JPMorgan Japanese Inv. Trust PLC Annual Financial Report (1168H)

TIDMJFJ

RNS Number : 1168H

JPMorgan Japanese Inv. Trust PLC

13 November 2018

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN JAPANESE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEARED 30th SEPTEMBER 2018

Legal Entity Identifier: 549300JZW3TSSO464R15

Information disclosed in accordance with the DTR 4.1.3

CHAIRMAN'S STATEMENT

Investment Performance

I am pleased to report that your Company has had a successful year. For the year to 30th September 2018 your Company produced a return on net assets of +26.8%, outperforming its benchmark index by some 14.2%. Once again, I would like to congratulate our Investment Managers for this excellent performance.

Further information on performance and stocks is included in the Investment Managers' Report on pages 9 to 15 of the Annual Report.

On 26th March 2018 the Company's market capitalisation had reached a sufficient size (GBP712.7 million) for it to become a constituent of the FTSE 250 Index at 31st March 2018. We very much hope that this will enhance the profile of your Company and improve demand for the shares.

Over recent years, while the investment objective of the Company has remained unchanged, the portfolio has evolved, with the active encouragement of the Board, to take advantage of the market opportunities that the Manager sees. In particular, the Investment Manager has reduced the number of holdings in the portfolio, has increasingly divested from larger capitalisation 'core' stocks and invested instead in companies outside the largest constituents of the TOPIX Index (where the Manager sees the most interesting investment opportunities) and also increased the holding periods of the investments made. In previous Chairman's Statements I have referred, in particular, to the opportunities among the newer companies and business models that have evolved in Japan in recent years.

To formalise this approach, the Board, having consulted with shareholders, has agreed that the Manager can in future hold investments up to 7.5% (previously 5%) in excess of the benchmark weighting, a level that is in line with many of the Manager's other portfolios. This will give the Investment Manager increased flexibility in managing the portfolio and in particular ensure that strongly performing investments can continue to be held for longer if the Investment Manager believes this is in the best interests of shareholders. It is not intended, however, that the Investment Manager will add further to any holding that, through market appreciation, rises to more than 5% in excess of the benchmark.

In addition, the Board has agreed that the Manager can make greater use of the Company's closed end structure in support of the current investment approach and invest in a limited number of more illiquid stocks.

To be clear the Company will continue to invest on a research-driven basis in attractive companies across the full market capitalisation range in Japan.

Revenue and Dividends

Income received during the year rose marginally, with earnings per share for the full year increasing to 5.53p (2017: 5.52p). The Board's dividend policy is to pay out the majority of the revenue available each year. This is set against the Company's objective of maximising capital growth and the dividend paid being a residual of the portfolio structure. The Board proposes, subject to shareholders' approval at the Annual General Meeting, to pay a final dividend of 5.00p per share (2017: 5.00p) on 21st December 2018 to shareholders on the register at the close of business on 23rd November 2018 (ex-dividend date 22nd November 2018).

Gearing and Long Term Debt

The Board of Directors sets the overall strategic gearing policy and guidelines, reviewing these at each meeting. In August the Board was able to take advantage of market conditions which offered the opportunity to secure long term debt financing in yen at rates below that paid on the Company's then existing five year term loan and completed the placing of Y13 billion of Senior Secured Notes (the 'Notes') at an average annualised interest rate of 1.10%. The net proceeds from the placing of the Notes were used to repay elements of the Company's short term indebtedness, namely the Yen9 billion term loan and Yen4 billion of the Yen11 billion revolving credit facility. Through these Notes your Company has been able to achieve fixed rate borrowing of up to 30 years at little or no additional coupon cost than the existing shorter term facilities we were able to repay. There has been no change in the Investment Managers' permitted gearing range, as previously set by the Board, to limit gearing within the range of 5% net cash to 20% geared in normal market conditions.

Management Fees

The Board has conducted its annual detailed review of management fees. It concluded that the current Ongoing Charges rate of 0.67% is extremely competitive compared to the Company's peer group, having reduced from 0.69% for the same period in 2017.

PRIIPs/KID

You will be aware that the Regulator introduced new rules (Packaged Retail and Insurance-based Investment Products Regulation (the 'PRIIPs Regulation')) that require the Investment Manager, who is deemed to be the 'Manufacturer' of the investment product, in our case this company, to prepare a Key Information Document (KID). The Company and Directors is/are not responsible for the information contained in the KID and investors should note that the procedures for calculating the risks, costs and potential returns are prescribed by the law. The figures in the KID may not reflect the returns the Company might eventually achieve and performance returns cannot be guaranteed.

