Japanese 4pp cover.qxp 20/05/2021 07:42 Page FC1 JPMorgan Japanese Investment Trust plc Be at the heart of Japan’s new growth Half Year Report and Financial Statements – 31st March 2021 Japanese 4pp cover.qxp 20/05/2021 07:42 Page IFC2 KEY FEATURES Your Company Investment Objective Capital growth from investments in Japanese companies. Investment Policy • To maintain a portfolio almost wholly invested in Japan. • To use gearing to increase potential returns to shareholders. The Company’s gearing policy is to operate within a range of 5% net cash to 20% geared, in normal market conditions. Further details on the objective and structure of the Company, together with investment restrictions and guidelines, are given in the Strategic Report on pages 25 and 26 of the Annual Report & Financial Statements for the year ended 30th September 2020. Benchmark The Tokyo Stock Exchange First Section Index (‘TOPIX’) with net dividends reinvested, expressed in sterling terms. Capital Structure UK domiciled. Premium listing on the London Stock Exchange. Constituent of the FTSE 250 Index. As at 31st March 2021, the Company’s share capital comprised 161,248,078 ordinary shares of 25p each, including 1,664,094 ordinary shares held in Treasury. Management Company and Company Secretary The Company employs JPMorgan Funds Limited (‘JPMF’ or the ‘Manager’) as its Alternative Investment Fund Manager (‘AIFM’) and Company Secretary. JPMF delegates the management of the Company’s portfolio to JPMorgan Asset Management (UK) Limited (‘JPMAM’), which in turn delegates day to day investment management activity to JPMorgan Asset Management (Japan) Limited (‘JPMAM (Japan)’) in Tokyo. Environmental, Social and Governance (‘ESG’) Considerations ESG considerations are fully integrated into the stock selection process. JPMAM research teams compile proprietary ESG analyses on each company as well as using external vendor research, and rank them. These ESG scores are combined with strategic and financial analysis to evaluate overall attractiveness. In addition, the Manager, together with Stewardship specialists, conducts extensive engagement on specific ESG issues with investee companies. Both JPMAM and JPMAM (Japan) are UN PRI signatories. JPMAM (Japan), follows the Japanese Stewardship Code and endeavours to vote at all of the meetings called by companies in which your portfolio invests; JPMAM follows the UK Stewardship Code. The Company’s detailed ESG report is on pages 14 to 16. Website The Company’s website, which can be found at www.jpmjapanese.co.uk, includes useful information on the Company, such as daily prices, factsheets and current and historic half year and annual reports. Company Ratings Overall Morningstar RatingTM HHHHH Morningstar CategoryTM Japan Large-Cap Equity Morningstar Analyst Rating. Source: Morningstar, April 2021. Awards Best Japanese Equities Trust at the Citywire Investment Trust Awards 2020. JPMORGAN JAPANESE INVESTMENT TRUST PLC. HALF YEAR REPORT & FINANCIAL STATEMENTS 2021 Japanese_pp01_05.qxp 20/05/2021 07:43 Page 1 KEY FEATURES Why invest in the JPMorgan Japanese Investment Trust WHEN IT COMES TO INVESTING IN JAPAN, BEING LOCALLY BASED IS Be at the heart of Japan’s new CRUCIAL. YOU JUST CAN’T GAIN THE growth SAME LEVEL OF INSIGHTS INTO THIS UNIQUE MARKET IF YOU'RE WATCHING The emergence of a dynamic new generation of FROM AFAR. Japanese companies is creating compelling investment opportunities. But getting to the Investment Manager, heart of Japan’s new growth requires on-the- JPMorgan Japanese ground expertise and local market knowledge Investment Trust plc and an unconstrained approach that’s fully Nicholas Weindling focused on the best that Japan has to offer. J.P. Morgan has over 50 years’ experience seeking out the most attractively valued Japanese stocks and sectors. Our highly WE SIMPLY INVEST IN THE MOST experienced Tokyo-based investment team of ATTRACTIVE, SUSTAINABLE LONG-TERM GROWTH OPPORTUNITIES, RIGHT ACROSS 25 Japanese equity professionals provides the THE MARKET CAP SPECTRUM, WITH AN vital local insights needed to uncover value in EMPHASIS ON BALANCE SHEET STRENGTH, Japan’s under-researched market. FREE CASH FLOW GENERATION AND COMPETITIVE POSITIONING. Invest in economic transformation Investment Manager, We use a combination of desk-based research JPMorgan Japanese Investment Trust plc and company meetings to seek out fast Miyako Urabe growing, sustainable companies from across 2020 Citywire top 30 female fund manager the market cap spectrum that are driving the long-term transformation of the Japanese and other economies. Our focus is on innovative stocks and global leaders in high-growth industries, such as robotics, e-commerce, fintech and computer gaming. Stocks are selected based on rigorous analysis. We look for competitively positioned companies with robust balance sheets, strong cash flows and attractive long-term growth potential. We also consider the performance of companies across a range of environmental, social and governance factors. The result is a portfolio of Japanese stocks that we believe offers the most attractive opportunities for sustainable long-term capital growth. 