Annual Report JPMorgan Japanese Investment Trust plc · 2 JPMorgan Japanese Investment Trust plc. Annual Report & Accounts 2014 Investment Performance In the year to 30th September

Annual Report2014JPMorgan Japanese Investment Trust plc

Annual Report & Accounts for the year ended 30th September 2014

Features

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).

Further details on investment policies and risk management are given in the BusinessReview on page 14.

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.

As at 30th September 2014, the Company’s share capital comprised 161,248,078(2013: 161,248,078) ordinary 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’).

Association of Investment Companies

The Company is a member of the Association of Investment Companies (‘AIC’).

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.

Website

The Company’s website can be found at www.jpmjapanese.co.uk and includes usefulinformation about the Company, such as daily prices, factsheets and current andhistoric half year and annual reports.

Contents

1 Financial Results

Strategic Report

2 Chairman’s Statement5 Investment Manager’s Report8 Performance9 Ten Year Financial Record10 Ten Largest Investments11 Sector Analysis12 List of Investments 14 Business Review

Governance

19 Board of Directors21 Directors’ Report24 Corporate Governance Statement30 Directors’ Remuneration Report33 Statement of Directors’

Responsibilities

34 Independent Auditors’ Report

Financial Statements

38 Income Statement39 Reconciliation of Movements in

Shareholders’ Funds40 Balance Sheet41 Cash Flow Statement42 Notes to the Accounts

Shareholder Information

58 Notice of Annual General Meeting61 Glossary of Terms and Definitions65 Information about the Company

Financial Data 2014 2013 % change

Net asset value, share price and discount at 30th SeptemberShareholders’ funds (£’000) 408,462 431,876 –5.4Net asset value per share 253.3p 267.8p –5.4Share price 218.0p 238.3p –8.5Share price discount to net asset value 13.9% 11.0%Exchange rate £1 = ¥177.8 £1 = ¥158.9 +11.9Shares in issue 161,248,078 161,248,078 —

Revenue for the year ended 30th SeptemberGross revenue attributable to shareholders (£’000) 5,715 6,041 –5.4Net revenue attributable to shareholders (£’000) 3,963 4,480 –11.5Earnings per share 2.46p 2.78p –11.5Dividend per share 2.80p 2.80p —

Gearing5 12.7% 13.7%

Ongoing Charges6 0.78% 0.78%

A glossary of terms and definitions is provided on page 61.

1Total returns (includes dividends reinvested).2S ource: J.P. Morgan.3Source: Morningstar.4Source: Datastream. The Company’s benchmark is The Tokyo Stock Exchange 1st Section Index (TOPIX) expressed in sterling terms.5Gearing represents the excess amount above shareholders’ funds of total assets (including net current assets/(liabilities)) less cash/cash equivalents, expressed as a percentage ofshareholders’ funds. If the amount calculated is negative, this is shown as a ‘net cash’ position.6Management fee and all other operating expenses excluding any finance costs, expressed as a percentage of the average of the daily net assets during the year. Ongoing chargesare calculated in accordance with guidance issued by the Association of Investment Companies in May 2012.

JPMorgan Japanese Investment Trust plc. Annual Report & Accounts 2014 1

–7.4%Return to shareholders1,3

(2013: +57.8%)

–5.3%Underperformance of Benchmark4

(2013: +15.6%)

2.80pDividend(2013: 2.80p)

–4.4%Return on net assets1,2

(2013: +45.9%)

+0.9%Benchmark return1,3,4

(2013:+30.3%)

Financial ResultsTotal returns

JPMorgan Japanese Investment Trust plc. Annual Report & Accounts 20142

Investment Performance

In the year to 30th September 2014, the Company’s net assets fell by 4.4% in sterlingterms, compared with the Tokyo Stock Exchange First Section (TOPIX) Index (ourbenchmark), which rose by 0.9%. The returns are calculated on a total return basis insterling terms and were impacted by the movement in the yen/sterling rate from yen158.9 at the beginning of the year to yen 177.8 at its conclusion. The share price ofyour Company fell by 7.4% during the year, assuming the reinvestment of thedividend. The results for the year to 30th September 2014 are disappointing though,over the two, three and five years ended 30th September 2014, the portfolio hasoutperformed the benchmark in sterling terms.

Revenue and Dividends

Income received during the year fell with earnings per share for the full year fallingto 2.46p (2013: 2.78p). However, in light of an apparent upward trend in dividendpayments by Japanese companies, the Board proposes, subject to shareholders’approval at the Annual General Meeting, to pay an unchanged final dividend of 2.80pper share (2013: 2.80p) on 23rd December 2014 to shareholders on the register at theclose of business on 28th November 2014 (ex-dividend date 27th November 2014).The objective of the Company is capital growth, any dividend paid being a residual ofthe portfolio structure and, in the event that this revenue increase is not forthcoming,it would be difficult to continue to maintain the dividend at this level. Incomereceived by the Company is subject to certain distribution requirements that must bemet 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 gearingwithin these agreed levels. On 30th September 2014, the Company had a gearinglevel of 12.7%. This level of gearing at the end of the financial year reflected theconfidence of the Investment Manager in the individual companies held in theportfolio. The management of gearing has also been active during the year with thelevel ranging between geared positions of 11% and 15% (month end figures).

The funds available to be drawn down by the Company are ¥12 billion and the loanfacility provides for additional capacity to increase gearing to ¥15 billion, shouldmarket conditions allow.

Investment Manager

The Company’s objective is to provide shareholders with capital growth from aportfolio of investments in Japanese companies and on a longer term view yourInvestment Manager has achieved this outperformance against our benchmark,equally through stock selection and gearing.

Strategic ReportChairman’s Statement


Board of Directors

Having been a Director since 1996, I am retiring at the conclusion of the AnnualGeneral Meeting. Over the time I have served on the Board Japan has faced bothglobal and domestic economic difficulties but, despite this, I remain convinced thatthe country will offer continuing investment opportunities for your portfolio.

I am delighted that Andrew Fleming, a Director since 2004, will be appointedChairman in my place.

In selecting a new Director, an outside consultant, Trust Associates, was appointed.Following interviews with all members of the Board, Christopher Samuel is to beappointed as a Director following the close of the Annual General Meeting on19th December 2014. Christopher was previously Chief Executive Officer of Ignis AssetManagement and will bring to the Board considerable experience of the investmentmanagement industry as well as Japan where he was based earlier in his career.

In accordance with the Company’s Articles of Association, Andrew Fleming and KeithPercy, having served on the Board for more than nine years, are retiring and seekingreappointment. Alan Barber will also retire and seek reappointment to comply withthe Company’s Articles of Association which requires a third of the Board to retire byrotation (excluding those with tenure in excess of nine years).

Alan, Andrew and Keith all bring a wealth of experience to the Board and I have nohesitation in recommending their reappointment.

Authority to Repurchase the Company’s Shares

At last year’s Annual General Meeting, shareholders granted the Directors’ authorityto repurchase up to 14.99% of the Company’s shares. No shares have beenrepurchased for cancellation during the year (2013: 70,000). The Directors continueto believe that the power to repurchase shares is of ongoing benefit to shareholdersand therefore propose that the authority be renewed for a further period. Sharerepurchases continue to be a useful tool for decreasing discount volatility and thisapproach will be used when considered to be appropriate by the Board.

Alternative Investment Fund Managers Directive (‘AIFMD’)

As required under AIFMD, with effect from 1st July 2014, the Company appointedJPMorgan Funds Limited as its Alternative Investment Fund Manager under a newinvestment management agreement. Portfolio management is delegated byJPMorgan Funds Limited to JPMorgan Asset Management (UK) Limited, thus retainingprevious portfolio management arrangements. The management fee and noticeperiod arrangements remain unchanged. The Company appointed BNY Mellon Trust& Depositary (UK) Limited to act as the Company’s Depositary, a new requirementunder AIFMD. JPMorgan Chase Bank, NA remains the Company’s Custodian, but as adelegate of the Depositary. JPMorgan Funds Limited was also appointed as CompanySecretary to the Company on 1st July 2014.


Independent Auditors

These accounts are the first to be audited by PricewaterhouseCoopers LLP. You willfind their first audit report to shareholders on page 34.

Annual General Meeting

This year’s Annual General Meeting will be held on Friday, 19th December 2014 at2.00 p.m. at 60 Victoria Embankment, London EC4Y 0JP. As in previous years, inaddition to the formal part of the meeting, there will be a presentation from theInvestment Manager who will answer questions on the portfolio and performance.There will also be an opportunity to meet the Board, the Investment Manager andrepresentatives of JPMorgan after the meeting. I look forward to welcoming as manyof you as possible to this meeting.

If you have any detailed or technical questions, it would be helpful if you could raisethese in advance of the meeting with the Company Secretary at 60 VictoriaEmbankment, London EC4Y 0JP. Alternatively, questions may be submitted via theCompany’s website (www.jpmjapanese.co.uk). Shareholders who are unable to attendthe Annual General Meeting are encouraged to use their proxy votes. Proxy votesmay be lodged electronically, whether shares are held through CREST or in certificateform, and full details are set out on the form of proxy.

Prospects

While it is disappointing that, to date, Prime Minister Abe has not made as muchprogress with his programme of revitalisation as initially expected, the recentdecision by the Bank of Japan to reinforce the process of monetary easing was asurprise to most observers. It perhaps reflects an opportunity for the Government topush forward their aim of improved economic growth coupled with an element ofinflation.

Your Investment Manager has laid out the areas where he believes opportunities willarise for your portfolio and I continue to think the well-managed and entrepreneurialcompanies in these sectors will provide investment opportunities for the future.

Jeremy Paulson-EllisChairman 12th November 2014

Strategic Report continuedChairman’s Statement continued


The benchmark TOPIX index rose by around 1% in sterling terms during the yearended 30th September 2014 with the Company’s NAV falling 4.4%. Over three yearsthe Company has returned 37% versus 25% for the index. Over five years 46% versus29% for the index.

Review

Prime Minister Abe remained popular which is remarkable in a country that hasbecome accustomed to a revolving door of prime ministers. This stability is positive.The global economic recovery, led by the United States, continued. The yenweakened and, perhaps most importantly of all from a stock market perspective,corporate earnings were strong while progress was made with corporate governance.

Economic data was mixed. On the positive side land prices rose, office vacancy ratesfell and the unemployment rate hit a multi-year low of 3.5%. However, although therehas been wage growth this has not kept pace with inflation. The consumption tax hikein April, from 5% to 8%, led to weak GDP numbers in the second quarter and so farthe recovery from this has been tepid. This is one reason why the Bank of Japanadded to its stimulus measures at the end of October 2014. Export data has also beenlacklustre despite the weaker yen. We attribute this softness to the ongoing shift ofproduction overseas by Japanese companies and the loss of competitiveness incertain industries such as consumer electronics.

The yen weakened substantially. The sharp depreciation at the end of the fiscal yearwas driven by the belief that the US Federal Reserve will gradually tighten policy dueto the improving economy while the Bank of Japan will continue its monetary easingprogramme. This view was cemented when the Bank of Japan announced its secondround of quantitative easing in October 2014. Monetary policy in Japan is now moreaggressive than in other developed markets. The weaker yen is a tailwind for most ofcorporate Japan but we have to monitor closely the impact on everyday lives whichhave been affected by rising import prices.

Corporate earnings continue to be the major positive. Earnings have been strong andanalyst projections for 2014 and 2015 have been revised up. This pattern continuedduring the interim results season in November 2014 and shareholder returns areimproving. In the first half of the year almost 250 companies set up share repurchaseprogrammes for a total value of ¥1.85 trillion, the highest tally since the first half of2008. Some companies increased their dividends including a few which hadpreviously eschewed substantial shareholder returns. A total of 160 institutionalinvestors, including J.P. Morgan Asset Management, have signed up to a newstewardship code which aims to boost transparency and improve corporategovernance. One notable point in the October Bank of Japan easing was itsannouncement to buy Exchange Traded Funds (ETFs) including an ETF linked to theJPX 400 index, an index that places emphasis on companies with high and improvingreturns on equity amongst other factors. We hope that progress with corporategovernance is the start of a long-term structural trend.

Portfolio Performance

The underperformance versus the benchmark over the year was due to poor stockselection. However, gearing was positive. At the sector allocation level the major

Investment Manager’s Report


positive contributors were the overweight in electric appliances (technologycompanies engaged in activities such as factory automation and electronics in cars)and the non-ownership of electric power, steel and securities. The overweightpositions in real estate, services and other financials detracted. The top five stockcontributors were Nippon Shinyaku (pharmaceuticals), Shimano (bicycle parts), Casio(electronics), Daikin (air conditioning) and Ono Pharmaceutical. The bottom five wereSanrio (consumer goods), Digital Garage (internet), Kakaku.com (internet), SegaSammy (gaming) and Rakuten (internet).