Stock Lending

We launched a stock lending programme for the Company during the course of the year. The revenue from this will help to defray expenses. We have made a relatively cautious start to the programme and it is still too early to determine how successful, or otherwise it has been. It will be reported on more fully in future reports.

The Board

Having had the privilege of being a director of the Company for nearly fifteen years, I will step down as chairman at the Annual General Meeting ('AGM'). I am very pleased that Christopher Samuel has agreed to replace me, and Stephen Cohen will replace Christopher as chairman of the Audit Committee. I am also delighted to report that Sally MacDonald will be joining the Board following the AGM as a result of a recruitment process that involved an independent consultant to identify candidates. Sally has a wealth of experience in investment management and I am sure she will make a strong contribution to your Company's Board. All the Directors of the JPMorgan Japanese Investment Trust will, therefore, have been appointed in or since 2013 and they will be in a strong position, led by Christopher, to build on the excellent investment process and performance record that has been established particularly since the management of the investment portfolio was moved to Tokyo. I would like to thank all our shareholders for their support of the Board while I have been a director. I wish Christopher, the directors, Nicholas Weindling and the Tokyo-based investment team all success in the future.

Annual General Meeting

This year's Annual General Meeting will be held on Thursday, 13th December 2018 at 12 noon at 60 Victoria Embankment, London EC4Y 0JP. As in previous years, in addition to the formal part of the meeting, there will be a presentation from the Investment Managers who will answer questions on the portfolio and performance. There will also be an opportunity to meet the Board and representatives of JPMorgan after the meeting. I look forward to welcoming as many of you as possible to this meeting.

If you have any detailed or technical questions, it would be helpful if you could raise these in advance of the meeting with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP. Alternatively, questions may be submitted via the Company's website (www.jpmjapanese.co.uk). Shareholders who are unable to attend the AGM are encouraged to use their proxy votes. Proxy votes may be lodged electronically, whether shares are held through CREST or in certificate form, and full details are set out on the form of proxy.

Outlook

There are three particularly important developments that are likely to impact the outlook for Japanese quoted companies: the first is the continuing general improvement in Japanese corporate return on equity; the second is the scale of the Bank of Japan's quantitative easing ('QE') programme which now stands out globally in scale and reach and the third is Japan's exposure to global trade in general and the Chinese economy and supply chain in particular.

Japanese quoted company operating margins and returns on equity are now on average the highest for 30 years with the latter, for example, having risen in aggregate to over 10%. Similarly, the ratio of current profits to sales is the highest for 30 years. Foreign investors, fixated as they have been by returns from US companies in recent years, have been very large sellers of Japanese equities so there is the real potential for these flows to reverse if these improvements in performance can be maintained. The second important positive for Japanese equities has been the Bank of Japan's (BoJ) bond and asset-purchase programme. The bond-purchase programme has been adjusted to maintain long-term interest rates effectively at zero, and the equity purchases continue on a huge scale albeit to buy into market falls rather than the earlier more indiscriminate buying programme. The BoJ now owns approximately half the government bond market, and nearly three quarters of equity ETFs and is now a top ten shareholder in over 40% of TSE-listed companies.

The big risk for Japanese equities is the potential for a slowdown in global growth and /or the dislocation of global trade flows through greater protectionism. In both respects it is worth noting that Japanese companies now trade more with China then they do with the United States.

Your Company's Tokyo-based research and portfolio management team has been able in recent years to identify many fast growing attractive companies often based on new business models. The Board believes that this approach will continue to serve the Company's shareholders well over the medium term and particularly so while there are continuing signs of subtle positive changes in the behaviour of Japanese corporate management in their attitude towards returns to shareholders.

Andrew Fleming

Chairman 12th November 2018

INVESTMENT MANAGERS' REPORT

Performance

In the 12 months to 30th September 2018 the Company produced a total return to shareholders of +24.6% and a total return on net assets of +26.8%, in sterling terms. These compare with a total return of +12.6% from the Company's benchmark index, the TOPIX Index, in sterling terms. Over the last three and five years the Company has returned +89.1% and +107.3% respectively versus +66.6% and +78.2% for the benchmark, also all in sterling, with a share price return of +83.9% and +103.4% over three and five years. The average level of gearing over the 12 month period was around 15%, which enhanced returns in a rising market.

