Annual Financial Report

RNS Number : 9258T

JPMorgan Asian Investment Tst PLC

19 December 2012

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30th SEPTEMBER 2012

Chairman's Statement

Performance

In the year to 30th September 2012, the Company's portfolio returned 10.0% net of management fees, expenses and other structural effects. The Company's diluted net asset value ('NAV') total return (which assumes that the 8,546,264 Subscription shares outstanding at 30th September 2012 were all exercised at 203p per share) was 11.4% and the return to Ordinary shareholders, which includes the effect of a significant widening in the year of the Company's discount to NAV, was 6.4%. The Company's benchmark returned 15.4%. This level of underperformance was particularly disappointing in light of the changes made after 2011's poor results. The investment managers' report below gives greater detail on the key factors which influenced performance in the year under review and an attribution table in the 2012 Annual Report & Accounts further provides an explanation for the calculation of the above performance figures. It is clear that, in hindsight, the Manager did not move decisively at the beginning of our financial year to address the issues that had led to the 2011 underperformance and, as explained in the investment managers' report, when our new investment manager was appointed at the beginning of calendar year 2012, the portfolio was even then not repositioned swiftly enough. The Company's 2012 underperformance, therefore, came very largely in the first few months of the financial year and the Board has been focused since then on regaining lost ground, as well as assuring ourselves as to whether the Manager now has the appropriate resources, processes and systems to enable it to deliver outperformance going forward. Shareholders will recently have seen announcements and a Circular which explain some of the further measures enacted by the Board to address the fact of an unacceptable performance record and Shareholders will have a further opportunity to vote on these and, indeed, on the future continuance of the Company, at the forthcoming Annual General Meeting ('AGM').

Continuing Appointment of the Manager on Revised Terms and Continuation Resolution

In a series of strategy meetings the Board conducted a fundamental review of the capabilities of JP Morgan Asset Management (UK) Limited (the 'Manager' or 'JPMAM') and examined in depth the measures which have now been put in place by the Manager to improve its investment performance. These measures include changes to key personnel and enhancements to the Manager's investment and risk management processes. The Board also undertook extensive consultations with Shareholders to canvass views on the future direction of the Company.

Following these Shareholder consultations, the recent strategy meetings and the Board's formal annual review of other services provided to the Company by JPMAM, which include company secretarial, administration and marketing services, the Board concluded that the continued appointment of JPMAM is in the interests of Shareholders. In reaching this decision, however, the Board agreed with JPMAM a number of revisions to the investment management arrangements.

JPMAM is currently paid a management fee based on the Company's market capitalisation. This fee uses the average of the Company's closing middle market share price for the last five business days of the relevant month, calculated monthly and paid quarterly at a rate of 0.75% per annum, based on the average of the preceding three month end market capitalisations. Investments in funds on which JPMAM charges a management fee are excluded from this calculation. JPMAM has agreed to reduce this management fee to 0.60% per annum, and, in order to defray a part of the costs that were incurred in the portfolio management transition earlier in the year, and cover other administration expenses, to make an additional one-off contribution to the Company's expenses in the amount of 0.35% of the value of the Company's total assets less current liabilities on 1st October 2012 (being an amount equal to £1,135,037). These changes will be subject to the passing of the 2013 Continuation Resolution at the forthcoming AGM, which has been introduced in order to allow Shareholders an opportunity to vote on the future of the Company. If the 2013 Continuation Resolution is passed the changes to the management fee will be applied as if having taken effect on 1st October 2012. There is no change to the performance fee arrangements.

The Board and JPMAM have also agreed, with effect from 17th October 2012, that the notice period for termination by the Company of the investment management agreement as a result of the Manager's poor investment performance will be reduced from six months to three months and that the notice period for termination without cause will also be shortened from 12 months to six months.

