Final Results

RNS Number : 2762L

JPMorgan Asia Growth & Income PLC

11 January 2021

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIA GROWTH & INCOME PLC

FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2020

Legal Entity Identifier: 5493006R74BNJSJKCB17

Information disclosed in accordance with the DTR 4.1.3

The Directors of JPMorgan Asia Growth & Income plc announce the Company's results for the year ended 30th September 2020.

chairman's statement

Performance and the Company's Improved Rating

In the year to 30th September 2020 the Company's return to shareholders was +22.3% compared with a return of +12.3% in sterling terms for the Company's benchmark index, the MSCI All Countries Asia ex Japan Index. The net asset value ('NAV') return was +9.3% (all figures are on a total return basis). Such returns would have been hard to envisage at the Company's six month mark, when I reported a return to shareholders of -6.6% and a NAV return of -11.5% as the effect of the COVID-19 pandemic took hold of economies throughout the globe. This remarkable turnaround reflects the significant recovery of East Asian countries in the second half of the Company's financial year, which to date have generally weathered the COVID-19 pandemic better than most other regions in the world.

The considerable +22.3% return to shareholders is comprised of an increase in the Company's net assets, but more significantly a substantial narrowing of the Company's discount from 10.0% at the start of the period to a premium of 0.6%. Shareholders are reminded that the discount/premium to NAV at which the Company's shares trade reflects a number of factors, including the performance of, and demand for, the Company's shares. Demand for the Company's shares has increased both because of strong performance but also the introduction of the higher dividend yield paid to shareholders since the beginning of the Company's financial year ended 2017. Demand from retail investors has been particularly strong, with such investors now holding just over 40% of the Company's share capital; such investors representing circa. 26% of the register in September 2016. The Board is delighted with the Company's improved share price rating. Since the year end, the Company has continued to trade at a premium to NAV (with the exception of two days) and the Board has taken the opportunity to authorise the issue of 265,000 shares from Treasury. The Board does believe that expanding the trust has benefits to its existing shareholders in terms of increased liquidity and lower costs per share, although we do not intend aggressively to pursue growth for its own sake. Shareholders are reminded that shares will only be issued at a premium to NAV so not to dilute the price for existing shareholders.

The principal reason for the Company's NAV underperformance relative to its benchmark was attributable to the portfolio's stock selection, with a marginal shift in the bias of the portfolio towards 'value' stocks detracting from performance, as 'growth' investing continues to outperform, with the gap in returns between these investment styles now at its widest point in 25 years. Full detail of the Company's performance, together with a market review and outlook for 2021 can be found in the Investment Managers' Report below.

Dividend Policy

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 2020 dividends paid totalled 15.8 pence (2019: 15.7 pence). Despite an increase in the Company's net assets over the year of 5.1%, there was not a commensurate increase on the prior year total dividend payment owing to the reduced second quarter dividend, that was based upon the Company's net assets as at 31st March 2020, the date on which the Company's NAV fell to almost its lowest point during the COVID-19 sell-off.

Continuation Vote and Change of Company Name

At the Company's Annual General Meeting held in February 2020, shareholders voted overwhelmingly in favour of the continuation of the Company for a further three year period. The Board thanks shareholders for their ongoing support.

Given the Company's enhanced distribution policy, as detailed above, the Company was moved into the AIC's Asia Pacific Income Sector. In light of this change and to better reflect the Company's investment and dividend policies, the Board authorised a change of the Company's name to 'JPMorgan Asia Growth & Income plc'. This change took effect from 14th February 2020 and was completed in conjunction with a change to the Company's TIDM, the 'ticker' or identification code used to identify it on the London Stock Exchange, from 'JAI' to 'JAGI'. Investors are reminded that the Company's key objective remains to maximise total returns.

Best Asia Pacific Equities Investment Trust Award

The Company was recently awarded the 'Best Asia Pacific Equities Investment Trust' at Money Observer's annual Investment Trust Awards 2020. In their commentary that accompanied the Award, Money Observer highlighted how the Company has utilised the investment trust structure to pay higher dividends to shareholders and 'outperformed its benchmark in each of the last five years, including particularly strong returns in 2017 and a resilient performance in the 2018 downturn'.

Gearing

The Company has in place a multi-currency loan facility with Scotiabank. The Investment Managers utilise draw downs from this loan facility to gear the portfolio. The Company deployed some limited gearing post the COVID-19 sell off in March 2020. At the time of writing the Company was not geared.

