Annual Results 2013

RNS Number : 4404V

JPMorgan Asian Investment Tst PLC

12 December 2013

 



LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIAN INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30th SEPTEMBER 2013

The Directors of JPMorgan Asian Investment Trust plc announce the Company's results

for the year ended 30th September 2013.

Chairman's Statement

Performance

In the year to 30th September 2013 the Company's return to Ordinary shareholders, which reflects a narrowing in the year of the Company's discount to net asset value ('NAV'), was 7.2%. The diluted NAV total return (which assumes that the 7,253,150 Subscription shares outstanding at 30th September 2013 were all exercised at 203p per share) was 6.4%. The Company's benchmark returned 5.1%. In sum, therefore, the Company delivered 1.3% outperformance against its benchmark on a NAV return basis. This is a satisfactory result, but one which marks only the beginning of the Company's recovery and delivery of consistent outperformance, which is our determined aim.

Continuing Appointment of the Manager

Shareholders will recall that last year I reported in detail on the Board's strategic review of the capabilities of JP Morgan Asset Management (UK) Limited (the 'Manager' or 'JPMAM') following our concerns about its investment and risk management processes, which had led to a period of unacceptable investment performance. Following our review a number of fundamental changes were wrought within JPMAM in Asia, as a result of which and after further critical review throughout the year, the Board is now confident that, under the stewardship of Ted Pulling, the new Chief Investment Officer of JPMAM in Asia (and one of the Company's investment management team), the Manager now has the appropriate people, organisation and processes to enable it to deliver outperformance in the future. The outperformance delivered to shareholders in the first six months of the review period was eroded in the second half, but the Board believes that JPMAM's revised investment processes are sound and logical and is pleased to note that some outperformance of the benchmark was achieved for the full year. Please refer to the Investment Managers' Report below for an explanation for the setback in performance over the six months to 30th September 2013. To strengthen still further the team managing the Company's assets the Board has recently welcomed Sonia Yu to the named investment management team, alongside Ted Pulling and Jeff Roskill.

Shareholders will recall that, in addition to the Company's triennial continuation votes, an additional continuation vote was put to shareholders at the 2013 Annual General Meeting. Shareholders voted overwhelmingly for the continuation of the Company and accordingly changes to the management arrangements, which were conditional upon the passing of the continuation vote, were implemented. The Manager is now paid a management fee of 0.60% per annum based on the Company's market capitalisation, having previously been paid at a rate of 0.75%. Furthermore, in order to defray a part of the costs that were incurred in the portfolio management transition in 2012, JPMAM made a one‑off contribution to the Company of £1.1 million.

The Board again recently carried out its formal annual review of the investment management and other services provided to the Company by JPMAM in 2013. This review encompassed their performance record, management processes, investment style, resources and risk control mechanisms. After full consideration the Board concluded that the continued appointment of JPMAM for provision of these services on the terms agreed is in the interests of shareholders as a whole.

Continuation Vote

The Articles of Association of the Company provide that the Directors must propose an Ordinary resolution for the continuation of the Company in its current form at the forthcoming Annual General Meeting to be held in January 2014. The Board has confidence in the Company's continued ability to benefit from the opportunities for long term growth by investing in Asia ex Japan stockmarkets and, having also consulted a number of its larger shareholders, has no hesitation in recommending that shareholders vote in favour of the resolution, as the Directors intend to do with their own shares. This will enable the Company to continue as an investment trust for a further three years until the Annual General Meeting to be held in 2017.

Discount Management and Tender Offers

In November 2012 a tender offer for up to 24.99% of the Company's Ordinary share capital was implemented at NAV, less the direct costs and expenses of the tender offer. A total of 37,170,686 shares, representing 24.99% of the Company's then outstanding Ordinary shares, were repurchased at a price of 218.59 pence per share and were subsequently cancelled.

At the 2013 Annual General Meeting, Shareholders approved two further 5% conditional tender offers. These conditional tender offers could be implemented by the Board if the Ordinary shares traded at an average discount of more than 9% to their diluted cum income NAV (the 'discount') over the six month periods ending 31st March 2013 and 30th September 2013. Over the course of both six month measurement periods, the Company's average discount was more than 9%, registering 10.7% and 12.6% respectively.