50+ 25 4,000+ 92.9% Years’ experience Japan-based investment Japanese company Active share investing in the Japan professionals visits each year WHY INVEST IN THE JPMORGAN JAPANESE INVESTMENT TRUST Japanese_pp01_05.qxp 20/05/2021 07:43 Page 2 CONTENTS Half Year Performance Financial Statements 4 Financial Highlights 20 Statement of Comprehensive Income 21 Statement of Changes in Equity 22 Statement of Financial Position Chairman’s Statement 23 Statement of Cash Flows 7 Chairman’s Statement 24 Notes to the Financial Statements Investment Review Interim Management 10 Investment Managers’ Report 28 Report 14 Environmental, Social and Governance Report (‘ESG’) 17 Sector Analysis Shareholder Information 18 List of Investments 30 Glossary of Terms and Alternative Performance Measures (‘APMs’) 32 Where to buy J.P. Morgan Investment Trusts 33 Information about the Company 2 | JPMORGAN JAPANESE INVESTMENT TRUST PLC. HALF YEAR REPORT & FINANCIAL STATEMENTS 2021 Japanese_pp01_05.qxp 20/05/2021 07:43 Page 3 Half Year Performance Japanese_pp01_05.qxp 20/05/2021 07:43 Page 4 FINANCIAL HIGHLIGHTS TOTAL RETURNS (INCLUDING DIVIDENDS REINVESTED) TO 31ST MARCH 2021 3 Year 5 Year 10 Year 6 months 1 Year Cumulative Cumulative Cumulative Return to shareholders1,A +325.3% +4.6% +71.3% +49.9% +145.4% Return on net assets2,A +271.9% +0.5% +47.6% +43.0% +114.2% Benchmark return3 +136.6% +8.5% +24.4% +18.2% +69.1% Net asset return performance compared to benchmark return +45.1% +135.3% –8.0% +23.2% +24.8% 1 Source: Morningstar. 2 Source: Morningstar/J.P. Morgan, using cum income net asset value per share with debt at fair value. 3 Source: Morningstar. The Company’s benchmark is the Tokyo Stock Exchange First Section Index (TOPIX) expressed in sterling terms. A Alternative Performance Measure (‘APM’). A glossary of terms and APMs is provided on pages 30 and 31. 4 | JPMORGAN JAPANESE INVESTMENT TRUST PLC. HALF YEAR REPORT & FINANCIAL STATEMENTS 2021 Japanese_pp01_05.qxp 20/05/2021 07:43 Page 5 FINANCIAL HIGHLIGHTS FINANCIAL DATA (EXCLUDING DIVIDENDS REINVESTED) 31st March 30th September 2021 2020 % change Key financial data as at 31st March Shareholders’ funds (£’000) 1,065,642 1,072,164 –0.61 Total Assets 1,222,776 1,237,303 –1.21 Number of shares in issue 159,583,984 159,839,078 –0.21 Net asset value per share with debt at par valueA 667.8p 670.8p –0.51 Net asset value per share with debt a fair valueA 664.3p 665.8p –0.22 Share price 643.0p 619.0p +3.93 Share price discount to net asset value per share with debt at par valueA 3.7% 7.7% Share price discount to net asset value per share with debt at fair valueA 3.2% 7.0% 12 month average share price discount to net asset value per share with debt at fair value4 6.7% 10.4% Exchange rate 1 £ = ¥ 152.5 1 £ = ¥ 136.4 +11.7 Shares in issue 159,583,984 159,839,078 GearingA 12.7% 14.8% Ongoing chargesA 0.60% 0.65% 1 % change, excluding dividends paid. Including dividends, the total return is 0.3%. 2 % change, excluding dividends paid. Including dividends, the total return is 0.5%. 3 % change, excluding dividends paid. Including dividends, the total return is 4.6%. 4 Morningstar/J.P.Morgan. A Alternative Performance Measure (‘APM’). A glossary of terms and APMs is provided on pages 30 and 31. HALF YEAR PERFORMANCE | 5 Japanese_pp06_08.qxp 20/05/2021 07:44 Page 6 Chairman’s Statement Japanese_pp06_08.qxp 20/05/2021 07:44 Page 7 CHAIRMAN’S STATEMENT Investment Performance In my last Chairman’s statement in December 2020, I reminded investors that given the Manager’s high conviction, unconstrained approach which is focussed on finding the best investment ideas in Japan, there will from time to time be periods of underperformance. That reminder now appears timely. For the six months ended 31st March 2021 the total return on net assets, with debt calculated at fair value1, was 0.5%. This compares with a total return for the same period from the Company’s benchmark index return, the Tokyo Stock Exchange First Section (TOPIX) Index (in sterling terms), of 8.5%. The share price Christopher Samuel Chairman total return, with dividends reinvested, increased over the same period by 4.6% (from 619.0p to 643.0p) as the discount narrowed. As the Investment Managers explain in their report on the following pages, the principal reason for the underperformance was a move in market sentiment towards companies expected to benefit from the rise in economic activity following the vaccine rollout. Owing to the expected short term nature of these gains they are not companies the Investment Managers had invested in. Performance was also negatively impacted by the more general rotation from growth to value stocks.