Final Results

RNS Number : 4828T

JPMorgan Asian Investment Tst PLC

05 January 2017

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2016

The Directors of JPMorgan Asian Investment Trust plc announce the Company's results for the year ended 30th September 2016.

CHAIRMAN'S STATEMENT

Performance

I am very pleased to report that in the year to 30th September 2016 the Company's return on net assets was +41.3%. The return to shareholders was +38.7%, reflecting a disappointing widening of the Company's discount from 11.7% to 13.4%. These results marked a continuation of the positive turnaround in the Company's performance, with the return on net assets representing an outperformance against its benchmark, the MSCI Asia ex Japan Index, of 5.1 percentage points, building on the 3.4 percentage points outperformance in 2015. It is also a point of pride to note that our recent investment returns have been accomplished with the lowest total charges ratio of all our peers in the Asia ex-Japan sector.

Continuing Appointment of the Manager

Earlier in the year JPMorgan Funds Limited ('JPMF') informed the Board that one of the Company's investment managers, Sonia Yu, had left JPMorgan Asset Management ('JPMAM') to pursue other interests. The Board subsequently approved the appointment of Ayaz Ebrahim, a managing director and portfolio manager at JPMAM, as her replacement. Mr Ebrahim, who is based in Hong Kong, chairs JPMAM's Asia Pacific Asset Allocation Committee within the Emerging Markets and Asia Pacific ('EMAP') equities team. Although he has only been in the role for a short period, Mr Ebrahim has already proved to be a valuable addition to the investment team managing the assets of your Company. Richard Titherington, the Chief Investment Officer of EMAP, continues to manage the Company's portfolio alongside Mr Ebrahim.

The Company's Manager, JPMF, has now delivered two consecutive years of strong relative investment performance. The Board is confident in its continuing ability to deliver satisfactory results and has therefore resolved that JPMF remain as the Company's Manager.

Continuation Vote

Pursuant to the Company's Articles of Association, the Board is required to put a triennial continuation vote to shareholders. Since the last time this requirement was enacted by the Company was in 2014, a continuation vote will be put to shareholders at the Annual General Meeting to be held on 2nd February 2017. Given the performance returns highlighted above, your Board has no hesitation in recommending to shareholders that they vote in favour of the Company continuing as an investment trust for a further three year period.

Revenue and Final Dividend

Revenue per share for the year amounted to 3.48p and the Board is recommending a final dividend of 3.0p which, if approved by shareholders, will be payable on 6th February 2017 to shareholders on the register at the close of business on 13th January 2017.

Proposed Change in Discount Management and Dividend Policy

Subject to the relevant shareholder approvals at the Annual General Meeting in 2017, the Board has approved the implementation of changes aimed at narrowing the Company's discount.

It has been the Board's stated objective for a number of years to stabilise the discount at a level no wider than between 8 and 10 per cent. under normal market conditions. The Board has been disappointed and concerned by the widening of the Company's discount over the year, particularly against the background of strong investment performance.

Widening of discounts has been a feature not only of Asian regional funds this year but also across the investment trust industry generally for many non-income focused funds. The Company's discount was consistently higher than 10 per cent. over the financial year and we have therefore, for some time, been actively considering our current discount control policy. We believe that, over the longer term, an effective discount control policy must address the concerns of current investors and make the Company more attractive to new investors at the same time.

The two major mechanisms we have deployed over the past few years to try to reduce the discount have been periodic, semi-annual tender offers and more regular share buybacks. On the subject of tenders, our experience has been that, whilst offering liquidity to those shareholders electing to participate, tenders per se at tight discounts were not having a measurable effect in reducing the discount, were mainly subscribed by larger institutional holders and not favoured by most shareholders, were delivering nugatory NAV uplift to remaining shareholders and at the same time were shrinking the size and consequently the market attractiveness of the Company. Our issued share capital has contracted significantly over recent years, mainly as a result of tender offers, and we believe that this contraction has been detrimental to the attractiveness of the Company in the market.

