TIDMJSGI TIDMJPSS
RNS Number : 4522V
JPMorgan Japan Small Cap G&I PLC
01 December 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPAN SMALL CAP GROWTH & INCOME PLC
(the 'Company')
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHSED
30TH SEPTEMBER 2023
Legal Entity Identifier: 549300KP3CRHPQ4RF811
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Investment Performance
For the six months to 30th September 2023, the total return on
the Company's net asset value was -0.7% (in GBP) compared to a
total return of +2.7% for the benchmark, the MSCI Japan Small Cap
Index, an underperformance of 3.4%. It is worth noting that while
performance was relatively close to benchmark in the first three
months of the period, the Company underperformed between July and
September 2023. This was in part due to a significant market
rotation away from the quality and growth stocks the Company
favours, towards the lower-quality, value-oriented stocks with
unappealing growth characteristics which dominated the
benchmark.
In the first half of 2023 there was a brief flurry of interest
in a handful of tech stocks exposed to artificial
intelligence-based technologies, but tech and other growth stocks
have subsequently lagged in all major markets. Investors focused on
the likelihood that global interest rates would remain elevated for
longer than previously hoped and this prospect adversely impacted
growth stocks whose valuations are based on discounted future cash
flows which decline as rates increase. Japanese growth stocks have
not been immune to this, despite relatively subdued Japanese
inflation, an accommodative central bank and clear signs of
improvement in Japan's economic and market outlook.
To give some perspective to the Company's recent disappointing
performance, it is important to note that the portfolio's focus on
quality and growth means it usually differs significantly from the
benchmark, and it is therefore inevitable that performance will
often vary substantially from the benchmark, regardless of market
conditions. Indeed, the Company has outperformed the market in six
of the last 10 calendar years, as reported in my Chairman's
Statement in the 2023 Annual Report. Given the Portfolio Managers'
conviction that good quality companies with strong growth prospects
will perform best over the long run, it is arguably more meaningful
to assess performance over a longer timeframe. For example, over
the 10 years ended 30th September 2023, the Company achieved an
average annualised return of 6.7%, not far from the average
annualised benchmark return of 7.1%.
The Company's recent investment performance is explained in
depth in the Portfolio Managers' Report, along with details of
portfolio activity over the past six months. The Portfolio Managers
also outline the reasons for their optimism about the outlook for
the Japanese market, and the themes they expect will further drive
the Company's performance over the short term and beyond.
Dividend Policy and Discount Management
The Company's 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, paid
from other reserves.
For the year ended 31st March 2023, quarterly dividends paid
totalled 14.2p per share (2022: 20.3p). For the half year ended
30th September 2023, the Board has declared two dividends, each of
3.5 pence, for the quarters ended 30th June and 30th September 2023
respectively. Two further dividends will be declared on the first
business day after 31st December 2023 and 31st March 2024. The
Company currently offers a relatively attractive dividend yield of
4.7%, based on the last four dividend payments and the share price
at 302p.
The discount at which the Company's shares trade relative to its
net asset value stood at 13.1% at 30th September 2023, up from the
9.8% reported at the Company's year-end, 31st March 2023. This
widening is broadly in line with the experience of many other
investment trusts over this period. The Board closely monitors the
discount and recognises that it is in shareholders' interests that
the Company's share price does not excessively differ from the
underlying NAV under normal market conditions. Taking the prolonged
period of widened discount into account, the Board decided to
resume share buybacks for the first time since March 2018. Since
the end of the financial half year, it has repurchased 86,112
shares. At the time of writing, the discount stood at 11.0%.
Gearing/Borrowing
The Portfolio 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 investment policy permits such tactical gearing
within a range of 10% net cash to 25% geared. However, the Board
requires the Manager to operate in the narrower range of 5% net
cash to 15% geared in normal market conditions. The Company's
gearing is discussed regularly by the Board and the Portfolio
Managers, and the gearing level is reviewed by the Directors at
each Board meeting. During the six months to end September 2023,
the Company's gearing level averaged 6% and ranged between 4.7% and
7.4%, ending the half year at 5.6% (end March 2023: 5.6%).