The decision to continue with JPMAM as Manager was not taken lightly. JPMAM does have significant experience and resources in managing Asian equities across a range of regional and single country portfolios and has over $44 billion under management in the region, and the Board received assurances from the new Chief Investment Officer for JPMAM's Pacific Region Group, Ted Pulling, that turning the performance of this Company around is a key priority for JPMAM. Ted was appointed as the new CIO at the beginning of 2012. He is an investment manager with more than 23 years experience and, until his appointment, he managed a number of Asian regional and country fund portfolios, including JPMorgan Indian Investment Trust. The Board was pleased that Ted agreed to be the second named manager for the Company alongside Jeff Roskell as a tangible demonstration of JPMAM's and his personal commitment. The Board's analysis of the Manager's revised investment and risk management processes also gave confidence that JPMAM should be able to deliver outperformance in future. All stakeholders are very aware of the absolute necessity now to deliver results commensurate with the strength and depth of JPMAM's organisation and its reputation in the region and the Board is confident that this can be achieved. Accordingly, Directors recommend that Shareholders vote in favour of the 2013 Continuation Resolution.

Discount Management and Tender Offers

In February 2012, a tender offer for up to 5% of the Company's Ordinary shares was implemented at a 2% discount to the fully diluted cum income net asset value ('NAV'), less the direct costs and expenses of effecting the tender offer. A total of 8,417,149 shares, representing 5% of the Company's then outstanding Ordinary shares, were repurchased at a price of 213.45p per share and were subsequently cancelled.

At the annual general meeting held in February 2012, Shareholders approved two further conditional tender offers for up to 5% of the Company's Ordinary shares in issue, at a 2% discount to NAV, less the direct costs and expenses of effecting such tender offers. These conditional tender offers could be implemented by the Board if the Ordinary shares traded at an average discount of more than 9% to their NAV over the six month periods ending 31st March 2012 and 30th September 2012. The first conditional tender offer was not implemented by the Board as the Company's average discount for the six months ended 31st March 2012 was under 9%.

During the second six month measurement period to the end of September 2012, the Company's Ordinary shares traded at an average daily discount of 12.6% relative to their NAV. The Board decided to use its discretion to propose a tender offer on enhanced terms for Shareholders, whereby the size of the tender offer was increased to 24.99% of the Company's Ordinary shares in issue. A Circular was sent to Shareholders with details of this tender offer in early November 2012. This tender offer was duly approved by Shareholders at a general meeting held on 27th November 2012. The tender price was the NAV per Ordinary share (inclusive of undistributed revenue reserves) as at 28th November 2012, less the direct costs and expenses of effecting the tender offer. A total of 37,170,686 shares, representing 24.99% of the Company's issued Ordinary shares on 18th October 2012 (including for these purposes those Subscription shares in respect of which a valid request for conversion was exercised by 31st October 2012) were repurchased on 29th November 2012 at a price of 218.59p per share and were subsequently cancelled.

Subject to receiving the necessary Shareholder approval at the forthcoming AGM, the Board intends to conduct, semi-annually, further tenders on the same terms as the conditional tender offers approved at the annual general meeting which was held in 2012 (in other words, if the Company's Ordinary shares trade at an average daily discount of more than 9% relative to their NAV over the period between 1st October 2012 and 31st March 2013 and the period between 1st April 2013 and 30th September 2013, to conduct a tender offer for up to 5% of the Company's Ordinary shares in issue at a 2% discount to NAV, less the direct costs and expenses of effecting such tender offers). Shareholders should note that these tender offers will, however, remain at the discretion of the Board and be subject to prevailing market conditions at the time, so they should place no expectation on these tender offers being implemented.

The conditional 5% tender offers are subject to Shareholder approval. The Board recommends that Shareholders vote in favour of this Resolution.

The Company's discount widened in the year as the sector fell out of favour, but it also widened relative to its peer group because of its relative underperformance. The Board has responded by pursuing a strategy that has included regular market buybacks (as more fully described below) and formal tenders, the latest, of course, being for 24.99% of the Share capital. The cumulative effect of these actions (after also including Subscription share exercises) has been to reduce the number of shares in issue from 168,316,005 at 1st October 2011 to 106,816,558 at the time of writing, resulting in a fall in the market capitalisation of the Company from £308.0 million to £213.6 million. As I stated above, all stakeholders are aware that outperformance against its benchmark is key to the Company's future existence. It is not in the interest of Shareholders for the size and market capitalisation of the Company to fall below critical mass by buybacks and/or discount widening, particularly with the advent of the Retail Distribution Review: outperformance is what must now be delivered and this will itself assist in controlling the Company's discount going forward.