The first 5% tender offer was approved by the Board and implemented in June 2013. The Board also resolved to implement the 5% tender in respect of the second six month period and details of this latest tender offer are contained in the Circular dated 21st November 2013 which was recently sent to shareholders. This tender will be completed in late December 2013.

The Board has recently consulted with shareholders owning over 45% of the Company's shares in relation to the principle and operation of the two smaller tender offers implemented by the Company in 2013. Whilst there was a wide spectrum of opinion, a significant percentage of these shareholders expressed opposition to the ongoing contraction of the Company via the semi annual tender mechanism and did not believe that it provides a sufficient benefit to longer term shareholders. Having considered this feedback the Board has decided to seek authority from shareholders at the Annual General Meeting to change the tender offer structure in 2014.

Subject to receiving the necessary shareholder approval at the Annual General Meeting, the Board is taking the authority for it to be given the discretion to implement a tender offer in December 2014 for up to 10% of the shares in issue on the relevant record date. Shareholders should note that this tender offer will remain entirely at the discretion of the Board and should place no expectation on it being implemented. In deciding whether to implement this tender the Board will have regard, inter alia, to the Company's relative and absolute performance, its relative and absolute discount level over the financial year ending 30th September 2014 and to market conditions at the time. If implemented, the offer price of this tender will be at a discount of 3.5% to the relevant cum income NAV less other costs associated with the tender offer.

In addition to this conditional tender offer the Board will also, subject to market conditions, consider buying back shares with the objective of stabilising the discount between 8% and 10% to their diluted cum‑income NAV, thereby providing an uplift in NAV per share for continuing investors (as a result of those shares being acquired at a discount to their NAV). It is intended that this will be the Board's policy for the year ahead and the Directors will therefore propose a resolution at the forthcoming Annual General Meeting to authorise the Company to repurchase its Ordinary and Subscription shares.

Revised Reporting Requirements

There have been a number of changes in reporting requirements for companies with financial years beginning on or after 1st October 2012. Shareholders will note in particular the addition of a Strategic Report and changes to the structure and voting in respect of the Directors' Remuneration Report.

The Strategic Report is designed to replace and enhance reporting previously included in the Business Review section of the Directors' Report. Its purpose is to inform shareholders and help them assess how the Directors have performed their duty to promote the success of the Company during the year under review. There have also been consequential changes in the contents of the remainder of the Report.

Revenue and Dividends

Revenue per share for the year amounted to 2.64p (on an undiluted basis) and the Board is recommending a final dividend of 2.6p which, if approved by shareholders, will be payable on 5th February 2014 to shareholders on the register at the close of business on 3rd January 2014.

Subscription Shares

Shareholders are reminded that Subscription shares may be exercised at a price of 203 pence per share on any business day until 31st March 2014, after which the rights on these shares will lapse. In the year to 30th September 2013, 13,488 Subscription shares were converted into Ordinary shares, raising proceeds of £27,000. As at the date of this Report, a further 9,592 Subscription shares have been exercised.

Further details on the Subscription shares, including the apportionments for capital gains tax purposes and how they may be exercised, can be found on the Company's website at www.jpmasian.co.uk and in the Company's Annual Report. Subscription shareholders will receive written notice of their possible courses of action in February 2014.

I draw shareholders' attention to the resolutions proposed at the Annual General Meeting and at a Separate General Meeting, which if passed will, amongst other permissions, amend the Company's Articles of Association to permit any outstanding Subscription shares to be converted into 'Deferred Shares' and subsequently cancelled by the Company. I refer shareholders to the explanatory notes and the appendix section in the Company's Annual Report for full details.

Performance Fee

As the Company's NAV total return outperformed the benchmark, this has resulted in a positive performance fee calculation of £95,000. This has marginally decreased the accumulated negative performance fee to £8.5 million which must be made good by future outperformance before any performance fee can be accrued or paid.

Gearing

During the year the Company's £30 million multi‑currency loan facility with ING Bank expired and has recently been replaced with a £25 million three year multi-currency loan facility with Scotiabank.

Board of Directors

The Board has procedures in place to ensure that the Company complies fully with the AIC Code on Corporate Governance and the UK Code on Corporate Governance.