Turning to buybacks, the Board and its advisers concluded, over the course of the past year, that market conditions were such that there was no certainty that conducting share buybacks on a standalone basis would have a lasting, or even temporary, impact in reducing the Company's discount.  Accordingly, no share buybacks were enacted by the Company in this financial year.  The Directors nonetheless continue to see the merits of buybacks as a means of addressing imbalances in supply and demand and of reducing the discount and will again propose a resolution at the forthcoming Annual General Meeting to authorise the Company to repurchase its Ordinary shares. The overall objective will remain, namely stabilising the discount at a level no wider than between 8 to 10 per cent. in normal market conditions.  

As the Board remains dissatisfied with the Company's current discount level, it has been actively considering other approaches for reducing the discount on a sustainable basis and has been considering the views of our shareholders as provided to our advisers.

One point that became clear was that the bulk of new demand for investment trust shares now comes from retail investors. Against the background of the low yields now available from many asset classes, these new investors are particularly interested in shares that offer an attractive, predictable and regular dividend.

With this in mind, and as previously announced to shareholders on 21st December 2016, the Board is proposing a new dividend policy under which it aims to pay, in the absence of unforeseen circumstances, a regular quarterly dividend equivalent to 1% of the Company's NAV on the last business day of each financial quarter, being the end of December, March, June and September. This dividend will be paid from a combination of the revenue and capital reserves. The Board will propose a resolution at the Annual General Meeting to amend the Company's Articles of Association to allow the Company to distribute capital as dividends, to allow for the long-term implementation of the new dividend policy. The proposed changes to the Company's Articles of Association are explained in the Director's Report on page 26. 

This proposed change in dividend policy will not be accompanied by a change in the investment policy of the Company. The Board takes the view that any demand placed on the investment managers to seek a higher income yield from the portfolio may be at the expense of the total returns available to shareholders.  By dissociating the dividend policy of the Company from the split of capital and revenue returns generated from its current investment policy, the Board expects to attract new buyers for the Company's shares, whilst maintaining the portfolio's ability to generate attractive total returns with a low level of attrition to the capital base of the Company.   

As part of its deliberations, the Board asked its advisers to secure feedback from shareholders (on a no names basis) as to their views on increasing the dividend yield by paying dividends out of capital. Whilst there was a broad spectrum of opinion, we believe that our shareholders are generally supportive of a move designed to stimulate new buying interest in the Company and hence lead to a reduction in the discount. The Board expects this change of policy to be permanent. However, it will keep the policy (and its expected positive impact on discount level) under constant review and may amend it in the light of potential changes in the expected total returns to be earned from the portfolio or changes in the nature of returns desired by shareholders.

Should the Resolution to permit the necessary changes to the Company's Articles of Association be approved, the new distribution policy will be effective for the year that commenced on 1st October 2016 and the first dividend payable on the new basis will be calculated by reference to the Company's net assets on 31st December 2016. This first quarterly dividend will be payable on 6th February 2017, at the same time as the 2016 final dividend, to shareholders on the register at the close of business on 13th January 2017. As the Company's cum income NAV on 31st December 2016 was 309.90 pence per share, this first new quarterly dividend will amount to 3.1 pence per share, resulting in a total distribution of 6.1 pence per share on 6th February 2017.

The Board expects that a combination of this new distribution policy, alongside the more traditional and consistent use of share buybacks, will be effective in tightening the discount at which your Company trades at a level no wider than between 8 to 10 per cent. The Board therefore recommends these proposals to shareholders for approval at the Annual General Meeting.

Gearing

The Company's £25 million three year multicurrency loan facility with Scotiabank expired in December 2016. The facility was renewed with Scotiabank at the level of £40 million, with the option of further increasing the facility to £60 million. In agreement with the Board, the investment managers increased gearing during the year and it stood at 5% at the year end. Gearing remains one of the key benefits of the closed end structure of investment trusts and, if implemented well, can enhance returns to shareholders. The investment management team has developed a model to assist with gearing decisions and the signals from the model are discussed with Directors at each Board meeting.