The Company currently has a Yen 4.0 billion two-year revolving
credit facility with ING Bank. This facility has a maturity date of
December 2024, and the Manager will seek to renew or replace this
facility, at the best available terms, on expiry.
Outlook
There are, as ever, issues generating uncertainty for investors
- the risk to global growth posed by persistently higher interest
rates as well as the continued war in Ukraine and recent conflicts
in the Middle East. However, it is encouraging to see clear signs
of improvement in the Japanese economy following its, albeit
delayed, post-pandemic re-opening. The prospect of an end to
decades of deflation is equally welcome. Japan is also undergoing
significant technological and structural changes, which should
bolster growth and productivity well into the future. The country's
innovative and dynamic small cap companies are ideally placed to
thrive in this environment - they are already leading the way in a
variety of niche markets. It also seems that investors are only
just beginning to grasp the very positive impact corporate
governance reforms are likely to have on shareholder returns over
the medium to longer term.
This is a very favourable investment backdrop, and the Board is
positive about the Company's prospects. It believes that the
Investment Managers' focus on quality and growth, supported by
JPMorgan's extensive, global and Tokyo-based research resources,
means that the Company is ideally placed to identify and capitalise
on the many interesting opportunities available amongst Japan's
smaller cap businesses. We therefore share the Portfolio Managers'
confidence in the Company's ability to deliver attractive levels of
capital growth, combined with a regular income, to shareholders
over the long term.
Alexa Henderson
Chairman 1st December 2023
PORTFOLIO MANAGERS' REPORT
Performance and market review
Over the six months to September 2023, the Company
underperformed its benchmark, the MSCI Japan Small Cap Index (in
GBP terms), by 3.4 percentage points, delivering a return of -0.7%
on a net asset value (NAV) basis (in GBP terms), compared to the
benchmark return of +2.7%.
The portfolio has a quality and growth bias and focuses on
companies with strong business models that can compound earnings
growth over the long-term. Our investment strategy looks beyond
short-term market fluctuations and adopts a long-term perspective,
based on the view that excess returns take time to accumulate,
especially for smaller cap stocks.
The review period began on an optimistic note. Investors
welcomed an acceleration in efforts to improve corporate governance
(discussed further below), and rising import inflation and wage
increases raised hopes of an end to Japan's long period of
deflation. The rise in Japanese equity markets was supported by
increased interest from foreign investors. The Company's
underperformance during the reporting period mainly occurred in the
second half of the period, between July and September 2023,
particularly in September, when we saw value stocks strongly
outperform the growth stocks we favour. Value stocks rose and
growth stocks came under pressure due to an increased focus on
monetary policy, as the US Federal Reserve and the Bank of England
kept hiking rates and the Bank of Japan (BoJ) eased its
longstanding yield curve controls. Higher rates have an adverse
impact on growth stocks, as they reduce the discounted future
cashflows on which their valuations are based.
Spotlight on stocks and sectors
During the six months under review, both stock selection and
sector allocation had negative impacts on performance.
The stocks that contributed most positively to returns included
MEC, Mitsubishi HC Capital and Nippon Sanso.
-- MEC is the global leader in the niche market for advanced
adhesion enhancer products used in printed circuit boards. Its
products improve the adhesion between the wiring materials and the
insulating materials in the semiconductor package. We anticipate
that the company will enjoy revenue growth as semiconductor
miniaturisation makes further advances and usage of this technology
spreads.
-- Mitsubishi HC Capital is a leasing company with a track
record of solid execution and steady long-term earnings growth. The
company was established through a merger of Mitsubishi UFJ Lease
and Hitachi Capital, and we anticipate continued synergies within
the group.
-- Nippon Sanso is Japan's number one supplier of industrial gas
and the fourth largest in the world. We believe that industrial gas
is an attractive industry, with high barriers of entry,
increasingly consolidated market shares, strong cashflow
generation, defensiveness backed by take-or-pay models for onsite
long-term contracts, and a favourable pricing environment. Nippon
Sanso has been successfully expanding their presence both
organically and through M&A activity.
On the other hand, the largest detractors at the stock level
included Square Enix, Milbon and MISUMI.
