REG - JPMorgan Japanese IT - Half-year Report
02/06/2023 07:00
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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
ENDED 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 ¥10 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 £5 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 £4.1million.
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
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'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 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 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 £546,019,000 Capital reserves are made
up of net gains on the sale of investments of £399,519,000, a gain on the
revaluation of investments still held of £128,115,000 and an exchange gain on
the foreign currency loans of £18,835,000. The £18,835,000 of Capital
reserves, arising on the exchange gain on the foreign currency loan, is not
distributable. The remaining amount of Capital reserves totalling
£527,634,000 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 £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.
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
At At At
31st March 31st March 30th September
2023 2022 2022
£'000 £'000 £'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 ended Six months ended For the year ended
31st March 31st March 30th September
2023 2022(1) 2022(1)
£'000 £'000 £'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 (55,483) 288,357 418,203
loss
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
£'000 £'000 £'000 £'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 ended Year ended
31st March 31st March 30th September
2023 2022 2022
£'000 £'000 £'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 ended Year ended
31st March 31st March 30th September
2023 2022 2022
£'000 £'000 £'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 ended Six months ended Year ended
31st March 31st March 30th September
2023 2022 2022
Net assets (£'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
(https://secureweb.jpmchase.net/readonly/https:/lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDIsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDA0MDUuMTk3NzA4MDEiLCJ1cmwiOiJodHRwczovL2RhdGEuZmNhLm9yZy51ay8jL25zbS9uYXRpb25hbHN0b3JhZ2VtZWNoYW5pc20ifQ.b7Q7NXHGRA8MjB_Ugl8Tv4JxhiU28TbcoNb04FTTMiY/br/77057565556-l)
The 2023 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.
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