Final Results

RNS Number : 0248X

JPMorgan Asian Investment Tst PLC

16 December 2019

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2019

Legal Entity Identifier: 5493006R74BNJSJKCB17

Information disclosed in accordance with the DTR 4.1.3

The Directors of JPMorgan Asian Investment Trust plc announce the Company's results for the year ended 30th September 2019.

CHAIRMAN'S STATEMENT

Performance

I am pleased to report that in the year to 30th September 2019 the Company's return on net assets was +7.9%, representing an outperformance of 5.7 percentage points over the benchmark, the MSCI AC Asia ex Japan Index, which returned +2.2% in sterling terms. The return to shareholders was +10.9%, reflecting a narrowing of the discount over the year from 12.1% to 10.0%. This continued trend of outperformance of the benchmark index for the fifth year in succession has resulted in a five year cumulative outperformance of 31.1%. Such performance is testament to the benefits of active fund management, and the Manager's disciplined investment approach supported by investment in local teams whose knowledge of regional companies is combined with sectoral insights derived from research undertaken by their global colleagues. These results have been accomplished with the lowest ongoing charges ratio of all our peers in the Asia ex-Japan sector.

Dividend Policy and Discount Management

The Company's dividend policy aims to pay, in the absence of unforeseen circumstances, regular quarterly dividends funded from a combination of revenue and capital reserves 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. For the year ended 30th September 2019 dividends paid totalled 15.7 pence. This is unchanged from the total dividend paid in the last financial year, reflecting the fall in the NAV per share in the early part of the Company's year as markets fell in the three months to the end of 2018.

The discount to NAV at which the Company's shares trade reflects a number of factors, some of which are outside the control of the Board. However, the strong NAV performance and the higher yield offered by the Company's shares have both contributed to a continuation of the discount tightening seen in the previous year. Although the discount has been somewhat volatile, ranging from 12.8% at its widest to 3.3% at its tightest over the year, the tightening trend has seen an average discount of 8.8% over the financial year, compared with 10.1% for the last financial year. At the Company's year end, the discount was 10.0% compared with 12.1% in the previous year. Since the year end the discount has continued to tighten and currently stands at circa 5.8%.

Change of Company Name

The Company's investment and dividend policies are proving attractive to investors. Your Board is keen that this powerful combination of a high dividend yield alongside an unconstrained investment policy is understood by as many current and prospective investors as possible. To this end, the Company recently moved to the AIC's Asia Pacific Income sector. Alongside this, the Company will be changing its name to 'JPMorgan Asia Growth & Income plc' to better reflect its current investment and dividend policies. The change in name will also see the Company's TIDM, the 'ticker' or identification code used to identify it on the London Stock Exchange, change to 'JAGI' from 'JAI'. The Company's change of name and ticker is intended to take effect shortly after the Company's forthcoming Annual General Meeting.

Fees

The Board continues to focus on costs incurred by the Company across all of its functions, with a view to enhancing shareholder value. As mentioned above, the Board is pleased to note that the Company's 'Ongoing Charges' (representing the Company's management fee and all other operating expenses) are the lowest within its comparable peer group of actively managed open and closed-ended investment vehicles at 0.74%, ensuring that the Company remains on a competitive footing.

Gearing

The Company has in place a multi currency loan facility with Scotiabank. The Company did not employ any gearing over the period.

Liquidity considerations

Portfolio liquidity is a topical subject at the moment. Whilst the closed-end structure of an investment trust means that investor redemptions are not a feature, it is reassuring that the Company's investment portfolio is constructed from a diverse group of listed Asian equities, to include both domestic and international earners. Liquidity risk is not considered to be significant, as the Company's investments comprise mainly readily realisable securities. In the event it was required, the Manager's expectation is that the current portfolio could be liquidated to the extent of 99.3% within three trading days, based on a conservative set of assumptions. This measure is updated and reviewed regularly by the Manager.

Environmental, Social and Governance ('ESG') Issues

As detailed in the Investment Managers' report, environmental, social and governance ('ESG') considerations are integral to the Investment Managers' investment process. The Board shares the Investment Managers' view of the importance of ESG when making investments that are sustainable over the long term and the necessity of continued engagement with investee companies throughout the duration of the investment.