We are reassured by the much improved long term performance of the Company butany period of underperformance is disappointing. The portfolio strategy is covered indetail below but we take multi-year views on companies and sectors. We carefullyanalyse each investment case and decide if the reason for the investment still stands.Internet related stocks, such as Kakaku.com Digital Garage and Rakuten have manyyears of growth ahead and we have confidence in the management teams. We do notbelieve anything has happened to alter that view. By contrast, our expectation thatlegislation permitting casinos would be quickly passed and fundamentally change thelong-term earnings outlook for a number of stocks was wrong and we have soldpositions in related companies such as Sega Sammy. Similarly the investment case forSanrio, the owner of the Hello Kitty character, changed and therefore we sold theposition.

Portfolio Strategy

At J.P. Morgan Asset Management we use a bottom-up process, centred aroundmeetings with companies, to pick the very best stocks for the portfolio. There aredifferent reasons why we choose to invest in any particular company and these areoften specific to each investment. However, it is possible to look at the portfolio interms of some of the broad themes we are trying to capture.

• The ageing population. The Japanese population has already started to fall andthe percentage of elderly is increasing. This is negative for some companies but itis a following wind for others. As such, we expect to see substantial consolidationas small companies with no successor disappear. This is why we own Nihon MACenter which advises companies how to deal with this issue.

• The importance of Asia. Japan is fortunate that by geographic chance it is locatedin one of the fastest growing regions in the world. Over the last 30 years thepercentage of exports that is destined for Asia has increased from roughly 25%to 55%. Rising incomes and the growing middle class mean greater demand forsome Japanese products. This is the reason we own companies such asair-conditioner maker Daikin. There is still low penetration of air-conditioning inhot Asian countries and higher incomes make this product more affordable. Theflip side of rising wages is that it is becoming more expensive to manufacturethroughout Asia. There is, therefore, a trend towards automation of factories.Japan has many world class companies in this field and we own several, such asFanuc.

Performance attribution for theyear ended 30th September 2014

% %

Contributions to total returns

Benchmark return +0.9

Stock/Sector -5.8Gearing/cash +1.3

Investment Managercontribution -4.5

Portfolio total return -3.6

Management fee/other expenses -0.8

Return on net assets -4.4

Source: JPMAM and Morningstar.

All figures are on a total return basis.

Performance attribution analyses howthe Company achieved its performancerelative to its benchmark.

A glossary of terms and definitions isprovided on page 61.

Strategic Report continuedInvestment Manager’s Report continued


• The increasing use of electronics in cars. Ultimately cars may be able to drivethemselves but even now there is an increasing proliferation of electronics incars. For example, the headlights of some cars already automatically switch fromfull beam to dipped. We own shares in several companies that stand to benefit,including Murata.

• New Japanese brands. Twenty years ago Japanese consumer electronicscompanies were global leaders with very valuable brands. Now, their productshave become commoditised and they have been surpassed by low-costmanufacturers in Taiwan, Korea and China. However, Japan remains very strongin other areas. Shimano is dominant in gears for bicycles, Kikkoman in soy sauce.

• Ecommerce. The percentage of online retail in Japan, at around 4% of total retailsales, is very much lower than other developed countries such as the UnitedKingdom where the equivalent figure is well over 12%. There is no basic reasonwhy this should be the case and growth is strong. This is one reason why wecontinue to hold the number one ecommerce company Rakuten.

• The growth in inbound tourism. For the first time ever the number of touristscoming to Japan has outnumbered Japanese going overseas. There are tworeasons for this. First, visa restrictions for some nationalities have been lifted.Second, Japan has become much cheaper following the depreciation of the yen.Retailer Don Quijote, which is a popular shopping destination for tourists, is oneexample of a company we hold that is benefitting from this.

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 increasinglyunusual and we expect this to be a source of continued competitive advantage.Overall, we are positive on the outlook for the economy, market, active fundmanagement and the performance of the Company.

Nicholas WeindlingInvestment Manager 12th November 2014


Performance Relative to BenchmarkFigures have been rebased to 100 at 30th September 2004

Source: Morningstar.

JPMorgan Japanese – share price total return.

JPMorgan Japanese – net asset value total return.

The benchmark index is represented by the grey horizontal line.

Ten Year PerformanceFigures have been rebased to 100 at 30th September 2004

Source: Morningstar/MSCI.



Benchmark.

Strategic Report continuedPerformance

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At 30th September 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Total assets less current liabilities (£’m) 393.1 504.3 511.7 431.8 298.1 315.7 306.1 326.6 302.1 494.8 408.4

Net asset value per share (p) 211.6 271.4 275.8 244.3 171.3 185.9 189.6 194.7 187.3 267.8 253.3

Share price (p) 188.5 263.0 254.5 214.5 145.5 157.0 160.0 166.8 154.5 238.3 218.0

Discount (%) 10.9 3.1 7.7 12.2 15.1 15.5 15.6 14.3 17.5 11.0 13.9

Gearing1/(net cash) (%) 6.8 13.8 12.5 12.3 8.0 7.6 (1.8) (0.6) 9.0 13.7 12.7

Yen exchange rate (=£1) 199.4 200.5 220.5 234.3 189.2 143.2 131.6 120.1 125.6 158.9 177.8

Year ended 30th September

Gross revenue attributable to shareholders (£’000) 5,272 6,537 8,450 7,068 7,160 7,596 6,138 7,323 8,121 6,041 5,715

Earnings per share (p) 2.06 2.75 3.60 2.96 2.97 2.96 2.91 3.49 4.10 2.78 2.46

Dividend per share (p) Nil Nil Nil 2.80 2.80 2.80 2.80 3.30 3.65 2.80 2.80

Ongoing charges2 (%) 0.83 0.73 0.78 0.75 0.79 0.77 0.81 0.86 0.77 0.78 0.78

Rebased to 100 at 30th September 2004

Share price total return3 100.0 139.5 135.0 113.8 78.3 86.4 89.8 95.1 89.9 141.9 131.4

Net asset value total return3 100.0 128.3 130.9 114.6 81.0 89.5 92.8 96.3 94.0 137.1 131.1

Benchmark3,4 100.0 128.9 135.0 129.0 109.4 123.3 124.3 127.8 121.0 157.7 159.2

A glossary of terms and definitions is provided on page 61.

1Gearing represents the excess amount above shareholders’ funds of total assets (including net current assets/(liabilities)) less cash/cash equivalents, expressed as a percentage ofshareholders’ funds. If the amount calculated is negative, this is shown as a ‘net cash’ position.2Ongoing charges are calculated in accordance with guidance issued by the AIC in May 2012 as follows. Management fee and all other operating expenses excluding any finance costs,expressed as a percentage of the average of the daily net assets during the year (2009 to 2011: Total Expense Ratio: Management fee and all other operating expenses excluding anyfinance costs, expressed as a percentage of the average of the month end net assets during the year; 2008 and prior years: expressed as the average of the opening and closing netassets).3Source: Morningstar.4Source: Datastream. The Company’s benchmark is The Tokyo Stock Exchange 1st Section Index (TOPIX) expressed in sterling terms.

Ten Year Financial Record


2014 2013Valuation Valuation

Company Sector £’000 %1 £’000 %1

Mazda Motor Transportation Equipment 14,974 3.3 12,226 2.5Mazda Motor manufactures and sells automobiles, trucks and auto parts.The company operates its business worldwide.

Hitachi Electric Appliances 13,947 3.0 12,050 2.5Hitachi manufactures communications and electronic equipment, heavyelectrical and industrial machinery and consumer electronics. Thecompany’s diverse product line ranges from nuclear power systems tokitchen appliances. Hitachi also operates subsidiaries in the wire andcable, metal and chemical industries.

Mitsubishi UFJ Banks 13,767 3.0 18,226 3.7Mitsubishi UFJ is Japan’s largest bank which offers personal banking,corporate banking, investment banking, investment management,mortgage and credit card services worldwide.

Softbank Information & 13,112 2.8 15,778 3.2Softbank provides telecommunication services. The company also Communicationoperates ADSL (Asymmetric Digital Subscriber Line) and fibre optichigh-speed internet connection, ecommerce businesses and internetbased advertising and auction businesses.

Sumitomo Mitsui Financial Banks 12,786 2.8 21,957 4.5Sumitomo Mitsui Financial is Japan’s second largest bank. The companyprovides a wide range of banking services, financial products and servicesworldwide.

Keyence2 Electric Appliances 12,641 2.7 5,502 1.1Keyence develops, manufactures and sells sensors and measuringinstruments used for factory automation and high technology hobbyproducts. The company’s products include fibre optic sensors,photoelectric sensors, programmable logic controllers, laser scanmicrometers, bar code readers and radio-controlled model cars.

Fuji Heavy Industries2 Transportation Equipment 11,169 2.4 9,359 1.9Fuji Heavy Industries manufactures passenger cars, buses, motor vehicleparts and industrial machinery. The company also produces aircraft partsand supplies these to the defence agency and Boeing Co. Fuji HeavyIndustries sells its passenger cars under the Subaru brand.

Orix Other Financing 10,914 2.4 15,779 3.2Orix provides comprehensive financial services throughout the world. BusinessThe company’s business lines include leasing, instalment loans, real estateloans, life insurance, banking, securities brokerage, venture capital andconsumer finance. Orix has also recently purchased an asset managementbusiness in Holland.

Daikin Industries2 Machinery 10,809 2.3 10,442 2.1Daikin manufactures air conditioning equipment for household andcommercial use. The company also produces fluorine chemical productssuch as fluorinated hydrocarbon gas and shells and warheads for thedefence industry.

Sumitomo Electric2 Nonferrous Metals 10,615 2.3 9,457 1.9Sumitomo Electric manufactures electric wires, cables and their relatedequipment. The company’s products include optical fibres, wire harnesses,antennas for broadcasting stations and electric monitoring systems.Sumitomo Electric also produces disc brakes and antilock braking systemsfor automobiles. It also produces printed circuit boards.

Total3 124,734 27.0

1Based on total portfolio investments of £459.6m (2013: £487.9m).2Not included in the ten largest investments at 30th September 2013.3At 30th September 2013, the value of the ten largest investments amounted to £145.2m representing 29.8% of total portfolio investments.

Strategic Report continuedTen Largest Investmentsat 30th September 2014


30th September 2014 30th September 2013Portfolio Benchmark Portfolio Benchmark

% % % %

Processing 59.7 48.5 53.4 46.0 Electric Appliances 20.6 13.2 7.1 11.3Services 11.3 2.5 12.0 2.2Information & Communications 9.7 7.1 8.6 7.0Transportation Equipment 7.6 11.9 9.0 12.0Machinery 4.8 5.5 7.4 5.2Glass & Ceramics Products 2.6 1.0 3.6 1.0Wholesale 2.2 4.5 5.2 4.6Other Products 0.9 1.4 — 1.4Precision Instruments — 1.4 0.5 1.3

Consumer 13.9 17.3 13.7 17.5 Retail Trade 7.0 4.1 8.2 4.2Pharmaceuticals 5.4 4.6 3.2 4.3Foods 1.5 4.0 2.3 4.0Other Consumer — 4.6 — 5.0

Financial 12.3 14.0 17.8 15.5 Banks 8.1 9.0 11.2 10.1Other Financing Business 4.2 1.3 6.6 1.3Insurance — 2.2 — 2.3Security & Commodity Futures — 1.5 — 1.8

Basic 8.1 7.3 4.8 6.9 Chemicals 4.6 5.7 2.0 5.3Nonferrous Metals 2.3 1.0 1.9 1.0Metal Products 1.2 0.6 0.9 0.6

Assets 6.0 5.9 10.3 6.4 Real Estate 5.2 3.1 8.4 3.8Construction 0.8 2.8 1.9 2.6

Utilities — 7.0 — 7.7

Total 100.0 100.0 100.0 100.0

Based on the total portfolio investments of £459.6m (2013: £487.9m).

