Unaudited Semi-Annual Report 31 March 2015 JPMorgan Asia Absolute Return Fund
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, if available. Notice to U.K. residents: This document is only directed to persons believed by JPMorgan Asset Management (U.K.) Limited to be investment professionals as defined in Article 19 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, high net worth companies, unincorporated associations and other persons as defined in Article 49 of that Order and to others to whom it can lawfully be distributed or given, inside the United Kingdom, without approval by an authorised person. Persons who do not have professional experience in matters relating to investments should not rely on it and any other person should not act on such information. This document is issued in the U.K. by JPMorgan Asset Management (U.K.) Limited and has been approved solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000 by JPMorgan Asset Management (U.K.) Limited which is authorised and regulated in the U.K. by the Financial Conduct Authority. Registered in England No. 01161446. Registered address: 25 Bank Street, Canary Wharf, London, UK, E14 5JP. 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.
Semi-annual report for the period ended 313 March 2015 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 2015 (Unaudited) 31.3.2015 30.9.2014 Assets Cash at banks 2,459,245 4,308,176 Amounts due from brokers 448,043 320,251 Margin deposits 1,467,196 1,609,698 Collateral deposits with brokers 544,300 1,917,000 Derivatives 46,973 475,911 Investments - long positions 38,827,163 46,472,330 Dividend and other accounts receivable 70,683 65,010 Total assets 43,863,603 55,168,376 ---------- ---------- Liabilities Amounts payable on redemption 4,552,497 608,170 Performance fee payable - 13,260 Derivatives 396,810 157,650 Investments - short positions 500,229 1,758,923 Other accounts payable 77,587 138,935 Liabilities (excluding net assets attributable to units) 5,527,123 2,676,938 ---------- ---------- units [Note 3] 38,336,480 52,491,438 The notes on pages 5 to 9 form part of these financial statements. - 1 -
Statement of Comprehensive Income For the (Unaudited) 1.10.2014 to 31.3.2015 1.10.2013 to 31.3.2014 Income Net gains/(losses) on investments and derivatives [Note 4] 315,636 (799,092) Dividend income 109,683 210,623 Interest on deposits 1,385 65,257 Securities borrowing fee (net of interest on collateral deposits) (814) (2,683) Net foreign currency exchange losses (83,513) (88,869) Other income - 462 342,377 (614,302) ---------- ---------- Expenses Management fee 244,509 392,581 Transaction costs 131,284 207,373 Auditor's fee 31,321 26,378 Legal and professional expenses 15,089 7,730 Trustee's fee 13,769 19,039 Printing and publication expenses 5,022 4,914 Safe custody and bank charges 3,237 5,051 Registrar's fee 1,327 3,436 Valuation fee 420 420 Performance fee - 13,259 Other operating expenses 6,793 13,131 452,771 693,312 ---------- ---------- Net operating loss (110,394) (1,307,614) Finance costs Interest paid (699) (2,311) Loss before taxation (111,093) (1,309,925) Taxation (12,372) (30,866) Decrease in net assets attributable to units and total comprehensive income (123,465) (1,340,791) 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) 1.10.2014 to 31.3.2015 1.10.2013 to 31.3.2014 units at the beginning of the period 52,491,438 84,994,545 ---------- ---------- Allotment of redeemable units - 609,548 Redemption of redeemable units (14,031,493) (13,716,079) Net redemption (14,031,493) (13,106,531) ---------- ---------- 38,459,945 71,888,014 Decrease in net assets attributable to units and total comprehensive income (123,465) (1,340,791) units at the end of the period 38,336,480 70,547,223 The notes on pages 5 to 9 form part of these financial statements. - 3 -