Environmental, Social and Governance ('ESG') Issues

As detailed in the Investment Managers' report, environmental, social and governance ('ESG') considerations are integral to the Manager's investment process and ESG considerations are core to how it selects stocks in companies in the Asian region. Please refer to the separate ESG Report within the Company's Annual Report & Financial Statements for the Year Ended 30th September 2020 ('2020 Annual Report') which provides much more comprehensive information on this integration.

Corporate Governance

The AIC Code of Corporate Governance for investment companies was revised and reissued in early 2019, in conjunction with the revision of the FRC UK Corporate Governance Code in 2018. The Board has procedures in place to ensure that the Company complies fully with the AIC Code on Corporate Governance, where applicable, and the relevant disclosures in this Annual Report & Financial Statements reflect the new disclosure requirements.

Board of Directors

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. In line with the AIC Code of Corporate Governance, additional statements to support the re-appointment of each Director are included in the 2020 Annual Report.

To ensure that the Company can continue to attract quality candidates to the Board, Directors fees have been increased from 1st October 2020 having last been increased in October 2017. For full details please refer to the Directors' Remuneration Report within the 2020 Annual Report.

The Manager and Other Third Party Service Providers

The Board is pleased to report that, since the on-set of the pandemic, the Manager and the Company's other service providers have been able to adjust their business models to accommodate the working from home requirements with limited disruption. The Board has received assurances that the Company's operations, to include the management of the portfolio and the maintenance of a strong controls environment, have continued as normal with no issues being identified.

Through the remit of the Management Engagement Committee ('MEC'), the Board has reviewed the Manager's performance and its fee arrangements with the Company. Based upon its 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.

The Board continues to focus on costs incurred by the Company across all of its functions, with a view to enhancing shareholder value. 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.

In an effort to improve the efficiency of the maintenance of the Company's share register, the Board seeks shareholder approval to adopt new Articles of Association (the 'New Articles') in order to update the Company's current Articles of Association (the 'Existing Articles') so that they reflect best practice in relation to untraced shareholders and, in particular, to clarify that the consideration, if any, received by the Company upon the sale of any shares pursuant to the untraced shareholder or share forfeiture provisions, will belong to the Company. For full details please refer details in the 2020 Annual Report and in the AGM Notice of Meeting.

Annual General Meeting

The Company's forthcoming Annual General Meeting will be held at 60 Victoria Embankment, London EC4Y 0JP on Wednesday, 17th February 2021 at 12.00 noon. Despite the very encouraging news on the roll out of vaccinations in the UK, due to the COVID-19 restriction tiers in place at the time of writing and ongoing public health concerns which are not likely to abate until well into 2021, the Board has reluctantly decided to limit attendance at the Annual General Meeting in person to Directors, their proxies and representatives from JPMorgan. This will ensure a quorum is in place and that the formal business of the Company will be able to proceed. Anyone seeking to attend the meeting will be refused entry.

However, in advance of the meeting, we will be uploading to the Company's website a presentation from the Investment Managers, reviewing the past year and discussing the outlook for Asian markets. Shareholders are invited to address any questions they have for the Investment Managers or the Board by writing to the Company Secretary at the address within the 2020 Annual Report or via email to [e-mail]

As shareholders will not be able to attend the Annual General Meeting, the Board strongly encourages all shareholders to exercise their votes by completing and returning their proxy forms in accordance with the notes to the Notice of Meeting.

If there are any changes to the above Annual General Meeting arrangements, the Company will update shareholders through the Company's website and, as appropriate, through an announcement on the London Stock Exchange.

The Board would like to thank shareholders for their understanding and co-operation at this difficult time. We very much hope that you and your families are safe and well and look forward to meeting with you in 2022 when we hope normality has returned.

Outlook

The Investment Managers provide a detailed commentary on the outlook for Asian markets and the Company's portfolio over the coming 12 months and beyond below. Despite the challenging global backdrop highlighted by the investment team, the Board remains committed to the Company's investment proposition which, short term market movements aside, offers the prospect of rewarding investors over the longer term.

Bronwyn Curtis OBE

Chairman  

11th January 2021

INVESTMENT MANAGERS' REPORT

Introduction

In this report, we consider the Company's investment performance for the year to 30th September 2020. We review the complex market backdrop for the period and examine the key stock and sector stories that impacted relative performance. 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?

What a difference a year can make; Asian equities ended 2019 on a strong note, supported by positive investor sentiment, backed by incremental central bank liquidity, supportive government policies and the unwinding of trade and geopolitical tensions. Notable developments included the emergence of a phase one trade deal between the United States and China, as well as the United Kingdom moving away from a disorderly exit from the European Union.