Share Buy Backs

As stated above, the Board continues closely to monitor the level of discount at which the Company's Ordinary shares trade relative to their NAV. Subject to market conditions, the Company will buy back Ordinary shares with the objective of stabilising the discount between 8% and 10% relative to their NAV, thereby providing an uplift in NAV per Ordinary share for continuing investors (as a result of those shares being acquired at a discount to their NAV). In the year ended 30th September 2012, 14,064,721 Ordinary shares (excluding the 5% tender offer) were acquired through buy backs. The Board has continued actively seeking to stabilise the discount since the year end and has bought back a further 5,030,000 shares (excluding the latest tender offer) in the market to the date of this announcement.

Revenue and Dividends

Revenue per share for the year amounted to 2.43p (on an undiluted basis) and the Board is recommending a final dividend of 2.4p which, if approved by Shareholders, will be payable on 7th February 2013 to Shareholders on the register at the close of business on 4th January 2013.

Subscription Shares

In February 2009 the Company issued 32,000,805 Subscription shares as a bonus issue to qualifying Shareholders on the basis of one Subscription share for every five Ordinary shares held. Each Subscription share confers the right (but not the obligation) to subscribe for one Ordinary share at predetermined prices on any business day during the period from 1st April 2009 until 31st March 2014, after which the rights on the Subscription shares will lapse. Between 1st October 2011 and 30th September 2012, 3,173,382 Subscription shares were converted into Ordinary shares, raising proceeds of £5,585,000. As at the date of this Announcement, a further 9,727 Subscription shares have been converted, meaning that a total of £33,476,000 has been raised for investment by the Company since the Subscription shares were issued, with 73.3% of the original allotment of Subscription shares being converted.

On 1st April 2012, the exercise price of the outstanding Subscription shares stepped up for the final time to 203p per share. At the time of writing the Company's Ordinary share price, is 200p, which is currently below the final step up price. Subscription shareholders will be sent a letter reminding them of the expiry date of the Subscription shares and the options available to them in early 2014. Further details on the Subscription shares, including the apportionments for capital gains tax purposes and how they may be exercised, can be found on the Company's website at www.jpmasian.co.uk and on page 68 of the Company's 2012 Annual Report & Accounts.

Performance Fee

As the Company's NAV total return underperformed the benchmark, this has resulted in a negative performance fee calculation of £8,607,000, which is carried forward and must be made good by future outperformance before any performance fee can be accrued or paid.

Gearing and Index Futures

The Company has a £30 million three year multi currency loan facility with ING Bank in place which will expire in August 2013. The Company did not utilise its bank borrowings over the review period. Since taking over the management of the portfolio, Jeff Roskell has introduced index futures into the portfolio within guidelines set by the Board, which replicate the effect of traditional gearing.

Annual General Meeting

This year's Meeting will be held at the Trinity House, Tower Hill, London EC3N 4DH on Thursday, 31st January 2013 at 12.00 noon. In addition to the formal proceedings, there will be a presentation by the investment managers who will also be available to respond to questions on the Company's portfolio, their investment strategy and outlook for Asian markets. Following the Meeting there will be an opportunity for Shareholders to meet the Board and investment managers over a buffet lunch and I look forward to seeing as many of you as possible.

Outlook

Global uncertainties will continue to influence the market, be it the US fiscal cliff, the European debt crisis, or the impact of political handover in China. Investors can therefore expect markets to continue to be volatile in the immediate future. Despite such uncertainties Asian equities are fundamentally cheap at their current levels and your investment managers are confident that sound investment opportunities remain.

