TIDMJPS TIDMJPSS
RNS Number : 8080C
JPMorgan Japan Smaller Co Tst PLC
19 June 2019
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPAN SMALLER COMPANIES TRUST PLC
FINAL RESULTS FOR THE YEARED 31st MARCH 2019
Legal Entity Identifier: 549300KP3CRHPQ4RF811
Information disclosed in accordance with DTR 4.2.2
CHAIRMAN'S STATEMENT
Dear Shareholders,
This is my first report to you as Chairman following the
retirement of Alan Clifton after our Annual General Meeting ('AGM')
held in July last year.
Investment Performance
The Company's total return on net assets for the year ended 31st
March 2019 was -7.9%, compared with -7.3% returned by the
benchmark. The total return to ordinary shareholders was -8.9%,
reflecting a slight widening of the share price discount to net
asset value from 11.6% at the beginning of the financial year to
12.8% at 31st March 2019.
After starting the year with a sense of optimism, Japanese
equity markets experienced significant volatility during the
financial year as macro-economic and political concerns, including
the US-China trade dispute, intensified globally.
The long-term performance of the Company continues to be strong
with both the net asset value and share price having outperformed
the benchmark over three and five years.
In their report, the Investment Managers have provided further
details on portfolio management, performance and attribution,
together with a commentary on markets.
Dividends Policy and Discount Management
The Company implemented a new dividend policy with effect from
1st April 2018, under which the Company aims to pay, in the absence
of unforeseen circumstances, a regular quarterly 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. These dividends are paid from a combination of the revenue,
capital and other reserves. In respect of the quarters to 30th June
2018, 30th September 2018, 31st December 2018 and 31st March 2019,
dividends of 4.9p, 4.9p, 3.9p and 4.3p per share respectively were
declared. This totalled 18.0p per share for the year, amounting to
4.5% of average share price for the year and 4.2% of average NAV
over the year.
It is important for investors to note that there has been no
change in the Company's investment policy, or in the Investment
Managers' approach to investment or the benchmark as a result of
the new dividend policy.
Since the introduction of the new dividend policy, it is
pleasing to note some narrowing of the Company's discount rate
driven by new demand and positive press commentary. Following the
Company's year end, the discount levels have narrowed further. The
Board will keep the dividend policy, as well as its expected
positive impact on both demand for the Company's shares and the
discount level, under constant review. The Board may also use share
buy-backs alongside the new dividend policy. It is expected that a
combination of a higher yield and the use of buy-backs will be
effective over time in tightening the discount at which your
Company's shares trade. At the time of writing, the discount level
was 11.6%.
A Resolution to approve the Company's dividend policy will be
put to shareholders at the forthcoming Annual General Meeting.
Fund Managers
Eiji Saito, who is responsible for the management of all mid-
and small-cap Japanese funds, including the investments in your
portfolio, is assisted by Naohiro Ozawa and Michiko Sakai. Shoichi
Mizusawa, who leads the Japanese research and investment management
team of over twenty people in Tokyo, continues to have oversight of
the Company's investments, but is not involved in the day-to-day
investments decisions and is therefore no longer shown in this
respect.
Gearing and Borrowing
Gearing is regularly discussed between the Board and the
Investment Managers and its level is reviewed by the Directors at
each Board meeting.
The Company has in place a two-year revolving floating rate loan
of Yen 4.0 billion with Scotiabank until October 2019 at which time
it will be reviewed and replaced as appropriate. The credit
facility is flexible and provides the Investment Managers with the
ability to gear tactically. The Company's investment policy permits
gearing within a range of 10% net cash to 25% geared. However, the
Board requires the Investment Managers, in normal market
conditions, to operate in the range of 5% cash to 15% geared.
During the year, the Company's gearing level ranged between
10.6% and 3.9%, and finished the financial year at 7.9%.
The Board
Having had the privilege of serving as a director of the Company
since 2008 and of chairing the Board since July 2018, I sadly and
very reluctantly, due to health reasons, plan to retire from the
Board at the conclusion of the forthcoming AGM on 29th July 2019. I
am pleased to inform you that Alexa Henderson has agreed to replace
me as chairman of the Board and of the Nomination Committee when I
step down. I am delighted that Martin Shenfield and Tom Walker will
be joining the Board immediately after the AGM as the result of a
recruitment process that involved an independent consultant to
identify candidates. Both Martin and Tom bring a wealth of
experience and different skill sets, and I am sure they will make a
strong contribution to the Board. Tom will replace Alexa as
chairman of the Audit Committee. Following the AGM the Board will
consist of five non-executive directors and will continue to have
an appropriate balance of skills and diversity.
