TIDMJFJ
RNS Number : 4076B
JPMorgan Japanese Inv. Trust PLC
02 June 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPANESE INVESTMENT TRUST PLC
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS
ED 31ST MARCH 2023
Legal Entity Identifier: 549300JZW3TSSO464R15
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Investment Performance
Inflation remains one of the main concerns for the global
economy, as rising interest rates and the war in Ukraine continue
to weigh on economic activity, mitigated in part by China's recent
reopening.
Given this backdrop, our Company performed as per its benchmark.
In the six months ended 31st March 2023, the Company returned +8.5%
on a net asset basis (in sterling terms), broadly consistent with
its benchmark, the TOPIX index, which also returned +8.5%. While
the one, three and five year performance numbers (as set out on
page 6 of the Half Year Report) are disappointing, largely because
of the six month period ending 31st March 2022, the long term
absolute and relative performance remain strong with an annualised
return of +10.2% over ten years to the end of March 2023, versus
the benchmark return of +7.3%.
Since 31st March 2023, through to 31st May 2023, I am pleased to
report that relative performance has begun to recover and the
Company returned +3.1%, while the TOPIX index returned +2.0%.
I am also delighted to report that the Company's Morningstar
Analyst rating has been maintained at the highest level, Gold, same
as from the previous rating in April 2022. The Morningstar report
recognises the strength of the Company's Investment Managers and
their investment process. As such, your Manager remains one of only
two active Japanese equity managers 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 Company continues to maintain
the highest Morningstar sustainability rating of five globes.
The Investment Managers' Report below discusses performance, the
investment rationale behind recent portfolio activity and the
outlook in more detail.
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 limits of 5% net
cash to 20% geared in normal market conditions. During the period,
gearing ranged from 9.8% to 14.4%, with an average of 12.2%. As at
31st March 2023, gearing was equivalent to 13.2% of net assets.
After the period end the Company took out a Yen10 billion
revolving credit facility with Industrial and Commercial Bank of
China Limited, London Branch, which is in addition to the existing
credit facility with Mizuho Bank Limited and the long-term fixed
rate debt.
Revenue and Dividends
Japanese companies often have stronger balance sheets than many
of their international counterparts. Dividends have been rising
strongly over the last few years and have continued to do so in the
results announcements we have seen since 31st March 2023. This is
in good measure a function of the improving corporate governance in
Japan and is one of several reasons why investors might consider
Japan a relatively attractive equity market. Nonetheless it cannot
be assumed that dividends will be maintained and prior year
dividends should not therefore be taken as a guide to future
payments.
For the year ended 30th September 2022, the Company paid a
dividend of 6.2p per share on 3rd February 2023, reflecting the
available revenue for distribution. Consistent with previous years
the Company will not be declaring an interim dividend.
Discount Management and 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
investments 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 2023, the share price discount to NAV with debt
at fair value was 7.7%, compared to 7.3% at the end of 30th
September 2022.
Over the six month period to 31st March 2023, the Company's
share price discount to net asset value ranged from 1.2% to 11.3%
(average: 6.8%) and the Company repurchased 1,110,000 shares at an
average discount of 9.0% and at a cost of GBP5 million.
Since 31st March 2023, the Company has repurchased a further
865,000 shares at an average discount of 8.9% at a cost of
GBP4.1million.
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. We are pleased that the Company retains the highest
Morningstar Sustainability rating of five globes.
Further information on JPMorgan's ESG process and engagement is
set out in the ESG Report in the 2022 Annual Report of the Company
on pages 10 to 23 and also in the JPMorgan Asset Management 2022
Investment Stewardship Report, which can be accessed at
https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/sustainableinvesting/
The Board
As mentioned in the Annual Report, having served as a Director
for nine years next year, I will be retiring from the Board and as
Chairman at the AGM in 2024. The Board has announced that Stephen
Cohen, the current Audit Chair, will replace me as Chairman.
Following the retirement of Sir Stephen Gomersall from the Board at
the Annual General Meeting ('AGM') of the Company held earlier this
year, Sally Macdonald, has succeeded Sir Stephen as the Company's
Senior Independent Director, effective from the conclusion of the
AGM.
