2014/15 - j.p. morgan · investment returns isa material result of mr abe’s policies and this...

JPMorgan Japanese Investment Trust plc

Half Year Report & Accounts for the six months ended 31st March 2015

Half Year Report2014/15

Features

Contents

About the Company

1 Half Year Performance2 Chairman’s Statement4 Investment Manager’s Report

Investment Review

7 List of Investments 9 Sector Analysis

Accounts

10 Income Statement11 Reconciliation of Movements in

Shareholders’ Funds12 Balance Sheet13 Cash Flow Statement14 Notes to the Financial Statements16 Interim Management Report

Shareholder Information

17 Glossary of Terms and Definitions21 Information about the Company

Objective

Capital growth from Japanese investments.

Investment Policy

- To maintain a portfolio almost wholly invested in Japan.

- To use gearing to increase potential returns to shareholders. The Company’s gearingpolicy is to operate within a range of 5% net cash to 15% geared in normal marketconditions.

- To invest no more than 15% of its gross assets in any listed company (includinginvestment trusts).

Benchmark

The Tokyo Stock Exchange 1st Section Index (TOPIX) expressed in sterling terms.

Capital Structure

UK domiciled. Full listing on the London Stock Exchange and the New Zealand StockExchange.

At 31st March 2015, the Company’s issued share capital comprised 161,248,078ordinary shares of 25p each.

Management Company

The Company employs JPMorgan Funds Limited (‘JPMF’ or the ‘Manager’) as itsAlternative Investment Fund Manager. JPMF delegates the management of theCompany’s portfolio to JPMorgan Asset Management (UK) Limited (‘JPMAM’).

FCA regulation of ‘non-mainstream pooled investments’

The Company currently conducts its affairs so that its shares can be recommended byIndependent Financial Advisers to ordinary retail investors in accordance with therules of the Financial Conduct Authority (‘FCA’) in relation to non-mainstreaminvestment products and intends to continue to do so for the foreseeable future.The shares are excluded from the FCA’s restrictions which apply to non-mainstreaminvestment products because they are shares in an investment trust.

+28.6%Return on net assets2

+35.6%Return to shareholders1

+17.2%Benchmark return3

Financial Data31st March 30th September %

2015 2014 change

Shareholders’ funds (£’000) 519,588 408,462 +27.2

Number of shares in issue 161,248,078 161,248,078 0.0

Net asset value per share 322.2p 253.3p +27.2

Share price 292.0p 218.0p +33.9

Share price discount tonet asset value per share 9.4% 13.9%

Exchange rate £1 = ¥178.1 £1 = ¥177.8 0.2

Gearing 12.3% 12.7% –3.1

Ongoing Charges 0.77% 0.78% –1.3

A dividend of 2.80p per share was paid in the period.

A glossary of terms and definitions is provided on page 17.

1Source: Morningstar.2Source: J.P. Morgan.3Source: Datastream. The Company’s benchmark is the Tokyo Stock Exchange 1st Section Index (TOPIX) expressed insterling terms.

1JPMorgan Japanese Investment Trust plc. Half Year Report & Accounts 2015

Half Year Performancefor the six months ended 31st March 2015

Total returns (includes dividends reinvested)

Performance

This is my first statement as Chairman and I am delighted to report that, for the sixmonths ended 31st March 2015 the total return to shareholders was +35.6% in sterlingterms, with a total return on net assets of +28.6%, compared with a rise in theCompany’s benchmark of +17.2%.

Shareholders benefited from a combination of strong returns from the Japanesestock markets, good relative performance from the Company’s portfolio, and anarrowing of the discount to net asset value at which the Company’s shares traded(from 13.9% to 9.4%) over the six months under review.

Revenue and Dividends

As emphasised in previous Chairman’s statements, dividend payments from Japanesecompanies are unpredictable and dividends paid to the Company’s shareholders inprevious years should not be taken as a guide to future payments. In respect of theyear ended 30th September 2014, we paid a dividend of 2.80p per share, in line withthe previous year.

Discount Management

The Board has guidelines in place with regard to the management of anydiscount/premium that may develop between the Company’s share price and its netasset value per share and to enhance returns to shareholders. The Company did notrepurchase any shares during the period under review.

Gearing

The Board of Directors sets the overall strategic gearing policy and guidelines andreviews these at each meeting. As at the date of this report, the Company was 12.3%geared. The Company’s loan with Scotiabank matures in July 2015 and arrangementsare underway to replace this loan with alternative financing. Since the half year end,the Company has drawn down a further JP¥3 billion from the loan facilities availableto it, with gearing now totalling JP¥15 billion.