It has been a pleasure to serve on this Company's Board and I
would like to thank my Board colleagues for all their help and
support over the years. I should like to thank all shareholders for
supporting the Board over the period during which I have been
involved. The Board's top priority continues to be to deliver the
best possible returns for shareholders and I wish my colleagues
every success in the future.
Annual General Meeting
My fellow Directors and I invite you to attend the Company's AGM
which will be held at 60 Victoria Embankment, London EC4Y 0JP on
29th July 2019 at 11.30 a.m. An investment presentation will be
made at the meeting by the Investment Managers via telepresence.
There will be an opportunity for shareholders to meet the Board and
representatives of JPMorgan after the meeting. I look forward to
welcoming as many of you as possible to this meeting.
If you have any detailed or technical questions, please submit
these in advance of the meeting in writing, or via the Company's
website, to the Company Secretary whose contact details are shown
on page 79 of the annual report. Shareholders who are unable to
attend the AGM are encouraged to use their proxy votes. Proxy votes
may be lodged electronically, whether shares are held through CREST
or in certificate form, and full details are set out on the form of
proxy.
Outlook
Whilst global economic growth is slowing and earnings
expectations are being downgraded, the Investment Managers expect a
slow down rather than a recession. Valuations of Japanese equities
are low by historic levels, as well as relative to other major
markets. On the policy front, Japan continues to make progress in
corporate governance, employment laws, free trade and in improving
relationships with many countries. Mr Shinzo Abe is likely to
become Japan's longest serving prime minister since the birth of
Japan's parliamentary system in the 1880s, providing a period of
stability which is in contrast to the situation in many other
countries. The positive corporate governance story in Japan
continues to develop and this increasingly looks structural in
nature. The market is likely to reward companies with improving
governance policies overall, including areas such as shareholder
returns, board structure and disclosure.
It is encouraging to note that the fundamental outlook for
Japanese smaller companies remains positive despite some of Japan's
key structural challenges, particularly demographics. The Company's
Tokyo-based research and portfolio management team has been able in
the past number of years to identify attractive Japanese smaller
companies with strong growth potential, healthy balance sheets and
attractive cash generation prospects. The Board believes that this
approach will continue to serve the Company's shareholders well
over the medium and longer term.
Robert White
Chairman
19th June 2019
INVESTMENT MANAGERS' REPORT
Market Review
Over the twelve months to March 2019, the Company's benchmark,
the Standard & Poor's Japan SmallCap NR (in sterling terms),
produced in sterling terms a total return of -7.3%. The Company's
net assets underperformed the index by 0.6 percentage points over
the same period, delivering a total return of -7.9%. The Company's
share price performance is ahead of the benchmark by 0.4 percentage
points per annum over three years and by 3.1 percentage points per
annum over five years.
The Japanese stock market as a whole experienced a volatile year
and ended the period with a negative return, principally driven by
weakness during calendar Q4 2018. A major source of this volatility
was US-China trade friction and associated concerns about the
outlook for global growth. During the same quarter, the Japanese
yen declined against the US dollar. This provided some support to
Japanese equity prices, particularly those with overseas
earnings.
Investment Philosophy
We aim to invest in companies that we believe will be able to
compound earnings growth over the long term, supported by
sustainable competitive advantages and good management teams. While
it is possible, even likely, that they may face occasional
short-term setbacks caused by either wider economic issues or more
company-specific challenges, we believe their strong and durable
competitive positions will allow them to substantially increase
their intrinsic value over the long term. Companies exhibiting
these attributes combine to form a portfolio with a bias towards
quality and growth. At the aggregate level, the companies in which
we have invested have returns on equity considerably above the
benchmark, with significantly lower leverage. Their historic
earnings growth has been faster than that of the benchmark and we
expect these portfolio attributes to endure.
