Annual Financial Report

RNS Number : 2480P

JPMorgan Japanese Inv. Trust PLC

15 November 2016

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN JAPANESE INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED 30th SEPTEMBER 2016

CHAIRMAN'S STATEMENT

Investment Performance

In the year to 30th September 2016, the Company's total return on net assets was 36.0% in sterling terms, compared with the Tokyo Stock Exchange First Section (TOPIX) Index (our benchmark), which rose by 31.7%. The returns are calculated on a total return basis in sterling terms and were improved by the movement in the yen/sterling rate from ¥181.4 at the beginning of the year to ¥131.5 at its conclusion. This change largely reflects weakness in sterling following the EU referendum rather than strength in the yen. The total return to shareholders was 31.5% during the year, assuming the reinvestment of the dividend, as the discount to net asset value widened slightly over the year. Additionally, I am very pleased to report, over the two, three and five years ended 30th September 2016, the portfolio has significantly outperformed the benchmark in sterling terms, and has achieved better performance returns relative to a range of peers.

Revenue and Dividends

Income received during the year rose with earnings per share for the full year increasing to 3.97p (2015: 3.06p). The Board proposes, subject to shareholders' approval at the Annual General Meeting, to pay a final dividend of 3.65p per share (2015: 2.80p) on 28th December 2016 to shareholders on the register at the close of business on 25th November 2016 (ex-dividend date 24th November 2016). The objective of the Company is capital growth, any dividend paid being a residual of the portfolio structure. Clearly, both the level of dividends the Company receives from its investee companies and the translation of those dividends into sterling can vary significantly year on year. Additionally, income received by the Company is subject to certain distribution requirements that must be met in order to retain the Company's investment trust status.

Gearing

The Board of Directors sets the overall strategic gearing policy and guidelines, reviewing these at each meeting. The Investment Manager then manages the gearing within these agreed levels. On 30th September 2016, the Company had a gearing level of 9.5%. The management of gearing has been active during the year with the level ranging between geared positions of 3.4% and 10.1% (month end figures).

The funds available to be drawn down by the Company are ¥9 billion, comprised of a five year term loan. The term of the previous one year revolving credit facility for ¥6 billion expired in July and has not been replaced, however gearing requirements remain under review by the Board.

Changes to the Company's Articles of Association

Following a review by the Board, it has been decided to amend the Company's Articles of Association to allow the payment of dividends out of capital. The Company has significant capital reserves. However, the Board is not currently seeking to utilise these powers.

Additionally, we are proposing an increase in the maximum aggregate annual limit on Directors' fees from £175,000 to £200,000, in response to increases in Directors' fees which have taken place over recent years, as documented within the Directors' Remuneration Report on page 32 of the Annual Report and Accounts for the year ended 30^th September 2016 (the 'Annual Report'), and to provide flexibility for the future. It is not proposed to amend Directors fees for the current year (the year ending 30th September 2017).

A resolution has therefore been proposed to effect these changes, and a mark-up of the Articles of Association will be available for viewing at the Annual General Meeting.

New Zealand Listing

The Board has resolved to de-list the Company from the New Zealand Stock Exchange. The level of holdings retained by shareholders in New Zealand has diminished and currently less than 1% of the register is held by these shareholders. It is anticipated that the delisting will take effect early in 2017. The Board has tried to manage this change in a professional manner which is helpful and responsible for New Zealand shareholders.

Management Fees

The Board has conducted its annual detailed review of management fees and continues actively to monitor whether the fees paid to the Manager and other service providers represent good value for money. It concluded that the current Ongoing Charges rate of 0.74%, which is a reduction on the rate of 0.77% paid in the previous reporting year, is extremely competitive compared to the Company's peer group.

Investment Managers

During the year under review the Investment Managers were Nicholas Weindling and Shoichi Mizusawa, both Managing Directors of JPMAM based in Japan. On behalf of the Board I would like to congratulate the Tokyo-based Investment Team on their delivery of strong investment returns achieved over the year under review and since management of the Company's assets was transferred to Tokyo in 2007.

