Half-year Report

JPMorgan China Growth & Income PLC

29 May 2024

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CHINA GROWTH & INCOME TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST MARCH 2024

Legal Entity Identifier: 549300S8M91P5FYONY25

Information disclosed in accordance with DTR 4.2.2

The Directors announce the Company's results for the six months ended 31st March 2024.

Chairman's Statement

Introduction

During the six months to 31st March 2024, the extreme volatility that has battered Chinese stock markets since March 2023 continued to overshadow market performance. Sentiment remained depressed, impacted by concerns about fragile domestic consumer confidence, the significant challenges facing the Chinese property and regional financial sectors, global macroeconomic concerns and continued geopolitical tensions, particularly between the US and China. Against this difficult backdrop, Chinese growth stocks, which have long been the focus of our disciplined Portfolio Managers, remained out of favour, and the Company's performance suffered accordingly.

Performance

Faced with this market volatility and these challenges, the Company's total return on net assets (with net dividends reinvested) fell 13.1% over the six months ended 31st March 2024, underperforming the MSCI China Index, which declined 9.5%. Over the same period, the total return to shareholders declined 11.9%, reflecting the narrowing of the discount to net asset value ('NAV') at which the Company's shares trade, from -11.5% at the previous financial year end to -10.4% at the half year end.

While this short-term performance is disappointing, we are mindful of the Company's 30 year track record as a listed entity, and the importance of taking a long-term view. We are encouraged that over the longer term, our Company has made positive absolute returns, comfortably outperforming the benchmark over ten years. The relative underperformance to the benchmark index is explained in the Investment Manager's Report in the Half Year Report. This report provides a detailed commentary on the portfolio positioning, the investment strategy and the outlook for investing in China.

Loan Facility and Gearing

The Portfolio Managers have been given the flexibility by the Board to manage gearing tactically within a range set by the Board of 10% net cash to 20% geared. During the period, the Company's gearing ranged from 3.8% to 15.6%, ending the half year at 4.3%.

During the reporting period, the Company continued to utilise its facility agreement with Industrial and Commercial Bank of China Limited, London Branch (ICBC), in respect of a revolving loan facility of up to £60.0 million to maintain a meaningful but modest level of gearing. Due to market movements and after discussions with ICBC, the Company's loan agreement was amended on 28th March 2024 and the facility was reduced to a commitment of up to £30.0 million. Some changes were also made to certain financial covenants.

There is currently £9.2 million drawn down on the existing loan facility, which expires in July 2025.

Our Dividend Policy

In the absence of unforeseen developments, the Company's dividend policy aims to pay regular, quarterly dividends, equivalent in total to 4% of the Company's NAV on the last business day of the preceding financial year, in order to provide clarity to shareholders over the income stream they can expect during the following 12 months. This is paid by way of four equal interim dividends on the first business day in December, March, June and September.

On 2nd October 2023, the Company announced that the cum income Net Asset Value at the close of business on 30th September 2023 (the Company's year-end) was 276.05 pence per share. In line with the Company's distribution policy, the Directors declared the first quarterly interim dividend of 2.76 pence per share. Since then, two further dividend declarations have been made on 2nd January 2024 and 2nd April 2024, both of 2.76 pence per share. With the planned declaration of the final quarterly dividend of 2.76 pence per share on 1st July 2024, in the absence of unforeseen circumstances, the annual dividend for the year ending 30th September 2024 will be 11.04 pence per share (2023: 13.68 pence).

Share Capital

At the time of writing, the Company's issued share capital consists of 83,202,465 Ordinary shares. The Company currently holds no shares in Treasury. During the six-month reporting period, the Company did not repurchase or issue any shares.

Stay Informed

The Company delivers email updates with regular news and views, as well as the latest performance. If you have not already signed up to receive these communications and you wish to do so, you can opt in via https://tinyurl.com/JCGI-Sign-Up or by scanning the QR code in the front of the Half Year Report.

Outlook

China stock markets have stabilised since January, as concerns about the Chinese property market and the broader economy eased. Investors have also been encouraged by the Chinese government's indications of a planned economic stimulus programme and continued evidence of companies raising dividend payouts and buying back shares. Reflecting this, the Company's share price has risen to 236.5p on 27th May 2024, climbing 12.6% since 31st March 2024, with the discount to NAV narrowing from 10.4% to 9.3% over the same period.