-- Square Enix develops and publishes video game software,
including long-running titles such as Dragon Quest and Final
Fantasy. A consistently rising digital download ratio is a
favourable industry trend, as digital downloads have higher
profitability than packaged games thanks to easier distribution,
and we expect companies such as Square Enix which possess strong
intellectual property in the form of popular games to benefit.
Near-term earnings have, however, been disappointing, with weaker
than expected title sales. The new CEO is focusing on raising
profitability to improve the business's performance, and we will
monitor execution going forward.
-- Milbon is Japan's number one manufacturer of salon exclusive
hair care products. With a strong consulting sales approach, the
company has been expanding market share at home, while also growing
overseas in countries such as China and Korea. In the near-term,
rising raw material costs have dampened profitability, but our
positive assessment of Milbon's positioning, and its scope to
expand both domestically and overseas, remains unchanged.
-- MISUMI is a producer and distributor of discrete automation
components. The company's offering is unique in that it
manufactures standardised factory automation components and also
has an online distribution service which sells both its own
products and those of third parties. While the long-term outlook
for automation demand remains strong, near-term earnings have been
difficult, particularly due to weakness in the Chinese market.
With respect to sector allocation, the main positive
contributors to performance at the sector level were our
underweight position in Equity Real Estate Investment Trusts, which
is a sector that performed poorly under a tighter monetary policy
environment. The overweight position in the materials sector also
contributed positively. The most significant detractors from
relative performance included our overweight position in software
& services and our underweight position in banks. Internet
companies have continued to struggle on profit taking after a
previous period of strong performance. However, we maintain our
view that digitalisation is an area of significant growth potential
in Japan considering the still low penetration of services such as
e-commerce, digital advertising, cashless payments. We therefore
remain overweight the sector, although we have reduced the size of
the overweight, due to attractive new ideas in other sectors (see
examples in the Portfolio Positioning section). Meanwhile, banks
performed strongly following the BoJ's move to allow more
flexibility in its yield curve control policy. While any resultant
increase in interest rates is likely to be supportive for banks'
earnings, it is difficult to find any legacy banks with sustainable
long-term growth opportunities or clear competitive advantages. The
only bank stock the Company owns is Rakuten Bank, which is a
fast-growing online bank with the ability to leverage the broader
Rakuten group ecosystem to acquire new business.
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 judicious capital allocation. We believe the
strong and durable market positioning of such businesses will allow
them to substantially 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 our ability to over- and underweight stocks
relative to the benchmark, as this 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 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 Standard
(formerly named Trading) to each stock based on its fundamentals,
governance and the sustainability of its revenues over the long
term. We aim to have a high exposure to Premium and Quality
companies, and where possible, we invest from an early stage, to
benefit fully as companies realise their growth potential.
This patient approach 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 current and prospective
portfolio holdings include a broad 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 that
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 DTS, a system integration
services provider, is one instance where our engagement with a
company has resulted in considerable progress in its corporate
governance practices, including, in DTS's case, in greater board
independence and diversity and a better shareholder return
policy.
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.
The investment themes which help shape the portfolio
include:
-- Changing demographics: Japan's ageing and declining
population is creating significant challenges for Japanese
policymakers. The government is committed to tackle these issues
through regulatory reforms and greater use of technology, and this
is providing opportunities for innovative smaller companies working
to improve the quality of life for the elderly, for example, by
reducing the need for face-to-face medical consultations. The
telemedicine company, Medley, is an example of a portfolio holding
benefiting from such innovation.
-- Improving labour productivity via digitalisation: Japan's
ageing population is also leading to a contraction in labour
supply, and digitalisation is a key part of the solution to this
problem, as it raises labour productivity. The government wants to
encourage adoption of digital technology 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, a cloud services provider, and Infomart, a
business-to-business trading platform for the food industry, are
examples of holdings that benefit from this long-term trend.
-- 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,
presenting attractive investment opportunities for portfolio
companies such as MEC and C. Uyemura 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, a
specialist industrial machinery supplier, 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, a supplier of exclusive
hair products, and watchmaker Seiko, 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 enhanced
shareholder returns, the appointment of more independent, external
directors to company boards, tighter internal controls and more
transparent disclosure rules. There is, however, room for further
improvement, and we engage in constructive dialogues 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.