James M Long

Chairman

19 December 2012

Investment Managers' Report

Market Review

Following a sharp correction in August-September 2011, the 12 months to 30th September 2012 was generally a strong period, with the MSCI Asia ex Japan Index rising by 15.4% in sterling terms.

Four of the top five performing markets over the past 12 months were from the South-East Asian region. The Philippines and Thailand both rallied by over 35% over the period, buoyed by earnings upgrades, a resilient economy, falling inflation and strong investor interest. Singapore was another notable outperformer, especially around the middle of 2012's calendar year as the abundance of high dividend yielding stocks in that market proved attractive for investors chasing income and yield. Takeovers and consolidation were another key supporting factor of the Singapore market. Malaysia, generally a more defensive market, also performed extremely well throughout the year.

The major laggards over the period were Indonesia and India. After having been re‑rated strongly in the 2011 calendar year, Indonesia suffered from profit taking this year. The market was negatively affected by concerns over macroeconomic fundamentals, particularly a widening current account deficit and potential currency instability. In addition, increased competition and more interventionist regulations led to investor concerns. In India, the market was generally weighed down throughout the year by stubborn inflation, earnings downgrades, corruption scandals and continued government policy paralysis. In particular, the government effectively reversed the decision to open the organised retail sector for foreign participation within weeks of having announced it in December 2011. In September 2012, amidst low expectations, the government announced a raft of new reforms, including liberalisation of the retail sector and fuel prices, which spurred a rally into the close of the reporting period.

China underperformed the benchmark marginally over the period although Hong Kong performed relatively well, rising by almost 25%. Companies in Hong Kong were supported by stable earnings, high dividend yields and defensive characteristics. On the other hand, Chinese equities were weighed down by macroeconomic uncertainty, the lack of any meaningful monetary stimulus, a slowdown in retail sales, concerns over a hard landing in the economy and the impact that could have on non-performing loans in the banking sector. Despite inflation falling to 2% in August 2012, Chinese monetary policy remained relatively tight, with only minor downward adjustments in interest rates and in the required reserve ratio for the banking sector. Latterly, equity markets in China have been held back by the policy vacuum ahead of the leadership transition in November 2012.

Performance

Over the 12 months ended 30th September 2012, the Company's portfolio returned 10.0%, net of management fees and expenses, underperforming the benchmark index which returned 15.4%. Both stock selection and the cash position detracted from performance, with stock selection in Korea and China accounting for most of the underperformance. In terms of asset allocation, the average overweight position in India and Indonesia, coupled with our cash position, detracted from performance. On the positive side however, the overweight in Thailand and underweight in Taiwan contributed positively to performance.

In Korea we started off the period with a large position in Mando Corp and Hyundai Mobis, two Korean autoparts makers. These companies were large underperformers as they suffered from earnings downgrades and cuts in orders as a result of uncertainty in global end demand. In addition, we were incorrectly overweight in Samsung Engineering, a cyclical Korean construction company, which fared poorly on the back of a deteriorating order book.

Similarly, in China, it was our overweight in cyclical industrial names which continued to detract from value. For example, we had a large position in Sany Heavy Equipment, which underperformed due to a slow down in mining equipment demand. Another detractor from performance in China was our underweight position in several domestic consumption related stocks, such as Tingyi, an instant noodle maker, and in Tencent, an internet company which we view as a consumer proxy. Tingyi rose by 20% on the back of robust earnings growth while Tencent rose by 56% over the 12 month period, driven by strong operating earnings as the company continued to add new subscribers and found ways to monetize its subscriber base.

Positive contributions to performance came from our overweight in Chinese property stocks, such as China Resources Land, Poly Property Group and in Chinese building materials stocks, e.g. China National Building Material. Many of these stocks started the year at distressed levels after a sell-down in the third quarter of 2011, and were thus trading at low valuations. The sector rallied strongly over the reporting period, and these companies were amongst the largest contributors to performance as their earnings outlook was not as low as investors had feared at the start of the period.

