LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPANESE INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 30TH SEPTEMBER 2022
Legal Entity Identifier: 549300JZW3TSSO464R15
Information disclosed in accordance with DTR 4.2.2
Chairman's Statement
Investment Performance
The Investment Manager's high conviction, unconstrained approach, focused on finding Japan's best investment ideas does, from time to time lead to periods of underperformance. This is what happened in the financial year ended 30th September 2022, resulting in a challenging period for shareholders and the Company.
As stated in the half-year report, the Company underperformed during the first half of the 2021/22 financial year. This continued into the second half but, as discussed in the Investment Managers' report both relative and absolute performance recovered in the final months of the review period. The Company's total return on net assets (in sterling terms), with debt calculated at fair value1, was -34.8%, compared with a total return of -13.9% on the Company's benchmark index, the Tokyo Stock Exchange (TOPIX) Index (also in sterling terms), over the same period. Therefore, over the full financial year, the Company underperformed the benchmark by -20.9% in net asset value (NAV) terms. The share price total return, with dividends reinvested, was -35.2%, resulting in very modest widening in the discount to NAV at which the Company's shares trade. A contributory factor to the absolute return was a decline in the yen versus sterling over the period of 7.4%.
As the Investment Managers set out in their report on pages 12 to 19 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022 the main reason for the poor outcome was the heavy exposure in the portfolio to companies whose valuations were more sensitive than the broader market to the negative impact of rapidly rising global inflation and the associated interest rate increases. The Investment Manager's strategy of investing for the long term in higher-quality companies with good growth prospects does mean that these periods of underperformance may occur.
The portfolio remains invested in many attractive companies whose prospects have not deteriorated and, in some cases, improved, while valuations have come down. While stock selection for the Company is not driven by macroeconomic considerations, macroeconomic factors, as we have seen, can affect valuation levels materially. So, it is worth noting that some macroeconomic indicators may now be improving. Inflation may be peaking. China may reopen and reflate. The US dollar may have peaked and rate rises may now slow down. All of this would most likely be positive for the portfolio's valuation levels.
Shareholders are reminded that, historically, the Company has outperformed after a period of underperformance of the magnitude we have seen and the Investment Managers' focus on the longer term means that it is more relevant to assess the Company's performance over a longer time frame, which remains strong, in both absolute and relative terms. The Company has outperformed the benchmark index over five and 10 years, by 4.5% and 47.4%, respectively.
Since the end of the financial year, the Company's NAV has increased by 5.5% as at 9th December 2022, compared to a benchmark increase of 2.7%, while the share price increased by 6.3%.
As I commented in the half-year report, the Company's Morningstar Analyst rating was increased to the highest level, Gold, from the previous rating of Silver in April 2022, with the Morningstar report recognising 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.
Whilst the Board has been monitoring the Investment Managers closely from the UK, we have not been able to visit the Investment Managers in Japan since March 2019 due to Covid-imposed travel restrictions. We were finally able to do so in October 2022 and this gave us the opportunity to spend time discussing the reason for the Company's underperformance with the Investment Managers. The Board remains confident that the Investment Managers and their process will continue to deliver attractive investment returns in the future.
1 As disclosed in the Company's 2021 Annual Report, the AIC has recommended that investment trusts with long-term fixed rate debt prepare a measure of their NAV that values this debt at 'fair value' rather than using par value. This reflects the fact that the economic value of this debt may differ materially from the par of accounting value of the debt instrument and the belief that this value may be of interest to shareholder and potential investors. Accordingly, the Board has decided to use this measurement when reporting NAV returns within the Company's financial report; this is also in line with the basis of the NAV released to the London Stock Exchange every business day.
Gearing
The Board of Directors believes that gearing can be beneficial to performance and the overall strategic gearing policy and guidelines, reviewing 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. As at 30th September 2022, gearing was equivalent to 11.7% (2021: 12.7%) of net assets.
During the second half of the financial year, the Company took out a ¥ 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.
The Scotiabank facility expired on 2nd December 2022, therefore the maximum gearing is currently limited to c. 14%. The Board is reviewing options to replace this facility.
Revenues and Dividends
Income received during the year ended 30th September 2022 again rose year-on-year, with earnings per share for the full year of 7.48p (2021: 5.99p). This reflected a continued recovery in the level of dividends paid and the strong balance sheets of portfolio companies.
The Board's dividend policy is to pay out the majority of the revenue available each year. The Board therefore proposes, subject to shareholders' approval at the Annual General Meeting to be held on 12th January 2023, to pay a final dividend of 6.2p per share (2021: 5.3p) on 3rd February 2023 to shareholders on the register at the close of business on 23rd December 2022 (ex-dividend date 22nd December 2022). This represents an increase of 17% in the dividend and follows last year's 4% increase.
We hope to be able to continue to increase the dividend in future years.
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, five and 10 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, the investment process and the strong long-term performance these have delivered. Since 2020, this commitment has resulted in not only increased expenditure on marketing but also a series of targeted buybacks. During the past financial year, a total of 2,278,345 shares (1.41% of shares in issue) were repurchased (2021: 2,858,644 shares).
As at 30th September 2022, the discount was 7.3%, very close to the level of 6.8% where it closed the previous year. Over the past financial year, the discount ranged from 10.6% to a premium of 2.7% and the average discount was 5.7%. This compares with the previous financial year, when the discount ranged from 9.2% to a premium of 1.5% and the average discount was 3.9%.
