
Gearing/Cash
|
-0.6
|
|
Investment manager contribution
|
|
-3.0
|
Dividends/residual
|
0.2
|
|
Portfolio return
|
|
-12.3
|
Management fee/other
expenses
|
-0.8
|
|
Return on net assetsA
|
|
-13.1
|
Impact of change in discount
|
|
1.2
|
Return to shareholdersA
|
|
-11.9
|
Source: FactSet, JPMAM and
Morningstar.
Performance attribution analyses how
the Company achieved its recorded performance relative to its
benchmark index.
A Alternative Performance Measure
('APM').
Transactions and sector allocation
Despite the adverse effect on recent
performance of our bias towards growth stocks, we intend to
maintain our preference for growth. Firstly, we believe that
despite cyclical headwinds and talks about diversifying supply
chains to include countries other than China, many Chinese
companies remain capable and competitive on a global basis. In
addition, we increasingly see our quality growth holdings launching
'self-help' measures to support their share prices, including cost
cutting, more generous dividend payouts and large-scale
buybacks.
Our sector weightings are largely
unchanged. We remain overweight in sectors with long-term growth
opportunities in information technology, internet platforms, health
care, and globally competitive manufacturing businesses. Meanwhile,
we continue to review our forecasts for some growth companies, as
we want to concentrate our positions in companies in which we have
the highest conviction.
We have executed more complete exits
in the past six months than usual, in part to increase the
concentration of our portfolio, and also because we reduced
leverage in December to meet NAV covenants. We sold a few small
positions where our conviction levels had waned. We also sold
several outperformers whose valuations were looking expensive. For
example, we took profits on China
Yangtze Power, China's largest hydro power producer, which
generates low-cost, eco-friendly electricity. Outperformance had
pushed the dividend yield down to some 4% and, as its EPS growth
looked set to remain in the low single digits, we sold the
position. We also realised gains on Shanghai Baosight Software, a software
and automation solution provider servicing the steel industry, and
on Beijing Kingsoft Office,
a business software provider.
We exited some positions when
performance had disappointed expectations, forcing us to sell at
a loss. For example, we sold two discretionary consumption
plays, Aier Eye Hospital
which specialises in treatments such as refractive eye surgery, and
Jiumaojiu International, a
casual dining restaurant chain. Originally, we expected these
businesses to benefit from pent-up demand following the
post-pandemic economic re-opening, but weak consumer confidence and
deflation in the consumer sector made them far less attractive than
we originally estimated. We also exited a few companies that
operate in highly competitive industries, where we no longer have
confidence in their ability to consolidate their positions. Sales
in this group included JD.com, one of China's largest
ecommerce platforms, ZTO
Express, a delivery company, Yunnan New Energy Material, a lithium
battery separator maker, and Longi
Green Energy Technology, a manufacturer of solar wafers and
panels.
We are still actively seeking and
investing in structural growth opportunities. In January 2024, we
bought a new position in Taiwan
Semiconductor Manufacturing Company (TSMC). Its strong
position in the semiconductor business is further cemented in the
AI era by its capability in advanced node and its ownership of
Chip-on-Wafer-on-Substrate (CoWoS), its proprietary packaging
technology platform. TSMC's valuation is very attractive
considering its status as an AI enabler. We also topped up
Foxconn Industrial
Internet, which makes communications network and cloud
services equipment, including graphic processing units (GPU), for
Nvidia, enterprise data centers and cloud service providers. The
complexity, intensive energy consumption and rapid product
evolution which characterise such businesses generate great growth
opportunities for Foxconn. We bought a modest position in the
world's largest lithium battery maker, Contemporary Ampertex Technology Limited
(CATL), a company which we have previously owned. This
industry has been dogged by oversupply, and, reflecting this,
CATL's valuation became more reasonable. Auto makers value CATL for
its quality, and lower tier battery makers are struggling to
compete, so the unit profit on its batteries has
stabilised.
We are also looking for quality
businesses offering great potential that are recovering from the
cyclical downturn. We initiated a new position in iQIYI, a long video streaming platform,
similar to Netflix. China's long video streaming industry has
consolidated in the past few years into a duopoly, with iQIYI and
Tencent Video as the two largest players. This has heralded a few
positive changes, including lower content costs, higher membership
fees, and the accumulation of content libraries that help retain
members at low cost. These changes should see iQIYI's cash
generation improve significantly, which will allow it to repay
expensive borrowing and implement share buybacks.