Board of Directors

The Board has procedures in place to ensure that the Company complies fully with the AIC Code on Corporate Governance and the UK Corporate Governance Code, where applicable. The Board further acknowledges the new UK Corporate Governance Codes and is taking steps to ensure compliance. The results of this year's Board evaluation process confirmed that all Directors possessed the experience and attributes to support a recommendation to shareholders that they retire and seek re-appointment at the Company's forthcoming Annual General Meeting. Directors' fees have not been increased this year.

The Board has established a new Committee, a Management Engagement Committee ('MEC'). Although the duties of the MEC were previously completed by the Board as a whole, the Committee was established to bring the Company into line with corporate governance best practice. The key duties of the MEC is to evaluate the Manager's performance and review the fee arrangements of the Manager, and ultimately to recommend to the Board the continuing appointment of the Manager or otherwise. Based upon this performance record and taking all factors into account, including other services provided to the Company and its shareholders, the MEC and the Board are satisfied that JPMF should continue as the Company's Manager and that its ongoing appointment remains in the best interests of shareholders.

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 2017, a continuation vote will be put to shareholders at the Annual General Meeting to be held on 13th February 2020. 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.

Annual General Meeting

The Company's forthcoming Annual General Meeting will be held at 60 Victoria Embankment, London EC4Y 0JP on Thursday, 13th February 2020 at 12.00 noon. In addition to the formal proceedings, shareholders will have the opportunity to meet with a representative from the investment management team, 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.

Outlook

It is easy to compose a list of geopolitical and economic issues that could de-rail the economies and markets in the region, not least US-Chinese trade relations and political uncertainty in Hong Kong. As a result of these concerns and a global reduction in growth prospects there is already evidence of a slowdown in many of the areas in which we invest including China, Hong Kong and India.

However, your Company invests in companies and not economies or markets. The Manager's competitive advantage lies in the identification of, and investment into, attractively priced, quality companies across the region.  There remains a wide universe of such companies, with strong business models, sound finances and quality management teams available to invest in at attractive valuations. We believe that, shorter term market movements aside, they offer the prospect of exciting returns to shareholders over the longer term.

Bronwyn Curtis OBE

Chairman

16th December 2019

INVESTMENT MANAGERS' REPORT

Introduction

In this report, we consider the Company's investment performance for the year to 30th September 2019. We review the complex market backdrop for the period and examine how stock selection enabled the Company to outperform Asian stock markets (as measured by the Company's benchmark index, the MSCI AC Asia ex Japan Index). Finally, we look at what could lie ahead for Asian equities over the coming year.

What has the market environment been like over the year?

The slowing global economy has been a major headwind for the whole of the Company's financial year. Factor in a plethora of other 'bad news' stories (including international trade friction, tightening liquidity and a collapse in corporate earnings growth globally) and it is fair to say that the performance of Asian and most global stock markets has exceeded expectations.

The first half of the Company's year was particularly turbulent. Asian equities fell sharply in the final quarter of 2018, on the back of deteriorating US-China relations and moderating grown expectations in both countries. Export-sensitive north Asia underperformed and the oil price peaked at around US$85 in October only to then plummet as much as 40% due to persistent concerns over the prospects for the global economy and oversupply. Asian markets then rebounded in the first quarter of 2019, with sentiment recovering as the Chinese government implemented an economic stimulus package and the US Federal Reserve, the undisputed driver of global monetary policy, changed direction; the Fed cut interest rates to reduce market volatility and stave off recession. In China, measures included tax cuts for small and medium-sized businesses, whilst the People's Bank of China cut the amount of cash reserves that banks must hold, in order to improve liquidity.

There was less market turmoil in the second half of the year, although trade fears continued to cast their shadow. Many stocks seemed to be 'treading water' whilst markets remained susceptible to perceived progress (or lack thereof) on trade negotiations as well as the direction of travel being taken by central bank policy makers. Uncertainty continued to prevail, and investors' risk appetite was dampened by muted economic and earnings momentum within the region. By the end of the Company's financial year, the geopolitical situation was just as fragile as it had been a year earlier with investors still weighing up the potential damage to corporate profits from the various headwinds at play.

How has the Company performed over the year under review?

