TIDMJMC
RNS Number : 7049J
JPMorgan Chinese Inv Tst PLC
06 December 2018
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN CHINESE INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEARED 30TH SEPTEMBER 2018
Legal Entity Identifier: 549300S8M91P5FYONY25
Information disclosed in accordance with DTR 4.2.2
The Directors announce the Company's results for the year ended
30th September 2018.
CHAIRMAN'S STATEMENT
I have great pleasure in presenting the Annual Report of the
JPMorgan Chinese Investment Trust PLC ('the Company') for the year
ended 30th September 2018.
Last year, my predecessor spoke about the developing investment
opportunities in China and the proposal from MSCI to include
A-shares in our benchmark, the MSCI China Index. From May 2018, 230
new stocks were added, representing 0.7% of the Index and supported
by an increase in the daily amount of A-shares that could be traded
by international investors through the Shanghai and Shenzhen Stock
Connect programme.
For the year ended 30th September the MSCI China Index showed a
small positive return of 0.6%. However the growing trade tensions
between China and the United States with the imposition of new
goods tariffs and the threat of more to come has created growing
uncertainty about the impact on economic growth in China. The
effect has been a fall of 9.6% in the MSCI China Index during the
month of October and 13.8% over the three months to end
October.
On a more positive note the MSCI has begun discussions to
increase the number of A-shares in the Index in 2019 and plans to
broaden the inclusion to Mid Cap shares in 2020. These changes
should increase the liquidity and international interest in the
A-share market.
Activity within the Company
At the Annual General Meeting ('AGM') in January 2018 the
Company received approval under the continuation vote. The next
vote will be in January 2023. However, there was a sizeable vote
against continuation. A key rationale for the Company's existence
is positive long-term investment performance, which I believe the
Investment Manager has delivered. To confirm our continuing
commitment to this objective the Board has agreed an obligation to
put forward proposals for a tender offer for up to 15% of the
Company's issued share capital at a price equal to the net asset
value ('NAV') less costs, if, over the next five years (from the
start of the 2018 financial year) the Company's NAV underperforms
its benchmark.
Performance
In volatile market conditions over the year to 30th September
2018, the Company's Total Return on Net Assets was a fall of 1.4%
which comprises the change in NAV with dividends reinvested. This
compares with the small positive return of the MSCI China Index of
0.6%. In keeping with most emerging market funds, the discount at
which shares were traded increased during the year with the result
that the Total Return to Shareholders of the Company over the year
was a fall of 5.0%.
Stock selection was a positive contributor to relative
performance against the index of 2.2% but outweighed by the impact
of the gearing. Also, the fall in the value of the Chinese Yuan had
an overall negative impact on performance.
A fuller commentary on the contributors to performance is
provided in the Investment Managers report.
Investment Approach
The investment team has continued to grow and develop the depth
and experience of its research capability and we have encouraged
the team to look for more investment opportunities in the A-share
market. The investment policy currently limits the proportion of
the portfolio that can be invested in China A-shares and China
related ADRs to 60% of the portfolio's value. With improved access
to China A-shares and further increases in the weighting of China
A-shares in the MSCI China Index expected in 2019 and 2020, the
Board believes that it is appropriate to remove this restriction.
Accordingly, the Board will propose a resolution to Shareholders at
the AGM to amend the investment policy to remove the limit on
investment in China A-shares and China related ADRs.
We expect the team to make greater use of the gearing potential
where it finds new stock ideas. Our due diligence visit in October
focussed on discussions with the investment managers and analysts
in Hong Kong, Taiwan and Shanghai. We are optimistic they will
continue to find interesting companies among the listed A-share
companies with overweight exposures towards structural growth names
in the consumer, healthcare and information technology sectors.
The investment approach may result in greater short-term
volatility relative to the Benchmark as we encourage the investment
managers to deliver long-term outperformance through investment in
A-shares.
Value for Money
We look closely at the costs of investment and were encouraged
by the decision of the Investment Manager to pay for third party
research costs following the implementation of MiFID II at the
beginning of 2018. We have also been in discussion with the Manager
about the appropriate level of the management fee in a market that
develops and matures as it opens to foreign investment. The Board
has agreed a management fee on net, rather than gross, assets under
management of 0.9% per annum with effect from 1st April 2019. Based
on assets at 30th September 2018 this would amount to a reduction
of 12.9% in the management fee payable in our 2019 Financial Year
and a further reduction of 14.8% in 2020.
Revenue and Dividends
Revenue for the year, after taxation, was GBP3,152,000 (2017:
GBP850,000). The revenue return per share calculated on the average
number of shares in issue was 4.32 pence (2017: 1.16 pence).