Positioning the portfolio for future success
Despite persistent market volatility, we have continued to
search for opportunities to purchase quality, long-term compounders
at attractive valuations. LIFEDRINK, Osaka Soda and Japan Material
are three names which we have purchased during the past six
months:
-- LIFEDRINK is a beverage company focused on private label
products for retailers. The company has a vertically integrated
business model which allows it to offer lower prices and enjoy
higher margins. We believe the company has a healthy growth runway,
as the Japanese market for private label products is still
under-developed compared to overseas markets such as US, and the
inflationary environment is ensuring strong demand, as consumers
prefer the company's lower priced items to national brands.
-- Osaka Soda is a chemical company that holds the top global
position in multiple niche product categories. The company's
biggest future growth driver is silica gel, which is used in GLP-1
obesity drugs. Osaka Soda has the largest share of the world market
and profitability on this product is very high, as the obesity drug
market is growing rapidly. Osaka Soda is currently expanding its
capacity accordingly. While capex investment for growth is likely
to be the near-term priority, and the company presently has a
stable dividend policy, its balance sheet is healthy, with a net
cash position, so there is scope for future dividend increases
which will enhance shareholder returns.
-- Japan Material provides after service to semiconductor plants
for various infrastructure such as gas, ultra-pure water and
specialty chemicals. Japan Material is the only company in Japan
that provides a 'one-stop' maintenance service, which provides
customers with savings of approximately 30% on the cost of these
services, compared to using separate contractors. We anticipate
strong demand in the mid to long-term, as there has been a
significant increase in the number of new semiconductor plants
scheduled for construction in Japan. We initiated this position in
March and have continued to add to it subsequently.
On the other hand, we sold our position in Nextage, one of
Japan's top three used car retailers. The used car retail market is
highly fragmented with room for consolidation over the long-term,
and Nextage has been quickly expanding through new store openings.
However, there have been media reports of fraudulent insurance
claims by various companies within the industry, including Nextage,
so we exited the position. We also trimmed several names, taking
some profits and adjusting position sizes as valuations became less
compelling compared to before following strong performance. This
includes on Monogatari Corp, which owns restaurant franchises,
Capcom, a gaming company and C. Uyemura, a specialist chemical
company supplying semiconductor manufacturers.
Over the review period, annualised portfolio turnover was around
31%. We maintain our bias towards quality and growth, which is
evidenced by the fact that the portfolio has a higher return on
equity (ROE) and higher growth in earnings per share (EPS) than the
overall market, while continuing to be disciplined on
valuations.
Outlook and strategy
The external environment remains uncertain, with persistent
concerns over inflation and the ramifications of tight monetary
policy, including the ongoing risk of a global recession. Japan is
also seeing signs of inflation, as the rise in commodity prices,
combined with a weaker yen, has imported inflationary pressures,
although inflation is still low compared to other major markets.
Some large corporates have announced notable wage hikes after
decades of stagnant wages growth, which is very encouraging for the
Japan economy, and the key question related to Japan's inflation
outlook is whether these pay increases will spread to mid- and
small-sized enterprises. The Bank of Japan made small adjustments
to its ultra-easy monetary policy in December 2022 and July 2023,
intended to allow rates to drift higher, and the policy direction
under the new governor will remain a focus for investors.
Another near-term support for the Japan economy, in addition to
rising wages, is the country's belated COVID reopening. Japan
reopened its borders in October 2022, and inbound tourism and
hospitality services have only resumed in recent months. The
reopening of the Chinese economy is providing additional impetus to
this rebound, not only via tourism, but also for many other
consumer and industrial companies.
Over the medium to long term, the key structural support for
Japan's equity market remains the improvement in corporate
governance. Improvements over the past few years are clear, in
large part thanks to the Corporate Governance Code introduced in
2015. In addition to steps such as the rising proportion of
independent board directors, we have seen notable increases in
dividend payments and share buybacks by some companies. These
measures have already improved shareholder returns, and with many
Japanese companies still awash with cash, we expect further
significant efforts to return cash to shareholders, and increase
investment returns accordingly. As a team, we conduct over 4000
company meetings a year, on the ground in Tokyo, and we have sensed
an acceleration in corporate reform efforts this year, particularly
after the Tokyo Stock Exchange's (TSE) initiatives announced
earlier this year. These initiatives include a requirement for
companies whose share price consistently trades below 1x price to
book to disclose a strategy to improve this. We anticipate a
broad-based improvement on the corporate governance front, not only
companies trading below book value, considering balance sheet
inefficiency is an issue seen across the market in Japan, and even
high quality companies with strong competitive positions have room
for improvement.