Since the end of the current review period, the Board has repurchased a further 735,000 shares and the discount stood at 6.6% as at 9th December 2022.
Shares are only repurchased at a discount to the prevailing net asset value, which increases the Company's net asset value per share. Shares may either be cancelled or held in Treasury for possible re-issue at a premium to net asset value.
Environmental, Social and Governance Considerations
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. As mentioned above, 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 on pages 10 to 23of the Company's Annual Report & Financial Statements for the year ended 30th September 2022 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/investmentstewardship-report.pdf
Succession Planning
The Board has given considerable thought to its succession planning. In line with this plan, Sir Stephen Gomersall will retire from the Board and as our Senior Independent Director at the forthcoming AGM. On behalf of the Board, I would like to thank Sir Stephen for his invaluable input to the Company over the years since he joined the Board in 2013 and wish him well for the future. Sally Macdonald, who has been a Director since 2018, will succeed Sir Stephen as the Company's Senior Independent Director, effective from the conclusion of the AGM.
Having served as a Director for nine years next year, the succession plan recognises that I will be retiring from the Board and as Chairman at the AGM in 2024. I am delighted that the Board has decided that Stephen Cohen, the current Audit Chair, will replace me as Chairman.
Board Appointment
Given these plans, in the early part of this year the Company engaged an independent search consultancy to find a suitably qualified Director to join the Board and to take over from Stephen Cohen as Audit Chair in due course. 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.
In appointing Sally Duckworth to the Board, I believe we have set the Company in good stead to ensure there is continuity with the changes to directorships over the coming 13 months.
In order that all Directors have sufficient time to dedicate to the Company's matters and to avoid conflicts of interest, the Board conducts a robust review prior to, approving a Director taking on a new appointment. Details of this process are set out in the Directors' Report on page 48 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022.
Board Evaluation
As required by the Corporate Governance Code, the Company undertook a comprehensive external Board evaluation this year. While this resulted in a small number of proposals that the Company will adopt, the overall conclusion was very positive in terms of the effectiveness of the Board and the skills, expertise and commitment of the Directors. The combination of the robust way in which the Board approves new appointments taken on by Directors and the annual Board evaluation means that the Board remains confident that each Director has the time to discharge responsibilities to the Company, something that is evidenced by, for example, full attendance at all the Company's meetings, as shown on page 48 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022.
Board Diversity
I am pleased to note that the Board meets the recommendations of the FTSE Women Leaders Review. The Review set targets for FTSE 350 companies to have 40% female representation, up from 33%, and requires that one of the Chair or Senior Independent Director be a woman. Other than a brief period at the end of 2021, the Board has had at least 33% female representation since July 2020, currently 40%. This will rise to 50% at the conclusion of the AGM and, with Sally Macdonald taking over as Senior Independent Director from Sir Stephen Gomersall, I am pleased to report that the Board will meet these targets well in advance of when it is required to report on them.
The Board is also focused on the requirements of the Parker Review, which seeks to increase the ethnic diversity of Boards with a recommendation that FTSE 250 companies have at least one director from an ethnically diverse background by 2024. The Company has long complied with this recommendation, with George Olcott appointed as a director in 2016. For the first time, we have included a table in the Annual Report this year, clearly showing the gender and ethnic composition of the Board, on page 32 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022.
In compliance with corporate governance best practice, all Directors, with the exception of Sir Stephen Gomersall, will be standing for re-appointment at the forthcoming AGM.
Annual General Meeting and Shareholder Contact
The Company's Annual General Meeting (AGM) will be held on 12th January 2023 at 12.30 pm at 60 Victoria Embankment, London EC4Y 0JP.
We are delighted that this year we will once again be able to invite shareholders to join us in person for the Company's AGM, to hear from the Investment Managers. Their presentation will be followed by a question and answer session. Shareholders wishing to follow the AGM proceedings but choosing not to attend in person will be able to view proceedings live and ask questions (but not vote) through conferencing software. Details on how to register, together with access details, will be available shortly on the Company's website at www.jpmjapanese.co.uk, or by contacting the Company Secretary at invtrusts.cosec@jpmorgan.com.
My fellow Board members, representatives of JPMorgan and I look forward to the opportunity to meet and speak with shareholders after the formalities of the meeting have been concluded.
Shareholders who are unable to attend the AGM are strongly encouraged to submit their proxy votes in advance of the meeting, so that they are registered and recorded at the AGM. Proxy votes can be lodged in advance of the AGM either by post or electronically: detailed instructions are included in the Notes to the Notice of Annual General Meeting on pages 93 to 95 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022.
If there are any changes to these arrangements for the AGM, the Company will update shareholders via the Company's website, and, if appropriate, through an announcement on the London Stock Exchange.
Outlook
Your Board shares the Investment Managers' longer term optimism about the prospects for holdings in the Company's portfolio and their enthusiasm about the appealing opportunities in the Japanese market, whilst remaining mindful of the recent and ongoing challenges resulting from the war in Ukraine and global inflation. Furthermore, the Board is confident that the Investment Managers' disciplined investment process and careful approach to risk management, supported by JPMorgan's extensive research resources, will continue to identify these opportunities and deliver attractive long-term returns for shareholders.
On behalf of the Board, I would like to thank you for your ongoing support.