In accordance with corporate governance best practice, all Directors will be retiring and seeking re‑election at the Company's forthcoming Annual General Meeting. The Nomination Committee met formally to evaluate the effectiveness of the Board as a whole and of each individual Director and is satisfied that all retiring Directors possess the knowledge and attributes required of a Director for this Company. Accordingly, the re-elections of all Directors at the forthcoming Annual General Meeting are recommended to shareholders.

The Company recently announced the appointment of Mrs Bronwyn Curtis OBE as a non‑executive Director with effect from 1st September 2013. Mrs Curtis was appointed following the retirement of Dr Linda Yueh from the Board on 31st March 2013. Details of Mrs Curtis' experience and qualifications can be found in the Company's Annual Report. Mrs Curtis will be standing for election at the Annual General Meeting and her fellow Directors strongly recommend that shareholders vote in favour of the resolution for her appointment.

The Board is resolved to continue to refresh its composition in an orderly manner over time and I will report further on specific developments in my 2014 half year statement.

Alternative Investment Fund Management Directive ('AIFMD')

The AIFMD is a European Union Directive which creates a European‑wide framework for the regulation of managers of all 'alternative investment funds', including investment trusts. This Directive, whose declared aim is to provide additional protection for investors, came into force in the UK on 22nd July 2013, albeit with a one‑year transitional period. For investment trusts, which are already able to demonstrate far higher levels of governance and transparency than open ended funds, the Directive would appear unlikely to introduce any increased protection for shareholders, but we have to comply with it by 22nd July 2014. Compliance with the AIFMD will have an impact on some of the Company's operations, as well as the contractual arrangements between the Company and its Manager. The Company will be entering into arrangements with an affiliate of JPMAM to act as its 'Alternative Investment Fund Manager', at no additional cost to the Company. The Directive also requires the appointment of a depository, which will result in extra administration fees for your Company.

Annual General Meeting

This year's Meeting will be held at Holborn Bars, 138-142 Holborn, London EC1N 2NQ on Friday, 31st January 2014 at 10.30 a.m. In addition to the formal proceedings, there will be a presentation by Ted Pulling, one of the Company's investment managers and, as mentioned above, the Chief Investment Officer for JPMAM in Asia, who will also be available to respond to questions on the Company's portfolio, the investment team's strategy and the outlook for Asian markets. Following the Meeting there will be an opportunity for shareholders to meet the Board, Mr Pulling and other Company advisers and I look forward to seeing as many of you as possible.

Outlook

I wrote last year that global uncertainties would continue to overshadow markets in 2013. Looking forward to 2014 it would appear that many of the same global uncertainties are as yet unresolved, whether it be the recovery of Europe from the debt crisis, the US fiscal cliff or whether the Chinese leadership will be able to deliver sustainable growth. Both the Board and investment managers are cautiously optimistic that the global economy is gradually recovering, although challenges remain. Asian equities remain attractively valued at current levels and your investment managers are confident of finding interesting investment opportunities for the Company.

James M Long

Chairman

12th December 2013

Investment Managers' Report

While the Company's financial year ended September 2013 concluded satisfactorily with a 6.4% diluted return on net assets and 130 basis points of outperformance, the period under review was a tale of two halves. For the first six months absolute gains were strong and the portfolio outperformed by a decent margin. During the second six months, however, a proportion of these gains were relinquished.

Market Review

Asian stock markets marked the end of calendar year 2012 with strength. The government transition in China passed smoothly. Asean economies continued to register robust economic growth in the 5-7% range. Tail risk in America and Europe was sharply lower, even if economic growth was anemic, allowing global equity valuations to trade to the upper end of their range. Overall sentiment in Asia was perky as investors looked ahead to a better 2013 during which earnings growth would accelerate.

The momentum carried into 2013. In particular, the property market in China defied the doomsayers, as volumes and prices all clocked solid year-on-year gains. The new government initiated a serious crackdown on corruption, which dented demand for consumer items, but overall the mainland economy seemed to be on a stronger footing. Foreign buying of Asian equities and fixed income was strong across the board except in Korea (due to benchmark selling by the investor Vanguard). Equally importantly, the improvement in risk appetite manifested itself in greater demand for stocks with growth attributes rather than the high dividend stocks or expensive quality names which had been preferred in previous years.