Faced with this difficult investment and geopolitical climate, we are pleased that the Company has outperformed its benchmark index for the fifth consecutive year. For the year to 30th September 2019, the Company's return on net assets was +7.9%, compared with a +2.2% return for the benchmark index, in sterling terms.

What have been the major contributors and detractors to performance?

In China, economic growth went into reverse, falling to its lowest rate since the global financial crisis of 2008 and domestic demand softened. The Chinese stock market had a dismal 2018 but recovered in early 2019.  Investing in Chinese equities was challenging but the Company's stock selection there was robust; our Chinese holdings were key contributors to the Company's outperformance.

Leading pharmaceutical company (and China's biggest drugs maker) Jiangsu Hengrui Medicine recovered strongly over the year, allaying broader jitters over the general outlook for corporate earnings. The stock outperformed on the back of solid results and regulatory approval for drugs it manufactures, potentially allowing them to be accessible through China's basic medical insurance programme. China's largest insurer Ping An Insurance rose steadily over the year as it continued to deliver solid earnings while leading real estate developer China Vanke benefitted from a positive government policy outlook for the property sector. Within the fast-moving internet space, our significant holdings in internet giants Alibaba and Tencent, both of which we consider to have high quality growth potential, and avoiding Baidu made a positive contribution to returns.

In Korea, several of our holdings disappointed. The country's largest hypermarket operator E-Mart continued the slide as noted in the Company's interim report earlier in the year, with its share price burdened by increasing online competition and offline weakness. We are no longer invested in the stock. Lotte Chemical fell over the year as global refinery margins remained under pressure, but we believe an earnings recovery is likely in 2020.

In Hong Kong, months of anti-government protests and city-wide shutdowns dealt a significant blow to the economy. Visitor numbers plunged and retail sales weakened, weighing heavily on the likes of real estate investment trust Link REIT and diversified conglomerate Swire Pacific. The protests had a direct and indirect impact on demand in several of Swire's underlying businesses, which include Cathay Pacific Group. Although the short-term fundamentals are challenging for Swire, in broader terms it is benefitting from decentralisation and we remain positive on the stock.

Indian stocks in the portfolio had mixed fortunes over the year, reflecting a difficult macro environment with manufacturing, financial and real estate service sectors all hit hard. A year ago, we referenced woes in India's financial sector, specifically its Non-Bank Finance Company (NBFC) entities, which began with the collapse of IL&FS (a large unlisted infrastructure finance company) and triggered a liquidity squeeze. NBFCs are a network of financial intermediaries that provide services akin to those of traditional banks but with less stringent regulation. These entities have been a leading source of finance for commercial vehicles, so the crisis hit the automobile sector hard. Our holding in Maruti Suzuki, which sells half of all cars sold in India performed poorly on the back of weaker sales; nevertheless, we remain comfortable with its long-term investment prospects.

Mumbai-based new generation bank IndusInd detracted from overall performance as the stock was weakened by its surprise direct exposure to select NBFCs. We continue to hold the stock as we believe in its long-term potential. Our holdings in HDFC Bank and HDFC Life made notable positive contributions to performance. Both stocks were untainted by the issues in the financial sector whilst HDFC Life rose on the back of a solid earnings outlook.

Elsewhere in the portfolio, Indonesia's Bank Central Asia and Telkom Indonesia enhanced performance. BCA is Indonesia's biggest lender by value, and we consider it a high-quality banking franchise, whilst Telkom enjoys a dominant market share of mobile phone subscribers in its home country.

What has influenced the country, sector and stock holdings in the Company's portfolio?

Despite the economic slowdown across the region and globally, Asia remains the world's fastest growing equity market. Our aim is to seek out its best growth ideas and stock selection remains the key contributor of performance returns for us.  We utilise our 'on the ground' research resources to help us identify our very best stock ideas.

JP Morgan's extensive proprietary research resource is pivotal in uncovering the most promising markets, sectors and, ultimately, stocks and we use both qualitative and quantitative research to steer us to areas of interest. There are attractive investment opportunities throughout the Asian continent and we believe that local knowledge is key to unlocking these ideas; that is why our large and experienced investment team is based in local markets throughout the region. 