The constructive macro backdrop was rudely disrupted in the first quarter of 2020 by the outbreak of the coronavirus pandemic ('COVID-19'), with Asian equities dropping sharply along with other global markets. However, equally remarkable was the sharp rebound from late March, fuelled by an unprecedented level of monetary and fiscal stimulus offered by central banks and governments globally. Unlike in the previous market cycle, the driver for the market rebound was not cyclical stocks, but structural growth sectors such as Information Technology, e-commerce and Healthcare: businesses which proved less vulnerable to the pandemic, or where demand actually accelerated as a result of it.

Asian equities continued to edge up in the run-up to the end of the Company's fiscal year, with investor sentiment anchored by the expectation of continued policy support as well as the prospect of the global economy recovering; these expectations rose as countries gradually eased social distancing measures, shrugging off resurgent US-China tensions (especially over technology), US election uncertainties, and a 'second wave' of COVID-19 cases in many global territories. These concerns drove the valuation spread between companies with the potential to outperform over time ('growth stocks') and those appearing to be trading below what they are really worth ('value stocks') to a new high as investor appetite for areas such as healthcare, e-commerce and mobile gaming continued to grow.

How has the Company performed over the year under review?

Against this highly volatile macro and market backdrop, the Company's return on net assets for the year to 30th September 2020 was +9.3%, compared with a +12.3% return for the benchmark index, the MSCI AC Asia-ex Japan, in sterling terms. The value of the Company's shares rose by 22.3% over the year, largely because of the discount narrowing from 10% at the start of the period to a premium of 0.6% at the year-end.

What have been the major contributors and detractors to performance?

China was one of the best performing markets, along with Taiwan, thanks to effective government interventions on COVID-19 and therefore a faster recovery in economic activity.

Our stock selection was mixed; Wuxi Biologics, a leading CRO (Contract Research Organisation), was one of the leading contributors as the pandemic significantly accelerated the Research & Development (R&D) outsourcing trend to China. Tencent was another clear winner from the pandemic. Shenzhou International, a leading textile manufacturer for clients such as Nike and Uniqlo, continued its strong run and benefitted from market consolidation. However, underweight positions in several e-commerce players such as Meituan Dianping and JD.com (a stock not held) detracted. Postal Savings Bank underperformed along with other state-owned large Chinese banks on concerns that policy makers were encouraging banks to conserve capital and support the broader economy. China Overseas Land Investment (COLI) fell, along with the Chinese property sector as a whole, as the government has been increasingly reticent to stimulate growth via the property sector and its current controlling measures are likely to remain in place.

In Taiwan, returns were boosted by the Company's holdings in Technology stocks. TSMC, the world's largest semiconductor manufacturer (providing chips for everything from mobile phones to electric vehicles), was among the top contributors. TSMC continued to deliver strong results whilst forecasting bullish revenues going forward, which prompted significant earnings upgrades. The company also benefitted from the announcement by US-based Intel that it was having problems with its internal manufacturing processes, leading to speculation that TSMC might see demand increase further.

Other notable contributors include SEA Ltd., South-East Asia's leading e-commerce and gaming business. COVID-19 has driven online sales upwards and SEA gained market share from competitors that are short of capital to invest in their digital propositions. The company also reported strong growth in its Fintech platform. While competition remains fierce in e-commerce, we see multiple options in fintech businesses and a long runway for growth across this populous region. 

In India, Financials continued to struggle as the macro outlook remained highly challenging. Our exposure to IndusInd Bank and HDFC Bank were among the worst detractors. Additionally, not owning Reliance Industries detracted as the stock continued to re-rate on the back of investments into its new ventures from leading global internet firms, such as Amazon buying a stake in its retail business.

In Hong Kong, months of anti-government protests were followed by the outbreak of the pandemic which hit the tourism industry hard. Diversified conglomerate Swire Pacific fell as several of its underlying businesses, which include Cathay Pacific Group, were among the worst impacted by the pandemic.

Our holdings in the Energy sector such as Thai Oil and S-Oil (Korea) detracted on oil price weakness; at its current level, the oil price is uneconomic for many oil producers.

How has the COVID-19 pandemic influenced the country, sector and stock holdings in the Company's portfolio?