As also outlined in the Annual Report, the Board undertook a
recruitment process to find a suitably qualified Director to join
the Board and to take over from Stephen Cohen as Audit Chair in
January 2024. After a thorough selection process, in October 2022
we announced the appointment of Sally Duckworth, effective from
31st October 2022. Sally is an established entrepreneur with a
focus on technology and has a background in finance and investment.
She qualified as a Chartered Accountant with PricewaterhouseCoopers
LLP.
Outlook
Pent-up demand for consumer spending and accommodative monetary
policy amid modest wage growth will likely result in reasonable
economic growth in the near term for Japan. At the same time the
trend of the last few years of substantial equity buybacks has been
reinforced by multiple announcements over the last few weeks. The
Investment Managers express their optimism for the market in their
Outlook comments and highlight in particular the possibility that
Japan's protracted deflation may be coming to an end. The Board
retains its confidence in the Investment Managers' high conviction,
unconstrained approach which focuses on finding the best investment
ideas in Japan.
The Investment Managers have set out their views on the outlook
for markets and your Company in their Report below. .
On behalf of the Board, I would like to thank you for your
ongoing support.
Christopher Samuel
Chairman
INVESTMENT MANAGERS' REPORT
Performance
In the six months ended 31st March 2023, the Company returned
+8.5% on a net asset basis (in sterling terms), consistent with its
benchmark, the TOPIX index, which returned +8.5%. Long term
absolute and relative performance remain strong with an annualised
return of +10.2% over ten years to the end of March 2023, versus
the benchmark return of +7.3%.
Performance attribution
Six months ended 31st March 2023
% %
---------------------------------------------- ----- -----
Contributions to total returns
---------------------------------------------- ----- -----
Benchmark return 8.5
---------------------------------------------- ----- -----
Stock selection -1.0
---------------------------------------------- ----- -----
Currency 0.0
---------------------------------------------- ----- -----
Gearing/Cash 1.3
---------------------------------------------- ----- -----
Investment Manager contribution 0.3
---------------------------------------------- ----- -----
Portfolio return(A) 8.8
---------------------------------------------- ----- -----
Management fee/other expenses -0.4
---------------------------------------------- ----- -----
Share Buy-Back 0.1
---------------------------------------------- ----- -----
Other effects -0.3
---------------------------------------------- ----- -----
Return on net assets - Debt at par value(A) 8.5
---------------------------------------------- ----- -----
Impact of fair value of debt 0.0
---------------------------------------------- ----- -----
Return on net assets - Debt at fair value(A) 8.5
---------------------------------------------- ----- -----
Return to shareholders(A) 8.2
---------------------------------------------- ----- -----
Source: JPMAM and Morningstar. All figures are on a total return
basis.
Performance attribution analyses how the Company achieved its
recorded performance relative to its benchmark.
(A) Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on pages 33 and 34 of
the Half Year Report.
Economic and market background
After volatile markets during the first half of 2022 (discussed
in detail in our last annual report), conditions steadied in the
past six months, as global inflation and interest rates showed
possible signs of peaking. The recent collapse of Silicon Valley
Bank in the US and the fire sale of Credit Suisse to UBS have added
to hopes that US rates are unlikely to rise much further, further
boosting market sentiment.
While last year's aggressive interest rate rises cast the shadow
of possible recession over other major economies, Japan is in a
very different, and more positive, phase of its economic cycle. It
was much slower to re-open post Covid-19 than most other developed
economies, only lifting its ban on foreign visitors in October
2022. However, since then it has seen strong growth, driven in part
by a dramatic recovery in the number of tourists visiting and
demand recovery from China's re-opening. In addition, many Japanese
businesses, including some of the Company's key holdings, have
major operations in China, which have resumed normal production
after three years of severe restrictions and rolling lockdowns.
Examples in the portfolio include Daikin, which produces
ultra-efficient air conditioners, Keyence and SMC, both global
leaders in the field of factory automation, Nippon Paint and
medical equipment companies Sysmex and Terumo.