Investment Philosophy and Process

Our investment approach emphasizes individual stock selection to build a portfolio of quality growth stocks with strong future growth prospects. This means that, within some broad portfolio risk limits, the Company's portfolio is likely to differ materially from the benchmark index as we will avoid companies and sectors that face structural issues even if they are a large constituent of the benchmark index.

The opportunity to find attractive opportunities is assisted by the fact that the Japanese market is under-researched when compared with other developed equity markets. With well over 50% of the constituents of the Company's benchmark index being covered by no more than one provider of broker research, there are significant opportunities to uncover hidden sources of return from Japanese equities.

Against the background of a market with poor sell-side coverage, we have the resources in Japan to carry out our own research and identify attractive investment themes and companies. Our Tokyo-based investment team consists of 24 investment professionals who have carried out over 2,000 company visits in the past year.

A combination of desk-based research and company meetings contribute to our rating of a company. We consider the growth opportunity for the industry overall before considering the company's competitive positioning and management. This allows us to assess the company's potential for growth. We then look at financial metrics with a focus on cash flow and balance sheet strength to assess the overall economics of the business. We also consider governance issues such as shareholder returns, management strength and the track record on environmental and social issues. Only then do we consider valuations - we do not buy a company where the short term valuation looks low unless it has a strong long term growth outlook.

This work carried out in looking through the under-researched parts of the market helps us build portfolios that are comprised of a number of high conviction holdings which we expect to hold for long periods of time.

Several points evidence this philosophy. The portfolio has long had a bias towards mid cap and small cap stocks. At the year end the portfolio held 61 different stocks, down from 70 over the period. And 16 of the stocks in the portfolio have been held continuously for more than three years.

Investment Performance

The themes to which the portfolio is exposed have not changed during the year under review. The financial characteristics of the portfolio are also unchanged: balance sheets and free cash flows are stronger; earnings growth faster and return on equity higher than the market as a whole. For example, as at 30th September 2018 the holdings in the portfolio generated an average return on equity of 15.8%, compared to the benchmark return on equity of 11.8%. The portfolio valuation, as measured by the price earnings ratio, is higher than the market average but we believe the strong long-term growth prospects of the companies we own more than justify this.

We also have a bias to mid and smaller sized companies reflecting the fact that coverage by analysts is poor. This provides us with the opportunity to identify investments overlooked by the broader market. These companies also tend to have more focused business models. Investors should expect to see these characteristics in the portfolio over the economic cycle.

Over the year under review, we made some changes to the portfolio, reducing the number of holdings from seventy to sixty one. We also increased the gearing level from 13.6% to 14.7%.

The largest purchases were Hikari Tsushin and SBI, with additions to our holdings in Shiseido, Recruit and M3.

The most significant sales were Sumitomo Mitsui Financial, Orix, NTT, and Sanwa Holdings, with a reduction in our holding in Mitsubishi UFJ.

During the year the top contributing stocks included Shiseido, CyberAgent and M3 which we comment on above.

The other top contributing stocks were:

-- MonotaRO - operator of an e-commerce website that sells to businesses. It is growing sales, with revenues growing in excess of 20% a year, and rapidly winning new customers; and

-- Recruit - a recruitment company. It operates several websites including the company Indeed, the world's largest employment website. Recruit is expected to benefit from the tight labour market and take market share from existing employment agencies.

The largest negative contributors to performance were Mercari, Suruga Bank, Komatsu, Square Enix and Nexon. Except for Suruga Bank, which had a compliance failure and we have sold, we have continued belief in the long term investment cases for these stocks and therefore remain holders of these positions.

At the end of September 2018, the largest overweight positions compared to the TOPIX were in Recruit, Keyence, M3, Shiseido and CyberAgent.

Investment outlook

The Japanese market is more cyclical than other developed markets and can be impacted by global economic developments, both positively and negatively. Currently there are concerns about a potential trade war between the United States and China. In addition, Chinese macro data is weaker than recent years and negotiations for a new trade deal between the United States and Japan are at an early stage. However, we continue to see robust corporate earnings growth, progress on corporate governance reform and good economic activity in Japan.