Statement of Cash Flows For the (Unaudited) 1.10.2014 to 31.3.2015 1.10.2013 to 31.3.2014 Operating activities Purchase of investments and derivatives (41,040,840) (45,430,015) Proceeds from disposal of investments and derivatives 48,283,081 52,722,388 Decrease in collateral deposits with brokers 1,372,700 1,800,700 Decrease in margin deposits 142,502 3,400,515 Dividend received 83,214 160,086 Interest received 2,427 27,403 Securities borrowing fee paid (net of interest on collateral deposits) (907) (3,307) Registrar's fee paid (3,864) (6,386) Performance fee paid (13,260) (54,120) Tax paid (12,372) (30,866) Trustee's fee paid (14,127) (19,360) Transaction costs paid (131,879) (212,951) Management fee paid (253,469) (405,415) Others (176,407) (89,143) Net cash inflow from operating activities 8,236,799 11,859,529 ----------- ----------- Financing activities Interest paid (699) (2,350) Receipts on allotment of redeemable units - 609,548 Payments on redemption of redeemable units (10,087,166) (14,316,631) Net cash outflow from financing activities (10,087,865) (13,709,433) ----------- ----------- Decrease in cash and cash equivalents (1,851,066) (1,849,904) Cash and cash equivalents at the beginning of the period 4,308,176 8,138,060 Exchange gains/(losses) on cash and cash equivalents 2,135 (67,656) Cash and cash equivalents at the end of the period 2,459,245 6,220,500 Analysis of balances of cash and cash equivalents: Cash at banks 2,459,245 2,999,523 Short term deposits - 3,220,977 2,459,245 6,220,500 The notes on pages 5 to 9 form part of these financial statements. - 4 -
Notes to the Financial Statements 1 The Fund JPMorgan Asia Absolute Return Fund (the "Fund") was established under a Trust Deed dated 6 September 1989, 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 the Asia-Pacific region (including Japan). 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 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 3 October 2014, there was no merging of unit classes in respect of the financial year ended 30 September 2014. Pursuant to the Trust Deed, with effect from 20 December 2002, 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. 2 Summary of principal accounting policies (a) Accounting policies 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 2014. (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 Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of financial assets and liabilities traded in active markets are based on last traded prices. 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 last traded prices if the collective investment schemes are listed or traded on an exchange. - 5 -
Open future and swap contracts are valued at last traded prices for both long and short positions at the valuation date. The differences between the last traded prices and the contract prices are recognized in the Statement of Comprehensive Income. Open option contracts are valued at last traded prices for both long and short positions at the valuation date. The differences between the last traded 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 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 6 September 1989, 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 units and are classified as a financial liability in the Statement of Financial Position which represents the net assets attributable to units (or "net asset value" or "net assets" or "NAV") and is carried at the redemption amount that would be payable at the Statement of Financial Position date if the units exercised the right to redeem units of the Fund. - 6 -
3 Number of units in issue and net assets attributable to units (per unit) 31.3.2015 Class A Class 1010 Class 1104 Class 1305 Class 1310 Units Units Units Units Units Number of units in issue: 570,039.932 50,582.374 26,449.872 16,371.212 5,154.706 units 36,158,262 479,147 253,870 156,092 49,537 units (per unit) 63.43 9.47 9.60 9.53 9.61 Class 1311 Class 1312 Class 1401 Class 1404 Class 1405 Units Units Units Units Units Number of units in issue: 18,000.000 15,000.000 22,800.000 3,507.633 53,332.940 units 173,526 142,930 222,195 34,667 527,879 units (per unit) 9.64 9.53 9.75 9.88 9.90 Class 1406 Class 1407 Class 1408 Units Units Units Number of units in issue: 5,000.000 3,300.000 5,812.500 units 49,238 32,216 56,921 units (per unit) 9.85 9.76 9.79-7 -
30.9.2014 Class A Class 1010 Class 1104 Class 1305 Class 1310 Units Units Units Units Units Number of units in issue: 777,140.768 115,925.705 55,510.483 16,371.212 5,154.706 units 49,339,093 1,099,104 533,276 156,231 49,581 units (per unit) 63.49 9.48 9.61 9.54 9.62 Class 1311 Class 1312 Class 1401 Class 1404 Class 1405 Units Units Units Units Units Number of units in issue: 18,000.000 15,000.000 22,800.000 3,507.633 53,332.940 units 173,681 143,058 222,394 34,698 528,353 units (per unit) 9.65 9.54 9.75 9.89 9.91 Class 1406 Class 1407 Class 1408 Units Units Units Number of units in issue: 5,000.000 10,819.200 5,812.500 units 49,282 105,715 56,972 units (per unit) 9.86 9.77 9.80-8 -
