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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Jpmorgan Japan Small Cap Growth & Income Plc | LSE:JSGI | London | Ordinary Share | GB0003165817 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -4.00 | -1.31% | 302.00 | 302.00 | 303.00 | 302.00 | 302.00 | 302.00 | 33,903 | 16:22:57 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | -9.61M | -12.76M | -0.2340 | -2.12 | 26.98M |
From Apr 2022 to Apr 2024
TIDMJSGI TIDMJPSS
RNS Number : 8812P
JPMorgan Japan Small Cap G&I PLC
23 June 2022
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPAN SMALL CAP GROWTH & INCOME PLC
(the "Company")
FINAL RESULTS FOR THE YEARED 31st MARCH 2022
Legal Entity Identifier: 549300KP3CRHPQ4RF811
CHAIRMAN'S STATEMENT
Investment Performance
Despite a positive first half, the financial year ended 31st March 2022 proved a challenging one for the Company. Performance in the first six months of the year was strong, supported by an improvement in Japan's economic outlook as the pandemic's grip on activity loosened. The Company returned +7.2% (in GBP) on an NAV basis over the half year, outperforming the benchmark, the MSCI Japan Small Cap Index, which returned +4.9%. However, performance worsened in the second half of the year, with the Company returning -24.6% on an NAV basis for the full year, compared to a benchmark return of -8.1%. The Company's return to shareholders was 23.3% over the same period.
This underperformance was the result of the portfolio's focus on quality and growth stocks. As in other major markets, high growth stocks, especially in the technology sector, were hit especially hard as investors focused on rising interest rates, spiralling inflation and the tragic events in Ukraine and tended to ignore the fundamental operational performance of businesses. Japanese growth stocks were caught up in this sell-off, even though inflation in Japan remains very low and the Bank of Japan is unlikely to raise interest rates in the foreseeable future.
It is useful to put the Company's latest results into a broader context. The Company's stock picking approach combined with a quality and growth bias means the portfolio tends to differ significantly from the benchmark, which is home to many low-quality companies. So it is therefore not unexpected that the performance will vary significantly from the benchmark. The Manager remains confident however that their bottom-up approach of focusing on good quality companies with strong growth prospects will always win out over the longer term despite temporary periods of underperformance. The Company has weathered previous bouts of short-term underperformance, while in years when growth stocks do well, the portfolio has outperformed. The prior financial year ended 31st March 2021 was one such year, which saw the portfolio deliver very strong absolute returns of over 40% in NAV terms, and outperformance against the benchmark of more than 20 percentage points. Whilst the Board and Manager share concerns over the poor results over the last six months, it is important not to lose sight of longer term performance. The Company's track record of significant absolute gains, and outperformance, over periods of five years and more, attests to the effectiveness of its investment approach in delivering meaningful gains to patient investors over the long term.
The Company's investment record and recent portfolio activity are explained in more depth in the Investment Managers' Report. They also outline the themes they expect will drive Japan's equity markets over the medium-term, and the reasons for their optimism about the Company's long-term prospects.
Dividend Policy and Discount Management
The Company's revised dividend policy has now been in place for four years. As a reminder, the dividend policy aims to pay, in the absence of unforeseen circumstances, a regular dividend equal to 1% of the Company's NAV on the last business day of the preceding financial quarter, being the end of March, June, September and December. Over the year, this would approximate to 4% of the average NAV. This dividend is paid from other reserves. For the year ended 31st March 2022, quarterly dividends paid totalled 20.3p per share (2021: 21.9p).
One of the objectives of the revised dividend policy is to enhance the Company's appeal to a broader range of investors. Since its introduction, it has therefore been pleasing to note some narrowing of the Company's discount, driven by new demand, some favourable press coverage and positive absolute and relative longer-term performance. Over the review period, the Company's discount remained relatively stable, ending the period at 7.4%, lower than the 8.7% at the same time last year, and 11.9% two years ago.
The Company did not repurchase any shares during the year. However, the Board continues to monitor the discount closely and is prepared to repurchase shares to narrow the discount, when it considers this is appropriate, taking account of market conditions. At the time of writing, the discount is 4.96%.
A resolution to approve the Company's dividend policy will be put to shareholders at the forthcoming Annual General Meeting.
Manager Changes
In January 2022, the Board was informed by its Manager that Eiji Saito, the Company's lead portfolio manager, would be leaving JPMorgan after 18 years' service to return to university and pursue a degree in law. The Board worked closely with the Manager to oversee and agree on the proposed changes to the investment management team.
Miyako Urabe has replaced Eiji as the lead manager of the Company and the JPMorgan Asset Management's Japan Small/Mid Cap strategy. Miyako has spent 14 years within the industry, including nine at JPMorgan, having joined the Japanese Equities team in 2013. Xuming Tao, who is also a small cap specialist fund manager, has joined Miyako as a portfolio manager of the Company. Xuming has spent nine years in the industry and three years with JPMorgan. Naohiro Ozawa continues as a portfolio manager of the Company, working alongside Miyako and Xuming. Naohiro has spent 16 years in the industry, 14 years with JPMorgan and four years managing the Company. Michiko Sakai has left the team to focus on the JPM Japan sustainable strategy responsibilities.
There has been no change to the Company's investment objectives, or its investment and dividend policies, as a result of these changes. The three portfolio managers will continue to work as part of the highly experienced team in Tokyo who have been managing Japanese equities mandates since 1969. They are supported by JPMorgan Asset Management's extensive resources around the world.
The Board would like to thank Eiji for his contribution to the management of the Company over the past five years. It looks forward to working with the portfolio management team and welcomes the new co-managers, Miyako and Xuming.
Gearing/Borrowing
The Managers seek, at times, to enhance investment returns for shareholders by borrowing money to buy more assets ('gearing'), subject to their view on prevailing market conditions. The Company's gearing is discussed regularly by the Board and the Managers, and the gearing level is reviewed by the Directors at each Board meeting.
The Company has a revolving credit facility of Yen 4.0 billion (with an option to increase available credit to Yen 6.0 billion) with Scotiabank, which was fully drawn at the year-end. The loan facility is on favourable and flexible terms, allowing the Company to repay the loan if required, without any penalties. This facility has a maturity date of October 2022 and the Managers will seek to renew or replace this facility, at the best available terms, on expiry.
