JPMorgan China Growth & Income

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN CHINA GROWTH & INCOME PLC

UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS

ENDED 31ST MARCH 2021

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 2021.

CHAIRMAN'S STATEMENT

Performance

This time last year I commented on the most exceptional investment period any of us had witnessed, which continued through the second half of the year and led to a year of outstanding performance. The last six months under review have again been a period of surprises: the share price started the period at 552 pence, peaking at 860 pence on 16th February 2021 and ended the period at 616 pence. Investing in Chinese equities and volatility go hand-in-hand and this period was no exception. Despite these levels of market volatility and the economic uncertainty that persisted, due to the continuing Coronavirus epidemic, I am pleased to report that for the six months period ended 31st March 2021, the Company's total return on net assets rose 13.8% (with net dividends reinvested) outperforming the benchmark, the MSCI China Index, which delivered +3.8% (in sterling terms). The total return to shareholders for this period was +13.4%.

The basis for this performance is explained in the Investment Managers' report which provides a detailed commentary on the portfolio positioning and the outlook for investing in China.

We have also seen regulatory developments in China which have impacted certain investments in our portfolio, and these are explained in detail in the Investment Managers' report together with their investment views. However, this continues to remind us of the regulatory risks to which we are exposed.

A positive development, coinciding with the beginning of the half year, was the move of the share price from a discount into a premium. Since early October 2020 and for the period to 31st March 2021, the shares have traded at an average 2.2% premium to Net Asset Value and the Company has been able to meet the increased level of demand with the issuance of shares from Treasury and newly created shares. Further details on this are described below.

Loan Facility and Gearing

The Investment Managers have been given the flexibility by the Board to manage the 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 2.6% to 12.9%, ending the half year at 8.9% geared.

The Company has a £50 million loan facility with Scotiabank that expires in July 2021. The Board is considering extending or renewing the facility at the current time. As at 31st March 2021 £47.2 million of this facility was drawn down.

Our Dividend Policy

At the Annual General Meeting in February 2020, shareholders approved an amendment to the Company's Articles of Association to allow the Company to distribute capital as income to enable the implementation of the revised dividend policy.

Shareholders are reminded that the target annual dividend of 4 per cent. of the Company's NAV on the last business day of the preceding financial year will be announced at the start of each financial year, to provide clarity to shareholders over the income stream they can expect during the following 12 months, and will be paid by way of four equal interim dividends on the first business day in March, June, September, and December.

On 1st October 2020, the Company announced that the cum income Net Asset Value at the close of business on 30th September 2020 (the Company's year-end) was 565.3 pence per share, up 62.4% over the year. In line with the Company's new distribution policy the Directors declared the first quarterly interim dividend of 5.7 pence per share. Since then, two further dividend declarations have been made on 4th January 2021 and 1st April 2021, both of 5.7 pence per share. With the planned final quarterly dividend of 5.7 pence per share on 1st July, the 2021 annual dividend will be 22.8 pence per share, an increase of over 300% compared to the previous year.

Share Issuance during the Period

At the time of writing, the Company's issued share capital consists of 82,077,465 Ordinary shares. The Company re-issued, at a weighted average 3.9% premium to NAV all 5,211,777 shares held in Treasury and issued an additional 4,162,500 new shares. The impact of this share issuance was to increase the assets of the Company by £70.3 million. During the six months reporting period the Company did not repurchase any shares.

Board of Directors

I am pleased to announce that Joanne Wong has been appointed to the board with effect from 1st June 2021. Joanne is a resident of Hong Kong and has some 30 years of experience as an Asian investment analyst. From 2002 until 2020 she worked with Franklin Templeton Investments Global Equity Group as a portfolio manager focusing on Asian equity portfolios with a particular responsibility for North Asia markets. Joanne will strengthen the Board's depth of understanding and oversight of the developments in the Chinese economy and equity markets.

Outlook and Strategy

This half-year has demonstrated again the volatility that is an inherent risk when investing in China. The Board continues to believe in the long-term growth opportunities from investment in China and our investment managers, supported by a well-resourced research team, continue to be able to find interesting 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 the depth of resources in our investment team, will enable us to deliver superior long-term total returns.

John Misselbrook

Chairman                                                                                                                                               21st May 2021

INVESTMENT MANAGERS' REPORT

During the six months ended 31st March 2021, the Company delivered a total return on net assets of 13.8% (in sterling terms), compared to the benchmark return of 3.8%. Portfolio gains of 19.4% during Q420 were partially offset losses of 4.5% during Q121.

Setting the scene

Global equity markets welcomed news of effective vaccines, which provided fresh impetus to the sharp rebound in share prices which began in Q220. Many equity markets ended 2020 at or near all-time highs and there was a notable rotation into cyclical, financial and value stocks that investors expect to outperform as economic activity strengthens. However, in Q121, a commodities boom, fuelled by rising global demand, and supply shortages, has stoked concerns about inflation around the world and led to the rapid rise in bond yields. This has had a significant adverse impact on equity valuations. Share price declines were greatest amongst technology and other growth and momentum stocks which have performed most strongly since the onset of the pandemic, as the rotation into cyclical and financial stocks continued.