The Board is recommending a dividend of 3.5 pence (2017: 1.6
pence) in respect of the financial year ended 30th September 2018.
Subject to shareholders' approval at the AGM, this dividend will be
paid on 6th February 2019 to shareholders on the register at the
close of business on 14th December 2018.
The increase in the dividend is primarily the result of the
change to allocation of expenses. Following the change in the
benchmark to the MSCI China Index the Board reviewed its policy of
allocation of expenses (management fees and finance costs) to
revenue and capital. With effect from the current financial year
the Board decided to split the allocation of expenses between 75%
to capital and 25% to income. In order to maintain our investment
trust status this results in an increase in dividends paid out by
the Company.
Gearing
In January 2018 the Company extended its GBP30 million facility
with Scotiabank for a further three months. In February 2018 the
Board agreed that the facility be increased from GBP30 million to
GBP50 million. In April 2018, the Company renewed the GBP50 million
facility with Scotiabank for a further 364 day period on the same
terms but at an increased margin. The current facility matures on
18th April 2019 at which point the Board will consider another
gearing facility.
During the year the Company's gearing ranged from 9.3% to 19.0%
(based on month end data) and, at the time of writing, was 17.1%.
At the time of the arrangement, the facility allowed the Investment
Managers the flexibility to manage the gearing facility within a
range set by the Board of 10% net cash to 20% geared.
Share Issues and Repurchases
The Directors have authority to issue new Ordinary shares for
cash and to repurchase shares in the market for cancellation or to
hold in Treasury. The Company will reissue shares held in Treasury
only at a premium to NAV.
During the year, the Company did not issue any new Ordinary
shares, although it did repurchase 224,794 shares into Treasury.
The board believes that its policy of share issuance and
repurchases has helped to reduce discount volatility in the past
and therefore recommends that the authorities be kept in place.
Accordingly, it is seeking approval from shareholders to renew the
share issuance and repurchase authorities at the AGM.
Review of services provided by the Manager
During the year the Board carried out a thorough review of the
investment management, secretarial and marketing services provided
to the Company by the Manager. Following this review, the Board has
concluded that the continued appointment of the Manager on the
terms agreed is in the interests of the shareholders as a
whole.
The Company's ongoing charges for the financial year, as a
percentage of the average daily net assets during the year, were
1.34% (2017: 1.38%).
Board of Directors
In July 2018 the Board, through its Nomination and Remuneration
Committee, carried out a comprehensive evaluation of the board, its
committees, the individual Directors and the Chairman. Topics
evaluated included the size and composition of the Board, Board
information and processes, shareholder engagement and training and
accountability. The report confirmed the efficacy of the Board.
Kathryn Matthews, our longest-serving director, will retire from
the Board at the AGM in January 2019. She joined the Board in July
2010 and has made a significant contribution to the Board and the
performance of the Company. On behalf of the Board, I would like to
thank Kathryn for her valuable contribution to the Company over the
years.
As part of the succession planning the Board has appointed
Alexandra Mackesy to succeed Kathryn Matthews. Alexandra is a
strong successor to Kathryn, bringing extensive investment
experience of China and as a director of investment trusts.
In accordance with the UK Corporate Governance Code David
Graham, Oscar Wong and myself will retire at the forthcoming AGM
and, being eligible, will offer ourselves for reappointment by
shareholders. In addition Alexandra Mackesy, having been appointed
during the financial year, will stand for appointment at the
AGM.
Annual General Meeting
This year's AGM will be held at 60 Victoria Embankment, London
EC4Y 0JP on Monday 28th January 2019 at 11.30 a.m. In addition to
the formal proceedings, there will be a presentation by a
representative of the investment management team who will also be
available to respond to questions on the Company's portfolio and
investment strategy. I look forward to seeing as many of you as
possible at the meeting. If you have any detailed questions, you
may wish to raise these in advance with the Company Secretary or
via the Company's website. Shareholders who are unable to attend
the AGM in person are encouraged to use their proxy votes.
Shareholders who hold their shares through CREST are able to lodge
their proxy votes electronically.
John Misselbrook
Chairman 6th December 2018
INVESTMENT MANAGERS' REPORT
Setting the scene
The Company's financial year to 30th September 2018 began
promisingly but became increasingly challenging as the year
unfolded. This has been a tough time for equity markets around the
world - global growth appears to have peaked and adverse political
influences have cast their shadow. Trade tensions have been
building, stirring fears of inflation and obstructions to global
supply chains. The low volatility and positive market returns that
characterised 2017 have been supplanted by global stock market
corrections and an overwhelming sense of investor uncertainty in
2018.