The JPMorgan Japanese Investment Trust focuses on individual stocks rather than attempting to predict global economic growth. The companies we have invested in have strong structural growth outlooks, competitive positions and balance sheets and we believe they will perform well in the long-term regardless of the performance of the wider global economy. Their competitive positions and balance sheets are strong enough to withstand such issues. The high level of gearing currently deployed reflects our conviction in the companies that we own.

Nicholas Weindling

Shoichi Mizusawa

Investment Managers

Tokyo 12th November 2018

PRINCIPAL 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. The risks identified have changed over the year under review, and the ways in which they are managed or mitigated are summarised as follows.

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

   --        Investment Underperformance and Strategy 

An inappropriate investment strategy, for example sector allocation, the level of gearing or the degree of portfolio risk, may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount.

The Board manages these risks by diversification of investments and through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The 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 attends all Board meetings, and reviews data which show statistical 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.

   --        Market and Currency 

Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board considers sector allocation, 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 monitors the implementation and results of the investment process with the Manager. 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 61 and 62 of the Annual Report.

   --        Political, Economic and Governance 

Administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

   --        Loss of Investment Team or Portfolio Manager 

A sudden departure of a Portfolio Manager or several members of the investment management team could result in a short term deterioration in investment performance. 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.

   --        Discount 

A disproportionate widening of the discount relative to the Company's peers could result in loss of value for shareholders. The Board regularly discusses discount policy and has set parameters for the Manager and the Company's broker to follow.

   --        Change of Corporate Control of the Manager 

The Board holds regular meetings with senior representatives of the Manager in order to obtain assurance that the Manager continues to demonstrate a high degree of commitment to its asset management and investment trust business.

   --        Accounting, Legal and Regulatory 

In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under Management of the Company on page 25. 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. 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, Market Abuse Regulation ('MAR'), Disclosure Guidance and Transparency Rules ('DTRs') and, as an investment trust, the Alternative Investment Fund Managers Directive ('AIFMD'). 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.

   --        Corporate Governance and Shareholder Relations 

Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance Statement on pages 29 to 32 of the Annual Report.

   --        Operational 

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. Details of how the Board monitors the services provided by JPMF 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 29 and 32 of the Annual Report.

   --        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.

   --        Financial 

The financial risks faced by the Company include market price risk, liquidity risk and credit risk. Further details are disclosed in note 22 on pages 60 to 66 of the Annual Report.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contract are set out in the Directors' Report on pages 25 to 26. The management fee payable to the Manager for the year was GBP4,527,000 (2017: GBP3,874,000) of which GBPnil (2017: GBPnil) was outstanding at the year end.

Included in administration expenses in note 6 on page 53 are safe custody fees amounting to GBP111,000 (2017: GBP50,000) payable to JPMorgan Chase Bank, N.A., of which GBP19,000 (2017: GBP17,000) was outstanding at the year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities for the year was GBP11,000 (2017: GBP13,000) of which GBPnil (2017: GBPnil) was outstanding at the year end.

Handling charges on dealing transactions amounting to GBP1,000 (2017: GBP3,000) were payable to JPMorgan Chase Bank N.A. during the year of which GBPnil (2017: GBPnil) was outstanding at the year end.

At the year end, total cash of GBP7,278,000 (2017: GBP3,551,000) was held with JPMorgan Chase. A net amount of interest of GBPnil (2017: GBP117) was receivable by the Company during the year from JPMorgan Chase of which GBPnil (2017: GBPnil) was outstanding at the year end.

Stock lending income amounting to GBP293,000 (2017: GBPnil) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to GBP52,000 (2017: GBPnil).

Full details of Directors' remuneration and shareholdings can be found on page 38 and in note 6 on pages 35 and 36 of the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the annual report and 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 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 financial statements unless they are satisfied that, taken as a whole, the annual report and 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 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 page 24, 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