In the broad consumer sector, we
favour businesses with pricing power. We initiated a position in
Chacha Food, the largest
sunflower, nut and seed snack brand in China. The company's margins
are improving thanks to efficiency gains and price hikes, and it
has committed to maintaining its good track record of paying
dividends by raising its payout ratio even further. We also bought
China Resources Sanjiu, a
market leader in traditional, over-the-counter Chinese medicines
for minor ailments. Sanjiu has become a household name following
decades of sophisticated brand building. Given its strong brand and
its control of distribution channels, it has an ample capability to
pass on raw material cost increases to its customers. In addition,
as a highly cash generative and well-managed SOE, it is likely to
gradually increase its payout ratio.
We maintain our focus on good ESG
practices and our preference for quality, cash generative
businesses that return excess capital to shareholders. As part of
our active engagement on ESG matters with the companies in our
portfolio, we have been encouraging them to improve shareholder
returns via larger dividend payments and share buybacks.
Outlook
We believe the worst is probably
behind us both in terms of the slowdown of China's economic growth,
and the derating of Chinese equities. There are good reasons to
view the outlook more positively. For a start, we see some
signs of a domestic economic recovery. At the same time, exports
have remained resilient throughout the economic downturn. Several
domestically focused internet and consumer companies have become
even more cash generative, thanks to improved operating
efficiencies and reductions of non-core investments. Like the SOEs,
they are returning more cash to shareholders. The property sector
is also showing some signs of stabilising. After declining for two
years, we believe sales of new homes are now close to a level
justified by long-term trends in population growth and new family
formation. The sector's drag on GDP is also diminishing, although
it will still detract from growth this year. We expect 2024 to
bring more local stimulus policies to support housing demand, and
perhaps even a comprehensive clean-up of developers' bad
loans. Contagion risks to the financial
sector are contained at the moment, helped by provisions made in
the past and decline in deposit rates. In the solar and electric
vehicle sectors, oversupply should ease gradually as some weaker,
poorly-funded suppliers struggle to compete and eventually exit the
market.
Valuations are now at very
attractive levels. Using the conservative valuation metrics of
price to book, the ratio of the MSCI China Index is 1.22x, a level
only seen during SARS in 2003 and China's 2016 slowdown. Chinese
stock markets are now priced more cheaply than they were during the
2008-2009 Global Financial Crisis. Geopolitics are partially to
blame, but we believe this dampener on sentiment and risk appetite
is abating. In the wake of several recent high level meetings
between US and Chinese leaders and officials, it is now widely
accepted that China and US will continue to compete in various
areas, irrespective of which candidate wins the US Presidency.
Direct confrontation and war is highly unlikely, as both parties
agree that this would be counter to their best interests. Concerns
regarding tensions across the Taiwan Strait also seem to have eased
after Taiwan's presidential election proceeded peacefully. The
victor, William Lai of the pro-independence Democratic Progressive
Party, favours preserving Taiwan's current political status. As the
election did not deliver a majority to any one party, it is highly
unlikely that Taiwan's legislature will pass any radical resolution
imposing pressure on the cross-strait relationship.
Valuations may be boosted over the
medium term by official pressure to improve shareholder returns.
Our portfolio should benefit accordingly. While many of our cash
rich holdings are already increasing payout ratios and conducting
buybacks, there is scope for some to do even more.
While challenges undoubtedly
remain, given the amount of risk,
disappointment and possible pessimism priced into the market at
current levels, we see potential for upside surprises to results
and valuations in the next twelve months, possibly encouraged by
ongoing market support from government financial
institutions.
For all these reasons, we are
becoming more optimistic about the prospects for Chinese equities
over the coming financial year. We are determined to grasp the
opportunities created by an economic and market recovery to claw
back lost performance, and we look forward to reporting on the
company's progress as our portfolio companies realise their true
worth.
We thank you for your ongoing
support.
Rebecca Jiang
Howard Wang
Li
Tan
Investment Team
29th May 2024
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; investment
strategy; 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; ESG risk; 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 2023, 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 and more recently the conflict between Israel and
Palestine, 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 also
identified the following emerging risks: social unrest within
China; and Artificial Intelligence.