Stock selection in Singapore was also particularly strong over the period. Our holdings in Fraser & Neave, a beverage conglomerate benefited from a take-over offer from ThaiBev/Thai Capital Corp in September 2012. Furthermore, Overseas Union Enterprise, a diversified real estate conglomerate and a key overweight in the portfolio, rose by 44% over the year, driven by reports that it would dispose of selected prime hotels and shopping malls in Singapore.

Another key positive contributor to performance was stock selection in Hong Kong, where our overweight in Macau casinos such as Galaxy Entertainment and Sands China were beneficial. These stocks rose strongly on the back of strong revenue growth from mainland Chinese visitors. We were also helped by an overweight in Wharf Holdings, a landlord that saw strong trends in retail rents.

Portfolio Activity/Positioning

As highlighted in last year's Chairman Statement, Joshua Tay was replaced as the Company's named manager at the end of 2011 and Jeff Roskell took on the role from 1st January 2012. At the start of 2012 and before any transactions, the Company was overweight in Indonesia and Thailand and held a number of high conviction mid-cap stocks. In addition, the portfolio had a defensive bias, with a higher than usual concentration of tobacco and telecom stocks from around the region, and also held a net cash position of around 4%. Since then we have sought to reduce the level of cyclicality in the portfolio and raise consumer type exposure through acquiring companies trading on sensible multiples, which we believe will continue to grow and outperform the market. This has resulted in an increased exposure to Hong Kong and China and the portfolio maintaining an overweight position in Indonesia and Thailand. The biggest underweights are in Malaysia and Taiwan.

As was previously the case, domestic consumption in South-East Asia remains a key strategy for the portfolio. However, it was deemed prudent to trim a number of the portfolio's outsized positions in holdings such as Astra International. As a cheaper alternative, an investment in Jardine Strategic was initiated, which derives a significant part of its earnings from Astra. Furthermore, holdings in several Indonesian banks including Bank Mandiri, Bank Negara Indonesia and Bank Rakyat Indonesia were sold. Similarly in Thailand, the portfolio's overweight position in telecom company Advanced Info Service was reduced and the position in oil-based chemical producer Siam Cement was switched to gas-based chemical producer PTT Global Chemical, given the latter's lower cost of feedstock.

The total weighting in Hong Kong and China was broadly stable, but this masked a sizeable shift in the nature of the exposure, particularly an increase in Hong Kong holdings at the expense of China. Generally, we reduced exposure to cyclical businesses, such as airlines, and those exposed to the investment and property cycle in China, such as cement, property and industrial equipment stocks. Instead, we increased holdings in companies with quality assets throughout the region and exposure to more enduring growth themes, particularly consumer related stocks such as retailers, China Mobile and Tencent, a leading internet company with an enormous potential customer base. We still see both value and growth opportunities and seek to access those opportunities both through Chinese and Hong Kong managed companies.

In Taiwan, we reduced President Chain Store and Chunghwa Telecom and added to positions in technology names such as Taiwan Semiconductor, Hon Hai Precision Industry and Foxconn Technology. In Korea, portfolio positions in Kia Motors were increased at the expense of Mando Corp, and LG Household & Healthcare was added at the expense of Amorepacific and KT&G. We also took advantage of a rally to trim positions in shipbuilders such as Hyundai Heavy Industries.

The restructuring of the portfolio is now complete, however, in retrospect, was not completed as soon as it should have been, as much of the underperformance of the benchmark this year can be attributed to retaining too much of a defensive bias through the sharp market rebound in the first quarter of 2012.

As Shareholders would anticipate, we have conducted a thorough autopsy of the causes and drivers of our recent weak performance, which has identified both the strengths of our investment process and the areas for improvement. Firstly, we still have confidence in our ability to deliver strong stock selection from a primarily country driven approach. Our country specialists have an excellent long term track record. 2011 was undoubtedly a poor year for many of our country funds, however this does not diminish our confidence in our country based stock pickers. What 2011 did demonstrate was the importance of portfolio construction and this is an area on which we have placed increased emphasis. To facilitate this process and improve our ability to approach portfolio construction from a variety of perspectives, each regional portfolio manager has taken on a 'sector gatekeeper' role. This sector perspective will further develop our ability to make cross border comparisons and identify trends within sectors and to raise conviction in stock ideas.