The ascent of markets stalled in May when Fed Chairman Ben Bernanke mooted the subject of tapering. The prospect of less quantitative easing, and the reality of the US Ten Year bond yield backing up sharply to the 3% level, instantly deflated risk appetite and spooked markets. The Asean economies and India, all at the end of strong credit cycles and generally experiencing deteriorating current account deficits, underperformed. Compounding the misery was currency depreciation, in particular the Indian Rupee and the Indonesian Rupiah. Foreign flows, which had been extremely positive since 2009 for global emerging markets, suddenly turned negative.

By the end of the Company's financial year, stock markets had stabilised and regained some of the Summer losses. Asian governments enacted some sensible policies designed to address their current account deficits. Meanwhile, the prospect of a US Government shutdown and the ensuing damage wrought on the American economy pushed back the arrival of tapering. Bond yields fell and a modicum of confidence returned to markets. A worldwide recovery in certain indicators was further confirmation that the global economy is healing, albeit grudgingly, which should bode well for earnings in 2014.

On the subject of earnings, from mid 2011 until the time of writing, investors in Asian equities have had to contend with constant downward revisions. Absent durable and faster earnings growth, it will be hard for equities in Asia to re-rate above the ongoing range of 1.5-1.8x trailing price to book value. All of this stands in contrast to developments in America and Europe, where earnings forecasts have held up much better and market valuations have re-rated to higher levels.

Performance review

During the year, the Company outperformed against its benchmark. That said, the longer term performance numbers are still poor and require significant improvement. The year under review was the start of that essential process.

Dissecting 2013's outperformance, one can see that a few key factors and decisions heavily influenced the outcome. To understand the performance and how the investment managers work together with the larger team, we can select a few key areas for closer examination:

The biggest detractor from performance was India. At the start of the year, the portfolio was in retrospect overweight this market, and was heavily weighted in high quality, private sector financials like HDFC Bank, IDFC and Indusind Bank. While the companies themselves were executing well - strong earnings growth, rising market share, excellent credit controls - the returns to the Company were materially reduced by Rupee depreciation. After Mr Bernanke's speech in May, an unexpected concatenation of events occurred, featuring a surprise hike in interest rates by the Reserve Bank of India and more currency losses, which resulted in heavy foreign selling of precisely the shares held within the Company's portfolio. Shareholders may gain cold comfort knowing that the positioning of the Company in Indian financial stocks replicated the positioning of JP Morgan's dedicated India funds. As Indian equities staged a recovery in August, we realigned the portfolio's sector exposure by increasing the weight in technology which earns revenues in Dollars, thereby benefitting from a weak Rupee.

On a more positive note, early in the second quarter we reduced the exposure to Asean stock markets. In particular, racier stocks in the property and infrastructure sectors were sold and replaced by more staid 'Dollar earners' given our expectation of currency depreciation. This portfolio de-risking in Asean protected a material proportion of the outperformance which had been generated in the previous year, ensuring that, overall, Asean was a positive contributor to performance over the year. The decision to de-risk was expertly led by the Asean team in Singapore and implemented across all portfolios. At the time, it was clearly contrarian to wider market views. Subsequently, it contributed materially to the improvement in competitor rankings.

Finally, the portfolio generated creditable outperformance in the Greater China markets over the period. Rather than participate in the ideological debates about China's economy and geopolitics and social issues, our objective has been simply to make money for clients in this dynamic sub-region. We have focused on valuations and mainland consumption. By doing so, stocks and sectors like Tencent and Macau casinos and Chinese auto companies have contributed to outperformance. Despite widespread concern in relation to Chinese property companies, we were overweight in a select few of such stocks, all of which reported very strong operational and earnings growth.

In summary, during what was problematic year, we navigated the markets satisfactorily. Portfolio construction in India was disappointing but the portfolio performed well elsewhere. Guided by our country specialists, all of whom manage dedicated country funds, stock selection for your Company was generally good, especially in Greater China and Asean. It is important for shareholders to understand that this portfolio is a reflection of the inputs of an entire team in Asia. The Company's named investment managers focus primarily on portfolio construction and risk management while communicating on a daily, if not more frequently basis with colleagues around the region. Every stock in this portfolio is owned and endorsed by country specialists, ensuring that corporate knowledge is both broad and deep and that there are always eyes on the share prices.