China has not been immune to the climate of negativity that has
dominated markets. Indeed, the country has been in sharp focus as
fears of mounting trade wars between the US and its global trading
partners have dealt a blow to Chinese stock markets. US-China trade
tensions are not a new phenomenon but the imposition of trade
tariffs on US imports of certain Chinese goods has created fears of
a full-on trade war. The short-term prospects for Chinese exports
look difficult and this is contributing to overall weakness in the
economy, a slowdown in retail sales and a vulnerable currency. This
uncertainty is causing manufacturers to reduce inventory and
thereby precipitating a fall in revenue for the whole manufacturing
supply chain.
After years of supercharged economic growth, the Chinese economy
- the world's second largest - has slowed down in recent months and
may grow by only 6.5% in 2018. These are still robust growth
figures that confirm China's status as a global economic superpower
but, nevertheless, economic growth in 2018 is likely to fall to its
lowest level since the global financial crisis of 2008.
At the half way point of the year, covering the six months to
31st March 2018, the Company's performance had been comfortably
ahead of its benchmark, the MSCI China Index. However, the economic
and geopolitical landscape has shifted materially since then, as
highlighted above, and the Chinese stock market has reflected this
over the second half of the year, with certain stocks and sectors
in which the Company invests particularly impacted.
Against this backdrop, the Company's NAV total return over the
year to 30th September 2018 was -1.4%, underperforming its
benchmark, which rose by +0.6% (on a total return, net basis, in
sterling terms). The value of the Company's shares (including
dividends) fell by -5.0% over the period. The use of gearing, which
averaged 14% over the period under review, contributed negatively
to returns as we had not anticipated the extent of the market fall
in the second half of the year.
Spotlight on stocks and sectors
Although the Chinese economy has grown at a phenomenal pace in
recent years, the year under review has demonstrated that it is not
immune from global economic challenges and certain Chinese stocks
have been hit hard. In this section we highlight specific companies
and sectors that have impacted portfolio performance (both
positively and negatively) over the year.
Oil prices hit a 4-year high in September, reflecting supply
shortage concerns, and, unsurprisingly, Energy stocks rose in
tandem. However, relative to our benchmark we have an underweight
exposure to the Energy sector and this has detracted from
performance.
Chinese Information Technology stocks have soared in recent
years and China has proved that tech innovation is not confined to
Silicon Valley. The Chinese IT market is massive, but it remains
largely impenetrable for the leading US tech giants like Amazon and
Google. The so-called 'BAT' stocks (the internet giants Baidu,
Alibaba and Tencent) are top ten holdings, which have been
unstoppable for a long time. This year, however, they have suffered
sharp corrections on the back of both macro issues and specific
challenges. Tencent's performance, for example, was hampered by
specific regulatory woes, with Beijing suggesting that approvals of
new games should be slowed down following evidence that too much
screen time causes eye problems. We remain positive on the
long-term prospects for all three BAT stocks. We believe they have
diverse interests and plenty of firepower for future growth. For
example, Tencent owns WeChat, China's most popular messaging app,
Alibaba continues to expand its core e-commerce business, and
Baidu, already China's leading search engine, has been investing
heavily in key areas like Artificial Intelligence and car
automation, while offloading non-core businesses, a move welcomed
by investors. As such, the BAT stocks are likely to remain
significant holdings in the portfolio subject to the investment
policy restrictions for any particular stock.
Looking more generally at IT, hardware suppliers have suffered
over the year, reflecting investor concerns on weaker-than-expected
demand for smartphones, with incrementally weaker iPhone momentum
and mounting cost pressure on component providers. In addition, the
escalation in China-US trade tensions have had a significant impact
on tech names, initially from the sanctions imposed on Chinese
phone maker ZTE and then more broadly impacting companies that have
had to reduce capacity and hiring amidst the ongoing trade
uncertainties.
Over the year, our overweight positions in AAC Technologies,
Largan Precision, BOE Technology and Shenzhen Sunway detracted from
performance. We subsequently sold our holdings in Largan Precision
and Shenzhen Sunway, while trimming our exposure to AAC
Technologies, to concentrate on our higher conviction picks.
Stock selection in Financials contributed positively. Our
long-term core positions in China's biggest insurer Ping An
Insurance and China Merchants Bank were the top contributors both
in their sector and in our portfolio overall. Ping An Insurance
continued to report strong operational results given its
competitive strength; its share price has been much more resilient
than the rest of the sector. China Merchants Bank was established
in 1987 and now has more than 70,000 employees. It outperformed
thanks to its highest return-on-assets amongst its peers, strong
capital position, improving deposit franchise and its
outward-looking approach. We remain on the side lines when it comes
to index-heavy, large cap banks, where we feel challenges may lie
ahead.