As a Board, we are mindful that challenges remain. While the Chinese government has recently confirmed its GDP forecast of 5% for 2024, domestic consumer demand is still subdued. While recent talks between China and US have been encouraging, an escalation in anti-Chinese rhetoric ahead of this year's US presidential election cannot be ruled out. Concerns also remain about shifting patterns in global supply chains and the ongoing conflicts in Ukraine and the Middle East, which may also dampen market sentiment in the short term. That said, our Portfolio Managers are increasingly optimistic about the prospects for Chinese equities over the coming year. Determined to recover lost performance, they are using the opportunities offered by current low valuations to build up positions in quality companies that offer robust long-term growth. As a Board, we share our Managers' optimism. We remain confident that their disciplined investment strategy, combined with the skills and experience of the well-resourced investment team, will enable the Company to deliver superior long-term returns.

Alexandra Mackesy

Chairman                                                                                                                                         29th May 2024

INVESTMENT MANAGER'S REPORT

Introduction

During the six months ended 31st March 2024, the Company's total return on net assets declined 13.1% (in sterling terms), compared to a benchmark decline of 9.5%. However, the Company's long-term track record of outright gains and outperformance remains intact. In the ten years ended March 2024, the portfolio outperformed its benchmark by a total of 23.4 percentage points.

Setting the scene

China's economic recovery remained relatively tepid during the period under review, registering GDP growth of 5.2% in real terms. The key reason for this is that it is taking time for the economy to work through the challenges it faces, including the bursting of the property sector bubble and high local government indebtedness.

Domestic policy makers remain responsive but are reluctant to launch large scale stimulus packages, as China did in 2008 in the wake of the global financial crisis, mainly because of concerns about local government debt levels. In the National People's Congress meeting in March 2024, the Premier announced that the authorities are targeting GDP growth of 5% (in real terms) and a government deficit of 3% of GDP. He also indicated plans to issue USD1.0 trillion of ultra-long dated treasury bonds to support fiscal spending in regions where local governments are subject to austerity measures. These announcements aligned with matched expectations of modest fiscal expansion. The People's Bank of China (PBoC) continues to ease monetary policy via cuts in the reserve ratio and the loan prime rate. However, the PBoC wants to limit the exchange rate impact of monetary easing, so its scope to loosen monetary settings further is being constrained by stickier than expected US inflation, which is likely to prevent the Fed from cutting rates as quickly as many hoped.

Turning to developments in specific industries, property sales and investment in new development projects continued to decline in the first quarter of 2024 on a year-on-year basis. However, we saw more measures intended to stimulate demand in the property sector. On the demand side, we saw reductions in down payment requirements and mortgage rates, and the removal of purchase restrictions in almost all but the largest cities. On the supply side, the government is calling on banks and local governments to make a coordinated effort to prevent key developers from defaulting. Elsewhere, in an attempt to boost weak consumer confidence, central and local governments launched stimulatory measures such as subsidies for scrapped vehicles and home appliances. To support business confidence, governments promised fiscal support for investment in technological development and equipment upgrades, with details yet to be disclosed.

Thanks at least in part to all these measures, the Chinese economy started to show some signs of recovery during the first quarter of 2024. The purchasing managers index (PMI), which is a forward indicator of activity in the manufacturing sector, returned to 50.8% meaning the manufacturing sectors are growing compared to the previous month, and inflation turned positive in February 2024. Investors welcomed industry-specific stimulus policies, and stock market sentiment began to improve from a very low level, assisted by state-owned investment funds, which began buying domestic stock ETFs. This buying sent a very strong signal of the government's willingness to support capital markets.

Valuations remain very attractive compared with both long-term historic levels and other major stock markets, especially given the authorities' recent efforts to improve shareholder returns. Returns on equity (ROE) and dividend payout ratios have become important key performance indicators (KPIs) for managers of state-owned enterprises (SOEs), and they are being urged to increase dividend payouts and become more shareholder friendly. In addition, the security market regulator, the China Securities Regulatory Commission (CSRC), pledged to improve shareholder returns and to crack down on capital market misconduct. These policy initiatives are widely regarded as signals of a shift in the authorities' mindset, from viewing the equity market as a tool to fund economic growth to seeing it as the means of wealth creation for shareholders. With the economy stabilising, valuations attractively low and shareholder returns increasing, international investors are once again focusing their attention on Chinese stock markets.