Portfolio positioning and Outlook

Looking into 2014, we are cautiously optimistic, and have positioned the portfolio to benefit from certain areas of strength and to avoid areas of weakness. The asset allocation can be encapsulated in a few key points:

We believe that the global economy is gradually re-accelerating. Recent Purchasing Managers Index data ('PMI') in Europe, America, Japan and China all indicate this. However there are headwinds, most notably ham-fisted government policies in developed markets, deleveraging globally, and widespread overcapacity in certain sectors. Overall, though, we think that tail risk is diminished and that economic growth can slip into a higher gear. A recovery in trade would be particularly beneficial to North Asia.

In Asia, certain political events will influence markets over the next year. Already, the Third Plenum has concluded in China. While implementation is key, the Plenum unveiled numerous reforms to include: the 'marketisation' of sectors dominated by state owned enterprises, reforms aimed at addressing China's woeful environmental problems, and it introduced new policies aimed at alleviating social burdens in the areas of land supply (rural land reform), migration (Houkou reform) and population growth (liberalising the One Child Policy). Overall, the Third Plenum has caused 'perma-bears' to re-evaluate their ideological approach to China, with many investors already panicking to reduce their underweight allocations to this market. We remain comfortably and opportunistically overweight China but we are certainly not complacent. Moreover, both India and Indonesia will have national elections ushering in new leaderships in 2014. Expectations in India have been rising as the campaign of Narendra Modi, the Chief Minister of Gujarat, has started surprisingly well. Indian infrastructure investment has ground to a halt: Modi is the man to revive it. No matter who is the next leader of Indonesia, this individual will have to enact many long overdue reforms if the Archipelago is to maintain its strong economic growth.

As mentioned above, pedestrian earnings growth in Asia has been the problematic norm for three years running, punctuated by all too frequent downward revisions. Expectations for 2014 are subdued. The market expects 12-14% earnings growth after about 9% in 2013. That means that Europe and America are expected to enjoy equal, if not stronger earnings growth in 2014, even if their economic growth is a fraction of Asia's. Of course, earnings growth for all of Asia is not entirely relevant. As we found in 2013, locating the pockets of real strength, priced attractively, is the essential task for the investment team. Finally, one should not forget that Asian equities are reasonably valued. Trading on a forward earnings multiple of less than 12x and on a price book value of 1.6x, Asia looks cheap, both historically and when compared to America and Europe.

We have reflected our outlook in the portfolio by being more heavily tilted toward North Asia and less exposed to Asean and India than previously. The former is better positioned for a global economic recovery, benefitting more from a trade resurgence, and generally has a stronger 'balance sheet' i.e. current account surpluses and sounder government finances. Countries within the Asean region and India need to address their inflation and current account surplus problems. Another key factor is valuation. Stocks in North Asia are cheaper and less owned than their more expensive and over owned peers in South Asia and India. Of course, asset allocation is dynamic and the Company will invest in the best single stock ideas generated by our country specialists.

Ted Pulling

Sonia Yu

Jeff Roskell

Investment Managers

12th December 2013

Strategic Report

Principal Risks

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 and Strategy: An inappropriate investment decision, in areas such as asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, and may result in the Company's shares trading on a wider discount. The Board seeks to mitigate these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analysis, revenue estimates and shareholder analysis. The Board monitors the implementation and results of the investment process with the investment managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Manager employs the Company's gearing tactically, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.

•     Market: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by the Manager. The Board monitors the implementation and results of the investment process with the Manager.

•     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 Company's Annual Report. Were the Company to breach Section 1158, it might 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 JPMAM 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. 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 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, JPMAM, to ensure compliance with the Companies Act 2006 and the UKLA Listing Rules.

•     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 report in the Company's Annual Report.

•     Operational: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included with the Internal Control section of the Corporate Governance report in the Company's Annual Report.

•     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.

•     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 Company's Annual Report.

•     Financial: The financial risks faced by the Company include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Further details are disclosed in note 23 in the Company's Annual Report.

•     Political and Economic: Changes in financial or tax legislation, including in the European Union, may adversely effect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to political risks, such as the imposition of restrictions on the free movement of capital.

Related Parties 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 financial statements, and the Directors' Remuneration Report 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 prepared 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 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 must be satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable and provide the information necessary for shareholders to assess the performance, business model and strategy of the Company; and 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 they have done so. 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 performance, business model and strategy of the Company.

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 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.