Our stock picks in the Consumer Discretionary and Consumer
Staples sectors were another key source of strength over this
challenging period. Textile manufacturer Shenzhou International is
one of our high conviction holdings because of its strong and
visible earnings growth momentum, as well as its competitive edge
in both pricing and delivery lead time. We believe these factors
should generate further market share gains. Premium liquor brand
Kweichow Moutai is another high conviction choice that contributed
to returns. It is the leader in the high-end Baijiu (Chinese grain
alcohol) sector, which is highly fragmented with room for
consolidation, and in a market that should continue to benefit from
rising consumer demand.
Overall stock selection in the Healthcare sector delivered mixed
results for the portfolio, with sector sell-off occurring in
response to a vaccine scandal and policy uncertainty. In July, one
of the largest domestic vaccine producers was investigated for
fabricating production and inspection data, triggering widespread
public concern. Subsequent probes revealed failings at the
regulatory body, the China Food and Drug Administration (CFDA), and
several senior officials were dismissed. Investors feared that the
change in CFDA personnel would lead to a slowdown in the drug
approval process. In September, the National Medical Insurance
Bureau proposed a centralised pharmaceutical procurement policy.
This, and the possibility of greater industry regulation, prompted
concerns of potential downward pricing pressures. Sino Biopharm,
one of the industry's leading players, was negatively impacted and
ended the period a top detractor for the Company. However, other
holdings, including Jiangsu Hengrui Medicine, CSPC Pharmaceutical
and Aier Eye Hospital, held up well and added value over the last
12 months.
Finally, it's pleasing to note that several new portfolio
acquisitions have added value. Travel related names performed
strongly on strong air traffic and yields, including Shanghai
International Airport and China International Travel Service Corp,
both rising on solid reported results. iQiyi, one of the largest
online video sites in the world and the Chinese equivalent of
Netflix, came to market via an Initial Public Offering (IPO)
earlier in 2018. It is majority owned by Baidu and its shares
rallied on good results over the period. iQiyi's above-average
subscriber and revenue growth and massive potential market for its
services give us confidence that the stock remains well supported
for the future.
Positioning the portfolio to face the current challenges
Naturally we are cautious in the current economic environment,
with escalating US-China trade tensions a major concern. The rise
in corporate debt in recent years has also been worrisome but we
are reassured by the regulatory crackdown on debt-like savings
products that had driven up leverage to such unprecedented levels.
We are also encouraged by the government's efforts (on both
monetary and fiscal fronts) to protect the economy from external
risks via structural reforms. This backdrop has given us the
confidence to retain gearing at current levels.
We continue to position the portfolio to benefit from the
structural growth opportunities in the Consumer, Technology and
Healthcare sectors. Our resolve to invest in 'New China' (and the
broad contour of the portfolio) is unaffected by short term
political and economic worries. We are underweight in our exposure
to the low growth, low quality and old industrials names. We have
trimmed exposure to companies with greater economic or export
sensitivity, an already modest part of the portfolio, including
banks, autos and technology. In turn, we added to areas like
software since both corporate and public sectors are catching up on
software spending where they have traditionally underspent.
We continue to find a variety of investment opportunities in
Healthcare, concentrating our exposure to those with long-term
structural potential, such as the most innovative drug
manufacturers. We also increased our exposure to the online
operators, a growing presence in the portfolio, given the level of
IPO activity we've seen in the Technology sector. As well as iQiyi,
we initiated new positions in Pinduoduo (e-commerce), Meituan
Dianping (online food delivery and services), Bilibili (online
content) and Weibo (social media) in the last year, in addition to
the existing holdings in the 'BAT' stocks.
Outlook - as the pendulum shifts
One of the great unknowns at the time of writing is just how the
US-China trade war is going to play out. Whatever happens, the
likelihood is that Chinese exports will face tougher times ahead
and Chinese economic growth will continue to moderate further. We
believe, however, that the decline is likely to be both modest and
controlled, as targeted and coordinated policy responses by the
Chinese government should offset growth headwinds resulting from
the financial deleveraging efforts and the ongoing trade war.
Beijing's reforms reflect the changing economic landscape at
home, acknowledging that the pendulum has shifted and targeting
effort on reforms to minimise the impact of external challenges.
The increased emphasis on domestic demand and a consumer-led
recovery leading to less dependence on export growth should
counteract the adverse effects of any further trade escalations
with the US as well as the risks of higher inflation and slower
global growth.