Japan's aging population means that it is experiencing shortages
of skilled labour in many fields. Typically, companies have been
resistant to raising wages to attract and retain workers, and wages
growth has stagnated for around 30 years. However, more recently,
larger corporations have begun to increase salaries significantly
and this trend is likely to spread across the economy, as
businesses continue to compete for workers.
Wage pressures have so far had little impact on Japanese
inflation. However, inflation is now at a 42-year high of around
4%, driven by rising energy and commodity prices and last year's
sharp depreciation in the yen, which is still relatively low
compared to current inflation rates in the US and other major
economies. The yen has started to recover as the gap between US and
Japanese interest rates has stabilised, helping to ease
inflationary pressures. The Bank of Japan ('BoJ') made a small
adjustment to its yield curve control policy in December, and the
newly appointed BoJ Governor may make further changes to monetary
policy.
Investment philosophy and process
Our investment strategy remained unchanged over the review
period. We maintain an unconstrained investment approach that seeks
out the very best Japanese companies with excellent long-term
outlooks. Specifically, we focus on high-quality companies with
strong balance sheets and leading competitive positions. We favour
companies with pricing power demonstrated over many years, which
are well-positioned to continue to prosper, largely regardless of
the macroeconomic environment.
The portfolio has a strong bias towards high-quality growth
names. This leads to volatile performance at times, such as during
the last financial year, when growth stocks fall out of favour with
investors, but nonetheless, we believe that our focus on quality
businesses will achieve the best results over a multi-year period,
as evidenced by the Company's long term performance track
record.
In identifying potential investments, we are supported by
JPMorgan Asset Management's well-resourced investment team on the
ground in Tokyo and JPMAM's extensive team of analysts, both in
Japan and globally. Our bottom-up, unconstrained approach means the
portfolio can, and does, look very different from the benchmark.
Typically, we do not hold many of the well-known names covered by
most analysts and included in the benchmark. We steer clear of many
of these large companies as they operate in structurally impaired
sectors, such as department stores and railway operators, which are
vulnerable to long-term declines in demand. As of 31st March, the
portfolio, including borrowings, had a very high active share
(which is a measure of how much the portfolio differs from the
benchmark) of 91%. This is a strong indicator of active
management.
As an indicator of the quality in the portfolio, as of 31st
March 2023, the Company's return on equity was 16% compared to 12%
for the market, while the operating margin was 22% versus the
market's 14%. At the same time, the portfolio's price to earnings
(P/E) ratio was 20x, above the market's 12.5x. We believe the
portfolio's higher-than-average P/E ratio is justified by the
significantly better long-term prospects of the companies we hold,
compared to others in traditional, declining sectors.
We use gearing judiciously to enhance returns and have recently
renewed our debt facility. Portfolio gearing has recently increased
as we have taken advantage of opportunities to purchase high
quality stocks at attractive levels. At the end of the review
period, gearing stood at 13.2%, compared to a 12-month average of
12.3%, and up from 11.8% at the end of September 2022.
Portfolio themes
The portfolio is constructed entirely on a stock-by-stock basis
as we seek out the best, most attractive companies. Nonetheless,
certain themes tend to underpin our investment decisions. In fact,
C0VID-19 accelerated several tech-based trends in which we were
already invested, strengthening the appeal of sectors such as
online shopping, gaming and cloud computing.
Japan remains well behind most other advanced economies in these
and many other areas, leaving plenty of scope for such trends to
continue developing over coming years. For example, the penetration
of e-commerce within the Japanese retail market is just over 10%
and remains much lower than in China, the UK, South Korea or the
US. Portfolio holdings such as Zozo, Japan's number one online
apparel retailer, and Monotaro, a top-ranked business-to-business
(B2B) e-commerce company, are well placed to benefit, as is Nomura
Research Institute (NRI), a consultancy that advises companies on
their digital strategy.
Elsewhere in the portfolio, Nintendo and Sony both own
impressive stables of games and related intellectual property that
will ensure growing revenue streams over the medium to long term.