The Company's objective is to provide shareholders with capital growth from a portfolio of investments in Japanese companies and your Investment Managers achieved outperformance against our benchmark, through stock selection and gearing. These results can be seen from the performance attribution data shown on page 8 of the Annual Report.

Board of Directors

As announced in last year's Annual Report, Alan Barber and Keith Percy will not seek reappointment at this year's Annual General Meeting. Both have served the Company in excess of ten years and I and the Board are extremely grateful for their contributions, and to Alan for chairing the Audit Committee.

Dr George Olcott and Stephen Cohen have been appointed Directors of the Company with effect from the conclusion of this year's Annual General Meeting. Both have extensive experience of business and corporate governance in Japan and will be valuable additions to the Board.

In accordance with the Company's Articles of Association, having served on the Board for more than nine years, I will retire and seek reappointment at the forthcoming Annual General Meeting. The other continuing Directors, Sir Stephen Gomersall and Christopher Samuel will also retire and seek reappointment by the shareholders, in accordance with corporate governance best practice. It is proposed that Christopher Samuel will be appointed Chairman of the Audit Committee with effect from the conclusion of the 2016 Annual General Meeting.

Authority to Repurchase the Company's Shares

At last year's Annual General Meeting, shareholders granted the Directors authority to repurchase up to 14.99% of the Company's shares. No shares have been repurchased for cancellation during the year (2015: none). The Directors continue to believe that the power to repurchase shares is of ongoing benefit to shareholders and therefore propose that the authority be renewed for a further period. Share repurchases continue to be a useful tool for decreasing discount volatility and this approach will be used when considered to be appropriate by the Board.

Auditor

These accounts are the third to be audited by PricewaterhouseCoopers LLP. You will find their report to shareholders on pages 36 to 41 of the Annual Report.

Annual General Meeting

This year's Annual General Meeting will be held on Tuesday, 20th December 2016 at 2.00 p.m. at 60 Victoria Embankment, London EC4Y 0JP. As in previous years, in addition to the formal part of the meeting, there will be a presentation from the Investment Managers who will answer questions on the portfolio and performance. There will also be an opportunity to meet the Board and representatives of JPMorgan after the meeting. I look forward to welcoming as many of you as possible to this meeting.

If you have any detailed or technical questions, it would be helpful if you could raise these in advance of the meeting with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP. Alternatively, questions may be submitted via the Company's website (www.jpmjapanese.co.uk). Shareholders who are unable to attend the Annual General Meeting 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.

Prospects

Against a background of the generally disappointing (certainly from the point of view of financial market participants) implementation of Prime Minister Abe's "three arrows" structural reform agenda, there are now real signs of progress following the new corporate governance and stewardship codes that were introduced in early 2015.

There is a greater interest on the part of quoted companies in criteria like Return on Equity to judge corporate progress, and over 80% of quoted medium or large sized companies now have independent directors. However, there is a long tradition of companies demonstrating only superficial support for these sorts of initiatives whilst continuing to behave as before. There are enough tangible, measurable, indications of real progress, for example, in share buybacks (at a level in the first half of 2016 similar to the whole of 2014) and higher dividends and pay-out ratios.

The Board continues to be very encouraged by the individual companies that are either performing well or which have new growth models, that your Investment Managers select for inclusion in your Company's portfolio.

Andrew Fleming

Chairman                                                                                                                           15th November 2016

INVESTMENT MANAGERS' REPORT

The benchmark TOPIX index rose by 31.7% in sterling terms during the year ended 30th September 2016 with the Company's total return on net assets being 36.0%. Over three years the Company's portfolio returned 49.1% versus 40.9% for the index. Over five years it has returned 112.9% versus 73.9% for the index.