Access to a credit facility provides the Managers with the ability to gear tactically within the set guidelines. The Company's investment policy permits gearing within a range of 10% net cash to 25% geared. However, the Board requires the Managers to operate in the narrower range of 5% net cash to 15% geared, in normal market conditions. During the 12 months of the review period the Company's gearing level ranged between 5.7% and 11.5%, ending the financial year at 6.1% (2021: 8.1%).
Environmental, Social and Governance Issues
As reported in the Investment Managers' Report, environmental, social and governance ('ESG') considerations are integral to the Managers' investment process. The Board shares the Managers' view of the importance of ESG when making investments that are sustainable over the long term, and the necessity of continual engagement with investee companies throughout the duration of the investment. The Managers use their regular company meetings with potential and existing portfolio companies to discuss and challenge management on their adherence to ESG principles and best practice. The Board believes that effective stewardship can help to create sustainable value for shareholders.
The war in Ukraine is an immense humanitarian tragedy which we hope will end soon. While its impact on global financial markets has been significant, it has had no direct impact on the Company, as none of its portfolio holdings has any exposure to either the Russian or Ukrainian markets.
Further information on the Manager's ESG process and engagement is set out in the ESG Report on pages 18 to 23 of the Annual Report.
The Board and Corporate Governance
There has been no change to the composition of the Board during the reporting period. Following the Board's annual evaluation by the Nomination Committee, the Committee felt that the Board's current composition and size are appropriate. The Board has a plan to refresh its membership in an orderly manner over time. As part of its long-term succession planning, and to ensure continuity, the Board will seek to recruit new non-executive Directors when current members approach retirement.
The Board supports annual re-election for all Directors, as recommended by the AIC Code of Corporate Governance, and all Directors will therefore stand for re-election at the forthcoming Annual General Meeting. Shareholders who wish to contact the Chairman or other members of the Board may do so through the Company Secretary or the Company's website, details of which appear below.
Auditor Review
The last formal exercise of audit tender was undertaken in 2014, when Grant Thornton was appointed. The Company's financial year ended 31st March 2021 was the last of a five-year tenure of Grant Thornton's audit partner, Marcus Swales, and a new partner was expected to take over.
However, the Board took the view that this change provided an opportune moment to review the Company's audit arrangements as a matter of good governance. The Board also felt that a review would give the Directors the chance to survey the market and ensure that the Company's audit arrangements remain competitively priced, providing good value for shareholders, while also maintaining the same high quality of the statutory audits. To this end, the Audit Committee undertook a tender process for the 2022 statutory audit. Following a review of tender proposals from a number of firms, Johnston Carmichael LLP has been appointed as the Company's new auditor.
Annual General Meeting
The Board is pleased to report that a more familiar format for the Annual General Meeting will be permissible for this year and, to that end, we will be holding the Company's Annual General Meeting ('AGM') at 60 Victoria Embankment, London EC4Y 0JP on 27th July 2022 at 12 noon.
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 new managers, who will present at the meeting via video link from Tokyo. Their presentation will be followed by a live question and answer session. Shareholders wishing to follow the AGM proceedings but choosing not to attend will be able to view them 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.jpmjapansmallcapgrowthandincome.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 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 91 to 93 of the Annual Report.
If there are any changes to the above AGM arrangements, the Company will update shareholders through an announcement to the London Stock Exchange and on the Company's website.
Outlook
The Board shares the Managers' confidence in the outlook for Japan's small cap companies. Japan is in the process of significant positive structural change, whose economic and societal benefits will resonate well into the future. Digitalisation is likely to be particularly positive for productivity over the medium term. Furthermore, Japan's membership of the new regional trading bloc, the Regional Comprehensive Economic Partnership ('RCEP'), should increase its access to Asia's rapidly expanding economies, while the recent depreciation of the yen should boost export competitiveness.
Japan's smaller, more entrepreneurial and innovative companies are leading the way across a variety of sectors and should thrive in this environment, generating many exciting investment opportunities. The Board remains confident that the Managers' focus on quality and growth businesses, supported by JPMorgan's extensive, Tokyo-based research resources, leaves the Company ideally placed to capitalise on these opportunities, and to continue to deliver a regular income, combined with attractive returns and outperformance, to shareholders over the longer term.
Alexa Henderson
Chairman 22 June 2022
INVESTMENT MANAGERS' REPORT
Performance
This is our first report having assumed responsibility for management of your portfolio during the year under review.
The second half of the financial year ended 31st March 2022 was an especially turbulent time for global financial markets due to increasing inflation, US interest rate increases and the war in Ukraine. Concerns about inflation and higher rates took a heavy toll on stocks whose valuations are based on their long-term growth prospects, as higher rates reduce the value of their expected future cashflows. As a result, the Company's benchmark, the MSCI Japan Small Cap Index (in GBP terms), produced a total return of -8.1% for the year as a whole. However, our particular focus on quality and growth stocks meant this market volatility had a greater adverse impact on the Company's performance. After delivering outright gains and outperforming the benchmark over the first half of the year, for the year as a whole, the Company's net assets returned -24.6%, underperforming the index by 16.5 percentage points.
This result is extremely disappointing. It is not the first time that the Company has experienced short-term volatility in its returns relative to the benchmark. Indeed, our quality and growth bias means that the Company's portfolio often differs markedly from the benchmark, which includes lower quality cyclical names. However, our investment strategy looks beyond such short-term market fluctuations, and adopts a long-term perspective, on the view that excess returns take time to accumulate, especially for smaller cap stocks. This approach has delivered attractive absolute growth and outperformance over the long run. The Company's gains have outpaced the benchmark over five and ten years, delivering an average annualised return over ten years of 10.9% on an NAV basis, compared to a benchmark performance over ten years of 8.1% on the same basis.
Performance attribution
Year ended 31st March 2022
Hot Features
Premium
% %
-------------------------------- ------ ------
Contributions to total returns
-------------------------------- ------ ------
Benchmark return -8.1
-------------------------------- ------ ------
Sector allocation -3.0
-------------------------------- ------ ------
Stock selection -12.1
-------------------------------- ------ ------
Gearing/cash -0.4
-------------------------------- ------ ------
Return relative to benchmark -15.5
-------------------------------- ------ ------
Portfolio return -23.6
-------------------------------- ------ ------
Management fee/other expenses -1.0
-------------------------------- ------ ------
Return on net assets(A) -24.6
-------------------------------- ------ ------
Return to shareholders(A) -23.3
-------------------------------- ------ ------
Source: Factset, JPMAM, Morningstar.