In China, economic activity became more broadly based during the review period, including in certain service sectors that had been severely disrupted by the COVID-19 pandemic. Demand for Chinese exports was particularly strong and domestic consumption remained resilient, including during the Chinese New Year period, despite the measures implemented to restrict domestic travel following a COVID-19 outbreak in January. Retail sales during the holiday period grew 28.7% compared with the same period in 2020 and were 4.9% higher than in 2019. China was the only major economy to register positive growth in 2020, and the IMF expects the rebound in Chinese economic activity to outpace the upturn in Western economies significantly both this year and next. In March, China's annual National People's Congress (NPC) session ended without delivering any big surprises - there were no material changes to either the government's policy stance, its growth targets (+6% GDP) or its focus on supporting domestic consumption. Beijing has also re-emphasised its long-term commitments to technological innovation and self-sufficiency, industrial upgrading, and green energy.

In China, 2020 earnings results were largely in line with or better than expectations, thanks to the improvement in domestic demand, and Chinese equities closed the six months ended March 2021 in positive territory, despite the Q1 sell-off. As in other markets, this sell-off was driven in part by the spike in bond yields, as well as by concerns about tightening domestic liquidity conditions. Also consistent with developments elsewhere, Chinese equities experienced a distinct style rotation away from highly-valued growth and momentum names, into more cyclical, economically sensitive and value stocks. At the end of the period, offshore China equities saw increased volatility arising from the unwinding of large collateral positions in certain US-listed Chinese equities.

Performance commentary

Stock selection was by far the most significant contributor to returns over the review period, although sector selection had a modestly favourable impact. Positive contributions from stock selection in consumer discretionary, industrials and communication services did most to enhance performance, but these gains were partially offset by the adverse impact of the style rotation away from several sectors which had previously outperformed, notably information technology and healthcare. Stock selection within information technology and healthcare also detracted.

Consumer discretionary was the largest favourable influence on returns during the period. The company's holding in JS Global, the world's third largest household appliances manufacturer, assisted performance. This company's 2020 results beat expectations and its growth prospects are favourable, thanks to its robust new product pipeline and geographical expansion plans. A position in the restaurant chain Jiumaojiu International also enhanced returns. Its revenue growth and margins recovered faster than expected and it has outperformed its restaurant peers. In addition to strong turnover in its core Taier brand, the launch of Jiumaojiu's new hot pot brand Song has been a success. These developments have increased our confidence in the merits of Jiumaojiu's brand incubation strategy and its prospects for continued growth over the longer-term. We have held positions in both JS Global and Jiumaojiu since their initial public offerings (IPOs).

The portfolio's overweight position in e-commerce platform Pinduoduo added meaningfully to returns in Q420, as the company increased its penetration into fresh products. However, these gains were partially offset in Q121 when the company's founder stepped down. The portfolio's structural underweight position in Alibaba compared with the MSCI China Index contributed positively to relative performance. Alibaba's performance suffered on concerns about increased regulatory scrutiny of its affiliate Ant Financial and risks that it would violate anti-trust regulations. Our investment in electric vehicle manufacturer XPeng also contributed positively.

In communication services, positive contributions mainly came from Bilibili and Kuaishou Technology. We believe these are structural beneficiaries of the 'videolization' trend in China with strong monetization potentials.

Information technology holdings that detracted from performance over the period included software names such as Shanghai Baosight, Glodon, and Beijing Kingsoft Office. These companies' businesses have performed well, but a lack of new fundamental news to drive further gains prompted investors to take profits and invest in more attractive opportunities in other parts of the market. Our investment in semiconductor maker Montage Technology also detracted from performance, as the company's short-term earnings were affected by the memory inventory cycles. Within healthcare, medical device names, including Venus Medtech and Kangji Medical, were the largest performance detractors due to general concerns of price cuts upon centralized procurement.

The use of gearing enhanced performance, as did currency effects.

Positioning

Our bottom-up stock selection continues to reflect the structural growth opportunities we see in the healthcare, technology and consumer sectors. Within the healthcare sector, notable positions include Wuxi Biologics and Shenzhen Mindray, which we believe are set to benefit from increased demand for medical products and services in the wake of the pandemic. We also hold Venus Medtech, a leading cardiovascular-focused medtech company with positive growth prospects. In technology, our preferred software names are Kingdee International and Beijing Kingsoft Office; along with hardware name Montage Technology and electric vehicle-related stocks Contemporary Amperex and Yunnan New Energy Material. In consumer, we have eCommerce names Alibaba, Meituan Dianping and Pinduoduo as the top holdings, along with social and online entertainment names Tencent, NetEase and Bilibili.

The Q1 sell-off created some great opportunities for us to add new names to the portfolio, and increase our exposure to some favoured names at more attractive valuations. Portfolio changes during the review period included an increase in the portfolio's exposure to semiconductor manufacturers, including StarPower and Maxscend. These companies are beneficiaries of the global shortage of semiconductors, which is encouraging Chinese companies to try to increase their self-sufficiency in these products by replacing imported components with domestically-produced alternatives. We also continued to add to our solar energy holdings, given this sector's cost competitiveness and China's long-term commitment to carbon neutrality. Specifically, we initiated a new position in Xinyi Solar, the global leader in solar glass, Tongwei, China's leading polysilicon producer, and increased our position in Longi Green Energy Technology.

