Half-year Report

JPMorgan China Growth & Income PLC

26 May 2023

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CHINA GROWTH & INCOME TRUST PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST MARCH 2023

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 2023.

Chairman's Statement

Performance

After a long challenging period, Chinese stock markets greeted with relief the Chinese government's decision to reverse course in several key policy areas during the six months ended 31st March 2023. The most prominent change was the unexpected, immediate end of the government's Covid-zero policy. As a result, the MSCI China Index rose, increasing 7.3% on a total return basis (in sterling terms) during the period. Your Company's total return on net assets (with net dividends reinvested) marginally outperformed this benchmark, rising 7.9% during the six months ended 31st March 2023. Over the same period, the total return to shareholders was +9.7%, reflecting the narrowing of the discount to net asset value ('NAV') at which the Company's shares trade, from 11.6% at the previous financial year end to 10.2% at the half year end.

The relative outperformance to the benchmark index is explained in the Investment Managers' 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 Investment 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 13.3% to 19.9%, ending the half year at 15.8%.

The Company has a £60 million loan facility with The Bank Nova Scotia. As at 31st March 2023, £52.7 million of this facility was drawn down. As this facility expires in July 2023, the Board is currently considering its renewal.

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 3rd October 2022, the Company announced that the cum income Net Asset Value at the close of business on 30th September 2022 (the Company's year-end) was 341.62 pence per share. In line with the Company's distribution policy, the Directors declared the first quarterly interim dividend of 3.42 pence per share. Since then, two further dividend declarations have been made on 4th January 2023 and 1st April 2023, both of 3.42 pence per share. With the planned declaration of the final quarterly dividend of 3.42 pence per share on 3rd July 2023, the 2023 annual dividend will be 13.68 pence per share (2022: 22.8p).

Continuation Vote and Conditional Tender Offer

I am pleased to report that, at the Company's Annual General Meeting held in February 2023, shareholders voted in favour of the Company's continuation as an Investment Trust for a further five-year period. We thank shareholders for their ongoing support. The next continuation vote will be held in early 2028.

The Company's previous conditional tender offer for the five years ended 30th September 2022 was not triggered as the Company's NAV total return significantly outperformed the benchmark total return during this five-year period. Following careful consultation with the Company's largest shareholders and its advisers, the Board has decided to renew the conditional tender offer for up to 15% of the Company's issued share capital at a price equal to net asset value less costs if, over the next five years (from the start of the current financial year, being 1st October 2022), the NAV total return underperforms the benchmark total return.

Share Issuance during the Period

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.

Changes to the Investment Management Team

As previously announced in April 2023, the Co-Investment Manager, Howard Wang, has relocated from JPMorgan's Hong Kong office to its Taipei office. Due to regulatory requirements, he is no longer listed as an Investment Manager of the Company and instead is listed as an Investment Advisor. Based in Hong Kong, Rebecca Jiang is now Lead Investment Manager of the Company. She has managed the Company's investments with Howard for six years and is well known to our shareholders via her AGM presentations to shareholders and her regular webcasts. Li Tan, also based in Hong Kong, will be added as a named Investment Manager of the Company alongside Rebecca. They will continue to work closely with Simmy Qi, who is based in Shanghai.

It is also worth noting that JPMorgan Asset Management received regulatory approval earlier this year to complete the acquisition of China International Fund Management, which has now been rebranded JPMorgan Asset Management China. This provides our portfolio managers with additional, locally-based investment resources.

Shareholders should note that there are no changes to the Company's investment process nor to JPMorgan's Greater China team structure. Howard Wang continues working with JPMorgan's research analysts and providing investment advice to the named Investment Managers. He also remains in his role as Head of the JPMorgan Greater China team, with ongoing responsibilities for the JPMorgan Greater China Growth strategies with Rebecca Jiang and Li Tan supported by Simmy Qi.

Reporting under the Task Force on Climate Related Financial Disclosures

In accordance with the requirements of the Taskforce on Climate Related Financial Disclosures ('TCFD'), JPMorgan Asset Management will provide product level reports for the investment trusts it manages in late June 2023 and annually thereafter. The report for the Company will be made available on the Company's website.