Board of Directors

As previously reported, I will retire at the conclusion of the forthcoming Annual General Meeting. I have had the privilege of serving on the Board of JPMorgan Asian Investment Trust since 1997 and although the Company has faced some challenging periods during my tenure, I am pleased to be leaving the Board with a strong investment team in charge, much improved performance and a dedicated Board of Directors to take the Company forward. I would like to thank shareholders, my fellow Directors and the team at JPMorgan for their many years of support.

I am delighted that Bronwyn Curtis, a Director since 2013, will be appointed Chairman upon my retirement, subject to her reappointment by shareholders at the Annual General Meeting.

Having served as a Director since 2009, James Strachan has decided also to retire at the forthcoming Annual General Meeting. I thank James for his strong contribution to the deliberations of the Board during his tenure and wish him well for the future.

The implementation of the Company's succession plan to refresh the Board has continued with the appointment of Peter Moon as a Director from 3rd August 2016. Peter has a strong background in investment management, notably as the former chief investment officer of the Universities Superannuation Scheme. He will stand for reappointment at the Annual General Meeting and I look forward to introducing him to shareholders at this event.

There is a formal process each year for evaluating the performance of the Board, its Committees, individual Directors and myself as Chairman. The performance reviews this year having been completed. Mrs Curtis and Messrs. Buckley, Gould and Moon will stand for reappointment at the Annual General Meeting and I warmly endorse and recommend them.

Annual General Meeting

This year's Meeting will be held at 60 Victoria Embankment, London EC4Y 0JP on Thursday, 2nd February 2017 at 12.00 noon. In addition to the formal proceedings, shareholders will have the opportunity to meet Richard Titherington, who will be presenting and will be available to respond to questions on the Company's portfolio, the investment team's strategy and the outlook for Asian markets. Following the Meeting there will be an opportunity for shareholders to meet the Board, investment management personnel and other Company advisers informally and I look forward to seeing as many of you as possible.

Conclusion

It is customary in Japan, upon news of the demise of the Emperor, for stock markets to dip slightly out of respect. Since I announced my intention to retire from the Company, by contrast, our share price has raced to all-time highs. I like to think that this is on the back of our recent excellent absolute and relative returns, but I can also happily live with the notion that the market believes that the Company is now set fair to accomplish even better things under my successor's leadership. The one aspect that gives more than a tinge of lingering disappointment to my term, however, is the seemingly remorseless rise of the discount over recent years. In rough terms, the Company is valued by the market at some £50 million less than its break-up value: that is c.£50 million we have constantly to try to recoup, if for no other reason than that it is a loss of value for shareholders that dwarfs our average annual total return.

I have seen such impressive and positive changes in the processes and people at our investment manager in recent years and am so pleased that these are now being translated into solid delivery of outperformance. And yet, the discount stubbornly remains wide. As that can, ultimately, only be because there are more sellers than buyers, I commend the new dividend policy to shareholders, for outperformance alone cannot be relied upon to generate buying interest in an acceptable time frame: we have to attract new retail buyers. I hope and expect that the increased dividend yield, coupled with the more consistent use of share buybacks will be effective, in that regard for the benefit of all shareholders.

I am delighted that Bronwyn Curtis is taking over from me as Chairman and, although I sometimes like to think that the Company is now simply going to move smoothly upwards, with turbulence and underperformance a thing of the past, I know that Asia will continue to be an exciting investment ride for her and the Board and I will continue to watch the market swings, from elation to despair, with keen interest going forward. I leave the Company in very good hands, in very good shape and with my very best wishes.

James M Long

Chairman                                                                                                                                             

5 January 2017

INVESTMENT MANAGERS' REPORT

Summary

During the year under review, the Company's return on net assets was +41.3%, outperforming Asian stock markets, as measured by the MSCI AC Asia ex Japan Index, which delivered a +36.2% return in sterling terms. In this report, we discuss the market backdrop, examine the drivers of the Company's performance and then consider the outlook for Asian stock markets in 2017.