In the consumer sector, we used the decline in Alibaba's share price to add to our holding, as we believe the market is excessively pessimistic about the company's long-term growth prospects. We also added to our holdings in gaming company Bilibili in response to its efforts to expand its target audience. To fund these acquisitions, we took profits in several consumer names that had performed strongly, but which we believe offer little further short-term upside, including winemaker and distiller Kweichow Moutai, home appliance manufacturer Midea and condiment maker Foshan Haitian.

Finally, within financials, we added to Ping An Insurance. This stock is attractively valued and we expect the company to benefit from the stable domestic rate environment. We trimmed the portfolio's real estate exposure, following the tightening in government regulation of property developers' leverage.

Regulatory Developments in China

China's State Administration of Market Regulators (SAMR) recently concluded its investigation of Alibaba and imposed a record fine of Rmb18.2bn (USD 2.75 billion) or 4% of 2019 domestic revenues for violations of the Anti-Monopoly Law. Despite speculation that the company could be broken up, the investigation affirmed Alibaba's business model as a platform ecosystem. Consequently, we continue to believe the risk for other large Chinese internet companies remains remote for now. Alibaba is devoting more resources to support merchants and therefore we may see incrementally lower profits and higher costs, but this paves the way for more sustainable growth. Overall, we believe Alibaba continues to offer the most comprehensive digital infrastructure to enable the digitalization of enterprises in China over the next decade.

We await further details of the restructuring of Ant Financial. M&A activity is under greater scrutiny due to the Anti-Monopoly Law and we believe it is likely that Tencent and Meituan will also be reviewed by the SAMR. Regulators are also focused on data privacy and how big tech companies collect, use and share data. The industry is clearly aware of this and is investing accordingly. It is clear that regulations for China internet companies, especially the larger firms, will continue to tighten in 2021. That said, the China government recognizes the contribution the big internet companies have made and we believe it will strike a balance between better regulation and growth.

Outlook

The global economy is on the road to recovery, evidenced in part by manufacturing survey data reflecting upbeat sentiment in many countries. President Biden's massive stimulus plan has added significantly to US economic momentum. We expect China to continue to lead the recovery, supported by strengthening overseas demand and the rollout of US fiscal stimulus. We are, however, mindful of the associated increase in inflation risks. Although the Fed appears sanguine on the outlook for longer-term inflation, we sense that on average, committee members have shifted to a slightly more hawkish stance. In China, policy makers are likely to continue to support economic activity in the short-term. But they will view inflation and asset price bubbles as risk factors, and we expect a gradual normalisation in China's domestic stimulus policies over time. The government's long-term focus on better quality growth was recently reaffirmed by the National People's Congress.

In summary, we remain optimistic about the outlook for Chinese equities. The country's robust economic outlook, combined with the many opportunities created by structural change, especially in technology and healthcare, will continue to drive positive and sustained returns in Chinese equities over the long-term, and attract increasing interest from foreign investors.

Howard Wang

Rebecca Jiang

Shumin Huang

Investment Team                                                                                                                                  21st May 2021

INTERIM MANAGEMENT REPORT

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

Principal and Emerging Risks and Uncertainties

We have seen specific instances of regulatory risk in China during the last six months which have been described in the Investment Managers' Report. With the exception of this, the principal and emerging risks and uncertainties faced by the Company have not changed during the period and fall into the following broad categories: geopolitical; investment underperformance; strategy and business management; loss of Investment Team or investment Manager; share price discount; governance; legal and regulatory; corporate governance and shareholder relations; operational risk and cybercrime; financial; global pandemic; and climate change. Information on each of these areas is given in the Business Review within the Annual report and Financial Statements for the year ended 30th September 2020.

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. 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 interim financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of the affairs of the Company and of the assets, liabilities, financial position and net return of the Company, as at 31st March 2021, as required by the UK Listing Authority Disclosure Guidance 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

John Misselbrook

Chairman                                                                                                                                               21st May 2021

STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 31ST MARCH 2021

¹     Includes income from securities lending.

STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 31ST MARCH 2021

¹     Created during the year ended 30th September 1999, following 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.

STATEMENT OF FINANCIAL POSITION

AT 31ST MARCH 2021

STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 31ST MARCH 2021

NOTES TO THE FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31^ST MARCH 2021

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 auditors.

The figures and financial information for the year ended 30th September 2020 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 October 2019.

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 2021.

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 2020.

3.  Return/(loss) per share

4.       Dividends paid

A third quarterly dividend of 5.7p has been declared for payment on 1st June 2021 for the financial year ending 30th September 2021.

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

5.       Net asset value per share

21st May 2021

For further information, please contact:

Divya Amin

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.

JPMORGAN FUNDS LIMITED

ENDS

A copy of the 2021 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 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.