Final Results

RNS Number : 8749Y

JPMorgan Chinese Inv Tst PLC

04 December 2014

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CHINESE INVESTMENT TRUST PLC

ANNOUNCEMENT OF FINAL RESULTS

The Directors of JPMorgan Chinese Investment Trust plc announce the Company's results for the year ended 30th September 2014.

Chairman's Statement

Performance

In the year to 30th September 2014, the Company achieved a return to Ordinary shareholders, which includes the final dividend of 1.6 pence paid in February 2014, of 12.0%. The Company's total return on net assets, which comprises the change in net asset value ('NAV') with the dividends received reinvested, amounted to 7.8%, outperforming the return of the Company's benchmark, the MSCI Golden Dragon Index, of 6.8% over the same period.

China Outlook

The Company has continued to outperform its benchmark despite the 'new normal in China', which is how President Xi Jinping interpreted the slow-down in China's growth last May as the economy moves from investment to consumption and productivity for its main engines for growth. Maintaining a balance between continued economic growth and the need to rein in excessive local government debts and shadow banking activities while at the same time having to mediate between conflicting regional and sectoral interests will remain a challenge for policy makers. Nonetheless, that China is entering a new phase of its modernisation and development is becoming increasingly clear.

Widespread restructuring at regional government levels with sustained focus on anti-corruption measures, new policies to address issues related to unequal income distribution, plans to restructure state‑owned enterprises ('SOE's) for improved operating efficiency, and environmental protection are current priorities. There is recognition that the excessive building development so prevalent in cities across China has to slow. Instead, attention will be diverted to life-quality matters like welfare, health and education as well as supporting services such as insurance. There is opportunity for venture capital to develop new businesses ranging from telephony to robotic engineering to life sciences, from entertainment to alternative energy, and from waste management to warehousing and logistics.

Nowhere are the signs of the generational change sweeping China clearer than in the e-commerce sector. Here the Company's portfolio includes Tencent and Alibaba, two leading e-commerce operators increasingly known world-wide. For investment managers, the opportunity to invest in innovative growth companies despite the macro economic slow-down will be enormous. Good corporate governance will remain a challenge, but as more Chinese companies aim to become world-class, this can be expected to become less of a problem over time. The recently established Shanghai-Hong Kong Stock Connect should give the Shanghai 'A' shares market a liquidity boost while encouraging more eligible local companies to seek a listing with international investors in mind. The Company already invests in China 'A' shares through the JP Morgan managed 'A' share funds. Further opportunity to invest in this potentially high growth market are being kept under close review.

Taiwan Outlook

Approximately 25% of the Company's portfolio is invested in Taiwanese companies quoted on the Taipei stock exchange. The investment managers have frequently been able to identify excellent growth stocks in this market based on their investment management strength on the ground. Taiwan has consistently produced companies at the forefront of technology with strong links both to Silicon Valley and the large market in mainland China. Despite the political turmoil earlier in the year which was triggered by an initiative to deepen economic cooperation with the mainland, cross‑strait commercial relations in general remain buoyant. Tourist arrival from the mainland is already a major source of income for local companies, and good investment opportunities continue to be available. As an off‑shore centre for Renminbi, Taiwan is second only to Hong Kong in volume in Asia.

Hong Kong Outlook

The Shanghai-Hong Kong Stock Connect is expected to increase liquidity on the Hong Kong Stock Exchange. Despite the international publicity surrounding the 'Occupy Central' movement, it does not appear to have had any profound effect on either the Hong Kong property market or share prices. However, the longer term consequences could be more worrisome if these protests are not peacefully resolved within a short time.

Revenue and Dividends

The revenue for the year, after taxation, was £1,281,000 (2013: £1,241,000). The revenue return per share, calculated on the average number of shares in issue, was 1.70 pence (2013: 1.63 pence).

