REG - JPMorgan Japanese IT - Half-year Report
19/05/2022 11:15
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220519:nRSS1206Ma&default-theme=true
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
ENDED 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 £4.65 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 £1.08 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
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'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
£'000 £'000 £'000 £'000 £'000 £'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 £634,777,000 Capital reserves are made up of net
gains on the sale of investments of £414,247,000, a gain on the revaluation
of investments still held of £205,935,000 and an exchange gain on the foreign
currency loans of £14,595,000. The £14,595,000 of Capital reserves arising
on the exchange gain on the foreign currency loan is not distributable. The
remaining amount of Capital reserves totaling £620,182,000 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 £166,791,000 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
£'000 £'000 £'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
£'000 £'000 £'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
£'000 £'000 £'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
£'000 £'000 £'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 (£'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
(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 (http://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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR BGGDURGBDGDCRecent news on JPMorgan Japanese Investment Trust
See all newsREG - JPMorgan Inv. Trusts - Gearing announcement
AnnouncementREG - JPMorgan Japanese IT - Gearing announcement
AnnouncementREG - JPMorgan Inv. Trusts - Net Asset Value(s)
AnnouncementREG - JPMorgan Japanese IT - Net Asset Value(s)
AnnouncementREG - JPMorgan Inv. Trusts - Net Asset Value(s)
Announcement