The external environment still presents challenges, but we believe tensions between China and the US have eased significantly, following a series of high-level engagements, including a Biden-Xi summit, and visits by the US Secretary of State and Treasury Secretary to meet their Chinese counterparts. As President Biden says, the US wants competition, not confrontation, with China.

Performance commentary

Investing in Chinese equities has been especially challenging during the past three years. Some of the risks encountered were completely unanticipated and beyond the control of companies and investors. Many of the growth companies we favour failed to meet their forecasts, and valuations came under pressure from rising interest rates relevant to international investors. In addition, the decline in domestic interest rates increased the attraction of high dividend yielding stocks, creating another style headwind for the company.

Our style bias in favour of growth stocks remained a drag on performance over the past six months. The MSCI China Growth Index declined by 11.6% (in GBP terms), lagging the MSCI China Value Index, which fell by only 4.8%. The value sectors that we tend to underweight, including Financials, Energy and Materials, outperformed the benchmark. Amongst our more growth-oriented holdings, sector allocation and stock selection in healthcare were the biggest detractors, along with stock selection in industrials.

Within Financials, large SOE banks such as China Construction Bank and Bank of China outperformed our holdings of more market-oriented banks such as China Merchants Bank, which we believe possess better long-term growth prospects. The main reasons for the SOEs' outperformance are attractive high single digit dividend yields as a result of low valuations; and investors generally assume dividends will not be reduced as the dividend stream is an important source of revenue for the central government. Despite China Merchants Bank's recent underperformance, we have retained our long-term holding. We believe it is still the best managed Chinese bank, and its healthy ROE and capitalisation make it one of the few Chinese banks with real scope to increase dividend payouts. Elsewhere in the financial sector, life insurers, including China Pacific Insurance which we hold, underperformed the sector on concerns about downward pressure on premiums and returns, after regulators banned the sales of certain investment products.

Energy outperformed, lead by petroleum and coal companies, primarily due to their high dividend yields. We are zero-weighted in this sector, as we struggle to find companies with repeatable growth, and we think the high dividend yields are not sufficient to offset the inherent volatility of these businesses. We also avoid petroleum and coal companies due to the high carbon intensity of their products. Materials also outperformed as demand for copper and aluminum was better than expected, and the supply side responded to cyclical low demand for aluminium by cutting capacity. However, the high growth companies making innovative materials that we hold, such as Sunresin New Material, a supplier of specialist industrial resins, underperformed. The decline in Sunresin's valuation provided us with the opportunity to top up our position at an attractive level. Within this sector, we also like companies producing materials such as copper and lithium, that play an important role in the production and supply of renewable energy.

Our stock selection in Health Care and Industrials contributed negatively to our performance. Wuxi Biologics and Asymchem, our holdings in the contract development & manufacturing organisation (CDMO) sector, which conducts R&D on a contract basis, saw their share prices plummet after the US House of Representatives sought to pass the Biosecure Act, which would prevent US federally funded projects from employing Chinese CDMOs on national security grounds. Investors also worried that the Act, if passed, may also adversely impact the willingness of US pharmaceutical companies to use Chinese CDMOs, even though these commercial projects are not funded by the US government. We are retaining our position in Wuxi Biologics because its valuation is attractive after the share price fall, even allowing for geopolitical risks. In addition, this company's fundamental businesses are resilient, and it has been building global capacity during the past few years in response to client demand. Some of its European factories are becoming profitable, in part due to strong order growth from European pharmaceutical companies. Asymchem, although not specifically mentioned in the Biosecure Act, also saw its valuation drop due to the same concerns. In addition, the company suffered from temporary capacity underutilization after the collapse in demand for COVID-related drugs.

Our holdings in several industrial names derated on concerns about sluggish fixed asset investment and oversupply in the solar and electric vehicle sectors. Affected holdings included Shanghai Liangxin Electricals, which specialises in low voltage electrical apparatus, Hongfa Technology, which produces electrical appliances and equipment, and Jiangsu Hengli Hydraulic, which supplies hydraulic pumps and electric motors for construction and other heavy machinery. We cannot dismiss the adverse impact of macroeconomic cyclicality on our industrial holdings, but there are lots of positive idiosyncratic factors in play, such as market share gains, growing export demand and new product launches, that we expect to support their outperformance over time. We made small adjustments to some position sizes but maintain our positive long-term assessment of our industrial holdings.