The Board is recommending a dividend of 1.60 pence (2013: 1.60 pence) per share in respect of the financial year ended 30th September 2014 given the Company's return on its Revenue Account. Subject to shareholders' approval at the Annual General Meeting, this dividend will be paid on 3rd February 2015 to shareholders on the register at the close of business on 12th December 2014.

As previously stated, shareholders should note that the Company's objective remains that of long term capital growth and dividends will vary from year to year accordingly.

Gearing

In January 2014 the Company renewed its £20 million facility with Scotiabank for a further 364 day period on the same terms and pricing. The facility matures on 22nd January 2015 at which point the Board will consider another gearing facility.

During the year the Company's gearing ranged from 6% to 11% geared and, at the time of writing, was 6%. The current facility allows the Investment Managers the flexibility to manage the gearing tactically within a range set by the Board of 10% net cash to 15% geared.

Share Issues and Repurchases

The Directors have authority to issue new Ordinary shares for cash and to repurchase shares in the market for cancellation or to hold in Treasury. The Company will re‑issue shares held in Treasury only at a premium to NAV.

During the year, the Company did not repurchase or issue any new Ordinary shares. However, the Board believes that its policy of share issuance and repurchases has helped to reduce discount volatility in the past and therefore recommends that the authorities be kept in place. Accordingly, it is seeking approval from shareholders to renew the share issue and repurchase authorities at the forthcoming Annual General Meeting.

Review of services provided by the Manager

During the year the Board carried out a thorough review of the investment management, secretarial and marketing services provided to the Company by the Manager. Following this review, the Board has concluded that the continued appointment of the Manager on the terms agreed is in the interests of the shareholders as a whole.

The fees payable to the Manager comprise a fixed basic annual management fee of 1% of total assets per annum and a performance related fee of 15% of any outperformance of the NAV total return over the benchmark. The amount of the latter fee actually payable to the Manager is capped at 1% of the net asset value in any one year, with any excess being carried forward and either paid out (subject to the 1% cap) or absorbed by any underperformance in subsequent years.

The Company outperformed its benchmark in the financial year ended 30th September 2014 which gave rise to a positive performance fee of £254,000 earned by the Manager.

The Company's Ongoing Charges for the financial year, as a percentage of the average of the daily net assets during the year, were 1.40% before accounting for the performance fee payable and 1.78% after doing so.

Board of Directors

In July 2014, the Board through its Nomination and Remuneration Committee carried out the annual evaluation of the Directors, the Chairman, the Board itself and its committees. The evaluation was comprehensive and covered a range of topics including size and composition of the Board, Board information and processes, shareholder engagement and training and accountability, as well as the effectiveness of the Audit Committee, the Nomination and Remuneration Committee, the Chairman and the Directors. The report confirmed the efficacy of the Board.

As part of the evaluation process, the Board has considered succession planning and has agreed a planned phased exit for the longest-serving Directors, ahead of the Company's next continuation vote in 2018. Irving Koo will retire from the Board at the conclusion of the 2015 AGM. He joined the Board in 2005. On behalf of the Board, I would like to thank Irving for his valuable contribution to the Company over the years. Ahead of Irving's retirement, the Board appointed Oscar Wong as a non-executive Director on 1st August 2014. Also based in Hong Kong, Oscar brings his senior level corporate experience and his in-depth knowledge of China to the Board. In addition, we will commence the search for a new Director and will seek to make an appointment later in 2015.

Alternative Investment Fund Managers Directive ('AIFMD' or the 'Directive')

With effect from 1st July 2014, in accordance with the AIFMD, the Company appointed JPMorgan Funds Limited ('JPMF') as its Alternative Investment Fund Manager under a new investment management agreement. Portfolio management is delegated by JPMF to JPMorgan Asset Management (UK) Limited, thus retaining previous portfolio management arrangements. The management fee and notice period arrangements of the contract remain unchanged. In addition, as required under the AIFMD, the Company appointed BNY Mellon Trust & Depositary (UK) Limited to act as the Company's Depositary. JPMorgan Chase Bank, NA remains the Company's Custodian, but as a delegate of the Depositary.

