JF Greater China Absolute Return Fund Unaudited Semi-Annual Report 31 March 2011
This report does not constitute an offer of any units in the fund forming the subject matter of this document (the "Fund"). Subscriptions are only valid if made on the basis of the current information memorandum (or equivalent), supplemented by the most recent financial report. Approved for issue in the UK to Professional Investors only by JPMorgan Asset Management Marketing Limited, Registered in England No. 288553, Registered Office 125 London Wall, London EC2Y 5AJ, which is authorised and regulated by the Financial Services Authority. JPMorgan Asset Management Marketing Limited also provides information on the Fund. UK Investors should note that this product is an unregulated collective investment scheme within the meaning of the UK Financial Services and Markets Act 2000. The normal protections provided by the UK regulatory system do not apply and compensation under the Financial Services Compensation Scheme is not available. There is no right to cancel an agreement to purchase units in the Fund under the Rules of the Financial Services Authority. Although JPMorgan Asset Management (Europe) S.à r.l., under certain administrative services agreements, provides services to the Fund, the Fund is not subject to the laws of Luxembourg nor is it subject to supervision by any supervisory authority in Luxembourg.
JF Greater China Absolute Return Fund period ended 31 3 March 2011 Contents Page Statement of Financial Position 1 Statement of Comprehensive Income 2 Statement of Changes in Net Assets Attributable to Holders of Redeemable Units 3 Statement of Cash Flows 4 Notes to the Financial Statements 5 9 Investment Portfolio 10-11 Statement of Movements in Portfolio Holdings 12
Statement of Financial Position As at 31 March 2011 (Unaudited) 31.3.2011 30.9.2010 Assets Cash at banks 965,263 471,612 Amounts due from brokers 326,497 567,606 Amounts receivable on allotment 5,360,853 - Margin deposits 533,181 428,986 Collateral deposits with brokers 1,461,425 1,453,392 Investments - long positions [Note 3] 11,425,303 11,054,021 Dividend and other accounts receivable 5,779 8,912 Total assets 20,078,301 13,984,529 ---------- ---------- Liabilities Short term bank loans - unsecured 115,731 961,586 Amounts due to brokers 563,064 293,095 Amounts payable on redemption - 174,287 Performance fee payable 15,758 15,571 Derivatives [Note 3] 165,128 57,227 Investments - short positions [Note 3] 1,067,991 1,118,537 Provision for taxation 74,012 72,789 Other accounts payable 29,396 51,743 Liabilities (excluding net assets attributable to holders of redeemable units) 2,031,080 2,744,835 ---------- ---------- Net assets attributable to holders of redeemable units (before fair value adjustment) [Note 3] 18,047,221 11,239,694 Fair value adjustment of units of the Fund [Note 3] 42,568 27,717 Net assets attributable to holders of redeemable units (after fair value adjustment) [Note 3] 18,089,789 11,267,411 The notes on pages 5 to 9 form part of these financial statements. - 1 -
Statement of Comprehensive Income For the (Unaudited) 1.10.2010 to 31.3.2011 1.10.2009 to 31.3.2010 Income Net gains on investments and derivatives [Note 4] 831,030 1,295,331 Net foreign currency exchange gains 29,570 6,471 Dividend income 6,272 11,536 Interest on deposits 26 33 Net expense on swaps - (532) Securities borrowing fee (net of interest on collateral deposits) (3,123) (2,572) Other income 168-863,943 1,310,267 ---------- ---------- Expenses Transaction costs 106,283 144,749 Management fee 59,856 58,731 Performance fee 15,758 6,679 Auditor's fee 9,624 9,375 Legal and professional expenses 8,096 - Trustee's fee 7,482 7,738 Printing and publication expenses 3,274 3,158 Safe custody and bank charges 1,819 5,196 Registrar's fee 1,144 1,176 Valuation fee 240 240 Other operating expenses 7,446 6,765 221,022 243,807 ---------- ---------- Net operating profit 642,921 1,066,460 Finance costs Interest paid (2,253) (2,920) Profit before taxation 640,668 1,063,540 Taxation (1,993) (626) 638,675 1,062,914 Change in cumulative difference arising from the fair value adjustment of units of the Fund 14,851 (4,260) Increase in net assets attributable to holders of redeemable units and total comprehensive income 653,526 1,058,654 The notes on pages 5 to 9 form part of these financial statements. - 2 -