Market Outlook

Regional benchmarks are trading at the top of their trading ranges. Sceptics, or maybe even realists, would consider these levels to be selling opportunities. Certainly earnings forecasts in Asia continue to endure downward revisions. With forecast earnings growth of 8-10% in 2012 and 13% in 2013, there may be more cuts to come. That said, valuations are entirely accommodating, i.e. still comfortably below 10 year averages, and expectations are very low.

Developments in the West are less unsettling. The American economy is grinding higher, the property market is recovering and employment is improving. However, investment remains anaemic as corporate America is unable to be confident about policy from Washington. In Europe, we think that tail risk has been largely removed, but the economic reality is grim. In summary, we expect demand for Asian exports to remain weak (Asian export growth is already negative) but we believe that downward pressure on equity valuations, due to fears of a Euro implosion, has declined.

China is still causing concern with a deceleration of growth and a once in a decade political handover to contend with. However, this has left many China related equities looking good value. Chinese growth will certainly be slower in future and the focus of policymakers will be on the balance and quality of growth rather than just the pace. To some extent this changes the kind of companies that we want to invest in, with less focus on commodity or investment related businesses. However, we still see many opportunities to invest in companies active in this large and fast changing economy. In particular, we have increased positions in Hong Kong listed companies with proven management and strong assets throughout Hong Kong and China and the wider Asian region.

Asian stock markets are still well below their summer 2011 levels. Since then earnings have increased and tail risk has decreased. From a sector perspective, industrials, cyclicals and financials all look inexpensive. From a country perspective, Greater China, Korea and India are attractively priced. Given our benign attitude toward the global economy and the existence of attractively priced investment opportunities in Asia, we still perceive more upside.

Jeff Roskell

Ted Pulling

Investment Managers

19 December 2012

Directors' Report

Principal Risks

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

•     Investment and Strategy: An inappropriate investment strategy, in areas such as asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, and may result in the Company's shares trading on a wider discount. The Board seeks to mitigate these risks 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 analysis, revenue estimates and shareholder analysis. 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 Manager employs the Company's gearing tactically, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.

•     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 Manager.

•     Accounting, 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 "Business of the Company" on page 19 of the Company's 2012 Annual Report & Accounts. Were the Company to breach Section 1158, it might 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 JPMAM 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. 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 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, JPMAM, to ensure compliance with the Companies Act 2006 and the UKLA Listing Rules.

•     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 section of the Company's 2012 Annual Report & Accounts.

•     Operational: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included with the Internal Control section of the Corporate Governance section of the Company's 2012 Annual Report & Accounts.

•     Financial: The financial risks faced by the Company include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Further details are disclosed in note 23 of the Company's 2012 Annual Report & Accounts.

•     Political and Economic: Changes in financial or tax legislation, including in the European Union, may adversely effect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to political risks, such as the imposition of restrictions on the free movement of capital.

Related Parties 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 the accounts 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 and applicable law). Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net 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 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.

The Directors are responsible for keeping proper 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 to 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.

Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Statement of Corporate Governance that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in the Directors' Report confirms that, to the best of his/her knowledge:

•     the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return or loss of the Company; and