Market Review

Asian equities rose over the 12 months to 30th September 2016, however, the period was characterised by high levels of volatility with a strong rally from October 2015 followed by a sharp sell-off at the beginning of 2016 from which the market rose steadily. Key catalysts for this volatility include the ever-changing outlook for US interest rates and the resulting direction of the US dollar, commodity prices including oil, iron ore and coal, the UK leaving the European Union, and importantly, the trajectory of economic growth and policy changes in China.

The calendar year 2016 began with a sharp drop in the oil price with Brent Crude Oil falling to 34 US dollars per barrel and resulting deflationary worries weighed on emerging market and Asian economies. As markets and commodity prices corrected, expectations of rate hikes in the US were reduced and by February markets priced the probability of less than one additional hike in 2016 which, ultimately contributed to a correction in the US dollar, a favourable development for many markets in Asia. Importantly, this coincided with policy stimulus in China and a stabilisation of the Renminbi following a period of depreciation in the summer of 2016 which market participants interpreted as a reactive move to slowing growth. Explicit commitments to reinforce stronger fixings in the exchange rate were taken positively. Despite the challenging conditions for the Chinese economy overall, the shift from central bank rate cuts to more explicit fiscal stimulus and policy measures led to a strong recovery in areas such as auto sales. With 10 year government bond rates stabilising at 3% and a slowing of non-performing loans, bank shares outperformed the market. The 'new economy' also continued to perform well with some of China's leading internet companies posting strong revenue and earnings growth. Overall, the Chinese government is trying to adjust to a slower rate of economic growth and they have found it challenging to design policies to address excessive capacity in manufacturing industries without leading to even slower economic growth.

Reform across the region was a major theme and positive change that also contributed to a re-rating of equity markets. In India the passing of the goods and services tax bill (GST) was an important step for the Narendra Modi-led government and removes a big road block in implementing what is possibly the biggest structural reform in India since 1992. Although economic growth in India has taken longer to recover than the market has expected, sentiment was also boosted by the appointment of Dr. Urjit Patel as the new Reserve Bank of India (RBI) Governor. This appointment helped reassure investors that the RBI would continue with its macro stability policy focus and inflation targeting. In Indonesia, the passing of the tax amnesty bill was a major achievement for the Joko Widodo led government. With a low and falling tax take in the Indonesian economy, the bill is key to helping reduce the budget deficit and ultimately leading to the government's ability to fund more infrastructure projects, of which the country is badly in need. In addition, the reappointment of Ms. Sri Mulyani Indrawati as Minister of Finance, who previously held the role from 2005 to 2010, was seen as further evidence that the Joko Widodo government is seriously addressing reform issues. Minister Indrawati has a distinguished record, having also worked as a Chief Operating Officer at the World Bank.

Asian markets continued to rally towards the end of the reporting year. The Chinese Insurance Regulatory Commission approved mainland insurance companies to invest directly in Hong Kong shares via the Shanghai-Hong Kong stock connect. Furthermore it was confirmed that the connect programme would be extended to the Shenzhen exchange. Such developments were positive and important in China's long but challenging journey of structural reform. The strong rebound in commodity prices helped alleviate deflationary concerns and also contributed to a broad reversal of company profit expectations.