Standardised cloud-based software for businesses is another digital
theme. Historically, many Japanese companies have used internal
software solutions, but now that the first generation of software
engineers is reaching retirement age, there is an imperative for
businesses to switch to standardised software solutions. Japan's
poor demographics will add impetus to this as a structural shift
over time and companies such as OBIC, a supplier of business
administrative systems, provide the portfolio with exposure to this
theme.
Deglobalisation is another trend gathering momentum. The
pandemic, and subsequent events such as widespread supply chain
shortages, the conflict in Ukraine and mounting US/China
geo-political tensions, have increased companies' desire to move
production nearer to end customers. With wage inflation now an
issue in the US and other markets, businesses establishing new
production plants and warehouses have a stronger incentive to
incorporate factory automation into these facilities wherever
feasible. Japan is fortunate to be home to some of the world's
leading automation companies, of which the Company holds several,
including Keyence, SMC and MISUMI.
Even before the outbreak of hostilities in Ukraine there was
already a clear need for Japan, along with many other Asian and
European countries, to shift its energy mix away from a heavy
reliance on imported fossil fuels. The war only highlighted the
need for Japan to speed up its transition to renewable energy
sources and to make faster progress towards realising its
commitment to reduce carbon emissions to net zero by 2050. Our
portfolio includes shares in Japan's leading solar energy REIT
(Canadian Solar Infrastructure) and in several companies that help
reduce energy usage, such as Daikin, which produces
energy-efficient air conditioners and Shimano, which has a dominant
market position in components for bicycles and e-bicycles. During
the past year, we have also bought shares in JGC, which constructs
liquid natural gas (LNG) production plants.
Japan is only at the beginning of its journey towards
digitalisation and renewable energy, but these trends are already
spawning many exciting new businesses, especially in the small and
mid-cap space. Such growth-oriented companies are set to gather
momentum over time and provide resilient, long-term sources of
returns for investors. For example, we expect our position in Tokyo
Electron, the semiconductor equipment supplier, to gain from
associated increases in demand for data processing and storage. As
of 31st March 2023, the thematic breakdown of the portfolio,
compared to the position 12 months ago, was as follows:
Significant contributors and detractors to performance
Top contributors
The largest contributors to returns over the six months to end
March 2023 included Keyence, Asics and ShinEtsu Chemical. Keyence's
performance was supported by its leading position in the growing
factory automation sector, and it has maintained its track record
of strong execution. ASICS manufactures and distributes sporting
goods and equipment. Following a change in management a few years
ago, the company re-focused on its core product, running shoes, and
profitability is rising as a result. ShinEtsu Chemical is the
world's largest supplier of semi-conductor materials, including
silicon wafers and PVC. The company's good results have been
supported by strong demand, and management efforts to improve
shareholder returns have been welcomed by the market.
Biggest detractors
The major detractors from performance over the review period
included Monotaro, Japan's top B2B eCommerce company. Monotaro's
growth has disappointed expectations, but we remain confident in
its long-term investment case, and the stock remains in our
portfolio. Another detractor was NRI. Despite recent share price
weakness, the company's results have been steady, and we do not see
any deterioration in its favourable long-term outlook, as
businesses digitalise their operations and administrative
processes. We continue to hold this stock. However, we have reduced
our position in Nihon M&A, the leading provider of mergers and
acquisitions related services in Japan and globally. The share
price has been under pressure for some time following an accounting
scandal, and recent results have remained sluggish. Concerns about
increased competition from new entrants to the sector prompted us
to trim our holding.
Portfolio activity
Last year's sharp market sell-off left Japanese stocks trading
cheaply relative to historical levels - on both a price to earnings
and price-to-book basis, the market is presently trading at its
lowest levels in over 20 years. This, combined with the more recent
improvement in market conditions, has created many interesting
investment opportunities, and we added several new names to the
portfolio over the review period.
The largest and most significant addition was Seven & I, the
leading convenience store operator in Japan. The company has also
operated in the United States for some time, and a recent
acquisition has significantly increased its share of the US market.