Outlook and Strategy

The ongoing conflict between Russia and the Ukraine and its broader impact continues to overshadow global geopolitics, macroeconomics and stock markets. Since March, Chinese stock markets have been volatile, buffeted by fragile business and consumer confidence, global macroeconomic concerns and continuing fundamental disagreements between China and the US. China's economic outlook, however, is in sharp contrast to expectations for other major economies, with inflation in China remaining low, interest rates trending down, and the government forecasting 5% GDP growth in 2023. Our Investment Managers report that valuation signals are attractive compared with historical averages and suggest that a sustained recovery in Chinese equity prices is in prospect, with the main driver of future stock performance likely to be renewed earnings growth. Supported by a well-resourced research team in Hong Kong, Shanghai and Taiwan, our Investment Managers continue to find well managed companies to invest in that are consistent with the structural growth bias of the investment strategy. We remain confident that our investment strategy, combined with careful stock picking and supported by the depth of resources in our investment team, will enable us to deliver superior long-term total returns.

Alexandra Mackesy

Chairman                                                                                                                                           26th May 2023

INVESTMENT MANAGERS' REPORT

Introduction

During the six months to 31st March 2023, JCGI delivered a total return on net assets of 7.9% (in sterling terms), compared to the benchmark return of 7.3%. This positive performance follows a challenging time for the Company in the last financial year ended 30th September 2022. However, in our view, it is more meaningful to assess performance over longer timeframes. On this basis, the Company has made positive absolute returns and outperformed the benchmark over three, five and ten years. Over the ten years to end March 2023, it made an average annualised return of 9.8%, versus a benchmark return of 5.7% on the same basis.

Setting the scene

In the past six months, the Chinese government reversed course in several key policy areas. The most prominent change was its surprisingly sudden exit from its Covid-zero policy at the end of November 2022, when it removed all domestic travel restrictions and lockdown requirements. Although Covid swept rapidly through the population early in 2023, this has not derailed the rebound in economic activity. The recovery in service sector activities such as travel and dining out has been particularly notable.

The Chinese government also changed tack in its approach to the property market, becoming more supportive of the sector, although it has not abandoned its position that "properties are for living in, not for speculation". On the supply side, developers' access to onshore credit and equity markets has improved thanks to government guidance. On the demand side, mortgage rates are near a 20-year low, while local governments removed certain purchase restrictions in many Chinese cities. The sector still has legacy issues such as unfinished new housing projects, which we do not expect to dissipate quickly, but we are nonetheless pleased to see signs of a recovery in transaction volumes. For example, total residential property sales in Q1 2023 rose 4% on a year-on-year basis. The recovery in activity has been particularly strong in large cities such as Beijing and Shanghai. All this suggests a significant reduction in systemic risk within the sector, although we remain cautious about the long-term demand for housing in China.

As well as improved access to financing for property developers, there has been a more general easing in credit provision during the review period. China's Central Bank cut the reserve requirement ratio (RRR) for banks twice, by a total of 50 basis points during the six months to end March 2023, lowering it to a weighted average of 7.6% for financial institutions. As a result, the so-called 'credit impulse' (defined as new credit flowing to the economy, as a percentage of GDP) began to increase at the beginning of 2023. We expect monetary and fiscal policies to remain supportive for the rest of this year, while the deployment of additional stimulus measures will depend on the speed of the recovery.

There has also been a marked shift in government policies towards a more pro-growth, pro-business stance. The central government has given guidance intended to promote private enterprises and restore confidence after three years of stringent Covid restrictions and sudden, harsh regulatory crackdowns on certain sectors. For example, pressures on the internet services sector have eased. Regulators concluded cyber-security reviews of Didi, a provider of ride-hailing, e-bike and food delivery services, and two other internet platform companies, allowing them to resume new user registrations. After an eight-month hiatus, regulators recommenced the issuance of licences to gaming companies in mid-2022, and the monthly approvals of new titles and related content are now back at levels comparable to those seen before the August 2021 crackdown on on-line gaming. Within the public sector, new initiatives to encourage reform amongst state owned enterprises include targets for return on equity, operating margins and the use of leverage, which will, hopefully, improve performance and returns over time.