Over the review period, and from a top-down perspective, we were moderately overweight in both China and Korea. Despite the uncertainties created by the trade impasse with the United States, China's economy has continued to grow (albeit at a slower pace) and our investments are spread across multiple sectors, focusing on domestic consumption-oriented businesses with more limited exposure to Chinese exporters. Korea has looked extremely cheap and more than 16% of the portfolio is invested there. However, our overweight position there detracted from overall returns as several of our holdings weakened. The Korean market is dominated by the fast-moving technology sector and cyclical stocks, so we will continue to invest there with due caution.

We were underweight in Taiwanese stocks, which hurt performance, but our position was based on our belief that the market has been relatively expensive. However, we have noted the pick-up in earnings expectations for the technology sector and this is reflected in our overweight holding in Taiwan Semiconductor Manufacturing Corp (TSMC), the largest investment in the portfolio just as it was a year ago.

Over the year we were underweight in India, although we had moved in line with the benchmark by the end of the period. We remain confident of the long-term growth potential that India has to offer and are waiting for a cyclical upturn. While the current situation in India presents some challenges to growth, we are reassured by recent government initiatives to stimulate economic activity. Our investment shift over the year was driven by opportunities to invest in robust stocks at attractive prices.

Elsewhere, we were modestly overweight in Indonesia, underweight in Thailand and we had no investments in Malaysia, with all these positions enhancing performance.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 30TH SEPTEMBER 2019

	%	%
Contributions to total returns
Benchmark return		2.2
Stock selection	6.3
Currency effect	0.2
Gearing/(net cash)	0.1
Investment Manager contribution		6.6
Dividends/Residual	-0.2
Portfolio return		8.6
Management fee/Other expenses	-0.7
Structural effects		7.9
Share Buy-back/Issuance	-
Return on net assets		7.9
Effect of movement in discount over the year		3.0
Return to shareholders		10.9

Source: FactSet, JPMAM and Morningstar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.

A glossary of terms and alternative performance measures is provided within the Company's Annual Report & Financial Statements for the year ended 30th September 2019 ('2019 Annual Report').

Are there any common themes in portfolio holdings? 

Our key sectoral overweight is in Financials. Asia's financial services infrastructure is not as well developed as it is in more mature economies and we continue to uncover financial stocks with attractive valuations and positive earnings outlooks. Penetration rates of financial services across Asia's growing economies remain low and favourable demographics, urbanisation shifts and growing middle class populations provide great growth potential for wealth, insurance and mortgage products, as well as for broad-based retail banking services. In India, we have largely been able to avoid financial names rocked by bad lending, fraud and default scandals over recent times. We have instead invested in institutions that are proven to be fundamentally sound and which we believe can continue gaining market share.

The reach and influence of the fast-moving Information Technology sector grows year-on-year and the technological revolution has already had a huge impact across the region - it is a disruptive force impacting all sectors of the economy. Although this is a significant investment area for us, we are inline with the benchmark weighting; we prefer to focus on quality, high conviction names with solid prospects, such as the world's largest semiconductor manufacturer TSMC and multinational giant Samsung.

Representing just under 38% of the portfolio, China is our key country weighting, although the position is only fractionally above benchmark. We continue to focus on structural growth opportunities in domestic consumption orientated businesses, such as e-commerce, financials, healthcare and properties.

Are Environmental, Social and Governance ('ESG') issues taken into account within the Investment Process?

We pay particular attention to issues that could affect the prospects for stocks within the Company's portfolio. We believe strongly that ESG considerations (particularly Governance) need to be a foundation of any investment process supporting long-term investing and that corporate policies at odds with environmental and social issues are not sustainable in the long run. For full detail on how ESG considerations are integrated into our investment process please refer to pages 14 and 15 of the Company's 2019 Annual Report.

What common misconceptions do you come across when speaking to investors?

There are many misconceptions we encounter. For example, some analysts treat the region as a single economic entity, not appreciating that each country has its own laws, language and culture. Being on the ground across the region provides us with a real advantage as we can fully understand the nuances of each country which ultimately enhances our research capabilities.