While Japan is a very mature market, we believe the US represents a
substantial growth opportunity for the company. We also opened a
position in Unicharm, the leading producer of household and
personal products, including adult incontinence pads and pet
products - both markets experiencing structural growth.
Our investment in leading life insurer T&D Holdings was
motivated by our expectation of a significant change in the
company's shareholder return policy. We also purchased I-NE, a new
and disruptive player in cosmetic and beauty products sector,
Seiko, which is increasing its focus on high-end watches, Sosei, a
biotech company with several promising drugs on license to major
pharmaceutical companies, and Japan Material, a company that is
generating high recurring revenues by providing low-cost services
to semiconductor plants.
These purchases were funded by the outright sale of several
holdings. The largest disposal was Yamashin Filter. This company
provides filters for industrial and precision machines, but the
execution of its business plan has been poor for some time. We also
closed positions in several long-standing names that we have been
steadily reducing on valuation grounds. These included M3, an
online medical services provider, CyberAgent, a web-based media and
advertising company, and Lasertec, which develops laser microscopes
for use in semi-conductors and a variety of high-tech products.
Recent events related to the bankruptcy of Silicon Valley Bank
in the US and UBS's acquisition of Credit Suisse, whilst creating
great uncertainty in the financial markets as a whole, did not, in
our view, directly impact any of the Company's portfolio holdings,
and have not elicited any portfolio adjustments. In all, annualised
portfolio turnover was 19.5% in the six months to the end of March
2023, implying an average holding period of around five years.
Outlook
We are heartened by some recent improvements in Japan's
near-term economic prospects, and on balance we expect activity to
continue to expand, supported by the re-opening of both the
Japanese and Chinese economies. We are also encouraged by early
signs of upward pressures on wages and by rising inflation, as this
provides hope that Japan may be pulling out of its long period of
damaging and seemingly intractable deflation. This would be a
welcome development from the BoJ's perspective, so, unlike the case
in other major economies, we do not expect the central bank to try
to quash nascent inflation pressures by implementing aggressive
rate hikes.
The outlook for Japanese corporates is also positive. Company
balance sheets are very strong compared to the rest of the world,
and the focus on corporate governance and shareholder returns is
increasing. For example, in February 2023 the Tokyo Stock Exchange
announced that it will require companies trading below book value
to devise and implement capital improvement plans. We expect
progress in corporate governance and shareholder returns to
continue apace, and in our view, this remains the single most
compelling reason to invest in Japanese equities on a multi-year
view. Half of Japan's listed companies still have net cash
positions, so there is significant scope for this cash to be
returned to shareholders over the longer term, while in the short
term, cash-rich businesses have greater scope to weather global
recession and other unforeseen events.
Another key factor supporting our favourable view on Japanese
equities is that the country is undergoing major technological
transformation. Businesses and government are increasing their
efforts to digitalise and automate their processes and
administrative procedures, creating the potential for significant
growth and productivity gains over the medium term. This should
prove a very supportive environment for the dynamic, quality growth
businesses in which we invest.
The Japanese market continues to offer many opportunities to
invest in innovative, interesting companies at the heart of Japan's
new growth, at attractive valuations. We believe that we are
especially well-placed to capitalise on these opportunities, thanks
to our active investment approach and our large, Tokyo-based
research team. We remain confident that our investment approach
will ensure the Company continues to deliver absolute gains and
outperformance to its shareholders over the long term.
Nicholas Weindling
Miyako Urabe
Investment Managers
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 that the principal and emerging risks and
uncertainties faced by the Company fall into the following broad
categories:
Market and Economic Risks - including currency; global inflation
and global recession.
Trust Specific Risks - including underperformance; widening
discount; loss of investment team or investment manager;
outsourcing; cybercrime; loss of investment trust status; statutory
and regulatory compliance.
Geopolitical Risks - including climate change; natural
disasters; social dislocation & conflict.
Information on each of these areas is given on pages 33 to 35 of
the Strategic Report within the Annual Report and Financial
Statements for the year ended 30th September 2022.