There was also positive news regarding US investors' capacity to invest in Chinese equities. American Depositary Receipts (ADRs) provide US investors with the means to purchase otherwise inaccessible foreign equities. They trade on US stock markets in the same manner as domestic shares. The market for Chinese ADRs has been subject to significant uncertainty for some time, due to China's reluctance to allow US regulators full access to the audit reports of Chinese listed companies. Investors in both China and the US therefore welcomed the news that China's financial regulators have agreed to grant US regulators the audit access. Following the successful conclusion of an initial round of audit inspections, it seems the risk that the US will de-list Chinese ADRs has fallen significantly.

The past six months have also been very eventful on the political front. At the Chinese Communist Party's 20th Congress, China's President Xi secured a third term in office and ensured the new Politburo Standing Committee consisted entirely of his supporters. However, we are pleased that all the top economic policymaking positions were allotted to well-regarded technocrats. The Congress highlighted several themes relevant to equity investors. Foremost amongst these was an increased emphasis on national security, which stretched beyond the traditional notion of territorial and sovereign security, to encompass the need for self-sufficiency in the form of reliable supply chains and the domestic technology advancement. As a result of this edict, we will be especially watchful for opportunities to invest in companies that benefit from increasing import substitution, and those businesses least susceptible to US bans on the export of key technology to China. The Congress also emphasised the importance of data collection and digitalisation. This theme was underscored by the establishment of a new National Bureau of Data, whose mandate includes strategic nationwide initiatives to encourage the development of the digital economy. We expect the government to step up support for related industries, including semiconductor production and enterprise digitalisation. A further important outcome from the Congress was a re-affirmation of the government's commitment to achieve carbon neutrality by 2060. Many of JCGI's holdings are already implementing strategies to ensure their operations are consistent with this and related targets and this will remain a key factor in our investment decisions going forward.

Performance commentary

During the six months to 31st March 2023, sector allocation contributed negatively by 3.9%. This was offset by the collective positive attribution from stock selection and gearing.

Information technology made the most positive attribution thanks to our holdings in Chinese software names such as Beijing Kingsoft Office, Hundsun Technologies, Shanghai Baosight and Glodon. The software sector and selected hardware companies were perceived as large language model (LLM) beneficiaries. Hundsun Technologies' outperformance can also be attributed to normalization of on-site software implementation to the financial industries after disruptions caused by the pandemic. Real estate also contributed positively thanks to strong execution by China Resources Mixc Lifestyle during the pandemic as well as KE Holdings thanks to low valuations, share buybacks and the improved outlook for property transactions.

The biggest detractors unfortunately came from our positions in the consumer discretionary sector. Our overweights in JD and Meituan hurt performance, as both were subject to increasing competition post reopening which delayed the track to higher profitability that we originally forecast. Our underweight position in Alibaba also hurt. Communication services detracted due to our structural underweight in Tencent (i.e. the benchmark's weighting is higher than our own investment limit) and not owning Chinese telecom companies which traded up on expectation of reforms within state owned enterprises (SOE) as well as increasing data center and cloud consumption driven by LLM adoption.

Sector allocation and transactions

We maintained overweights in areas with the most favourable secular growth prospects, notably information technology (IT) and healthcare, while maintaining underweights to financials and consumer discretionary. However, we did add some new names, and topped-up some existing positions, in response to recent U-turns in the government's policies on internet companies, Covid restrictions and the property sector.

Within IT, we continue to find plenty of opportunities to invest in companies with very favourable long-term growth prospects. We added to existing positions in Montage, a global leader in the production of specialist semiconductors, and Hundsun Technologies, a software company serving financial institutions in securities and asset management. These are now our two largest IT positions. In the hardware space, we purchased BOE Technology, a leading manufacturer of display panels. BOE's competitive landscape has improved, as several other players exited the market during the downturn. We funded this purchase by selling Advanced Micro Fabrication (AMF) and Mediatek. AMF is a semiconductor equipment maker which we sold due to concerns that it may be adversely impacted by US tech bans to its key clients. We exited Mediateck, a chipmaker for Android phones, on lower valuation signals and poor demand for Android phones. In the software sector, we sold cybersecurity company DBAPP Security, due to concerns about its governance practices, and ZWSOFT, a computer aided design (CAD) software provider that has disappointed us in its execution. We also reduced our holding in Beijing Kingsoft Office, a producer of office software, after a rally in its share price. We continue to like the company as it is widely perceived as a beneficiary of LLM such as Open AI, as better AI functions embedded in Kingsoft Office products can potentially increase future customer paying ratios.