Sector Analysis


ValuationCompany £’000

ProcessingElectric AppliancesHitachi 13,947Keyence 12,641Murata 9,795Omron 9,431Mitsubishi Electric 9,314Casio Computer 8,593Fanuc 8,153Minebea 6,696Sysmex 6,413Nidec 6,396Obara 3,240

94,619ServicesRakuten 8,738M3 6,926Sohgo Securities 6,368Cyberagent 5,232H.I.S 4,901Cookpad 4,224Oriental Land 4,172Nihon M&A Center 4,008Kakaku.com 3,824Infomart Corporation 3,612

52,005Information & CommunicationsSoftbank 13,112KDDI 10,185Nippon Telegraph & Telephone 8,123Hikari Tsushin 5,147Otsuka 4,335Digital Garage 3,797

44,699Transportation EquipmentMazda Motor 14,974Fuji Heavy Industries 11,169Shimano 7,258Yamaha Motor 1,651

35,052


MachineryDaikin Industries 10,809Kubota 9,923Makita 1,241

21,973Glass & Ceramics ProductsTaiheiyo Cement 5,955Nippon Sheet Glass 5,685

11,640WholesaleDaiichiKosho 5,076Misumi 4,992

10,068Other ProductsPigeon 4,299

4,299

Total Processing 274,355

ConsumerRetail TradeDon Quijote 9,317Cosmos Pharmaceutical 7,347MonotaRO 6,999Seria 4,332Askul 4,182

32,177PharmaceuticalsAstellas Pharma 8,211Nippon Shinyaku 7,699ONO Pharmaceutical 7,633Peptidream 987

24,530FoodsKikkoman 4,112Coca-Cola 2,904

7,016

Total Consumer 63,723

Strategic Report continuedList of Investmentsat 30th September 2014



FinancialBanksMitsubishi UFJ 13,767Sumitomo Mitsui Financial 12,786Seven Bank 6,208Shinsei Bank 4,308

37,069Other Financing BusinessOrix 10,914Industrial & Infrastructure Fund 3,869Aeon Credit Service 2,995Credit Saison 1,788

19,566

Total Financial 56,635

BasicChemicalsUnicharm 9,117Kansai Paint 7,737Nifco 4,042

20,896Nonferrous MetalsSumitomo Electric 10,615

10,615Metal ProductsSanwa 5,632

5,632

Total Basic 37,143


AssetsReal EstateSumitomo Realty & Development 7,994Leopalace21 4,341Japan Airport Terminal 4,103Park 24 3,697Tokyu Fudosan 3,642

23,777ConstructionSho-Bond 4,000

4,000

Total Assets 27,777

Total Portfolio 459,633

The portfolio comprises entirely equity investments.


The aim of the Strategic Report is to provide shareholders withthe ability to assess how the Directors have performed theirduty to promote the success of the Company during the yearunder review. To assist shareholders with this assessment, theStrategic Report sets out the structure and objective of theCompany, its investment policies and risk management,investment limits and restrictions, performance and keyperformance indicators, share capital, principal risks and howthe Company seeks to manage those risks, the Company’senvironmental, social and ethical policy and finally its futuredevelopments.

Business Review

Business of the Company JPMorgan Japanese Investment Trust plc is an investment trustcompany that has a premium listing on the London StockExchange and is fully listed on the New Zealand StockExchange. In seeking to achieve its objectives, the Companyemploys JPMorgan Funds Limited (‘JPMF’ or the ‘Manager’)which, in turn, delegates portfolio management to JPMorganAsset Management (UK) Limited, to actively manage theCompany’s assets. The Board has determined investmentpolicies and related guidelines and limits. These objectives,investment policies and related guidelines and limits aredetailed below.

The Company is subject to UK and European legislation andregulations including UK company law, UK Financial ReportingStandards, the UK Listing, Prospectus, Disclosure andTransparency Rules, taxation law and the Company’s ownArticles of Association.

The Company is an investment company within the meaningof Section 833 of the Companies Act 2006 and has beenapproved by HM Revenue & Customs as an investment trust(for the purposes of Sections 1158 and 1159 of the CorporationTax Act 2010). As a result the Company is not liable for taxationon capital gains. The Directors have no reason to believe thatapproval will not continue to be retained. The Company is nota close company for taxation purposes.

Investment ObjectiveThe Company’s objective is to achieve capital growth frominvestments in Japanese companies by long termoutperformance of the Company’s benchmark index, the TokyoStock Exchange 1st Section Index (‘TOPIX’) expressed in sterlingterms.

Investment Policies and Risk ManagementIn order to achieve its stated investment policy and to seek tomanage investment risks, the Company invests in a diversified

portfolio of quoted Japanese companies. The number ofinvestments in the portfolio will normally range between 50and 100. The average number of holdings in the portfolio hasreduced in recent years as the Manager has focused on thosecompanies that have strong balance sheets and are notaffected by macro-economic issues. The Company makes useof both long and short term borrowings to increase returns andfocuses on first hand company research and analysis.

Investment Restrictions and GuidelinesThe Board seeks to manage the Company’s risk by imposingvarious investment limits and restrictions:

• The Company must maintain 97.5% of investments inJapanese securities or securities providing an indirectinvestment in Japan. (30th September 2014: 100%).

• No investment to be more than 5% in excess of benchmarkweighting at time of purchase. (30th September 2014: nil).

• The Company does not normally invest in unquotedinvestments and to do so requires prior Board approval.(30th September 2014: nil).

• The Company’s gearing policy is to operate within a rangeof 5% net cash to 15% geared in normal market conditions.(30th September 2014: 12.7%).

• The Company does not normally enter into derivativetransactions and to do so requires prior Board approval.(30th September 2014: nil).

• The Company will not invest more than 15% of its grossassets in other UK listed investment companies and willnot invest more than 10% of its gross assets in companiesthat themselves may invest more than 15% of gross assetsin UK listed investment companies. (30th September2014: nil).

• The Investment Manager does not hedge the portfolioagainst foreign currency risk.

These limits and restrictions may be varied by the Board at anytime at its discretion.

Monitoring of ComplianceCompliance with the Board’s investment restrictions andguidelines is monitored continuously by the Manager and isreported to the Board on a monthly basis.

PerformanceIn the year ended 30th September 2014, the Companyproduced a total return to shareholders of -7.4% and a totalreturn on net assets of -4.4%. This compares with thereturn on the Company’s benchmark of +0.9%. As at

Strategic Report continuedBusiness Review


30th September 2014, the value of the Company’s investmentportfolio was £459.6 million. The Investment Manager’sReport on pages 5 to 7 includes a review of developmentsduring the year as well as information on investment activitywithin the Company’s portfolio.

Total Loss, Revenue and Dividends Gross total loss for the year amounted to £14.5 million (2013:return £139.8 million) and the net total loss after deductingthemanagement fee, other administrative expenses, financecosts and taxation, amounted to £18.9 million (2013: return£135.8 million). Distributable income for the year amountedto £4.0million (2013: £4.5 million).

The Directors have declared a dividend of 2.80p (2013: 2.80p)per share. This dividend amounts to £4.5 million (2013:£4.5 million) and the revenue reserve after allowing for thedividend will amount to £1.9 million (2013: £2.4 million).The dividend will be subject to shareholder approval at theforthcoming Annual General Meeting and is detailed furtherbelow.

Key Performance Indicators (‘KPIs’) The Board uses a number of financial KPIs to monitor andassess the performance of the Company. The principal KPIs are:

• Performance against the benchmark indexThis is the most important KPI by which performance isjudged. Information on the Company’s performance isgiven in the Chairman’s Statement and the InvestmentManager’s Report on pages 2 to 4 and 5 to 7 respectively.

Performance Relative to Benchmark IndexFigures have been rebased to 100 at 30th September 2004

Source: Morningstar.



The benchmark index is represented by the grey dotted horizontal line.

Ten Year PerformanceFigures have been rebased to 100 at 30th September 2004

Source: Morningstar/ MSCI.



Benchmark.

• Performance against the Company’s peers Whilst the principal objective is to achieve capital growthrelative to the benchmark, the Board also monitors theperformance relative to a broad range of competitor funds.

• Performance attributionThe purpose of performance attribution analysis is toassess how the Company achieved its performance relativeto its benchmark index, i.e. to understand the impact on theCompany’s relative performance of the variouscomponents such as asset allocation and stock selection.Details of the attribution analysis for the year ended30th September 2014 are given in the InvestmentManager’s Report on page 6.

• Share price discount to net asset value (‘NAV’) per shareThe Board recognises that the possibility of a wideningdiscount can be a key disadvantage of investment truststhat can discourage investors. The Board therefore hasa share repurchase programme which seeks to addressimbalances in supply of and demand for the Company’sshares within the market. Its aim is to minimise the volatilityand absolute level of the discount to NAV per share atwhich the Company’s shares trade in relation to its peers inthe sector. In the year to 30th September 2014, the sharestraded between a discount of 6.3% and 13.9% at an averageof 9.8%.

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Discount Performance

Source: Datastream (month end data).

JPMorgan Japanese – discount.

• Ongoing chargesThe ongoing charges represent the Company’smanagement fee and all other operating expensesexcluding any finance costs, expressed as a percentage ofthe average of the daily net assets during the year. Theongoing charges for the year ended 30th September 2014were 0.78% (2013: 0.78%). Each year the Board reviews ananalysis which shows a comparison of the Company’songoing charges and its main expenses against those of itspeers.

Share CapitalThe Company has the authority to repurchase shares in themarket for cancellation (or to be held in Treasury) and to issuenew shares for cash on behalf of the Company.

During the year the Company did not repurchase any ordinaryshares (2013: 70,000 repurchased for cancellation). No shareshave been repurchased for cancellation or into Treasury sincethe year end.

The Company did not issue any new shares during the year.

Resolutions to renew the authorities to issue new shares,reissue shares from Treasury and to repurchase shares forcancellation or to be held in Treasury will be put toshareholders at the forthcoming Annual General Meeting.It should be noted that the Board would only reissue sharesfrom Treasury at a premium to NAV. It is not seeking authorityto reissue shares from Treasury at a discount to NAV.

The full text of these resolutions is set out in the Notice ofMeeting on pages 58 and 59.

The Directors recommend a final dividend of 2.80p (2013: same)per share payable on 23rd December 2014 to holders on the

register at the close of business on 28th November 2014(ex dividend date 27th November 2014).

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

• Investment Underperformance and Strategy: Aninappropriate investment strategy, for example assetallocation, the level of gearing or the degree of portfoliorisk, may lead to underperformance against the Company’sbenchmark index and peer companies, resulting in theCompany’s shares trading on a wider discount.

The Board manages these risks by diversification ofinvestments and through its investment restrictions andguidelines, which are monitored and reported on by theManager. The Manager provides the Directors with timelyand accurate management information, includingperformance data and attribution analyses, revenueestimates, liquidity reports and shareholder analyses. TheBoard monitors the implementation and results of theinvestment process with the Investment Manager, whoattends all Board meetings, and reviews data which showstatistical measures of the Company’s risk profile. TheInvestment Manager employs the Company’s gearingtactically, within a strategic range set by the Board. TheBoard holds a separate meeting devoted to strategy eachyear.

• Market and Currency: Market risk arises from uncertaintyabout the future prices of the Company’s investments. Itrepresents the potential loss the Company might sufferthrough holding investments in the face of negative marketmovements. The Board considers asset allocation, stockselection and levels of gearing on a regular basis and has setinvestment restrictions and guidelines which are monitoredand reported on by the Manager. The Board monitors theimplementation and results of the investment process withthe Manager. The majority of the Company’s assets,liabilities and income are denominated in yen rather than inthe Company’s functional currency of sterling (in which itreports). As a result, movements in the yen : sterlingexchange rate may affect the sterling value of thoseitems. Therefore, there is an inherent risk from theseexchange rate movements. No foreign currency hedgingis undertaken. Further details about the foreign currencyrisk may be found in note 22 on pages 51 and 52.

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Strategic Report continuedBusiness Review continued


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

• Loss of Investment Team or Investment Manager: A suddendeparture of the Investment Manager or several membersof the investment management team could result in a shortterm deterioration in investment performance. TheManager takes steps to reduce the likelihood of such anevent by ensuring appropriate succession planning and theadoption of a team based approach, as well as specialefforts to retain key personnel.

• Discount: A disproportionate widening of the discountrelative to the Company’s peers could result in loss of valuefor shareholders. The Board regularly discusses discountpolicy and has set parameters for the Manager and theCompany’s broker to follow.

• Change of Corporate Control of the Manager: The Boardholds regular meetings with senior representatives of theManager in order to obtain assurance that the Managercontinues to demonstrate a high degree of commitment toits investment trust business through the provision ofsignificant resources.

• Accounting, Legal and Regulatory: In order to qualifyas an investment trust, the Company must complywith Section 1158 of the Corporation Tax Act 2010(‘Section 1158’). Details of the Company’s approval aregiven under ‘Business of the Company’ above. Were theCompany to breach Section 1158, it may lose investmenttrust status and, as a consequence, gains within theCompany’s portfolio would be subject to Capital GainsTax. The Section 1158 qualification criteria are continuallymonitored by the Manager and the results reported to theBoard each month. The Company must also comply withthe provisions of the Companies Act 2006 and, since itsshares are listed on the London Stock Exchange, the UKLAListing Rules, Disclosure and Transparency Rules (‘DTRs’)and, as an investment trust, the Alternative InvestmentFund Managers Directive (‘AIFMD’). A breach of theCompanies Act could result in the Company and/or theDirectors being fined or the subject of criminalproceedings. Breach of the UKLA Listing Rules or DTRscould result in the Company’s shares being suspendedfrom listing which in turn would breach Section 1158. The

Board relies on the services of its Company Secretary, theManager and its professional advisers to ensurecompliance with the Companies Act 2006, the UKLAListing Rules, DTRs and AIFMD.

