JAGI Jpmorgan Asia Growth & Income Plc

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ASIA GROWTH AND INCOME PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31ST MARCH 2024

Legal Entity Identifier: 5493006R74BNJSJKCB17

Information disclosed in accordance with DTR 4.2.2

CHAIRMAN'S STATEMENT

Performance and Market Background

The Company's return on net assets over the six months ended 31st March 2024 was 4.6%, while the return to Ordinary shareholders was 3.4%, reflecting a widening of the trust's share price discount to net asset value ('NAV') over the period. The Company underperformed its benchmark, the MSCI AC Asia ex Japan Index, which returned 5.3%, due mostly to its underweight to the thriving Indian market, which rose strongly over the period, and to the poor performance of a number of Chinese stocks. While this underperformance is disappointing, the Company invests for the long-term, so it is more meaningful to consider performance over longer timeframes. The Company has outperformed its benchmark over the long term period of five and ten years ended 31st March 2024.

The Portfolio Managers' Report which follows includes a market review and details of performance and portfolio positioning, together with an assessment of the outlook for Asian equity markets.

Dividend Policy

In the absence of unforeseen developments, the Company's dividend policy aims to pay regular, quarterly dividends, each equivalent to 1% of the Company's NAV, based on the NAV on the last business day of each financial quarter, being the end of December, March, June and September. Dividends are funded from a combination of revenue and capital reserves. Shareholders are reminded that dividends are based on a percentage of net assets, so the dividend paid to shareholders will reflect the Company's net assets at each quarter end. Dividends will therefore be subject to market and performance fluctuations and will vary from quarter to quarter, in line with underlying earnings, currency movements and changes in the portfolio.

In the Board's view, resetting the dividend quantum each quarter is a prudent way of delivering an income which tracks performance and does not put the Company under strain. For the year ended 30th September 2023, dividends paid totalled 15.7 pence per share (2022: 16.5 pence per share). In respect of the following two quarters ended 31st December 2023 and 31st March 2024, the Company paid quarterly dividends of 3.7 pence and 3.9 pence respectively. Two further dividends will be declared on the first business day after 30th June and 30th September 2024.

Premium/Discount and Share Capital Management

The discount at which the Company's shares trade widened during the review period, ending at 10.4%. This is slightly higher than the discount of 9.2% at the end of the last financial year, but remains broadly in line with the discounts of its immediate peers. The Board's view is that buy back activity can help balance the demand for and supply of the Company's shares, while maintaining underlying liquidity. The Company utilised its buy back powers over the period, buying in a total of 5.6 million shares (representing 6.2% of issued share capital) and holding them in Treasury. The maximum number of Ordinary shares authorised to be purchased as per the shareholder's approval at the Annual General Meeting is 13,381,538, or if less, that number of Ordinary shares which is equal to 14.99% of the issued share capital (excluding shares held in Treasury) as at 15th February 2024.

Gearing

Over the reporting period and at the time of writing, the Company was not geared. The Company's multi-currency loan facility with Scotiabank was retired in December 2023. However, the Board regularly discusses gearing with the Portfolio Managers and is considering approaching potential funders to reinstate a loan facility. This will give the Portfolio Managers the capacity to utilise market drawdowns to gear the portfolio, with a view to enhancing performance during subsequent market upturns.

Environmental, Social and Governance issues

It is the Board's strong conviction that effective investment stewardship can materially contribute to the construction of stronger portfolios over the long term, and therefore enhance returns. The Company's Investment Manager has a well-established approach to investment stewardship, designed both to understand how companies address issues related to Environmental, Social and Governance ('ESG') factors and to seek to influence their behaviour and encourage best practice. Financially material ESG factors have been integrated into the investment process, and these issues are considered as part of the investment decision making process. The Board receives regular ESG updates from the Investment Manager.

The Investment Manager has recently published a document containing its latest Investment Stewardship Priorities, which may be of interest to shareholders. This can be found at: https://am.jpmorgan.com/gb/en/asset-management/adv/about-us/investment-stewardship/

Board Succession

The Board plans for succession to ensure it retains an appropriate balance of skills, knowledge and diverse perspectives. Following Dean Buckley's retirement at the February 2024 Annual General Meeting, June Aitken has become the Chair of the Audit Committee, and Peter Moon the Senior Independent Director. On behalf of the Board I would like to thank Dean Buckley once again for his significant contribution to the Company during his ten years of service. The Board can confirm that its current composition is compliant with all applicable diversity targets for UK companies listed on the premium segment of the London Stock Exchange. It is the Board's intention that this will continue to be the case.