The pandemic accelerated many of the structural trends we were already observing, such as digital transformation, the shift to the cloud and the adoption of online alternatives; all of which benefitted the Company's holdings in the video gaming, e-commerce, and hardware technology sectors. The crisis also forced consolidation across many sectors where firms with leveraged balance sheets were struggling, while favouring industry leaders with strong balance sheets and competitive positions. Consolidation in sectors such as restaurants, textiles and Chinese real-estate benefitted the best and largest players. The Company's exposure to Information Technology and Consumer Discretionary increased over the year, with the latter being our largest overweight sector; having previously been the allocation to Financials.

On the flipside, the pandemic hit the more macro-sensitive cyclical sectors, such as banking and energy, the hardest. Unlike 2008's global financial crisis, the financial sector is not at the epicentre of the current downturn, however banks have had to conserve capital, extend credit and cut shareholder benefits. This was most notable among large state-owned banks in China. Energy has been hit because of the sharp decline in travel and our holdings across the region were negatively impacted. We have reduced significantly the Company's exposure to Financials over the course of the year, however remain overweight compared to benchmark; this positioning has enabled us to consolidate our investments in high quality franchises with attractive valuations and positive earnings outlooks.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 30TH SEPTEMBER 2020

	%	%
Contributions to total returns
Benchmark return		12.3
Stock selection	-2.7
Currency effect	-0.1
Gearing/(net cash)	0.5
Investment Manager contribution		-2.3
Portfolio return		10.0
Management fee/Other expenses	-0.7
Return on net assetsAPM		9.3
Effect of movement in discount over the year		13.0
Return to shareholdersAPM		22.3

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.

^APM   Alterative Performance Measure ('APM').

A glossary of terms and APMs is provided within the 2020 Annual Report.

Are there any common themes in portfolio holdings?

Asia boasts some of the global leaders in Technology Hardware. The aforementioned TSMC is now an undisputed global leader in cutting edge semiconductor production technology, while Samsung Electronics and SK Hynix in Korea are the two dominant players in the memory storage market which has undergone significant industry consolidation over the past decade.

Another area of increasing focus for us is on Environmental. Social & Governance (ESG) leaders in sub-industries such as Textiles, where ESG considerations are becoming ever more critical and could bring significant financial consequences. Here, we have identified Shenzhou International (see below) and Crystal International as clear sub-industry leaders.

Finally, shifting consumer preferences for premium brands remain a structural growth driver in Asia and we have taken advantage of this by investing in high quality consumer franchises such as Yum China which operates KFC and Pizza Hut, and Budweiser which is growing fast due to its dominance in China's premium beer market as well as in South Korea. Yum China held its own during lockdown and has benefitted hugely from its engaged digital audience and a material increase in online orders and delivery during 2020.

From an ESG perspective are there examples where you have engaged with an investee company and instigated change or chosen to disinvest because a company refused to acknowledge your concerns?

We held a meeting with Shenzhou International to review their ESG practices. In our view, Shenzhou continues to maintain high standards in water treatment and recycling, air and chemical emission management, labour management and worker safety. However, we believe it can improve its disclosure on carbon emissions and long-term targets as well as introducing employee incentive schemes. We provided feedback and suggestions such as introducing 'natural carbon offset' as a path to meet the zero net emission goal until an improved infrastructure is made available in places such as Vietnam. We also suggested introducing incentive schemes to motivate employees, especially middle management, and to attract talented individuals. The company has acknowledged our suggestions, and we will continue to engage and monitor further developments.

What common misconceptions have you come across recently when speaking to investors?

Many investors believe that China is a risky place to invest, however we believe it is quite the opposite; a belief that is reflected in the fact that just under 55% of the portfolio is now invested in China and Hong Kong. Firstly, the economy is still growing at a healthy pace compared to its global peers, as measured by Gross Domestic Product (GDP), and will be one of the few economies to post positive growth in calendar year 2020 (China +1.9%, US -4.3%, Japan -5.3%, Eurozone -8.3%). China is likely to continue to deliver superior nominal economic growth relative to other markets over the next decade, and as a result, we believe China's share of global GDP will continue to rise accordingly - as will China's share of global equity market indices. The investment universe in China continues to expand, increasingly driven by innovative businesses in areas such as Technology, Healthcare and e-commerce. Last but not least, China is also home to some of the top technology companies in the world, including Alibaba and Tencent.

How concerned should investors be about geopolitical pressures in the region, in particular US/China relations?

Although the trade wrangles between the US and China remain a source of uncertainty, the Chinese government continues to open up selected areas of its economy to foreign investors. Areas such as insurance, banking, asset management and automotive production are gradually being liberalised and becoming more accessible, with strong interest from foreign investors.