• Corporate Governance and Shareholder Relations: Detailsof the Company’s compliance with Corporate Governancebest practice, including information on relations withshareholders, are set out in the Corporate GovernanceStatement on pages 24 to 29.

• Operational: Disruption to, or failure of, the Manager’saccounting, dealing or payments systems or the Depositaryor Custodian’s records may prevent accurate reporting andmonitoring of the Company’s financial position. Details ofhow the Board monitors the services provided by JPMF andits associates and the key elements designed to provideeffective risk management and internal control are includedwithin the Risk Management and Internal Controls section ofthe Corporate Governance Statement on pages 28 and 29.

• Going concern: Pursuant to the Sharman Report, Boards arenow advised to consider going concern as a potential risk,whether or not there is an apparent issue arising in relationthereto. Going concern is considered rigorously on anongoing basis and the Board’s statement on going concernis detailed on page 22.

• Financial: The financial risks faced by the Company includemarket price risk, liquidity risk and credit risk. Furtherdetails are disclosed in note 22 on pages 50 to 56.

Board DiversityWhen recruiting a new Director, the Board’s policy is to appointindividuals on merit. Diversity is important in bringing anappropriate range of skills and experience to the Board.

At 30th September 2014, there were five male Directors and nofemale Directors on the Board.

Employees, Social, Community and Human Rights IssuesThe Company is managed by JPMF, has no employees and all ofits Directors are non-executive, the day to day activities beingcarried out by third parties. There are therefore no disclosuresto be made in respect of employees. The Board notes thepolicy statements of JPMorgan Asset Management (UK) Limited(‘JPMAM’) in respect of Social, Community, Environmental andHuman Rights issues, as highlighted in italics.


Social, Community, Environmental and Human RightsJPMAM believes that companies should act in a socially responsiblemanner. Although our priority at all times is the best economic interestsof our clients, we recognise that, increasingly, non-financial issues suchas social and environmental factors have the potential to impact theshare price, as well as the reputation of companies. Specialists withinJPMAM’s environmental, social and governance (‘ESG’) team are taskedwith assessing how companies deal with and report on social andenvironmental risks and issues specific to their industry.

JPMAM is also a signatory to the United Nations Principles of ResponsibleInvestment, which commits participants to six principles, with the aim ofincorporating ESG criteria into their processes when making stockselection decisions and promoting ESG disclosure. Our detailed approachto how we implement the principles is available on request.

Greenhouse Gas EmissionsThe Company is managed by JPMF with portfolio managementdelegated to JPMAM. It has no employees and all of itsDirectors are non-executive, the day to day activities beingcarried out by third parties. There are therefore no disclosures

to be made in respect of employees. The Company itself has nopremises, consumes no electricity, gas or diesel fuel andconsequently does not have a measurable carbon footprint.JPMAM is a signatory to the Carbon Disclosure Project andJPMorgan Chase is a signatory to the Equator Principles onmanaging social and environmental risk in project finance.

Future Developments The future development of the Company is dependent on thesuccess of the Company’s investment strategy in the lightof economic and equity market developments and thecontinued support of its shareholders. The InvestmentManager discusses the outlook in his report on pages 5 to 7.

By order of the Board Rebecca Burtonwood for and on behalf of JPMorgan Funds Limited Company Secretary

12th November 2014

Strategic Report continuedBusiness Review continued


Jeremy Paulson-Ellis (Chairman)

A Director since 1996.

Last reappointed to the Board: 2013.

Until 30th June 2009, he was Chairman of Genesis Investment Management LLP,a specialist institutional investment manager. Prior to that Mr Paulson-Ellis wasChairman of Vickers da Costa Limited where he had responsibility for all their Japanesebusiness.

Connections with Manager: None.

Shared directorships with other Directors: None.

Alan Barber (Chairman of the Audit Committee)



Currently Non-Executive Chairman of the Management Consulting Group plc anda Director and Audit Committee Chairman of Witan Pacific Investment Trust plc. Formerlya Director of Impax Asian Environmental Markets plc, Mr Barber is a CharteredAccountant and was a partner in KPMG for twenty five years prior to his retirement in2004.



Andrew Fleming (Chairman Designate)



He has over thirty years of international investment management experience, whichincluded six years running an investment company in Tokyo and most recently was ChiefExecutive of Kames Capital. Mr Fleming is a member of the Investment Committee of theNational Trust.



GovernanceBoard of Directors


All Directors, with the exception of Mr Paulson-Ellis, are members of the AuditCommittee. All Directors are members of the Nomination and Remuneration Committee.All Directors are considered independent of the Manager.

Keith Percy



Currently Chairman of Brunner Investment Trust plc and a Director of Standard LifeEquity Income Trust plc and Henderson Smaller Companies Investment Trust plc,Mr Percy was formerly a Director of F&C Asset Management plc.



Sir Stephen Gomersall, KCMG



Deputy Chairman of Hitachi Europe and a director of a number of Hitachi Groupcompanies in the UK. Sir Stephen entered the Foreign & Commonwealth Office in 1970and held a number of appointments overseas including being Ambassador to Japanfrom 1999 to 2004. He has spent more than fourteen years living and working in Japan.



Governance continuedBoard of Directors continued


The Directors present their report and the audited financialstatements for the year ended 30th September 2014.

A number of disclosures previously incorporated in theDirectors’ Report are now included in the Strategic Report.These include: Business of the Company; Investment Objective;Investment Policies and Risk Management; InvestmentRestrictions and Guidelines; Performance; Total Return.Revenue and Dividends; KPIs; Share Capital; Principal Risks;Employee, Social, Community and Human Rights Issues; andFuture Developments.

Management of the Company

TheManager and Company Secretary to the Company isJPMorgan Funds Limited. The Manager is employed undera contract which can be terminated on six months’ notice,without penalty. If the Company wishes to terminate thecontract on shorter notice, the balance of remuneration ispayable by way of compensation.

The Manager is a wholly-owned subsidiary of JPMorgan ChaseBank which, through other subsidiaries, also providesaccounting, banking, dealing and custodian services to theCompany.

Portfolio management is delegated to JPMorgan AssetManagement (UK) Limited. The current ManagementAgreement was entered into with effect from 1st July 2014following the implementation of a number of changes requiredby the Alternative Investment Fund Managers Directive, asdetailed in the Chairman’s Statement on page 3.

From 1st December 2007, the Board and the Manager agreedthat day-to-day investment management activity would beconducted in Tokyo by JPMorgan Asset Management (Japan)Limited, a fellow investment management subsidiary and partof JPMorgan Chase Bank.

The Board conducts a formal evaluation of the performance of,and contractual relationship with, the Manager on an annualbasis. Part of this evaluation includes a consideration of themanagement fees and whether the service received is value formoney for shareholders. No separate managementengagement committee has been established because allDirectors are considered to be independent of the Managerand, given the nature of the Company’s business, it is felt thatall Directors should take part in the review process.

The Board has thoroughly reviewed the performance of theManager in the course of the year. The review covered theperformance of the Manager, its management processes,investment style, resources and risk controls and the quality ofsupport that the Company receives from the Manager includingthe marketing support provided. As part of this process, theBoard visits Japan each year. The Board is of the opinion thatthe continuing appointment of the Manager is in the bestinterests of shareholders as a whole. Such a review is carriedout on an annual basis.

The Alternative Investment Fund Managers Directive (‘AIFMD’)

JPMF, an affiliate of JPMAM, has been appointed as theCompany’s alternative investment fund manager (‘AIFM’).JPMF has been approved as an AIFM by the Financial ConductAuthority (‘FCA’). For the purposes of the AIFMD the Companyis an alternative investment fund (‘AIF’).

The Company entered into a new investment managementagreement with JPMF on 1st July 2014. JPMF has delegatedresponsibility for the day to day management of the Company’sportfolio to JPMAM. JPMF is required to ensure that a depositaryis appointed to the Company. The Company therefore hasappointed BNY Mellon Trust and Depositary (UK) Limited (‘BNY’)as its depositary. BNY has delegated its safekeeping function tothe custodian, JPMorgan Chase Bank, N.A., however, BNYremains responsible for the oversight of the custody of theCompany’s assets and for monitoring its cash flows.

The AIFMD requires certain information to be made availableto investors in AIFs before they invest and requires thatmaterial changes to this information be disclosed in the annualreport of each AIF. Investor Disclosure Documents, which setout information on the Company’s investment strategy andpolicies, leverage, risk, liquidity, administration, management,fees, conflicts of interest and other shareholder information areavailable on the Company’s website at www.jpmjapanese.co.uk

There have been no material changes (other than thosereflected in these financial statements) to this informationrequiring disclosure. Any information requiring immediatedisclosure pursuant to the AIFMD will be disclosed to theLondon Stock Exchange through a primary informationprovider. As an authorised AIFM, JPMF will make the requisitedisclosures on remuneration levels and polices to the FCA atthe appropriate time.

Directors’ Report


Management Fee

The fixed basic annual management fee, negotiated in 2005, isa sliding scale based on the Company’s net assets. Themanagement fee is charged monthly in arrears.

Net assets Fee level

First £465 million under management 0.65%£465 million to £930 million under management 0.485%Over £930 million under management 0.40%

The management fee includes a contribution towards theManager’s general marketing and client administration costs.

If the Company invests in funds managed or advised by theManager, or any of its associated companies, those investmentsare excluded from the calculation of the fixed basic annualmanagement fee.

Going Concern

The Directors believe that, having considered the Company’sinvestment objective (see page 14), risk management policies(see page 14), liquidity risk (see note 22 on page 55), capitalmanagement policies and procedures (see note 23 on page 57),the nature of the portfolio and expenditure and cashflowprojections, the Company has adequate resources, anappropriate financial structure and suitable managementarrangements in place to continue in operational existence forthe foreseeable future. For these reasons, they consider thatthere is reasonable evidence to continue to adopt the goingconcern basis in preparing the accounts.

Directors

All Directors served throughout the year and their details areincluded on pages 19 and 20. Details of their beneficialshareholdings may be found in the Directors’ RemunerationReport on page 31.

Andrew Fleming and Keith Percy, having been Directors formore than nine years, will retire and seek reappointment.Jeremy Paulson-Ellis will retire at the conclusion of the AnnualGeneral Meeting and is not seeking reappointment.

In accordance with the Company’s Articles of Associationrequirement that a third of Directors retire by rotation and seekreappointment each year (excluding those required to retireand seek reappointment annually), Alan Barber will retire byrotation and, being eligible, seeks reappointment at theforthcoming Annual General Meeting.

Christopher Samuel will be appointed a Director of theCompany following the Annual General Meeting on19th December 2014.

The Nomination Committee, having considered the Directors’qualifications, performance and contribution to the Board andits Committees, confirms that each Director continues to beeffective and demonstrates commitment to the role and theBoard recommends to shareholders that those standing forreappointment be reappointed.

Director Indemnification and Insurance

As permitted by the Company’s Articles of Association, eachDirector has the benefit of an indemnity which is a qualifyingthird party indemnity, as defined by Section 234 of theCompanies Act 2006. The indemnities were in place duringthe year and as at the date of this report.

An insurance policy is maintained by the Company whichindemnifies the Directors of the Company against certainliabilities arising in the conduct of their duties. There is nocover against fraudulent or dishonest actions.

Disclosure of information to theAuditors

In the case of each of the persons who are Directors of theCompany at the time when this report was approved:

(a) so far as each of the Directors is aware, there is no relevantaudit information (as defined in the Companies Act 2006) ofwhich the Company’s Auditors are unaware, and

(b) each of the Directors has taken all the steps that he ought tohave taken as a Director in order to make himself aware ofany relevant audit information (as defined) and to establishthat the Company’s Auditors are aware of that information.

The above confirmation is given and should be interpreted inaccordance with the provisions of Section 418(2) of theCompanies Act 2006.

Independent Auditors

Further to a review of audit services in 2013, Begbies retired asthe Company’s Auditors at the 2013 Annual General Meeting.PricewaterhouseCoopers LLPwere appointed Auditors of theCompany in their place. PricewaterhouseCoopers LLP haveexpressed their willingness to continue in office as the Auditorsand a resolution to reappoint PricewaterhouseCoopers LLP andauthorise the Directors to determine their remuneration for theensuing year, will be proposed at the Annual General Meeting.