On the positive side, stock selection in some sectors has resulted in positive returns. At the sectoral level, our exposure to Consumer Discretionary contributed the most. Holdings in travel related names such as Trip.com, an online travel agency, and hotelier H World outperformed as leisure travel remained strong. Competition in this industry is benign and both companies executed really well. In the auto sector, we prefer to gain exposure to the rising penetration of electrical vehicles (EVs) globally through component makers such as Fuyao Glass, an auto glass maker, and Hongfa Technology, a high voltage relay maker, rather than via original equipment makers (OEM), which use those components to manufacturer equipment for use in EVs. Our decision not to own several EV OEMs, namely Xpeng, Nio, Li Auto and BYD, collectively contributed to relative returns. Despite exciting model launches, profitability in this industry struggles due to fierce competition between traditional auto OEMs and new entrants. In Communication Services, there was a positive contribution from Kanzhun, which operates Boss Zhipin, the largest online job matching platform in China. Boss Zhipin continues to gain market share and revenues. Judging from leading indicators on its platform, the overall employment market is recovering, which bodes well for future demand for its services. Not owning Baidu, the largest search engine, and Kuaishou, a short video social media platform, also contributed positively, as these companies are losing market share in their core businesses of online advertising and short video social media due to increased pressure from competitors.

Performance attribution

For the six months ended 31st March 2024

	%	%
Contributions to total returns
Benchmark Return		-9.5
Sector allocation	1.0
Stock allocation	-3.5
Currency effect	0.1
Gearing/Cash	-0.6
Investment manager contribution		-3.0
Dividends/residual	0.2
Portfolio return		-12.3
Management fee/other expenses	-0.8
Return on net assetsA		-13.1
Impact of change in discount		1.2
Return to shareholdersA		-11.9

Source: FactSet, JPMAM and Morningstar.

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

^A     Alternative Performance Measure ('APM').

Transactions and sector allocation

Despite the adverse effect on recent performance of our bias towards growth stocks, we intend to maintain our preference for growth. Firstly, we believe that despite cyclical headwinds and talks about diversifying supply chains to include countries other than China, many Chinese companies remain capable and competitive on a global basis. In addition, we increasingly see our quality growth holdings launching 'self-help' measures to support their share prices, including cost cutting, more generous dividend payouts and large-scale buybacks.

Our sector weightings are largely unchanged. We remain overweight in sectors with long-term growth opportunities in information technology, internet platforms, health care, and globally competitive manufacturing businesses. Meanwhile, we continue to review our forecasts for some growth companies, as we want to concentrate our positions in companies in which we have the highest conviction.

We have executed more complete exits in the past six months than usual, in part to increase the concentration of our portfolio, and also because we reduced leverage in December to meet NAV covenants. We sold a few small positions where our conviction levels had waned. We also sold several outperformers whose valuations were looking expensive. For example, we took profits on China Yangtze Power, China's largest hydro power producer, which generates low-cost, eco-friendly electricity. Outperformance had pushed the dividend yield down to some 4% and, as its EPS growth looked set to remain in the low single digits, we sold the position. We also realised gains on Shanghai Baosight Software, a software and automation solution provider servicing the steel industry, and on Beijing Kingsoft Office, a business software provider.

We exited some positions when performance had disappointed expectations, forcing us to sell at a loss. For example, we sold two discretionary consumption plays, Aier Eye Hospital which specialises in treatments such as refractive eye surgery, and Jiumaojiu International, a casual dining restaurant chain. Originally, we expected these businesses to benefit from pent-up demand following the post-pandemic economic re-opening, but weak consumer confidence and deflation in the consumer sector made them far less attractive than we originally estimated. We also exited a few companies that operate in highly competitive industries, where we no longer have confidence in their ability to consolidate their positions. Sales in this group included JD.com, one of China's largest ecommerce platforms, ZTO Express, a delivery company, Yunnan New Energy Material, a lithium battery separator maker, and Longi Green Energy Technology, a manufacturer of solar wafers and panels.