Performance

For the Company's financial year ended September 2016, the portfolio outperformed its benchmark index. Positive relative performance was driven by both country allocation and stock selection, with positions in Taiwan, India and China being the stand out contributors.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	%	%
Contributions to total returns
Benchmark return		+36.2
Stock selection	+4.6
Currency effect	+0.8
Gearing/(net cash)	+0.7
Investment Manager contribution		+6.1
Dividends/residual	-0.2
Portfolio return		+42.1
Management fee/other expenses	-0.8
Return on net assets		+41.3
Effect of movement in discount over the year		-2.6
Return to shareholders		+38.7

In Taiwan, overweight positions in leading technology companies were the primary contributors to good stock selection. Taiwan Semiconductor Manufacturing (TSMC), Silicon Motion and Largan Precision all benefited from strong trends in the mobile handset and memory segments of the technology sector. Although the outlook for growth in the global handset market is slowing, speciality firms are taking a higher share of content per client device because of technology upgrades, including more advanced cameras and faster processing speeds. In addition, the shift from hard disk drives to solid-state memory and NAND memory drove earnings growth at firms including Silicon Motion, Samsung and SK Hynix.

In China, our holdings in the property sector, utilities and health care performed well over the period under review. China Vanke was the top performing stock within the broader financial sector due to accelerating property prices in major cities. Elsewhere, our positions in the technology sector, including Tencent and AAC Technology, continued to deliver positive returns with strong top line growth throughout the year. We continue to believe that there are growth opportunities in consumption in China.

In India, the main contributor to performance came from the holdings in Maruti Suzuki, Ambuja Cement and HDFC Bank. The outlook for certain cyclical sectors has gradually improved, including the auto and cement markets. In Maruti Suzuki's case, the company has also taken market share in new segments including cross-over vehicles, where investors were sceptical that consumers would trade up within the Maruti Suzuki brand. The company's market share at the end of September was nearly 50%. HDFC Bank, the largest overweight position in India, again delivered upbeat earnings with strong loan and fee income growth. The secular growth story in quality Indian private banks remains intact and we continue to prefer them over government owned banks.

The holding in the JP Morgan Vietnam Opportunities fund was also an important contributor to performance. Sentiment in Vietnam has gradually improved on the back of important reform measures.

However, stock selection was poor in Hong Kong, with our position in CK Hutchinson underperforming for a variety of reasons, including the negative impact from the weaker sterling exchange rate and the European Commission's decision to prohibit the proposed 3UK/O2 merger. Other areas of weakness in the portfolio included Chinese life insurers and Korean retailers. The underweight in Alibaba also negatively contributed to performance over the period under review.

Outlook

Looking ahead, we expect the outlook for Asian markets to be characterised by numerous opportunities for growth against a backdrop of periodic volatility driven by events inside and outside the region. In China, policy makers are confronted by overall slower growth with oversupply in many manufacturing and commodity sectors, but at the same time an overheating property sector where prices in major cities have rapidly increased over the last year and they are responding with measures to cool this sector. How successful policy makers will be in terms of balancing the economy without unintended consequences remains to be seen but it is clear that the divergence between 'new' industries like the internet and 'old' industries should widen over time. The longer term outlook in India remains broadly positive, driven by our belief that economic growth and earnings are set for a strong cyclical recovery, with falling interest rates a key catalyst. Reform continues to be in focus and, importantly, events such as the passing of the GST are the first in an upcoming series of legislative reforms which required constitutional amendment as opposed to simply procedural reform, which had previously been the prior driver. In addition to the positive reform developments in India and Indonesia, the removal of foreign ownership caps in Vietnam's largest listed company, Vietnam Dairy Products, marks an important turning point for the opening of the country's stock market to further foreign investment.

Our investment philosophy is to own high quality growth companies in undervalued countries. Against that backdrop, our three key positions in the portfolio include overweight allocations to the information technology sector, the insurance sector, particularly in China, and selected private sector banks in India.

Richard Titherington

Ayaz Ebrahim

Investment Managers                                                                                                                          

5th January 2017

PRINCIPAL RISKS

The Directors confirm that they have carried out a thorough assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Three key risks have been identified and the ways in which they are managed or mitigated are summarised as follows:

•   Investment and Strategy: An inappropriate investment decision, 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.

•   Political and Economic: Changes in financial or tax legislation, 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. In addition, the Company is subject to political risks, such as the imposition of restrictions on the free movement of capital.

•   Operational Risk and Cybercrime: 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 report on pages 29 and 30 of the 2016 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 by Deloitte and reported every six months against the AAF Standard.

