TIDMJFJ
RNS Number : 1206M
JPMorgan Japanese Inv. Trust PLC
19 May 2022
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPANESE INVESTMENT TRUST PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS
ED 31ST MARCH 2022
Legal Entity Identifier: 549300JZW3TSSO464R15
Information disclosed in accordance with DTR 4.2.2
Chairman's Statement
Investment Performance
In the six months ended 31st March 2022 the global investment
environment was mixed, with the relative success of the Covid
vaccination programme in Japan and across the globe contrasting
with rising global consumer price inflation and the catastrophic
war in Ukraine.
For the half year, the total return on net assets of the
Company, with debt calculated at fair value, was -24.2%. This
compares with a total return for the same period from the Company's
benchmark index return, the Tokyo Stock Exchange (TOPIX) Index(1)
(in sterling terms), of -8.7%. The share price total return over
the same period was -23.4% with the discount narrowing from 6.8% to
6.0% over the period. The Company's policy of not hedging means
that the share price will be exposed to currency fluctuations.
In my last Chairman's statement in December 2021 I reminded
investors that, given our Investment Managers' high conviction,
unconstrained approach focused on finding the best investment ideas
in Japan, there will from time to time be periods of
underperformance. That reminder remains timely given the major
shift in financial market sentiment in favour of cyclical and value
companies. The companies benefitting from this shift are not
generally the kind of names your Company invests in given its focus
on quality stocks with strong growth prospects over the
longer-term. However the Company's longer-term NAV performance
remains strong, with outperformance against the benchmark index(1)
over 3, 5 and 10 years of +8.6%, +23.3% and +87.5%
respectively.
The Investment Managers' Report on pages 10 to 15 discusses
performance, the investment rationale behind recent portfolio
activity and the outlook in more detail.
Notwithstanding this period of difficult performance, I am
delighted to report that the Company's Morningstar Analyst rating
has been increased to their highest level, Gold, from the previous
rating of Silver. It is particularly good to see the Morningstar
report recognise the strength of the Company's Investment Manager,
in particular Nicholas Weindling, Miyako Urabe and the rest of the
JPMAM Japanese Equity investment team, and their investment
process. Your Manager is the only active Japanese Equity Manager
with a Gold Morningstar Analyst rating across some 900 Japanese
equity funds and share classes which Morningstar classify as "Japan
Large-Cap equity" and on which they provide data on their UK
website. You can find further details of the Morningstar research
and rating at www.morningstar.co.uk
Gearing
The Board of Directors believes that gearing can be beneficial
to performance and sets the overall strategic gearing policy and
guidelines and reviews these at each Board meeting. The Investment
Managers then manage the gearing within the agreed levels. The
Investment Managers' permitted gearing limit is within the range of
5% net cash to 20% geared in normal market conditions. During the
period, gearing ranged from 11.9% to 16.6%, with an average of
13.6%. As at 31st March 2022, gearing was equivalent to 12.5% of
net assets (12.7% as at 30th September 2021).
After the period end the Company took out a yen 5 billion
revolving credit facility with Mizuho Bank Ltd to enable the
Investment Managers to invest further as and when they see
opportunities and to diversify the funding sources available to the
Company. This facility is in addition to the credit facility with
Scotia Bank and the costs are in line with the existing
facility.
Revenue and Dividends
Japanese companies often have stronger balance sheets than many
of their international counterparts; nonetheless it cannot be
assumed that dividends will be maintained. Prior year dividends
should not therefore be taken as a guide to future payments.
For the year ended 30th September 2021 we paid a dividend of
5.3p per share on 28th January 2022, reflecting the available
revenue for distribution. Consistent with previous years, the
Company will not be declaring an interim dividend.
Discount Management/share repurchases
The Board monitors the discount to NAV at which the Company's
shares trade and believes that, over the long-term, for the
Company's shares to trade close to NAV the focus has to remain on
consistent, strong investment performance over the key one, three
and five year timeframes, combined with effective marketing and
promotion of the Company.
The Board recognises that a widening of, and volatility in, the
Company's discount is seen by some investors as a disadvantage of
investment trusts. The Board has restated its commitment over the
long run to seek a stable discount or premium commensurate with
investors' appetite for Japanese equities and the Company's various
attractions, not least the quality of the investment team and the
investment process, and the strong long-term performance these have
delivered. Since 2020, this commitment has resulted in both
increased marketing spend and a series of targeted buybacks.
As of 31st March the discount was -6.0%, compared to -6.8% at
the end of 30th September 2021.