In the ecommerce space, we maintained significant positions in Tencent and Netease, but reduced our exposure to Meituan and JD, due to concerns that heightened competition and increasing promotions may slow progress towards higher margins. We took some profits on our holding in e-commerce platform PDD (formerly known as Pinduoduo) on valuation grounds, as the stock outperformed in 2022. During the review period, we rebuilt a position in Alibaba. This company is restructuring itself into six business units which, if floated separately, may be value accretive for shareholders. However, we remain underweight this stock due to our conservative view on Alibaba's ability to regain growth momentum in its core ecommerce space as it has been losing market share in ecommerce in the format of livestreaming and competitors like PDD.

In healthcare, we maintained largest positions in Wuxi Biologics and Shenzhen Mindray. We initiated a new position in Imeik Technology, a manufacturer of aesthetics cosmetic fillers and botox products. We also added to our existing position in Angelalign Technology, a manufacturer of transparent dental alignment products. We expect both these companies to benefit from the recovery in discretionary spending on healthcare services. In addition, we foresee scope for both businesses to expand their product offering, which will help them gain market share over the long term. On the other hand, we streamlined our holdings in some healthcare names, exiting or reducing positions where our level of conviction has decreased. This includes medical device makers Broncus Holding, Kangji Medical Holdings and Venus Medtech Hangzhou. We also took profit on Beigene, a cancer drug developer, after its share price rose following China's re-opening.

In the broad universe of consumption-related companies, although we are underweight consumer discretionary as a sector, Trip.com, China's largest online travel agency (OTA), remains one of the Company's largest holdings. We also initiated two new positions in Chinese liquor companies, Wuliangye and Luzhou Laojiao. Both these businesses are positioned at the premium end of the market and have incentive systems in place to encourage management to drive their businesses forward in innovative ways. Another new position is Jiumaoujiu International, a casual dining chain running three Chinese brands. This company demonstrated great operational resilience during the pandemic and is well-positioned to benefit now that restaurants have re-opened. We expect its multi-brand strategy to drive mid- to long-term growth.

China's reopening also prompted us to add to several existing service sector positions, including H World, the country's largest mid-priced hotel chain. This company implemented cost savings during the pandemic and is now experiencing a strong recovery in occupancy rates and revenues which should boost bottom line growth. We also built a position in Focus Media, an advertising agency specialising in lift spaces, as we expect the rebound in activity to translate into larger marketing budgets later this year. Like H World, Focus Media also underwent rigorous cost cutting during Covid. However, we exited Chongqing Brewery and Proya Cosmetics as both outperformed in 2022 and we expect future returns to weaken. In the case of Chongqing Brewery, there is also the risk of higher input price pressures this year.

The portfolio is modestly overweight real estate, and we maintained our key holding in China Resources Mixc, and built a new position in KE Holdings. This acquisition was motivated by our expectation that KE Holdings will benefit from the recovery in property transactions, especially in the secondary market. It is also likely to gain market share, as several smaller competitors did not survive the property downturn. The company boasts a strong balance sheet, good capital allocation and a lean cost structure.

Finally, we continue to like electric vehicles (EVs) and renewables, but we made some changes to our holdings in these sectors. We sold Contemporary Amperex Technology (CATL), a producer of batteries for EVs and other uses. EV manufacturers are cutting their prices aggressively and we were concerned that this will adversely impact CATL's returns as auto manufacturers seek to reduce the cost of their inputs to help compensate for lower vehicle prices. We also disposed of Xpeng, an EV car manufacturer, as our conviction in this company diminished. These sales were used to fund the acquisition of Ningbo Tuopu, an auto component maker seeing strong demand from Tesla. In the renewable energy space, we have large holdings in Suzhou Maxwell and Zhejiang Jingsheng. Both these companies are solar equipment makers with high technical barriers to entry. We expect both to benefit from ongoing technological improvements and greater production capacity.

Performance attribution

For the six months ended 31st March 2023

	%	%
Contributions to total returns
Benchmark Return		7.3
Sector allocation	-3.9
Stock allocation	1.9
Currency effect	1.3
Gearing/Cash	2.2
Investment manager contribution		1.5
Dividends/residual	-0.4
Portfolio return		8.4
Management fee/other expenses	-0.5
Return on net assetsA		7.9
Impact of change in discount		1.8
Return to shareholdersA		9.7

Source: FactSet, JPMAM and Morningstar.