The following risks, although not viewed as critical, have also been identified as important in our risk matrix:

•   Change of Corporate Control of the Manager: The Board holds regular meetings with senior representatives of JPMF and JPMAM in order to obtain assurance that the Manager continues to demonstrate a high degree of commitment to its investment trusts business through the provision of significant resources.

•   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.

•   Loss of Investment Team: 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.

•   Financial: The financial risks faced by the Company include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk, credit risk and the failure of any counterparty. Further details are disclosed in note 22 on pages 55 to 61 of the 2016 Annual Report.

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 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, comprising Financial Reporting Standard 102. The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) 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 position and 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 order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

•   make judgements and accounting estimates that are reasonable and prudent;

•   state whether applicable UK Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

•   notify the Company's shareholders in writing about the use of disclosure exceptions, if any, in FRS 102 used in the preparation of 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 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.

The accounts are published on the www.jpmasian.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 Auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditors accept 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 Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed on pages 22 and 23 of the 2016 Annual Report confirm that, to the best of their 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 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 Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

The Board also confirms that it is satisfied that the Strategic Report and Directors' Report include a fair review of the development and performance of the business, and the position of the Company, together with a description of the principle risks and uncertainties that the Company faces.

For and on behalf of the Board

James M Long

Chairman

5th January 2017

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	2016			2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments held at
fair value through profit or loss	-	87,626	87,626	-	(9,841)	(9,841)
Net foreign currency (losses)/gains	-	(1,700)	(1,700)	-	566	566
Income from investments	5,965	-	5,965	5,591	-	5,591
Interest receivable	4	-	4	19	-	19
Gross return/(loss)	5,969	85,926	91,895	5,610	(9,275)	(3,665)
Management fee	(1,277)	-	(1,277)	(1,317)	-	(1,317)
Other administrative expenses	(737)	-	(737)	(707)	-	(707)
Net return/(loss) on ordinary activities
before finance costs and taxation	3,955	85,926	89,881	3,586	(9,275)	(5,689)
Finance costs	(292)	-	(292)	(229)	-	(229)
Net return/(loss) on ordinary activities
before taxation	3,663	85,926	89,589	3,357	(9,275)	(5,918)
Taxation	(356)	-	(356)	(513)	-	(513)
Net return/(loss) on ordinary activities
after taxation	3,307	85,926	89,233	2,844	(9,275)	(6,431)
Return/(loss) per share (Note 3)	3.48p	90.40p	93.88p	2.99p	(9.76)p	(6.77)p

Details of dividends paid and proposed are given in note 2 below.

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/(loss) on ordinary activities after taxation represents the profit/(loss) for the year and also the total comprehensive income.

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserves	Reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2014	23,887	31,646	977	24,996	142,540	3,999	228,045
Repurchase and cancellation of the Company's
own shares	(125)	-	-	125	(1,067)	-	(1,067)
Net (loss)/return on ordinary activities	-	-	-	-	(9,275)	2,844	(6,431)
Dividend paid in the year	-	-	-	-	-	(2,091)	(2,091)
At 30th September 2015	23,762	31,646	977	25,121	132,198	4,752	218,456
Net return on ordinary activities	-	-	-	-	85,926	3,307	89,233
Dividend paid in the year	-	-	-	-	-	(2,376)	(2,376)
At 30th September 2016	23,762	31,646	977	25,121	218,124	5,683	305,313

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 AT 30TH SEPTEMBER 2016

	2016	2015
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	319,185	218,740
Current assets
Derivative financial assets	1	-
Debtors	2,475	897
Cash and cash equivalents1	1,065	9,017
	3,541	9,914
Current liabilities
Creditors: amounts falling due within one year	(17,413)	(197)
Derivative financial liabilities	-	(1)
Net current (liabilities)/assets	(13,872)	9,716
Total assets less current liabilities	305,313	228,456
Creditors: amounts falling due after more than one year	-	(10,000)
Net assets	305,313	218,456
Capital and reserves
Called up share capital	23,762	23,762
Share premium	31,646	31,646
Exercised warrant reserve	977	977
Capital redemption reserve	25,121	25,121
Capital reserves	218,124	132,198
Revenue reserve	5,683	4,752
Total shareholders' funds	305,313	218,456
Net asset value per share (Note 4)	321.2p	229.8p