All of these factors, in particular the longer-term potential
for improved shareholder returns- bode well for Japanese equities.
The portfolio's exposure to several significant, very positive,
long-term structural trends should provide further impetus to
performance over the longer term.
But regardless of the economic backdrop at any point in time, we
believe it is always important to focus on good quality businesses
with leading market positions, strong cashflow generation, robust
balance sheets and the potential for structural growth. It is
reassuring to us that such companies tend to have significantly
larger cash positions, and stronger balance sheets than their peers
in other developed countries. This gives them the wherewithal to
weather any unexpected short-term fluctuations in the economic or
market environment.
Furthermore, average valuations of Japanese companies remain
attractive compared to most other major markets. And in sharp
contrast to other developed economies, Japan's smaller and more
entrepreneurial companies are at the forefront of innovation,
ideally positioned to prosper over the long term. Yet, the sell
side coverage for such exciting small and mid-cap companies tends
to be scant. We believe this gives us a considerable competitive
advantage, as our large and dedicated team of Japan equities
analysts and fund managers, on the grounds in Tokyo, is ideally
placed to discover exciting investment opportunities amongst
smaller companies, and to capitalise on the long-term structural
changes playing out in Japan.
We therefore remain confident our investment approach and
portfolio positioning will deliver positive and sustained returns
to our shareholders over the medium and long term.
Miyako Urabe
Xuming Tao
Naohiro Ozawa
Portfolio Managers 1st December 2023
INTERIM MANAGEMENT REPORT
The Company is required to make the following disclosures in its
half year report.
Principal and Emerging Risks and Uncertainties
The principal and emerging risks and uncertainties faced by the
Company have not changed and fall into the following broad
categories: investment and strategy; market; operational and cyber
crime; loss of investment team or investment managers; share price
relative to NAV per share; accounting, legal and regulatory;
political and economic; global pandemics; geopolitical instability,
climate change and artificial intelligence. Information on each of
these areas is given in the Business Review within the Annual
Report and Financial Statements for the year ended 31st March
2023.
Related Parties Transactions
During the first six months of the current financial year, no
transactions with related parties have taken place which have
materially affected the financial position or the performance of
the Company during the period.
Going Concern
The Directors believe, having considered the Company's
investment objectives, risk management policies, capital management
policies and procedures, nature of the portfolio and expenditure
projections, that the Company has adequate resources, an
appropriate financial structure and suitable management
arrangements in place to continue in operational existence for the
foreseeable future and, more specifically, that there are no
material uncertainties pertaining to the Company that would prevent
its ability to continue in such operational existence for at least
12 months from the date of the approval of this half yearly
financial report. For these reasons, they consider that there is
reasonable evidence to continue to adopt the going concern basis in
preparing the financial statements.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its
knowledge:
(i) the condensed set of financial statements contained within
the half yearly financial report has been prepared in accordance
with FRS 104 'Interim Financial Reporting' and gives a true and
fair view of the state of the affairs of the Company and of the
assets, liabilities, financial position and net return of the
Company as at 30th September 2023, as required by the FCA
Disclosure Guidance and Transparency Rule 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by DTRs 4.2.7R and 4.2.8R of the FCA
Disclosure Guidance and Transparency Rules.
In order to provide these confirmations, and in preparing these
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business;
and the Directors confirm that they have done so.