Our research focus remains on "New China" companies and sectors
that are capitalising on the transition of the country to a more
consumer-driven economy. Being on the ground in mainland China is a
significant advantage for us. We acknowledge that Chinese stocks
have been hit hard over recent months, reflecting negative news
flow, volatility and US Dollar strength but are reassured that
interest in the domestic market from foreign investors has remained
strong.
We continue to adopt a patient, long-term approach to investing
as we believe this offers the Company's shareholders the best
likelihood of benefiting from the economic transformation of China
and its evolving role as a global economic powerhouse. There will
always be short-term uncertainties that threaten to derail
performance but the long-term case for China remains robust. We are
excited by the prospect of discovering many more interesting
investment opportunities that will benefit from the growth of the
Chinese domestic market. Above all, we still believe that investing
in Chinese equities can deliver positive and sustained returns over
the long-term.
Howard Wang
Rebecca Jiang
Investment Managers 6th December 2018
PRINCIPAL RISKS
Investors should note that there can be significant economic and
political risks inherent in investing in emerging economies. As
such, the Greater China markets can exhibit more volatility than
developed markets and this should be taken into consideration when
evaluating the suitability of the Company as a potential
investment.
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The risks identified have not changed over
the year under review, and the ways in which they are managed or
mitigated are summarised as follows:
With the assistance of the Manager, the Board has completed a
robust risk assessment and drawn up a risk matrix, which identifies
the key risks to the Company. In assessing the risks and how they
can be mitigated, the Board has given particular attention to those
issues that threaten the viability of the Company. These key risks
fall broadly under the following categories:
-- Investment Underperformance
An inappropriate investment decision may lead to sustained
underperformance against the Company's benchmark index and peer
companies, resulting in the Company's shares trading on a wider
discount. The Board manages this risk by diversification of
investments through its investment restrictions and guidelines
which are monitored and reported on by the Manager. The Manager
provides the Directors with timely and accurate management
information, including performance data and attribution analyses,
revenue estimates and transaction reports. The Board monitors the
implementation and results of the investment process with the
investment managers, who attend all Board meetings, and reviews
data which show statistical measures of the Company's risk profile.
The investment managers employ the Company's gearing within a
strategic range set by the Board.
-- Strategy/Business Management/Political
An ill-advised corporate initiative, for example an
inappropriate takeover of another company or an ill-timed issue of
new capital; misuse of the investment trust structure, for example
inappropriate gearing; or if the Company's business strategy is no
longer appropriate, may lead to a lack of investor demand. In
addition, the Company is exposed to political risks, such as the
imposition of restrictions on the free movement of capital. The
Board discusses these risks regularly and takes advice from the
Manager and its professional advisers.
-- Loss of Investment Team or Investment Manager
A sudden departure of several members of the investment
management team could result in a deterioration in investment
performance. The Manager takes steps to reduce the likelihood of
such an event by ensuring appropriate succession planning and the
adoption of a team-based approach, as well as special efforts to
retain key personnel.
-- Share Price Discount
A disproportionate widening of the discount relative to the
Company's peers could result in a loss of value for shareholders.
In order to manage the Company's discount, which can be volatile,
the Company operates a share repurchase programme and the Board
regularly discusses discount policy and has set parameters for the
Manager and the Company's broker to follow. The Board receives
regular reports and is actively involved in the discount management
process.
-- Market
Market risk arises from uncertainty about the future prices of
the Company's investments. It represents the potential loss that
the Company might suffer through holding investments in the face of
negative market movements. The Board considers asset allocation,
stock selection and levels of gearing on a regular basis and has
set investment restrictions and guidelines, which are monitored and
reported on by the Manager. The Board monitors the implementation
and results of the investment process with the Investment
Managers.
-- Governance
Changes in financial, regulatory or tax legislation, including
in the European Union, may adversely affect the Company. The
Manager makes recommendations to the Board on accounting, dividend
and tax policies and the Board seeks external advice where
appropriate.
-- Legal and Regulatory
In order to qualify as an investment trust, the Company must
comply with Section 1158 of the Corporation Tax Act 2010 ('Section
1158'). Details of the Company's approval are given under
'Structure of the Company' in the Annual Report. Were the Company
to breach Section 1158, it may lose investment trust status and, as
a consequence, gains within the Company's portfolio would be
subject to Capital Gains Tax. The Section 1158 qualification
criteria are continually monitored by the Manager and the results
reported to the Board each month. The Company must also comply with
the provisions of the Companies Act 2006 and, since its shares are
listed on the London Stock Exchange, the UKLA Listing Rules,
Disclosure Guidance and Transparency Rules ('DTRs') and, as an
Investment Trust, the Alternative Investment Fund Managers
Directive ('AIFMD'). A breach of the Companies Act 2006 could
result in the Company and/or the Directors being fined or the
subject of criminal proceedings. Breach of the UKLA Listing Rules
or DTRs could result in the Company's shares being suspended from
listing which in turn would breach Section 1158. The Board relies
on the services of its Company Secretary, JPMorgan Funds Limited
and its professional advisers to ensure compliance with the
Companies Act 2006, the UKLA Listing Rules, DTRs and AIFMD.