Increasing geopolitical pressures have also meant that Chinese companies in particular are increasingly raising capital in local markets instead of the US, with many existing US-listed firms issuing new capital in Hong Kong and China.

From a bottom-up stock selection perspective, there are many businesses which are driven by domestic demand, irrespective of geopolitical tensions. Rising incomes in such an enormous country that is undergoing economic transformation is leading the shift to a consumer-led economy resulting in many attractive stock opportunities.

What should investors expect for the next 12 months?

After such a landmark year dominated by human and economic shock and its aftermath, predicting the outlook for the coming year is rather challenging. The continued spread of COVID-19 in some parts of the world whilst other territories see a gradual normalisation in household mobility and spending epitomises our conundrum in forecasting what lies ahead. However, it is clear that investors are already considering the potential for recovery. At the time of writing, valuations have risen to the higher end of their 10-year historical range, while earnings expectations continue their own recovery, with positive revisions apparent in more sectors and countries.

As the world attempts to adjust to some sort of 'normal order', we believe that the pre-existing structural trends in Asian equities will reassert themselves. The fundamental backdrop remains favourable, as the secular growth trends that we have witnessed in this region have either remained intact this year or even accelerated as a direct result of COVID-19. Examples include the growth in e-commerce and online gaming, increasing adoption of industrial automation, and surging demand for semiconductors. Furthermore, governments and central banks in Asia are committed to maintaining their accommodative policy stances which should cushion their respective economies in what remains of this economic downturn.

Whilst we remain broadly optimistic on the long-term outlook for Asian equities, the current environment renders it crucial that we exercise caution. The road to recovery from the pandemic remains uncertain whilst the gradual withdrawal of stimulus programmes (such as unemployment benefits and fiscal aid) may create a roadblock along the way. It is also important to highlight that valuations are above-trend and that it may become more challenging to beat market expectations given that the low hanging fruit on consensus upgrades have already been factored into prices. As a team, we adopt a patient approach and having a valuation framework is vital in that respect, allowing us to look beyond short-term trends in order to identify attractive long-term growth opportunities.

The quality of growth from companies trading at rich multiples will become more important as those corporates that fail to meet market expectations may see their heady valuations come under pressure. We mentioned earlier that the spread between growth and value stocks is at an all-time high. The key, in our view, is to identify higher quality cyclical candidates, by focusing on the fundamental qualities of specific stocks.

As a team, we continue unhindered in our search for Asia's very best growth ideas. Despite the challenging global situation, we remain confident that our long experience and local presence provides us with optimum access to Asia's fast-growing markets. Against the macro backdrop we have highlighted in our report, we remain broadly optimistic on the outlook for Asian equities and confident that the Company's investment strategy will continue to reward patient investors over the long-term.

Ayaz Ebrahim

Robert Lloyd

Richard Titherington

Investment Managers  

11th January 2021

PRINCIPAL AND EMERGING RISKS

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. With the assistance of JPMF, the Audit Committee has drawn up a risk matrix, which identifies the key risks to the Company. The risks identified and the broad categories in which they fall, and the ways in which they are managed or mitigated are summarised below. The AIC Code of Corporate Governance requires the Audit Committee, for the first time this year, to put in place procedures to identify emerging risks. The key emerging risks identified are also summarised below. The Board believes the coronavirus (COVID-19) pandemic and Brexit to be existing risks, rather than emerging risks. Their impact is considered within the relevant sections below.