Over the six month period to 31st March 2022, the Company's
share price ranged from a +2.7% premium to a -9.5% discount
(average discount: -4.9%) and the Company repurchased 746,945
shares at an average discount of -7.0% at a cost of GBP4.65
million.
Since 31st March 2022, the Company has repurchased a further
225,000 shares at an average discount of 6.5% at a cost of GBP1.08
million.
Shares are only repurchased at a discount to the prevailing net
asset value, which increases the Company's net asset value per
share, and may either be cancelled or held in Treasury for possible
reissue at a premium to net asset value.
Environmental, Social and Governance Issues
As detailed in the Investment Managers' Report, Environmental,
Social and Governance ('ESG') considerations are fully integrated
into their investment process. The Board shares the Investment
Managers' view of the importance of ESG factors when making
investments for the long-term and the necessity of continued
engagement with investee companies over the duration of the
investment.
Further information on JPMorgan's ESG process and engagement is
set out in the ESG Report on pages 16 to 18 and in the JPMorgan
Asset Management 2021 Investment Stewardship Report which can be
accessed at
https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/sustainable-investing/investment-stewardship-report.pdf.
The Board
As outlined in the 2021 Annual Report, the Board undertook a
recruitment process to find a replacement Director to join the
Board following Yoko Dochi's resignation in October 2021 for
personal reasons. Accordingly, the Board announced the appointment
of Anna Dingley as a non-executive director of the Company with
effect from 13th January 2022.
Anna brings to the Board a wealth of experience following a
25-year career spanning technology, finance and government sectors.
She has lived and worked extensively in Japan for 8 years over her
career. Her fluent Japanese, a deep understanding of Japanese
culture and business relationships will greatly benefit the Board.
She is the only foreign non-executive director at Nihon M&A
Center Holdings Inc. (listed in Tokyo).
Outlook
The Investment Managers have set out their views on the outlook
for markets and your Company on pages 14 and 15 of the Investment
Managers' report.
In a notable speech in London on 5th May 2022, Japanese Prime
Minister Kishida emphasised his strong personal commitment to
further economic and governance reforms, increased investment and
wages, more entrepreneurialism, increased R&D, national
strategies for specific new technologies, and his 'earnest wish to
create the next start-up boom in Japan. The full text can be found
at
https://japan.kantei.go.jp/101_kishida/statement/202205/_00002.html.
The Board is greatly encouraged that these clear intentions,
coupled with Japan's political stability, should provide a
supportive environment for new growth and significantly accelerate
the availability and quantity of interesting investment
opportunities for your Company.
On behalf of the Board, I would like to thank you for your
ongoing support.
Christopher Samuel
Chairman
19th May 2022
(1) The Tokyo Stock Exchange was restructured on 4th April 2022.
The constituents of TOPIX following the restructuring remain
unchanged, regardless of their new market segment. However, the
index weights of the smallest constituents (sub JPY 5bn) will
reduce to zero over time.
INVESTMENT MANAGERS' REPORT
Performance
For the six months ended 31st March 2022, the Company returned
-24.2% on a net asset basis (NAV) in sterling terms,
underperforming its benchmark, the TOPIX index, by 15.5 percentage
points.
This near-term performance is disappointing, but is the result
of the same quality and growth focus in its holdings that has
underpinned the Company's long-term record of strong absolute
returns and outperformance. Over the ten years to end-March 2022,
the Company delivered an annualised return of 12.1% (on an NAV
basis), decisively outpacing the benchmark's annualised total
return of 8.5%. The Company's long-term share price performance has
been even stronger.
Economic and market backdrop
The Japanese economy grew by 1.6% during 2021, a much more
tentative recovery than the post-pandemic rebound experienced by
other major economies, but it is, at least, starting to normalise.
Manufacturing production has risen for fifteen consecutive months
and service sector activity is showing early signs of expansion and
corporate earnings are solid. A program of booster vaccines is
proceeding well, and most Covid restrictions have been lifted.
Although Japan remains closed to tourists, it is only a matter of
time before remaining restrictions are lifted. Meantime, retail
sales are still weak and consumer sentiment is fragile.
Historically, there has been little correlation between the
Japanese economy and earnings growth. Earnings have grown close to
250% over the last ten years while GDP has been flat.