Directorate

Following many years of service to the Company, Jeremy Paulson-Ellis retired asa Director and Chairman following the Annual General Meeting in December.Christopher Samuel was appointed a Director at that time and I was appointedChairman.

The Board and the Company benefited enormously from Jeremy’s deep knowledge ofJapan and his relentless pursuit of excellence and shareholder returns. His wisecounsel will be greatly missed and no one will be more pleased to note the recentinvestment performance of the Company than Jeremy.

JPMorgan Japanese Investment Trust plc. Half Year Report & Accounts 20152

Chairman’s Statement

JPMorgan Japanese Investment Trust plc. Half Year Report & Accounts 2015 3

Outlook

The Company’s Investment Manager successfully repositioned the portfolio in thefourth quarter of 2012 in response to the election of Mr Abe as prime minister on anelectoral platform of what has subsequently become known as ‘Abenomics’. Themuch improved performance of the Japanese equity markets and the Company’sinvestment returns is a material result of Mr Abe’s policies and this repositioning.

The portfolio remains positioned to benefit further from ‘Abenomics’ and the outlookis, therefore, to a large extent dependent on continued reform and associatedmonetary easing from the Bank of Japan. Of the three main strands that make up‘Abenomics’ the third, structural reform, is the last and most difficult to implement.The longer term prospects for the Japanese economy and stockmarkets will largelybe dependent on whether and how progress is made in this area.

Japanese exporting companies have also been able to take advantage from theweakness in the yen and they would have their competitiveness challenged by anysignificant recovery in the value of the Japanese currency.

Andrew FlemingChairman 22nd May 2015


Investment Manager’s Report

Review

Several events renewed our conviction in the overall outlook for the market. InOctober the Bank of Japan announced additional easing measures while PrimeMinister Abe was re-elected in December. Political stability combined with anaggressive Bank of Japan is a powerful combination. Additionally, some domesticinstitutions have begun to buy Japanese equities with the Government Pension Fund,the world’s largest pension fund, announcing a change to its asset allocation. As such,its exposure to Japanese equities will increase from 12% to roughly 25%. Oil andcommodity prices fell sharply. Falling commodity prices are particularly beneficial toJapan which has almost no natural resources of its own. Corporate profits havecontinued to be strong and this, combined with a tight labour market, has meant thatwages have started to rise. Indeed, the spring wage negotiation resulted in anaverage wage increase of around 2.5%. This may seem small but it is the fastest pacesince 1998. Lower petrol prices and higher wages should mean that consumptionimproves in 2015.

A recent trend has been the sudden increase in tourists visiting Japan. In 2013 Japanwas only the 27th most popular tourist destination globally but, due to relaxed visarestrictions and the weaker yen, tourist arrivals have increased dramatically,particularly from Asia. In 2014, for example, Chinese tourist numbers rose around80% year-over-year. The impact of this has been felt at airports, hotels, departmentstores and theme parks amongst other places.

Important developments have taken place in the area of corporate governance. Thegovernment has announced a series of measures which have included theintroduction of a Stewardship Code while a Corporate Governance Code will belaunched in June. A new stock market index – the JPX Nikkei Index 400 – waslaunched at the beginning of 2014, with return on equity as one of its selectioncriteria for company constituents. Criteria for inclusion in the index also include anumber of qualitative factors including the number of outside board directors. Thisincreased focus on governance and shareholder rights has seen Japanese companiespay record high dividends in the first half of the 2014 fiscal year. When combined withshare buybacks, total shareholder returns are expected to reach their highest everlevel in 2015. These developments have directly impacted the portfolio with ourlargest holding Keyence tripling its dividend (although the payout ratio is still verylow) and leading robot maker Fanuc announcing that it will increase its dividendpayout ratio from 30% to 60%, cancel treasury stock and appoint two outsidedirectors.

Performance Review

The benchmark TOPIX index rose by 17.2% in sterling terms during the half yearended 31st March 2015 with the Company’s NAV rising 28.6%. Over three years theCompany has returned 72.0% versus 40.8% for the index. Over five years 65.6%versus 38.1% for the index. We continued with a bias to quality companies in areaswhich we think offer long term growth. We also maintained the Company’s gearingclose to the maximum permitted to reflect our optimistic view on the market and thefact that we can find many good opportunities in which to invest.


The outperformance versus the benchmark over the six months was due to bothasset allocation and stock selection with additional outperformance coming from theeffect of the Company’s gearing.

