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Share Name Share Symbol Market Type Share ISIN Share Description
Jpmorgan Japan Smaller Co Tst Plc LSE:JPS 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
  0.00 0.0% 561.00 556.00 566.00 0.00 01:00:00
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Equity Investment Instruments 0.0 0.8 0.8 738.2 271

JPMorgan Japan Small Cap G&I PLC Final Results - Replacement

23/06/2022 8:52am

UK Regulatory (RNS & others)

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RNS Number : 9394P

JPMorgan Japan Small Cap G&I PLC

23 June 2022



(the "Company")


Legal Entity Identifier: 549300KP3CRHPQ4RF811


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.


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 or by contacting the Company Secretary at .

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.


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



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

                                       %       % 
--------------------------------  ------  ------ 
 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


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 
                                                         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 
                                                         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 
                                                         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 
                                                         arrangements detailing service 
                                                         expectations. The Audit Committee 
                                                         receives assurance and internal 
                                                         controls reports from key 
                                                         service providers on an annual 
                                                         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 
                                                                                               high import 
                                                                                               and energy 
--------------------  --------------------------------  -----------------------------------  ------------------------- 
 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 
--------------------  --------------------------------  -----------------------------------  ------------------------- 
 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 
                                                         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 
-----------------  ----------------------------------  --------------------------------------------- 
 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. 
-----------------  ----------------------------------  --------------------------------------------- 


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.


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.


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


22 June 2022


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 


                        Called                Capital 
                         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.


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 


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 
-----------------------------------------------------  ---------  ---------- 


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




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:


The annual report will shortly be available on the Company's website at 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 or visit

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(END) Dow Jones Newswires

June 23, 2022 03:52 ET (07:52 GMT)

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