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

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

Each of the Directors, whose names and functions are listed in the Directors' Report, 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 fair, balanced and understandable view of the assets, liabilities, financial position and return or loss 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.

For and on behalf of the Board
James M Long
Chairman

12th December 2013

Income Statement

for the year ended 30th September 2013

	2013			2012
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through profit or loss	-	12,349	12,349	-	30,475	30,475
Net foreign currency losses	-	(984)	(984)	-	(87)	(87)
Income from investments	5,704	-	5,704	7,744	-	7,744
Other interest receivable and similar income	2	-	2	5	-	5
Gross return	5,706	11,365	17,071	7,749	30,388	38,137
Management fee	(1,382)	-	(1,382)	(2,216)	-	(2,216)
Management fee contribution	-	1,135	1,135	-	-	-
Other administrative expenses	(729)	-	(729)	(726)	-	(726)
Net return on ordinary activities before finance costs and taxation	3,595	12,500	16,095	4,807	30,388	35,195
Finance costs	(355)	-	(355)	(262)	-	(262)
Net return on ordinary activities before taxation	3,240	12,500	15,740	4,545	30,388	34,933
Taxation	(291)	(251)	(542)	(709)	-	(709)
Net return on ordinary activities after taxation	2,949	12,249	15,198	3,836	30,388	34,224
Return per Ordinary share - diluted	2.63p	10.94p	13.57p	2.44p	19.32p	21.76p
Return per Ordinary share - undiluted	2.64p	10.96p	13.60p	2.43p	19.24p	21.67p

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

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

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies. 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 2011	42,196	26,679	977	6,002	79,874	173,517	4,292	333,537
Repurchase of the Company's own Ordinary shares for cancellation	(5,620)	-	-	5,620	(45,375)	-	-	(45,375)
Exercise of Subscription shares into Ordinary shares	(32)	32	-	-	-	-	-	-
Issue of Ordinary shares on exercise of Subscription shares	793	4,792	-	-	-	-	-	5,585
Net return on ordinary activities	-	-	-	-	-	30,388	3,836	34,224
Dividends appropriated in the year	-	-	-	-	-	-	(3,675)	(3,675)
At 30th September 2012	37,337	31,503	977	11,622	34,499	203,905	4,453	324,296
Repurchase of the Company's own Ordinary shares for cancellation	(12,048)	-	-	12,048	(34,499)	(69,822)	-	(104,321)
Repurchase of Subscription shares for cancellation	(12)	12	-	-	-	(339)	-	(339)
Issue of Ordinary shares on exercise of Subscription shares	3	24	-	-	-	-	-	27
Expenses in relation to Tender offers	-	-	-	-	-	(337)	-	(337)
Net return from ordinary activities	-	-	-	-	-	12,249	2,949	15,198
Dividends appropriated in the year	-	-	-	-	-	-	(3,068)	(3,068)
At 30th September 2013	25,280	31,539	977	23,670	-	145,656	4,334	231,456

Balance Sheet

at 30th September 2013

	2013	2012
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	230,588	314,574
Current assets
Financial assets: Derivative financial instruments	-	106
Debtors	1,573	269
Cash and short term deposits	6,829	12,066
	8,402	12,441
Creditors: amounts falling due within one year	(7,534)	(2,714)
Financial liability: Derivative financial instruments	-	(5)
Net current assets	868	9,722
Total assets less current liabilities	231,456	324,296
Net assets	231,456	324,296
Capital and reserves
Called up share capital	25,280	37,337
Share premium	31,539	31,503
Exercised warrant reserve	977	977
Capital redemption reserve	23,670	11,622
Other reserve	-	34,499
Capital reserves	145,656	203,905
Revenue reserve	4,334	4,453
Total equity shareholders' funds	231,456	324,296
Net asset value per Ordinary share - diluted	227.8p	216.8p
Net asset value per Ordinary share - undiluted	229.6p	217.6p

The accounts were approved and authorised for issue by the Board of Directors on 12th December 2013 and were signed on their behalf by:

James M Long

Director

 Company registration number: 3374850.