•     the Directors' Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

For and on behalf of the Board
James M Long
Chairman

19 December 2012

Income Statement

for the year ended 30th September 2012

		2012			2011
		Revenue	Capital	Total	Revenue	Capital	Total
	Note	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at fair value through profit or loss		-	30,475	30,475	-	(91,982)	(91,982)
Net foreign currency losses		-	(87)	(87)	-	(19)	(19)
Income from investments		7,744	-	7,744	9,163	-	9,163
Other interest receivable and similar income		5	-	5	12	-	12
Gross return/(loss)		7,749	30,388	38,137	9,175	(92,001)	(82,826)
Management fee		(2,216)	-	(2,216)	(2,964)	-	(2,964)
Other administrative expenses		(726)	-	(726)	(835)	-	(835)
Net return/(loss) on ordinary activities before finance costs and taxation		4,807	30,388	35,195	5,376	(92,001)	(86,625)
Finance costs		(262)	-	(262)	(592)	-	(592)
Net return/(loss) on ordinary activities before taxation		4,545	30,388	34,933	4,784	(92,001)	(87,217)
Taxation		(709)	-	(709)	(955)	-	(955)
Net return/(loss) on ordinary activities after taxation		3,836	30,388	34,224	3,829	(92,001)	(88,172)
Return/(loss) per Ordinary share - diluted	3	2.44p	19.32p	21.76p	2.19p	(52.73)p	(50.54)p
Return/(loss) per Ordinary share - undiluted	3	2.43p	19.24p	21.67p	2.23p	(53.55)p	(51.32)p

A final dividend of 2.4p (2011: 2.2p) per share is proposed in respect of the year ended 30th September 2012, amounting to £3,576,000 (2011: £3,703,000). Further information on dividends is given in note 8 of the Company's 2012 Annual Report & Accounts.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2010	44,371	26,438	977	3,789	100,436	265,518	3,473	445,002
Repurchase of the Company's own Ordinary shares for cancellation	(2,213)	-	-	2,213	(20,562)	-	-	(20,562)
Exercise of Subscription shares into Ordinary shares	(2)	2	-	-	-	-	-	-
Issue of Ordinary shares on exercise of Subscription shares	40	239	-	-	-	-	-	279
Net (loss)/return on ordinary activities	-	-	-	-	-	(92,001)	3,829	(88,172)
Dividends appropriated in the year	-	-	-	-	-	-	(3,010)	(3,010)
At 30th September 2011	42,196	26,679	977	6,002	79,874	173,517	4,292	333,537
Repurchase of the Company's own Ordinary shares for cancellation	(5,620)	-	-	5,620	(45,375)	-	-	(45,375)
Exercise of Subscription shares into Ordinary shares	(32)	32	-	-	-	-	-	-
Issue of Ordinary shares on exercise of Subscription shares	793	4,792	-	-	-	-	-	5,585
Net return on ordinary activities	-	-	-	-	-	30,388	3,836	34,224
Dividends appropriated in the year	-	-	-	-	-	-	(3,675)	(3,675)
At 30th September 2012	37,337	31,503	977	11,622	34,499	203,905	4,453	324,296

Balance Sheet

at 30th September 2012

		2012	2011
	Note	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		314,574	320,030
Current assets
Debtors		269	4,129
Cash and short term deposits		12,066	20,570
Derivative financial instruments held at fair value through profit or loss		106	-
		12,441	24,699
Creditors: amounts falling due within one year		(2,714)	(2,843)
Derivative financial instruments held at fair value through profit or loss		(5)	(4)
Net current assets		9,722	21,852
Total assets less current liabilities		324,296	341,882
Creditors: amounts falling due after more than one year		-	(8,345)
Net assets		324,296	333,537
Capital and reserves
Called up share capital		37,337	42,196
Share premium		31,503	26,679
Exercised warrant reserve		977	977
Capital redemption reserve		11,622	6,002
Other reserve		34,499	79,874
Capital reserves		203,905	173,517
Revenue reserve		4,453	4,292
Total equity shareholders' funds		324,296	333,537
Net asset value per Ordinary share - diluted	4	216.8p	196.7p
Net asset value per Ordinary share - undiluted	4	217.6p	198.2p