-- Corporate Governance and Shareholder Relations
Details of the Company's compliance with Corporate Governance
best practice, including information on relations with
shareholders, are set out in the Corporate Governance statement in
the Annual Report.
-- Operational Risk and Cybercrime
Disruption to, or failure of, the Manager's accounting, dealing
or payments systems or the depositary's or custodian's records may
prevent accurate reporting and monitoring of the Company's
financial position. Details of how the Board monitors the services
provided by the Manager, its associates and depositary and the key
elements designed to provide effective internal control are
included within the Risk Management and Internal Control section of
the Directors' Report in the Annual Report. The threat of cyber
attack, in all its guises, is regarded as at least as important as
more traditional physical threats to business continuity and
security. The Company benefits directly or indirectly from all
elements of JPMorgan's Cyber Security programme. The information
technology controls around the physical security of JPMorgan's data
centres, security of its networks and security of its trading
applications are tested independently.
The risk of fraud or other control failures or weaknesses within
the Manager or other service providers could result in losses to
the Company. The Audit Committee receives independently audited
reports on the Manager's and other service providers' internal
controls, as well as a report from the Manager's Compliance
function. The Company's management agreement obliges the Manager to
report on the detection of fraud relating to the Company's
investments and the Company is afforded protection through its
various contracts with suppliers, of which one of the key
protections is the Depositary's indemnification for loss or
misappropriation of the Company's assets held in custody.
-- Financial
The financial risks faced by the Company include market risk,
currency risk, liquidity risk and credit risk. Further details are
disclosed in note 21 of the Annual Report and Financial
Statements.
RELATED PARTY TRANSACTIONS
During the 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 year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards), comprising FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland'
and applicable law). Under company law the Directors must not
approve the financial statements unless they are satisfied that,
taken as a whole, the annual report and accounts are fair, balanced
and understandable; provide the information necessary for
shareholders to assess the Company's performance, business model
and strategy; and that they give a true and fair view of the state
of affairs of the Company and of the total return or loss of the
Company for that period. In preparing these financial statements,
the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments 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 a going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
and the Directors confirm that they have done so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The accounts are published on the www.jpmchinese.co.uk website,
which is maintained by the Company's Manager. The maintenance and
integrity of the website maintained by the Manager is, so far as it
relates to the Company, the responsibility of the Manager. The work
carried out by the auditor does not involve consideration of the
maintenance and integrity of this website and, accordingly, the
auditor accepts no responsibility for any changes that have
occurred to the accounts since they were initially presented on the
website. The accounts are prepared in accordance with UK
legislation, which may differ from legislation in other
jurisdictions.
Under applicable law and regulations the Directors are also
responsible for preparing a Strategic Report, a Directors' Report
and a Directors' Remuneration Report that comply with that law. The
Strategic Report and the Directors' report include a fair review of
the development and performance of the business and the position of
the issuer, together with a description of the principal risks and
uncertainties that they face.
Each of the Directors, whose names and functions are listed in
Directors' Report confirm that, to the best of their knowledge:
-- the Company's financial statements, which have been prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
'The Financial Reporting Standard applicable in the UK and Republic
of Ireland', and applicable law), give a true and fair view of the
assets, liabilities, financial position and profit of the Company;
and
-- the Directors' Report and the Strategic Report includes a
fair review of the development and performance of the business and
the position of the Company, together with a description of the
principal risks and uncertainties that it faces.
The Directors consider that the annual report and accounts,
taken as a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the Company's
performance, business model and strategy.