Cash Flow Statement

for the year ended 30th September 2013

	2013	2012
	£'000	£'000
Net cash inflow from operating activities	3,866	3,686
Returns on investments and servicing of finance
Interest paid	(348)	(298)
Taxation recovered	40	-
Capital expenditure and financial investment
Purchases of investments	(247,274)	(302,129)
Sales of investments	343,082	341,357
Settlement of futures contracts	839	(1,896)
Other capital charges	(41)	124
Net cash inflow from capital expenditure and financial investment	96,606	37,456
Dividends paid	(3,068)	(3,675)
Net cash inflow before financing	97,096	37,169
Financing
Net drawdown/(repayment) of bank loans	6,966	(8,054)
Issue of Ordinary shares on exercise of Subscription shares	27	5,585
Repurchase of Ordinary shares for cancellation	(107,207)	(42,826)
Repurchase Subscription shares for cancellation	(339)	-
Net cash outflow from financing	(100,553)	(45,295)
Decrease in cash in the year	(3,457)	(8,126)

Notes to the Accounts

for the year ended 30th September 2013

1.    Accounting policies

      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.

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

2.   Dividends

      Dividends paid and proposed

		2013	2012
		£'000	£'000
	Dividend paid
	2012 final dividend of 2.4p (2011: 2.2p)1	2,564	3,675
	2012 special dividend of 0.5p (2011: nil)2	504	-
	Total dividends paid in the year	3,068	3,675
	Dividend proposed
	2013 final dividend proposed of 2.6p (2012: 2.4p)	2,622	3,576
	Total dividends proposed for the year	2,622	3,576

          1        The final dividend disclosed for the year ended 30th September 2012 was £3,576,000, however, the actual payment amounted to £2,564,000 due to share buybacks after the balance sheet date but prior to the share register record date.

          2        Due to the reduction of the Company's share capital, following a 24.99% Tender Offer in November 2012, and the subsequent reduction in the amount distributed to Shareholders, Directors declared an additional dividend of 0.5 pence per share in respect of the Company's financial year ended 30th September 2012.

      The final dividend proposed in respect of the year ended 30th September 2013 is subject to 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 2014.

		2013	2012
		£'000	£'000
3.	Return per Ordinary share
	Return per Ordinary share is based on the following:
	Revenue return	2,949	3,836
	Capital return	12,249	30,388
	Total return	15,198	34,224
	Weighted average number of Ordinary shares in issue during the year used for the purpose of the diluted calculation	111,939,781	157,246,781
	Weighted average number of Ordinary shares in issue during the year used for the purpose of the undiluted calculation	111,745,277	157,910,701
	Diluted
	Revenue return per Ordinary share	2.63p	2.44p
	Capital return per Ordinary share	10.94p	19.32p
	Total return per Ordinary share	13.57p	21.76p
	Undiluted
	Revenue return per Ordinary share	2.64p	2.43p
	Capital return per Ordinary share	10.96p	19.24p
	Total return per Ordinary share	13.60p	21.67p

      The diluted return per Ordinary share represents the return on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the year as adjusted in accordance with Financial Reporting Standard 22 'Earnings per share'.

		2013	2012
4.	Net asset value per Ordinary share
	Diluted
	Ordinary shareholders' funds assuming exercise of Subscription shares (£'000)	246,180	341,645
	Number of potential Ordinary shares in issue	108,082,485	157,553,781
	Net asset value per Ordinary share (pence)	227.8	216.8
	Undiluted
	Ordinary shareholders' funds (£'000)	231,456	324,296
	Number of Ordinary shares in issue	100,829,335	149,007,517
	Net asset value per Ordinary share (pence)	229.6	217.6

      The diluted net asset value per Ordinary share assumes that all outstanding Subscription shares were converted into Ordinary shares at the year end.

5.   Status of announcement

2012 Financial Information

      The figures and financial information for 2012 are extracted from the Annual Report and Accounts for the year ended 30th September 2012 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes 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 Registrar of Companies in due course.

2013 Financial Information

      The figures and financial information for 2013 are extracted from the Annual Report and Accounts for the year ended 30th September 2013 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes 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 Registrar 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 ASSET MANAGEMENT (UK) LIMITED

- ENDS -

Annual Report and Accounts

      The Annual Report and Accounts will be posted to shareholders on or around 19th December 2013 and will shortly be available on the Company's website (www.jpmasian.co.uk ) or in hard copy format from the Company's Registered Office, Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ. A copy of the annual report will also shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmasian.co.uk.

For further information please contact:

Alison Vincent

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary - 020 7742 4000

12th December 2013

 

END

 

 

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