Investing in Japanese equities is not investing in the Japanese
economy
The worst of the Covid threat may have receded since our last
report but two new, and equally unwelcome, developments dominated
financial markets in the six months to end-March 2022 - rising
inflation and Russia's invasion of Ukraine. Even before the tragic
events in Ukraine, rising energy and commodity prices, combined
with supply chain disruptions, especially in the semiconductor
industry, had driven inflation to thirty-year highs in the US and
other major economies. The Ukraine conflict is exacerbating upward
price pressures, including on soft commodities, as Ukraine is one
of the world's largest grain producers. As a result, investors'
fears of rising interest rates have begun to be realised in some
major markets. The Bank of England embarked on a series of rate
increases beginning in December 2021 and the US Federal Reserve
followed suit in March 2022, accompanying the hike with a clear
signal that it will take further tightening steps in coming
months.
Compared with other markets, Japan remains different in several
respects, notably in its low inflation rate (0.8 percent in the 12
months to March vs 8.5% in the US) and in the maintenance of very
low interest rates by the Bank of Japan. Nevertheless the markdown
in growth stocks which has characterised global markets has fed
across into Japan, while interest rate differentials have caused a
weakening of the yen and therefore in the sterling valuation of our
portfolio.
The Japanese yen has been one of the weakest currencies in the
world this year. The yen has weakened due to a difference in
monetary policy between the US and Japan. The US is hiking interest
rates in response to rising inflation while Japanese policy remains
ultra easy as inflation is at a much lower level. We see few signs
of 'sticky' inflation in Japan such as rising rents or wages and,
in contrast to the US, there is little need to shift policy. While
the weak yen is good for the profits of companies that export it is
negative for the average person. Salaries and pensions remain
stable while the price of essential items such as gasoline, energy
and food is increasing particularly in yen terms. This is likely to
hurt the Japanese economy overall. While it is not impossible that
monetary policy changes, particularly as the current Bank of Japan
governor is due to retire next year, we do not currently expect
interest rate hikes. Regardless of inflation or the level of the
yen we believe the high quality companies in the portfolio are able
to cope with the environment and will ultimately be able to reflect
these changes in pricing.
Our investment philosophy and process
We adopt a bottom-up, unconstrained approach focused on
individual listed stocks. We look for high quality, innovative
businesses with a competitive advantage, free cash flow, robust
balance sheets, sustainable margins and strong management, which we
believe have the potential for earnings growth over the long-term.
Typically we do not hold many of the well-known names covered by
most analysts and included in the market index (which comprises
many larger companies operating in structurally impaired sectors
vulnerable to long-term declines in demand). Instead we may hold
small and medium sized businesses, less well covered by other
analysts and thus less known to investors.
We are supported in our search for such companies by JPMorgan
Asset Management's well-resourced investment team on the ground in
Tokyo, which is ideally placed to identify interesting companies
and investment opportunities overlooked by other investors.
We assign a classification to each company, based on a number of
metrics, with 'Premium' being the highest rating, followed by
'Quality' and 'Trading'. Our focus on quality and growth, combined
with our unconstrained approach, means that the portfolio can, and
does, look very different from the benchmark. As at end-March 2022,
it had an active share of 93% (on a geared basis). Our bias towards
Premium and Quality companies also results in a portfolio that is
higher quality than the market. At the end of the review period the
ROE (return on equity) of the companies in the portfolio was 16%
compared to a 10% ROE for the market. Their operating margin was
23%, versus 12% for the index, while the price to earnings (PE)
ratio was 25x, compared to an index PE of 12.5x. The portfolio's PE
has declined substantially from a year ago, when the PE was 37x
(and 33x at end of September 2021). This was a result of rising
global interest rate expectations in the face of rising inflation
expectations. We believe the higher-than-average portfolio PE
multiple versus the market is justified by the significantly better
long-term prospects of the companies that we hold, compared to
others in traditional sectors represented in the index.
Portfolio themes
Although the portfolio is constructed on a bottom-up stock
selection basis, we do find certain general areas of the economy
particularly interesting. One key, and pervasive, investment theme
is the adoption of digital technology. The onset of the pandemic
accelerated many digital trends such as the rising popularity of
online shopping and gaming, cashless payments and cloud computing.
However, this theme still has a very long way to run, as Japan's
take-up of digitisation across many sectors continues to lag that
of other countries. For example, e-commerce still represents just
over 10% of total Japanese retail sales, a small fraction of the
market penetration already realised in other major economies such
as China, the US, the UK and South Korea. So companies such as
portfolio holding ZOZO, Japan's number one online apparel retailer,
and MonotaRO, the country's top business to business e-commerce
company, have scope for further significant expansion.