Review

Investors continued to worry about the strength of the global economic recovery, the pace of interest rate hikes in the United States, the slowdown in Chinese economic growth and the consequences of Brexit. The most pertinent to shareholders was the decision by the United Kingdom to leave the European Union. This resulted in considerable weakness in sterling due to concerns that the British economy may deteriorate. Over the course of the Company's financial year the value of the pound against the yen weakened from a peak of almost ¥190 to ¥127 at the time of writing. This is the major reason for the strong sterling NAV performance of the Company.

In Japan, politics remained stable over the year under review. Prime Minister Abe continued to enjoy strong popularity and his Liberal Democratic Party won the Upper House election in July. The Bank of Japan continued with its aggressive monetary policies, which included a new negative interest rate policy, in line with its 2% inflation target. It has not yet achieved this target, with CPI again negative. Consumer spending also remained lacklustre. However, there have been several positive results on the economic front. The labour market has been as tight as at any point in the last twenty years with, currently, 136 jobs available for every 100 applicants and there has been some evidence of rising wages. Female participation has also continued to rise. Meanwhile the number of foreign tourist arrivals has increased to a record level and the government has revised up its mid-term target to forty million arrivals by 2020.

Finally, corporate performance was mixed as the stronger currency put pressure on exporter profits. Most importantly, improvements in corporate governance continued. Dividends continued to rise and the pace of share buybacks accelerated. The number of independent directors on boards has increased. We believe that the sustainability of improvements in corporate governance at Japanese companies can drive valuations of the market higher over the long term. The substantial improvement in corporate governance was the major reason for our purchases of insurer Tokio Marine and Japan Tobacco.

Portfolio Performance

The outperformance versus the benchmark was due to both asset allocation including gearing and stock selection. At the asset allocation level the sector underweights in banks, which were hurt by the new negative interest rate policy, and utilities were particularly helpful. The main detractor was the gearing which detracted value as the market fell in yen terms.

Top contributing stocks included M3, Keyence, Ono Pharmaceutical, Lion and Cosmos Pharmaceutical.

•   M3 operates websites used by doctors and helps pharmaceutical companies to reduce their marketing expenses. It is the number one site in Japan and the United Kingdom amongst other regions. It is a globally unique business with top class management.

•   Keyence is a sensor company that is benefitting as more industries automate. It has expanded aggressively overseas in the last few years such that sales outside of Japan now account for over 50% of the total as compared to around 25% five years ago. It makes operating margins in excess of 50% which are some of the highest of any industrial company in the world. The trend towards more automation also benefits our holdings SMC and Fanuc which have margins of 31% and 35% respectively. Regardless of what happens in the global economy we believe companies will continue to automate to reduce costs and increase quality. We are aware of the threat of Asian competition but our bottom up research shows the gap between Japan and the rest of the world remains very wide.

•   Ono Pharmaceutical's Opdivo immunotherapy cancer treatment drug is licensed out to Bristol Myers Squibb in the United States and is a way of treating cancer. The stock performed very well over the year and we sold the position as expectations for future growth became lower.

•   Lion Corporation is a manufacturer of consumer goods that changed management in 2012. Its margins have been far below those of domestic and global peers and the new CEO has decided to focus on profits ahead of sales. The company is also expanding rapidly in Asia, particularly China and Thailand where Japanese quality, safety and reliability are significant competitive advantages. It is already number one in online toothpaste sales in China. We have other stocks that play the same theme. Kewpie is the number one mayonnaise company in Shanghai and Beijing with 90% and 60% shares respectively in the consumer mayonnaise market. Consumption of mayonnaise and dressings is relatively new in China and the market has the potential to mimic the strong growth of the Japanese market between 1960 and 1990. Similarly, Pigeon is the number one maker of baby bottles and other baby goods across Asia and has a big opportunity for expansion in India.