All figures are on a total return basis.

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

^A        Alternative Performance Measure ('APM').

Outlook

The global economy is facing ongoing challenges - record inflation, high, and possibly still rising, interest rates, and a resultant slowdown in growth, which may drift into recession in some countries. This is in sharp contrast to China's economic outlook, where inflation measured by CPI is 1.3% for 1Q 2023, the five year loan primary rate is down 4.3% from 4.6% a year ago, and the government is targeting GDP growth of around 5% during 2023. This is considered conservative by some market observers, but in our view, it is a reasonable goal given the headwinds faced by developed economies and the impact this will have on demand for Chinese exports. We expect consumption to be the main driver of Chinese GDP growth. Service sector activity is already rebounding strongly and certain industry data, such as trips made by high-speed rail, have surpassed their pre-pandemic levels.

However, the recovery in demand for big-ticket household items and cars is likely to be more gradual, as the property market remains lukewarm, the labour market is still slack and the demand for vehicles was front-loaded into 2022 thanks to government subsidies. The contribution from investment is also likely to be modest, as it is coming off a high base following last year's surge in public infrastructure investment, which was intended to support growth. In addition, new home starts will be slow to increase as developers are still repairing their balance sheets. The official GDP growth target may also assume a decline in net exports, as growth slows in many developed markets, but the severity and duration of this adverse influence is difficult to forecast.

On the global stage, fundamental disagreements between China and the US persist and there seems little prospect of near-term reproachment. For instance, the US continues its efforts to limit China's access to cutting-edge technologies. However, it is extremely difficult for the world's two largest economies to decouple, and it is in neither's economic interests to do so. This mutual self-interest should serve to encourage ongoing dialogue and co-operation in some spheres. Since the country exited its zero-Covid policy, government and business leaders have been keen to rebuild international relationships, which, if successful, should help the economy regain momentum.

In this persistently uncertain climate, it may take time for business and consumer confidence to recover from the past three, very difficult years, but the recent, much more pro-growth, pro-business tone of government policy announcements should lay the base for a multi-year recovery.

We remain equally optimistic about the longer-term prospects for Chinese equities. Despite the market rally triggered by China's re-opening, valuation signals remain attractive compared to historical averages. Our proprietary, five-year expected return model, as well as familiar measures such as price-to-book (P/B) and Price Earnings (P/E) ratios, remain near long-term lows, suggesting a sustained recovery in Chinese equity prices is in prospect. The main driver of future stock performance is likely to be renewed earnings growth. While some industries operating at the cutting-edge of technology will remain susceptible to geopolitical risks, elsewhere we see ample opportunities to invest in companies benefiting from structural trends such as the growth in China's middle class, import substitution, digitalisation and the transition to carbon neutrality.

All this, combined with the size of the Chinese economy, suggests to us that Chinese equities demand a meaningful allocation within any fully diversified global portfolio. Historically low valuations suggest now may be a particularly good time to invest. For those who agree, JCGI offers an appealing, low-cost means of accessing this vibrant market. The Company's positive long track record illustrates the advantages of being on the ground in China and the effectiveness of our bottom-up investment process. We are confident that our focus on attractively priced, quality companies, that offer sustainable long-term growth, will continue to deliver superior capital gains and reliable and rising income to investors willing to look beyond near-term uncertainties.

We thank you for your ongoing support.

Rebecca Jiang

Howard Wang

Li Tan

Investment Team                                                                                                                                  26th May 2023

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; strategy and business management; 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; 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 2022, 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, 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 identified social unrest within China as an Emerging Risk. Subsequent to the year end, the Board also identified Artificial Intelligence as an Emerging Risk.