4 Net gains/(losses) on investments and derivatives 1.10.2014 to 31.3.2015 1.10.2013 to 31.3.2014 Change in unrealized gains/losses in value of investments and derivatives 616,111 (1,244,042) Realized (losses)/gains on sale of investments and derivatives (300,475) 444,950 315,636 (799,092) 5 Soft dollar arrangements/commission sharing arrangements The Investment Manager has entered into soft dollar arrangements/commission sharing 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 2014: nil). - 9 -
Investment Portfolio As at 31 March 2015 (Unaudited) Holding Fair value % of net assets Listed/Quoted Investments (99.1%) (I) Equities (26.9%) China (6.5%) China CITIC Bank 'H' 700,000 527,276 1.4 China State Construction Intl 400,000 557,199 1.4 CSPC Pharmaceutical Group 300,000 253,836 0.7 Fu Shou Yuan Intl Group 500,000 236,036 0.6 New China Life Insurance 'H' 90,000 502,641 1.3 Qihoo 360 Technologies ADR 8,000 409,600 1.1 Hong Kong (4.8%) BOC Hong Kong (Hldgs) 150,000 534,951 1.4 Chow Tai Fook Jewellery Group 218,400 234,934 0.6 CK Hutchison Hldgs 15,000 307,234 0.8 HSBC Hldgs-HK List 51,033 438,711 1.1 New World Development 300,199 348,094 0.9 India (1.3%) Axis Bank 20,000 179,606 0.5 ICICI Bank ADR 30,000 310,800 0.8 Japan (7.6%) Bridgestone Corp 6,000 240,951 0.6 Daikin Industries 5,000 335,460 0.9 Hitachi Ltd 70,000 480,500 1.3 Honda Motor 8,000 260,363 0.7 JFE Hldgs 10,000 221,305 0.6 Orix Corp 20,000 281,593 0.7 Softbank Corp 10,000 582,029 1.5 Suzuki Motor 12,000 361,476 0.9 Taiheiyo Cement 100,000 306,025 0.8 Takeda Pharmaceutical (10,000) (500,229) (1.3) Toshiba Corp 80,000 336,344 0.9 Korea (4.4%) CJ O Shopping Co 1,000 206,499 0.5 Hyundai Marine & Fire Insurance 10,000 223,534 0.6 Hyundai Motor 2,000 303,754 0.8 KIA Motors 8,000 325,927 0.9 Samsung Fire & Marine Insurance 1,000 241,110 0.6 Shinhan Financial Group 10,000 378,115 1.0 Singapore (0.9%) United Overseas Bank 20,000 335,350 0.9 Thailand (1.4%) Kasikornbank Public Co (F) 50,000 353,411 0.9 PTT Exploration & Production (F) 60,000 200,983 0.5 10,315,418 26.9 --------- ---- (II) Debt Securities (73.1%) Cayman Islands (13.1%) China Overs Fin III5.375%10/23-RegS USD1,000,000 1,109,744 2.9 China Overs Fin VI 5.95% 5/24-RegS USD1,000,000 1,155,450 3.0 New World China Land 8.5% 4/15-RegS CNH16,450,000 2,755,820 7.2-10 -
Investment Portfolio (Continued) As at 31 March 2015 (Unaudited) Holding Fair value % of net assets China (8.4%) Bank of China 5% 13/11/24-RegS USD2,000,000 2,149,611 5.6 Ind & Comm Bk CN 6% Perp-RegS USD1,000,000 1,065,817 2.8 Hong Kong (32.8%) Bank of East Asia VRN 8.5%Perp-RegS USD2,000,000 2,404,417 6.3 Bank of East VRN 4.25% 11/24-RegS USD500,000 514,692 1.3 China Unicom HK 4% 16/04/17-RegS CNH10,000,000 1,602,693 4.2 Cosco Pacific Fin 4.375% 31/01/23 USD3,500,000 3,406,346 8.9 Dah Sing Bank VRN 5.25%29/1/24-RegS USD500,000 524,119 1.3 Sino-Ocean Land VRN 10.25%Perp-RegS USD2,000,000 2,219,053 5.8 Yuexiu Property 4.5% 24/01/23 USD2,000,000 1,908,500 5.0 Singapore (8.6%) Olam Intl 7.5% 12/08/20 USD2,000,000 2,276,633 5.9 Pakuwon Prima 7.125% 02/07/19-RegS USD1,000,000 1,025,763 2.7 United Kingdom (4.2%) CCBL Funding 3.2% 29/11/15-RegS CNH10,000,000 1,612,736 4.2 Virgin Islands (6.0%) Fita Intl 7% 10/02/20 USD2,000,000 2,280,122 6.0 28,011,516 73.1 --------- ---- (III) Derivatives (-0.9%) Forward foreign exchange contracts (-0.0%) (19,206) (0.0) Futures (-0.9%) HSCEI (HFE) Fut 04/15 (30) (68,283) (0.2) HSI (HFE) Fut 04/15 (5) (18,444) (0.1) JGB 10Yr Bond (OSE) Fut 06/15 (10) (3,752) (0.0) KOSPI 200 (KFE) Fut 06/15 (20) (55,884) (0.1) Share Price Idx 200 (SFE) Fut 06/15 (5) (5,730) (0.0) TOPIX (OSE) Fut 06/15 (40) (78,382) (0.2) US 10Yr Note (CBT) Fut 06/15 (110) (100,156) (0.3) (349,837) (0.9) --------- ---- Total Listed/Quoted Investments 37,977,097 99.1 Cash at banks 2,459,245 6.4 Other net liabilities (2,099,862) (5.5) units at 31 March 2015 38,336,480 100.0 Total investments, at cost less proceeds on short positions 38,393,265-11 -
Statement of Movements in Portfolio Holdings For the (Unaudited) % holdings of net assets 31.3.2015 30.9.2014 Listed/Quoted Investments Equities Japan 7.6 8.0 China 6.5 14.5 Hong Kong 4.8 5.4 Korea 4.4 7.8 Thailand 1.4 1.1 India 1.3 2.3 Singapore 0.9 - Philippines - 0.7 Indonesia - 0.6 Debt Securities Hong Kong 32.8 18.4 Cayman Islands 13.1 13.3 Singapore 8.6 - China 8.4 - Virgin Islands 6.0 10.0 United Kingdom 4.2 3.1 Derivatives Forward foreign exchange contracts (0.0) 0.5 Futures (0.9) 0.1 Total Listed/Quoted Investments 99.1 85.8 Cash at banks 6.4 8.2 Other net (liabilities)/assets (5.5) 6.0 units 100.0 100.0-12 -
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