Governance continuedDirectors’ Report continued


Section 992 Companies Act 2006

The following disclosures are made in accordance withSection 992 Companies Act 2006.

Capital StructureAs at 30th September 2014, the Company’s issued share capitalcomprised 161,248,078 ordinary shares of 25p each. Therewere no shares held in Treasury.

Voting Rights in the Company’s sharesDetails of the voting rights in the Company’s shares as at thedate of this report are given in note 16 to the Notice of AnnualGeneral Meeting on page 60.

Notifiable Interests in the Company’s Voting RightsAt the year end, the following had declared a notifiable interestin the Company’s voting rights:

Number of Shareholders shares held %

Lazard Asset Management1 29,229,402 18.11607 Capital Partners1 26,353,471 16.3Derbyshire County Council1 6,564,361 4.1Legal & General2 4,928,847 3.1

1Indirect holding.2Direct holding.

No further changes had been notified since the year end to thedate of this report.

The Company is also aware that as at 30th September 2014,approximately 3.5% of the Company’s total voting rights wereheld by individuals through the savings products managed byJ.P. Morgan Asset Management and registered in the name ofChase Nominees Limited as at the year end. If those votingrights are not exercised by the beneficial holders, inaccordance with the terms and conditions of the savingsproducts, under certain circumstances, J.P. Morgan AssetManagement has the right to exercise those voting rights. Thatright is subject to certain limits and restrictions and falls awayat the conclusion of the relevant general meeting.

The rules concerning the appointment, reappointment andreplacement of Directors, amendment of the Company’sArticles of Association and powers to issue or buy back theCompany’s shares are contained in the Articles of Associationof the Company and the Companies Act 2006.

There are no restrictions concerning the transfer of securitiesin the Company; no special rights with regard to control

attached to securities; no agreements between holders ofsecurities regarding their transfer known to the Company; noagreements to which the Company is party that affect itscontrol following a takeover bid; and no agreements betweenthe Company and its Directors concerning compensation forloss of office.

Annual General Meeting

NOTE: THIS SECTION IS IMPORTANT AND REQUIRES YOURIMMEDIATE ATTENTION. If you are in any doubt as to the actionyou should take, you should seek your own personal financialadvice from your stockbroker, bank manager, solicitor or otherfinancial adviser authorised under the Financial Services andMarkets Act 2000.

Resolutions relating to the following item of special businesswill be proposed at the forthcoming Annual General Meeting:

The full text of the resolutions is set out in the Notice of AnnualGeneral Meeting on pages 58 and 59.

(i) Authority to allot new shares and to disapply statutorypre-emption rights (resolutions 9 and 10)

The Directors will seek renewal of the authority at the AnnualGeneral Meeting to issue up to 8,062,400 new ordinary sharesfor cash or by way of a sale of Treasury shares up to anaggregate nominal amount of £2,015,600 such amount beingequivalent to 5% of the present issued share capital (excludingTreasury shares) as at the last practicable date before thepublication of this document or, if different, the number ofordinary shares which is equal to approximately 5% of theCompany’s issued share capital (excluding Treasury shares) asat the date of the passing of the resolution.

This authority will expire at the conclusion of the AnnualGeneral Meeting in 2015 unless renewed at a prior generalmeeting.

Resolution 10 will enable the allotment of shares otherwisethan by way of a pro rata issue to existing shareholders. It isadvantageous for the Company to be able to issue new shares(or to sell Treasury shares) to participants purchasing sharesthrough the JPMorgan savings products and also to otherinvestors when the Directors consider that it is in the bestinterests of shareholders to do so. Any such issues would onlybe made at prices greater than the net asset value (‘NAV’),thereby increasing the NAV per share and spreading theCompany’s administrative expenses, other than themanagement fee which is charged on the value of theCompany’s market capitalisation, over a greater number of


shares. The issue proceeds would be available for investmentin line with the Company’s investment policies. No issue ofshares will be made which would effectively alter the control ofthe Company without the prior approval of shareholders ingeneral meeting.

The Company currently does not hold any shares in the capitalof the Company in Treasury.

(ii) Authority to repurchase the Company’s Shares (resolution 11)The authority to repurchase up to 14.99% of the Company’sissued share capital, granted by shareholders at the 2013Annual General Meeting, will expire on 19th June 2015 unlessrenewed at the forthcoming Annual General Meeting. TheDirectors consider that the renewal of the authority is in theinterests of shareholders as a whole, as the repurchase ofshares at a discount to their underlying NAV enhances the NAVof the remaining shares.

Resolution 11 gives the Company authority to repurchase itsown issued shares in the market as permitted by theCompanies Act 2006. The authority limits the number of sharesthat could be purchased to a maximum of 24,171,000 shares,representing approximately 14.99% of the Company’s issuedshares as at 10th November 2014 (being the latest practicabledate prior to the publication of this document) or, if different,the number of ordinary shares which is equal to 14.99% of theCompany’s issued share capital (excluding Treasury shares) asat the date of the passing of the resolution. The authority alsosets minimum an maximum prices. The authority also setsminimum and maximum prices.

If resolution 11 is passed at the Annual General Meeting, theBoard may repurchase the shares for cancellation or hold themin Treasury pursuant to the authority granted to it for possiblereissue at a premium to NAV.

Any repurchase will be at the discretion of the Board and willbe made in the market only at prices below the prevailing NAVper share, thereby enhancing the NAV of the remaining shares,as and when market conditions are appropriate. The authorityto repurchase shares will expire on 18th June 2016, but it is theBoard’s intention to seek renewal of the authority at the 2015Annual General Meeting.

Recommendation

The Board considers that resolutions 10 to 12 are likely topromote the success of the Company and are in the bestinterests of the Company and its shareholders as a whole.The Directors unanimously recommend that you vote in favourof the resolutions as they intend to do, where voting rights areexercisable, in respect of their own beneficial holdings which

amount in aggregate to 23,349 shares representingapproximately 0.01% of the voting rights of the Company.

Corporate Governance StatementCompliance

The Company is committed to high standards of corporategovernance. This statement, together with the Statement ofDirectors’ Responsibilities on page 33, indicates how theCompany has applied the principles of good governance of theFinancial Reporting Council’s UK Corporate Governance Code(the ‘UK Corporate Governance Code’) and the Association ofInvestment Companies’ (‘AIC’) Code of Corporate Governance(the ‘AIC Code’), which complements the UK CorporateGovernance Code and provides a framework of best practicefor investment trusts.

The Board is responsible for ensuring the appropriate level ofcorporate governance and considers that the Company hascomplied with the best practice provisions of the UK CorporateGovernance Code and of the AIC Code, other than in respect ofthe provision relating to the appointment of a seniorindependent director, and insofar as they are relevant to theCompany’s business, throughout the year under review.

Role of the Board

The Management Agreement between the Company and theManager sets out the matters which have been delegated tothe Manager. This includes management of the Company’sassets and the provision of accounting, company secretarial,administration, and some marketing services. All other mattersare reserved for the approval of the Board. A formal scheduleof matters reserved to the Board for decision has beenapproved. This includes determination and monitoring of theCompany’s investment objective and policy and its futurestrategic direction, gearing policy, management of the capitalstructure, appointment and removal of third party serviceproviders, review of key investment and financial data and theCompany’s corporate governance and risk controlarrangements.

At each Board meeting, Directors’ interests are considered.These are reviewed carefully, taking into account thecircumstances surrounding them, and, if consideredappropriate, are approved. It was resolved that there were noactual or indirect interests of a Director which conflicted withthe interests of the Company, which arose during the year.

Following the introduction of The Bribery Act 2010, the Boardhas adopted appropriate procedures designed to prevent



bribery. It confirms that the procedures have operatedeffectively during the year under review.

The Board meets at least quarterly during the year andadditional meetings are arranged as necessary. Full and timelyinformation is provided to the Board to enable it to functioneffectively and to allow Directors to discharge theirresponsibilities.

There is an agreed procedure for Directors to take independentprofessional advice, if necessary, and at the Company’sexpense. This is in addition to the access that every Directorhas to the advice and services of the Company Secretary, whichis responsible to the Board for ensuring that Board proceduresare followed and for compliance with applicable rules andregulations.

Board Composition

The Board, chaired by Jeremy Paulson-Ellis, consisted of fivenon-executive Directors during the year ended 30th September2014, all of whom are regarded by the Board as independent ofthe Company’s Manager, including the Chairman. JeremyPaulson-Ellis will retire following the Annual General Meetingand Andrew Fleming will be appointed Chairman at that stage.Christopher Samuel will be appointed as a Director of theCompany following the Annual General Meeting. The Directorshave a breadth of investment knowledge, business and financialskills and experience relevant to the Company’s business andbrief biographical details of each Director are set out onpages 19 and 20.

There have been no changes to the Chairman’s othersignificant commitments during the year under review.

A review of Board composition and balance is included as partof the annual performance evaluation of the Board, details ofwhich may be found below. The Board has considered whethera senior independent director should be appointed, and hasconcluded that, due to the Company’s nature of business as aninvestment trust and because the Board is comprised entirelyof non-executive Directors, this is unnecessary at present.However, the Chairman of the Audit Committee leads theevaluation of the performance of the Chairman and is availableto shareholders if they have concerns that cannot be resolvedthrough discussions with the Chairman.

Tenure

Directors are initially appointed until the following AnnualGeneral Meeting when, under the Company’s Articles ofAssociation, it is required that they be reappointed by

shareholders. Thereafter, Directors are required to submitthemselves for reappointment at least every three years.The Chairman will meet with each Director before the Directoris proposed for reappointment, and subject to theperformance evaluation carried out each year, the Board willagree whether it is appropriate for the Director to seek anadditional term. The Board does not believe that length ofservice in itself necessarily disqualifies a Director fromseeking reappointment but, when making a recommendation,the Board will take into account the ongoing requirements ofthe UK Corporate Governance Code, including the needto refresh the Board and its Committees.

Any Directors with more than nine years’ service are requiredto submit themselves annually for reappointment. In this,regard, the Board recommends the reappointment of AndrewFleming and Keith Percy who, having served in excess of nineyears, retire at this year’s AGM. Andrew Fleming and KeithPercy have a wealth of experience in the financial sector andmake a valuable contribution to the workings of the Board. TheBoard considers that Andrew Fleming, who will be appointedChairman with effect from the end of the Annual GeneralMeeting, will demonstrate effective leadership of the Company.As part of the Board’s ongoing refreshment and successionplanning, Jeremy Paulson-Ellis is not seeking reappointmentand will retire immediately following the Annual GeneralMeeting. Christopher Samuel will be appointed as a Director ofthe Company following the Annual General Meeting.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment, copies of which areavailable for inspection on request at the Company’s registeredoffice and at the Annual General Meeting.

Induction and Training

On appointment, the Manager and Company Secretary provideall Directors with induction training. Thereafter, regularbriefings are provided on changes in law and regulatoryrequirements that affect the Company and Directors. Directorsare encouraged to attend industry and other seminars coveringissues and developments relevant to investment trustcompanies. Regular reviews of the Directors’ training needs arecarried out by the Chairman by means of the evaluationprocess described below.

Meetings and Committees

The Board delegates certain responsibilities and functions toCommittees. Details of membership of these Committees areshown with Directors’ profiles on pages 19 and 20.


The table below details the number of formal Board andCommittee meetings attended by each Director. During theyear under review there were five Board meetings, in additionto a meeting devoted to strategy, two Audit Committeemeetings and one meeting of the Nomination andRemuneration Committee. These meetings weresupplemented by additional meetings held to cover proceduralmatters and formal approvals. In addition there is regularcontact between the Directors and the Manager and CompanySecretary throughout the year.

Meetings Attended

Nominationand

Audit RemunerationDirector Board Committee Committee

Alan Barber 5 2 1Andrew Fleming 5 2 1Sir Stephen Gomersall, KCMG 5 2 1

Jeremy Paulson-Ellis1 5 2 1David Pearson2 2 1 1Keith Percy 5 2 1

1Invited to attend the Audit Committee meetings held during the year.2Retired December 2013.

Board Committees

Nomination and Remuneration Committee The Nomination and Remuneration Committee, chaired byJeremy Paulson-Ellis, which consists of the entire Board, meetsat least annually to ensure that the Board has an appropriatebalance of skills and experience to carry out its fiduciary dutiesand to select and propose suitable candidates for appointmentwhen necessary. The appointment process takes account of thebenefits of diversity, including gender. A variety of sources,including the use of independent external recruitmentconsultants, may be used to ensure that a wide range ofcandidates is considered. Trust Associates have beenappointed to assist in the recruitment process by ensuring awide range of candidates is considered, resulting in a decisionto appoint Christopher Samuel as a Director of the Companyfollowing the Annual General Meeting on 19th December 2014.Open advertising was not used as part of the process as it wasfelt that using Trust Associates, a specialist investment trustrecruiting firm, would be the most appropriate to theCompany’s circumstances.