With so much attention focused on intensifying trade tensions over the last year, and its detrimental impact on exports, it is very easy to underestimate the impact that domestic consumption is having on economic growth across Asia. Using China as an example, its economy has, of course, slowed but continues to be impressive, at more than 6% - despite the protracted trade dispute. Over the last year, the Government has taken measures to stimulate the economy, driving up domestic consumption. As such, the economy is much better placed to withstand international trade tensions than may be appreciated.

Better focus on capital management by Asian companies has been a welcome development in recent years. This is significant as it means that high growth rates can be better transformed into corporate profits. We also see better balance sheet management and a higher return on equity - both of which are primary drivers of Asian equity returns.

How concerned should investors be about geopolitical pressures in the region?

Since the beginning of 2019, equities have been caught in a stalemate situation which is very challenging for investors. On the one hand, the deteriorating health of the global economy and growing geopolitical worries have taken centre stage and triggered a sharp fall in investor confidence. On the other, monetary easing from central banks has buoyed sentiment and propelled stock market indices higher. It has been an uneasy ride, with sentiment anchored to both positive and negative news flow on the latest developments. Meanwhile, fundamentals such as corporate results have yet to instil confidence.

Whilst it is impossible to predict the outcome of the current challenges, we continue to see heightened volatility around this ongoing tussle between nations on trade and other agendas. We share investors' concern that there are so many layers of uncertainty at present. It is an unhelpful backdrop for shareholders, yet these situations can also create pockets of opportunity which we will continue to pursue.

One notable observation from the summer was the converging direction of monetary and fiscal policies, with governments and central banks working together to stabilise their respective markets and economies. Within Asia, we have seen this in action in countries such as China and South Korea. India is the latest example, where a surprise rate cut was accompanied by a reduction in corporate tax rates. We expect such initiatives to continue and they should alleviate concerns over slowing growth and help to restore market confidence.

What should investors expect for the next 12 months?

We expect Asian equity earnings to be relatively weak in US dollar terms for the coming months, given global growth concerns and the persistent strength of the US dollar which puts pressure on Asian businesses, impacting growth and earnings. However, market expectations for earnings are sufficiently bearish and we do not see an immediate catalyst for this to change. Valuations are also well below the long-term averages; and, historically, at these valuation levels investors have been rewarded over the long-term.

Our base scenario for the coming year is slower but still positive economic growth that should be supportive for Asian equities. We continue to see value in sectors such as insurance, banking and consumer where growth trends in Asia remain strong. Technology is another sector of interest, given Asia is home to leading edge manufacturers in certain electronic components and equipment.

Reforms in Asia remain a key focus especially post-elections in countries such as India, Thailand and Indonesia. Specific to China, we are encouraged by government action to stimulate the economy which should help ease investor concerns of a more pronounced slowdown in Asia's largest economy. It is also worth noting that the Company has relatively limited exposure to Chinese exporters which is a positive given the current lack of resolution on trade talks.

The most important risks to the Asian market remain further disappointment on the growth front, no trade deal between the US and China, and the persistent strength of the US dollar; these are all potential headwinds for the coming year. In these uncertain times we believe investors should be reassured by our long experience in the region and our long-term performance record across diverse market conditions. We focus on the fundamentals of specific stocks and our strategy is tried and tested.

We believe strongly that Asian economies continue to offer attractive potential and that the secular growth opportunities within Asian equities are still intact. Further, we expect the underlying fundamentals to pick up as and when the trade dispute noise abates. Valuations are still fair, with the index trading slightly below its 10-year averages, therefore we remain cautiously optimistic towards the region, in anticipation of the re-emergence of growth ahead.

Ayaz Ebrahim

Robert Lloyd

Richard Titherington

Investment Managers

16th December 2019

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

Political and economic risk, political change or protectionism can impact the Company's assets, such as a US-led trade war, North Korean conflict, and other political tensions both in Asia and closer to home to include tensions in the Eurozone and Brexit risks. Changes in financial or tax legislation, to include tariffs, may also 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.

•   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 33 and 34 of the 2019 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 PricewaterhouseCoopers LLP 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 21 on pages 63 to 69 of the 2019 Annual Report.

•   Share Price Relative to Net Asset Value ('NAV') per Share:

If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount.

Throughout 2019, the Company's shares traded at a discount. The Board monitors the Company's premium/discount level and, although the rating largely depends upon the relative attractiveness of the trust, the Board will seek, where deemed prudent, to address imbalances in the supply and demand of the Company's shares through share buybacks.