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 economic conditions in China, risks
relating to the Chinese property market, the financial stability of
provincial governments and continuing geopolitical tensions between
China and the US on the Company's financial, operational position
and market conditions. They have also considered the
wider implications of the ongoing Russia-Ukraine conflict and more
recently the conflict between Israel and Palestine. 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
2024, 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
29th May 2024
CONDENSED STATEMENT OF
COMPREHENSIVE INCOME
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
Six months
ended
|
Six months
ended
|
Year ended
|
|
31st March
2024
|
31st March
2023
|
30th September
2023
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
(Losses)/gains on
investments
|
|
|
|
|
|
|
|
|
|
held at fair value
through
|
|
|
|
|
|
|
|
|
|
profit or loss
|
-
|
(30,253)
|
(30,253)
|
-
|
20,148
|
20,148
|
-
|
(45,372)
|
(45,372)
|
Net foreign currency gains
|
-
|
923
|
923
|
-
|
4,542
|
4,542
|
-
|
4,740
|
4,740
|
Income from investments
|
615
|
-
|
615
|
270
|
-
|
270
|
3,305
|
-
|
3,305
|
Interest receivable and
similar
|
|
|
|
|
|
|
|
|
|
income1
|
33
|
-
|
33
|
290
|
-
|
290
|
440
|
-
|
440
|
Gross return/(loss)
|
648
|
(29,330)
|
(28,682)
|
560
|
24,690
|
25,250
|
3,745
|
(40,632)
|
(36,887)
|
Management fee
|
(231)
|
(692)
|
(923)
|
(329)
|
(988)
|
(1,317)
|
(617)
|
(1,851)
|
(2,468)
|
Other administrative
expenses
|
(324)
|
-
|
(324)
|
(280)
|
-
|
(280)
|
(628)
|
-
|
(628)
|
Net
return/(loss) before
|
|
|
|
|
|
|
|
|
|
finance costs and taxation
|
93
|
(30,022)
|
(29,929)
|
(49)
|
23,702
|
23,653
|
2,500
|
(42,483)
|
(39,983)
|
Finance costs
|
(161)
|
(482)
|
(643)
|
(363)
|
(1,088)
|
(1,451)
|
(735)
|
(2,206)
|
(2,941)
|
Net
(loss)/return before
|
|
|
|
|
|
|
|
|
|
taxation
|
(68)
|
(30,504)
|
(30,572)
|
(412)
|
22,614
|
22,202
|
1,765
|
(44,689)
|
(42,924)
|
Taxation
|
(18)
|
-
|
(18)
|
(8)
|
-
|
(8)
|
(208)
|
-
|
(208)
|
Net
(loss)/return after taxation
|
(86)
|
(30,504)
|
(30,590)
|
(420)
|
22,614
|
22,194
|
1,557
|
(44,689)
|
(43,132)
|
(Loss)/return per share (note 3)
|
(0.10)p
|
(36.66)p
|
(36.76)p
|
(0.50)p
|
27.18p
|
26.68p
|
1.87p
|
(53.71)p
|
(51.84)p
|
1 Includes income from securities
lending.
All revenue and capital items in the
above statement derive from continuing operations. No operations
were acquired or
discontinued in the
period.
The 'Total' column of this statement
is the profit and loss account of the Company and the 'Revenue' and
'Capital' columns
represent supplementary information
prepared under guidance issued by the Association of Investment
Companies.
The net return/(loss) after taxation
represents the return/(loss) for the period and also the total
comprehensive income.
CONDENSED STATEMENT OF
CHANGES IN EQUITY
|
Called up
|
|
Exercised
|
Capital
|
|
|
|
|
|
share
|
Share
|
warrant
|
redemption
|
Other
|
Capital
|
Revenue
|
|
|
capital
|
premium
|
reserve
|
reserve
|
reserve1
|
reserves2
|
reserve2
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Six
months ended 31st March 2024
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
At
30th September 2023
|
20,803
|
80,951
|
3
|
581
|
37,392
|
90,042
|
-
|
229,772
|
Proceeds from share
forfeiture3
|
-
|
-
|
-
|
-
|
-
|
323
|
-
|
323
|
Net loss
Dividend paid in the period (note
4)
|
-
-
|
-
-
|
-
-
|
-
-
|
-
-
|
(30,504)
(4,593)
|
(86)
-
|
(30,590)
(4,593)
|
Refund of unclaimed divdiends (note
4)
|
-
|
-
|
-
|
-
|
-
|
161
|
-
|
161
|
At
31st March 2024
|
20,803
|
80,951
|
3
|
581
|
37,392
|
55,429
|
(86)
|
195,073
|
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
|
Year
ended 30th September 2023
|
|
|
|
|
|
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
At
30th September 2022
|
20,803
|
80,951
|
3
|
581
|
37,392
|
144,556
|
-
|
284,286
|
Net (loss)/return
|
-
|
-
|
-
|
-
|
-
|
(44,689)
|
1,557
|
(43,132)
|
Dividend paid in the year (note
4)
|
-
|
-
|
-
|
-
|
-
|
(9,825)
|
(1,557)
|
(11,382)
|
At
30th September 2023
|
20,803
|
80,951
|
3
|
581
|
37,392
|
90,042
|
-
|
229,772
|
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 During the period the Company
undertook an Asset Reunification Program for its
shareholders. In accordance with the
Company's Articles of Association, shares
that could not be traced to shareholders over 12 years old were
forfeited. These share were sold in the open market and the
proceeds returned to the Company.