Statement of Changes in Net Assets Attributable to Holders of Redeemable Units For the (Unaudited) 1.10.2010 to 31.3.2011 1.10.2009 to 31.3.2010 Net assets attributable to holders of redeemable units at the beginning of the period 11,267,411 12,502,709 ---------- ---------- Allotment of redeemable units 6,650,355 344,590 Redemption of redeemable units (481,503) (2,469,957) Net allotment/(redemption) 6,168,852 (2,125,367) ---------- ---------- 17,436,263 10,377,342 Increase in net assets attributable to holders of redeemable units and total comprehensive income 653,526 1,058,654 Net assets attributable to holders of redeemable units at the end of the period 18,089,789 11,435,996 The notes on pages 5 to 9 form part of these financial statements. - 3 -
Statement of Cash Flows For the (Unaudited) 1.10.2010 to 31.3.2011 1.10.2009 to 31.3.2010 Operating activities Purchase of investments and derivatives (11,846,142) (20,050,023) Proceeds from disposal of investments and derivatives 12,875,596 21,476,859 Dividend received 6,585 17,179 Interest received 28 33 Expense paid on swaps - (532) Tax paid (770) (626) Registrar's fee paid (2,111) (2,308) Securities borrowing fee paid (net of interest on collateral deposits) (4,143) (2,630) Trustee's fee paid (7,306) (7,807) Increase in collateral deposits with brokers (8,033) (512,878) Performance fee paid (15,571) (1,066) Management fee paid (58,444) (59,081) Increase in margin deposits (104,195) (62,240) Transaction costs paid (110,511) (154,762) Others (68,213) (50,076) Net cash inflow from operating activities 656,770 590,042 ----------- ----------- Financing activities Interest paid (2,271) (2,893) Receipts on allotment of redeemable units 1,289,502 447,720 Payments on redemption of redeemable units (655,790) (3,342,183) Net cash inflow/(outflow) from financing activities 631,441 (2,897,356) ----------- ----------- Increase/(decrease) in cash and cash equivalents 1,288,211 (2,307,314) Cash and cash equivalents at the beginning of the period (489,974) 1,819,927 Exchange gains on cash and cash equivalents 51,295 11,980 Cash and cash equivalents at the end of the period 849,532 (475,407) Analysis of balances of cash and cash equivalents: Cash at banks 965,263 840,180 Short term bank loans - unsecured (115,731) (1,315,587) 849,532 (475,407) The notes on pages 5 to 9 form part of these financial statements. - 4 -
Notes to the Financial Statements 1 The Fund JF Greater China Absolute Return Fund (the "Fund") was established under a Trust Deed dated 20 November 2002, as amended, and is governed by the laws of the Cayman Islands. The Fund is authorized by the Securities and Futures Commission of Hong Kong. The investment objective of the Fund is to provide investors with long-term capital growth in terms through an aggressively managed portfolio of equities, bonds and currencies, and derivatives of any of these. The Manager seeks to achieve this objective by investing primarily in securities whose performance is linked to the economies of the Mainland China, Hong Kong and Taiwan. The Fund may, as considered appropriate by the Manager, hold substantial amounts of its portfolio in cash and cash-based instruments. In order to ensure that the relevant performance fee charged to holders of redeemable units would relate more accurately to any investment gains in which they have participated, all units issued on a particular monthly dealing day have notionally been regarded as a separate unit class from units issued on other dealing days. Accordingly, a number of different unit