For and on behalf of the Board
Alexa Henderson
Chairman 1st December 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30th September 2023
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th September 30th September 31st March 2023
2023 2022
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
Losses on
investments
held at fair value
through
profit or loss - (3,085) (3,085) - (19,640) (19,640) - (15,007) (15,007)
Net foreign
currency
gains - 1,320 1,320 - 358 358 - 619 619
Income from
investments 1,750 - 1,750 1,993 - 1,993 4,736 41 4,777
Other interest
receivable 3 - 3 1 - 1 3 - 3
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
Gross return/(loss) 1,753 (1,765) (12) 1,994 (19,282) (17,288) 4,739 (14,347) (9,608)
Management fee (910) - (910) (939) - (939) (1,856) - (1,856)
Other
administrative
expenses (240) - (240) (262) - (262) (472) - (472)
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
Net return/(loss)
before finance
costs and taxation 603 (1,765) (1,162) 793 (19,282) (18,489) 2,411 (14,347) (11,936)
Finance costs (149) - (149) (107) - (107) (321) - (321)
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
Net return/(loss)
before taxation 454 (1,765) (1,311) 686 (19,282) (18,596) 2,090 (14,347) (12,257)
Taxation (174) - (174) (227) - (227) (500) - (500)
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
Net return/(loss)
after taxation 280 (1,765) (1,485) 459 (19,282) (18,823) 1,590 (14,347) (12,757)
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
Return/(loss) per
share (note 3) 0.51p (3.24)p (2.73)p 0.84p (35.37)p (34.53)p 2.92p (26.32)p (23.40)p
-------------------- -------- --------- -------- -------- ---------- ---------- -------- ---------- ---------
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the period. The 'Total' column of this statement is the profit
and loss account of the Company and the 'Revenue' and 'Capital'
columns represent supplementary information prepared under guidance
issued by the Association of Investment Companies.
Net return/(loss) after taxation represents the profit/(loss)
for the period/year and also Total Comprehensive Income.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Called Capital
up
share Share redemption Other Capital Revenue
capital premium reserve reserve(1,2) reserves(2) reserve(2) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
Six months ended 30th
September
2023 (Unaudited)
At 31st March 2023 5,595 33,978 1,836 262,994 (99,107) (9,274) 196,022
Net (loss)/return - - - - (1,765) 280 (1,485)
Dividends paid in the period
(note 4) - - - (3,870) - - (3,870)
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
At 30th September 2023 5,595 33,978 1,836 259,124 (100,872) (8,994) 190,667
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
Six months ended 30th
September
2022 (Unaudited)
At 31st March 2022 5,595 33,978 1,836 270,952 (84,760) (10,864) 216,737
Net (loss)/return - - - - (19,282) 459 (18,823)
Dividends paid in the period
(note 4) - - - (4,034) - - (4,034)
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
At 30th September 2022 5,595 33,978 1,836 266,918 (104,042) (10,405) 193,880
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
Year ended 31st March 2023
(Audited)
At 31st March 2022 5,595 33,978 1,836 270,952 (84,760) (10,864) 216,737
Net (loss)/return - - - - (14,347) 1,590 (12,757)
Dividends paid in the year
(note 4) - - - (7,958) - - (7,958)
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
At 31st March 2023 5,595 33,978 1,836 262,994 (99,107) (9,274) 196,022
------------------------------- -------- -------- ----------- ------------- ------------ ----------- ----------
(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.