•   Cosmos Pharmaceutical is a discount drugstore based on the southern island of Kyushu. It is only just beginning to expand across Japan and we believe its business model will be successful elsewhere in the country where there is strong demand for the lowest priced items. This is similar to the success of disruptors Lidl and Aldi in European food retail and, in addition to Cosmos, our holdings in Don Quijote and Seria (Y100 stores) should benefit. These companies will also benefit from increasing industry consolidation. For example, the top ten drugstores in Japan still only have around 25% market share whereas the top two in the UK have over 50%. Consolidation will mean increasing economies of scale for the winner companies. The other major trend in Japanese retail is the increasing penetration of e-commerce which is the reason for our holding in Start Today, an online apparel retailer.

Stocks that contributed negatively to performance included Cookpad, Laox, Toyo Tire, Rakuten and Kaken Pharmaceutical.

•   Cookpad operates a recipe website and we had owned it for many years due to the potential for it to monetise its user base of women aged 20-50. However, there was a sudden change in strategy and we sold the shares as a result.

•   Laox is a retailer catering to Chinese tourists visiting Japan. It was hit by a slowdown in purchases as the yen strengthened. We sold the shares after reassessing the company's competitive advantage.

•   Toyo Tire was involved in a quality problem in one of its non-core businesses but we sold the shares due to concerns about oversupply in the global tyre industry.

•   Rakuten is Japan's number one e-commerce company. We reduced the position on concerns of increasing industry competition.

•   Kaken Pharmaceuticals new drugs grew more slowly than expected and we sold the shares.

Current Portfolio

At the beginning of the Company's new financial year, the largest overweights were in Keyence, M3, Lion, Don Quijote and Start Today.

We seek companies that will be strong and have the greatest opportunities to grow earnings over the next five to ten years and beyond. These companies may not be operating in the areas of Japan's historic strength of motor manufacture and consumer electronics, where products are becoming increasingly commoditised, or there is a risk of significant industry disruption. For example, the ability to take photographs or videos using a smartphone makes the outlook for traditional camera and camcorder companies uncertain, while Taxi apps such as Uber, as well as car sharing and, in time, automated driving, pose a substantial challenge for the motor industry.

Looking at the characteristics of the portfolio, balance sheets and free cash flow are stronger, earnings growth faster and Return on Equity higher than the market as a whole. Much of this growth is structural and in aggregate the companies should do well regardless of what happens in the global or Japanese economy. The valuation, as measured by PE ratios is higher than the market average but we believe the strong long-term growth prospects more than justify this.

PERFORMANCE ATTRIBUTION

FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	%	%
Contributions to total returns
Benchmark return		+31.7
Asset allocation	+2.9
Stock selection	+3.5
Gearing/cash	-1.4
Investment Manager contribution		+5.0
Portfolio total return		+36.7
Management fee/other expenses	-0.7
Return on net assets		+36.0

Source: JPMAM and Morningstar.

All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark.

Outlook

The Japanese equity market as a whole is a cyclical one, due to its large exposure to global manufacturing sectors relative to other major markets, as well as relative to its own economy. As such, uncertainty about the macro environment, whether this be due to a stronger yen, the US election result or political uncertainty in Europe, could adversely influence the Japanese market.

However, the long-term outlook is positive: government policy is supportive, the global economy is slowly improving and companies are starting to emphasise increasing returns to shareholders. We continue to focus on structural growth areas such as the increasing penetration of internet shopping, the ageing population, factory automation, Japanese companies expanding in Asia and companies prioritising improving shareholder returns. We continue to be able to find compelling investment opportunities.

We believe strongly in active management and feel the case for doing so in Japan is particularly compelling. There are two underlying reasons. First, it is a very under-researched market. Of the roughly 1700 companies listed on the TOPIX index, more than half have two or fewer brokerage or investment bank analysts covering them. Second, as outlined above, the types of areas in which Japan may be strong in the future may not be the same as in the past.

Nicholas Weindling

Shoichi Mizusawa

JPMorgan Asset Management

Tokyo                                                                                                                                    15th November 2016

Principal Risks

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risks identified have changed over the year under review, and the ways in which they are managed or mitigated are summarised as follows.