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
In accordance with The Financial Reporting Council's guidance on
going concern and liquidity risk, including its Covid-19 guidance,
the Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern. The Board has, in
particular, considered the impact of heightened market volatility
since the Covid-19 outbreak and more recently the Russian invasion
of Ukraine, but does not believe the Company's going concern status
is affected. The Company's assets, the vast majority of which are
investments in quoted securities which are readily realisable,
exceed its liabilities significantly under all stress test
scenarios reviewed by the Board. Gearing levels and compliance with
borrowing covenants are reviewed by the Board on a regular basis.
Furthermore, the Directors are satisfied that the Company and its
key third party service providers have in place appropriate
business continuity plans.
Accordingly, having assessed the principal and emerging risks
and other matters, 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 yearly financial
report.
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 2023, 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
Condensed Statement of Comprehensive Income
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st March 2023 31st March 2022 30th September 2022
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
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
Gains/(Losses)
on
investments
held at fair
value
through
profit or
loss(1) - 55,483 55,483 - (288,357) (288,357) - (418,203) (418,203)
Net foreign
currency
gains(2) - 1,986 1,986 - 7,163 7,163 - 8,328 8,328
Income from
investments 7,516 - 7,516 6,719 - 6,719 14,016 - 14,016
Other interest
receivable
and
similar income 301 - 301 357 - 357 682 - 682
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
Gross
return/(loss) 7,817 57,469 65,286 7,076 (281,194) (274,118) 14,698 (409,875) (395,177)
Management fee (221) (1,992) (2,213) (283) (2,550) (2,833) (512) (4,612) (5,124)
Other
administrative
expenses (601) - (601) (482) - (482) (959) - (959)
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
Net
return/(loss)
before
finance costs
and
taxation 6,995 55,477 62,472 6,311 (283,744) (277,433) 13,227 (414,487) (401,260)
Finance costs (65) (580) (645) (61) (549) (610) (141) (1,272) (1,413)
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
Net
return/(loss)
before
taxation 6,930 54,897 61,827 6,250 (284,293) (278,043) 13,086 (415,759) (402,673)
Taxation (752) - (752) (671) - (671) (1,400) - (1,400)
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
Net
return/(loss)
after taxation 6,178 54,897 61,075 5,579 (284,293) (278,714) 11,686 (415,759) (404,073)
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
Return/(loss)
per
share (note 3) 4.01p 35.66p 39.67p 3.56p (181.58)p (178.02)p 7.48p (266.28)p (258.80)p
----------------- -------- -------- -------- -------- ----------- ----------- -------- ---------- -----------
(1) Includes foreign currency gains or losses on investments.
(2) Foreign currency gains are due to yen denominated loan notes and bank loans.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or
discontinued in the period.
The 'Total' column of this statement is the profit and loss
account of the Company and the 'Revenue' and 'Capital' columns
represent supplementary information prepared under guidance
issued by the Association of Investment Companies.
The net return/(loss) after taxation represents the profit for
the period and also the total comprehensive income.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Called Capital
up
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
2023 (Unaudited)
At 30th September 2022 40,312 8,650 166,791 496,089 18,532 730,374
Repurchase of shares into Treasury - - - (4,967) - (4,967)
Net return - - - 54,897 6,178 61,075
Dividends paid in the period
(note 4) - - - - (9,546) (9,546)
------------------------------------ -------- ----------- ----------- ------------ ----------- -----------
At 31st March 2023 40,312 8,650 166,791 546,019 15,164 776,936
------------------------------------ -------- ----------- ----------- ------------ ----------- -----------
Six months ended 31st March
2022 (Unaudited)
At 30th September 2021 40,312 8,650 166,791 842,661 13,750 1,072,164
Repurchase of shares into Treasury - - - (4,580) - (4,580)
Net (loss)/return - - - (284,293) 5,579 (278,714)
Dividends paid in the period
(note 4) - - - - (8,295) (8,295)
------------------------------------ -------- ----------- ----------- ------------ ----------- -----------
At 31st March 2022 40,312 8,650 166,791 553,788 12,425 780,575
------------------------------------ -------- ----------- ----------- ------------ ----------- -----------
Year ended 30th September
2022 (Audited)
At 30th September 2021 40,312 8,650 166,791 923,650 15,141 1,154,544
Repurchase of shares into Treasury - - - (11,802) - (11,802)
Net (loss)/return - - - (415,759) 11,686 (404,073)
Dividends paid in the year
(note 4) - - - - (8,295) (8,295)
------------------------------------ -------- ----------- ----------- ------------ ----------- -----------
At 30th September 2022 40,312 8,650 166,791 496,089 18,532 730,374
------------------------------------ -------- ----------- ----------- ------------ ----------- -----------