We are still actively seeking and investing in structural growth opportunities. In January 2024, we bought a new position in Taiwan Semiconductor Manufacturing Company (TSMC). Its strong position in the semiconductor business is further cemented in the AI era by its capability in advanced node and its ownership of Chip-on-Wafer-on-Substrate (CoWoS), its proprietary packaging technology platform. TSMC's valuation is very attractive considering its status as an AI enabler. We also topped up Foxconn Industrial Internet, which makes communications network and cloud services equipment, including graphic processing units (GPU), for Nvidia, enterprise data centers and cloud service providers. The complexity, intensive energy consumption and rapid product evolution which characterise such businesses generate great growth opportunities for Foxconn. We bought a modest position in the world's largest lithium battery maker, Contemporary Ampertex Technology Limited (CATL), a company which we have previously owned. This industry has been dogged by oversupply, and, reflecting this, CATL's valuation became more reasonable. Auto makers value CATL for its quality, and lower tier battery makers are struggling to compete, so the unit profit on its batteries has stabilised.

We are also looking for quality businesses offering great potential that are recovering from the cyclical downturn. We initiated a new position in iQIYI, a long video streaming platform, similar to Netflix. China's long video streaming industry has consolidated in the past few years into a duopoly, with iQIYI and Tencent Video as the two largest players. This has heralded a few positive changes, including lower content costs, higher membership fees, and the accumulation of content libraries that help retain members at low cost. These changes should see iQIYI's cash generation improve significantly, which will allow it to repay expensive borrowing and implement share buybacks.

In the broad consumer sector, we favour businesses with pricing power. We initiated a position in Chacha Food, the largest sunflower, nut and seed snack brand in China. The company's margins are improving thanks to efficiency gains and price hikes, and it has committed to maintaining its good track record of paying dividends by raising its payout ratio even further. We also bought China Resources Sanjiu, a market leader in traditional, over-the-counter Chinese medicines for minor ailments. Sanjiu has become a household name following decades of sophisticated brand building. Given its strong brand and its control of distribution channels, it has an ample capability to pass on raw material cost increases to its customers. In addition, as a highly cash generative and well-managed SOE, it is likely to gradually increase its payout ratio.

We maintain our focus on good ESG practices and our preference for quality, cash generative businesses that return excess capital to shareholders. As part of our active engagement on ESG matters with the companies in our portfolio, we have been encouraging them to improve shareholder returns via larger dividend payments and share buybacks.

Outlook

We believe the worst is probably behind us both in terms of the slowdown of China's economic growth, and the derating of Chinese equities. There are good reasons to view the outlook more positively. For a start, we see some signs of a domestic economic recovery. At the same time, exports have remained resilient throughout the economic downturn. Several domestically focused internet and consumer companies have become even more cash generative, thanks to improved operating efficiencies and reductions of non-core investments. Like the SOEs, they are returning more cash to shareholders. The property sector is also showing some signs of stabilising. After declining for two years, we believe sales of new homes are now close to a level justified by long-term trends in population growth and new family formation. The sector's drag on GDP is also diminishing, although it will still detract from growth this year. We expect 2024 to bring more local stimulus policies to support housing demand, and perhaps even a comprehensive clean-up of developers' bad loans. Contagion risks to the financial sector are contained at the moment, helped by provisions made in the past and decline in deposit rates.  In the solar and electric vehicle sectors, oversupply should ease gradually as some weaker, poorly-funded suppliers struggle to compete and eventually exit the market.

Valuations are now at very attractive levels. Using the conservative valuation metrics of price to book, the ratio of the MSCI China Index is 1.22x, a level only seen during SARS in 2003 and China's 2016 slowdown. Chinese stock markets are now priced more cheaply than they were during the 2008-2009 Global Financial Crisis. Geopolitics are partially to blame, but we believe this dampener on sentiment and risk appetite is abating. In the wake of several recent high level meetings between US and Chinese leaders and officials, it is now widely accepted that China and US will continue to compete in various areas, irrespective of which candidate wins the US Presidency. Direct confrontation and war is highly unlikely, as both parties agree that this would be counter to their best interests. Concerns regarding tensions across the Taiwan Strait also seem to have eased after Taiwan's presidential election proceeded peacefully. The victor, William Lai of the pro-independence Democratic Progressive Party, favours preserving Taiwan's current political status. As the election did not deliver a majority to any one party, it is highly unlikely that Taiwan's legislature will pass any radical resolution imposing pressure on the cross-strait relationship.

Valuations may be boosted over the medium term by official pressure to improve shareholder returns. Our portfolio should benefit accordingly. While many of our cash rich holdings are already increasing payout ratios and conducting buybacks, there is scope for some to do even more. While challenges undoubtedly remain, given the amount of risk, disappointment and possible pessimism priced into the market at current levels, we see potential for upside surprises to results and valuations in the next twelve months, possibly encouraged by ongoing market support from government financial institutions.