Stay Informed

The Company is committed to engaging with its shareholders, in particular those with smaller holdings who invest via platforms. To support this goal, the Company delivers email updates on the Company's progress with regular news and views, as well as the latest performance data. 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/JAGI-Sign-Upor by scanning the QR code on page 10 of the Company's Half Year Report for the six months ended 31st March 2024 ('2024 Half Year Report').

Outlook

The Asian equity markets remain extremely attractive in absolute terms and relative to other markets, there are reasons to be optimistic about the outlook as the global backdrop is supportive. Inflation is gradually receding in the US and other developed markets, the US economy is doing better than expected and appears to have avoided a hard landing, and the US Federal and other central banks seem likely to cut interest rates later this year. This may not happen as quickly as many had previously anticipated, but the prospect of lower rates has nonetheless provided comfort to investors and ensured major western markets have started the year on a positive note.

However, the geopolitical outlook remains uncertain, clouded by the ongoing war in Ukraine and violence in the Middle East. The US Presidential election and its potential consequences for US relations with Russia and China could provide further challenges at the end of the year and beyond.

In Asia, China's equity market started the year well and more recently Beijing has started to take more decisive action to resolve its property crisis, while valuations in India look expensive, other markets remain attractive. Recent efforts by the South Korean authorities to emulate Japan's successful corporate governance reforms suggest that shareholder returns in the Korean market are set to begin improving, just as they are doing in Japan.

There may be periods, such as the past six months, when the Company underperforms the Benchmark and you will note that the Portfolio Managers' address this directly in their report. However the long-term performance track record of outright gains and outperformance attests to the strategy's effectiveness in maximising total returns over the long run. The Board remains confident that this approach, allied with the Portfolio Managers' experience and expertise, will continue to reward investors going forward.

We share the Portfolio Managers' view that over the longer term, the Asian region can look forward to many years of strong growth and productivity increases, thanks to structural changes including digitalisation, urbanisation and the expansion of the middle class. These trends will continue to generate compelling investment opportunities and we are confident that the focused and disciplined stock selection process adopted by the Investment Manager will identify and grasp these opportunities as they emerge, ensuring the Company continues to deliver growth and income to shareholders over the long term.

On behalf of the Board, I would like to thank you for your continuing support.

Sir Richard Stagg

Chairman                                                                                                                                               29th May 2024

PORTFOLIO MANAGERS' REPORT

Performance

During the six months ended 31st March 2024, Asian stock markets delivered positive returns. The Company's benchmark, the MSCI AC Asia ex Japan Index, rose 5.3% (in GBP terms) during the period, while your Company made a total return on net assets of 4.6%. The underweight in India, combined with positions in Chinese and Hong Kong stocks, were the largest detractors. However, despite this recent underperformance, the Company has a positive long-term track record of absolute returns and outperformance. Over the ten years to 31st March 2024, the Company generated an average annualised return of 9.2% in NAV terms, compared with the benchmark return of 7.1%.

In this report, we will discuss the major market developments during the review period, recent contributors to performance, current portfolio structure, and the outlook for the remainder of 2024.

The Market Environment

Investor sentiment varied across the region in the first half of the Company's financial year. There was a wide gap in the performance: Taiwanese equities were the best performers, rising by nearly 30%, followed by Korea and India, both of which made returns of around 15%; by contrast, the Chinese and Hong Kong markets both fell by nearly 10%.

Taiwan's strong performance was driven primarily by stocks associated with high-performance computing and artificial intelligence (AI). Taiwan's semiconductor supply chain possesses some of the world's top players in the industry, most notably Taiwan Semiconductor Manufacturing Company (TSMC), which has a near monopoly in the global production of the smallest, leading-edge chips. Taiwan's dominant position in the sector is further assured by a complex supply chain of semiconductor design, components and server assembly businesses that are all benefitting from increased spending on generative AI models. These trends have also extended to Korea, which is home to several manufacturers of high band-width memory chips. These are used alongside graphic processing units in the high-performance, large language computing models that drive generative AI software. The broader Korean market re-rated sharply in the first quarter of 2024 in response to the government's initiative to improve corporate governance. As has been the case in Japan, this initiative is expected to see companies in the financial sector, including banks and brokerages, step up shareholder returns. Meanwhile, the Indian market continues to do well, thanks to robust economic growth and a re-rating of stock market valuations, especially amongst firms seen as beneficiaries of the rise in capital spending.

Indonesian equities were up just over 1% during the period mainly in response to positive political developments. The country conducted general elections to elect a new President, Legislature and representatives of regional and local bodies. The outgoing President Joko Widodo is highly regarded for initiating sustainable reforms during his tenure. Joko Widodo was replaced by Prabowo Subianto as president, in a generally smooth election process. Prabowo Subianto is expected to pursue similar policies to his predecessor.