Our research process is conducted in Tokyo by a team of over 20
investment professionals. Many stocks in Japan have little or no
third-party research coverage, particularly mid-and
smaller-capitalisation stocks. We have internal resources that
allow us to identify investment opportunities in areas of the
market which are generally under-researched and are therefore
potentially under-appreciated by many market participants.
Investing Responsibly
An increasingly broad spectrum of investors now rightly focus
not simply on return, risk and investment process issues but also
on Environmental, Social and Governance ('ESG') considerations for
their portfolios. They want to know that: their investment managers
are aware of these concerns; they take them into account in
building their portfolios; and they raise matters directly with
investee companies. Simplistic negative or positive screening has
dwindled in popularity. Investors expect to see an integrated
approach to ESG and that this approach is clearly linked to driving
financial returns, both through portfolio construction and
stewardship.
JPMorgan has long been a leader in using such an Integrated
Approach and believes that this has particular relevance in Japan,
where widespread shareholder engagement is a more recent phenomenon
but where, equally, it is beginning to prove effective.
We believe that ESG factors, particularly those related to
governance, can play a critical role in a long-term investment
strategy. Companies that address ESG issues and adopt sustainable
business practices are better placed to maximise their performance
and create enduring value for shareholders.
In our view, corporate governance considerations have the most
direct bearing on the risk/reward profile of the Company's
portfolio; as such it is the area most integrated into our
investment process. However, environmental concerns are an
ever-increasing part of the investment landscape in part due to the
impact they can have on investment returns and cash flows; where
relevant we make an assessment of environmental issues and include
them in our decision-making process. Where social issues are
relevant, again the focus is on the economic impact of the
involvement.
We seek to identify investee companies that run their businesses
in a sustainable and efficient way, with high-quality board
decision-making, and aim to influence their behaviour and encourage
best practice through dialogue. While we are always focused on
efficient capital use and structures we have engaged broadly on
multiple topics that affect valuation and propriety. The
introduction of the Stewardship and Corporate Governance Codes has
led to greater willingness on the part of a number of companies to
engage.
We use an active bottom-up process, with emphasis placed on
direct contact with companies. ESG factors are systematically and
explicitly considered during the investment decision-making
process, with a risk profile analysis undertaken on the economics,
duration (which includes sustainability) and governance of a
company, to ensure that there is due focus on potential risks.
Our commitment to sustainable investing extends beyond the
initial investment, as we incorporate ESG issues into our ownership
policies and practices. The following are examples of topics
discussed during recent engagements:
Environmental - Clean Energy/Carbon Emissions
We have requested that a company publicly disclose its
greenhouse gas reduction target, like many of its global peers.
This will help independent parties to monitor and to track progress
of CO(2) reduction.
Social - Cyber Security
Upon our request, one company for example delivered a
satisfactory plan detailing their policies and actions taken toward
cyber security and data privacy protection.
Governance - Board Structure
After numerous exchanges with one company with global
operations, we welcomed its management's decision to appoint two
new foreign directors to the board. We believe that having external
and independent directors on the board is essential.
In addition to engaging in meaningful interaction with investee
companies through dedicated meetings, we vote in a prudent and
diligent manner, and in the financial interests of our clients. The
highest percentage of our votes against management were on income
allocation, director and statutory auditor elections (primarily due
to independence concerns) and director remuneration, where the
increase is significant or there is no compensation committee.
Investment Themes
While our decisions are based on company-specific factors, there
are also structural, long-term trends and themes that underlie much
of our stock selection. These trends include changing demographics,
technological innovation, and international trade and tourism.
Japan faces slowing economic growth due to ageing demographics.
This presents opportunities for Japanese companies that are working
to improve the quality of life for an ageing population. Although
Japanese companies are often by nature conservative, driven by the
tightening labour market, many are having to pursue technological
innovation and the beneficial productivity opportunities available
from adopting such technology. Despite Japan being an advanced
industrial economy, certain areas such as financial services and
payments lag behind many other markets in terms of technological
sophistication. This is creating all kinds of opportunities for
innovative Japanese companies. Supporting innovation and
efficiency, Japanese manufacturing is world class and Japan is a
leading supplier of factory automation equipment and robots.