Christopher Samuel
Chairman
13th December 2022
Investment Managers' Report
Performance
For the financial year ended 30th September 2022, the Company returned -34.8% on a net asset basis (in sterling terms), underperforming its benchmark, the TOPIX index, which declined 13.9%.
We use an unconstrained investment approach, looking for the very best companies with excellent long-term prospects. This means the portfolio has a strong bias towards growth companies, which inevitably leads to poor performance at times, as it has in the past two years. The extent of the Company's recent underperformance is certainly very disappointing to us, and we clearly recognise the disappointment of shareholders. However, we stress that this underperformance is the result of the same focus, particularly on quality, that we believe achieves the best performance over a multi-year period. Indeed, the Company's long-term track record of strong absolute returns and outperformance is evidence of this. Over the 10 years to 30th September 2022, the Company's average annualised NAV return was 10.9%, outpacing the benchmark return of 8.8%. The Company's long-term share price performance has been even stronger at 12.3% per annum over the same period, resulting in a narrowing of the discount.
Performance attribution
Year ended 30th September 2022
| | % | % |
| Contributions to total returns | | |
| Benchmark return | | -13.9 |
| Stock selection | -19.9 | |
| Currency | -0.1 | |
| Gearing/Cash | -0.8 | |
| Investment Manager contribution | | -20.8 |
| Portfolio returnA |
| -34.7 |
| Management fee/other expenses | -0.7 | |
| Share Buy-Back/Issuance | +0.1 | |
| Other effects | | -0.6 |
| Return on net assets - Debt at par valueA |
| -35.3 |
| Impact of fair value of debt | | +0.5 |
| Return on net assets - Debt at fair valueA |
| -34.8 |
| Return to shareholdersA |
| -35.2 |
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').
Economic and Market Background
The main reason for recent underperformance was rapidly rising global inflation and the associated interest rates rises around the world coupled with the portfolio's high exposure to growth stocks. Performance was particularly poor during the first four months of 2022 as all major equity markets reacted to news of Russia's invasion of Ukraine, which compounded existing inflationary pressures and prompted an aggressive reaction from the US Federal Reserve and its counterparts in the UK and Europe. This was very detrimental to our performance as higher interest rates outside Japan reduced the value of future cash flows, and thus company valuations globally, including those in Japan. This was especially the case for the valuations of technology and other growth-oriented stocks, which were hardest hit in the past year's global stock market rout.
We do not believe the long-term outlook for the companies we own has deteriorated. Indeed, in certain areas we think the outlook for our companies has improved materially. One example is factory automation, where rising wages in manufacturing companies and the desire to shorten supply chains make the arguments for automation more compelling. Nor do we expect significantly higher interest rates in Japan. Yet the Japanese market has not escaped the past year's global sell-off and, as in other markets, the Premium and Quality growth-oriented stocks we favour have underperformed significantly. This can be seen in the chart shown in the Company's Annual Report & Financial Statements for the year ended 30th September 2022. Although these companies possess the best long-term growth outlooks, highest margins and strongest balance sheets, their valuations are based on long-term growth projections and are negatively impacted by the prospect of rising rates.
Performance - Strategic Classifications
At least in the Japanese market, there have already been signs that this correction may have run its course. The Company's performance, in both absolute and relative terms, has been recovering in recent months, as investors have begun to appreciate that the business outlook for quality and growth names remains as positive as it was before the sell-off. In the three months to 30th September 2022, the Company returned 3.7%, compared to a benchmark return of 1.1%. Since the end of the financial year, the Company's NAV has increased by 5.5% as at 9th December 2022, compared to a benchmark increase of 2.7%, while the share price increased by 6.3%.
Equally, the business outlook for the cyclical and value sectors that we do not own remains unattractive. The banking sector is one example. We do not expect a significant pick-up in loan demand; Japan is 'over-banked' and returns on equity are low (currently 6%) and look set to remain so.
Investment philosophy and process
Our investment strategy is therefore unchanged. We will remain focused on high-quality companies with strong balance sheets and leading competitive positions. Such companies have demonstrated pricing power over many years and we believe they are well positioned to continue to prosper, regardless of the challenges of the current macroeconomic environment. 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. Many of these large companies operate in structurally impaired sectors such as department stores and railway operators, both of which are vulnerable to long-term declines in demand. As at 30th September 2022, the portfolio had an active share of 84% (on a geared basis). Active share is a measurement of the difference in the Company's portfolio compared to the benchmark index.
As an indicator of the quality in the portfolio, as at 30th September 2022, the Company's return on equity was 17% compared to 12% for the market, while the operating margin was 24% versus the market's 13%. At the same time, the portfolio's price to earnings (P/E) ratio was 18x, significantly above the market's 11.5x. This is lower than a year ago, when the Company's P/E was 35x, due in part to the general market decline and also because the companies we hold have, in many instances, revised up their earnings, further reducing their P/E ratios. In addition, over the past year we have tended to sell more highly valued companies and buy companies on lower valuations (see below for further discussion on recent portfolio activity). 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. Portfolio gearing averaged 12.8% (2021: 14.0%) and was 11.7% (2021: 12.7%) at the end of the period as we continued to see opportunities to purchase high-quality stocks at attractive levels.