Suppliers of software solutions also have great potential for
future growth. Historically, many Japanese companies used software
solutions tailored to their specific requirements by in-house
engineers. Now that this first generation of software engineers is
starting to retire, a lack of skilled replacements has made it
imperative for businesses to switch to standardised, cloud-based
software provided by companies such as Obic, the IT service
provider, Bengo4.com, Japan's leading digital signature provider,
and tele-medicine company, Medley, are other examples of portfolio
holdings benefitting from the digitisation of a variety of
services.
Associated increases in demand for data processing and storage
will support the long-term outlook for several portfolio holdings.
Companies like Tokyo Electron, a semiconductor equipment supplier
and Shin-Etsu Chemical, a producer of specialist industrial
materials, should benefit from the trend towards vehicle
automation, while businesses in all sectors impacted by rapid
digitisation may require the services of Nomura Research Institute
(NRI), a consultancy which advises companies on their digital
strategy.
Automation is another tech-related investment theme. A
structural increase in demand for automation is underpinned by
several factors. Persistent US/China trade tensions, delays to the
delivery of many manufacturing components and the war in Ukraine
are all encouraging companies to shorten their supply chains by
building new production sites nearer to their customers. This is
creating an opportunity for businesses to introduce greater levels
of automation to their manufacturing and supply processes. In many
economies, rising wage inflation is also strengthening the case for
the use of robotics in factories and warehouses. Some of the
world's leading factory automation companies, including Keyence,
SMC and MISUMI are listed in Japan and are among our portfolio
holdings.
Japan's transition to renewable energy is another important
investment theme. Japan has committed to carbon neutrality (net
zero) by 2050. However, it is presently highly reliant on imported
fossil fuels. The outbreak of war in Ukraine and the resultant
surge in energy price has highlighted the need for Japan to speed
up its transition to more secure, and sustainable, energy sources.
Investments driven by this theme include our holdings in Japan's
leading solar energy REIT, Canadian Solar Infrastructure, and in
several companies whose products help reduce energy usage. For
example Daikin Industries makes ultra-efficient air conditioners,
while Shimano is a global market leader in the production of
components for bicycles and e-bicycles.
Relatively, Japan is only at the beginning of its transition to
renewable energy and the long process of digitisation, but these
trends are already spawning many exciting new businesses,
especially in the small and mid-cap space. These growth-oriented
companies are likely to gather momentum over time and provide
resilient, long-term sources of return for investors.
Significant contributors and detractors to performance
Our focus on quality and growth companies took a short-term toll
on the Company's performance in the six months to end-March 2022.
Our Japanese growth holdings were subject to the same revaluation
pressures as their counterparts in other markets, even though we do
not expect significantly higher interest rates in Japan, and
despite the fact that the long-term outlook for these companies has
not deteriorated. Indeed, as discussed above, their prospects are
improving materially as a result of the long-term structural shifts
underway across the Japanese economy.
Performance over the review period was also adversely impacted
by the outperformance of some economically-sensitive sectors, such
as financials, which we do not own. Just as we view the sell-off in
Japanese growth stocks as unjustified, we also believe the
outperformance of Japanese banks is not supported by fundamentals.
With economic growth set to remain modest, a significant pick-up in
loan demand seems unlikely. Furthermore, Japan's banking sector
remains highly competitive, while returns on equity are low
(currently 6%) and look set to remain so.
Portfolio holdings worst hit by market revaluations over the
review period include Keyence, along with Benefit One and Recruit
which both provide employment and business services. These are all
Premium rated companies that continue to post strong results, so we
expect their recent sell-offs to prove transitory, and all remain
in the portfolio.
Our holdings in other quality growth names such as Lasertec, a
semiconductor producer also hurt performance, while Nihon M&A
Center detracted for stock-specific reasons. This company provides
mergers and acquisition-related services to companies in Japan and
globally. Its share price fell sharply late last year after it
announced an investigation into some accounting irregularities over
the last few years, which had the effect of artificially enhancing
sales revenues in some periods. The issue has now been resolved and
the company has announced measures to prevent a re-occurrence of
this problem. While growth may be somewhat lower in the future, in
our view the company's long-term opportunities remain positive. We
continue to hold the stock.
At the end of the review period, gearing stood at 12.5%, lower
than the average level of 13.6% over the review period. This
reflects our conviction in the near-term outlook for the market and
portfolio. However, gearing detracted from performance during the
review period.