For and on behalf of the Board
John Misselbrook
Chairman 6th December 2018
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30th September 2018
2018 2017
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- -------- ---------- ---------- -------- --------- ---------
(Losses)/gains on investments
held
at fair value through
profit or loss - (1,330) (1,330) - 48,152 48,152
Net foreign currency (losses)/gains(1) - (2,091) (2,091) - 763 763
Income from investments 4,625 - 4,625 3,480 - 3,480
Interest receivable and
similar income 299 - 299 207 - 207
---------------------------------------- -------- ---------- ---------- -------- --------- ---------
Gross return 4,924 (3,421) 1,503 3,687 48,915 52,602
Management fee (713) (2,139) (2,852) (2,092) - (2,092)
Other administrative expenses (500) - (500) (595) - (595)
---------------------------------------- -------- ---------- ---------- -------- --------- ---------
Net return/(loss) on ordinary
activities before finance
costs
and taxation 3,711 (5,560) (1,849) 1,000 48,915 49,915
Finance costs (254) (761) (1,015) (352) - (352)
---------------------------------------- -------- ---------- ---------- -------- --------- ---------
Net return/(loss) on ordinary
activities before taxation 3,457 (6,321) (2,864) 648 48,915 49,563
Taxation (charge)/credit (305) - (305) 202 - 202
---------------------------------------- -------- ---------- ---------- -------- --------- ---------
Net return/(loss) on ordinary
activities after taxation 3,152 (6,321) (3,169) 850 48,915 49,765
---------------------------------------- -------- ---------- ---------- -------- --------- ---------
Return/(loss) per share 4.32p (8.67)p (4.35)p 1.16p 66.78p 67.94p
(1) (GBP1,857,000) due to an exchange loss on the loan which is
denominated in US dollar. (GBP234,000) due to net exchange losses
on cash and cash equivalents, (2017: GBP718,000 due to an exchange
gain on the loan which is denominated in US dollar, GBP45,000 due
to net exchange gains on cash and cash equivalents).
A final dividend of 3.5p (2017: 1.6p) has been proposed in
respect of the year ended 30th September 2018, totalling
GBP2,545,000 (2017: GBP1,167,000). Further details are given in
note 10 of the Annual Report and Financial Statements.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance issued
by the Association of Investment Companies. Net return on ordinary
activities after taxation represents the profit for the year and
also total comprehensive income.
STATEMENT OF CHANGES IN EQUITY
For the year ended 30th September 2018
Called Exercised Capital
up
share Share warrant redemption Other Capital Revenue
capital premium reserve reserve reserve reserves reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- ---------- ----------- -------- --------- ----------- --------
At 30th September
2016 19,481 13,321 3 581 37,392 106,641 2,376 179,795
Repurchase of
shares into Treasury - - - - - (2,420) - (2,420)
Net return from
ordinary activities - - - - - 48,915 850 49,765
Dividends paid
in the year (note
2) - - - - - - (1,178) (1,178)
----------------------- -------- -------- ---------- ----------- -------- --------- ----------- --------
At 30th September
2017 19,481 13,321 3 581 37,392 153,136 2,048 225,962
Repurchase of
shares into Treasury - - - - - (664) - (664)
Net (loss)/return
from
ordinary activities - - - - - (6,321) 3,152 (3,169)
Dividends paid
in the year (note
2) - - - - - - (1,167) (1,167)
At 30th September
2018 19,481 13,321 3 581 37,392 146,151 4,033 220,962
----------------------- -------- -------- ---------- ----------- -------- --------- ----------- --------
(1) This reserve forms the distributable reserve of the Company
and may be used to fund distribution of profits to investors via
dividend payments.
STATEMENT OF FINANCIAL POSITION
As at 30th September 2018
2018 2017
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Fixed assets
Investments held at fair value through profit or loss 260,541 246,881
Current assets
Debtors 785 1,781
Cash and cash equivalents 7,174 1,890
------------------------------------------------------- --------- ---------
7,959 3,671
Current liabilities
Creditors: amounts falling due within one year (47,538) (24,590)
------------------------------------------------------- --------- ---------
Net current liabilities (39,579) (20,919)
------------------------------------------------------- --------- ---------
Total assets less current liabilities 220,962 225,962
------------------------------------------------------- --------- ---------
Net assets 220,962 225,962
------------------------------------------------------- --------- ---------
Capital and reserves
Called up share capital 19,481 19,481
Share premium 13,321 13,321
Exercised warrant reserve 3 3
Capital redemption reserve 581 581
Other reserve 37,392 37,392
Capital reserves 146,151 153,136
Revenue reserve 4,033 2,048
------------------------------------------------------- --------- ---------
Total shareholders' funds 220,962 225,962
------------------------------------------------------- --------- ---------
Net asset value per share 303.9p 309.8p
STATEMENT OF CASH FLOWS
For the year ended 30th September 2018
2018 2017
GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
Net cash outflow from operations before dividends and
interest (3,307) (2,394)
Dividends received 4,363 3,018
Interest received 11 6
Overseas tax recovered 45 431
Interest paid (909) (310)
------------------------------------------------------- ---------- ----------
Net cash inflow from operating activities 203 751
------------------------------------------------------- ---------- ----------
Purchases of investments (187,015) (156,348)
Sales of investments 172,261 152,898
Settlement of foreign currency contracts 10 (30)
------------------------------------------------------- ---------- ----------