The Board’s policy on diversity, including gender, is to takeaccount of the benefits of these during the appointmentprocess. However, the Board remains committed to appointingthe most appropriate candidate, regardless of gender or otherforms of diversity. Therefore, no targets have been set againstwhich to report.

The Committee conducts an annual performance evaluation ofthe Board, its Committees and individual Directors to ensurethat all Directors have devoted sufficient time and contributedadequately to the work of the Board and its Committees. Theevaluation of the Board considers the balance of experience,skills, independence, corporate knowledge, its diversity,including gender, and how it works together.

Questionnaires, drawn up by the Board, with the assistance ofthe Manager and a firm of independent consultants, arecompleted by each Director. The responses are then collatedand discussed by the Committee. The evaluation of individualDirectors is led by the Chairman who also meets with eachDirector. The Audit Committee Chairman leads the evaluationof the Chairman’s performance. An evaluation of the Board wascarried out externally in 2011 by Stephenson & Co., which hasno other connections with the Company. Further externallyfacilitated Board evaluations will take place as and whendeemed appropriate by the Committee.

The Committee also reviews Directors’ fees and makesrecommendations to the Board as and when appropriate inrelation to remuneration policy. This review forms only aminimal part of discussions and therefore it is felt to beappropriate for Jeremy Paulson-Ellis to act as Chairman of theCommittee. On the retirement of Jeremy Paulson-Ellis, AndrewFleming will be appointed as Chairman of the Committee.

Audit Committee The Audit Committee, chaired by Alan Barber, and whosemembership is set out on pages 19 and 20, meets at least twiceeach year. The members of the Audit Committee consider thatthey have the requisite skills and experience to fulfil theresponsibilities of the Committee. At least one member of theAudit Committee has recent and relevant financial experience.Jeremy Paulson-Ellis is not a member of the Audit Committee,however he is invited to attend meetings as a guest whenappropriate.

The Committee reviews the actions and judgements of theManager in relation to the half year and annual accounts andthe Company’s compliance with the UK Corporate GovernanceCode.



During its review of the Company’s financial statements for theyear ended 30th September 2014, the Audit Committeeconsidered the following significant issues, including thosecommunicated by the Auditors during their reporting:

Significant issue How the issue was addressed

The valuation of investments is undertaken inaccordance with the accounting policies, disclosed innote 1 to the accounts on page 42. Controls are in placeto ensure that valuations are appropriate and existenceis verified through Depositary and Custodianreconciliations.

The recognition of investment income is undertaken inaccordance with accounting policy note 1(b) to theaccounts on page 42. The Board regularly reviewssubjective elements of income such as special dividendsand agrees their accounting treatment.

Approval for the Company as an investment trust underSections 1158 and 1159 for financial years commencingon or after 1st October 2012 has been obtained andongoing compliance with the eligibility criteria ismonitored on a regular basis.

Having taken all available information into consideration andhaving discussed the content of the annual report and accountswith the Alternative Investment Fund Manager, InvestmentManagers, Company Secretary and other third party serviceproviders, the Audit Committee has concluded that the annualreport and accounts for the year ended 30th September 2014,taken as a whole, are fair, balanced and understandable andprovide the information necessary for shareholders to assessthe Company’s performance, business model and strategy, andhas reported these findings to the Board. The Board’sconclusions in this respect are set out in the Statement ofDirectors’ Responsibilities on page 33.

The Board was made fully aware of any significant financialreporting issues and judgements made in connection with thepreparation of the financial statements.

The Audit Committee reviews the terms of the managementagreement and examines the effectiveness of the Company’sinternal control systems and receives information from theManager’s Compliance department. The Directors’ statementon the Company’s system of Risk Management and InternalControls is set out on pages 28 and 29. The Committee alsoreviews the scope and results of the external audit, itseffectiveness and cost effectiveness, the balance of audit andnon-audit services and the independence and objectivity of theexternal Auditors. In the Directors’ opinion the Auditors are

independent. The Committee also has primary responsibilityfor making recommendations to the Board on thereappointment and removal of the external Auditors.

Representatives of the Company’s Auditors attend the AuditCommittee meeting at which the draft annual report andaccounts are considered and also engage with the Directors asand when required. Having reviewed the performance of theexternal Auditors, including assessing the quality of work,timing of communications and work with the Manager, theCommittee considered it appropriate to recommend theAuditors’ reappointment. The Board supported thisrecommendation and a resolution will be put to shareholdersat the forthcoming Annual General Meeting.

As part of its review of the continuing appointment of theAuditors, the Audit Committee considered the length of tenureof the audit firm, its fee, its independence from JPMF and theInvestment Managers and any matters raised during the audit.A formal tender exercise was undertaken in 2013, as a result ofwhich PricewaterhouseCoopers LLP was appointed in place ofBegbies. The Company’s year ended 30th September 2014 istherefore the new Audit Partner’s first of a five year maximumterm. The Board reviews and approves any non-audit servicesprovided by the independent Auditors and assesses the impactof any non-audit work on the ability of the Auditors to remainindependent. No such work was undertaken during the year.Details of the fees paid for audit services are included in note 5on page 44.

The Committee reviews the terms of the managementagreement between the Company and the Manager, reviewsthe performance of the Manager, reviews the notice period thatthe Board has with the Manager and makes recommendationsto the Board on the continued appointment of the Managerfollowing these reviews.

Terms of Reference

The Nomination and Remuneration and Audit Committeeshave written terms of reference which define clearly theirrespective responsibilities, copies of which are available onthe Company’s website and for inspection on request at theCompany’s registered office and at the Company’s AnnualGeneral Meeting.

Relations with Shareholders

The Board regularly monitors the shareholder profile of theCompany. It aims to provide shareholders with a fullunderstanding of the Company’s activities and performance

Recognition ofinvestment income

Compliance withSections 1158 and 1159Corporation Tax Act2010

Valuation, existenceand ownership ofinvestments


and reports formally to shareholders twice a year by way ofthe annual report and accounts and the half year report.These are supplemented by the daily publication, through theLondon Stock Exchange, of the net asset value of theCompany’s shares. Announcements released to the LondonStock Exchange are also released to the New Zealand StockExchange.

All shareholders are encouraged to attend the Company’sAnnual General Meeting at which the Directors andrepresentatives of the Manager are available to meetshareholders and answer their questions. In addition, apresentation is given by the Investment Manager who reviewsthe Company’s performance.

During the year, the Company’s brokers, the InvestmentManager and JPMF hold regular discussions with largershareholders. The Directors are made fully aware of theirviews. The Chairman and Directors make themselves availableas and when required to support these meetings and toaddress shareholder queries. The Directors may be contactedthrough the Company Secretary whose details are shown onpage 65. The Chairman can also be contacted via theCompany’s website by following the ‘Ask the Chairman’ link atwww.jpmjapanese.co.uk

The Company’s annual report and accounts are published intime to give shareholders at least twenty working days’ noticeof the Annual General Meeting. Shareholders wishing to raisequestions in advance of the meeting are encouraged to submitquestions via the Company’s website or write to the CompanySecretary at the address shown on page 65.

Details of the proxy voting position on each resolution will bepublished on the Company website shortly after the AnnualGeneral Meeting.

Risk Management and Internal Controls

The UK Corporate Governance Code requires the Directors, atleast annually, to review the effectiveness of the Company’ssystem of risk management and internal controls and to reportto shareholders that they have done so. This encompasses areview of all controls, which the Board has identified asincluding business, financial, operational, compliance and riskmanagement.

The Directors are responsible for the Company’s system of riskmanagement and internal controls, which is designed tosafeguard the Company’s assets, maintain proper accountingrecords and ensure that financial information used within thebusiness, or published, is reliable. However, such a system canonly be designed to manage rather than eliminate the risk of

failure to achieve business objectives and therefore can onlyprovide reasonable, but not absolute, assurance against fraud,material misstatement or loss.

Since investment management, custody of assets and alladministrative services are provided to the Company by theManager and its associates, the Company’s system of riskmanagement and internal controls mainly comprisesmonitoring the services provided by the Manager and itsassociates, including the operating controls established bythem, to ensure they meet the Company’s business objectives.There is an ongoing process for identifying, evaluating andmanaging the significant risks faced by the Company (seePrincipal Risks on pages 16 and 17). This process has been inplace for the year under review and up to the date of theapproval of the annual report and accounts, and it accords withthe Turnbull guidance. Whilst the Company does not have aninternal audit function of its own, the Board considers that it issufficient to rely on the internal audit department of theManager. This arrangement is kept under review.

The key elements designed to provide effective internalcontrols are as follows:

Financial Reporting – Regular and comprehensive review bythe Board of key investment and financial data, includingmanagement accounts, revenue projections, analysis oftransactions and performance comparisons.

Management Agreement – Appointment of a manager,depositary and custodian regulated by the FCA, whoseresponsibilities are clearly defined in a written agreement.

Management Systems – The Manager’s system of riskmanagement and internal controls includes organisationalagreements which clearly define the lines of responsibility,delegated authority, control procedures and systems. Theseare monitored by the Manager’s Compliance department whichregularly monitors compliance with FCA rules.

Investment Strategy – Authorisation and monitoring of theCompany’s investment strategy and exposure limits by theBoard.

The Board, either directly or through the Audit Committee,keeps under review the effectiveness of the Company’s systemof risk management and internal controls by monitoring theoperation of the key operating controls of the Manager and itsassociates as follows:

• reviews the terms of the management agreement andreceives regular reports from the Manager’s Compliancedepartment;



• reviews reports on the risk management and internalcontrols and operations of its Depositary, BNY Mellon Trust& Depositary (UK) Limited, and its Custodian, JPMorganChase Bank, which are themselves independently reviewed;and

• reviews every six months an independent report on the riskmanagement and internal controls and the operations ofthe Manager.

By the means of the procedures set out above, the Boardconfirms that it has reviewed the effectiveness of theCompany’s system of risk management and internal controlsfor the year ended 30th September 2014 and to the date ofapproval of this annual report and accounts.

The Board confirms that any failings or weaknesses identifiedduring the course of its review of the systems of riskmanagement and internal controls were not significant and didnot impact the Company.

London and New Zealand Listings

The Company is listed on the London Stock Exchange and theNew Zealand Stock Exchange. The corporate governance rulesand principles of the UK Listing Authority and London StockExchange may differ materially from the New Zealand StockExchange’s corporate governance rules and the principles ofthe Corporate Governance Best Practice Code. Investors mayfind out more information about the corporate governance andprinciples applicable in the United Kingdom for the UK ListingAuthority and London Stock Exchange websites:www.fca.org.uk/firms/markets/ukla andwww.londonstockexchange.com

Corporate Governance and Voting Policy

The Company delegates responsibility for voting to theManager. The following is a summary of the policy statementsof JPMorgan Asset Management (UK) Limited (‘JPMAM’) oncorporate governance, voting policy and social andenvironmental issues, which has been reviewed and noted bythe Board. Details on social and environmental issues areincluded in the Strategic Report on pages 17 and 18.

Corporate Governance JPMAM believes that corporate governance is integral to our investmentprocess. As part of our commitment to delivering superior investmentperformance to our clients, we expect and encourage the companies inwhich we invest to demonstrate the highest standards of corporategovernance and best business practice. We examine the share structureand voting structure of the companies in which we invest, as well as the

board balance, oversight functions and remuneration policy. Theseanalyses then form the basis of our proxy voting and engagementactivity.

Proxy VotingJPMAM manages the voting rights of the shares entrusted to it as it wouldmanage any other asset. It is the policy of JPMAM to vote in a prudent anddiligent manner, based exclusively on our reasonable judgement of whatwill best serve the financial interests of our clients. So far as is practicable,we will vote at all of the meetings called by companies in which we areinvested.

Stewardship/EngagementJPMAM recognises its wider stewardship responsibilities to its clients as amajor asset owner. To this end, we support the introduction of the FRCStewardship Code, which sets out the responsibilities of institutionalshareholders in respect of investee companies. Under the Code,managers should:

– publicly disclose their policy on how they will discharge theirstewardship responsibilities to their clients;

– disclose their policy on managing conflicts of interest;

– monitor their investee companies;

– establish clear guidelines on how they escalate engagement;

– be willing to act collectively with other investors where appropriate;

– have a clear policy on proxy voting and disclose their voting record;and

– report to clients.