The detrimental performance impact of these developments was
partially offset by positive contributions from several holdings,
including Nintendo and Tokyo Electron, which benefited from a
particularly strong set of results. MonotaRO also enhanced returns
after it announced a significant expansion in capacity. We have
since taken some profits on our positions in both Tokyo Electron
and MonotaRO.
Portfolio activity
The recent sell-off in growth names has generated opportunities
to increase our exposure to some Premium and Quality rated names at
more attractive levels. For example, we have opened a position in
Nippon Sanso, Japan's leading provider of industrial gases. We
expect an improvement in this company's profitability thanks to a
new management team at its parent company, Mitsubishi Chemical. We
added exposures to Nippon Paint - the number one consumer paint
company in Japan and China - and to JSR, a specialist chemicals
producer which is the world leader in a range of electronic
materials. We bought Kissei Pharmaceutical, a small company with
three new drugs approaching approval and a very strong balance
sheet, along with Tokio Marine Holdings, Japan's number one
property and casualty insurance company. Tokio has a large US
business and an attractive dividend policy.
In addition to these new acquisitions, we also added to existing
positions in Shin-Etsu Chemical, as the company announced a
significant improvement in its dividend pay-out policy. We also
like the fact that this company has the pricing power to pass on
higher costs to customers.
These acquisitions were funded by a number of partial sales,
including profit-taking on Tokyo Electron and MonotaRO (mentioned
above). We also took some profits on positions in Recruit, Lasertec
and M3, a provider of online medical information, which had all
risen substantially in value since acquisition.
We also closed a number of positions, including exposures to
several companies facing increased competition. For instance, we
sold Hennge, a software infrastructure supplier, Giftee, an online
gifting company, and Pigeon, a provider of mother and baby products
facing increasing competition in its key China business. We also
exited positions in Mercari, a consumer-to-consumer e-commerce
site, due to rising competition in the US and slowing domestic
growth, and in Modalis Therapeutics, due to disappointing progress
with the development of its drug pipeline.
With some regret we also sold Renova, a leading player in
Japan's renewable energy market, following its failure to secure an
offshore wind contract in circumstances where price competition
raised serious questions about the viability of the sector.
In all, portfolio turnover at end-March 2022 was 18% on an
annualised basis, with over 50% of the portfolio held continuously
for over five years. At the end of the review period, the portfolio
held 60 stocks, compared to 63 at 30th September 2021. None of the
Company's portfolio holdings had significant exposure to either
Russia or Ukraine.
Outlook
Japan's post pandemic recovery is likely to remain relatively
subdued compared to other major economies. The war in Ukraine will
have an inevitable adverse impact on activity. Japan procures less
than 10% of its liquefied natural gas imports from Russia, so it is
better placed in terms of energy security than many European
countries that rely heavily on Russian oil and gas. Japan also has
little other direct trade with Russia and Ukraine. Consumers will,
however, feel the indirect effects, especially through rising
energy prices, as Japan has almost no gas, oil or coal of its own,
and the production of energy from renewable sources such as solar
and wind remains in its infancy. Import price rises will be
compounded by the weaker yen, although on the positive side, the
lower yen will boost export receipts.
But unlike the case in most other major nations, inflation
should not be a significant concern in Japan. Although prices have
begun to rise due to rising energy and material costs, there has
been no significant increase in property rents, and despite a tight
labour market, wage growth remains low. In this environment, rises
in energy and other prices may prove to be mostly one-offs, that do
not feed through into higher wage demands and long-term inflation
expectations.
Despite some inevitable short-term uncertainties, we are
positive about the longer-term outlook for Japan. The country is in
the process of a major technological transformation that should
deliver growth and substantial productivity gains over time.
Moreover, Japan's Prime Minister Fumio Kishida, who was elected in
September 2021, remains very popular and we expect Japan's
political landscape to remain stable for the foreseeable future,
while improvements in Japan's corporate governance continue.
We therefore maintain our positive view on the long-term
prospects for Japanese growth stocks and the themes that guide our
investment decisions. Indeed, just as Covid accelerated the pace of
change in some areas, such as e-commerce and digitalisation, so too
have recent developments accelerated other trends. For example,
energy price rises have made the transition to renewable energy
more urgent, while mounting wage pressures have in some major
economies boosted the demand for automation.
This is an ideal environment for Japan's many dynamic,
innovative, quality businesses, especially those in the small and
mid-cap space. We seek out the very best of these investment
opportunities, at the heart of Japan's new growth. The recent
market sell-off has made many of these opportunities available at
more attractive prices. We have therefore increased the combined
weight of Premium and Quality stocks to reflect this. The high
quality companies we own have strong balance sheets, leading
competitive positions and are often number one in their respective
industries, in Japan or internationally. They have demonstrated
pricing power over many years, and we believe they are capable of
prospering, over the long-term, regardless of the macroeconomic
environment.