JPMorgan Funds Limited was also appointed as Company Secretary to the Company on 1st July 2014.

Annual General Meeting

This year's Annual General Meeting will be held at 60 Victoria Embankment, London EC4Y 0JP on Monday, 26th January 2015 at 11.30 a.m. In addition to the formal proceedings, there will be a presentation by a representative of the investment management team, who will also be available to respond to questions on the Company's portfolio and investment strategy. I look forward to seeing as many of you as possible at the meeting. If you have any detailed questions, you may wish to raise these in advance with the Company Secretary or via the Company's website by following the 'Ask the Chairman' link at www.jpmchinese.co.uk. Shareholders who are unable to attend the Annual General Meeting in person are encouraged to use their proxy votes. Shareholders who hold their shares through CREST are able to lodge their proxy votes electronically.

William Knight

Chairman

4th December 2014

Investment Managers' Report

Over the 12 months ended 30th September 2014, the Company achieved a return of +7.8% (in GBP terms) against a benchmark return of +6.8%. Over the year, stock selection in China and in Taiwan contributed positively while stock selection in Hong Kong was a marginal detractor. However, in terms of country allocation, our overweight in China (A-shares and others) detracted from performance given that China lagged the other markets in the region. Our average 8% gearing level helped performance over the year given the market rise.

Over the reporting period, the Company's portfolio was helped by stock selection in China. Our holdings in internet stocks were amongst the top contributors to performance as the stocks were boosted by optimism over their scalable business models and strong earnings growth. This included names such as Tencent, JD.Com and YY Inc which all performed strongly over the year. In addition, our overweight in property stocks such as Sunac China helped performance given expectations over monetary loosening later in the year. Our basket of healthcare names such as Luye Pharma and iKang Healthcare also helped performance as the stocks were deemed beneficiaries of structural reform in China. Our technology holdings in Taiwan such as Largan and Advanced Semiconductor were also contributors to performance as they rose over the period under review due to strong order books as Apple placed component orders ahead of the i-Phone 6 launch.

On the negative side, we were hurt by our allocation to the JPMorgan China New Generation Fund, which invests in A-shares. We felt that valuations of the market were attractive and had a position in the Fund in order to gain exposure to mid-cap consumer names in the domestic A-share market. Unfortunately, the market fell throughout the period under review and only started moving upwards towards the end of the review period. We were also hurt by an underweight in Hong Kong Exchanges and Clearing. We felt the stock was richly priced given its growth prospects but the stock received a boost around the middle of the year due to an announcement of the Shanghai-Hong Kong Stock Connect programme, which would in theory allow 2-way trading between the two markets. Our overweight in China Cinda Asset Management was another detractor as the stock fell due to concerns over the property value of its collateral.

China Review

Chinese equities started off the period under review (fourth quarter of the Calendar Year 2013) on a strong note. Overseas investors were positively surprised by the bold reform blueprint outlined in the Chinese Communist Party's Third Plenum. Despite concern about the potential negative impact from rising interbank interest rates as banks deleverage, reform beneficiaries, such as insurance and environmental protection, led the rally, while potential targets of reform, such as oil majors and telcoms, lagged. The reform proposals exceeded market expectations in both depth and scope, including key areas such as breaking up the state-owned enterprise ('SOE') monopoly and rural land reform, potentially changing its growth model from fixed asset investment ('FAI')-led to productivity-led.

However, Chinese equities fell in the first quarter of 2014, with the relevant index down by 5.8%. The gradual decline in interbank rates from their fourth-quarter high did not alleviate market concerns over slowing growth, cases of trust/bond defaults and lack of evidence for solid structural reforms. On the macro front, growth was negatively affected by a crackdown on the country's shadow banking system. New total social financing in the first two months was down 3% year on year ('YoY'), but off-balance sheet credit was down 19% YoY, affecting property developers and Local Government Funding Vehicles ('LGFVs') who rely heavily on shadow banking for their financing needs.