classes are created within the Fund. A merging of separate unit classes will normally occur where, as at a year-end date, a management performance fee becomes payable by each of such unit classes. For unit classes to be merged, all units from respective unit class will be redeemed and subsequently subscribed into a merged unit class. The total value of any unitholders' units is not affected by the merger. On 4 October 2010, certain unit classes were merged in respect of the financial year ended 30 September 2010. All units for any new unit classes are issued at a fixed price of 10 per unit (the "Subscription Price"). A preliminary charge per unit of up to 5 per cent of Subscription Price on the issue of unit is charged and paid to the Manager. All unitholders' rights with regard to the convening, voting or otherwise acting at any meeting of unitholders are the same. Refer to Note 3. 2 Summary of principal accounting policies (a) Basis of preparation of interim financial statements The accounting policies and methods of computation used in the preparation of these unaudited condensed interim financial statements are consistent with those used in the annual financial statements for the year ended 30 September 2010. (b) Investments and derivatives Classification The Fund classifies its investments and derivatives as financial assets or financial liabilities at fair value through profit or loss. These financial assets or financial liabilities are held-for-trading as they are acquired or incurred principally for the purpose of selling or repurchasing in the near term or short-term profit taking. All derivatives are carried in assets when amounts are receivable by the Fund and in liabilities when amounts are payable by the Fund. The Fund makes short sales in which a borrowed security is sold in anticipation of a decline in the market value of that security, or it may use short sales for various arbitrage transactions. Short sales are classified as financial liabilities at fair value through profit or loss. Recognition, derecognition and measurement Purchases and sales of investments and derivatives are accounted for on the trade date basis. Investments and derivatives are initially recognized at fair value and are subsequently re-measured at fair value. Realized and unrealized gains and losses on investments and derivatives are recognized in the Statement of Comprehensive Income. Investments and derivatives are derecognized when the rights to receive cash flows from the investments and derivatives have expired or the Fund has transferred substantially all risks and rewards of ownership. Fair value estimation Investments that are listed or traded on an exchange and investments with prices quoted in over-the-counter markets or by market makers, are fair valued based on quoted "bid" prices on long investments and quoted "ask" prices on investments sold short. When trading in the securities of an investee company is suspended, the investment is valued at the Manager's estimate of its fair value. Debt securities are fair valued based on quoted prices inclusive of accrued interest. Investments in collective investment schemes are stated at fair value based on the net asset value per unit of the respective funds as determined by the administrators of the relevant funds or stated at "bid" prices if the collective investment schemes are listed or traded on an exchange. - 5 -