In China, 2023 marked the third successive year of market declines for the MSCI China Index. The ongoing poor performance of the Chinese and Hong Kong markets during the review period was fuelled by continued property sector weakness, which is weighing on investor and consumer sentiment and adversely impacting equity market valuations. The property market's protracted woes are now also translating into below-trend corporate earnings growth.

Performance Attribution

For the six months ended 31st March 2024

¹     The dividend/residual arises principally from timing differences in the treatment of income flows.

^A     Alternative Performance Measure ('APM').

Source: FactSet, JPMAM and Morningstar.

All figures are on a total return basis. Performance attribution analyses how the portfolio achieved its recorded performance relative to its benchmark.

A glossary of terms and APMs is provided on pages 31 to 33 of the Half Year Report.

Major Contributors and Detractors to Performance

Contributors

The main contributors to performance over the six months to end March 2024 included SK Hynix, which is a leading Korean manufacturer of memory chips. This stock's good performance over the period was underpinned by rising shipments of advanced memory chips for use in high performance computing, including AI software and large language modelling. Foxconn Industrial was another key contributor. This company is a leading Chinese designer and manufacturer of communication network and cloud service equipment, precision tools, and industrial robots. Its good share price performance was fuelled by rising orders for AI server assembly. TSMC maintained its technological and economic leadership in the semiconductor sector, outpacing large competitors such as Samsung Electronics and Intel. Our decision not to hold Alibaba, a major Chinese internet retailer, also enhanced returns as rising competition in the Chinese e-commerce sector has resulted in lower growth and poor share price performance for large players such as Alibaba.

Detractors

Yum China, an operator of restaurant chains, was one of the main detractors from performance over the review period. The shares underperformed as down-trading and competition put pressure on margins and sales. Hong Kong Exchange was hurt by the decline in the market and lower stock market trading volumes. India's HDFC Bank was adversely impacted by its merger with its parent HDFC Ltd. This transaction coincided with some tightening in liquidity that resulted in elevated costs and negligible earnings growth.

Portfolio Activity and Positioning

Buys

Efforts by Korean policy makers to improve corporate governance and increase shareholder returns prompted us to purchase several over-capitalised Korean banks that are likely to begin returning cash to shareholders via increased dividends or share buybacks. We also opened a position in Taiwan's ASE Technology, a leader in semiconductor packaging assembly and testing, which is benefiting from the increasing complexity of chip packaging.

Sells

We sold our position in Xinyi Solar, a Chinese solar glass producer. Three factors have conspired to worsen the company's prospects: an oversupply of panel capacity; increased competition from loss-making Chinese companies; and weak European demand. We also exited Chinese internet retailer Meituan. The company's in-store business has seen increasing competition from Chinese private companies which has weighed on overall returns, despite a broad improvement in Meituan's core food delivery business.

Outlook

This year began with much discussion about falling US inflation, and the prospect that this would allow the US Fed to ease policy, thereby increasing the likelihood of a soft landing, rather than the recession many feared. However, economic data released during the first three months of 2024 proved more resilient than expected. Corporate cash flows have been healthy, companies have insulated themselves from the worst effects of high interest rates, and real rates are lower than in previous cycles. As a result, the economic and corporate environment has been sufficiently robust to withstand the impact of higher nominal rates. Investors revised their forecasts for inflation and near-term rate cuts accordingly. Additionally, as Jamie Dimon (Chairman & CEO of JPMorgan Chase Bank) noted in his annual letter to shareholders, there is a growing need for spending to support the transition to a net zero economy, the restructuring of global supply chains and rising healthcare costs. All these factors could compound the stickiness of inflation. The trajectory of yields on ten-year US Treasuries has mapped the path of inflation expectations over recent months. Yields fell from 5% in October 2023, to a low of 3.8% in January of 2024, before rising to 4.5% at the time of writing.

In Asia, market attention has focused on the poor performance of Chinese equities, especially relative to developed markets. Chinese equities declined by 17% in the five years to the end of 2023, while US and European large cap stocks have risen by 107% and 60% respectively over this period. The major problem facing China is the enormous misallocation of capital into the residential property sector. Home ownership stands at 90%, and 20% of households own more than one home. However, the sector is now struggling with massive oversupply and declining sales, and several developers have been bankrupted by heavy debt burdens. The challenging outlook for residential property exacerbated by demographic trends has weighed on Chinese consumer sentiment, which is at an all-time low. On the positive side, poor equity market sentiment has resulted in attractive valuations. With lower Chinese interest rates likely to stimulate economic activity, there is considerable scope for a recovery in valuations, if stronger growth lifts corporate earnings.