For all these reasons, we are becoming more optimistic about the prospects for Chinese equities over the coming financial year. We are determined to grasp the opportunities created by an economic and market recovery to claw back lost performance, and we look forward to reporting on the company's progress as our portfolio companies realise their true worth.

We thank you for your ongoing support.

Rebecca Jiang

Howard Wang

Li Tan

Investment Team                                                                                                                             29th May 2024

INTERIM MANAGEMENT REPORT

The Company is required to make the following disclosures in its half year report:

Principal and Emerging Risks and Uncertainties

Supported by a detailed risk matrix, the Board has identified the principal risks and uncertainties which face the Company. These risks fall into the following broad categories: geopolitical; investment underperformance; investment strategy; loss of Investment Team or Investment Manager; share price discount; corporate governance; shareholder relations; financial; cybercrime; fraud/other operating failures or weaknesses; legal and regulatory; global pandemics; ESG risk; and climate change. While these categories have not changed from those reported in the Strategic Report within the Annual Report and Financial Statements for the year ended 30th September 2023, the Board considers that some uncertainties within these categories have increased in risk since the year end and are monitoring them carefully. These include the continuing conflict between Russia and the Ukraine and more recently the conflict between Israel and Palestine, heightened tensions between the US and China, the introduction of trade-related sanctions by both the US and China, and fragile consumer demand in China. Last year, the Board also identified the following emerging risks: social unrest within China; and Artificial Intelligence.

Related Parties Transactions

During the first six months of the current 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 period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operational existence for at least 12 months from the date of the approval of this half yearly financial report. In reaching that view, the Directors have considered the impact of economic conditions in China, risks relating to the Chinese property market, the financial stability of provincial governments and continuing geopolitical tensions between China and the US on the Company's financial, operational position and market conditions.  They have also considered the wider implications of the ongoing Russia-Ukraine conflict and more recently the conflict between Israel and Palestine. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)      the condensed set of Financial Statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st March 2024, as required by the UK Listing Authority Disclosure and Transparency Rule ('DTR') 4.2.4R; and

(ii)     the interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the UK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•        select suitable accounting policies and then apply them consistently;

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

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

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

and the Directors confirm that they have done so.

For and on behalf of the Board

Alexandra Mackesy

Chairman                                                                                                                                              29th May 2024

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st March 2024			31st March 2023			30th September 2023
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments
held at fair value through
profit or loss	-	(30,253)	(30,253)	-	20,148	20,148	-	(45,372)	(45,372)
Net foreign currency gains	-	923	923	-	4,542	4,542	-	4,740	4,740
Income from investments	615	-	615	270	-	270	3,305	-	3,305
Interest receivable and similar
income1	33	-	33	290	-	290	440	-	440
Gross return/(loss)	648	(29,330)	(28,682)	560	24,690	25,250	3,745	(40,632)	(36,887)
Management fee	(231)	(692)	(923)	(329)	(988)	(1,317)	(617)	(1,851)	(2,468)
Other administrative expenses	(324)	-	(324)	(280)	-	(280)	(628)	-	(628)
Net return/(loss) before
finance costs and taxation	93	(30,022)	(29,929)	(49)	23,702	23,653	2,500	(42,483)	(39,983)
Finance costs	(161)	(482)	(643)	(363)	(1,088)	(1,451)	(735)	(2,206)	(2,941)
Net (loss)/return before
taxation	(68)	(30,504)	(30,572)	(412)	22,614	22,202	1,765	(44,689)	(42,924)
Taxation	(18)	-	(18)	(8)	-	(8)	(208)	-	(208)
Net (loss)/return after taxation	(86)	(30,504)	(30,590)	(420)	22,614	22,194	1,557	(44,689)	(43,132)
(Loss)/return per share (note 3)	(0.10)p	(36.66)p	(36.76)p	(0.50)p	27.18p	26.68p	1.87p	(53.71)p	(51.84)p

¹     Includes income from securities lending.

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

discontinued in the period.

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/(loss) after taxation represents the return/(loss) for the period and also the total comprehensive income.