How we rate companies we consider for investment
A quality growth focus is the core of our investment process. We assign a strategic classification to each company, based on desk-based research and company meetings. The highest rating is 'Premium', followed by 'Quality', and then 'Trading'. When assigning these ratings, in addition to assessing companies on fundamentals such as balance sheet strength, free cash flow, market position and growth prospects, we also consider governance issues, as well as potential risks arising from environmental, social and governance (ESG) considerations. Only businesses with sound governance practices and corporate behaviour consistent with our ESG criteria will receive a Premium or Quality rating, and the bar is high. Within the investable universe of Japanese companies, we rate only about 20% as Premium or Quality, whereas Premium or Quality names comprise around 90% of our portfolio. This rating system means that we incorporated ESG considerations into our strategic and valuation analysis of individual companies and into our investment decisions. However, we are continually improving the ways in which we consider ESG factors and integrate them into our investment process, and we are pleased with recent progress in this direction. The Environmental, Social and Governance Report on pages 20 to 23 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022 provides more detail.
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 and gaming and cloud computing. However, 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 the 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 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.
Japan population 2020
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 trade 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, and the Company numbers several, including Keyence, SMC and MISUMI, among its holdings.
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.
Japan is coal and gas dependent
Our portfolio includes shares in Japan's leading solar energy REIT (Canadian Solar Infrastructure) and in several companies that help reduce energy usage. For example, Daikin produces ultra-efficient air conditioners and Shimano has a dominant market position to components for bicycles and e-bicycles. During the past six months, we 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, our holding in telemedicine company Medley is already benefiting from this trend, while we expect our position in Tokyo Electron, the semiconductor equipment supplier, to gain from associated increases in demand for data processing and storage.
Significant contributors and detractors to performance
The largest detractors from returns were Recruit and Benefit One, providers of employment and business services, Keyence, a global leader in manufacturing sensors for factory automation and Hoya, a global business across the fields of healthcare and information technology. However, we expect the share price weakness experienced by all of these names to prove transitory, as their results and investment cases remain robust, and all remain in the portfolio.
Our position in Nihon M&A Center, which provides mergers and acquisition-related services in Japan and globally, also remained under some pressure. As we discussed in the half year report, the share price fell sharply late last year when the company announced an investigation into some accounting irregularities over the last few years, which had the effect of artificially enhancing sales revenues in some periods. This issue has now been resolved and remedial measures are in place to prevent a recurrence of this problem. Although future revenue growth may be slower than previously expected as a result, we continue to hold the stock, as we still have confidence in the long-term investment case.
The detrimental performance impact of these and other holdings was partially offset by the positive contribution of several other holdings, most notably Nintendo and another gaming company, Capcom, whose earnings have remained steady, displaying little economic cyclicality. The decision of Tokio Marine, a general insurer, to increase shareholder returns triggered a significant recovery in its share price. Our decision not to own Nidec, which produces motors and electronic components, or Softbank Group, an owner of stakes in many energy, financial and technology companies, also helped relative performance, as both these names underperformed the benchmark over the period.
Portfolio activity
The past year's sharp sell-off in quality and growth companies enabled us to further increase our exposure to some great companies at compelling valuations. In addition to a number of acquisitions made in the first half of the financial year, and discussed in the half-year report, we purchased several other attractively priced companies in the second half of the year. JGC, a leading builder of LNG production plants, has performed very well since acquisition. We also opened positions in Paltac, Japan's number one wholesaler of household and personal goods, and in Itochu, which owns many stable cashflow generating businesses including the convenience store operator, Familymart. We particularly appreciate Itochu's focus on steady profit growth and ROE, and its determination to improve shareholder returns. Management's prioritisation of shareholder returns was the main reason for our decision to acquire Nippon Telegraph and Telephone, Japan's leading telecoms company. We also added Murata, the leading global supplier of multi layered ceramic capacitors (MLCCs), which are used in many electronic devices, with demand from vehicle manufacturers increasing especially rapidly. Deregulation of retail pharmacies, historically a very fragmented sector, prompted our purchase of Ain Holdings. The government's recent decision to permit pharmacies to operate inside large hospitals has allowed Ain to increase market share and scale up operations, by offering consumers a more conveniently located service.
These purchases have been funded in part by the outright sales of several holdings whose potential growth rates have been undermined by increased competition. The half-year report mentioned several disposals motivated by such concerns. In addition, in the latter half of the year we closed positions in Uzabase and Minkabu, providers of financial and business information; Yappli, a software applications developer; Bengo4, an online legal consultation service; and Lifenet, a life insurance company. We also sold our holding in internet retailer Rakuten. Despite very heavy investment, there is still little evidence of progress in its mobile telecom operations, which remain heavily loss-making, creating a drain on an otherwise attractive online business.
In all, portfolio turnover over the past year was 19%, implying an average holding period of over five years. This is close to last year's turnover, but lower than 2020's 38%, which was due to the extraordinary opportunities provided by the onset of the pandemic.
Outlook
Japan's near-term economic outlook has improved since our last report. With the vaccine programme having been rolled out effectively, the Government has recently lifted the last of its Covid restrictions and the country is now fully reopened to foreign tourism. Furthermore, exporters will receive a fillip from the yen's recent depreciation. The yen/dollar rate was c ¥136.9/$ on l December 2022, thanks to the wide disparity between US and Japanese interest rates. While the US has rapidly increased rates, the Bank of Japan (BoJ) has so far maintained an ultra-loose monetary policy stance.