JPMAM endorses the Stewardship Code for its UK investments andsupports the principles as best practice elsewhere. We believe thatregular contact with the companies in which we invest is central to ourinvestment process and we also recognise the importance of being an‘active’ owner on behalf of our clients.

JPMAM’s Voting Policy and Corporate GovernanceGuidelines are available on request from the CompanySecretary or can be downloaded from JPMAM’s website:http://www.jpmorganinvestmenttrusts.co.uk/governance, whichalso sets out its approach to the seven principles of the FRCStewardship Code, its policy relating to conflicts of interestand its detailed voting record.

By order of the Board Rebecca Burtonwood, for and on behalf of JPMorgan Funds Limited, Company Secretary

12th November 2014


The Board presents the Directors’ Remuneration Report for theyear ended 30th September 2014, which has been prepared inaccordance with the requirements of Section 421 of theCompanies Act 2006 as amended.

The law requires the Company’s Auditors to audit certain of thedisclosures provided. Where disclosures have been audited,they are indicated as such. The Auditors’ opinion is included intheir report on pages 34 to 37.

The Nomination and Remuneration Committee reviewsDirectors’ fees on a regular basis and makes recommendationsto the Board as and when appropriate.

Directors’ Remuneration Policy

The Directors’ Remuneration Policy is subject to a triennialbinding vote, however, a decision has been taken to seekapproval annually and therefore an ordinary resolution toapprove this policy will be put to shareholders at theforthcoming Annual General Meeting. The policy subject to thevote is set out in full below and is currently in force.

The Board’s policy for this and subsequent years is thatDirectors’ fees should properly reflect the time spent by theDirectors on the Company’s business and should be at a levelto ensure that candidates of a high calibre are recruited to theBoard and retained. The Chairman of the Board and theChairman of the Audit Committee are paid higher fees than theother Directors, reflecting the greater time commitmentinvolved in fulfilling those roles.

Reviews are based on information provided by the Managerand industry research carried out by third parties on the levelof fees paid to the directors of the Company’s peers and withinthe investment trust industry generally. The involvement ofremuneration consultants has not been deemed necessary aspart of this review. The Company has no Chief Executive Officerand no employees and therefore no consultation of employeesis required and there is no employee comparative data toprovide, in relation to the setting of the remuneration policy forDirectors.

All of the Directors are non-executive. There are noperformance-related elements to their fees and the Companydoes not operate any type of incentive, share scheme, award orpension scheme and therefore no Directors receive bonuspayments or pension contributions from the Company or holdoptions to acquire shares in the Company. Directors are notgranted exit payments and are not provided withcompensation for loss of office. No other payments are made

to Directors, other than the reimbursement of reasonableout-of-pocket expenses incurred in attending the Company’sbusiness.

In the year under review, Directors’ fees remained unchangedfrom the previous year and were paid at the following rates:Chairman £32,500; Chairman of the Audit Committee £27,500;and other Directors £22,500.

With effect from 1st September 2014, fees have been increasedto the following rates: Chairman £34,000; Chairman of theAudit Committee £28,500; and other Directors £24,000.

The Company’s Articles of Association provide that anyincrease in the maximum aggregate annual limit on Directors’fees, currently £175,000, requires both Board and shareholderapproval.

The Company has not sought shareholder views on itsremuneration policy. The Nomination Committee considers anycomments received from shareholders on remuneration policyon an ongoing basis and takes account of those views.

The terms and conditions of Directors’ appointments are setout in formal letters of appointment which are available forreview at the Company’s Annual General Meeting and theCompany’s registered office. Details of the Board’s policy ontenure are set out on page 25.

Directors’ Remuneration Policy Implementation

The Directors’ Remuneration Report, which includes details ofthe Directors’ remuneration policy and its implementation, issubject to an annual advisory vote and therefore an ordinaryresolution to approve this report will be put to shareholders atthe forthcoming Annual General Meeting. There have been nochanges to the policy compared with the year ended30th September 2013 and no changes are proposed for theyear ending 30th September 2015.

At the Annual General Meeting held on 20th December 2013,of votes cast in respect of the Remuneration Policy, 99.8% ofvotes cast were in favour (or granted discretion to theChairman who voted in favour) and 0.1% voted against.Abstentions were received from 0.1% of the votes cast. Inrespect of the remuneration report, 99.8% of votes cast werein favour (or granted discretion to the Chairman who voted infavour) and 0.1% voted against. Abstentions were receivedfrom 0.1% of the votes cast.

Details of the implementation of the Company’s remunerationpolicy are given below.

Governance continuedDirectors’ Remuneration Report

Single total figure of remuneration

The single total figure of remuneration for each Director isdetailed below together with the prior year comparative.

Single total figure table1

Total fees2014 2013

Directors’ Name £ £

Jeremy Paulson-Ellis 32,500 32,500Alan Barber 27,500 27,500Andrew Fleming 22,500 22,500Sir Stephen Gomersall, KCMG2 22,500 5,625David Pearson3 5,048 22,500Keith Percy 22,500 22,500

Total 132,548 133,125

1Audited information. The other disclosure requirements set out in the reportingregulations are omitted because they are not applicable.2Appointed July 2013.3Retired December 2013.

A table showing the total remuneration for the Chairman overthe five years ended 30th September 2014 is below:

Remuneration for the Chairman over the five years ended30th September 2014

Performance related benefits received as a

Year ended percentage of 30th September Fees maximum payable1

2014 £32,500 n/a2013 £32,500 n/a2012 £30,000 n/a2011 £30,000 n/a2010 £25,000 n/a

Directors’ Shareholdings1

There are no requirements pursuant to the Company’s Articlesof Association for the Directors to own shares in the Company.The Directors’ shareholdings are detailed below. All shares areheld beneficially.

2014 2013Number of Number of

Directors’ Name shares held shares held

Jeremy Paulson-Ellis 9,000 9,000Alan Barber 5,300 5,300Andrew Fleming 1,500 1,500Sir Stephen Gomersall, KCMG 3,049 3,049David Pearson2 n/a 4,904Keith Percy 4,500 4,500

Total 23,349 28,253

1Audited information.2Retired December 2013.

As at the latest practicable date before the publication of thisdocument, there have been no changes to the Directors’shareholdings. The Directors have no other share interests orshare options in the Company and no share schemes areavailable.

In accordance with the Companies Act 2006, a graph showingthe Company’s share price total return compared with itsbenchmark, the Tokyo Stock Exchange 1st Section (TOPIX)Index expressed in sterling terms, over the last five years isshown below. Because the TOPIX Index is the adoptedbenchmark for the Company, it is deemed by the Board to bethe most representative comparator. Although the InvestmentManager does not track the TOPIX Index, the Index is the mostrepresentative of the Company’s investment remit.

Five Year Share Price and Benchmark TotalReturn Performance to 30th September 2014

Source: Morningstar/Datastream.

Share price total return.

Benchmark.

90

100

110

120

130

140

150

160

170

201420132012201120102009



A table showing actual expenditure by the Company onremuneration and distributions to shareholders for the yearand the prior year is below:

Expenditure by the Company on remuneration and distributions toshareholders

Year ended 30th September

2014 2013

Remuneration paid to all Directors £132,548 £133,125

Distribution to shareholdersby way of:— dividend £4,515,000 £4,515,000— share repurchases nil £138,177

Total distribution to shareholders £4,647,548 £4,786,302

For and on behalf of the Board Jeremy Paulson-Ellis Chairman

12th November 2014

Governance continuedDirectors’ Remuneration Report continued


The Directors are responsible for preparing the annual reportand accounts in accordance with applicable law andregulations.

Company law requires the Directors to prepare financialstatements for each financial year. Under that law, the Directorshave elected to prepare the financial statements in accordancewith United Kingdom generally accepted accounting practice(United Kingdom Accounting Standards and applicable law).Under company law the Directors must not approve thefinancial statements unless they are satisfied that, taken as awhole, the annual report and accounts are fair, balanced andunderstandable, provide the information necessary forshareholders to assess the Company’s performance, businessmodel and strategy and that they give a true and fair view ofthe state of affairs of the Company and of the total return orloss of the Company for that period. In order to provide theseconfirmations, and in preparing these financial statements, theDirectors 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 a going concern basisunless it is inappropriate to presume that the Company willcontinue in business;

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accountingrecords that are sufficient to show and explain the Company’stransactions and disclose with reasonable accuracy at any timethe financial position of the Company and to enable them toensure that the financial statements comply with theCompanies Act 2006. They are also responsible forsafeguarding the assets of the Company and hence for takingreasonable steps for the prevention and detection of fraud andother irregularities.

The accounts are published on the www.jpmjapanese.co.ukwebsite, which is maintained by the Company’s Manager. Themaintenance and integrity of the website maintained by theManager is, so far as it relates to the Company, the

responsibility of the Manager. The work carried out by theAuditors does not involve consideration of the maintenanceand integrity of this website and, accordingly, the Auditorsaccept no responsibility for any changes that have occurredto the accounts since they were initially presented on thewebsite. The accounts are prepared in accordance with UKlegislation, which may differ from legislation in otherjurisdictions.

Under applicable law and regulations the Directors are alsoresponsible for preparing a Directors’ Report, StrategicReport, Statement of Corporate Governance and Directors’Remuneration Report that comply with that law and thoseregulations.

Each of the Directors, whose names and functions are listed onpages 19 and 20, confirms that, to the best of their knowledge:

• the financial statements, which have been prepared inaccordance with United Kingdom generally acceptedaccounting practice (United Kingdom AccountingStandards and applicable law), give a true and fair view ofthe assets, liabilities, financial position and return or loss ofthe Company; and

• the Strategic Report includes a fair review of thedevelopment and performance of the business and theposition of the Company, together with a description of theprincipal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the annual reportand accounts taken as a whole are fair, balanced andunderstandable and provide the information necessary forshareholders to assess the strategy and business model of theCompany.

The Board also confirms that it is satisfied that the StrategicReport and Directors’ Report include a fair review of thedevelopment and performance of the business, and theposition of the Company, together with a description of theprincipal risks and uncertainties that the Company faces.

For and on behalf of the Board Jeremy Paulson-EllisChairman

12th November 2014

Statement of Directors’ Responsibilities


Report on the financial statements

In our opinionIn our opinion, JPMorgan Japanese Investment Trust plc’sfinancial statements (the ‘financial statements’):

• give a true and fair view of the state of the Company’saffairs as at 30th September 2014 and of its net return andcash flows for the year then ended;

• have been properly prepared in accordance with UnitedKingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirementsof the Companies Act 2006.

What we have auditedJPMorgan Japanese Investment Trust plc’s financial statementscomprise:

• the Balance Sheet as at 30th September 2014;

• the Income Statement for the year then ended;

• the Cash Flow Statement for the year then ended;

• the Reconciliation of Movements in Shareholders’ Funds forthe year then ended; and

• the notes to the financial statements, which includea summary of significant accounting policies and otherexplanatory information.

The financial reporting framework that has been applied in thepreparation of the financial statements is applicable law andUnited Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice).

Our audit approach

Overview

Overall materiality: £4 million which represents approximately1% of net assets. The Company is a standalone InvestmentTrust Company and engages JPMorgan Funds Limited (the‘Manager’) to manage its assets.

We conducted our audit of the financial statements atJPMorgan Chase & Co., Investor Services (the ‘Administrator’)to whom the Manager has, with the consent of the Directors,delegated the provision of certain administrative functions.

We tailored the scope of our audit taking into account the typesof investments within the Company, the involvement of thethird parties referred to above, the accounting processes andcontrols, and the industry in which the Company operates.

The scope of our audit and our areas of focus

We conducted our audit in accordance with InternationalStandards on Auditing (UK and Ireland) (‘ISAs (UK & Ireland)’).

We designed our audit by determining materiality andassessing the risks of material misstatement in the financialstatements. As in all of our audits, we also addressed the risk ofmanagement override of internal controls, including evaluatingwhether there is evidence of bias by the Directors that mayrepresent a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effecton our audit, including the allocation of our resources andeffort, are identified as ‘areas of focus’ in the table belowtogether with an explanation of how we tailored our audit toaddress these specific areas. This is not a complete list of allrisks identified by our audit.

How our audit addressed the area Area of focus of focus

We assessed the accounting policyfor revenue recognition forcompliance with accountingstandards and the AIC SORP andperformed testing to check thatincome had been accounted for inaccordance with this statedaccounting policy as set out in thefinancial statements.

We understood and assessed thedesign and implementation of keycontrols surrounding revenuerecognition.

In addition, we tested dividendreceipts by agreeing the dividendrates from a sample of investmentsto independent third party sources.To test for completeness, we testedthat the appropriate dividends hadbeen received in the year byreference to independent data ofdividends declared by a sample ofinvestment holdings in theportfolio.