Transactions with the Manager and related parties

Details of the management contract are set out in the Directors' Report on page 29 of the 2019 Annual Report. The management fee payable to the Manager for the year was £1,922,000 (2018: £1,972,000) of which £nil (2018: £nil) was outstanding at the year end.

During the year £48,000 (2018: £82,000), was payable to the Manager for the administration of savings scheme products, of which £nil (2018: £11,000) was outstanding at the year end.

Safe custody fees amounting to £161,000 (2018: £164,000) were payable to JPMorgan Chase Bank N.A. during the year of which £28,000 (2018: £29,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £5,000 (2018: £nil) of which £nil (2018: £nil) was outstanding at the year end.

Handling charges on dealing transactions amounting to £32,000 (2018: £34,000) were payable to JPMorgan Chase Bank N.A. during the year of which £7,000 (2018: £4,000) was outstanding at the year end.

During the year the Company held cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMorgan. At the year end this was valued at £2,191,000 (2018: £nil). Interest amounting to £25,000 (2018: £32,000) was receivable during the year of which £nil (2018: £2,000) was outstanding at the year end.

Stock lending income amounting to £21,000 (2018: £51,000) were receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £3,000 (2018: £9,000)

At the year end, total cash of £2,213,000 (2018: £1,337,000) was held with JPMorgan Chase Bank N.A. A net amount of interest of £3,000 (2018: £1,000) was receivable by the Company during the year of which £nil (2018 £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found on page 38 and in note 6 on page 56 of the 2019 Annual Report.

STATEMENT of directors' Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared 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 they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

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

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

•   prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business, and the Directors confirm that they have done so.

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 and the Directors' Remuneration Report comply with the Companies Act 2006.

The Directors 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 Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements 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 Directors' Remuneration Report that comply with the law and those regulations.

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 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 & Financial Statements, 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
Bronwyn Curtis OBE
Chairman

16th December 2019

Statement of Comprehensive income

for the year ended 30th September 2019

	2019			2018
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	22,940	22,940	-	21,033	21,033
Net foreign currency gains/(loss)	-	196	196	-	(159)	(159)
Income from investments	8,081	-	8,081	8,708	-	8,708
Interest receivable and similar income	49	-	49	84	-	84
Gross return	8,130	23,136	31,266	8,792	20,874	29,666
Management fee	(1,922)	-	(1,922)	(1,972)	-	(1,972)
Other administrative expenses	(753)	-	(753)	(820)	-	(820)
Net return before finance costs and taxation	5,455	23,136	28,591	6,000	20,874	26,874
Finance costs	(45)	-	(45)	(138)	-	(138)
Net return before taxation	5,410	23,136	28,546	5,862	20,874	26,736
Taxation	(717)	(133)	(850)	(711)	(210)	(921)
Net return after taxation	4,693	23,003	27,696	5,151	20,664	25,815
Return per share	4.99p	24.45p	29.44p	5.48p	21.96p	27.44p

A fourth quarterly dividend of 4.0p (2018: 3.9p) per share has been declared in respect of the year ended 30th September 2019, totalling £3,763,000 (2018: £3,669,000). Further details are given in note 10 on page 58 of the 2019 Annual Report.

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 net return after taxation represents the profit for the year and also the total comprehensive income.

statement of changes in equity

for the year ended 30th September 2019

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserves1	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2017	23,762	31,646	977	25,121	271,661	-	353,167
Net return	-	-	-	-	20,664	5,151	25,815
Dividend paid in the year (note 3)	-	-	-	-	(9,525)	(5,151)	(14,676)
At 30th September 2018	23,762	31,646	977	25,121	282,800	-	364,306
Net return	-	-	-	-	23,003	4,693	27,696
Dividend paid in the year (note 3)	-	-	-	-	(9,983)	(4,693)	(14,676)
At 30th September 2019	23,762	31,646	977	25,121	295,820	-	377,326

¹ These reserves form the distributable reserves of the Company and may be used to fund distribution of profits to investors via dividend payments.