At the asset allocation level the overwhelming positives were the gearing and theoverweight in services. Services is a very varied sector encompassing everythingfrom internet to karaoke so generalisations are difficult but many of these companieshave high market shares in growing markets allowing the companies to haverelatively high margins, good free cash flow and strong balance sheets. The maindetractor was land transport, an area where we have not found compellinginvestment opportunities.

Stocks that contributed most positively were Rakuten, Japan Airport Terminal, DonQuijote, Oriental Land and CyberAgent. Rakuten is Japan’s number one ecommercecompany and is benefiting from the continued growth of the market. The penetrationof online retail in Japan is still some way behind other developed markets such as theUK. Japan Airport Terminal operates duty free shops, for example at Tokyo’s HanedaAirport, Don Quijote is a well-run retailer and Oriental Land operates Tokyo DisneyLand. All three of these companies are enjoying the tail wind of surging touristarrivals into Japan. CyberAgent specialises in online advertising particularly forsmartphones, an area that is growing strongly.

Toyota, Mazda, Hitachi, Sony and Taiheiyo Cement were amongst the stocks thatdetracted from performance. Toyota has continued to execute well and our non-ownership of the shares hurt. Mazda has relatively high exposure to Europe andRussia and macro-economic weakness weighed on the shares. We sold the positiondue to the deteriorating outlook. Hitachi reported somewhat disappointing earningsbut we continue to believe that the company is restructuring and steadily moving inthe right direction. Sony has started to restructure and our continued non-ownershipwas negative. Results at Taiheiyo Cement were also lacklustre but we believe that theoutlook for its operations in Japan and the United States is improving.

Portfolio Strategy

There has been little change to either the market outlook or our strategy. Overall, wecontinue to see the combination of political stability, policy support from the Bank ofJapan, healthy corporate earnings and a recovering global economy as a powerfulcombination. We are encouraged by improvements in corporate governance so far. Ifthese are long-lasting the market may re-rate.

We think the domestic economic outlook looks brighter than a few months ago. Thetight labour market and higher corporate profits have already led to higher wages.Unlike last year this increase will not be soaked up by the consumption tax rise. It isalso positive that oil prices are lower as it should mean higher disposable incomes.Lower commodity prices are a positive for Japan, although we are mindful this makesit harder to achieve the Bank of Japan’s 2% inflation target. We also believe that theglobal economy continues to broadly recover albeit slowly.

We have continued with the strategy of investing in stocks that will grow stronglythrough the economic cycle and will maintain a sustainable edge versus both


domestic and global competitors. Key long term themes in the portfolio include theageing population; use of the internet and online content; domestic consolidation;Japanese brands that have globally strong positions; the increased use of electronicsin cars; factory automation; Japanese companies that are growing in Asian markets;and the increase in inbound tourist numbers. We also believe that Japanesecompanies are starting to make progress in terms of improving corporategovernance and shareholder returns and are seeking to take advantage of this in theportfolio. We continue to avoid those companies and industries about which we havelong term structural concerns.

At JPMorgan we have a large team based on the ground in Tokyo trying to identifysignificant changes in sectors and companies. Being based locally is unusual and weexpect this to be a source of continued competitive advantage. Overall, we arepositive on the outlook for the economy, market, active fund management and theperformance of the Company.

Nicholas WeindlingInvestment Manager 22nd May 2015

Investment Manager’s Reportcontinued


List of Investmentsat 31st March 2015

Valuation PercentageCompany Sector1 £’000 %

Keyence Electric Appliances 19,972 3.4Murata Electric Appliances 16,342 2.8Fanuc Electric Appliances 16,322 2.8KDDI Information & Communications 15,770 2.7Fuji Heavy Industries Transportation Equipment 15,076 2.6Rakuten Services 14,673 2.5Mitsubishi UFJ Banks 14,495 2.5Don Quijote Retail Trade 14,455 2.5Casio Computer Electric Appliances 14,226 2.4Japan Airport Terminal Real Estate 13,782 2.4

Top 25%Minebea Electric Appliances 13,390 2.3Oriental Land Services 12,913 2.2Nidec Electric Appliances 12,107 2.1Hitachi Electric Appliances 11,933 2.1SMC Machinery 11,656 2.0Unicharm Chemicals 11,487 2.0Asahi Foods 11,403 2.0Kansai Paint Chemicals 11,195 1.9Nippon Telegraph & Telephone Information & Communications 11,171 1.9MonotaRO Retail Trade 11,104 1.9Kubota Machinery 10,903 1.9ONO Pharmaceutical Pharmaceuticals 10,633 1.8