₁ This line item combines the two lines of 'investment in liquidity funds held at fair value through profit or loss' and 'Cash and short term deposits' in the financial statements for the year ended 30th September 2016 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	2016	2015
	£'000	£'000
Net cash outflow from operations before dividends and interest	(1,935)	(1,331)
Dividends received	5,197	4,854
Interest received	4	18
Overseas tax recovered	164	71
Interest paid	(294)	(252)
Net cash inflow from operating activities	3,136	3,360
Purchases of investments	(124,394)	(174,075)
Sales of investments	112,291	182,602
Settlement of forward currency contracts	113	(154)
Net cash (outflow)/inflow from investing activities	(11,990)	8,373
Repurchase and cancellation of the Company's own shares	-	(1,067)
Dividend paid	(2,376)	(2,091)
Repayment of bank loan	(10,000)	(10,000)
Drawdown of bank loan	13,273	5,000
Net cash inflow/(outflow) from financing activities	897	(8,158)
(Decrease)/increase in cash and cash equivalents	(7,957)	3,575
Cash and cash equivalents at start of year	9,017	5,438
Exchange movements	5	4
Cash and cash equivalents at end of year	1,065	9,017
(Decrease)/increase in cash and cash equivalents	(7,957)	3,575
Cash and cash equivalents consist of:
Cash and short term deposits	1,065	963
Cash held in JPMorgan US Dollar Liquidity Fund	-	8,054
Total	1,065	9,017

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH SEPTEMBER 2016

1.  Accounting policies

(a)     Basis of accounting

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP'), including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in November 2014.

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 on page 29 of the Directors' Report within the 2016 Annual Report form part of these financial statements.

2.       Dividends₁

(a)     Dividends paid and proposed

	2016	2015
	£'000	£'000
2015 final dividend paid of 2.5p (2014: 2.2p) per share	2,376	2,091
2016 final dividend proposed of 3.0p (2015: 2.5p) per share	3,327	2,376

The dividend proposed in respect of the year ended 30th September 2016 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 2017.

(b)    Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')

The requirements of Section 1158 are considered on the basis of the dividend proposed in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £3,307,000 (2015: £2,844,000).

	2016	2015
	£'000	£'000
Final dividend proposed of 3.0p (2015: 2.5p) per share	3,327	2,376

₁ All dividends paid and proposed in the period are funded from the revenue reserve.

The revenue reserve after payment of the final dividend will amount to £2,851,000 (2015: £2,376,000)

3.       Return/(loss) per share

	2016	2015
	£'000	£'000
Revenue return	3,307	2,844
Capital return/(loss)	85,926	(9,275)
Total return/(loss)	89,233	(6,431)
Weighted average number of shares in issue during the year	95,046,993	95,049,733
Revenue return per share	3.48p	2.99p
Capital return/(loss) per share	90.40p	(9.76)p
Total return/(loss) per share	93.88p	(6.77)p

4.       Net asset value per share

	2016	2015
	£'000	£'000
Net assets (£'000)	305,313	218,456
Number of shares in issue	95,046,993	95,046,993
Net asset value per share	321.2p	229.8p

5.     Status of results announcement

2015 Financial Information

The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 30th September 2015 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2016 Financial Information

The figures and financial information for 2016 are extracted from the published Annual Report and Accounts for the year ended 30th September 2016 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.

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

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.jpmasian.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

Legal Entity Identifier: 5493006R74BNJSJKCB17

Information disclosed in accordance with Disclosure Guidance and Transparency Rule 4.1

 

END

 

 

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