All figures are on a total return basis.
Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark.
(A) Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on pages 94 and 95 of the Annual Report.
Market Background
In the first half of the year, Japanese equities, in line with other major markets, advanced on hopes that the global COVID vaccine roll-out would allow economic activity to return to normal. Japan's state of emergency was lifted in September 2021 and the ruling Liberal Democratic Party ('LDP') re-assumed power in the autumn election, confirming Fumio Kishida as the new Prime Minister. However, in the latter half of the financial year market volatility increased sharply. As well as escalating geo-political tensions to levels unprecedented in the past half century, news of Russia's invasion of Ukraine exacerbated existing energy and commodity price pressures, compelling the US Federal Reserve, and the Bank of England, to begin raising interest rates. In Japan, inflation remains low and the Bank of Japan has maintained its stimulatory monetary policy stance, but Japanese equities suffered the same sell-off as in other major markets, and, as elsewhere, technology and other growth stocks were the worst affected. In addition, widening interest rate differentials saw the Japanese yen weaken against the US dollar and sterling.
Spotlight on Stocks and Sectors
Stock selection was responsible for most of the underperformance during the 12 months under review, although sector selection also detracted from relative performance to a more modest extent.
At the stock level, several names made significant positive contributions to returns:
-- MEC manufactures advanced adhesion enhancer products used in printed circuit boards. The company is a global leader in this niche market. Its products improve adhesion between the wiring and insulating materials in semiconductors, which is key to manufacturers' efforts to reduce the size of semiconductor units. With semiconductors in significant and growing demand, for use in a vast array of products including electric vehicles, smartphones, wearable tech and many household items, we expect MEC to enjoy continued solid revenue growth over coming years and we have maintained our off benchmark holding.
-- C. Uyemura is another niche market player and off benchmark position. The company produces specialist chemicals and plating machinery used in EVs, smartphones, and other home appliances. It is benefitting from structural changes in mobile telecommunications, as the sector transitions from 4G to 5G - the electronic parts used in 5G smartphone require higher quality and more extensive plating technology. C. Uyemura is well-positioned in high-end plating, with a dominant market share and few new competitors, as the market is too small for large players to enter aggressively.
-- Litalico provides employment support to people with disabilities. Japanese society is becoming increasingly aware of the importance of diversity and inclusion, and companies are stepping up efforts to create welcoming workplaces for workers regardless of their gender, age, nationality, or disabilities. Litalico is Japan's number one provider of support services for disabled people.
The favourable impact of these stocks on relative performance was more than offset by negative contributions from a number of holdings, including:
-- Our holding in Miura, which is a pioneer in the manufacture of compact, energy-efficient gas boilers. These boilers are much more environmentally friendly than coal-fired versions. Miura has a dominant share of the Japanese market, with a high proportion of profits from recurring revenues, and there is a long-term growth opportunity in China, where the market is six times larger, and 80% of boilers are still coal-fired. Miura's expansion into China has stalled due to China's severe lockdowns, but we continue to hold this name due to our confidence in the company's long-term growth potential.
-- Another off benchmark position in SpiderPlus, which supplies digital drafting, photographic and other software services to the construction industry. These services deliver productivity gains by significantly reducing the amount of manual labour involved in such tasks. The company's share price has corrected during the broad-based sell-off in growth stocks, rather than for stock specific reasons, and we continue to hold this name.
-- RAKSUL, which is Japan's leading provider of specialist EC printing services for businesses. Compared to other printing EC players who operate printing facilities, Raksul employs a sharing economy model utilising idle capacity in regional printing facilities to realise value without having to carry the cost of any fixed asset required for printing themselves. This allows them to continue improving user experience and enjoy a higher margin and return. EC printing still only comprises less than 5% of Japan's overall market for business printing services, suggesting significant growth potential given that penetration rates are around 30% in countries such as Germany. As in the case of SpiderPlus, Raksul's share price has been dragged lower in the recent sell-off without any underlying fundamental justification, and we continue to hold.
With respect to sector allocation, as mentioned above, the kind of stocks we favour tend to be concentrated in those sectors which have been hardest hit in the recent market decline, while lower-value, lower-quality stocks in economically-sensitive sectors such as transport, banks and consumer goods, which we generally avoid, have done relatively well. Accordingly, the top detractor from performance at the sector level over the past year, by a significant margin, was our overweight in IT software & services. The portfolio's underweightings in transportation and real estate also detracted more modestly. However, our overweight in semiconductors & semiconductor equipment, and our underweight in food, beverage & tobacco, made positive contributions to returns.
Gearing stood at 6.1% at the end of the financial year, down from 8.1% at the end of FY21. Given the significant decline in the Company's NAV, gearing negatively impacted returns over the year.
About Our Investment Philosophy
The Company aims to provide shareholders with access to the innovative and fast-growing smaller companies at the core of the Japanese economy. Our investment approach favours quality and structural growth, and we target companies (other than Japan's largest 200) which we believe can compound earnings growth over the long term, supported by sustainable competitive advantages, good management teams and capital investment. We believe the strong and durable market positioning of such businesses will allow them substantially to increase their intrinsic value over time. We avoid stocks that have no clear differentiation and those that operate in industries plagued by excess supply and structural decline. Our focus on quality and growth means that the portfolio tends to benefit from the ability to invest the portfolio into stocks with different weightings to that of the benchmark, which provides a potential source for additional return, enhancing the Company's scope to outperform over the long term.
Our stock selection is based on fundamental analysis, 'on-the-ground' knowledge and extensive contact with the management teams of prospective and current portfolio companies. The Company is managed by a team of three, supported by over 20 Tokyo-based investment professionals. Their knowledge of the local market provides us with significant strength in identifying investment opportunities in small cap companies - a sector of the market which is very under-researched and overlooked by many investors.
The starting point in our bottom-up investment process is our Strategic Classification framework, where we address the key question 'Is this a business that we want to own?'. Through this process we assign a rating of Premium, Quality or Trading to each stock based on its fundamentals, governance and the sustainability of its revenues over the long term. We aim to maximise our exposure to Premium and Quality companies, and where possible, we invest from an early stage in order to benefit fully as companies realise their growth potential.