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

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

     The Board manages these risks by diversification of investments and through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, at least one of whom attends all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employs the Company's gearing tactically, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.

•   Market and Currency: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines which are monitored and reported on by the Manager. The Board monitors the implementation and results of the investment process with the Manager. The majority of the Company's assets, liabilities and income are denominated in yen rather than in the Company's functional currency of sterling (in which it reports). As a result, movements in the yen:sterling exchange rate may affect the sterling value of those items and therefore impact on reported results and/or financial position. Therefore, there is an inherent risk from these exchange rate movements. It is the Company's policy not to undertake foreign currency hedging. Further details about the foreign currency risk may be found in note 21 on pages 54 and 55.

•   Political, Economic and Governance: Administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

•   Loss of Investment Team or Investment Manager: A sudden departure of an Investment Manager or several members of the investment management team could result in a short term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach, as well as special efforts to retain key personnel. The Board engages with the senior management of the Manager in order to mitigate this risk.

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

•   Change of Corporate Control of the Manager: The Board holds regular meetings with senior representatives of the Manager in order to obtain assurance that the Manager continues to demonstrate a high degree of commitment to its investment trust business through the provision of significant resources.

•   Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under 'Business of the Company' above. Were the Company to breach Section 1158, it may lose investment trust status and, as a consequence, gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by the Manager and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules, Disclosure Guidance and Transparency Rules ('DTRs') and, as an investment trust, the Alternative Investment Fund Managers Directive ('AIFMD'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, the Manager and its professional advisers to ensure compliance with the Companies Act 2006, the UKLA Listing Rules, DTRs and AIFMD.

•   Corporate Governance and Shareholder Relations: Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance Statement on pages 26 to 31 of the Annual Report.

•   Operational and Cyber Crime: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary or Custodian's records may prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by JPMF and its associates and the key elements designed to provide effective risk management and internal control are included within the Risk Management and Internal Controls section of the Corporate Governance Statement on pages 29 and 30. The threat of cyber attack, in all guises, is regarded as at least as important as more traditional physical threats to business continuity and security.

•   Financial: The financial risks faced by the Company include market price risk, liquidity risk and credit risk. Further details are disclosed in note 21 on pages 54 to 59 of the Annual Report.

Related Party Transactions

During the 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 year.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the annual report and accounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom generally accepted accounting practice (United Kingdom Accounting Standards) including FRS 102 'The Financial Reporting Standards applicable in the UK and Republic of Ireland' and applicable laws. Under company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

•   make judgements and accounting estimates that are reasonable and prudent;

•   state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•   prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business;

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the www.jpmjapanese.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditors does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditors accept no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed on pages 21 and 22 of the Annual Report, confirms that, to the best of their knowledge:

•   the financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, and applicable law), (United Kingdom Generally Accepted Accounting Practice) give a true and fair view of the assets, liabilities, financial position and net return or loss of the Company; and

•   the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period.

For and on behalf of the Board

Andrew Fleming

Chairman

15th November 2016

STATEMENT OF COMPREHENSIVE INCOME 

FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	2016			2015
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair
value through profit or loss	-	179,145	179,145	-	55,125	55,125
Net foreign currency (losses)/gains	-	(16,545)	(16,545)	-	2,587	2,587
Income from investments	8,725	-	8,725	6,970	-	6,970
Gross return	8,725	162,600	171,325	6,970	57,712	64,682
Management fee	(673)	(2,691)	(3,364)	(606)	(2,423)	(3,029)
Other administrative expenses	(619)	-	(619)	(592)	-	(592)
Net return on ordinary activities
before finance costs and taxation	7,433	159,909	167,342	5,772	55,289	61,061
Finance costs	(153)	(612)	(765)	(147)	(587)	(734)
Net return on ordinary activities
before taxation	7,280	159,297	166,577	5,625	54,702	60,327
Taxation	(874)	-	(874)	(697)	-	(697)
Net return on ordinary activities
after taxation	6,406	159,297	165,703	4,928	54,702	59,630
Return per share (Note 3)	3.97p	98.79p	102.76p	3.06p	33.92p	36.98p