CONDENSED STATEMENT OF FINANCIAL POSITION
At 30th September 2023
(Unaudited) (Unaudited) (Audited)
30th September 30th September 31st March
2023 2022 2023
GBP'000 GBP'000 GBP'000
---------------------------------------- --------------- --------------- -----------
Fixed assets
Investments held at fair value through
profit or loss 201,275 203,091 206,931
---------------------------------------- --------------- --------------- -----------
Current assets
Debtors 2,014 1,444 3,412
Cash and cash equivalents 5,674 9,485 7,446
---------------------------------------- --------------- --------------- -----------
7,688 10,929 10,858
Creditors: amounts falling due within
one year (18,296) (20,140) (21,767)
---------------------------------------- --------------- --------------- -----------
Net current liabilities/assets (10,608) (9,211) (10,909)
---------------------------------------- --------------- --------------- -----------
Total assets less current liabilities 190,667 193,880 196,022
---------------------------------------- --------------- --------------- -----------
Net assets 190,667 193,880 196,022
---------------------------------------- --------------- --------------- -----------
Capital and reserves
Called up share capital 5,595 5,595 5,595
Share premium 33,978 33,978 33,978
Capital redemption reserve 1,836 1,836 1,836
Other reserve 259,124 266,918 262,994
Capital reserves (100,872) (104,042) (99,107)
Revenue reserve (8,994) (10,405) (9,274)
---------------------------------------- --------------- --------------- -----------
Total shareholders' funds 190,667 193,880 196,022
---------------------------------------- --------------- --------------- -----------
Net asset value per share (note 5) 349.8p 355.7p 359.6p
---------------------------------------- --------------- --------------- -----------
CONDENSED STATEMENT OF CASH FLOWS
For the six months ended 30th September 2023
(Unaudited) (Unaudited) (Audited)
30th September 30th September 31st
March
2023 2022 (1) 2023
GBP'000 GBP'000 GBP'000
------------------------------------------------------- --------------- --------------- ----------
Cash flows from operating activities
Net loss before finance costs and taxation (1,162) (18,489) (11,936)
Adjustment for:
Net losses on investments held at fair value
through profit or loss 3,085 19,640 15,007
Net foreign currency gains (1,320) (358) (619)
Dividend income (1,750) (1,993) (4,736)
Interest income (3) (1) (3)
Realised (gain)/loss on foreign exchange transactions (560) (56) 25
Decrease in accrued income and other debtors 24 3 92
Decrease/(Increase) in accrued expenses 38 (7) 15
------------------------------------------------------- --------------- --------------- ----------
(1,648) (1,261) (2,155)
Dividends received 2,578 2,459 4,355
Interest received 3 1 3
Overseas tax paid (174) (200) (473)
------------------------------------------------------- --------------- --------------- ----------
Net cash inflow from operating activities 759 999 1,730
------------------------------------------------------- --------------- --------------- ----------
Purchases of investments (35,705) (26,071) (46,467)
Sales of investments 37,193 33,372 55,328
Settlement of foreign currency contracts - 5 -
------------------------------------------------------- --------------- --------------- ----------
Net cash inflow from investing activities 1,488 7,306 8,861
------------------------------------------------------- --------------- --------------- ----------
Dividends paid (3,870) (4,034) (7,958)
Repayment of bank loan - (4,844) (4,844)
Interest paid (152) (113) (340)
------------------------------------------------------- --------------- --------------- ----------
Net cash outflow from financing activities (4,022) (8,991) (13,142)
------------------------------------------------------- --------------- --------------- ----------
Cash and cash equivalents at start of period/year 7,446 10,143 10,143
Exchange movements 3 28 (146)
------------------------------------------------------- --------------- --------------- ----------
Cash and cash equivalents at end of period/year 5,674 9,485 7,446
------------------------------------------------------- --------------- --------------- ----------
Decrease in cash and cash equivalents (1,775) (686) (2,551)
------------------------------------------------------- --------------- --------------- ----------
Cash and cash equivalents consist of:
Cash and short term deposits 5,674 9,485 7,446
------------------------------------------------------- --------------- --------------- ----------
Total 5,674 9,485 7,446
------------------------------------------------------- --------------- --------------- ----------
(1) The presentation of the Cash Flow Statement, as permitted
under FRS 102, has been changed so as to present the reconciliation
of 'net return/(loss) before finance costs and taxation' to 'net
cash inflow used in operating activities' on the face of the Cash
Flow Statement. Previously, this was shown by way of note. Interest
paid has also been reclassified to financing activities, previously
shown under operating activities, as this relates to the loans
drawndown. Other than consequential changes in presentation of the
certain cash flow items, there is no change to the cash flows as
presented in previous periods.
Analysis of change in net debt
As at As at
31st March Exchange 30th September
2023 Cash flows movement 2023
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- ----------- ----------- --------- ---------------
Cash and cash equivalents
Cash 7,446 (1,775) 3 5,674
--------------------------- ----------- ----------- --------- ---------------
7,446 (1,775) 3 5,674
Borrowings
Debt due within one year (19,446) - 1,877 (17,569)
--------------------------- ----------- ----------- --------- ---------------
(19,446) - 1,877 (17,569)
--------------------------- ----------- ----------- --------- ---------------
Net debt (12,000) (1,775) 1,880 (11,895)
--------------------------- ----------- ----------- --------- ---------------
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 30th September 2023
1. Financial statements
The information contained within the condensed financial
statements in this half year report has not been audited or
reviewed by the Company's auditors.