(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 31st March 2023, the GBP546,019,000 Capital reserves are
made up of net gains on the sale of investments of GBP399,519,000,
a gain on the revaluation of investments still held of
GBP128,115,000 and an exchange gain on the foreign currency loans
of GBP18,835,000. The GBP18,835,000 of Capital reserves, arising on
the exchange gain on the foreign currency loan, is not
distributable. The remaining amount of Capital reserves totalling
GBP527,634,000 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.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
At At At
31st March 31st March 30th September
2023 2022 2022
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------ ------------ ---------------
Fixed assets
Investments held at fair value through profit
or loss 879,381 971,236 815,789
----------------------------------------------- ------------ ------------ ---------------
Current assets
Debtors 5,874 5,838 7,161
Cash and cash equivalents 974 9,099 27,974
----------------------------------------------- ------------ ------------ ---------------
6,848 14,937 35,135
Creditors: amounts falling due within one
year (372) (42,346) (9,619)
----------------------------------------------- ------------ ------------ ---------------
Net current (liabilities)/assets 6,476 (27,409) 25,516
----------------------------------------------- ------------ ------------ ---------------
Total assets less current liabilities 885,857 943,827 841,305
----------------------------------------------- ------------ ------------ ---------------
Creditors: amounts falling due after more
than one year (108,921) (80,872) (110,931)
----------------------------------------------- ------------ ------------ ---------------
Net assets 776,936 862,955 730,374
----------------------------------------------- ------------ ------------ ---------------
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 546,019 634,777 496,089
Revenue reserve 15,164 12,425 18,532
----------------------------------------------- ------------ ------------ ---------------
Total shareholders' funds 776,936 862,955 730,374
----------------------------------------------- ------------ ------------ ---------------
Net asset value per share (note 5) 505.8p 552.3p 472.1p
----------------------------------------------- ------------ ------------ ---------------
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months Six months For the year
ended ended ended
31st March 31st March 30th September
2023 2022(1) 2022(1)
GBP'000 GBP'000 GBP'000
------------------------------------------------ ------------ ------------ ---------------
Cash flows from operating activities
Net profit/(loss) before finance costs
and taxation 62,472 (277,433) (401,260)
Adjustment for:
Net (gains)/losses on investments held
at fair value through profit or loss (55,483) 288,357 418,203
Net foreign currency gains (1,986) (7,163) (8,328)
Dividend income (7,516) (6,719) (14,016)
Realised gain on foreign exchange transactions (102) (692) (1,215)
Decrease/(increase) in accrued income
and other debtors 13 (43) (19)
Increase/(decrease) in accrued expenses 86 (92) (29)
Dividends received 6,063 4,554 10,967
------------------------------------------------ ------------ ------------ ---------------
Net cash inflow from operating activities 3,547 769 4,303
------------------------------------------------ ------------ ------------ ---------------
Purchases of investments and derivatives (94,379) (87,563) (176,268)
Sales of investments and derivatives 88,243 130,855 242,438
Settlement of foreign currency contracts - (41) -
------------------------------------------------ ------------ ------------ ---------------
Net cash (outflow)/inflow from investing
activities (6,136) 43,251 66,170
------------------------------------------------ ------------ ------------ ---------------
Equity dividends paid (9,546) (8,295) (8,295)
Repurchase of shares into Treasury (4,965) (4,596) (11,820)
Drawdown of bank loan - - 30,979
Repayment of bank loan (9,225) (29,385) (60,364)
Interest paid (671) (721) (1,390)
------------------------------------------------ ------------ ------------ ---------------
Net cash outflow from financing activities (24,407) (42,997) (50,890)
------------------------------------------------ ------------ ------------ ---------------
(Decrease)/increase in cash and cash
equivalents (26,996) 1,023 19,583
------------------------------------------------ ------------ ------------ ---------------
Cash and cash equivalents at start of
period/year 27,974 8,299 8,299
Unrealised (losses)/gains on foreign
currency cash and
cash equivalents (4) (223) 92
------------------------------------------------ ------------ ------------ ---------------
Cash and cash equivalents at end of
period/year 974 9,099 27,974
------------------------------------------------ ------------ ------------ ---------------
Cash and cash equivalents consist of:
------------------------------------------------ ------------ ------------ ---------------
Cash and short term deposits 974 9,099 27,974
------------------------------------------------ ------------ ------------ ---------------
(1) The presentation of the Cash Flow Statement, as permitted
under FRS 102, has been changed so as to present the reconciliation
of 'net profit/(loss) before finance costs and taxation' to 'cash
from operating activities' on the face of the Cash Flow Statement.