CONDENSED STATEMENT OF CHANGES IN EQUITY

	Called up		Exercised	Capital
	share	Share	warrant	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserve1	reserves2	reserve2	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 31st March 2024
(Unaudited)
At 30th September 2023	20,803	80,951	3	581	37,392	90,042	-	229,772
Proceeds from share forfeiture3	-	-	-	-	-	323	-	323
Net loss Dividend paid in the period (note 4)	- -	- -	- -	- -	- -	(30,504) (4,593)	(86) -	(30,590) (4,593)
Refund of unclaimed divdiends (note 4)	-	-	-	-	-	161	-	161
At 31st March 2024	20,803	80,951	3	581	37,392	55,429	(86)	195,073
Six months ended 31st March 2023
(Unaudited)
At 30th September 2022	20,803	80,951	3	581	37,392	144,556	-	284,286
Net return/(loss)	-	-	-	-	-	22,614	(420)	22,194
Dividend paid in the period (note 4)	-	-	-	-	-	(5,692)	-	(5,692)
At 31st March 2023	20,803	80,951	3	581	37,392	161,478	(420)	300,788
Year ended 30th September 2023
(Audited)
At 30th September 2022	20,803	80,951	3	581	37,392	144,556	-	284,286
Net (loss)/return	-	-	-	-	-	(44,689)	1,557	(43,132)
Dividend paid in the year (note 4)	-	-	-	-	-	(9,825)	(1,557)	(11,382)
At 30th September 2023	20,803	80,951	3	581	37,392	90,042	-	229,772

¹     Created during the year ended 30th September 1999, following a cancellation of the share premium account.

²     These reserves form the distributable reserves of the Company and may be used to fund distribution to investors.

³     During the period the Company undertook an Asset Reunification Program for its shareholders. In accordance with the Company's Articles of Association, shares that could not be traced to shareholders over 12 years old were forfeited. These share were sold in the open market and the proceeds returned to the Company.

CONDENSED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Unaudited)	(Audited)
	At	At	At
	31st March	31st March	30th September
	2024	2023	2023
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	203,446	348,361	262,005
Current assets
Debtors	74	954	157
Cash and cash equivalents	1,514	7,798	87
	1,588	8,752	244
Current liabilities
Creditors: amounts falling due within one year1	(724)	(56,325)	(669)
Net current assets/(liabilities)	864	(47,573)	(425)
Total assets less current liabilities	204,310	300,788	261,580
Non current liabilities
Creditors: amounts falling due after more than one year1	(9,237)	-	(31,808)
Net assets	195,073	300,788	229,772
Capital and reserves
Called up share capital	20,803	20,803	20,803
Share premium	80,951	80,951	80,951
Exercised warrant reserve	3	3	3
Capital redemption reserve	581	581	581
Other reserve	37,392	37,392	37,392
Capital reserves	55,429	161,478	90,042
Revenue reserve	(86)	(420)	-
Total shareholders' funds	195,073	300,788	229,772
Net asset value per share (note 5)	234.5p	361.5p	276.2p

¹     As at 31st March 2024, £9.2m (31st March 2023: £52.6m; 30th September 2023: £31.8m) was drawn down from the loan facility.

CONDENSED STATEMENT OF CASH FLOWS

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March	31st March	30th September
	2024	2023	2023
	£'000	£'000	£'000
Cash flows from operating activities
Net (loss)/profit before finance costs and taxation	(29,929)	23,653	(39,983)
Adjustment for:
Net losses/(gains) on investments held at fair value through
profit or loss	30,253	(20,148)	45,372
Net foreign currency gains	(923)	(4,542)	(4,740)
Dividend income	(615)	(270)	(3,305)
Interest income	(13)	(117)	(216)
Realised (gains)/losses on foreign exchange transactions	(29)	(809)	95
Realised exchange losses on the JPMorgan USD Liquidity Fund	-	(310)	(990)
Increase in accrued income and other debtors	-	(12)	(8)
(Decrease)/increase in accrued expenses	(79)	(24)	44
Net outflow from operating activities before dividends
and interest	(1,335)	(2,579)	(3,731)
Dividends received	680	310	3,068
Interest received	13	117	216
Net cash outflow from operating activities	(642)	(2,152)	(447)
Purchases of investments	(19,801)	(122,398)	(184,366)
Sales of investments	48,604	127,557	208,204
Net cash inflow from investing activities	28,803	5,159	23,838
Equity dividends paid (note 4)	(4,432)	(5,692)	(11,382)
Refund of unclaimed dividends (note 4) Repayment of bank loan	161 (21,618)	- (4,317)	- (53,866)
Drawdown of  bank loan	-	4,723	34,318
Proceeds from share forfeiture	323	-	-
Loan interest paid	(1,007)	(1,187)	(2,804)
Net cash outflow from financing activities	(26,734)	(6,473)	(33,734)
Increase/(decrease) in cash and cash equivalents	1,427	(3,466)	(10,343)
Cash and cash equivalents at start of period/year	87	10,950	10,950
Exchange movements	-	314	(520)
Cash and cash equivalents at end of period/year	1,514	7,798	87
Cash and cash equivalents consist of:
Cash and short term deposits	481	272	83
Cash held in JPMorgan USD Liquidity Fund	1,033	7,526	4
Total	1,514	7,798	87