Top 50%Seven Bank Banks 10,564 1.8Omron Electric Appliances 10,244 1.8Nippon Shinyaku Pharmaceuticals 10,138 1.7Sohgo Securities Services 10,111 1.7M3 Services 10,029 1.7Cosmos Pharmaceutical Retail Trade 9,905 1.7Astellas Pharma Pharmaceuticals 9,891 1.7Shimano Transportation Equipment 9,732 1.7Sysmex Electric Appliances 9,697 1.7Sanwa Metal Products 9,453 1.6Cyberagent Services 9,339 1.6Cookpad Services 9,165 1.6Sumitomo Mitsui Financial Banks 8,987 1.5Toyo Tire & Rubber Rubber Products 8,461 1.5Aeon Financial Service Other Financing Business 8,459 1.5

Top 75%


Valuation PercentageCompany Sector1 £’000 %

Misumi Wholesale Trade 7,313 1.3HOYA Precision Instruments 7,095 1.2Pigeon Other Products 6,995 1.2Obara Electric Appliances 6,982 1.2Japan Exchange Other Financing Business 6,779 1.2Mitsubishi Electric Electric Appliances 6,666 1.1DaiichiKosho Wholesale Trade 6,426 1.1Fast Retailing Retail Trade 6,242 1.1Park 24 Real Estate 5,783 1.0Laox Retail Trade 5,629 1.0Sho-Bond Construction 5,524 1.0Orix Other Financing Business 5,398 0.9Kikkoman Foods 5,229 0.9Nihon M&A Center Services 5,204 0.9Sumitomo Realty & Development Real Estate 5,198 0.9Daiwa Securities Securities & Commodity Futures 5,116 0.9Otsuka Information & Communications 5,075 0.9Nifco Chemicals 4,953 0.9Daikin Industries Machinery 4,903 0.8Industrial & Infrastructure Fund Other Financing Business 4,737 0.8Seria Retail Trade 4,487 0.8Infomart Corporation Services 4,173 0.7H.I.S Services 3,581 0.6Kakaku.com Services 2,782 0.5Leopalace21 Real Estate 2,565 0.4Nakanishi Precision Instruments 2,324 0.4Yamaha Motor Transportation Equipment 2,234 0.4Taiheiyo Cement Glass & Ceramics Products 2,212 0.4

Total Portfolio 580,788 100.0

1Tokyo Stock Exchange classifications.

List of Investments continuedat 31st March 2015


at 31st March 2015 at 30th September 2014Portfolio Benchmark Portfolio Benchmark

% % % %

Processing 58.2 47.6 59.7 48.5Electric Appliances 23.7 13.1 20.6 13.2Services 14.0 3.2 11.3 2.5Information & Communications 5.5 6.7 9.7 7.1Transportation Equipment 4.7 11.7 7.6 11.9Machinery 4.7 5.0 4.8 5.5Wholesale 2.4 4.0 2.2 4.5Precision Instruments 1.6 1.5 — 1.4Other Products 1.2 1.5 0.9 1.4Glass & Ceramics Products 0.4 0.9 2.6 1.0Consumer 18.6 17.9 13.9 17.3Retail Trade 9.0 4.4 7.0 4.1Pharmaceuticals 5.2 5.0 5.4 4.6Foods 2.9 4.2 1.5 4.0Other Consumer 1.5 4.3 — 4.6

Financial 11.1 14.0 12.3 14.0Banks 5.8 8.9 8.1 9.0Other Financing Business 4.4 1.3 4.2 1.3Security & Commodity Futures 0.9 1.3 — 1.5Insurance — 2.5 — 2.2

Basic 6.4 7.8 8.1 7.3Chemicals 4.8 6.2 4.6 5.7Metal Products 1.6 0.7 1.2 0.6Nonferrous Metals — 0.9 2.3 1.0

Assets 5.7 5.5 6.0 5.9 Real Estate 4.7 3.0 5.2 3.1Construction 1.0 2.5 0.8 2.8

Utilities — 7.2 — 7.0

Total 100.0 100.0 100.0 100.0

Based on the total portfolio of investments of £580.8m (2014: £459.6m).