This patient perspective is key to generating excess return over the long term, although the portfolio's focus on quality and growth means it tends to struggle during value rallies. Having said that, the Company does not target 'growth at any price'. We always strive to acquire shares at a reasonable price. To this end, we use a five-year expected return framework to consider whether a stock's price is at an attractive level. We believe it is also important to construct a well-balanced, diversified portfolio, to minimise exposure to unintended risks. The Company's prospective and current portfolio holdings comprises around 75 stocks, in a range of sectors, including not only IT hardware and software, but materials, chemicals, construction, machinery and consumer goods and services.
We believe that well-run companies, which exhibit behaviour which respects the environment and the interests of their shareholders, customers, employees and other stakeholders, are most likely to deliver sustainable, long-term returns. Such environmental, social and governance ('ESG') considerations are thus integral to our investment process and a key driver of our quest to generate financial returns. ESG factors influence our decisions both at the portfolio construction stage and thereafter once companies are held in the portfolio, when ongoing engagement with managers can be effective in encouraging them to realise and maintain acceptable ESG standards. Our long-term holding in Litalico (discussed above) is one example of the way in which ESG considerations influence our investment decisions, as this company is at the forefront of Japan's efforts to improve employee well-being and workplace diversity.
Trends and Themes
While our investment decisions are based on company-specific factors, there are also structural, long-term trends and themes that underlie our stock selection.
Our investment themes include:
-- Changing demographics: Japan's ageing and declining population is creating significant challenges for Japanese policymakers. The government is committed to tackling these issues through regulatory reforms and digitalisation, and this is providing opportunities for innovative smaller companies working to improve the quality of life for the elderly. For example, reducing the need for face-to-face medical appointments. The tele-medicine company, Medley, is an example of a holding benefitting from such innovation.
-- Improving labour productivity via digitalisation: Japan's ageing population is also leading to a contraction in labour supply, and once again digitalisation is a key part of the solution to this problem, as it raises labour productivity. The government wants to encourage the adoption of digitalisation across the economy, and to this end it has established an agency which is focused on digitalising the operations of national and local governments, as well as Japan's education and healthcare systems. Portfolio holdings Rakus and Money Forward are benefiting from this drive, while Spiderplus, mentioned above, is one of many companies contributing to productivity improvements in the private sector.
-- Technological innovation: While certain areas of the Japanese economy such as financial services lag other markets in terms of their technological sophistication, Japanese manufacturers are world class. The country is a leading global supplier of factory automation equipment, robots, electronics parts and materials, proving attractive investment opportunities for portfolio companies such as MEC and C. Uyemura, mentioned above, that specialise in niche technology markets.
-- De-carbonisation: The Japanese government`s commitment to reduce carbon emissions to net zero by 2050 has galvanised efforts to transition the economy to renewable energy sources and take other necessary steps to mitigate climate change. Some smaller Japanese companies possess unique technologies related to the production of electric vehicles, solar and wind power and other forms of clean energy, and we continue our search for companies such as Canadian Solar Infrastructure Fund and Hirano Tecseed that are well-positioned to benefit from the global push towards carbon neutrality.
-- Overseas growth: The Asian region is experiencing rapid structural growth. Japanese luxury goods producers and other strong brands such as our investments in Milbon and Casio Computer are likely to continue experiencing strong demand from new customers in China, India and other increasingly prosperous Asian countries.
-- Corporate governance: Japan's corporate sector is making a concerted effort to strengthen governance standards via the appointment of more independent, external directors to company boards, enhanced shareholder returns and tighter internal controls and disclosure rules. There is, however, room for further improvement, and we maintain a constructive dialogue with portfolio companies and potential investments on this broad theme, on the view that the market is likely to keep rewarding companies that upgrade their governance practices.
Portfolio Activity
The sharp share price correction which took place in the second half of the financial year has provided us with the opportunity to purchase some interesting businesses at attractive prices.
-- Under the digitalisation theme, we purchased a new position in Rakus, a software company providing business services including digital invoicing, expense management and email management and distribution systems. The company has a mix of mature, very profitable and cash generative services, as well as a suite of new product offerings. This portfolio approach provides Rakus with earnings stability, as well as good growth potential.
-- Our purchase of Yamato Kogyo aligns with our focus on the trend towards de-carbonisation. Yamato Kogyo is a steel producer which uses electric arc furnaces, rather than conventional blast furnaces, in its manufacturing process. Electric arc furnaces emit only around one sixth to a quarter of the greenhouse gases produced by conventional blast furnaces and Yamato Kogyo is one of the largest Japanese steelmakers using this technology. It also has joint venture operations and subsidiaries in the United States, Thailand, and other countries. The company is likely to see increased demand for its products as construction and manufacturing companies strive to reduce the carbon footprint of their steel inputs.
-- Tokai Carbon is a play on the same theme. It is a leading global supplier of ultra-high quality graphite electrodes, which are a key component of electric arc furnaces. Demand for Tokai Carbon's products is likely to escalate as steel companies phase out their use of conventional blast furnaces, in favour of more environmentally friendly electric arc furnaces.
-- Shift is a leading software testing company in Japan. Japan is experiencing a structural shortage of software engineers as it is better for engineers to focus on software development rather than testing given the tight supply. Shift started targeting this specific testing market over a decade ago and has accumulated considerable know-how in software testing. Considering the fact that outsourcing penetration for the software testing market in Japan is still only 1-2%, we believe the growth runway is significant and that they can continue to deliver compound growth over the long term.
-- Sanwa Holdings is the number one shutter maker in Japan. They have a very stable business model in Japan with only three companies dominating the market, of which Sanwa has the strongest position with a market share over 50%. They also provide business overseas, mainly in the US and Europe, through past acquisitions. The company is very well managed with consistently positive free cashflow, steady margins and proactive shareholder returns.
Two of our largest divestments over the past year were Nippon Prologis REIT and CyberAgent. The Company's investment guidelines prohibit investment in Japan's top 200 securities and Nippon Prologis, an industrial REIT, and CyberAgent, an internet advertiser and media content business, were approaching this threshold, so we closed our positions at a profit.
The Company's portfolio holdings have no notable exposure to Russian or Ukrainian markets, either through any operational presence in, or sales revenues from, these markets.
Our bias towards quality and growth means the portfolio continues to have a higher return on equity and stronger earnings per share growth than its benchmark.