Open futures and swap contracts are valued at "bid" prices for long positions and "ask" prices for short positions at the valuation date. The differences between the bid/ask prices and the contract prices are recognized in the Statement of Comprehensive Income. Open options contracts are valued at "bid" prices for long positions and "ask" prices for short positions at the valuation date. The differences between the bid/ask prices and the premium amounts/contract prices are recognized in the Statement of Comprehensive Income. Forward foreign exchange contracts are valued at the forward rates ruling at the valuation date. The differences between the forward rates and the contract rates are recognized in the Statement of Comprehensive Income. (c) Securities es lending and borrowing Securities lenders' agreements are entered into with institutions of appropriate financial standing who engage in such arrangements acceptable to the Trustee and on arm's length commercial terms. Securities lent are included in the investment portfolio of the Fund. Relevant securities lending income entitled by the Fund is accounted for in the Statement of Comprehensive Income. Collateral received for the purpose of securities lent generally consist of non-cash collateral which are off-balance sheet transactions and are therefore not included in the financial statements. The Fund may enter into securities borrowing arrangements for short sale purposes. Short positions represent obligations to deliver securities sold but not yet purchased, and are accounted for as investments and valued at their fair value. Securities borrowed during the period/year are off-balance sheet transactions and are therefore not included in the investment portfolio of the Fund. Collateral placed for the purpose of securities borrowed generally consist of cash collateral and are included in the Statement of Financial Position separately. (d) Foreign currency translation Functional and presentation currency The Fund has adopted United States dollar as its functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of assets and liabilities denominated in foreign currencies at period/year end exchange rates are recognized in the Statement of Comprehensive Income. Foreign exchange gains and losses relating to cash and cash equivalents are presented in the Statement of Comprehensive Income within "Net foreign currency exchange gains/losses". Foreign exchange gains and losses relating to the financial assets and liabilities carried at fair value through profit or loss are presented in the Statement of Comprehensive Income within "Net gains/losses on investments and derivatives". (e) Proceeds and payments on allotment and redemption of units The net asset value per unit is computed for each dealing day. The price at which units are allotted or redeemed is calculated by reference to the net asset value per unit as at the close of business on the relevant dealing day in accordance with the provisions of the Fund's Trust Deed dated 20 November 2002, as amended, which may be different from the accounting policies stated in the financial statements. Units of the Fund are redeemable at the option of the holders of redeemable units and are classified as a financial liability in the Statement of Financial Position which represents the net assets attributable to holders of redeemable units (or "net asset value", "net assets" or "NAV") and is carried at the redemption amount that would be payable at the Statement of Financial Position date if the holders of redeemable units exercised the right to redeem units of the Fund. - 6 -
3 Net assets attributable to holders of redeemable units and number of units in issue Fair value adjustment of units of the Fund As stated in Note 2(e), units of the Fund are redeemable at the option of the holders of redeemable units and are classified as a financial liability in the Statement of Financial Position which represents the net assets attributable to the holders of redeemable units and is carried at the redemption amount that would be payable at the Statement of Financial Position date, if the holders of redeemable units exercised the right to redeem units of the Fund. The redemption amount is determined based on the net assets attributable to holders of redeemable units calculated in accordance with the provisions of the Fund's Trust Deed dated 20 November 2002, as amended ("Trust Deed NAV"). 