Global central bank policy rate changes
Conversely, the weak yen makes imports more expensive - a particular problem for Japan as it has almost no natural resources, so it must import energy and other commodities. The weaker yen has increased the cost of these imports, adding to price increases triggered by pandemic-related shortages and the war in Ukraine. As a result, inflation has begun to rise in Japan, but remains lower than in most other developed countries.
Global inflation rates
Despite a tight labour market, wage growth remains low and there has been no significant increase in property rents. While we do not expect these developments yet to elicit any change in BoJ policy, we continually monitor available data and will reappraise our views if circumstances change. In particular, we are aware that policy may shift with the likely appointment of a new BoJ governor next spring.
Improvements in Japan's corporate governance continue, with more companies focused on improving shareholder returns. The country is in the process of a major technological transformation that should deliver growth and productivity gains over the medium term. Japanese equity markets are more vibrant than some investors appreciate, with many new and interesting listings on the Tokyo Stock Exchange each year.
Number of IPOs in Japan
Thus, Japan offers a strong environment for the kind of dynamic, quality businesses in which we invest and Japan is an attractive market in which to build a differentiated portfolio. This is particularly true for active, bottom-up investors like us, supported by a large, Tokyo-based team of researchers.
We are optimistic about the long-term prospects of our portfolio holdings and will continue our search for exciting companies 'at the heart of Japan's new growth' and those capable of thriving regardless of the near-term macroeconomic environment. Most importantly, we remain confident that our investment approach will ensure the Company continues to deliver outperformance over the long term.
Nicholas Weindling
Miyako Urabe
Investment Managers
13th December 2022
Principal and Emerging Risks
The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. With the assistance of JPMF, the Audit Committee has drawn up a risk matrix, which identifies the key risks to the Company. These are reviewed and noted by the Board. The risks identified and the broad categories in which they fall, and the ways in which they are managed or mitigated are summarised below. The AIC Code of Corporate Governance requires the Audit Committee to put in place procedures to identify emerging risks. Emerging risks, which are not deemed to represent an immediate threat, are considered by Audit Committee as they come into view and are incorporated into the existing review of the Company's risk register. However, since emerging risks are likely to be more dynamic in nature, they are considered on a more frequent basis, through the remit of Board when the Audit Committee does not meet. The key principal and emerging risks identified are summarised below.
|
|
|
| Movement in risk |
|
|
|
| status in year to |
| Principal risk | Description | Mitigating activities | 30th September 2022 |
| Investment Management and Performance | |||
| Underperformance | Poor implementation of the investment strategy, for example as to thematic exposure, sector allocation, stock selection, undue concentration of holdings, factor risk exposure or the degree of total portfolio risk, may lead to underperformance against the Company's benchmark index and peer companies. | The Board manages these risks by monitoring the Investment Managers diversification of investments and through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The Investment Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, at least one of whom usually attends all Board meetings, and reviews data which show measures of the Company's risk profile. The Investment Managers employ the Company's gearing tactically, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year. | Ý |
| Widening Discount | A widening of the discount could result in loss of value for shareholders. | The Board monitors the level of both the absolute and sector relative premium/discount at which the shares trade. The Board reviews both sales and marketing activity and sector relative performance, which it believes are the primary drivers of the relative discount level. In addition, the Company has authority to buy back its existing shares to enhance the NAV per share for remaining shareholders when deemed appropriate. | Ý |
| Market and Economic Risk | Market risk arises from uncertainty about the future prices of the Company's investments, which might result from political, economic, fiscal, monetary, regulatory or climate change, including the impact from energy shocks, recessions or wars. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board considers thematic and factor risks, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Manager. | The Board believes that shareholders expect that the Company will and should be fairly fully invested in Japanese equities at all times. The Board therefore would normally only seek to mitigate market risk through guidelines on gearing given to the Investment Manager. The Board receives regular reports from the Investment Manager's strategists and Investment Managers regarding market outlook and gives the Investment Mangers discretion regarding acceptable levels of gearing and/or cash. Currently the Company's gearing policy is to operate within a range of 5% net cash to 20% geared. The Board also receives ESG reports from the Investment Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making. | Ý |
| Currency Risk | Currency risk arises from currency volatility and/or significant currency movements, principally in the yen:sterling rate. | The majority of the Company's assets, liabilities and income are denominated in yen rather than in the Company's functional currency of sterling (in which it reports). As a result, movements in the yen:sterling exchange rate may affect the sterling value of those items and therefore impact on reported results and/or financial position. Therefore, there is an inherent risk from these exchange rate movements. It is the Company's policy not to undertake foreign currency hedging. Further details about the foreign currency risk may be found in note 22 on pages 81 and 81 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022. | Ý |
| Loss of Investment Team or Investment Manager | A sudden departure of an Investment Manager or several members of the investment management team could result in a short term deterioration in investment performance. | The Board seeks assurance that the Manager takes steps to reduce the risk arising from such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel. The Board engages with the senior management of the Manager in order to mitigate this risk. | Þ |
| Global Inflation | Globally Government/Central Bank fiscal/monetary management could result in significant levels of inflation persisting and/or weaker economic growth and/or lower valuation levels. | The Manager's market strategists are available for the Board and can discuss market trends. External consultants and experts can be accessed by the Board. The Board can, with shareholder approval look to amend the investment policy and objectives of the Company, if required, to enable investment in companies which are less impacted by inflation risks. | Ý |