Sector Analysis


Income Statementfor the six months ended 31st March 2015

(Unaudited) (Unaudited) (Audited)Six months ended Six months ended Year ended31st March 2015 31st March 2014 30th September 2014

Revenue Capital Total Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Gains/(losses) on investments held at fair value through profit or loss — 115,037 115,037 — (47,622) (47,622) — (26,100) (26,100)

Net foreign currency(losses)/gains — (680) (680) — 4,290 4,290 — 5,933 5,933

Income from investments 3,700 — 3,700 3,052 — 3,052 5,715 — 5,715

Gross return/(loss) 3,700 114,357 118,057 3,052 (43,332) (40,280) 5,715 (20,167) (14,452)Management fee (282) (1,128) (1,410) (273) (1,094) (1,367) (525) (2,099) (2,624)Other administrative expenses (290) — (290) (230) — (230) (506) — (506)

Net return/(loss) on ordinary activities before finance costs and taxation 3,128 113,229 116,357 2,549 (44,426) (41,877) 4,684 (22,266) (17,582)

Finance costs (69) (277) (346) (77) (310) (387) (149) (596) (745)

Net return/(loss) on ordinary activities before taxation 3,059 112,952 116,011 2,472 (44,736) (42,264) 4,535 (22,862) (18,327)

Taxation (370) — (370) (306) — (306) (572) — (572)

Net return/(loss) on ordinary activities after taxation 2,689 112,952 115,641 2,166 (44,736) (42,570) 3,963 (22,862) (18,899)

Return/(loss) per share (note 3) 1.67p 70.05p 71.72p 1.34p (27.74)p (26.40)p 2.46p (14.18)p (11.72)p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired ordiscontinued in the period.

The ‘Total’ column of this statement is the profit and loss account of the Company and the ‘Revenue’ and ‘Capital’ columnsrepresent supplementary information prepared under guidance issued by the Association of Investment Companies. The Totalcolumn represents all the information that is required to be disclosed in a Statement of Total Recognised Gains and Losses(‘STRGL’). For this reason a STRGL has not been presented.


Reconciliation of Movements inShareholders’ Funds

Called up CapitalSix months ended share redemption Other Capital Revenue31st March 2015 capital reserve reserve reserves reserve Total(Unaudited) £’000 £’000 £’000 £’000 £’000 £’000

At 30th September 2014 40,312 8,650 166,791 186,300 6,409 408,462Net return on ordinary activities — — — 112,952 2,689 115,641Dividend appropriated in the period — — — — (4,515) (4,515)

At 31st March 2015 40,312 8,650 166,791 299,252 4,583 519,588

Called up CapitalSix months ended share redemption Other Capital Revenue31st March 2014 capital reserve reserve reserves reserve Total(Unaudited) £’000 £’000 £’000 £’000 £’000 £’000

At 30th September 2013 40,312 8,650 166,791 209,162 6,961 431,876Net (loss)/return on ordinary activities — — — (44,736) 2,166 (42,570)Dividend appropriated in the period — — — — (4,515) (4,515)

At 31st March 2014 40,312 8,650 166,791 164,426 4,612 384,791

Called up CapitalYear ended share redemption Other Capital Revenue30th September 2014 capital reserve reserve reserves reserve Total(Audited) £’000 £’000 £’000 £’000 £’000 £’000

At 30th September 2013 40,312 8,650 166,791 209,162 6,961 431,876Net (loss)/return on ordinary activities — — — (22,862) 3,963 (18,899)Dividend appropriated in the year — — — — (4,515) (4,515)

At 30th September 2014 40,312 8,650 166,791 186,300 6,409 408,462


Balance Sheetat 31st March 2015

(Unaudited) (Unaudited) (Audited)31st March 2015 31st March 2014 30th September 2014

£’000 £’000 £’000

Fixed assetsInvestments held at fair value through profit or loss 580,788 430,683 459,633

Current assetsDebtors 2,622 4,852 13,201Cash and short term deposits 3,673 20,502 15,463

6,295 25,354 28,664

Creditors: amounts falling due within one year (67,495) (1,353) (79,835)

Net current (liabilities)/assets (61,200) 24,001 (51,171)

Total assets less current liabilities 519,588 454,684 408,462

Creditors: amounts falling due after more than one year — (69,893) —

Net assets 519,588 384,791 408,462

Capital and reservesCalled up share capital 40,312 40,312 40,312Capital redemption reserve 8,650 8,650 8,650Other reserve 166,791 166,791 166,791Capital reserves 299,252 164,426 186,300Revenue reserve 4,583 4,612 6,409

Total equity shareholders’ funds 519,588 384,791 408,462

Net asset value per share (note 4) 322.2p 238.6p 253.3p


Cash Flow Statementfor the six months ended 31st March 2015


£’000 £’000 £’000

Net cash inflow from operating activities (note 5) 888 906 2,352Net cash outflow from returns on investments

and servicing of finance (340) (372) (735)Net cash (outflow)/inflow from capital expenditure and

financial investment (7,077) 9,483 4,143Dividend paid (4,515) (4,515) (4,515)Net cash inflow from financing — 12,204 12,204