Our approach means the portfolio typically has a high active
share which means it often looks very different to the benchmark.
This inevitably leads to some volatility in relative performance,
as we have seen over the review period. However, over the last ten
years, the strategy has generated returns well in excess of the
benchmark, and we remain confident in the portfolio's ability to
continue to outperform the benchmark over the long-term.
Nicholas Weindling
Miyako Urabe
Investment Managers
19th May 2022
Interim management report
The Company is required to make the following disclosures in its
half year report.
Principal and Emerging Risks and Uncertainties
The Board believes the principal and emerging risks and
uncertainties faced by the Company now fall into the following
broad categories:
Market and Economic - including currency; global inflation and
global recession.
Trust Specific - underperformance; widening discount; loss of
investment team or portfolio manager; outsourcing; cyber crime;
loss of investment trust status; statutory and regulatory
compliance.
Geopolitical - climate change; natural disasters; social
dislocation & conflict.
These risks have been updated to reflect Covid-19, both its
potential economic and market impact as well as its potential
impact on staff and operating effectiveness. Information on each of
these areas is given on pages 30 to 31 of the Strategic Report
within the Annual Report and Financial Statements for the year
ended 30th September 2021. The Board also notes that the investment
strategy pursued by the Manager has proved robust relative to the
broader market.
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. In particular, the Directors have considered
the impact of Covid-19 and believe that this should have a limited
financial impact on the Company's operational resources and
existence. The Directors believe 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 year 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 2022, 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.
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
Christopher Samuel
Chairman
19th May 2022
statement of comprehensive income
for the six months ended 31st March 2022
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2022 31st March 2021 30th September 2021
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------- -------- ---------- ----------- -------- ---------- ---------- -------- --------- ---------
(Losses)/gains
on investments
held at fair
value through
profit or
loss(1) - (288,357) (288,357) - (17,008) (17,008) - 89,356 89,356
Net foreign
currency
gains(2) - 7,163 7,163 - 17,879 17,879 - 16,117 16,117
Income from
investments 6,719 - 6,719 6,119 - 6,119 11,452 - 11,452
Other interest
receivable and
similar income 357 - 357 958 - 958 1,551 - 1,551
----------------- -------- ---------- ----------- -------- ---------- ---------- -------- --------- ---------
Gross
return/(loss) 7,076 (281,194) (274,118) 7,077 871 7,948 13,003 105,473 118,476
Management fee (283) (2,550) (2,833) (603) (2,413) (3,016) (1,186) (4,744) (5,930)
Other
administrative
expenses (482) - (482) (393) - (393) (846) - (846)
----------------- -------- ---------- ----------- -------- ---------- ---------- -------- --------- ---------
Net
return/(loss)
before finance
costs and
taxation 6,311 (283,744) (277,433) 6,081 (1,542) 4,539 10,971 100,729 111,700
Finance costs (61) (549) (610) (131) (524) (655) (295) (1,179) (1,474)
----------------- -------- ---------- ----------- -------- ---------- ---------- -------- --------- ---------
Net
return/(loss)
before taxation 6,250 (284,293) (278,043) 5,950 (2,066) 3,884 10,676 99,550 110,226
Taxation (671) - (671) (608) - (608) (1,140) - (1,140)
----------------- -------- ---------- ----------- -------- ---------- ---------- -------- --------- ---------
Net
return/(loss)
after taxation 5,579 (284,293) (278,714) 5,342 (2,066) 3,276 9,536 99,550 109,086
----------------- -------- ---------- ----------- -------- ---------- ---------- -------- --------- ---------
Return/(loss)
per share (note
3) 3.56p (181.58)p (178.02)p 3.35p (1.29)p 2.06p 5.99p 62.54p 68.53p
(1) Includes foreign currency gains or losses on
investments.