The second half of the year under review witnessed a rebound, with Chinese equities rising in the CY2Q14 by 3.4%. Markets were volatile, with initial weakness in April due to weak macro data, followed by a recovery, helped by a series of mini stimulus policy measures. Economic‑sensitive sectors such as banks, brokerage and autos outperformed, while defensives such as staples and healthcare lagged. After the price correction in March/April, internet stocks rebounded due to strong earnings.

China Outlook

We expect the macroeconomic environment to recover from August's extreme low base, due to the continued fall in interest rates, as well as the People's Bank of China's liquidity injection. The government is likely to continue its mini stimulus policy, avoiding a hard landing and providing enough cushion to carry out further structural reforms. Property, the key factor for the weak macroeconomic environment, should also see improvements from lower interest rates as well as the removal of Household Purchase Restrictions in most cities. We do not expect major stimulus policy on the cyclical side as the government puts more emphasis on reform.

On the structural reform front, we have seen good progress, such the 'hukou' (residents' registration) reform which potentially may enable 200 million migrant workers to settle in urban areas, the start of farm land reform to address income inequality and boost consumption, pilot programmes for local asset management companies to address high local government leverage, and pilot state-owned enterprise reforms. We expect 2015-16 will be a critical period to see the implementation of reforms already announced, as well as the launch of further and more complex reforms, such as those related to income distribution.

The market's valuation at 8.9x forward one-year price to earnings, with earnings growth in the high single-digits, is undemanding (vs. mid-cycle 12x). We believe the market could remain volatile as investors weigh up the impact of the reform-induced slowdown and the resulting better quality of growth.

Hong Kong Review

Hong Kong equities started off the period under review strongly, largely driven by strength in the Macau gaming sector. Property developers continued their recent strategy of launching new projects at attractive prices, sometimes on a par with neighbouring secondary units, in order to generate interest. However, despite this successful selling strategy, property stocks fell due to concern over tapering demand and fear of further pricing pressures. Macau gaming stocks were the top performers, as sector growth continued to surprise on the upside.

Hong Kong equities retreated in the beginning of CY2014 due to concerns over slowing economic growth in China. Macau gaming share prices sold off despite strong operating performance. The Chief Executive's policy address was largely a non-event, while the budget speech reaffirmed a strong fiscal position with only modest scaling back of one-time fiscal stimulus. A comment from the Chief Executive regarding the cancellation of a land sale programme for local residential buyers only triggered speculation of a roll-back of tightening measures. However, this turned out to be a false hope as the government has not altered its stance on its property policy.

Hong Kong equities rebounded in the second half of the period under review due to a confluence of positive factors, including economic stabilisation in China, the announcement of the mutual market access agreement with the Shanghai stock exchange, and a surprising drop in long-term US Treasury yields. However, in late September, market sentiments suffered a major hit as pro-democracy student protests rolled into an earlier-than-expected start to the 'Occupy Central' movement. The ill-timed use of tear gas by the police then galvanised the pro-democracy segment of the population resulting in more participants joining the demonstrations. Initially the retail sector was the hardest hit as the street protests led to store closures and serious traffic disruption.

Hong Kong Outlook

While there has been moderation in the confrontations between the protesters and police, there remains the risk of a negative turn, especially since there are no obvious paths to resolving the differences between what Beijing authorities have prescribed and what the protesters are demanding regarding electoral reform.

Should the protests wind down in an expeditious and orderly manner, we believe the economic impact would be limited. However, the longer-term consequences could be more worrisome if these protests are not contained. For example, group tour suspension from mainland China could significantly impact retail sales in Hong Kong, given group tours constituted almost 10% of Hong Kong's tourist arrivals in 2013. While the property market has proved resilient in the first wave of the 'Occupy Central' movement, it remains vulnerable to the prospect of rising interest rates in the US.