Andrew Fleming

Chairman

12th November 2018

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEARED 30TH SEPTEMBER 2018

 
                                                    2018                            2017 
                                        Revenue   Capital      Total   Revenue    Capital      Total 
                                        GBP'000   GBP'000    GBP'000   GBP'000    GBP'000    GBP'000 
-------------------------------------  --------  --------  ---------  --------  ---------  --------- 
 Gains on investments held at 
  fair 
 value through profit or loss                 -   179,515    179,515         -     44,397     44,397 
 Net foreign currency (losses)/gains          -   (2,915)    (2,915)         -     10,514     10,514 
 Income from investments                 11,665         -     11,665    11,640          -     11,640 
 Other interest receivable and 
  similar income                            293         -        293         -          -          - 
-------------------------------------  --------  --------  ---------  --------  ---------  --------- 
 Gross return                            11,958   176,600    188,558    11,640     54,911     66,551 
 Management fee                           (905)   (3,622)    (4,527)     (775)    (3,099)    (3,874) 
 Other administrative expenses            (690)         -      (690)     (613)          -      (613) 
-------------------------------------  --------  --------  ---------  --------  ---------  --------- 
 Net return on ordinary activities 
 before finance costs and taxation       10,363   172,978    183,341    10,252     51,812     62,064 
 Finance costs                            (282)   (1,127)    (1,409)     (189)      (755)      (944) 
-------------------------------------  --------  --------  ---------  --------  ---------  --------- 
 Net return on ordinary activities 
 before taxation                         10,081   171,851    181,932    10,063     51,057     61,120 
 Taxation                               (1,168)         -    (1,168)   (1,161)          -    (1,161) 
-------------------------------------  --------  --------  ---------  --------  ---------  --------- 
 Net return on ordinary activities 
 after taxation                           8,913   171,851    180,764     8,902     51,057     59,959 
-------------------------------------  --------  --------  ---------  --------  ---------  --------- 
 Return per share                         5.53p   106.58p    112.11p     5.52p     31.66p     37.18p 
 

STATEMENT OF CHANGES IN EQUITY

FOR THE YEARED 30TH SEPTEMBER 2018

 
                                       Called      Capital 
                                           up 
                                        share   redemption      Other    Capital    Revenue 
                                      capital      reserve    reserve   reserves    reserve       Total 
                                      GBP'000      GBP'000    GBP'000    GBP'000    GBP'000     GBP'000 
-----------------------------------  --------  -----------  ---------  ---------  ---------  ---------- 
 At 30th September 2016                40,312        8,650    166,791    400,299      8,713     624,765 
 Net return on ordinary activities          -            -          -     51,057      8,902      59,959 
 Dividend paid in the year 
  (note 3)                                  -            -          -          -    (5,886)     (5,886) 
-----------------------------------  --------  -----------  ---------  ---------  ---------  ---------- 
 At 30th September 2017                40,312        8,650    166,791    451,356     11,729     678,838 
 Net return on ordinary activities          -            -          -    171,851      8,913     180,764 
 Dividend paid in the year 
  (note 3)                                  -            -          -          -    (8,062)     (8,062) 
-----------------------------------  --------  -----------  ---------  ---------  ---------  ---------- 
 At 30th September 2018                40,312        8,650    166,791    623,207     12,580     851,540 
-----------------------------------  --------  -----------  ---------  ---------  ---------  ---------- 
 

This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.

STATEMENT OF FINANCIAL POSITION

AT 30TH SEPTEMBER 2018

 
                                                                 2018       2017 
                                                              GBP'000    GBP'000 
---------------------------------------------------------  ----------  --------- 
 Fixed assets 
 Investments held at fair value through profit or loss        976,724    771,143 
 Current assets 
 Debtors                                                        7,001      3,852 
 Cash and cash equivalents                                      7,278      3,551 
---------------------------------------------------------  ----------  --------- 
                                                               14,279      7,403 
 Current liabilities 
 Creditors: amounts falling due within one year               (4,951)      (385) 
---------------------------------------------------------  ----------  --------- 
 Net current assets                                             9,328      7,018 
---------------------------------------------------------  ----------  --------- 
 Total assets less current liabilities                        986,052    778,161 
---------------------------------------------------------  ----------  --------- 
 Creditors: amounts falling due after more than one year    (134,512)   (99,323) 
---------------------------------------------------------  ----------  --------- 
 Net assets                                                   851,540    678,838 
---------------------------------------------------------  ----------  --------- 
 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                                             623,207    451,356 
 Revenue reserve                                               12,580     11,729 
---------------------------------------------------------  ----------  --------- 
 Total shareholders' funds                                    851,540    678,838 
---------------------------------------------------------  ----------  --------- 
 Net asset value per share                                     528.1p     421.0p 
 