CONDENSED STATEMENT OF
FINANCIAL POSITION
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
At
|
At
|
At
|
|
31st March
|
31st March
|
30th
September
|
|
2024
|
2023
|
2023
|
|
£'000
|
£'000
|
£'000
|
Fixed assets
|
|
|
|
Investments held at fair value through profit or
loss
|
203,446
|
348,361
|
262,005
|
Current assets
|
|
|
|
Debtors
|
74
|
954
|
157
|
Cash and cash equivalents
|
1,514
|
7,798
|
87
|
|
1,588
|
8,752
|
244
|
Current liabilities
|
|
|
|
Creditors: amounts falling due within
one year1
|
(724)
|
(56,325)
|
(669)
|
Net
current assets/(liabilities)
|
864
|
(47,573)
|
(425)
|
Total assets less current liabilities
|
204,310
|
300,788
|
261,580
|
Non
current liabilities
|
|
|
|
Creditors: amounts falling due after
more than one year1
|
(9,237)
|
-
|
(31,808)
|
Net
assets
|
195,073
|
300,788
|
229,772
|
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
|
37,392
|
37,392
|
Capital reserves
|
55,429
|
161,478
|
90,042
|
Revenue reserve
|
(86)
|
(420)
|
-
|
Total shareholders' funds
|
195,073
|
300,788
|
229,772
|
Net
asset value per share (note 5)
|
234.5p
|
361.5p
|
276.2p
|
1 As at 31st March 2024, £9.2m (31st
March 2023: £52.6m; 30th September 2023: £31.8m) was drawn down
from the loan facility.
CONDENSED STATEMENT OF CASH
FLOWS
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
Six months
ended
|
Six months
ended
|
Year ended
|
|
31st March
|
31st March
|
30th
September
|
|
2024
|
2023
|
2023
|
|
£'000
|
£'000
|
£'000
|
Cash
flows from operating activities
|
|
|
|
Net (loss)/profit before finance
costs and taxation
|
(29,929)
|
23,653
|
(39,983)
|
Adjustment for:
|
|
|
|
Net losses/(gains) on investments
held at fair value through
|
|
|
|
profit or loss
|
30,253
|
(20,148)
|
45,372
|
Net foreign currency
gains
|
(923)
|
(4,542)
|
(4,740)
|
Dividend income
|
(615)
|
(270)
|
(3,305)
|
Interest income
|
(13)
|
(117)
|
(216)
|
Realised (gains)/losses on foreign
exchange transactions
|
(29)
|
(809)
|
95
|
Realised exchange losses on the
JPMorgan USD Liquidity Fund
|
-
|
(310)
|
(990)
|
Increase in accrued income and other
debtors
|
-
|
(12)
|
(8)
|
(Decrease)/increase in accrued
expenses
|
(79)
|
(24)
|
44
|
Net
outflow from operating activities before
dividends
|
|
|
|
and interest
|
(1,335)
|
(2,579)
|
(3,731)
|
Dividends received
|
680
|
310
|
3,068
|
Interest received
|
13
|
117
|
216
|
Net
cash outflow from operating activities
|
(642)
|
(2,152)
|
(447)
|
Purchases of investments
|
(19,801)
|
(122,398)
|
(184,366)
|
Sales of investments
|
48,604
|
127,557
|
208,204
|
Net
cash inflow from investing activities
|
28,803
|
5,159
|
23,838
|
Equity dividends paid (note
4)
|
(4,432)
|
(5,692)
|
(11,382)
|
Refund of unclaimed dividends (note
4)
Repayment of bank loan
|
161
(21,618)
|
-
(4,317)
|
-
(53,866)
|
Drawdown of bank
loan
|
-
|
4,723
|
34,318
|
Proceeds from share
forfeiture
|
323
|
-
|
-
|
Loan interest paid
|
(1,007)
|
(1,187)
|
(2,804)
|
Net
cash outflow from financing activities
|
(26,734)
|
(6,473)
|
(33,734)
|
Increase/(decrease) in cash and cash
equivalents
|
1,427
|
(3,466)
|
(10,343)
|
Cash and cash equivalents at start of
period/year
|
87
|
10,950
|
10,950
|
Exchange movements
|
-
|
314
|
(520)
|
Cash
and cash equivalents at end of period/year
|
1,514
|
7,798
|
87
|
Cash
and cash equivalents consist of:
|
|
|
|
Cash and short term
deposits
|
481
|
272
|
83
|
Cash held in JPMorgan USD Liquidity
Fund
|
1,033
|
7,526
|
4
|
Total
|
1,514
|
7,798
|
87
|
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS
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 2023 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
2024.