| Operational Risks |
|
|
|
| Outsourcing | Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary or Custodian's records may prevent accurate reporting and monitoring of the Company's financial position or a misappropriation of assets. | Details of how the Board monitors the services provided by JPM and its associates and the key elements designed to provide effective risk management and internal control are included within the Risk Management and Internal Controls section of the Corporate Governance Statement on pages 49 to 51 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022. The Manager has a comprehensive business continuity plan which facilitates continued operation of the business in the event of a service disruption (including and disruption resulting from the COVID-19 pathogen. | Þ |
| Cyber Crime | The threat of cyber attack, in all guises, is regarded as at least as important as more traditional physical threats to business continuity and security. | The Company benefits directly and/or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around physical security of JPMorgan's data centres, security of its networks and security of its trading applications, are tested by independent auditors and reported every six months against the AAF Standard. | Þ |
| Corporate Governance | |||
| Loss of Investment Trust Status | In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Were the Company to breach Section 1158, it may lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. | The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. | Þ |
| Statutory and Regulatory Compliance | The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure Guidance and Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. | The Board relies on the services of its Company Secretary, the Manager and its professional advisers to ensure compliance with the Companies Act 2006, the UKLA Listing Rules, DTRs, MAR and AIFMD. Details of the Company's compliance with Corporate Governance best practice, are set out in the Corporate Governance Statement on pages 45 to 50 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022. | Þ |
| Environmental |
|
|
|
| Climate Change | Climate change has become one of the most critical issues confronting companies and their investors. Climate change can have a significant impact on the business models, sustainability and even viability of individual companies, whole sectors and even asset classes. | The Board receives ESG reports from the Manager on the portfolio and the way ESG considerations are integrated into the investment decision-making, so as to mitigate risk at the level of stock selection and portfolio construction. As extreme weather events become more common, the resiliency, business continuity planning and the location strategies of the Company's services providers will come under greater scrutiny. | Ý |
|
|
|
| Movement in risk |
|
|
|
| status in year to |
| Emerging risk | Description | Mitigating activities | 30th September 2022 |
| Specific to Japan |
|
|
|
| Natural Disasters | Although natural disasters anywhere in the world could impact individual companies, the Board believes the largest such impact could arise from an earthquake causing general economic damage to Japan and to the operations of specific companies in the portfolio. The Japanese government believes there is a 70% probability of an earthquake, registering a magnitude seven on the Richter Scale, hitting Tokyo over the next 30 years. | The Manager reports on Business Continuity Plans ('BCPs') and other mitigation plans in place for itself and other key service providers. BCPs plans are regularly tested and applied, including split teams, relocations and limiting access to/meetings with third parties. The Manager discusses BCPs with investee companies. | Ý |
| Global |
|
|
|
| Social Dislocation & Conflict | Social dislocation/civil unrest may threaten global economic growth and, consequently, companies in the portfolio. | The Manager's market strategists are available for the Board and can discuss market trends. External consultants and experts can be accessed by the Board. The Board can, with shareholder approval, look to amend the investment policy and objectives of the Company to gain exposure to or mitigate the risks arising from geopolitical instability although this is limited if it is truly global. | Ý |
| Global Recession | Government/Central Bank fiscal/monetary response geopolitical risks/rising cost of living could be ineffective in stimulating global recovery meaning rising debt levels lead to deflation and recession. | The Manager's market strategists are available for the Board and can discuss market trends. External consultants and experts can be accessed by the Board. The Board can, with shareholder approval look to amend the investment policy and objectives of the Company, if required, to enable investment in companies which are not impacted by inflation risks. | Ý |
Long-Term Viability
The Company is an investment trust with an objective of achieving long term capital growth. Taking account of the Company's current position, the principal and emerging risks that it faces and their potential impact on its future development and prospects, the Directors have assessed the prospects of the Company, to the extent that they are able to do so, over the next five years. They have made that assessment by considering those principal and emerging risks, the Company's investment objective and strategy, the liquidity of the Company's portfolio, the capabilities of the Manager and the current outlook for the Japanese economy and equity market.
In addition to the above, the Company carried out stress testing in connection with the Company's principal risks. The stress tests and scenarios considered the impact of severe market volatility on shareholders' funds. This included modelling substantial market falls, and significantly reduced market liquidity. The scenarios assumed that there would be no recovery in asset prices.
The results demonstrated the impact on the Company's NAV, its expenses and its ability to meet its liabilities. In even the most stressed scenario, the Company was shown to have sufficient cash, or to be able to liquidate a sufficient portion of its listed holdings, in order to meet its liabilities as they fall due.
In determining the appropriate period of assessment the Directors had regard to their view that, given the Company's objective of achieving capital growth, shareholders should consider the Company as a long-term investment proposition. This is consistent with advice provided by independent financial advisers and wealth managers, that investors should consider investing in equities for a minimum of five years. Accordingly, the Directors consider five years to be an appropriate time horizon to assess the Company's viability.
The Directors confirm that they have a reasonable expectation, on the assumption that the principal risks identified above, including investment underperformance, are managed or mitigated effectively, that the Company will be able to continue in operation and meet its liabilities as they fall due over the five year period of assessment.