STATEMENT OF CASH FLOWS

FOR THE YEARED 30 SEPTEMBER 2018

 
                                                               2018        2017 
                                                            GBP'000     GBP'000 
-------------------------------------------------------  ----------  ---------- 
 Net cash outflow from operations before dividends and 
  interest                                                  (4,461)     (4,442) 
 Dividends received                                          10,902       9,648 
 Interest paid                                              (1,262)     (1,037) 
-------------------------------------------------------  ----------  ---------- 
 Net cash inflow from operating activities                    5,179       4,169 
-------------------------------------------------------  ----------  ---------- 
 Purchases of investments                                 (404,862)   (250,200) 
 Sales of investments                                       379,693     207,947 
 Settlement of foreign currency contracts                        15           5 
-------------------------------------------------------  ----------  ---------- 
 Net cash outflow from investing activities                (25,154)    (42,248) 
-------------------------------------------------------  ----------  ---------- 
 Dividend paid                                              (8,062)     (5,886) 
 Drawdown of bank loan                                       32,990      41,442 
 Drawdown of senior secured loan note                        88,967           - 
 Repayment of bank loan                                    (90,235)           - 
-------------------------------------------------------  ----------  ---------- 
 Net cash inflow from financing activities                   23,660      35,556 
-------------------------------------------------------  ----------  ---------- 
 Increase/(decrease) in cash and cash equivalents             3,685     (2,523) 
-------------------------------------------------------  ----------  ---------- 
 Cash and cash equivalents at start of year                   3,551       6,118 
 Exchange movements                                              42        (44) 
 Cash and cash equivalents at end of year                     7,278       3,551 

-------------------------------------------------------  ----------  ---------- 
 Increase/(decrease) in cash and cash equivalents             3,685     (2,523) 
-------------------------------------------------------  ----------  ---------- 
 Cash and cash equivalents consist of: 
 Cash and short term deposits                                 7,278       3,551 
-------------------------------------------------------  ----------  ---------- 
 

NOTES TO THE FINANCIAL STATEMENTS

   1.       Accounting policies 

Basis of accounting

The 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 November 2014 and updated in February 2018.

All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 33 of the Annual Report form part of these financial statements.

The policies applied in these financial statements are consistent with those applied in the preceding year.

   2.       Return per share 
 
                                                             2018          2017 
                                                          GBP'000       GBP'000 
---------------------------------------------------  ------------  ------------ 
 Revenue return                                             8,913         8,902 
 Capital return                                           171,851        51,057 
---------------------------------------------------  ------------  ------------ 
 Total return                                             180,764        59,959 
---------------------------------------------------  ------------  ------------ 
 Weighted average number of shares in issue during 
  the year                                            161,248,078   161,248,078 
 Revenue return per share                                   5.53p         5.52p 
 Capital return per share                                 106.58p        31.66p 
---------------------------------------------------  ------------  ------------ 
 Total return per share                                   112.11p        37.18p 
---------------------------------------------------  ------------  ------------ 
 
   3.       Dividends 
   (a)     Dividends paid and proposed 
 
                                                           2018      2017 
                                                        GBP'000   GBP'000 
-----------------------------------------------------  --------  -------- 
 Dividend paid 
 2017 final dividend paid of 5.00p (2016: 3.65p) per 
  share                                                   8,062     5,886 
-----------------------------------------------------  --------  -------- 
 Dividend proposed 
 2018 final dividend proposed of 5.00p (2017: 5.00p) 
  per share                                               8,062     8,062 
-----------------------------------------------------  --------  -------- 
 

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 2018 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 financial statements for the year ending 30th September 2019.

   (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 GBP8,913,000 (2017: GBP8,902,000). The revenue reserve after payment of the final dividend will amount to GBP4,518,000.

 
                                                      2018      2017 
                                                   GBP'000   GBP'000 
------------------------------------------------  --------  -------- 
 Final dividend proposed of 5.00p (2017: 5.00p) 
  per share                                          8,062     8,062 
------------------------------------------------  --------  -------- 
 
   4.       Net asset value per share 
 
                                     2018          2017 
---------------------------  ------------  ------------ 
 Net assets (GBP'000)             851,540       678,838 
 Number of shares in issue    161,248,078   161,248,078 
---------------------------  ------------  ------------ 
 Net asset value per share         528.1p        421.0p 
---------------------------  ------------  ------------ 
 

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.

JPMORGAN FUNDS LIMITED

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

The annual report will shortly be available 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

12th November 2018

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

END

FR LLFFTLSLFLIT

(END) Dow Jones Newswires

November 13, 2018 02:00 ET (07:00 GMT)