(Decrease)/increase in cash for the period (11,044) 17,706 13,449

Reconciliation of net cash flow to movement in net debt

Net cash movement (11,044) 17,706 13,449Loans drawn down in the period — (12,204) (12,204)Exchange movements (672) 4,301 5,933

Movement in net (debt)/funds in the period (11,716) 9,803 7,178

Net debt at the beginning of the period (52,016) (59,194) (59,194)

Net debt at the end of the period (63,732) (49,391) (52,016)

Represented by:Cash and short term deposits 3,673 20,502 15,463Debt falling due within one year (67,405) — (67,479)Debt falling due after more than one year — (69,893) —

Net debt at the end of the period (63,732) (49,391) (52,016)


Notes to the Financial Statementsfor the six months ended 31st March 2015

1. Financial statements

The information contained within the financial statements in this half year report has not been audited or reviewed by theCompany’s auditors.

The figures and financial information for the year ended 30th September 2014 are extracted from the latest publishedfinancial statements of the Company and do not constitute statutory accounts for that year. Those financial statements havebeen delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did notcontain a statement under either Section 498(2) or 498(3) of the Companies Act 2006.

2. Accounting policies

The financial statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice(‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies andVenture Capital Trusts’ issued in January 2009.

All of the Company’s operations are of a continuing nature.

The accounting policies applied to these half year financial statements are consistent with those applied in the financialstatements for the year ended 30th September 2014.

3. Return/(loss) per share


£’000 £’000 £’000

Return/(loss) per share is based on the following:Revenue return 2,689 2,166 3,963Capital return/(loss) 112,952 (44,736) (22,862)

Total return/(loss) 115,641 (42,570) (18,899)

Weighted average number of shares in issue 161,248,078 161,248,078 161,248,078

Revenue return per share 1.67p 1.34p 2.46pCapital return/(loss) per share 70.05p (27.74)p (14.18)p

Total return/(loss) per share 71.72p (26.40)p (11.72)p

4. Net asset value per share

Net asset value per share is calculated by dividing the funds attributable to ordinary shareholders by the number of ordinaryshares in issue at 31st March 2015 of 161,248,078 (31st March 2014: 161,248,078 and 30th September 2014: 161,248,078).


5. Reconciliation of net return/(loss) on ordinary activities before finance costs and taxation to net cash inflow from operating activities


£’000 £’000 £’000

Net return/(loss) on ordinary activities before finance costs and taxation 116,357 (41,877) (17,582)

(Less capital return)/add capital loss on ordinary activitiesbefore finance costs and taxation (113,229) 44,426 22,266

(Increase)/decrease in net debtors and accrued income (709) (180) 326(Decrease)/increase in accrued expenses (33) (63) 13Overseas taxation (370) (306) (572)Management fee charged to capital (1,128) (1,094) (2,099)

Net cash inflow from operating activities 888 906 2,352


Interim Management Report

The Company is required to make the following disclosures inits half year report.

Principal Risks andUncertainties

The principal risks and uncertainties faced by the Companyhave not changed and fall into the following broad categories:investment underperformance and strategy; market andcurrency; political, economic and governance; loss ofinvestment team or investment manager; discount; change ofcorporate control of the Manager; accounting, legal andregulatory; corporate governance and shareholder relations;operational; going concern and financial. Information on eachof these areas is given in the Business Review within theAnnual Report and Accounts for the year ended30th September 2014.

Related Parties Transactions

During the first six months of the current financial year, notransactions with related parties have taken place which havematerially affected the financial position or the performanceof the Company during the period.

Going Concern

The Directors believe, having considered the Company’sinvestment objectives, risk management policies, capitalmanagement policies and procedures, nature of the portfolioand expenditure projections, that the Company has adequateresources, an appropriate financial structure and suitablemanagement arrangements in place to continue in operationalexistence for the foreseeable future and, more specifically, thatthere are no material uncertainties pertaining to the Companythat would prevent its ability to continue in such operationexistence for at least twelve months from the date of theapproval of this half yearly financial report. For these reasons,they consider there is reasonable evidence to continue toadopt the going concern basis in preparing the accounts.

Directors’ Responsibilities

The Board of Directors confirms that, to the best of itsknowledge:

(i) the condensed set of financial statements contained withinthe half yearly financial report has been prepared inaccordance with the Accounting Standards Board’sStatement ‘Half Yearly Financial Reports’ and gives a trueand fair view of the state of the affairs of the Company andof the assets, liabilities, financial position and net return ofthe Company, as at 31st March 2015, as required by theUK Listing Authority Disclosure and Transparency Rule4.2.4R; and

(ii) the interim management report includes a fair review ofthe information required by DTR 4.2.7R and 4.2.8R of theUK Listing Authority Disclosure and Transparency Rules.