Principal Risk	Description	Mitigating Activities
Investment Management and Performance
Underperformance	Poor implementation of the investment strategy, for example as to thematic exposure, sector allocation, stock selection, undue concentration of holdings, factor risk exposure or the degree of total portfolio risk, may lead to underperformance against the Company's benchmark index and peer companies.	The Board manages these risks by diversification of investments and through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, at least one of whom usually attends all Board meetings, and reviews data which show measures of the Company's risk profile. The Investment Managers employ the Company's gearing tactically, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.
Widening Discount	A disproportionate widening of the discount relative to the Company's peers could result in loss of value for shareholders.	The Board monitors the level of premium/discount at which the shares trade and the Company has authority to buy back its existing shares to enhance the NAV per share for remaining shareholders when deemed appropriate.
Market and Economic Risk	Market risk arises from uncertainty about the future prices of the Company's investments, which might result from economic, fiscal, climate, regulatory, etc change. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board considers thematic and factor risks, 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 believes that shareholders expect that the Company will and should be fairly fully invested in Asian equities at all times. The Board therefore would normally only seek to mitigate market risk through guidelines on gearing given to the Manager. The Board receives regular reports from the Manager's strategists and Investment Managers regarding market outlook and gives the Investment Mangers discretion regarding acceptable levels of gearing and/or cash, currently the Company's gearing policy is to operate within a range of 10% net cash to 20% geared. In particular also the Board receives ESG reports from the Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making.
Change of Corporate Control of the Manager	Change of corporate control of Manager or similar event that changes focus of JPMAM.	The Board holds regular meetings with senior representatives of the Manager in order to obtain assurance that the Manager continues to demonstrate a high degree of commitment to its asset management and investment trust business.
Loss of Investment Team or Portfolio Manager	A sudden departure of a Portfolio Manager or several members of the investment management team could result in a short term deterioration in investment performance.	The Board seeks assurance that the Manager takes steps to reduce the risk arising from such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel. The Board engages with the senior management of the Manager in order to mitigate this risk.
Operational Risks
Outsourcing	Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary or Custodian's records may prevent accurate reporting and monitoring of the Company's financial position or a misappropriation of assets.	Details of how the Board monitors the services provided by JPM and its associates and the key elements designed to provide effective risk management and internal control are included within the Risk Management and Internal Controls section of the Corporate Governance Statement within the 2020 Annual Report. The Manager has a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption (including and disruption resulting from the COVID-19 pathogen. Since the introduction of the COVID-19 restrictions, Directors have received assurances that the Manager and its key third party service providers have all been able to maintain service levels.
Cyber Crime	The threat of cyber attack, in all guises, is regarded as at least as important as more traditional physical threats to business continuity and security.	The Company benefits directly and/or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around physical security of JPMorgan's data centres, security of its networks and security of its trading applications, are tested by independent auditors and reported every six months against the AAF Standard.
Corporate Governance
Loss of Investment Trust Status	In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Were the Company to breach Section 1158, it may lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax.	The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month.
Corporate Governance
Statutory and Regulatory Compliance	The risk of not meeting and being in compliance with legal and regulatory responsibilities.	The Board relies on the services of its Company Secretary, the Manager and its professional advisers to ensure compliance with the Companies Act 2006, the UKLA Listing Rules, DTRs, MAR and AIFMD. Details of the Company's compliance with Corporate Governance best practice, are set out in the Corporate Governance Statement 2020 Annual Report.
Environmental
Climate Change	Climate change, which barely registered with investors a decade ago, has today become one of the most critical issues confronting asset managers and their investors. Investors can no longer ignore the impact that the world's changing climate will have on their portfolios, with the impact of climate change on returns now inevitable.	Financial returns for long-term diversified investors should not be jeopardised given the investment opportunities created by the world's transition to a low-carbon economy. The Board is also considering the threat posed by the direct impact on climate change on the operations of the Manager and other major service providers. As extreme weather events become more common, the resiliency, business continuity planning and the location strategies of the Company's services providers will come under greater scrutiny. In particular also the Board receives ESG reports from the Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making.
Economic and Geopolitical
Global Geopolitical Risk	There is significant exposure to the economic cycles and political movements of the markets in which the underlying investments are listed. Political and economic risk, political change or protectionism may have an adverse effect on underlying valuations, 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.	The Board regularly discusses the global geo-political issues and general economic conditions and developments with the Investment Managers. Political tensions between and changes within the US, China, Europe and UK continue the uncertainty and volatility in financial markets. The medium and longer term impacts of COVID-19 on this risk, for example the unprecedented levels of fiscal stimulus and travel restrictions will continue to be assessed in light of how they may affect the Company's portfolio and the economic and geopolitical environment in which the Company operates within overall. The potential consequences of Brexit continue to be monitored through existing control systems. Since the portfolio has no investments in the UK or Europe the Board does not believe that there is likely to be any significant or direct impact on the operation of the Company or the structure of the portfolio.
Emerging Risk	Description	Mitigating Activities
Global
Social Dislocation & Conflict	Social dislocation/civil unrest may threaten global economic growth and, consequently, companies in the portfolio.	The Manager's market strategists are available for the Board and can discuss market trends. External consultants and experts can be accessed by the Board. The Board can, with shareholder approval, look to amend the investment policy and objectives of the Company to gain exposure to or mitigate the risks arising from geopolitical instability although this is limited if it is truly global.
Inappropriate Monetary/Fiscal Policies	Inappropriate Government/Central banks fiscal or monetary responses to the Covid-19 pandemic result in excessively loose economic conditions resulting in the medium term risk of significant levels of inflation or, alternatively, are ineffective in stimulating a recovery resulting in deflation and depression.	The Manager's market strategists are available for the Board and can discuss market trends. External consultants and experts can be accessed by the Board. The Board can, with shareholder approval look to amend the investment policy and objectives of the Company, if required, to enable investment in companies or assets which offer more appealing risk/return characteristics in prevailing economic conditions.
Rising Competition between China and Western Economies	China is emerging as a challenger to the western hegemony of recent decades. This brings with it increased competition in political and military affairs alongside the development of a major trading bloc operating to different cultural, legal political and technological norms and standards.  These areas of conflict may give rise to geopolitical crises that threaten the markets in which investee companies operate and fragment previously global markets into more isolated trading blocs which may limit the opportunity of investee companies to grow and thrive.	The Board has access to a range of expert resources and strategists in the UK and in the Asian region to provide long term insight and guidance on geopolitical developments. The Managers investment process incorporates non-financial measures and risks in the assessment of investee companies to allow the portfolio to adapt to changing competitive and political landscapes.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contract are set out in the Directors' Report on page xx. The management fee payable to the Manager for the year was £2,084,000 (2019: £1,922,000) of which £nil (2019: £nil) was outstanding at the year end.