Net cash outflow from investing activities (14,744) (3,480)
------------------------------------------------------- ---------- ----------
Repurchase of shares into Treasury (664) (2,525)
Dividends paid (1,167) (1,178)
Repayment of bank loan (2,544) (1,860)
Drawdown of bank loan 24,209 9,667
------------------------------------------------------- ---------- ----------
Net cash inflow from financing activities 19,834 4,104
------------------------------------------------------- ---------- ----------
Increase in cash and cash equivalents 5,293 1,375
------------------------------------------------------- ---------- ----------
Cash and cash equivalents at start of year 1,890 515
Exchange movements (9) -
Cash and cash equivalents at end of year 7,174 1,890
------------------------------------------------------- ---------- ----------
Increase in cash and cash equivalents 5,293 1,375
------------------------------------------------------- ---------- ----------
Cash and cash equivalents consist of:
Cash at bank 464 1,890
Cash held in JPMorgan US Dollar Liquidity Fund 6,710 -
------------------------------------------------------- ---------- ----------
7,174 1,890
------------------------------------------------------- ---------- ----------
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
Basis of accounting
The financial statements are prepared under the historical cost
convention, modified to include fixed asset investments at fair
value, and in accordance with the Companies Act 2006, United
Kingdom Generally Accepted Accounting Practice ('UK GAAP'),
including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland' and with the Statement of
Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (the 'SORP') issued by the
Association of Investment Companies in November 2014, and updated
in February 2018.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern
basis. The disclosures on going concern in the Directors' Report
form part of these financial statements.
The policies applied in these financial statements are
consistent with those applied in the preceding year.
2. Dividends
Dividends paid and proposed
2018 2017
GBP'000 GBP'000
--------------------------------------------------------------- -------------- --------------
Dividend paid
2017 final dividend paid of 1.6p (2016: 1.6p) per share 1,167 1,178
--------------------------------------------------------------- -------------- --------------
Dividend proposed
2018 final dividend proposed of 3.5p (2017: 1.6p) per
share 2,545 1,167
--------------------------------------------------------------- -------------- --------------
The dividend proposed in respect of the year ended 30th
September 2018 is subject to shareholder approval at the
forthcoming Annual General Meeting. In accordance with the
accounting policy of the Company, this dividend will be reflected
in the financial statements for the year ending 30th September
2019.
3. (Loss)/return per share
2018 2017
GBP'000 GBP'000
--------------------------------------------------------- ----------------- -----------------
Revenue return 3,152 850
Capital (loss)/return (6,321) 48,915
--------------------------------------------------------- ----------------- -----------------
Total (loss)/return (3,169) 49,765
--------------------------------------------------------- ----------------- -----------------
Weighted average number of shares in issue during
the year 72,887,822 73,253,728
Revenue return per share 4.32p 1.16p
Capital (loss)/return per share (8.67)p 66.78p
--------------------------------------------------------- ----------------- -----------------
Total (loss)/return per share (4.35)p 67.94p
--------------------------------------------------------- ----------------- -----------------
4. Net asset value per share
2018 2017
--------------------------------- ----------- -----------
Net assets (GBP'000) 220,962 225,962
Number of shares in issue 72,703,188 72,928,162
--------------------------------- ----------- -----------
Net asset value per share 303.9p 309.8p
--------------------------------- ----------- -----------
5. Status of results announcement
2017 Financial Information
The figures and financial information for 2017 are extracted
from the published Annual Report and Financial Statements for the
year ended 30th September 2017 and do not constitute the statutory
accounts for that year. The Annual Report and Financial Statements
have been delivered to the Registrar of Companies and included the
Report of the Independent Auditors which was unqualified and did
not contain a statement under either section 498(2) or section
498(3) of the Companies Act 2006.
2018 Financial Information
The figures and financial information for 2018 are extracted
from the published Annual Report and Financial Statements for the
year ended 30th September 2018 and do not constitute the statutory
accounts for that year. The Annual Report and Financial Statements
have been delivered to the Registrar of Companies and included the
Report of the Independent Auditors which was unqualified and did
not contain a statement under either section 498(2) or section
498(3) of the Companies Act 2006.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement
JPMORGAN FUNDS LIMITED
6th December 2018
For further information, please contact:
Lucy Dina
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the annual report will shortly be submitted to the
National Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The annual report will shortly be available on the Company's
website at www.jpmchinese.co.uk where up-to-date information on the
Company, including daily NAV and share prices, factsheets and
portfolio information can also be found.
JPMORGAN FUNDS LIMITED
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FKADPBBDDCBK
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