By order of the Board
Nira Mistry, for and on behalf of
JPMorgan Funds Limited,
Company Secretary
13th December 2022
Transactions with the Manager and related parties
Details of the management contract are set out in the Directors' Report on page 43 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022 . The management fee payable to the Manager for the year was £ 5,124,000 (2021: £5,930,000) of which £nil (2021: £nil) was outstanding at the year end.
Included in administration expenses in note 6 on page 74 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022 are safe custody fees amounting to £74,000 (2021: £125,000) payable to JPMorgan Chase Bank, N.A., of which £nil (2021: £58,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions through other JPMorgan subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities for the year was £2,000 (2021: £2,000) of which £nil (2021: £nil) was outstanding at the year end.
Handling charges on dealing transactions amounting to £5,000 (2021: £4,000) were payable to JPMorgan Chase Bank N.A. during the year of which £2,000 (2021: £2,000) was outstanding at the year end.
At the year end, total cash of £27,974,000 (2021: £8,299,000) was held with JPMorgan Chase. A net amount of interest of £nil (2021: £nil) was receivable by the Company during the year from JPMorgan Chase of which £nil (2021: £nil) was outstanding at the year end.
Stock lending income amounting to £682,000 (2021: £1,551,000) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £76,000 (2021: £172,000).
Full details of Directors' remuneration and shareholdings can be found on pages 54 and 56 and in note 6 on page 74 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report & Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the Annual Report & Financial Statements in accordance with United Kingdom generally accepted accounting practice (United Kingdom Accounting Standards) including FRS 102 'The Financial Reporting Standards applicable in the UK and Republic of Ireland' and applicable laws. Under company law, the Directors must not approve the Annual Report & Financial Statements unless they are satisfied that, taken as a whole, Annual Report & Financial Statements are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these Annual Report & 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 a 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.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The accounts are published on the www.jpmjapanese.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditors accept no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.
Each of the Directors, whose names and functions are listed on pages41 and 42 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022, confirms that, to the best of their knowledge:
• the financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, and applicable law), (United Kingdom Generally Accepted Accounting Practice) give a true and fair view of the assets, liabilities, financial position and net return or loss of the Company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
The Board confirms that it is satisfied that the annual report and financial statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period.
For and on behalf of the Board
Christopher Samuel
Chairman
13th December 2022
Statement of Comprehensive Income
For the year ended 30th September 2022
| | 2022 | 2021 | ||||
| | Revenue | Capital | Total | Revenue | Capital | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| (Losses)/gains on investments held at fair value through profit or loss | - | (418,203) | (418,203) | - | 89,356 | 89,356 |
| Net foreign currency gains1 | - | 8,328 | 8,328 | - | 16,117 | 16,117 |
| Income from investments | 14,016 | - | 14,016 | 11,452 | - | 11,452 |
| Other interest receivable and similar income | 682 | - | 682 | 1,551 | - | 1,551 |
| Gross return/(loss) | 14,698 | (409,875) | (395,177) | 13,003 | 105,473 | 118,476 |
| Management fee | (512) | (4,612) | (5,124) | (1,186) | (4,744) | (5,930) |
| Other administrative expenses | (959) | - | (959) | (846) | - | (846) |
| Net return/(loss) before finance costs and taxation | 13,227 | (414,487) | (401,260) | 10,971 | 100,729 | 111,700 |
| Finance costs | (141) | (1,272) | (1,413) | (295) | (1,179) | (1,474) |
| Net return/(loss) before taxation | 13,086 | (415,759) | (402,673) | 10,676 | 99,550 | 110,226 |
| Taxation | (1,400) | - | (1,400) | (1,140) | - | (1,140) |
| Net return/(loss) after taxation | 11,686 | (415,759) | (404,073) | 9,536 | 99,550 | 109,086 |
| Return/(loss) per share | 7.48p | (266.28)p | (258.80)p | 5.99p | 62.54p | 68.53p |
1 Foreign currency gains are due to Yen denominated loan notes and bank loans.
Statement of Changes in Equity
| | Called up | Capital | | | | |
| | share | redemption | Other | Capital | Revenue | |
| | capital | reserve1 | reserve1 | reserves1 | reserve1 | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| 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 3) | - | - | - | - | (8,145) | (8,145) |
| 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) |
| Dividend paid in the year (note3) | - | - | - | - | (8,295) | (8,295) |
| At 30th September 2022 | 40,312 | 8,650 | 166,791 | 496,089 | 18,532 | 730,374 |