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1.  Financial Statements

The information contained within the condensed financial statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 30th September 2023 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.  Accounting policies

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP') including FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in July 2022.

FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting Council ('FRC') in March 2015, has been applied in preparing this condensed set of financial statements for the six months ended 31st March 2024.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 30th September 2023.

3.  (Loss)/return per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2024	31st March 2023	30th September 2023
	£'000	£'000	£'000
(Loss)/return per share is based on the following:
Revenue (loss)/return	(86)	(420)	1,557
Capital (loss)/return	(30,504)	22,614	(44,689)
Total (loss)/return	(30,590)	22,194	(43,132)
Weighted average number of shares in issue during
the period/year	83,202,465	83,202,465	83,202,465
Revenue (loss)/return per share	(0.10)p	(0.50)p	1.87p
Capital (loss)/return per share	(36.66)p	27.18p	(53.71)p
Total (loss)/return per share	(36.76)p	26.68p	(51.84)p

4.  Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2024	31st March 2023	30th September 2023
	£'000	£'000	£'000
First quarterly interim dividend (2024: 2.76p; 2023: 3.42p)	2,296	2,846	2,846
Second quarterly interim dividend (2024: 2.76p; 2023: 3.42p)	2,297	2,846	2,846
Third quarterly interim dividend (2023: 3.42p)	-	-	2,845
Fourth quarterly interim dividend (2023: 3.42p)	-	-	2,845
Total dividends paid	4,593	5,692	11,382
Refund of unclaimed dividends over 12 years old	(161)	-	-
Net dividends paid	4,432	5,692	11,382

A third quarterly dividend of 2.76p has been declared for payment on 30th June 2024 for the financial year ending 30th September 2024.

Dividend payments in excess of the revenue amount will be paid out of the Company's distributable capital reserves.

5. Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2024	31st March 2023	30th September 2023
Net assets (£'000)	195,073	300,788	229,772
Number of shares in issue	83,202,465	83,202,465	83,202,465
Net asset value per share	234.5p	361.5p	276.2p

6.  Fair valuation of investments

The fair value hierarchy disclosures required by FRS 102 are given below:

	(Unaudited)		(Unaudited)		(Audited)
	Six months ended		Six months ended		Year ended
	31st March 2024		31st March 2023		30th September 2023
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Level 1	200,116	-	332,785	-	256,299	-
Level 2	3,3301	-	15,5762	-	5,7063	-
Total	203,446	-	348,361	-	262,005	-

¹  Participatory Notes. 31st March 2024: (Shanghai Liangxin Electrical, Qingdao Haier Biomedical, Amoy Diagnostics).

²  Participatory notes. 31st March 2023: (Acrobiosystems, Amoy Diagnostics, Bestechnic, OPT Machine Vision, Qingdao Haier Biomedical, Shanghai Liangxin Electrical, SUPCON Technology).

³  Participatory notes. 30th September 2023: (Shanghai Liangxin Electrical, Amoy Diagnostics, Qingdao Haier Biomedical, Yunnan Energy New Material).

7.  Analysis of Changes in Net Debt

	As at		Other	As at
	30th September		non-cash	31st March
	2023	Cash flows	charges	2024
	£'000	£'000	£'000	£'000
Cash and cash equivalents
Cash and short term deposits	83	398	-	481
Cash held in JPMorgan USD Liquidity Fund	4	1,029	-	1,033
	87	1,427	-	1,514
Borrowings
Bank loan	(31,808)	21,618	953	(9,237)
Net debt	(31,721)	23,045	953	(7,723)

JPMORGAN FUNDS LIMITED

29th May 2024

For further information, please contact:

Lucy Dina

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

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.

ENDS

A copy of the 2024 Half Year 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 Half Year Report will also shortly be available on the Company's website at www.jpmchinagrowthandincome.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

 

END