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 2023.
3. (Loss)/return per share
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
Six months
ended
|
Six months
ended
|
Year ended
|
|
31st March
2024
|
31st March
2023
|
30th September
2023
|
|
£'000
|
£'000
|
£'000
|
(Loss)/return per share is based on
the following:
|
|
|
|
Revenue (loss)/return
|
(86)
|
(420)
|
1,557
|
Capital (loss)/return
|
(30,504)
|
22,614
|
(44,689)
|
Total (loss)/return
|
(30,590)
|
22,194
|
(43,132)
|
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
|
(0.10)p
|
(0.50)p
|
1.87p
|
Capital (loss)/return per
share
|
(36.66)p
|
27.18p
|
(53.71)p
|
Total (loss)/return per share
|
(36.76)p
|
26.68p
|
(51.84)p
|
4. Dividends paid
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
Six months
ended
|
Six months
ended
|
Year ended
|
|
31st March
2024
|
31st March
2023
|
30th September
2023
|
|
£'000
|
£'000
|
£'000
|
First quarterly interim
dividend
(2024: 2.76p; 2023: 3.42p)
|
2,296
|
2,846
|
2,846
|
Second quarterly interim
dividend
(2024: 2.76p; 2023: 3.42p)
|
2,297
|
2,846
|
2,846
|
Third quarterly interim
dividend
(2023: 3.42p)
|
-
|
-
|
2,845
|
Fourth quarterly interim
dividend
(2023: 3.42p)
|
-
|
-
|
2,845
|
Total dividends paid
|
4,593
|
5,692
|
11,382
|
Refund of unclaimed dividends over 12
years old
|
(161)
|
-
|
-
|
Net
dividends paid
|
4,432
|
5,692
|
11,382
|
A third quarterly dividend of 2.76p
has been declared for payment on 30th June 2024 for the financial
year ending 30th September 2024.
Dividend payments in excess of the
revenue amount will be paid out of the Company's distributable
capital reserves.
5.
Net asset value per share
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
Six months
ended
|
Six months
ended
|
Year ended
|
|
31st March
2024
|
31st March
2023
|
30th September
2023
|
Net assets (£'000)
|
195,073
|
300,788
|
229,772
|
Number of shares in issue
|
83,202,465
|
83,202,465
|
83,202,465
|
Net
asset value per share
|
234.5p
|
361.5p
|
276.2p
|
6. Fair valuation of investments
The fair value hierarchy disclosures
required by FRS 102 are given below:
|
(Unaudited)
|
(Unaudited)
|
(Audited)
|
|
Six months
ended
|
Six months
ended
|
Year ended
|
|
31st March
2024
|
31st March
2023
|
30th September
2023
|
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Level 1
|
200,116
|
-
|
332,785
|
-
|
256,299
|
-
|
Level 2
|
3,3301
|
-
|
15,5762
|
-
|
5,7063
|
-
|
Total
|
203,446
|
-
|
348,361
|
-
|
262,005
|
-
|
1 Participatory Notes. 31st March 2024: (Shanghai
Liangxin Electrical, Qingdao Haier Biomedical, Amoy
Diagnostics).
2 Participatory notes. 31st March 2023: (Acrobiosystems,
Amoy Diagnostics, Bestechnic, OPT Machine Vision, Qingdao Haier
Biomedical, Shanghai Liangxin Electrical, SUPCON
Technology).
3 Participatory notes. 30th September 2023: (Shanghai
Liangxin Electrical, Amoy Diagnostics, Qingdao Haier Biomedical, Yunnan
Energy New Material).
7. Analysis of Changes in Net Debt
|
As at
|
|
Other
|
As at
|
|
30th
September
|
|
non-cash
|
31st March
|
|
2023
|
Cash flows
|
charges
|
2024
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Cash
and cash equivalents
|
|
|
|
|
Cash and short term
deposits
|
83
|
398
|
-
|
481
|
Cash held in JPMorgan USD Liquidity
Fund
|
4
|
1,029
|
-
|
1,033
|
|
87
|
1,427
|
-
|
1,514
|
Borrowings
|
|
|
|
|
Bank loan
|
(31,808)
|
21,618
|
953
|
(9,237)
|
Net
debt
|
(31,721)
|
23,045
|
953
|
(7,723)
|
JPMORGAN FUNDS LIMITED
29th May 2024
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 2024 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.