During the year £nil (2019: £48,000), was payable to the Manager for the administration of savings scheme products, of which £nil (2019: £nil) was outstanding at the year end.

Safe custody fees amounting to £149,000 (2019: £161,000) were payable to JPMorgan Chase Bank N.A. during the year of which £25,000 (2019: £28,000) 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 £1,000 (2019: £5,000) of which £nil (2019: £nil) was outstanding at the year end.

Handling charges on dealing transactions amounting to £22,000 (2019: £32,000) were payable to JPMorgan Chase Bank N.A. during the year of which £5,000 (2019: £7,000) 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 £1,160,000 (2019: 2,191,000). Interest amounting to £6,000 (2019: £25,000) was receivable during the year of which £nil (2019: £nil) was outstanding at the year end.

Stock lending income amounting to £17,000 (2019: £21,000) were receivable by the Company during the year.

JPMAM commissions in respect of such transactions amounted to £2,000 (2019: £3,000).

At the year end, total cash of £2,806,000 (2019: £2,213,000) was held with JPMorgan Chase Bank N.A. A net amount of interest of £3,000 (2019: £3,000) was receivable by the Company during the year of which £nil (2019 £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found 2020 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

11th January 2021

statement of comprehensive income

for the year ended 30th September 2020

	2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value
through profit or loss	-	29,604	29,604	-	22,940	22,940
Net foreign currency gains	-	116	116	-	196	196
Income from investments	7,906	-	7,906	8,081	-	8,081
Interest receivable and similar income	26	-	26	49	-	49
Gross return	7,932	29,720	37,652	8,130	23,136	31,266
Management fee	(2,084)	-	(2,084)	(1,922)	-	(1,922)
Other administrative expenses	(666)	-	(666)	(753)	-	(753)
Net return before finance costs and
taxation	5,182	29,720	34,902	5,455	23,136	28,591
Finance costs	(111)	-	(111)	(45)	-	(45)
Net return before taxation	5,071	29,720	34,791	5,410	23,136	28,546
Taxation	(710)	(90)	(800)	(717)	(133)	(850)
Net return after taxation	4,361	29,630	33,991	4,693	23,003	27,696
Return per share (note 2)	4.64p	31.49p	36.13p	4.99p	24.45p	29.44p

A fourth quarterly dividend of 4.2p (2018: 4.9p) per share has been declared in respect of the year ended 30th September 2020, totalling £3,951,000 (2019: £3,763,000). Further details are given in note 10 on page 58 of the 2020 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 2020

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Capital	Revenue
	capital	premium	reserve	reserve	reserves 1	reserve 1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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
Net return	-	-	-	-	29,630	4,361	33,991
Dividend paid in the year (note 3)	-	-	-	-	(10,316)	(4,361)	(14,677)
At 30th September 2020	23,762	31,646	977	25,121	315,134	-	396,640

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

as at 30th September 2020

	2020	2019
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	394,141	373,976
Current assets
Derivative financial assets	5	-
Debtors	1,032	922
Cash and cash equivalents	3,966	4,404
	5,003	5,326
Current liabilities
Creditors: amounts falling due within one year	(2,504)	(1,976)
Net current assets	2,499	3,350
Total assets less current liabilities	396,640	377,326
Net assets	396,640	377,326
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	315,134	295,820
Total shareholders' funds	396,640	377,326
Net asset value per share	421.6p	401.1p