Operating beyond Japan's shores, companies are also in a very
strong position to capture the benefits of the dynamic economic
growth across Asia which is creating new customers for Japanese
goods, services and brands. Japanese products are often recognised
as high quality and are widely embedded in regional supply
chains.
Another important dynamic operating in Japan over past years has
been the improvement in corporate governance, which began with the
adoption of a stewardship code, followed by a corporate governance
code. This has resulted in steady increases in both stock dividends
and share buybacks and a rise in the number of independent outside
directors serving on company boards, leading to an increase in the
number of companies specifying return on equity and/or asset
targets. Although the pace of change is gradual, we observe that
compliance with the governance code is steadily growing. We
continue to engage with companies in order to establish and
maintain a constructive dialogue in this area.
Government policies have also been supportive, recognising as
they do the need to pursue reforms aimed at improving labour
productivity in the face of a declining workforce. The significant
rise in the female employment participation rate is a key indicator
and, remarkably, this is now higher than in the United States. The
stable political environment has also led to the adoption of
policies to reform work style and corporate governance and to
encourage inbound tourism. Against this backdrop we remain very
positive that the Japanese stock market can continue to offer a
wealth of opportunities in small- and mid-capitalisation
stocks.
Performance Review
During the 12 months under review not one of the three key
drivers of performance stood out. That being said, the Company's
gearing modestly detracted from performance. A positive level of
gearing was maintained throughout the year, leading to a negative
performance impact in a declining market. Stock selection and
sector allocation in aggregate had a small positive impact.
Stocks that contributed most positively include Bengo4.com,
which was one of the largest new purchases during the period,
Benefit One, and RAKSUL. These companies all performed well thanks
to strong earnings growth supported by a tight labour market and
the increasing use of online services designed to improve workforce
productivity in Japan.
PERFORMANCE ATTRIBUTION
YEARED 31ST MARCH 2019
% %
-------------------------------- ----- -----
Contributions to total returns
-------------------------------- ----- -----
Benchmark return -7.3
-------------------------------- ----- -----
Asset allocation -0.4
-------------------------------- ----- -----
Stock selection +1.6
-------------------------------- ----- -----
Gearing/cash effect -0.7
-------------------------------- ----- -----
Return relevant to Benchmark +0.5
-------------------------------- ----- -----
Portfolio return -6.8
-------------------------------- ----- -----
Management fee/other expenses -1.1
-------------------------------- ----- -----
Return on net assets(A) -7.9
-------------------------------- ----- -----
Return to shareholders(A) -8.9
-------------------------------- ----- -----
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 75 and 76 of
the annual report.
-- Bengo4.com operates an online legal consulting service. As
the most popular website in the legal sector, with nearly 11
million users, Bengo4.com is an attractive marketing tool for
lawyers. The company also runs a website called Zeiri4.com, which
offers similar services for tax accountants, and has a business
called CloudSign, a cloud-based service that shifts contract
paperwork to digital format, reducing time, paper and postal
charges.
-- Benefit One manages fringe benefit programs on behalf of
employers. With a shrinking and ageing population, the incentive
for companies to improve benefits for their employees will increase
as competition for labour rises. Work style reform, which pursues
equal pay for equal work amongst other things, will also drive
fringe benefit growth.
-- RAKSUL operates two resource sharing platform services called
'Raksul', a print sharing platform, and 'Hacobell', a logistics
sharing platform. Online representation by both the printing and
trucking industries is still low. We believe the company has huge
growth potential as it offers companies the opportunity to cut
costs by utilising and matching excess capacity through
internet-based platforms.
SUMCO, RS Technologies and Taiyo Yuden were among stocks that
contributed negatively to relative performance. Semiconductor and
technology hardware companies such as these underperformed due to
concerns over the US-China trade war and over current levels of
stock held by manufacturers. We believe demands for semiconductor
and electronics parts will grow in response to innovation entailing
increased use of technology in the automotive industry and the
emerging 'internet-of-things'. We have, therefore, kept these
holdings in the face of short-term headwinds.
With respect to sector allocation, top contributors include
software & services (overweight), and top detractors include
semiconductors & semiconductor equipment (overweight).
Portfolio Activity
The Company maintained its focus on stocks that we believe will
be able to compound earnings growth over the long term, supported
by strong management teams and healthy cash flow. We avoided stocks
that have no clear differentiation and operate in industries
plagued by excess supply. Many stocks in the financial services and
real estate sectors fall into this category.
