RNS Number : 1206M

JPMorgan Japanese Inv. Trust PLC

19 May 2022




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


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).


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


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.



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.


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


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 
-----------------  --------  ----------  -----------  --------  ----------  ----------  --------  ---------  --------- 
  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 
  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 
-----------------  --------  ----------  -----------  --------  ----------  ----------  --------  ---------  --------- 
  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) 
  expenses            (482)           -        (482)     (393)           -       (393)     (846)          -      (846) 
-----------------  --------  ----------  -----------  --------  ----------  ----------  --------  ---------  --------- 
  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) 
-----------------  --------  ----------  -----------  --------  ----------  ----------  --------  ---------  --------- 
  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) 
-----------------  --------  ----------  -----------  --------  ----------  ----------  --------  ---------  --------- 
  after taxation      5,579   (284,293)    (278,714)     5,342     (2,066)       3,276     9,536     99,550    109,086 
-----------------  --------  ----------  -----------  --------  ----------  ----------  --------  ---------  --------- 
  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

                                     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 
 -------------------------------------------------------  -----------------  -----------------  -------------------- 


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.


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) Dow Jones Newswires

May 19, 2022 06:13 ET (10:13 GMT)

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