(2) Foreign currency gains are due to yen denominated loan notes
and bank loans
statement of changes in equity
for the six months ended 31st March 2022
Called
up Capital
share redemption Other Capital Revenue
capital reserve(1) reserve(1) reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
Six months ended 31st March
2022 (Unaudited)
At 30th September 2021 40,312 8,650 166,791 923,650 15,141 1,154,544
Repurchase of shares into
Treasury - - - (4,580) - (4,580)
Net (loss)/return - - - (284,293) 5,579 (278,714)
Dividend paid in the period
(note 4) - - - - (8,295) (8,295)
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
At 31st March 2022 40,312 8,650 166,791 634,777 12,425 862,955
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
Six months ended 31st March
2021 (Unaudited)
At 30th September 2020 40,312 8,650 166,791 842,661 13,750 1,072,164
Repurchase of shares into
Treasury - - - (1,653) - (1,653)
Net (loss)/return - - - (2,066) 5,342 3,276
Dividend paid in the period
(note 4) - - - - (8,145) (8,145)
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
At 31st March 2021 40,312 8,650 166,791 838,942 10,947 1,065,642
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
Year ended 30th September
2021 (Audited)
At 30th September 2020 40,312 8,650 166,791 842,661 13,750 1,072,164
Repurchase of shares into
Treasury - - - (18,561) - (18,561)
Net return - - - 99,550 9,536 109,086
Dividend paid in the year
(note 4) - - - - (8,145) (8,145)
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
At 30th September 2021 40,312 8,650 166,791 923,650 15,141 1,154,544
----------------------------- -------- ----------- ----------- ------------ ----------- -----------
(1) In accordance with the Company's Articles of Association and
with ICAEW Technical Release 02/17BL on Guidance on Realised and
Distributable Profits under the Companies Act 2006, the Capital
reserves may be used as distributable profits for all purposes and,
in particular, the repurchase by the Company of its ordinary shares
and for payments as dividends.
As at 31(st) March 2022 GBP634,777,000 Capital reserves are made
up of net gains on the sale of investments of GBP414,247,000, a
gain on the revaluation of investments still held of GBP205,935,000
and an exchange gain on the foreign currency loans of
GBP14,595,000. The GBP14,595,000 of Capital reserves arising on the
exchange gain on the foreign currency loan is not distributable.
The remaining amount of Capital reserves totaling GBP620,182,000 is
subject to fair value movements, may not be readily realisable at
short notice and as such may not be entirely distributable.
The Capital redemption reserve is not distributable under the
Companies Act 2006.
The Other reserve of GBP166,791,000 was created during the year
ended 30th September 1999, following a cancellation of the share
premium account, and forms part of the Company's distributable
reserves.
The investments are subject to financial risks, as such Capital
reserves (arising on investments sold) and Revenue reserve may not
be entirely distributable if a loss occurred during the realisation
of these investments.
statement of financial position
at 31st March 2022
(Unaudited) (Unaudited) (Audited)
31st March 2022 31st March 2021 30th September 2021
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ---------------- ---------------- --------------------
Fixed assets
Investments held at fair value through profit or loss 971,236 1,200,922 1,300,867
--------------------------------------------------------- ---------------- ---------------- --------------------
Current assets
Debtors 5,838 3,671 8,402
Cash and cash equivalents 9,099 18,183 8,299
--------------------------------------------------------- ---------------- ---------------- --------------------
14,937 21,854 16,701
Creditors: amounts falling due within one year (42,346) (211) (3,999)
--------------------------------------------------------- ---------------- ---------------- --------------------
Net current (liabilities)/assets (27,409) 21,643 12,702
--------------------------------------------------------- ---------------- ---------------- --------------------
Total assets less current liabilities 943,827 1,222,565 1,313,569
--------------------------------------------------------- ---------------- ---------------- --------------------
Creditors: amounts falling due after more than one year (80,872) (156,923) (159,025)
--------------------------------------------------------- ---------------- ---------------- --------------------
Net assets 862,955 1,065,642 1,154,544
--------------------------------------------------------- ---------------- ---------------- --------------------
Capital and reserves
Called up share capital 40,312 40,312 40,312
Capital redemption reserve 8,650 8,650 8,650
Other reserve 166,791 166,791 166,791
Capital reserves 634,777 838,942 923,650
Revenue reserve 12,425 10,947 15,141
--------------------------------------------------------- ---------------- ---------------- --------------------
Total shareholders' funds 862,955 1,065,642 1,154,544
--------------------------------------------------------- ---------------- ---------------- --------------------
Net asset value per share (note 5) 552.3p 667.8p 735.5p
statement of cash flows
for the six months ended 31st March 2022
(Unaudited) (Unaudited) (Audited)
31st March 2022 31st March 2021 30th September 2021
GBP'000 GBP'000 GBP'000
------------------------------------------------------------ ---------------- ---------------- --------------------
Net cash outflow from operations before dividends and
interest (3,785) (2,815) (5,516)
Dividends received 4,554 4,664 9,624
Interest paid (721) (760) (1,456)