1 See footnote to note 16 on page 78 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022.
Statement of Financial Position
At 30th September 2022
| | 2022 | 2021 |
| | £'000 | £'000 |
| Fixed assets | | |
| Investments held at fair value through profit or loss | 815,789 | 1,300,867 |
| Current assets | | |
| Debtors | 7,161 | 8,402 |
| Cash and cash equivalents | 27,974 | 8,299 |
| | 35,135 | 16,701 |
| Current liabilities | | |
| Creditors: amounts falling due within one year | (9,619) | (3,999) |
| Net current assets | 25,516 | 12,702 |
| Total assets less current liabilities | 841,305 | 1,313,569 |
| Creditors: amounts falling due after more than one year | (110,931) | (159,025) |
| Net assets | 730,374 | 1,154,544 |
| Capital and reserves | | |
| Called up share capital | 40,312 | 40,312 |
| Capital redemption reserve | 8,650 | 8,650 |
| Other reserve | 166,791 | 166,791 |
| Capital reserves | 496,089 | 923,650 |
| Revenue reserve | 18,532 | 15,141 |
| Total shareholders' funds | 730,374 | 1,154,544 |
| Net asset value per share | 472.1p | 735.5p |
Statement of Cash Flows
For the year ended 30th September 2022
| | 2022 | 2021 |
| | £'000 | £'000 |
| Net cash outflow from operations before dividends and interest | (6,664) | (5,516) |
| Dividends received | 10,967 | 9,624 |
| Interest paid | (1,390) | (1,456) |
| Net cash inflow from operating activities | 2,913 | 2,652 |
| Purchases of investments | (176,268) | (231,668) |
| Sales of investments | 242,438 | 249,509 |
| Settlement of foreign currency | - | 65 |
| Net cash inflow from investing activities | 66,170 | 17,906 |
| Repurchase of shares into Treasury | (11,820) | (18,975) |
| Dividends paid | (8,295) | (8,145) |
| Drawdown of bank loan | 30,979 | 10,943 |
| Repayment of bank loan | (60,364) | - |
| Net cash outflow from financing activities | (49,500) | (16,177) |
| Increase in cash and cash equivalents | 19,583 | 4,381 |
| Cash and cash equivalents at start of year | 8,299 | 3,806 |
| Exchange movements | 92 | 112 |
| Cash and cash equivalents at end of year | 27,974 | 8,299 |
| Cash and cash equivalents consist of: | | |
| Cash and short term deposits | 27,974 | 8,299 |
Notes to the Financial Statements
For the year ended 30th September 2022
1. Accounting policies
(a) Basis of accounting
The Annual Report & Financial Statements are prepared under the historical cost convention, modified to include fixed asset investments at fair value, 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.
All of the Company's operations are of a continuing nature.
The Annual Report & Financial Statements have been prepared on a going concern basis. The Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence up to 31st January 2024 which is at least 12 months from the date of approval of these Financial Statements. In making their assessment the Directors have reviewed income and expense projections, reviewed the liquidity of the investment portfolio and considered the Company's ability to meet liabilities as they fall due. In forming this opinion, the Directors have also considered any potential impact of the COVID-19 pandemic and the heightened market volatility and more recently the Russian invasion of Ukraine on the going concern and viability of the Company. In making their assessment, the Directors have reviewed and considered the mitigation measures which key service providers, including the Manager, have in place to maintain operational resilience. The disclosures on long term viability and going concern on pages 36 and 51 of the Directors' Report of the Company's Annual Report & Financial Statements for the year ended 30th September 2022 form part of these financial statements.
In preparing these financial statements the Directors have considered the impact of climate change risk as a principal and as an emerging risk as set out on page 35 of the Company's Annual Report & Financial Statements for the year ended 30th September 2022, and have concluded that there was no further impact of climate change to be taken into account as the investments are valued based on market pricing.
The policies applied in these financial statements are consistent with those applied in the preceding year.
2. Return/(loss) per share
|
| 2022 | 2021 |
|
| £'000 | £'000 |
| Revenue return | 11,686 | 9,536 |
| Capital (loss)/return | (415,759) | 99,550 |
| Total (loss)/return | (404,073) | 109,086 |
| Weighted average number of shares in issue during the year | 156,138,247 | 159,166,121 |
| Revenue return per share | 7.48p | 5.99p |
| Capital (loss)/return per share | (266.28)p | 62.54p |
| Total (loss)/return per share | (258.80)p | 68.53p |
There are no dilutive or potentially dilutive shares in issue.
3. Dividends
(a) Dividends paid and proposed
|
|
| 2022 | 2021 |
|
|
| £'000 | £'000 |
|
| Dividends paid |
|
|
| | 2021 final dividend paid of 5.3p (2020: 5.1p) per share | 8,295 | 8,145 |
|
| Dividend proposed |
|
|
| | 2022 final dividend proposed of 6.2p (2021: 5.3p) per share | 9,500 | 8,320 |
All dividends paid and proposed in the year are and will be funded from the revenue reserve.
The dividend proposed in respect of the year ended 30th September 2022 is subject to shareholder approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the Annual Report & Financial Statements for the year ending 30th September 2023.
(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of the dividend proposed in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £11,686,000 (2021: £9,536,000). The revenue reserve after payment of the final dividend will amount to £9.0 million.
|
|
| 2022 | 2021 |
|
|
| £'000 | £'000 |
|
| Final dividend proposed of 6.2p (2021: 5.3p) per share | 9,500 | 8,320 |
| | | | |
4. Net asset value per share
|
| 2022 | 2021 |
| Net assets (£'000) | 730,374 | 1,154,544 |
| Number of shares in issue | 154,702,089 | 156,980,434 |
| Net asset value per share | 472.1p | 735.5p |
5. Status of results announcement
2021 Financial Information
The figures and financial information for 2021 are extracted from the Annual Report and Accounts for the year ended 30th September 2021 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.
2022 Financial Information
The figures and financial information for 2022 are extracted from the published Annual Report and Accounts for the year ended 30th September 2022 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
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.
13th December 2022
For further information, please contact:
Nira Mistry
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the Annual 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 Annual 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.
JPMORGAN FUNDS LIMITED
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.