Outlook and Strategy
While most major economies are likely to be subjected to continuing upward pressures on prices and interest rates, we expect the Bank of Japan to maintain its expansionary monetary policy stance. Japan is not overly reliant on Russian oil and gas and there is a general absence of domestic price and wage pressures. While the weaker yen will put some upward pressure on import prices, it will enhance the competitiveness of Japanese exports. On the political front, continuity and stability remain the defining characteristics of Japanese politics, as the LDP secured a strong mandate to govern for the next few years, and we expect it to continue in broad terms to pursue the policies and reforms implemented by the previous two Prime Ministers, Shinzo Abe and Yoshihide Suga, over the last nine years.
Regardless of the concerns and uncertainties overshadowing global financial markets, we remain optimistic about the long-term outlook for Japanese small cap companies. Japanese businesses typically have large cash positions and stronger balance sheets than their peers in other countries. Average valuations of Japanese companies remain reasonable, both lower than historical averages and below those of most other major markets. As importantly, the pandemic has given added impetus to some positive long term structural trends developing in the Japanese economy, especially the application of technology and digitalisation to a multitude of goods and services. These trends are set to underpin growth, productivity and corporate earnings for many years to come. In sharp contrast to other developed economies, Japan's smaller and more entrepreneurial companies are at the forefront of such innovation, and therefore, are ideally positioned to prosper over the longer term.
We believe that it is always important to focus on the best of these businesses - good quality companies with leading market positions and the potential for structural growth. In a part of the market where sell--side coverage is patchy at best, JPMorgan's large team of Tokyo-based analysts puts the Company in a favourable position to uncover exciting investment opportunities amongst smaller companies, and thus to capitalise on the long-term structural changes playing out in Japan.
The allocated weightings to stocks in the portfolio illustrates how our portfolio differs substantially from the benchmark. This often leads to significant oscillations in relative performance as we have seen to our detriment over the last six months and in some previous periods. However, we believe our investment approach is capable of weathering these oscillations and any short-term shifts in sentiment driven by geo-political developments or economic roadblocks, just as it has done in the past. We are confident the Company will continue to deliver positive returns, and relative outperformance to our shareholders over the longer term.
Miyako Urabe
Xuming Tao
Naohiro Ozawa
Investment Managers 22 June 2022
PRINCIPAL AND EMERGING RISKS
The Board has overall responsibility for reviewing the effectiveness of the Company's system of risk management and internal control.
The Board is supported by the Audit Committee in the management of risk. The risk management process is designed to identify, evaluate, manage, and mitigate risks faced.
Although the Board believes that it has a robust framework of internal controls in place this can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and is designed to manage, not eliminate, risk.
The Directors confirm that they have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risks identified and the ways in which they are managed or mitigated are summarised below.
With the assistance of JPMF, the Audit Committee has drawn up a risk matrix, which identifies the principal and emerging risks to the Company. These are reviewed and discussed on a regular basis by the Board, through the Audit Committee. These risks fall broadly into the following categories:
Principal Movement from
risk Description Mitigation/Control Prior Year
Investment An inappropriate investment The Company has a clearly Risk has been
and Strategy strategy, poor asset defined strategy and investment heightened
allocation or the level remit, which is reviewed annually. by the Company's
of gearing, may lead The portfolio is managed by under-performance
to underperformance a highly experienced Investment during the
against the Company's Manager, with a defined investment year together,
benchmark index and appraisal process. The Board with the resultant
its peer companies, relies on the Investment Manager's effects on
resulting in the Company's skills and judgment to make global trade
shares trading on a investment decisions based posed by supply
wider discount. on research and analysis of issues, higher
individual stocks and sectors. levels of inflation
The AIFM also monitors the and volatility
Investment Manager against in stockmarkets.
the Company's investment
guidelines.
The Board reviews the performance
of the portfolio against the
Company's benchmark index,
that of its competitors and
the outlook for the markets
on a regular basis, with the
portfolio managers who attend
Board meetings.
The Board also reviews the
level of premium/discount
to NAV at which the Company's
shares trade and movements
in the share register. The
Board regularly seeks the
views of its investors.
-------------------- -------------------------------- ----------------------------------- -------------------------
Market Market risk arises The Board considers the split Risk has been
from uncertainty about in the portfolio between small heightened
the future prices of and large companies, sector by a weakened
the Company's investments. and stock selection and levels economy in
This market risk comprises of gearing on a regular basis Japan at the
three elements - equity and has set investment start of the
market risk, currency restrictions year, including
risk and interest rate and guidelines, which are inflationary
risk. monitored and reported on increases,
by JPMF. The Board monitors high import
the implementation and results and energy
of the investment process costs.
with the Manager. However,
the fortunes of the portfolio
are significantly determined
by market movements in Japanese
equities, the rate of exchange
between the Yen and sterling
and interest rate changes.
This is a risk that investors
take having invested into
a single country fund. The
Board recognises the benefits
of a closed-end fund structure
in extremely volatile markets
such as those affected by
the COVID-19 pandemic. During
times of elevated market stress,
the ability of a closed-ended
fund structure to remain invested
for the long term enables
the Manager to adhere to
disciplined
fundamental analysis from
a bottom-up approach and be
ready to respond to dislocations
in the market as opportunities
present themselves.
-------------------- -------------------------------- ----------------------------------- -------------------------
Operational Disruption to, or failure On 1st July 2014, the Company Risk remains
and Cybercrime of, the Manager's accounting, appointed Bank of New York relatively
dealing or payments Mellon (International) Limited unchanged.
systems or the custodian's to act as its depositary, The operational
or depositary's records responsible for overseeing requirements
could prevent accurate the operations of the custodian, of the Company,
reporting and monitoring JPMorgan Chase Bank, N.A., including from
of the Company's financial and the Company's cash flows. its key third-party
position. Details of how the Board monitors service providers,
the services provided by the have been subject
Manager and its associates to rigorous
and the key elements designed testing as
to provide effective internal to their application
control are included in the during the
Risk Management and Internal COVID-19 pandemic,
Control section of the Corporate where working
Governance Report on pages from home and
50 and 51 of the Annual Report. online communication
As an externally managed were required.
investment To date the
trust, there is a continued operational
reliance on the Manager and arrangements
other third-party service have proven
providers. robust and
The Board reviews the overall key third-party
performance of the Manager service providers
and other key third-party have not experienced
service providers and compliance significant
with the investment management operational
agreement on a regular basis difficulties.
to ensure their continued
competitiveness and effectiveness,
which includes assessment
of the providers' control
systems, whistle-blowing,
anti-bribery and corruption
policies and business continuity
plans.