STATEMENT OF CASH FLOWS

for the year ended 30th September 2020

	2020	2019
	£'000	£'000
Net cash outflow from operations before dividends and interest1	(2,816)	(2,544)
Dividends received	6,878	7,009
Interest received	9	30
Interest paid	(110)	(45)
Net cash inflow from operating activities	3,961	4,450
Purchases of investments	(161,482)	(153,146)
Sales of investments	171,566	166,390
Settlement of forward currency contracts	72	38
Net cash inflow from investing activities	10,156	13,282
Dividends paid	(14,677)	(14,676)
Repayment of bank loans	(8,848)	-
Drawdown of bank loans	9,114	-
Net cash outflow from financing activities	(14,411)	(14,676)
(Decrease)/increase in cash and cash equivalents	(294)	3,056
Cash and cash equivalents at start of year	4,404	1,337
Unrealised (loss)/gain on foreign currency cash and cash equivalents1	(144)	11
Cash and cash equivalents at end of year	3,966	4,404
(Decrease)/increase in cash and cash equivalents	(294)	3,056
Cash and cash equivalents consist of:
Cash and short term deposits	2,806	2,213
Cash held in JPMorgan US Dollar Liquidity Fund	1,160	2,191
Total	3,966	4,404

¹ The unrealised exchange gain on the JPMorgan US Dollar Liquidity Fund in the comparative column has been moved from the initial 'Net cash outflow from operations' total to be disclosed separately as the 'unrealised (loss)/gain on foreign currency cash and cash equivalents'.

Notes to the financial statements

for the year ended 30th September 2020

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 October 2019.

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

The financial statements have been prepared on a going concern basis. In forming this opinion, the directors have considered any potential impact of the COVID-19 pandemic on the going concern and viability of the Company. They have considered the potential impact of COVID-19 and the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience particularly in light of COVID-19. The Directors have reviewed the compliance with debt covenants in assessing the going concern and viability of the Company. The Directors have reviewed income and expense projections and the liquidity of the investment portfolio in making their assessment.  The disclosures on going concern within the 2020 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

	2020	2019
	£'000	£'000
Revenue return	4,361	4,693
Capital return	29,630	23,003
Total return	33,391	27,696
Weighted average number of shares in issue during the year	94,081,493	94,081,493
Revenue return per share	4.64p	4.99p
Capital return per share	31.49p	24.45p
Total return per share	36.13p	29.44p

3.  Dividends

(a) Dividends paid and declared

	2020	2019
	£'000	£'000
Dividends paid
2019 fourth quarterly dividend of 4.0p (2018: 3.9p)	3,763	3,669
First quarterly dividend of 4.1p (2019: 3.7p)	3,858	3,481
Second quarterly dividend of 3.5p (2019: 4.0p)	3,293	3,763
Third quarterly dividend of 4.0p (2019: 4.0p)	3,763	3,763
Total dividends paid in the period	14,677	14,676
Dividend declared
Fourth quarterly dividend declared of 4.2p (2019: 4.0p) per share	3,951	3,763

A fourth quarterly dividend of 4.2p has been declared and was paid on 12th November 2020 for the financial year ended 30th September 2020. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 30th September 2021.

(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 aggregate of the distributable reserves is £225,349,000 (2019: £221,283,000).

	2020	2019
	£'000	£'000
First quarterly dividend of 4.1p (2019: 3.7p)	3,858	3,481
Second quarterly dividend of 3.5p (2019: 4.0p)	3,293	3,763
Third quarterly dividend of 4.0p (2019: 4.0p)	3,763	3,763
Fourth quarterly dividend declared of 4.2p (2019: 4.0p)	3,951	3,763
Total dividends for Section 1158 purposes	14,865	14,770

The aggregate of the distributable reserves after the payment of the final dividend will amount to £221,398,000 (2019: £217,520,000).

4.  Net asset value per share

	2020	2019
Net assets (£'000)	396,640	377,326
Number of shares in issue	94,081,493	94,081,493
Net asset value per share	421.6p	401.1p

5. Status of results announcement

2019 Financial Information

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

2020 Financial Information

The figures and financial information for 2020 are extracted from the published Annual Report and   Accounts for the year ended 30th September 2020 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.

11th January 2021

For further information:

Alison Vincent

JPMorgan Funds Limited 

020 7742 4000

ENDS

A copy of the 2020 Annual Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism

The 2020 Annual Report will shortly be available on the Company's website at www.jpmasiagrowthandincome.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

 

 

FR BBMTTMTABBPB