statement of financial position

at 30th September 2019

	2019	2018
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	373,976	363,154
Current assets
Debtors	922	787
Cash and cash equivalents	4,404	1,337
	5,326	2,124
Current liabilities
Creditors: amounts falling due within one year	(1,976)	(972)
Net current assets	3,350	1,152
Total assets less current liabilities	377,326	364,306
Net assets	377,326	364,306
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	295,820	282,800
Total shareholders' funds	377,326	364,306
Net asset value per share	401.1p	387.2p

statement of cash flows

for the year ended 30th September 2019

	2019	2018
	£'000	£'000
Net cash outflow from operations before dividends and interest	(2,534)	(2,778)
Dividends received	7,009	7,522
Interest received	30	33
Interest paid	(45)	(187)
Net cash inflow from operating activities	4,460	4,590
Purchases of investments	(153,146)	(244,896)
Sales of investments	166,390	251,805
Settlement of forward currency contracts	38	(179)
Net cash inflow from investing activities	13,282	6,730
Dividends paid	(14,676)	(14,676)
Net cash outflow from financing activities	(14,676)	(14,676)
Increase/(decrease) in cash and cash equivalents	3,066	(3,356)
Cash and cash equivalents at start of year	1,337	4,687
Exchange movements	1	6
Cash and cash equivalents at end of year	4,404	1,337
Increase/(decrease) in cash and cash equivalents	3,066	(3,356)
Cash and cash equivalents consist of:
Cash and short term deposits	2,213	1,337
Cash held in JPMorgan US Dollar Liquidity Fund	2,191	-
Total	4,404	1,337

Notes to the financial statements

for the year ended 30th September 2019

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. The revised SORP issued in October 2019 is applicable for accounting periods beginning on or after 1st January 2019. The Company has chosen not to early adopt the revised SORP.

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 35 of the Directors' Report within the 2019 Annual Report form part of these financial statements.

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

2.    Return per share

		2019	2018
		£'000	£'000
	Revenue return	4,693	5,151
	Capital return	23,003	20,664
	Total return	27,696	25,815
	Weighted average number of shares in issue during the year	94,081,493	94,081,493
	Revenue return per share	4.99p	5.48p
	Capital return per share	24.45p	21.96p
	Total return per share	29.44p	27.44p

3.     Dividends

(a)   Dividends paid and declared

		2019	2018
		£'000	£'000
	Dividends paid
	2018 fourth quarterly dividend of 3.9p (2017: 3.8p)	3,669	3,575
	First quarterly dividend of 3.7p (2018: 4.0p)	3,481	3,763
	Second quarterly dividend of 4.0p (2018: 3.9p)	3,763	3,669
	Third quarterly dividend of 4.0p (2018: 3.9p)	3,763	3,669
	Total dividends paid in the period	14,676	14,676
	Dividend declared
	Fourth quarterly dividend declared of 4.0p (2018: 3.9p) per share	3,763	3,669

A fourth quarterly dividend of 4.0p has been declared and was paid on 7th November 2019 for the financial year ended 30th September 2019. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 30th September 2020.

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

		2019	2018
		£'000	£'000
	First quarterly dividend of 3.7p (2018: 4.0p)	3,481	3,763
	Second quarterly dividend of 4.0p (2018: 3.9p)	3,763	3,669
	Third quarterly dividend of 4.0p (2018: 3.9p)	3,763	3,669
	Fourth quarterly dividend declared of 4.0p (2018: 3.9p)	3,763	3,669
	Total dividends for Section 1158 purposes	14,770	14,770

The aggregate of the distributable reserves after the payment of the final dividend will amount to £217,520,000 (2018: £216,768,000).

4.     Net asset value per share

		2019	2018
	Net assets (£'000)	377,326	364,306
	Number of shares in issue	94,081,493	94,081,493
	Net asset value per share	401.1p	387.2p

5.     Status of results announcement

2018 Financial Information

The figures and financial information for 2018 are extracted from the Annual Report and Accounts for the year ended 30th September 2018 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. The Annual Report and Accounts will be delivered to the Register of Companies in due course.

2019 Financial Information

The figures and financial information for 2019 are extracted from the published Annual Report and    Accounts for the year ended 30th September 2019 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.

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.

16th December 2019

For further information:

Alison Vincent

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.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

 

END

 

 

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