For the period, the portfolio's largest overweight positions
were in the information technology and communication services
sectors. We maintained our higher weighting in them, favouring
companies with high earnings growth potential.
Three of the largest purchases were Taiyo Yuden, Mercari, and
Bengo4.com. We expect these stocks to benefit from technological
innovation in the automotive and retail industries, and also from a
tighter labour market which will increase internet usage in
Japan.
-- Taiyo Yuden manufactures large-size multi-layer ceramic
capacitors (MLCC). The automotive industry is in the middle of a
significant technological innovation cycle related to 'connected'
cars (those that use mobile internet technology), autonomous
driving, shared services and electric vehicles, which will
translate into huge potential markets for MLCC manufacturers.
-- Mercari operates the largest consumer-to-consumer (C2C)
market place in Japan. It recently launched a mobile-based service,
and we believe the company has significant further potential as the
C2C market grows. A further source of growth comes from the
company's efforts to broaden its offering through a new payment
service called Merpay.
-- Bengo4.com is described above.
Three of our largest divestments were Sanwa Holdings, Yamabiko,
and Nippon Shinyaku. We sold Sanwa Holdings as we now believe it
will take longer than expected to improve margins in its US
subsidiary, ODC, which manufactures speciality doors. We liquidated
our holding in Yamabiko in response to emerging tough competition
in battery outdoor power equipment products, a key area in which it
operates. Nippon Shinyaku is a mid-sized pharmaceutical company
which develops drugs for 'orphan' diseases such as chenne Muscular
Dystrophy (DMD). We sold it as we consider an experimental gene
therapy for DMD, developed by a US pharmaceutical company, risks
posing a serious threat to Nippon Shinyaku in the long term.
Over the period, the portfolio turnover was 22%. The overall
shape of the portfolio has not changed significantly, and we
maintain a bias towards quality and growth, higher than average ROE
and EPS growth. The Company's gearing level was increased from 6.3%
to 7.9%.
Outlook
Valuations of Japanese companies are lower than historical
averages and below those of most major markets. Many economies
around the world have seen steady growth over recent years and we
believe that the global economic backdrop remains broadly positive.
Japanese companies are sensitive to economic cycles in overseas
markets and, although we do not expect a recession, a failure to
achieve a positive outcome for the current range of trade issues
would pose a headwind.
The fundamental outlook for Japanese smaller companies remains
positive, and we see no shortage of exciting investment
opportunities. As symbolised by the new Imperial era named Reiwa
(beautiful harmony) which began on 1st May Japan is seeking to
achieve sustainable and broadly-based growth thanks to reforms to
tackle threats such as the declining size of its population.
Japan's key structural challenge presents significant
opportunities, especially for smaller companies. The Company
maintains its focus on investing in businesses with strong growth
potential, solid balance sheets and strong cash generation, across
a diverse range of industries.
We remain mindful that the current economic cycle is maturing,
but believe that the global financial and business environment is
healthy and not showing imminent signs of a broader slowdown. We
also believe that by focusing on companies with leading market
positions, strong balance sheets and healthy cash generation, the
Company is well positioned to benefit from the secular trends in
Japan as well as weathering potential short-term changes in
sentiment driven by trade policies or other shorter-term economic
indicators.
Eiji Saito
Naohiro Ozawa
Michiko Sakai
Investment Managers
19th June 2019
Principal Risks
The Directors confirm that they have carried out a robust
assessment of the principal risks facing the Company, including
those that would threaten its business model, future performance,
solvency or liquidity. The principal risks and how they are being
managed or mitigated are summarised as follows:
-- Operational and Cyber Crime
Disruption to, or failure of, the Manager's accounting, dealing
or payments systems or the depositary's or custodian's records
could prevent accurate reporting and monitoring of the Company's
financial position. Details of how the Board monitors the services
provided by the Manager and its associates and the key elements
designed to provide effective internal control are included within
the Risk Management and Internal Control section of the Corporate
Governance report on pages 30 and 31.
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 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 on every six months against the
AAF Standard.