------------------------------------------------------------ ---------------- ---------------- --------------------
Net cash inflow from operating activities 48 1,089 2,652
------------------------------------------------------------ ---------------- ---------------- --------------------
Purchases of investments (87,563) (123,469) (231,668)
Sales of investments 130,855 136,161 249,509
Settlement of foreign currency contracts (41) 45 65
------------------------------------------------------------ ---------------- ---------------- --------------------
Net cash inflow from investing activities 43,251 12,737 17,906
------------------------------------------------------------ ---------------- ---------------- --------------------
Dividends paid (8,295) (8,145) (8,145)
Drawdown of bank loan - 10,943 10,943
Repurchase of shares into Treasury (4,596) (2,085) (18,975)
Repayment of bank loan (29,385) - -
------------------------------------------------------------ ---------------- ---------------- --------------------
Net cash (outflow)/inflow from financing activities (42,276) 713 (16,177)
------------------------------------------------------------ ---------------- ---------------- --------------------
Increase in cash and cash equivalents 1,023 14,539 4,381
------------------------------------------------------------ ---------------- ---------------- --------------------
Cash and cash equivalents at the start of the period 8,299 3,806 3,806
Exchange movements (223) (162) 112
Cash and cash equivalents at the end of the period 9,099 18,183 8,299
------------------------------------------------------------ ---------------- ---------------- --------------------
Increase in cash and cash equivalents 1,023 14,539 4,381
------------------------------------------------------------ ---------------- ---------------- --------------------
Cash and cash equivalents consist of:
Cash and short-term deposits 9,099 18,183 8,299
Notes to the financial statements
for the six months ended 31st March 2022
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 information contained within the financial statements in
this half year report does not constitute statutory accounts as
defined by sections 434 and 436 of the Companies Act 2006 and has
not been audited or reviewed by the Company's auditors.
The figures and financial information for the year ended 30th
September 2021 are extracted from the latest published financial
statements of the Company. The financial statements for the year
ended 30th September 2021 have been delivered to the Registrar of
Companies including 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 April
2021.
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 2022.
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 2021.
3. (Loss)/return per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2022 31st March 2021 30th September 2021
GBP'000 GBP'000 GBP'000
---------------------------------------------------- ----------------- ----------------- --------------------
(Loss)/return per share is based on the following:
Revenue return 5,579 5,342 9,536
Capital (loss)/return (284,293) (2,066) 99,550
---------------------------------------------------- ----------------- ----------------- --------------------
Total (loss)/return (278,714) 3,276 109,086
---------------------------------------------------- ----------------- ----------------- --------------------
Weighted average number of shares in issue 156,568,539 159,712,865 159,166,121
Revenue return per share 3.56p 3.35p 5.99p
Capital (loss)/return per share (181.58)p (1.29)p 62.54p
---------------------------------------------------- ----------------- ----------------- --------------------
Total (loss)/return per share (178.02)p 2.06p 68.53p
---------------------------------------------------- ----------------- ----------------- --------------------
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2022 31st March 2021 30th September 2021
GBP'000 GBP'000 GBP'000
------------------------------------------------------- ----------------- ----------------- --------------------
2021 final dividend paid of 5.3p (2020: 5.1p) per
share 8,295 8,145 8,145
------------------------------------------------------- ----------------- ----------------- --------------------
The dividend paid in the period has been funded from the revenue
reserve (2021: same).
No interim dividend has been declared in respect of the six
months ended 31st March 2022 (2021: nil).
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2022 31st March 2021 30th September 2021
------------------------------------------------------- ----------------- ----------------- --------------------
Net assets (GBP'000) 862,955 1,065,642 1,154,544
Number of shares in issue (excluding shares held in
Treasury) 156,233,489 159,583,984 156,980,434
------------------------------------------------------- ----------------- ----------------- --------------------
Net asset value per share 552.3p 667.8p 735.5p
------------------------------------------------------- ----------------- ----------------- --------------------
JPMORGAN FUNDS LIMITED
19th May 2022
For further information, please contact:
Nira Mistry
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
ENDS
A copy of the half year report will be submitted to the National
Storage Mechanism and will be available shortly for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The half year report will also be available shortly on the
Company's website at www.jpmjapanese.co.uk where up to date
information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
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END
IR BGGDURGBDGDC
(END) Dow Jones Newswires
May 19, 2022 06:13 ET (10:13 GMT)
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