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 the ongoing Russia-Ukraine conflict and the increase in US-China tensions on the Company's financial, operational position and market conditions. 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 2023, 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                                                                                                                                       26th May 2023

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	31st March 2023			31st March 2022			30th September 2022
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains/(losses) on investments
held at fair value
through profit or loss	-	20,148	20,148	-	(139,922)	(139,922)	-	(158,974)	(158,974)
Net foreign currency
gains/(losses)	-	4,542	4,542	-	(1,335)	(1,335)	-	(10,027)	(10,027)
Income from investments	270	-	270	283	-	283	3,693	-	3,693
Interest receivable and
similar income1	290	-	290	225	-	225	493	-	493
Gross return/(loss)	560	24,690	25,250	508	(141,257)	(140,749)	4,186	(169,001)	(164,815)
Management fee	(329)	(988)	(1,317)	(483)	(1,450)	(1,933)	(850)	(2,549)	(3,399)
Other administrative expenses	(280)	-	(280)	(320)	-	(320)	(605)	-	(605)
Net return/(loss) before
finance costs and taxation	(49)	23,702	23,653	(295)	(142,707)	(143,002)	2,731	(171,550)	(168,819)
Finance costs	(363)	(1,088)	(1,451)	(89)	(268)	(357)	(281)	(845)	(1,126)
Net return/(loss) before
taxation	(412)	22,614	22,202	(384)	(142,975)	(143,359)	2,450	(172,395)	(169,945)
Taxation	(8)	-	(8)	-	-	-	(199)	-	(199)
Net return/(loss) after
taxation	(420)	22,614	22,194	(384)	(142,975)	(143,359)	2,251	(172,395)	(170,144)
Return/(loss)
per share (note 3)	(0.50)p	27.18p	26.68p	(0.46)p	(171.84)p	(172.30)p	2.71p	(207.20)p	(204.49)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 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
Six months ended 31st March 2022
(Unaudited)
At 30th September 2021	20,803	80,951	3	581	37,392	333,672	-	473,402
Net loss	-	-	-	-	-	(142,975)	(384)	(143,359)
Dividends paid in the period (note 4)	-	-	-	-	(9,486)3	-	-	(9,486)
At 31st March 20223	20,803	80,951	3	581	27,906	190,697	(384)	320,557
Year ended 30th September 2022
(Audited)
At 30th September 2021	20,803	80,951	3	581	37,392	333,672	-	473,402
Net (loss)/return	-	-	-	-	-	(172,395)	2,251	(170,144)
Dividend paid in the year (note 4)	-	-	-	-	-	(16,721)3	(2,251)	(18,972)
At 30th September 2022	20,803	80,951	3	581	37,392	144,556	-	284,286

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  For the six months ended 31st March 2022, the dividend paid of £9,486,000 was initially recognised in other reserve and subsequently reallocated to capital reserves for the year ended 30th September 2022. The other reserve and capital reserves as at 31st March 2022 have not been adjusted for this reallocation. As at 30th September 2022, all the dividends paid in the year were allocated to capital reserves.

CONDENSED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Unaudited)	(Audited)
	At	At	At
	31st March	31st March	30th September
	2023	2022	2022
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	348,361	377,680	333,206
Current assets
Debtors	954	888	1,997
Cash and cash equivalents	7,798	1,895	10,950
	8,752	2,783	12,947
Current liabilities
Creditors: amounts falling due within one year1	(56,325)	(248)	(61,867)
Net current (liabilities)/assets	(47,573)	2,535	(48,920)
Total assets less current liabilities	300,788	380,215	284,286
Creditors: amounts falling due after more than one year1	-	(59,658)	-
Net assets	300,788	320,557	284,286
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	27,9062	37,392
Capital reserves	161,478	190,6972	144,556
Revenue reserve	(420)	(384)	-
Total shareholders' funds	300,788	320,557	284,286
Net asset value per share (note 5)	361.5p	385.3p	341.7p

¹  As at 31st March 2023, £52.6m (31st March 2022: £59.7m; 30th September 2022: £57.5m) was drawn down from the loan facility.

²  For the six months ended 31st March 2022, the dividend paid of £9,486,000 was initially recognised in other reserve and subsequently reallocated to capital reserves for the year ended 30th September 2022. The other reserve and capital reserves as at 31st March 2022 have not been adjusted for this reallocation. As at 30th September 2022, all the dividends paid in the year were allocated to capital reserves.