The Manager's internal control
processes are monitored throughout
the year and are evidenced
through its Service Organisation
Control (SOC 1) reports, prepared
by an independent auditor.
The SOC 1 reports, which are
reviewed annually by the Audit
Committee, provide assurance
in respect of the effective
operation of internal controls.
Service providers are appointed
with clearly-documented
contractual
arrangements detailing service
expectations. The Audit Committee
receives assurance and internal
controls reports from key
service providers on an annual
basis.
The threat of cyber-attack,
in all its guises, is regarded
as at least as important as
more traditional physical
threats to business continuity
and security. The Board has
received the cyber security
policies for its key third
party service providers and
JPMF has assured the Directors
that the Company benefits
directly or indirectly from
all elements of JPMorgan's
Cyber Security programme.
The information technology
controls around the physical
security of JPMorgan's data
centres, security of its networks
and security of its trading
applications are tested by
independent reporting accountants
and reported every six months
against the Audit and Assurance
Faculty Standard.
-------------------- -------------------------------- ----------------------------------- -------------------------
Loss of Investment The sudden departure The Manager takes steps to Risk has been
Team or Investment of the investment managers reduce the likelihood of such heightened
Managers or several members an event by ensuring appropriate by a weakened
of the wider investment succession planning and the economy in
management team could adoption of a team based approach. Japan at the
result in a short-term start of the
deterioration in investment year, including
performance. inflationary
increases,
high import
and energy
costs.
-------------------- -------------------------------- ----------------------------------- -------------------------
Share Price If the share price The Board monitors the Company's Risk remains
Relative of an investment trust premium/discount level and, relatively
to NAV per is lower than the NAV although the rating largely unchanged.
Share per share, the shares depends upon the relative The Board regularly
are said to be trading attractiveness of the trust, reviews and
at a discount. the Board has authority to monitors the
issue new shares or buy backs Company's objective
its existing shares when deemed and investment
by the Board to be in the policy and
best interests of the Company strategy, the
and its shareholders. The investment
Board is committed to consider portfolio and
buying back the Company's its performance,
shares when/if they stand the level of
at anything more than a small discount/premium
discount to enhance the NAV to net asset
per share for remaining value at which
shareholders. the shares
trade and movements
in the share
register.
-------------------- -------------------------------- ----------------------------------- -------------------------
Accounting, In order to qualify Were the Company to breach Risk remains
Legal and as an investment trust, Section 1158, it might lose relatively
Regulatory the Company must comply its investment trust status unchanged.
with Section 1158 of and, as a consequence, gains Compliance
the Corporation Tax within the Company's portfolio with relevant
Act 2010 ('Section would be subject to Capital regulations
1158'). Details of Gains Tax. The Section 1158 is monitored
the Company's approval qualification criteria are on an ongoing
are given on page 29 continually monitored by JPMF basis by the
of the Annual Report. and the results reported to Company Secretary
Section 1158 requires, the Board each month. The and Manager
among other matters, Company must also comply with who report
that the Company does the provisions of the Companies regularly to
not retain more than Act 2006 and, as its shares the Board.
15% of its investment are listed on the London Stock
income, can demonstrate Exchange, the UKLA Listing
an appropriate diversification Rules and Disclosure Guidance
of risk and is not and Transparency Rules ('DTRs').
a close company. A breach of the Companies
Act 2006 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 Directors seek to comply
with all relevant regulation
and legislation in the UK,
Europe and the US and rely
on the services of its Company
Secretary, JPMF, and its
professional
advisers to monitor compliance
with all relevant requirements.
-------------------- -------------------------------- ----------------------------------- -------------------------
Political Political changes in The Company is at risk from Risk remains
and Economic Japan and the resulting changes to the regulatory, relatively
economic uncertainty legislative and taxation framework unchanged.
may affect the Company, within which it operates, Political risks
the value of its investments whether such changes were have always
in Japan and capital designed to affect it or not. been part of
allocation decision The Board monitors and receives the investment
making. Changes in advice from the Manager and process.
legislation, including other advisors on political
in Japan, the US, UK and economic risks.
and the European Union,
may adversely affect
the Company either
directly or because
of restrictions or
enforced changes on
the operations of the
Manager. JPMF makes
recommendations to
the Board on accounting,
dividend and tax policies
and the Board seeks
external advice where
appropriate. Significant
political events could
impact the health of
the Japanese or UK
economy, resulting
in the imposition of
restrictions on the
free movement of capital.
-------------------- -------------------------------- ----------------------------------- -------------------------
Global Pandemics COVID-19 was identified The Board receives reports Risk remains
initially as an emerging on the business continuity relatively
risk, but quickly moved plans of the Manager and other unchanged.
to become a current key service providers. The The economic
significant risk. The effectiveness of these measures impact of the
emergence of COVID-19 has been assessed throughout COVID-19 pandemic
has highlighted the the course of the COVID-19 has been considered.
speed and extent of pandemic and the Board will There are always
economic damage that continue to monitor developments exogenous risks
can arise from a pandemic. as they occur and seek to and consequences,
There is the risk that learn lessons which may be which are difficult
emergent strains may of use in the event of future to predict
not respond to current pandemics. and plan for
vaccines and may be To date the portfolio's holdings in advance.
more lethal and that have not exhibited a long-term The Company
they may spread as negative impact and have recovered does what it
global travel increases. as the containment measures can to address
The response to the eased, although the pandemic these risks
Pandemic by the Japanese has yet to run its course. when they emerge,
and other governments The Board seeks to manage not least operationally
may potentially fail these risks through: a broadly and in trying
to mitigate the economic diversified equity portfolio, to meet its
damage created by the appropriate asset allocation, investment
Pandemic and public reviewing key economic and objective.
health responses to political events and regulatory
it, or may create new changes, active management
risks in their own of risk and the application
right. of relevant policies on gearing
and liquidity.
-------------------- -------------------------------- ----------------------------------- -------------------------
Emerging Risks
The Board is cognisant of emerging risks, which are characterised by a high degree of uncertainty in terms of probability of occurrence and possible effects on the Company.