The figures and financial information for the year ended 31st
March 2023 are extracted from the latest published financial
statements of the Company and do not constitute statutory accounts
for that year. Those financial statements have been delivered to
the Registrar of Companies, including the report of the auditors
which was unqualified and did not contain a statement under either
section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The condensed financial statements have been prepared in
accordance with the Companies Act 2006, FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland' of
the United Kingdom Generally Accepted Accounting Practice ('UK
GAAP') and with the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' (the revised 'SORP') issued by the Association of
Investment Companies in July 2022.
FRS 104, 'Interim Financial Reporting', issued by the Financial
Reporting Council ('FRC') in March 2015 has been applied in
preparing this condensed set of financial statements for the six
months ended 30th September 2023.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of
financial statements are consistent with those applied in the
financial statements for the year ended 31st March 2023.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th September 30th September 31st March
2023 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------- ----------------- ----------------- -----------
Return per Ordinary share
is based on the following:
Revenue return 280 459 1,590
Capital loss (1,765) (19,282) (14,347)
--------------------------------- ----------------- ----------------- -----------
Total loss (1,485) (18,823) (12,757)
--------------------------------- ----------------- ----------------- -----------
Weighted average number of
shares in issue during the
period/year (excluding Treasury
shares) 54,510,339 54,510,339 54,510,339
Revenue return per share 0.51p 0.84p 2.92p
Capital loss per share (3.24)p (35.37)p (26.32)p
--------------------------------- ----------------- ----------------- -----------
Total loss per share (2.73)p (34.53)p (23.40)p
--------------------------------- ----------------- ----------------- -----------
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th September 30th September 31st March
2023 2022 2023
GBP'000 GBP'000 GBP'000
-------------------------------- ----------------- ----------------- -----------
2023 fourth quarterly dividend
of 3.6p (2022: 4.0p) 1,962 2,180 2,180
2024 first quarterly dividend
of 3.5p (2023: 3.4p) 1,908 1,854 1,854
2023 second quarterly dividend
of 3.6p (2022: 5.8p) - - 1,962
2023 third quarterly dividend
of 3.6p (2022: 5.0p) - - 1,962
-------------------------------- ----------------- ----------------- -----------
Total dividends paid 3,870 4,034 7,958
-------------------------------- ----------------- ----------------- -----------
The dividend paid in the period has been funded from the other
reserve.
A second quarterly dividend of 3.5p (2023: 3.6p) per share,
amounting to GBP1,907,199 (2023: GBP1,962,372) has been declared
payable in respect of the year ending 31st March 2024. It was paid
on 17th November 2023 to shareholders on the register at the close
of business on 20th October 2023.
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th September 30th September 31st March
2023 2022 2023
Net assets (GBP'000) 190,667 193,880 196,022
Number of shares in issue 54,510,339 54,510,339 54,510,339
--------------------------- ----------------- ----------------- -----------
Net asset value per share 349.8p 355.7p 359.6p
--------------------------- ----------------- ----------------- -----------
6. Fair valuation of instruments
The fair value hierarchy analysis for financial instruments held
at fair value at the period end is as follows:
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th September 30th September 2022 31st March 2023
2023
Assets Liabilities Assets Liabilities Assets Liabilities
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- ------------ -------- ------------ -------- ------------
Level 1 201,275 - 203,091 - 206,931 -
---------------------------- -------- ------------ -------- ------------ -------- ------------
Total value of instruments 201,275 - 203,091 - 206,931 -
---------------------------- -------- ------------ -------- ------------ -------- ------------
JPMORGAN FUNDS LIMITED
1st December 2023
For further information, please contact:
Divya Amin
For and on behalf of
JPMorgan Funds Limited
0800 20 40 20 or +44 1268 44 44 70
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
ENDS
A copy of the half year will be submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
The half year report will also shortly be available on the
Company's website at www.jpmjapansmallercompanies.co.uk where up to
date information on the Company, including daily NAV and share
prices, factsheets and portfolio information can also be found.
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END
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