In order to provide these confirmations, and in preparing thesefinancial statements, the Directors are required to:

• select suitable accounting policies and then apply themconsistently;

• make judgements and accounting estimates that arereasonable and prudent;

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

• prepare the financial statements on the going concern basisunless it is inappropriate to presume that the Company willcontinue in business;

and the Directors confirm that they have done so.

For and on behalf of the Board

Andrew FlemingChairman 22nd May 2015


Glossary of Terms and Definitions

Return to Shareholders

Total return to the investor, on a mid-market price tomid-market price basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the shares ofthe Company at the time the shares were quoted ex-dividend.

Return onNet Assets

Total return on net asset value (‘NAV’) per share, on a bidvalue to bid value basis, assuming that all dividends paidout by the Company were reinvested, without transactioncosts, into the shares of the Company at the NAV per share atthe time the shares were quoted ex-dividend.

In accordance with industry practice, dividends payable whichhave been declared but which are unpaid at the balance sheetdate are deducted from the NAV per share when calculatingthe total return on net assets.

BenchmarkReturn

Total return on the benchmark, on a mid-market value tomid-market value basis, assuming that all dividends receivedwere reinvested, without transaction costs, into the shares ofthe underlying companies at time the shares were quotedex-dividend.

The benchmark is a recognised index of stocks which shouldnot be taken as wholly representative of the Company’sinvestment universe. The Company’s investment strategy does

not ‘track’ this index and consequently, there may be somedivergence between the Company’s performance and that ofthe benchmark.

Gearing/(Net Cash)

Gearing represents the excess amount above shareholders’funds of total assets expressed as a percentage of theshareholders’ funds. Total assets include total investments andnet current assets/liabilities less cash/cash equivalents andexcluding bank loans of less than one year. If the amountcalculated is negative, this is shown as a ‘net cash’ position.

Ongoing Charges

The Ongoing Charges represent the Company’s management feeand all other operating expenses excluding finance costs,expressed as a percentage of the average of the daily net assetsduring the year and is calculated in accordance with guidanceissued by the AIC. The figure as at 31st March 2015 is an estimatedannualised figure.

SharePriceDiscount/Premium toNet Asset Value (‘NAV’) Per Share

If the share price of an investment trust is lower than the NAVper share, the shares are said to be trading at a discount. Thediscount is shown as a percentage of the NAV per share. Theopposite of a discount is a premium. It is more common for aninvestment trust’s shares to trade at a discount than at apremium.

Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to beworthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, ifyou buy or sell shares in this way you will probably lose your money.

Keep in mind that firms authorised by the FCAare unlikely to contact you out of the blue withan offer to buy or sell shares.

Do not get into a conversation, note the nameof the person and firm contacting you and thenend the call.

Check the Financial Services Register fromwww.fca.org.uk to see if the person and firmcontacting you is authorised by the FCA.

Beware of fraudsters claiming to be from anauthorised firm, copying its website or givingyou false contact details.

Use the firm’s contact details listed on theRegister if you want to call it back.

Call the FCA on 0800 111 6768 if the firm doesnot have contact details on the Register or youare told they are out of date.

Search the list of unauthorised firms to avoid atwww.fca.org.uk/scams.

Consider that if you buy or sell shares from anunauthorised firm you will not have access to theFinancial Ombudsman Service or FinancialServices Compensation Scheme.

Think about getting independent financial andprofessional advice before you hand over anymoney.

Remember: if it sounds too good to be true, itprobably is!

If you are approached by fraudsters please tell theFCA using the share fraud reporting form atwww.fca.org.uk/scams, where you can find outmore about investment scams.

You can also call the FCA Consumer Helpline on0800 111 6768.

If you have already paid money to share fraudstersyou should contact Action Fraud on 0300 123 2040.

5,000 people contact the Financial ConductAuthority about share fraud each year,with victims losing an average of £20,000

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Beware of share fraud

How to avoid share fraud

Report a scam

In association with:

Financial Conduct Authority


Where to buy J.P. MorganInvestment Trusts Savings Plan

The Company participates in the J.P. Morgan Investment TrustsSavings Plan, which facilitates both regular monthlyinvestments and occasional lump sum investments in theCompany’s ordinary shares. Shareholders who would likeinformation on the Savings Plan should call J.P. Morgan AssetManagement free on 0800 731 1111 or visit our website athttps://am.jpmorgan.co.uk/investor/guidance-and-planning/guides/regular-savings-made-simple-guide.aspx

Stocks & Shares Individual Savings Accounts (ISA)

The Company’s shares are eligible investments withinJ.P. Morgan’s Stocks & Shares ISA. For the 2015/16 tax year,from 6th April 2015 and ends 5th April 2016, the total ISAallowance is £15,240. Details are available from J.P. MorganAsset Management free on 0800 731 1111 or via our website athttps://am.jpmorgan.co.uk/investor/isas/what-is-a-stocks-and-shares-isa.aspx .