Emerging risks are considered as they are identified and are incorporated into the Company's risk matrix. The Board, through the Audit Committee, will continue to assess these risks on an ongoing basis. The following have been identified as emerging risks:
Emerging risk Description Mitigation/Control
----------------- ---------------------------------- ---------------------------------------------
Environmental Risks
----------------------------------------------------------------------------------------------------
Climate Change Climate change is one The Manager's investment process integrates
of the most critical consideration of environmental, social
emerging issues confronting and governance factors into decisions
asset managers and their on which stocks to buy, hold or sell.
investors. Climate change This includes the approach investee
may have a disruptive companies take to recognising and
effect on the business mitigating climate change risks.
models and profitability In the Company's and Manager's view,
of individual investee companies that successfully manage
companies, and indeed, climate change risks will perform
whole sectors. better in the long-term. Consideration
of climate change risks and opportunities
is an integral part of the investment
process.
----------------- ---------------------------------- ---------------------------------------------
ESG requirements The Company's policy The Manager has integrated the consideration
from investors on ESG and climate change of ESG factors into the Company's
may be out of line with investment process. Further details
ESG practices in accordance are set out in the ESG report on pages
with which investors 18 to 23 of the Annual Report.
are looking to invest.
----------------- ---------------------------------- ---------------------------------------------
Geopolitical Risks
----------------------------------------------------------------------------------------------------
Geopolitical Geopolitical Risk is There is little direct control of
Instability the potential for political, risk possible. The Company addresses
socio-economic and cultural these global developments through
events and developments regular questioning of the Manager
to have an adverse effect and will continue to monitor these
on the value of the issues as they develop.
Company's assets. The Board has the ability, with shareholder
The Company and its approval, to amend the policy and
assets may be impacted objectives of the Company to mitigate
by geopolitical instability, the risks arising from geopolitical
in particular concerns concerns.
over global economic
growth. The crisis in
Ukraine has already
affected energy and
commodity markets and
may cause further damage
to the global economy.
The ongoing conflict
between Russia and Ukraine
has heightened the possibility
that tensions will spill
over and intensify geo-political
unrest between other
countries sharing a
common border.
----------------- ---------------------------------- ---------------------------------------------
TRANSACTIONS WITH THE MANAGER
Details of the management contract are set out in the Directors' Report on page 45 of the Annual Report. The management fee payable to the Manager for the year was GBP2,498,000 (2021: GBP2,478,000) of which GBPnil (2021: GBPnil) was outstanding at the year end.
During the year GBPnil (2021: GBPnil) was paid to the Manager for the marketing and administration of savings scheme products, of which GBPnil (2021: GBPnil) was outstanding at the year end.
Included in administration expenses in note 6 on page 75 of the Annual Report are safe custody fees payable to JPMorgan Chase group subsidiaries amounting to GBP29,000 (2021: GBP35,000) of which GBP7,000 (2021: GBP13,000) 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 Limited for the year was GBPnil (2021: GBPnil) of which GBPnil (2021: GBPnil) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP4,000 (2021: GBP4,000) were payable to JPMorgan Chase Bank N.A. during the year of which GBP1,000 (2021: GBPnil) was outstanding at the year end.
At the year end, total cash of GBP10,143,000 (2021: GBP627,000) was held with JPMorgan Chase. A net amount of interest of GBPnil (2021: GBPnil) was receivable by the Company during the year from JPMorgan Chase of which GBPnil (2021: GBPnil) was outstanding at the year end.
TRANSACTIONS WITH RELATED PARTIES
Full details of Directors' remuneration and shareholdings can be found on pages 56 and 57 and in note 6 on page 75 of the Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business
and the Directors confirm that they have done so.
The Directors are responsible for keeping adequate 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 enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors 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 Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for preparing a Strategic Report, a Directors' Report and a Directors' Remuneration Report that comply with the law and those regulations.
Each of the Directors, whose names and functions are listed in Directors' Report confirm that, to the best of their knowledge:
-- the Company's financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
-- the Directors' 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 it faces.
The Directors consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For and on behalf of the Board
Deborah Guthrie
Director
22 June 2022
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st March 2022
2022 2021
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- -------- ---------- ---------- -------- -------- --------
(Losses)/gains on investments
held at
fair value through profit
or loss - (72,449) (72,449) - 88,639 88,639
Net foreign currency gains - 920 920 - 3,334 3,334
Income from investments 3,855 - 3,855 3,526 - 3,526
---------------------------------- -------- ---------- ---------- -------- -------- --------
Gross return/(loss) 3,855 (71,529) (67,674) 3,526 91,973 95,499
Management fee (2,498) - (2,498) (2,478) - (2,478)
Other administrative expenses (454) - (454) (465) - (465)
---------------------------------- -------- ---------- ---------- -------- -------- --------
Net return/(loss) before
finance costs
and taxation 903 (71,529) (70,626) 583 91,973 92,556
Finance costs (215) - (215) (264) - (264)
---------------------------------- -------- ---------- ---------- -------- -------- --------
Net return/(loss) before
taxation 688 (71,529) (70,841) 319 91,973 92,292
Taxation (357) - (357) (350) - (350)
---------------------------------- -------- ---------- ---------- -------- -------- --------
Net return/(loss) after taxation 331 (71,529) (71,198) (31) 91,973 91,942
---------------------------------- -------- ---------- ---------- -------- -------- --------
Return/(loss) per share 0.61p (131.22)p (130.61)p (0.06)p 168.73p 168.67p
STATEMENT OF CHANGES IN EQUITY
Called Capital
up
share Share redemption Other Capital Revenue
capital premium reserve reserve reserves(1,2) reserve(2) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- ----------- ---------- -------------- ----------- ----------
At 31st March 2020 5,595 33,978 1,836 293,955 (105,204) (11,164) 218,996
Net return/(loss) - - - - 91,973 (31) 91,942
Dividends paid in
the year - - - (11,120) - - (11,120)
-------------------- -------- -------- ----------- ---------- -------------- ----------- ----------
At 31st March 2021 5,595 33,978 1,836 282,835 (13,231) (11,195) 299,818
Net (loss)/return - - - - (71,529) 331 (71,198)
Dividends paid in
the year - - - (11,883) - - (11,883)
-------------------- -------- -------- ----------- ---------- -------------- ----------- ----------
At 31st March 2022 5,595 33,978 1,836 270,952 (84,760) (10,864) 216,737
-------------------- -------- -------- ----------- ---------- -------------- ----------- ----------
(1) The share premium was cancelled in the period ended 31st March 2001 and redesignated as 'other reserve'.