-- Investment Underperformance and Strategy
An inappropriate investment strategy, for example asset
allocation or the level of gearing, may lead to underperformance
against the Company's benchmark index and peer companies, resulting
in the Company's shares trading on a wider discount. The Board
manages these risks by diversification of investments through its
investment restrictions and guidelines which are monitored and
regularly reported on by the Manager. The Manager provides the
Directors with timely and accurate management information,
including performance data and attribution analyses, revenue
estimates, liquidity reports and shareholder analyses.
The Board monitors the implementation and results of the
investment process with the Investment Managers, who attend all
Board meetings, and reviews data which show statistical measures of
the Company's risk profile. The Investment Managers employ the
Company's gearing within a strategic range set by the Board. The
Board holds a separate meeting devoted to strategy each year.
-- Loss of Investment Team or Investment Manager
Loss of key staff by the Manager, such as the Investment
Managers, could affect the performance of the Company. The Manager
takes steps to reduce the likelihood of such an event by ensuring
appropriate succession planning and the adoption of a team based
approach.
-- Share Price Relative to Net Asset Value ('NAV') per Share
If the share price of an investment trust is lower than the NAV
per share, the shares are said to be trading at a discount.
Throughout the year ended 31st March 2019, the Company's shares
traded at a discount. The Board monitors the Company's discount
level and, although the rating largely depends upon the relative
attractiveness of the portfolio, the Board will seek to address
imbalances in the supply and demand of the Company's shares through
a programme of share issuance and buybacks.
-- Political and Regulatory
Changes in financial or tax legislation, including in Japan and
the UK 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.
In addition, the Company is subject to political risks, such as
the imposition of restrictions on the free movement of capital. The
Company is therefore at risk from changes to the regulatory,
legislative and taxation framework within which it operates,
whether such changes were designed to affect it or not. The Board
will continue to keep under review the impact of the UK's decision
to leave the European Union. The negotiations between the UK and
European Union are likely to introduce further currency volatility
which may impact portfolio returns.
-- Financial
The financial risks faced by the Company include market risk
(comprising currency risk, interest rate risk and other price
risk), liquidity risk, credit risk and the failure of any
counterparty. Further details are disclosed in note 22 on pages 62
to 67 of the annual report.
Transactions with related parties
Full details of Directors' remuneration and shareholdings can be
found on pages 36 and 37 and in note 6 on page 55 of the annual
report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and
applicable law). Under company law the Directors must not approve
the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period. In preparing the
financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable United Kingdom Accounting Standards,
comprising FRS 102, have been followed, subject to any material
departures disclosed and explained in the financial statements;
-- make judgements and accounting estimates that are reasonable and prudent; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
and the Directors confirm that they have done so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements and the Directors' Remuneration Report
comply with the Companies Act 2006.
The Directors are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also
responsible for preparing a Strategic Report, a Directors' Report
and Directors' Remuneration Report that comply with the law and
those regulations.
Each of the Directors, whose names and functions are listed in
Directors' Report confirm that, to the best of their knowledge:
-- the Company's financial statements, which have been prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
'The Financial Reporting Standard applicable in the UK and Republic
of Ireland', and applicable law), give a true and fair view of the
assets, liabilities, financial position and profit of the Company;
and
-- the Directors' Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
For and on behalf of the Board
Deborah Guthrie
Director
19th June 2019
Statement of Comprehensive income
FOR THE YEARED 31ST MARCH 2019
2019 2018
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 - (20,917) (20,917) - 55,519 55,519
Net foreign currency (losses)/gains - (530) (530) - 1,224 1,224
Income from investments 4,007 - 4,007 3,735 - 3,735
-------------------------------------------- -------- ---------- --------- -------- -------- --------
Gross return/(loss) 4,007 (21,447) (17,440) 3,735 56,743 60,478
Management fee (2,294) - (2,294) (2,199) - (2,199)
Other administrative expenses (426) - (426) (415) - (415)
-------------------------------------------- -------- ---------- --------- -------- -------- --------
Net return/(loss) before finance costs
and taxation 1,287 (21,447) (20,160) 1,121 56,743 57,864
Finance costs (220) - (220) (170) - (170)
-------------------------------------------- -------- ---------- --------- -------- -------- --------
Net return/(loss) before taxation 1,067 (21,447) (20,380) 951 56,743 57,694
Taxation (389) - (389) (373) - (373)