The fundamentals of the Macau gaming industry remain intact, particularly the mass gaming segment. However, the short-term headwinds have become stronger due to the slowdown of the Chinese economy as well as the government's anti-corruption policy stance. Another negative factor is the full smoking ban in casinos, starting in early October. Political turbulence and the prospect of rising rates would suggest caution for Hong Kong equities. The upcoming Shanghai-Hong Kong Stock Connect programme could provide a short-term boost to select stocks. We target high quality stocks that benefit from high barriers to entry in their market segment, as well as those that stand to benefit from the economic stabilisation and reform progress in China.

Taiwan Review

Taiwan performed well in the first half of the period under review. China and Taiwan held government-to-government talks for the first time since 1949. Taiwan's economic monitoring indicator hit a 32-month high of 25 for February. A surge of liquidity into Taiwan pushed the Taiwan index to its highest level since 2007, as enthusiasm grew over local technology companies and a recovering economy boosted corporate earnings. Several global electronics brands such as Apple will unveil new models later this year, which will boost local suppliers' shipments. However, the index sold off all through September, with low trading volumes on weak sentiment and net foreign institutional selling.

Taiwan Outlook

Growth in export orders continued to be boosted by the new i-Phones, where demand remains very strong. The momentum of electronics from the launch of new Apple products will continue through the remaining months of 2014. However, expectations for the iPhone6 are already very high. With a lack of other near‑term catalysts and along with muted turnover, the Taiex may continue to trade in a tight range. The Taiwanese government is planning to introduce new measures to boost the stock market, which may improve trading volume.

In the near term, there should be some volatility in share prices, with companies reporting September sales and third-quarter results in the coming weeks. Share prices should react well to positive earnings and a positive outlook given the recent correction. However, international fund flows could be a drag if the outflows continue into October, though government-related funds are reported to be bargain hunting.

Overall, fundamentals remain strong and valuations are still modest. We remain overweight in technology, industrial and consumption, and underweight in telecommunications and petrochemicals. We have also raised our weighting in financials to a slight overweight.

Greater China Outlook

Locally, China's property policy has inflected towards selective easing measures, which historically has been a strong positive indicator for the domestic economy. The Shanghai-Hong Kong Stock Connect is an important event given its implications for China's financial liberalisation. Despite the collapse in the price of oil, there has been no broad-based upgrade to exporter earnings to reflect the implicit tax cut for global consumers. The confluence of these factors keep us optimistic on Greater China and we expect markets to be supported into the year-end. Valuations are generally undemanding, and we believe the Chinese government's determination to maintain stable growth will pave the way for further structural reforms over the medium to long-term which should support a relatively healthy outlook.

Howard Wang

Emerson Yip

Shumin Huang

William Tong

Investment Managers

4th December 2014

Principal Risks

Investors should note that there can be significant economic and political risks inherent in investing in emerging economies. As such, the Greater China markets can exhibit more volatility than developed markets and this should be taken into consideration when evaluating the suitability of the Company as a potential investment.

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

•   Investment Underperformance: An inappropriate investment decision may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages 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 analyses, revenue estimates, transaction reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the investment manager, who attends all Board meetings, and review data which show statistical measures of the Company's risk profile. The investment managers employ the Company's gearing within a strategic range set by the Board. The Board holds an annual strategy meeting in addition to at least four Board meetings.

•   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, as well as special efforts to retain key personnel.

•   Discount: A disproportionate widening of the discount relative to the Company's peers could result in a loss of value for Shareholders. In order to manage the Company's discount, which can be volatile, the Company operates a share repurchase programme and the Board regularly discusses discount policy and has set parameters for the Manager and the Company's broker to follow.

•   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 JPMAM. The Board monitors the implementation and results of the investment process with the Manager.