(2) These reserves form the distributable reserves of the Company and may be used to fund distributions to investors via dividend payments.
STATEMENT OF FINANCIAL POSITION
At 31st March 2022
2022 2021
GBP'000 GBP'000
----------------------------------------------------- ---------- ---------
Fixed assets
Investments held at fair value through profit or
loss 229,912 324,002
----------------------------------------------------- ---------- ---------
Current assets
Debtors 2,672 1,568
Cash and cash equivalents 10,143 627
----------------------------------------------------- ---------- ---------
12,815 2,195
Creditors : amounts falling due within one year (25,990) (142)
----------------------------------------------------- ---------- ---------
Net current (liabilities)/assets (13,175) 2,053
----------------------------------------------------- ---------- ---------
Total assets less current liabilities 216,737 326,055
Creditors : amounts falling due after more than one
year - (26,237)
----------------------------------------------------- ---------- ---------
Net assets 216,737 299,818
----------------------------------------------------- ---------- ---------
Capital and reserves
Called up share capital 5,595 5,595
Share premium 33,978 33,978
Capital redemption reserve 1,836 1,836
Other reserve 270,952 282,835
Capital reserves (84,760) (13,231)
Revenue reserve (10,864) (11,195)
----------------------------------------------------- ---------- ---------
Total shareholders' funds 216,737 299,818
----------------------------------------------------- ---------- ---------
Net asset value per share 397.6p 550.0p
STATEMENT OF CASH FLOWS
For the year ended 31st March 2022
2022 2021
GBP'000 GBP'000
----------------------------------------------------- --------- ----------
Net cash outflow from operations before dividends
and interest (3,246) (3,262)
Dividends received 3,231 3,429
Interest paid (223) (260)
----------------------------------------------------- --------- ----------
Net cash outflow from operating activities (238) (93)
----------------------------------------------------- --------- ----------
Purchases of investments (67,865) (76,939)
Sales of investments 89,635 76,012
Settlement of foreign currency contracts 45 32
----------------------------------------------------- --------- ----------
Net cash (outflow)/inflow from investing activities 21,815 (895)
----------------------------------------------------- --------- ----------
Dividends paid (11,883) (11,120)
Net cash outflow from financing activities (11,883) (11,120)
----------------------------------------------------- --------- ----------
Increase/(decrease) in cash and cash equivalents 9,694 (12,108)
----------------------------------------------------- --------- ----------
Cash and cash equivalents at start of year 627 12,743
Exchange movements (178) (8)
Cash and cash equivalents at end of year 10,143 627
----------------------------------------------------- --------- ----------
Increase/(decrease) in cash and cash equivalents 9,694 (12,108)
----------------------------------------------------- --------- ----------
Cash and cash equivalents consist of:
Cash and short-term deposits 10,143 627
----------------------------------------------------- --------- ----------
Total 10,143 627
----------------------------------------------------- --------- ----------
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st March 2022
1. Accounting policies (a) Basis of accounting
The financial statements are prepared under the historical cost convention, modified to include the revaluation of fixed asset investments which are recorded 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 April 2021.
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 53 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. Dividends
(a) Dividends paid and declared
2022 2021
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Dividends paid
2021 fourth quarterly dividend of 5.5p (2020: 4.0p)
paid to shareholders in May 2,998 2,180
2022 first quarterly dividend of 5.5p (2021: 5.0p)
paid to shareholders in August 2,998 2,726
2022 second quarterly dividend of 5.8p (2021: 5.5p)
paid to shareholders in November 3,162 2,998
2022 third quarterly dividend of 5.0p (2021: 5.9p)
paid to shareholders in February 2,725 3,216
----------------------------------------------------- -------- --------
Total dividends paid in the year 11,883 11,120
----------------------------------------------------- -------- --------
2022 2021
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Dividend declared
2022 fourth quarterly dividend of 4.0p (2021: 5.5p)
payable to shareholders in May 2,180 2,998
----------------------------------------------------- -------- --------
All dividends paid and declared in the year have been funded from the other reserve.
The fourth quarterly dividend has been declared in respect of the year ended 31st March 2022. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 31st March 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 dividends declared in respect of the financial year, shown below.
2022 2021
GBP'000 GBP'000
----------------------------------------------- -------- --------
2022 first quarterly dividend of 5.5p (2021:
5.0p) 2,998 2,726
2022 second quarterly dividend of 5.8p (2021:
5.5p) 3,162 2,998
2022 third quarterly dividend of 5.0p (2021:
5.9p) 2,725 3,216
2022 fourth quarterly dividend payable of
4.0p (2021: 5.5p) 2,180 2,998
----------------------------------------------- -------- --------
Total 11,065 11,938
----------------------------------------------- -------- --------
3. (Loss)/return per share
2022 2021
GBP'000 GBP'000
---------------------------------------------- ----------- -----------
Return per share is based on the following:
Revenue return/(loss) 331 (31)
Capital (loss)/return (71,529) 91,973
---------------------------------------------- ----------- -----------
Total (loss)/return (71,198) 91,942
---------------------------------------------- ----------- -----------
Weighted average number of shares in issue
during the year (excluding Treasury shares) 54,510,339 54,510,339
Revenue return/(loss) per share 0.61p (0.06)p
Capital (loss)/return per share (131.22)p 168.73p
---------------------------------------------- ----------- -----------
Total (loss)/return per share (130.61)p 168.67p
---------------------------------------------- ----------- -----------
4. Net asset value per share
2022 2021
--------------------------------------------- ----------- ----------- Net assets (GBP'000) 216,737 299,818 Number of shares in issue, excluding shares held in Treasury 54,510,339 54,510,339 --------------------------------------------- ----------- ----------- Net asset value per share 397.6p 550.0p --------------------------------------------- ----------- ----------- 5. Status of results announcement
2022 Financial Information
The figures and financial information for 2022 are extracted from the published Annual Report and Accounts for the year ended 31st March 2022 and do not constitute the statutory accounts for that year. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course and includes the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
2021 Financial Information
The figures and financial information for 2021 are extracted from the Annual Report and Accounts for the year ended 31st March 2021 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include the Report of the Independent Auditor 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 has been delivered to the Register of Companies.
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
NATIONAL STORAGE MECHANISM
A copy of the Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
WEBSITE
The annual report will shortly be available on the Company's website at www.jpmjapansmallcapgrowthandincome.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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END
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