-------------------------------------------- -------- ---------- --------- -------- -------- --------
Net return/(loss) after taxation 678 (21,447) (20,769) 578 56,743 57,321
-------------------------------------------- -------- ---------- --------- -------- -------- --------
Return/(loss) per share (note 2) 1.24p (39.35)p (38.11)p 1.06p 103.70p 104.76p
statement of changes in equity
FOR THE YEARED 31ST MARCH 2019
Called
up Capital
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
---------------------- -------- -------- ----------- ------------- ------------ ----------- ---------
At 31st March 2017 5,595 33,978 1,836 313,004 (133,782) (12,835) 207,796
Repurchase of shares
into Treasury - - - (1,767) - - (1,767)
Net return for the
year - - - - 56,743 578 57,321
---------------------- -------- -------- ----------- ------------- ------------ ----------- ---------
At 31st March 2018 5,595 33,978 1,836 311,237 (77,039) (12,257) 263,350
Share transaction
expense(3) - - - (3) - - (3)
Net (loss)/return
for the year - - - - (21,447) 678 (20,769)
Dividends paid in
the year (note 3) - - - (7,468) - - (7,468)
---------------------- -------- -------- ----------- ------------- ------------ ----------- ---------
At 31st March 2019 5,595 33,978 1,836 303,766 (98,486) (11,579) 235,110
---------------------- -------- -------- ----------- ------------- ------------ ----------- ---------
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.
3 Stamp duty on shares repurchased into Treasury on 29th March
2018.
statement of financial position
AT 31ST MARCH 2019
2019 2018
GBP'000 GBP'000
--------------------------------------------------------- --------- ---------
Fixed assets
Investments held at fair value through profit or loss 253,585 279,946
--------------------------------------------------------- --------- ---------
Current assets
Debtors 1,786 1,898
Cash and cash equivalents 10,343 9,117
--------------------------------------------------------- --------- ---------
12,129 11,015
Creditors: amounts falling due within one year (30,604) (799)
--------------------------------------------------------- --------- ---------
Net current (liabilities)/assets (18,475) 10,216
--------------------------------------------------------- --------- ---------
Total assets less current liabilities 235,110 290,162
Creditors: amounts falling due after more than one year - (26,812)
--------------------------------------------------------- --------- ---------
Net assets 235,110 263,350
--------------------------------------------------------- --------- ---------
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 303,766 311,237
Capital reserves (98,486) (77,039)
Revenue reserve (11,579) (12,257)
--------------------------------------------------------- --------- ---------
Total shareholders' funds 235,110 263,350
--------------------------------------------------------- --------- ---------
Net asset value per share (note 4) 431.3p 483.1p
statement of cash flows
FOR THE YEARED 31ST MARCH 2019
2019 2018
GBP'000 GBP'000
---------------------------------------------------------------- --------- ---------
Net cash outflow from operations before dividends and interest (2,694) (2,206)
Dividends received 3,465 3,200
Interest paid (222) (154)
---------------------------------------------------------------- --------- ---------
Net cash inflow from operating activities 549 840
---------------------------------------------------------------- --------- ---------
Purchases of investments (61,376) (55,664)
Sales of investments 69,840 49,966
Settlement of foreign currency contracts 30 27
---------------------------------------------------------------- --------- ---------
Net cash inflow/(outflow) from investing activities 8,494 (5,671)
---------------------------------------------------------------- --------- ---------
Dividends paid (7,468) -
Repurchase of shares into Treasury (469) (1,301)
Drawdown of bank loan - 10,385
---------------------------------------------------------------- --------- ---------
Net cash (outflow)/inflow from financing activities (7,937) 9,084
---------------------------------------------------------------- --------- ---------
Increase in cash and cash equivalents 1,106 4,253
---------------------------------------------------------------- --------- ---------
Cash and cash equivalents at start of year 9,117 4,895
Exchange movements 120 (31)
Cash and cash equivalents at end of year 10,343 9,117
---------------------------------------------------------------- --------- ---------
Increase in cash and cash equivalents 1,106 4,253
---------------------------------------------------------------- --------- ---------
Cash and cash equivalents consist of:
Cash and short term deposits 10,343 9,117
---------------------------------------------------------------- --------- ---------
Total 10,343 9,117
---------------------------------------------------------------- --------- ---------
Notes to the financial statements
for the year ended 31st march 2019
1. Accounting policies
Basis of accounting
The financial statements are prepared in accordance with the
Companies Act 2006, United Kingdom Generally Accepted Accounting
Practice ('UK GAAP'), including FRS 102 'The Financial Reporting
Standard applicable in the UK and Republic of Ireland' and with the
Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (the 'SORP')
issued by the Association of Investment Companies in November 2014
and updated in February 2018.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern
basis. The disclosures on going concern on page 33 of the annual
report form part of these financial statements.