CONDENSED STATEMENT OF CASH FLOWS

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March	31st March	30th September
	2023	20221	20221
	£'000	£'000	£'000
Cash flows from operating activities
Net return/(loss) before finance costs and taxation	23,653	(143,002)	(168,819)
Adjustment for:
Net (gains)/losses on investments held at fair value through
profit or loss	(20,148)	139,922	158,974
Net foreign currency (gains)/losses	(4,542)	1,335	10,027
Dividend income	(270)	(283)	(3,693)
Interest income	(117)	(1)	(59)
Realised gains on foreign exchange transactions	(809)	(496)	(776)
Realised exchange (gains)/losses on the Liquidity Fund	(310)	51	1,089
Increase in accrued income and other debtors	(12)	(27)	(17)
(Decrease)/increase in accrued expenses	(24)	(78)	6
Net cash used in operating activities	(2,579)	(2,579)	(3,268)
Dividends received	310	237	3,412
Interest received	117	1	59
Net cash (outflow)/inflow from operating activities	(2,152)	(2,341)	203
Purchases of investments and derivatives	(122,398)	(156,164)	(233,601)
Sales of investments and derivatives	127,557	159,858	265,482
Settlement of foreign currency contracts	-	(147)	(129)
Net cash inflow from investing activities	5,159	3,547	31,752
Equity dividends paid	(5,692)	(9,486)	(18,972)
Repayment of loan	(4,317)	-	(12,470)
Drawdown of loan	4,723	9,995	9,995
Utilisation of bank overdraft	-	(124)	(124)
Interest paid	(1,187)	(327)	(920)
Net cash (outflow)/inflow from financing activities	(6,473)	58	(22,491)
(Decrease)/increase in cash and cash equivalents	(3,466)	1,264	9,464
Cash and cash equivalents at start of period/year	10,950	36	36
Unrealised gains on foreign currency cash and
cash equivalents	314	595	1,450
Cash and cash equivalents at end of period/year	7,798	1,895	10,950
Cash and cash equivalents consist of:
Cash and short term deposits	272	1,516	2,865
Cash held in JPMorgan US Dollar Liquidity Fund	7,526	379	8,085
Total	7,798	1,895	10,950

¹     The presentation of the Cash Flow Statement, as permitted under FRS 102, has been changed so as to present the reconciliation of 'net return/(loss) before finance costs and taxation' to 'net cash used in operating activities' on the face of the Cash Flow Statement. Previously, this was shown by way of note. Other than consequential changes in presentation of the certain cash flow items, there is no change to the cash flows as presented in previous periods.

Reconciliation of net debt

	As at		Other	As at
	30th September		non-cash	31st March
	2022	Cash flows	charges	2023
	£'000	£'000	£'000	£'000
Cash and cash equivalents
Cash	2,865	(3,290)	697	272
Cash equivalents	8,085	(176)	(383)	7,526
	10,950	(3,466)	314	7,798
Borrowings
Bank loan	(57,511)	(406)	5,347	(52,570)
	(57,511)	(406)	5,347	(52,570)
Net debt	(46,561)	(3,872)	5,661	(44,772)

Notes to the financial statements

for the six months ended 31st March 2023

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 2022 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 2023.

        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 2022.

3.     Return/(loss) per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2023	31st March 2022	30th September 2022
	£'000	£'000	£'000
Return/(loss) per share is based on the following:
Revenue (loss)/return	(420)	(384)	2,251
Capital return/(loss)	22,614	(142,975)	(172,395)
Total return/(loss)	22,194	(143,359)	(170,144)
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	(0.50)p	(0.46)p	2.71p
Capital return/(loss) per share	27.18p	(171.84)p	(207.20)p
Total return/(loss) per share	26.68p	(172.30)p	(204.49)p

4.     Dividends paid

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2023	31st March 2022	30th September 2022
	£'000	£'000	£'000
2023 first quarterly interim dividend of 3.42p (2022: 5.7p)	2,846	4,743	4,743
2023 second quarterly interim dividend of 3.42p (2022: 5.7p)	2,846	4,743	4,743
2022 third quarterly interim dividend of 5.7p	-	-	4,743
2022 fourth quarterly interim dividend of 5.7p	-	-	4,743
Total dividends paid	5,692	9,486	18,972

A third quarterly dividend of 3.42p has been declared for payment on 1st June 2023 for the financial year ending 30th September 2023.

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

5.     Net asset value per share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	31st March 2023	31st March 2022	30th September 2022
Net assets (£'000)	300,788	320,557	284,286
Number of shares in issue	83,202,465	83,202,465	83,202,465
Net asset value per share	361.5p	385.3p	341.7p

JPMORGAN FUNDS LIMITED

26th May 2023

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 2023 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