•   Political, Economic and Governance: Changes in financial, regulatory or tax legislation, including in the European Union, may adversely affect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

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

•   Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under "Structure of the Company" in the Annual Report and Accounts. Were the Company to breach Section 1158, it may lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure and Transparency Rules ('DTRs'). A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, the Manager, and its professional advisers to ensure compliance with the Companies Act 2006, the UKLA Listing Rules and DTRs.

•   Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance statement in the Annual Report and Accounts.

•   Operational: Disruption to, or failure of, JPMAM'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 JPMAM and its associates and the key elements designed to provide effective internal control are included with the Risk Management and Internal Control section of the Corporate Governance report in the Annual Report and Accounts.

•   Going concern: Pursuant to the Sharman Report, Boards are now advised to consider going concern as a potential risk, whether or not there is an apparent issue arising in relation thereto. Going concern is considered rigorously on an ongoing basis and the Board's statement on going concern is detailed in the Annual Report and Accounts.

•   Financial: The financial risks faced by the Company include market risk, liquidity risk and credit risk. Further details are disclosed in the Annual Report and Accounts.

Related Party Transactions

During the financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the year.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and accounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•           select suitable accounting policies and then apply them consistently;

•           make judgements and estimates that are reasonable and prudent;

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

•          prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the www.jpmchinese.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

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

Each of the Directors, whose names and functions are listed in the Governance section of the Annual Report and Accounts, confirms that, to the best of their knowledge:

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

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

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

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

For and on behalf of the Board

William Knight,

Chairman

4th December 2014

Income Statement

for the year ended 30th September 2014

	2014			2013
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	9,138	9,138	-	19,697	19,697
Net foreign currency (losses)/gains	-	(72)	(72)	-	65	65
Income from investments	3,585	-	3,585	3,620	-	3,620
Gross return	3,585	9,066	12,651	3,620	19,762	23,382
Management fee	(1,417)	-	(1,417)	(1,334)	-	(1,334)
Performance fee	-	(254)	(254)	-	(1,467)	(1,467)
Other administrative expenses	(454)	-	(454)	(516)	-	(516)
Net return on ordinary activities before  finance costs and taxation	1,714	8,812	10,526	1,770	18,295	20,065
Finance costs	(178)	-	(178)	(223)	-	(223)
Net return on ordinary activities before  taxation	1,536	8,812	10,348	1,547	18,295	19,842
Taxation	(255)	-	(255)	(306)	-	(306)
Net return on ordinary activities after taxation	1,281	8,812	10,093	1,241	18,295	19,536
Return per Ordinary share (note 3)	1.70p	11.66p	13.36p	1.63p	23.99p	25.62p

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. The Total column represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses ('STRGL'). For this reason a STRGL has not been presented.

Reconciliation of Movements in Shareholders' Funds

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2012	19,595	13,129	3	581	37,392	39,709	1,811	112,220
Issue of Ordinary shares on exercise of Subscription shares	12	66	-	-	-	-	-	78
Repurchase of Ordinary shares into Treasury	-	-	-	-	-	(1,691)	-	(1,691)
Cancellation of Subscription shares	(126)	126	-	-	-	-	-	-
Net return from ordinary activities	-	-	-	-	-	18,295	1,241	19,536
Dividends appropriated in the year	-	-	-	-	-	-	(1,225)	(1,225)
At 30th September 2013	19,481	13,321	3	581	37,392	56,313	1,827	128,918
Net return from ordinary activities	-	-	-	-	-	8,812	1,281	10,093
Dividends appropriated in the year	-	-	-	-	-	-	(1,209)	(1,209)
At 30th September 2014	19,481	13,321	3	581	37,392	65,125	1,899	137,802

Balance Sheet

at 30th September 2014

	2014	2013
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	151,184	144,280
Current assets
Debtors	301	1,086
Cash and short term deposits	1,071	2,603
	1,372	3,689
Creditors: amounts falling due within one year	(14,754)	(18,796)
Net current liabilities	(13,382)	(15,107)
Total assets less current liabilities	137,802	129,173
Provision for liabilities and charges
Performance fee	-	(255)
Net assets	137,802	128,918
Capital and reserves
Called up share capital	19,481	19,481
Share premium	13,321	13,321
Exercised warrant reserve	3	3
Capital redemption reserve	581	581
Other reserve	37,392	37,392
Capital reserves	65,125	56,313
Revenue reserve	1,899	1,827
Total equity shareholders' funds	137,802	128,918
Net asset value per Ordinary share (note 4)	182.4p	170.7p

Company registration number: 02853893.