The policies applied in these financial statements are
consistent with those applied in the preceding year.
2. Return/(loss) per share
2019 2018
GBP'000 GBP'000
------------------------------------------------------------------------- ----------- -----------
Return per share is based on the following:
Revenue return 678 578
Capital (loss)/return (21,447) 56,743
------------------------------------------------------------------------- ----------- -----------
Total (loss)/return (20,769) 57,321
------------------------------------------------------------------------- ----------- -----------
Weighted average number of shares in issue during the year used for the
purpose of the calculation 54,510,339 54,717,778
Revenue return per share 1.24p 1.06p
Capital (loss)/return per share (39.35)p 103.70p
------------------------------------------------------------------------- ----------- -----------
Total (loss)/return per share (38.11)p 104.76p
------------------------------------------------------------------------- ----------- -----------
3. Dividends
(a) Dividends paid and declared
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------------------------- -------- --------
Dividends paid
First quarterly dividend of 4.9p (2018: 0.0p) paid to shareholders in August 2,671 -
Second quarterly dividend of 4.9p (2018: 0.0p) paid to shareholders in November 2,671 -
Third quarterly dividend of 3.9p (2018: 0.0p) paid to shareholders in February 2,126 -
-------------------------------------------------------------------------------- -------- --------
Total dividends paid in the year 7,468 -
-------------------------------------------------------------------------------- -------- --------
2019 2018
GBP'000 GBP'000
-------------------------------------------------------------------------------- -------- --------
Dividend declared
Fourth quarterly dividend of 4.3p (2018: 0.0p) payable to shareholders in May 2,344 -
-------------------------------------------------------------------------------- -------- --------
(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.
2019 2018
GBP'000 GBP'000
----------------------------------------------- -------- --------
First quarterly dividend of 4.9p (2018: 0.0p) 2,671 -
Second quarterly dividend of 4.9p (2018: 0.0p) 2,671 -
Third quarterly dividend of 3.9p (2018: 0.0p) 2,126 -
Final dividend payable of 4.3p (2018: 0.0p) 2,344 -
----------------------------------------------- -------- --------
Total 9,812 -
----------------------------------------------- -------- --------
4 Net asset value per share
2019 2018
-------------------------------------------------------------- ----------- -----------
Net assets (GBP'000) 235,110 263,350
Number of shares in issue, excluding shares held in Treasury 54,510,339 54,510,339
-------------------------------------------------------------- ----------- -----------
Net asset value per share 431.3p 483.1p
-------------------------------------------------------------- ----------- -----------
5. Status of results announcement
2019 Financial Information
The figures and financial information for 2019 are extracted
from the published Annual Report and Accounts for the year ended
31st March 2019 and do not constitute the statutory accounts for
that year. The Annual Report and Accounts has been delivered to the
Registrar of Companies and included the Report of the Independent
Auditors which was unqualified and did not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006.
2018 Financial Information
The figures and financial information for 2018 are extracted
from the Annual Report and Accounts for the year ended 31st March
2018 and do not constitute the statutory accounts for the year. The
Annual Report and Accounts include the Report of the Independent
Auditors which is unqualified and does not contain a statement
under either section 498(2) or section 498(3) of the Companies Act
2006. The Annual Report and Accounts will be delivered to the
Register of Companies in due course.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement
JPMORGAN FUNDS LIMITED
19th June 2019
For further information, please contact:
Divya Amin
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the annual report will shortly be submitted to the
National Storage Mechanism and will be available for inspection at
www.morningstar.co.uk/uk/NSM
The annual report will shortly be available on the Company's
website at www.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.
JPMORGAN FUNDS LIMITED
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UKUVRKAANAAR
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