 Cash Flow Statement

for the year ended 30th September 2012

		2012	2011
		£'000	£'000
Net cash inflow from operating activities		3,686	3,958
Returns on investments and servicing of finance
Interest paid		(298)	(553)
Taxation paid		-	(80)
Capital expenditure and financial investment
Purchases of investments		(302,129)	(523,944)
Sales of investments		341,357	569,121
Settlement of futures contracts		(1,896)	-
Other capital charges		124	(36)
Net cash inflow from capital expenditure and financial investment		37,456	45,141
Dividends paid		(3,675)	(3,010)
Net cash inflow before financing		37,169	45,456
Financing
Repurchase of the Company's own Ordinary shares for cancellation		(42,826)	(20,564)
Issue of Ordinary shares on exercise of Subscription shares		5,585	279
Net repayment of bank loans		(8,054)	(36,474)
Net cash outflow from financing		(45,295)	(56,759)
Decrease in cash in the year		(8,126)	(11,303)

Notes to the Accounts

for the year ended 30th September 2012

1.   Accounting policies

(a)  Basis of accounting

      The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the AIC in January 2009.

      All of the Company's operations are of a continuing nature.

      The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments at fair value.

      The policies applied in these accounts are consistent with those applied in the preceding year.

2.   Dividends

(a)  Dividends paid and proposed

		2012	2011
	Dividend paid	£'000	£'000
	2011 final dividend proposed of 2.2p (2010: 1.7p)	3,675	3,010
	Dividend proposed
	2012 final dividend proposed of 2.4p (2011: 2.2p)	3,576	3,703

      The final dividend paid in respect of the year ended 30th September 2011, amounted to £3,703,000, however, the actual payment amounted to £3,675,000 due to share buybacks after the balance sheet date but prior to the share register record date.

      The final dividend proposed in respect of the year ended 30th September 2012 is subject to approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 30th September 2013.

		2012	2011
		£'000	£'000
3.	Return/(loss) per Ordinary share
	Return/(loss) per Ordinary share is based on the following:
	Revenue return	3,836	3,829
	Capital return/(loss)	30,388	(92,001)
	Total return/(loss)	34,224	(88,172)
	Weighted average number of Ordinary shares in issue during the year used for the purpose of the diluted calculation	157,246,781	174,464,515
	Weighted average number of Ordinary shares in issue during the year used for the purpose of the undiluted calculation	157,910,701	171,802,870
	Diluted
	Revenue return per Ordinary share	2.44p	2.19p
	Capital return/(loss) per Ordinary share	19.32p	(52.73)p
	Total return/(loss) per Ordinary share	21.76p	(50.54)p
	Undiluted
	Revenue return per Ordinary share	2.43p	2.23p
	Capital return/(loss) per Ordinary share	19.24p	(53.55)p
	Total return/(loss) per Ordinary share	21.67p	(51.32)p

      The diluted return per Ordinary share represents the return on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the year as adjusted in accordance with Financial Reporting Standard 22 'Earnings per share'.

		2012	2011
4.	Net asset value per Ordinary share
	Diluted
	Ordinary shareholders' funds assuming exercise of Subscription shares (£'000)	341,645	354,163
	Number of potential Ordinary shares in issue	157,553,781	180,035,651
	Net asset value per Ordinary share (pence)	216.8	196.7
	Undiluted
	Ordinary shareholders' funds (£'000)	324,296	333,537
	Number of Ordinary shares in issue	149,007,517	168,316,005
	Net asset value per Ordinary share (pence)	217.6	198.2

      The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the year end.

5.   Status of announcement

      2011 Financial Information

      The figures and financial information for 2011 are extracted from the Annual Report and Accounts for the year ended 30th September 2011 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

      2012 Financial Information

      The figures and financial information for 2012 are extracted from the Annual Report and Accounts for the year ended 30th September 2012 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

      Annual Report and Accounts

      The Annual Report and Accounts will be posted to shareholders on or around 28th December 2012 and will shortly be available on the Company's website (www.jpmasian.co.uk) or in hard copy format from the Company's Registered Office, Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ. A copy of the annual report will also shortly be submitted to the National Storage Mechanism and will be available for inspection at www.hemscott.com/nsm.do

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 ASSET MANAGEMENT (UK) LIMITED

- ENDS -

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmasian.co.uk.

For further information please contact:

Alison Vincent

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary - 020 7742 4000

19 December 2012

 

END

 

 

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