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30TH SEPTEMBER 2016

	Called up	Capital
	share	redemption	Other	Capital	Revenue
	capital	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 30th September 2014	40,312	8,650	166,791	186,300	6,409	408,462
Net return on ordinary activities	-	-	-	54,702	4,928	59,630
Dividend paid in the year	-	-	-	-	(4,515)	(4,515)
At 30th September 2015	40,312	8,650	166,791	241,002	6,822	463,577
Net return on ordinary activities	-	-	-	159,297	6,406	165,703
Dividend paid in the year	-	-	-	-	(4,515)	(4,515)
At 30th September 2016	40,312	8,650	166,791	400,299	8,713	624,765

STATEMENT OF FINANCIAL POSITION AT 30TH SEPTEMBER 2016

	2016	2015
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	683,857	493,278
Current assets
Debtors	3,465	6,315
Cash and cash equivalents	6,118	46,923
	9,583	53,238
Current liabilities
Creditors: amounts falling due within one year	(257)	(33,329)
Net current assets	9,326	19,909
Total assets less current liabilities	693,183	513,187
Creditors: amounts falling due after more than one year	(68,418)	(49,610)
Net assets	624,765	463,577
Capital and reserves
Called up share capital	40,312	40,312
Capital redemption reserve	8,650	8,650
Other reserve	166,791	166,791
Capital reserves	400,299	241,002
Revenue reserve	8,713	6,822
Total shareholders' funds	624,765	463,577
Net asset value per share (Note 4)	387.5p	287.5p

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH SEPTEMBER 2016

1.  Accounting policies

(a)     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.

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 29 of the Directors' Report form part of these financial statements.

2.  Dividends¹

(a)     Dividends paid and proposed

	2016	2015
	£'000	£'000
Dividend paid
2015 final dividend of 2.80p (2014: 2.80p) per share	4,515	4,515
Dividend proposed
2016 final dividend proposed of 3.65p (2015: 2.80p) per share	5,886	4,515

The dividend proposed in respect of the year ended 30th September 2016 is subject to shareholder approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 30th September 2017.

(b)    Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010
('Section 1158')

The requirements of Section 1158 are considered on the basis of the dividend proposed in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £6,406,000 (2015: £4,928,000).

	2016	2015
	£'000	£'000
Final dividend proposed of 3.65p (2015: 2.80p) per share	5,886	4,515

¹     All dividends paid and proposed in the period are funded from the revenue reserve.

The revenue reserve after payment of the final dividend will amount to £2,827,000.

3.  Return per share

	2016	2015
	£'000	£'000
Revenue return	6,406	4,928
Capital return	159,297	54,702
Total return	165,703	59,630
Weighted average number of shares in issue during the year	161,248,078	161,248,078
Revenue return per share	3.97p	3.06p
Capital return per share	98.79p	33.92p
Total return per share	102.76p	36.98p

4.  Net asset value per share

	2016	2015
Net assets (£'000)	624,765	463,577
Number of shares in issue	161,248,078	161,248,078
Net asset value per share	387.5p	287.5p

5.   Status of results announcement

2015 Financial Information

The figures and financial information for 2015 are extracted from the published Annual Report and Accounts for the year ended 30th September 2015 and do not constitute the statutory accounts for that year. This Annual Report 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.

2016 Financial Information

The figures and financial information for 2016 are extracted from the Annual Report and Accounts for the year ended 30th September 2016 and do not constitute the statutory accounts for the year.  The Annual Report includes 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 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

ENDS

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

The annual report will shortly be available on the Company's website at www.jpmjapanese.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

JPMORGAN FUNDS LIMITED

 

END

 

 

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