31.3.2011 30.9.2010 Net assets attributable to holders of redeemable units (before fair value adjustment) 18,047,221 11,239,694 Fair value adjustment of units of the Fund: Difference between bid/ask prices and last traded prices basis in valuing investments and derivatives as at the end of the period [Note 3(a)] 42,568 27,717 Net assets attributable to holders of redeemable units (after fair value adjustment) 18,089,789 11,267,411 Note: (a) Listed investments, investments and derivatives with prices quoted in over-the-counter markets or by market makers are stated at the last traded prices for the purpose of the Trust Deed NAV. As stated in Note 2(b), the accounting policy of the Fund for the purpose of compliance with Hong Kong Accounting Standards 39 "Financial Instruments: Recognition and Measurement" and for reporting purposes is to value its investments and derivatives at fair value based on the relevant bid/ask market prices on the Statement of Financial Position date. Number of units in issue 31.3.2011 30.9.2010 Units Units Number of units in issue Class 0301 431,566.067 439,618.272 Class 0710 4,956.089 4,956.089 Class 0711 5,516.800 5,516.800 Class 0712 5,695.952 5,695.952 Class 0801 55,002.998 85,002.998 Class 0804 24,900.498 24,900.498 Class 0906 49,417.151 12,100.516 Class 0909-10,313.000 Class 1001-10,283.965 Class 1004-5,121.998 Class 1005-5,102.488 Class 1008-9,633.416 Class 1010 13,775.247 - Class 1011 12,176.422 - Class 1101 44,542.924 - Class 1102 58,455.706 - Class 1103 536,085.259 - - 7 -
31.3.2011 30.9.2010 Net assets attributable to holders of redeemable units (after fair value adjustment) Class 0301 9,857,511 9,491,111 Class 0710 43,341 40,966 Class 0711 49,401 46,693 Class 0712 51,021 48,225 Class 0801 555,526 813,497 Class 0804 257,020 244,834 Class 0906 609,073 142,532 Class 0909-117,344 Class 1001-112,894 Class 1004-53,818 Class 1005-55,273 Class 1008-100,224 Class 1010 141,762 - Class 1011 124,336 - Class 1101 442,672 - Class 1102 597,754 - Class 1103 5,360,372-18,089,789 11,267,411 Net assets attributable to holders of redeemable units (per unit) Class 0301 22.84 21.59 Class 0710 8.75 8.27 Class 0711 8.95 8.46 Class 0712 8.96 8.47 Class 0801 10.10 9.57 Class 0804 10.32 9.83 Class 0906 12.33 11.78 Class 0909-11.38 Class 1001-10.98 Class 1004-10.51 Class 1005-10.83 Class 1008-10.40 Class 1010 10.29 - Class 1011 10.21 - Class 1101 9.94 - Class 1102 10.23 - Class 1103 10.00-4 Net gains on investments and derivatives 1.10.2010 to 31.3.2011 1.10.2009 to 31.3.2010 Change in unrealized gains/losses in value of investments and derivatives (90,203) 20,154 Realized gains on sale of investments and derivatives 921,233 1,275,177 831,030 1,295,331-8 -
5 Soft commission arrangements The Investment Manager has entered into soft commission arrangements with brokers under which certain goods and services used to support investment decision making are received by the Investment Manager. The Investment Manager does not make direct payment for these services but transacts an agreed amount of business with the brokers on behalf of the Fund. Commission is paid from the Fund on these transactions. The goods and services must be of demonstrable benefit to the Fund and may include research and advisory services; economic and political analysis; portfolio analysis, including valuation and performance measurement; market analysis, data and quotation services, computer hardware and software incidental to the above goods and services; clearing and custodian services and investment-related publications. 6 Distribution No distribution was made during the period (31 March 2010: nil). - 9 -