Previously, this was shown by way of note. Other than changes in
presentation of the certain cash flow items, there is no change to
the cash flows as presented in previous periods.
Reconciliation of net debt
As at Other As at
30th September non-cash 31st March
2022 Cash flows changes 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- ----------- --------- -----------
Cash and cash equivalents
Cash 27,974 (26,996) (4) 974
--------------------------- --------------- ----------- --------- -----------
27,974 (26,996) (4) 974
Borrowings
Debt due within one year (9,283) 9,225 58 -
Debt due after one year (110,931) - 2,010 (108,921)
--------------------------- --------------- ----------- --------- -----------
(120,214) 9,225 2,068 (108,921)
--------------------------- --------------- ----------- --------- -----------
Net Debt (92,240) (17,771) 2,064 (107,947)
--------------------------- --------------- ----------- --------- -----------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 31st March 2023
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 2022 are extracted from the latest published financial
statements of the Company. The financial statements for the year
ended 30th September 2022 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 condensed 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 July 2022.
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 2023.
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 2022.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months Year ended
ended
31st March 31st March 30th September
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------- ----------------- ------------ ---------------
Return/(loss) per share is
based on the following:
Revenue return 6,178 5,579 11,686
Capital return/(loss) 54,897 (284,293) (415,759)
------------------------------- ----------------- ------------ ---------------
Total return/(loss) 61,075 (278,714) (404,073)
------------------------------- ----------------- ------------ ---------------
Weighted average number of
shares in issue 153,963,270 156,568,539 156,138,247
Revenue return per share 4.01p 3.56p 7.48p
Capital return/(loss) per
share 35.66p (181.58)p (266.28)p
------------------------------- ----------------- ------------ ---------------
Total return/(loss) per share 39.67p (178.02)p (258.80)p
------------------------------- ----------------- ------------ ---------------
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months Year ended
ended
31st March 31st March 30th September
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------ ----------------- ------------ ---------------
2022 final dividend paid of
6.2p (2021: 5.3p) per share 9,546 8,295 8,295
------------------------------ ----------------- ------------ ---------------
All dividends paid in the period have been funded from the
revenue reserve (2022: same).
No interim dividend has been declared in respect of the six
months ended 31st March 2023 (2022: nil).
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended
31st March 31st March 30th September
2023 2022 2022
-------------------------------------- ------------ ------------ ---------------
Net assets (GBP'000) 776,936 862,955 730,374
Number of shares in issue (excluding
shares held
in Treasury) 153,592,089 156,233,489 154,702,089
-------------------------------------- ------------ ------------ ---------------
Net asset value per share 505.8p 552.3p 472.1p
-------------------------------------- ------------ ------------ ---------------
JPMORGAN FUNDS LIMITED
01 June 2023
For further information, please contact:
Priyanka Vijay Anand
For and on behalf of
JPMorgan Funds Limited - Company Secretary
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 2023 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 2023 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.
This information is provided by RNS, the news service of the
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END
IR BUGDLCUGDGXB
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