Cash Flow Statement

for the year ended 30th September 2014

	2014	2013
	£'000	£'000
Net cash inflow from operating activities	106	1,100
Returns on investments and servicing of finance
Interest paid	(172)	(219)
Net cash outflow from returns on investments and servicing of finance	(172)	(219)
Taxation
Taxation recovered	-	67
Capital expenditure and financial investment
Purchases of investments	(128,064)	(109,126)
Sales of investments	131,362	109,532
Other capital charges	(72)	(59)
Net cash inflow from capital expenditure and financial investment	3,226	347
Dividend paid	(1,209)	(1,225)
Net cash inflow before financing	1,951	70
Financing
Net (repayment)/drawdown of short term loan	(3,300)	4,916
Repurchase of Ordinary shares into Treasury	-	(3,146)
Issue of Ordinary shares on exercise of Subscription shares	-	78
Net cash (outflow)/inflow from financing	(3,300)	1,848
Net (decrease)/increase in cash for the year	(1,349)	1,918

Notes to the Accounts

for the year ended 30th September 2014

1.    Accounting policies

(a) Basis of accounting

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

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

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

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

2.   Dividends

(a) Dividends paid and proposed

		2014	2013
		£'000	£'000
	2013 Final dividend paid of 1.6p (2012: 1.6p)	1,209	1,225
	2014 Final dividend proposed of 1.6p (2013: 1.6p)1	1,209	1,209

      1     Based on Ordinary shares in issue of 75,531,426 (2013: 75,531,426).

      The final dividend proposed in respect of the year ended 30th September 2014 is subject to shareholder approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 30th September 2015.

(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, as follows:

		2014	2013
		£'000	£'000
	Final dividend proposed of 1.6p (2013: 1.6p)	1,209	1,209

      The revenue available for distribution by way of dividend for the year is £1,281,000 (2013: £1,241,000).

3.   Return per Ordinary share

The revenue return per share is based on the revenue return attributable to the Ordinary shares of £1,281,000 (2013: £1,241,000) and on the weighted average number of shares in issue during the year of 75,531,426 (2013: 76,255,930) excluding shares held in Treasury.

The capital return per share is based on the capital return attributable to the Ordinary shares of £8,812,000 (2013: £18,295,000) and on the weighted average number of shares in issue during the year of 75,531,426 (2013: 76,255,930) excluding shares held in Treasury.

The total return per share is based on the total return attributable to the Ordinary shares of £10,093,000 (2013: £19,536,000) and on the weighted average number of shares in issue during the year of 75,531,426 (2013: 76,255,930) excluding shares held in Treasury.

4.   Net asset value per Ordinary share

The net asset value per share is based on the net assets attributable to the Ordinary shareholders of £137,802,000 (2013: £128,918,000) and on the 75,531,426 (2013: 75,531,426) Ordinary shares in issue at the year end excluding 2,383,539 (2013: 2,383,539) shares held in Treasury.

5.   Status of results announcement

2013 Financial Information

The figures and financial information for 2013 are extracted from the published Annual Report and Accounts for the year ended 30th September 2013 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.

2014 Financial Information

The figures and financial information for 2014 are extracted from the Annual Report and Accounts for the year ended 30th September 2014 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.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN FUNDS LIMITED

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

The annual report will shortly be available on the Company's website at www.jpmchinese.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

JPMORGAN FUNDS LIMITED

 

END

 

 

FR EAAALESXLFFF