Investment Portfolio As at 31 March 2011 (Unaudited) Holding Fair value % of net assets Listed/Quoted Investments (56.3%) (I) Equities (55.1%) China (31.1%) Agile Property Hldgs 128,000 200,437 1.1 Agricultural Bank of China 'H' 825,000 465,628 2.6 Aluminum Corp of China 'H' 134,000 127,485 0.7 Asia Cement China Hldgs 125,500 78,254 0.4 Beijing Jingkelong Co 'H' 85,000 103,488 0.6 China CITIC Bank 'H' 674,000 488,719 2.7 China Commun Construction 'H' 203,000 193,130 1.1 China Construction Bank 'H' 338,640 316,950 1.7 China Merchants Bank 'H' 56,000 154,072 0.8 China National Bldg Material 'H' 72,000 263,814 1.5 China Oilfield Services 'H' 174,000 390,584 2.2 China Petroleum & Chemical 'H' 210,000 210,049 1.2 China Resources Gas Group 120,000 163,843 0.9 China Resources Land 96,000 179,702 1.0 China Taiping Insurance Hldgs 66,800 196,238 1.1 China Unicom (Hong Kong) (72,000) (119,781) (0.6) China Vanke 'B' 216,100 283,384 1.6 China Yurun Food Group 42,000 140,932 0.8 CNOOC Ltd 185,000 466,175 2.6 Greatview Aseptic Packaging 178,000 113,965 0.6 Hengdeli Hldgs 224,000 117,210 0.6 Hidili Industry Intl Development 150,000 132,486 0.7 Intime Department Store (Group) 119,000 160,641 0.9 Intl Mining Machinery 183,000 159,986 0.9 Lenovo Group (274,000) (156,406) (0.9) Lianhua Supermarket Hldgs 'H' 30,000 118,022 0.6 Maoye Intl Hldgs 434,000 186,920 1.0 Parkson Retail Group 69,500 95,071 0.5 PetroChina Co 'H' (174,000) (264,863) (1.5) Ping An Insurance (Group) 'H' 16,000 161,888 0.9 Sihuan Pharmaceutical Hldgs 192,000 116,510 0.6 Sino-Ocean Land Hldgs (168,000) (104,538) (0.6) Sinopharm Group 'H' (28,000) (99,535) (0.5) Tencent Hldgs 6,800 165,144 0.9 Want Want China Hldgs 155,000 121,159 0.7 Yanzhou Coal Mining 'H' 50,000 180,954 1.0 Zijin Mining Group 'H' 154,000 122,159 0.7 Hong Kong (10.2%) AIA Group 49,600 152,405 0.8 Bank Of East Asia (26,400) (112,514) (0.6) BOC Hong Kong (Hldgs) 47,500 154,197 0.9 Cheung Kong (Hldgs) 10,000 163,020 0.9 Foxconn Intl Hldgs (75,000) (45,030) (0.3) Hang Lung Properties 60,000 261,886 1.4 Hong Kong Exchanges & Clearing (7,600) (165,324) (0.9) Jardine Matheson Hldgs (CDP) 6,800 301,920 1.7 Kerry Properties 25,000 124,225 0.7 Orient Overseas (Intl) 12,500 131,136 0.7 Power Assets Hldgs 23,500 156,350 0.9 Samling Global 1,126,000 114,363 0.6 Sands China 77,200 171,706 0.9 Wharf (Hldgs) 44,000 303,489 1.7 Wing Hang Bank 12,000 141,318 0.8-10 -
Investment Portfolio (Continued) As at 31 March 2011 (Unaudited) Holding Fair value % of net assets Taiwan (13.8%) Advanced Semiconductor Eng 194,674 210,519 1.2 Asustek Computer 16,000 137,657 0.8 China Life Insurance 196,000 197,623 1.1 China Petrochemical Development 137,000 174,473 1.0 Coretronic Corp 76,000 122,633 0.7 E Sun Financial Hldg 258,000 161,872 0.9 Formosa Chemicals & Fibre 89,000 335,946 1.8 Fubon Financial Hldg 127,042 168,488 0.9 Huaku Development 41,278 114,402 0.6 Polaris Securities 201,000 135,679 0.7 Powertech Technology 33,000 103,355 0.6 Taishin Financial Hldgs 350,000 197,575 1.1 Taiwan Cement 138,886 167,429 0.9 TPK Hldgs Co 5,000 137,045 0.8 Unimicron Technology 79,000 134,324 0.7 9,982,043 55.1 --------- ---- (II) Collective Investment Schemes (2.1%) China (2.1%) JF China New Generation Fd * 36,719 375,269 2.1 --------- ---- (III) Derivatives (-0.9%) Futures (-0.9%) CBOE VIX (CBF) Fut 04/11 5 (17,770) (0.1) HSCEI (HFE) Fut 04/11 (36) (94,225) (0.5) HSI (HFE) Fut 04/11 (9) (26,883) (0.2) MSCI Taiwan Idx (SGX) Fut 04/11 (57) (26,250) (0.1) (165,128) (0.9) --------- ---- Total Listed/Quoted Investments 10,192,184 56.3 Cash at banks 965,263 5.3 Short term bank loans - unsecured (115,731) (0.6) Other net assets 7,048,073 39.0 Net assets attributable to holders of redeemable units at 31 March 2011 18,089,789 100.0 Total investments, at cost less proceeds on short positions 8,474,703 * Issued and managed by the Manager - 11 -
Statement of Movements in Portfolio Holdings For the (Unaudited) % holdings of net assets 31.3.2011 30.9.2010 Listed/Quoted Investments Equities China 31.1 54.5 Taiwan 13.8 22.5 Hong Kong 10.2 11.2 Collective Investment Schemes China 2.1 - Derivatives Futures (0.9) (0.5) Total Listed/Quoted Investments 56.3 87.7 Cash at banks 5.3 4.2 Short term bank loans - unsecured (0.6) (8.6) Other net assets 39.0 16.7 Net assets attributable to holders of redeemable units 100.0 100.0-12 -
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