There are a number of ways that you can buy shares ininvestment trust companies; you can invest throughJ.P. Morgan WealthManager+ or on the following:

Fund supermarkets:

Alternatively you can invest through an InvestmentProfessional (e.g. a Financial Adviser) on the following3rd party platforms:

Ascentric Nucleus Avalon Praemium Axa Elevate TransactNovia

Please note that these websites are third party websites andJ.P. Morgan Asset Management does not endorse orrecommend any of them. This list is not exhaustive and issubject to change. Please observe each site’s privacy andcookie policies as well as their platform charges structure.

You can also buy investment trusts through stockbrokers,wealth managers and banks.

To familiarise yourself with the Financial Conduct Authority(‘FCA’) adviser charging and commission rules, visitwww.fca.org.uk.

AJ BellAlliance TrustBarclays StockbrokersBestinvestCharles Stanley DirectHalifax Share Dealing ServiceHargreaves Lansdown

Interactive InvestorJames Brearley James HaySelftradeTD DirectThe Share Centre Transact


Notes

History

The Company was formed in 1927 as The Capital & National TrustLimited. It was a general investment trust until 1982, when itsshareholders approved a change of name to The Fleming JapaneseInvestment Trust plc and the adoption of a policy of specialising ininvestment in Japan. It is the largest UK investment trust specialisingin Japan. The Company adopted its current name in December 2006.

Directors

Andrew Fleming (Chairman) Alan BarberSir Stephen Gomersall, KCMGKeith PercyChristopher Samuel

Company Numbers

Company registration number: 223583London Stock Exchange number: 0174002 ISIN: GB0001740025Bloomberg code: JFJ LNReuters code: JFJ.L

Market Information

The Company’s unaudited net asset value (‘NAV’) per share is publisheddaily via the London Stock Exchange. The Company’s shares arelisted on the London Stock Exchange. The market price is shown dailyin the Financial Times, The Times, The Daily Telegraph, The Scotsmanand on the JPMorgan website at www.jpmjapanese.co.uk, where theshare price is updated every fifteen minutes during trading hours.

Website

www.jpmjapanese.co.uk

Share Transactions

The Company’s shares may be dealt in directly through a stockbrokeror professional adviser acting on an investor’s behalf. They may alsobe purchased and held through the J.P. Morgan Investment Account,J.P. Morgan ISA and J.P. Morgan SIPP. These products are all availableon the online wealth manager service, J.P. Morgan WealthManager+available at www.jpmorganwealthmanagerplus.co.uk

Manager and Company Secretary

JPMorgan Funds Limited

Company’s Registered Office

60 Victoria EmbankmentLondon EC4Y 0JPTelephone number: 020 7742 4000

For company secretarial and administrative matters please contactRebecca Burtonwood at the above address.

DepositaryBNY Mellon Trust & Depositary (UK) LimitedBNY Mellon Centre160 Queen Victoria StreetLondon EC4V 4LA

The Depositary has appointed JPMorgan Chase Bank, N.A. as theCompany’s custodian.

Registrars

Equiniti LimitedReference 1090Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone number: 0871 384 2317

Notifications of changes of address and enquiries regarding sharecertificates or dividend cheques should be made in writing to theRegistrar quoting reference 1090.

Registered shareholders can obtain further details on their holdings onthe internet by visiting www.shareview.co.uk.

Independent Auditors

PricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

Brokers

Canaccord Genuity88 Wood StreetLondon EC2V 7QR

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISAand J.P. Morgan SIPP, call the JPMorgan Helpline on Freephone0800 20 40 20 or +44 (0)20 7742 9995.

Information about the Company

Financial CalendarFinancial year end 30th SeptemberFinal results announced NovemberHalf year end 31st MarchHalf year results announced MayDividend on ordinary shares paid DecemberAnnual General Meeting 18th December 2015

A member of the AIC


J.P. Morgan HelplineFreephone 0800 20 40 20 or +44 (0)20 7742 9995

Your telephone call may be recorded for your security

www.jpmjapanese.co.uk

2014/15 - j.p. morgan · investment returns isa material result of mr abe’s policies and this...

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