In sharp contrast to the current malaise in the Chinese market, the backdrop for markets in India and Taiwan appears extremely positive. In these markets, high valuations are the stumbling block for many investors, especially in India, where the index is trading close to all-time high valuations, as measured on a price to book basis. As noted above, this market is being buoyed by India's strong economic performance. Following a contraction in 2021, India's GDP growth exceeded 9% in 2022 and 7% in 2023 in real terms, and is expected to have reached a similar level for the fiscal year ending March 2024, thanks to rising urban consumption, supported by wage growth, and a surge in capital expenditure. It is widely expected that Prime Minister Modi will win the current parliamentary elections.

The Taiwanese market has been led by the growing earnings of its largest company, TSMC, and broad swathes of the technology sector that are seen as beneficiaries of rising tech spending, especially in AI-related areas. With respect to TMSC, recent company meetings and industry analysis suggest that the company has consolidated its global leadership in the fabrication of the most advanced semiconductor chips. Within its high performance computing business, it is possible that revenues related to AI processing chips could rise to 20% of total revenues within the next three years, compared to below 10% today.

We are excited by the Korean authorities' efforts to replicate Japan's successful corporate governance reform agenda. Korea's so-called 'Corporate Value-Up Program' encourages companies to take steps to improve their chronic low valuations, due to the risk of being 'named and shamed' if they fail to act. In addition, the authorities plan to make supportive regulatory changes aimed at protecting minority shareholders from poor governance practices. While questions remain regarding the authorities' commitment to corporate governance reforms, the measures have the support of some 14 million individual investors, who together account for one third of eligible voters. This reform program is part of broader efforts by Korean regulators and various capital market leaders to help households create wealth through investment in financial assets. The plan also incorporates proposals for tax incentives, including the removal of capital gains tax, which will take effect from 2025.

Despite persistent uncertainties related to global and regional geo-political tensions, Asia's powerful combination of strong growth, innovation, favourable structural trends, and attractive valuations in at least in some key markets, underpins our belief that Asian equity markets continue to provide many attractive investment opportunities. We remain confident that our long experience, our presence on the ground in local markets, and our focus on the fundamental analysis of specific stocks, will allow us to keep identifying the region's best opportunities, ensuring the Company continues to provide our shareholders with attractive returns, outperformance and a predictable dividend over the long-term.

For and on behalf of the Investment Manager

Ayaz Ebrahim

Robert Lloyd

Portfolio Managers                                                                                                                              29th May 2024

INTERIM MANAGEMENT REPORT

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

Principal Risks and Uncertainties

The principal and emerging risks faced by the Company fall into the following broad categories: investment and strategy, geopolitical and economic, operational risk and cybercrime, climate change and global pandemic. Information on the principal and emerging risks faced by the Company is given in the business review section within the Annual Report and Financial Statements for the year ended 30th September 2023.

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 (being mainly securities which are readily realisable) 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. For these reasons, they consider there is reasonable evidence to adopt the going concern basis in preparing the financial statements. This conclusion also takes into account the Board's assessment of the impact of heightened market volatility due to the Russian invasion of Ukraine and the unrest in Israel and Gaza.

Continuation votes are held every three years and the next continuation vote will be put to shareholders at the Annual General Meeting in 2026.

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 Guidance and Transparency Rules 4.2.4R; and

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

Sir Richard Stagg

Chairman                                                                                                                                          29th May 2024

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

¹     Includes income from securities lending.

All revenue and capital items in the above statement derive from continuing operations.

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.

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

CONDENSED STATEMENT OF CHANGES IN EQUITY

¹     These reserves form the distributable reserves of the Company and may be used to fund distributions to investors.

²     During the period the Company undertook an Asset Reunification Program for its shareholders. As a result, and in accordance with the Company's Articles of Association, shares that could not be traced to shareholders were forfeited. These share were sold in the open market and the proceeds returned to the Company.

CONDENSED STATEMENT OF FINANCIAL POSITION

CONDENSED STATEMENT OF CASH FLOWS

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31ST MARCH 2024

1.       Financial statements

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

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.       Return/(loss) per share

4.       Dividends paid

A second interim dividend of 3.9p has been declared for payment on 24th May 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 reserves.

5.       Net asset value per share

6.  Fair valuation of instruments

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

¹  The Level 2 disclosure represents the investment in Berlian Laju Tanker.

7.  Analysis of Changes in Net (Debt)/Cash

JPMORGAN FUNDS LIMITED

29th May 2024

For further information, please contact:

Anmol Dhillon

For and on behalf of

JPMorgan Funds Limited

Telephone: 0800 20 40 20 or or +44 1268 44 44 70

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 half year will be submitted to the National Storage Mechanism and will shortly 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.jpmasiagrowthandincome.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.