Revenue

ISAs (UK & Ireland) presume thereis a risk of fraud in revenuerecognition because of the pressuremanagement may feel to achievegrowth in line with the objective ofthe Company.

We focused on the accuracy andcompleteness of dividend incomerecognition and its presentation inthe Income Statement as set out inthe requirements of The Associationof Investment Companies Statementof Recommended Practice (the ‘AICSORP’).

This is because incomplete orinaccurate revenue could have amaterial impact on the Company’snet asset value.

Independent Auditors’ Reportto the Members of JPMorgan Japanese Investment Trust plc


How our audit addressed the area Area of focus of focus

We tested the valuation of the listedequity investments by agreeing theprices used in the valuation toindependent third party sources.

We tested the existence of theinvestment portfolio by agreeingthe holdings for investments to anindependent custodianconfirmation from JPMorgan ChaseBank N.A.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performedenough work to be able to give an opinion on the financialstatements as a whole, taking into account the types ofinvestments within the Company, the involvement of theManager and Administrator, the accounting processes andcontrols, and the industry in which the Company operates.

The Company’s accounting is delegated to the Administratorwho maintain their own accounting records and controls andreport to the Manager and the Directors.

As part of our risk assessment, we assessed the controlenvironment in place at both the Manager and theAdministrator to the extent relevant to our audit of theCompany. This assessment of the operating and accountingstructure in place at both organisations involved obtaining andreading the relevant control reports issued by the independentauditor of the Manager and the Administrator in accordancewith generally accepted assurance standards for such work.We then identified those key controls at the Administrator onwhich we could place reliance to provide audit evidence.We also assessed the gap period of six months between theperiod covered by the controls report and the year-end of theCompany. Following this assessment, we applied professionaljudgement to determine the extent of testing required overeach balance in the financial statements, including whether weneeded to perform additional testing in respect of those keycontrols to support our substantive work. For the purposes ofour audit, we determined that additional testing of controls inplace at the Administrator was not required because additionalsubstantive testing was performed.

Materiality

The scope of our audit is influenced by our application ofmateriality. We set certain quantitative thresholds formateriality. These, together with qualitative considerations,helped us to determine the scope of our audit and the nature,timing and extent of our audit procedures and to evaluate theeffect of misstatements, both individually and on the financialstatements as a whole.

Based on our professional judgement, we determinedmateriality for the financial statements as a whole as follows:

£4 million

1% of net assets

We have applied this benchmark, agenerally accepted auditingpractice for investment trust audits,in the absence of indicators that analternative benchmark would beappropriate and because webelieve this provides an appropriateand consistent year-on-year basisfor our audit.

We agreed with the Audit Committee that we would report tothem misstatements identified during our audit above£200,000 as well as misstatements below that amount that,in our view, warranted reporting for qualitative reasons.

Going concern

Under the Listing Rules we are required to review the Directors’statement, set out on page 22, in relation to going concern.We have nothing to report having performed our review.

As noted in the Directors’ statement, the Directors haveconcluded that it is appropriate to prepare the Company’sfinancial statements using the going concern basis ofaccounting. The going concern basis presumes that theCompany has adequate resources to remain in operation, andthat the Directors intend it to do so, for at least one year fromthe date the financial statements were signed. As part of ouraudit we have concluded that the Directors’ use of the goingconcern basis is appropriate.

However, because not all future events or conditions can bepredicted, these statements are not a guarantee as to theCompany’s ability to continue as a going concern.

Valuation and existence ofinvestments

The investment portfolio at theyear-end comprised listed equityinvestments valued at£459,633,000.

We focused on the valuation andexistence of investments becauseinvestments represent the principalelement of the net asset value asdisclosed on the Balance Sheet inthe financial statements.

Overall materiality

How we determined it

Rationale for benchmark applied


Other required reporting

Consistency of other information

Companies Act 2006 opinions

In our opinion:

• the information given in the Strategic Report and theDirectors’ Report for the financial year for which thefinancial statements are prepared is consistent with thefinancial statements.

ISAs (UK & Ireland) reporting

Under ISAs (UK & Ireland) we are required to report to you if, inour opinion:

We have no exceptions to reportarising from this responsibility.


ISAs (UK & Ireland) reporting


Adequacy of accounting records and information and explanationsreceivedUnder the Companies Act 2006 we are required to report toyou if, in our opinion:

• we have not received all the information and explanationswe require for our audit; or

• adequate accounting records have not been kept, orreturns adequate for our audit have not been received frombranches not visited by us; or

• the financial statements and the part of the Directors’Remuneration Report to be audited are not in agreementwith the accounting records and returns.

We have no exceptions to report arising from thisresponsibility.

Directors’ remuneration

Directors’ remuneration report – Companies Act 2006 opinion

In our opinion, the part of the Directors’ Remuneration Reportto be audited has been properly prepared in accordance withthe Companies Act 2006.

Other Companies Act 2006 reporting

Under the Companies Act 2006 we are required to report toyou if, in our opinion, certain disclosures of Directors’remuneration specified by law are not made. We have noexceptions to report arising from this responsibility.

Corporate governance statementUnder the Listing Rules we are required to review the part ofthe Corporate Governance Statement relating to theCompany’s compliance with nine provisions of the UKCorporate Governance Code. We have nothing to report havingperformed our review.

• information in the AnnualReport is:

− materially inconsistent with theinformation in the auditedfinancial statements; or

− apparently materially incorrectbased on, or materiallyinconsistent with, ourknowledge of the Companyacquired in the course ofperforming our audit; or

− is otherwise misleading.

• the statement given by theDirectors on page 33, inaccordance with provision C.1.1of the UK CorporateGovernance Code (the ‘Code’),that they consider the AnnualReport taken as a whole to befair, balanced andunderstandable and providesthe information necessary formembers to assess theCompany’s performance,business model and strategy ismaterially inconsistent with ourknowledge of the Companyacquired in the course ofperforming our audit.

• the section of the AnnualReport on pages 26 and 27, asrequired by provision C.3.8 ofthe Code, describing the workof the Audit Committee doesnot appropriately addressmatters communicated by us tothe Audit Committee.

Independent Auditors’ Reportcontinued


Responsibilities for the financial statements and the audit

Our responsibilities and those of the DirectorsAs explained more fully in the Statement of Directors’Responsibilities set out on page 33, the Directors areresponsible for the preparation of the financial statementsand for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on thefinancial statements in accordance with applicable law andISAs (UK & Ireland). Those standards require us to comply withthe Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for andonly for the Company’s members as a body in accordance withChapter 3 of Part 16 of the Companies Act 2006 and for noother purpose. We do not, in giving these opinions, accept orassume responsibility for any other purpose or to any otherperson to whom this report is shown or into whose hands itmay come save where expressly agreed by our prior consentin writing.

What an audit of financial statements involvesAn audit involves obtaining evidence about the amounts anddisclosures in the financial statements sufficient to givereasonable assurance that the financial statements are freefrom material misstatement, whether caused by fraud or error.This includes an assessment of:

• whether the accounting policies are appropriate to theCompany’s circumstances and have been consistentlyapplied and adequately disclosed;

• the reasonableness of significant accounting estimatesmade by the Directors; and

• the overall presentation of the financial statements.

We test and examine information, using sampling and otherauditing techniques, to the extent we consider necessary toprovide a reasonable basis for us to draw conclusions.We obtain audit evidence through testing the effectiveness ofcontrols, substantive procedures or a combination of both.

In addition, we read all the financial and non-financialinformation in the Annual Report to identify materialinconsistencies with the audited financial statements and toidentify any information that is apparently materially incorrectbased on, or materially inconsistent with, the knowledgeacquired by us in the course of performing the audit. If webecome aware of any apparent material misstatements orinconsistencies we consider the implications for our report.

Jeremy Jensen (Senior Statutory Auditor)for and on behalf of PricewaterhouseCoopers LLPChartered Accountants and Statutory AuditorsLondon

12th November 2014


2014 2013Revenue Capital Total Revenue Capital Total

Notes £’000 £’000 £’000 £’000 £’000 £’000

(Losses)/gains on investments held at fair value through profit or loss 2 — (26,100) (26,100) — 124,427 124,427

Net foreign currency gains — 5,933 5,933 — 9,302 9,302Income from investments 3 5,715 — 5,715 6,041 — 6,041

Gross return/(loss) 5,715 (20,167) (14,452) 6,041 133,729 139,770Management fee 4 (525) (2,099) (2,624) (459) (1,835) (2,294)Other administrative expenses 5 (506) — (506) (519) — (519)

Net return/(loss) on ordinary activities before finance costs and taxation 4,684 (22,266) (17,582) 5,063 131,894 136,957

Finance costs 6 (149) (596) (745) (151) (605) (756)

Net return/(loss) on ordinary activities before taxation 4,535 (22,862) (18,327) 4,912 131,289 136,201

Taxation 7 (572) — (572) (432) — (432)

Net return/(loss) on ordinary activities after taxation 3,963 (22,862) (18,899) 4,480 131,289 135,769

Return/(loss) per share 9 2.46p (14.18)p (11.72)p 2.78p 81.40p 84.18p

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

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.

The notes on pages 42 to 57 form an integral part of these accounts.

Financial StatementsIncome Statementfor the year ended 30th September 2014


Called up Capitalshare redemption Other Capital Revenue

capital reserve reserve reserves reserve Total£’000 £’000 £’000 £’000 £’000 £’000

At 30th September 2012 40,330 8,632 166,791 78,012 8,369 302,134Repurchase and cancellation of the Company’s own shares (18) 18 — (139) — (139)Net return on ordinary activities — — — 131,289 4,480 135,769Dividend paid in the year — — — — (5,888) (5,888)

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 paid in the year — — — — (4,515) (4,515)

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


Reconciliation of Movements in Shareholders’ Funds


2014 2013Notes £’000 £’000

Fixed assets Investments held at fair value through profit or loss 10 459,633 487,941

Current assets 11Debtors 13,201 5,623Cash and short term deposits 15,463 3,737

28,664 9,360

Creditors: amounts falling due within one year 12 (79,835) (2,494)

Net current (liabilities)/assets (51,171) 6,866

Total assets less current liabilities 408,462 494,807

Creditors: amounts falling due after more than one year 13 — (62,931)

Net assets 408,462 431,876

Capital and reserves Called up share capital 14 40,312 40,312Capital redemption reserve 15 8,650 8,650Other reserve 15 166,791 166,791Capital reserves 15 186,300 209,162Revenue reserve 15 6,409 6,961

Total equity shareholders’ funds 408,462 431,876

Net asset value per share 16 253.3p 267.8p

The accounts on pages 38 to 57 were approved and authorised for issue by the Directors on 12th November 2014 and were signedon their behalf by:

Jeremy Paulson-EllisDirector


Company registration number: 223583

Financial Statements continuedBalance Sheetat 30th September 2014


2014 2013Notes £’000 £’000

Net cash inflow from operating activities 17 2,352 3,738

Returns on investments and servicing of finance Interest paid (735) (757)

Capital expenditure and financial investment Purchases of investments (132,450) (264,472)Sales of investments 136,596 226,068Other capital charges (3) (3)

Net cash inflow/(outflow) from capital expenditure and financial investment 4,143 (38,407)

Dividend paid (4,515) (5,888)

Net cash inflow/(outflow) before financing 1,245 (41,314)

Financing Net drawdown of loans 12,204 41,420Repurchase and cancellation of the Company’s own shares — (139)

Net cash inflow from financing 12,204 41,281

Increase/(decrease) in cash and cash equivalents 18 13,449 (33)


Cash Flow Statementfor the year ended 30th September 2014


1. Accounting policies

(a) Basis of accountingThe accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted AccountingPractice (‘UK GAAP’) and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companiesand Venture Capital Trusts’ (the ‘SORP’) issued by the AIC in January 2009. They have also been prepared on the assumptionthat approval as an investment trust will continue to be granted.

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

The accounts have been prepared on a going concern basis under the historical cost convention, as modified by therevaluation of investments and derivative financial instruments at fair value.

The policies applied in these accounts are consistent with those applied in the preceding year.

(b) Valuation of investmentsThe Company’s business is investing in financial assets with a view to profiting from their total return in the form of incomeand capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis, inaccordance with a documented investment strategy, and information is provided internally on that basis to the Company’sBoard of Directors. Accordingly, upon initial recognition, the investments are designated by the Company as ‘held at fair valuethrough profit or loss’. They are included initially at fair value which is taken to be their cost, excluding expenses incidental topurchase which are written off to capital at the time of acquisition. Subsequently the investments are valued at fair valuewhich are quoted bid prices for investments traded in active markets.

Gains and losses on sales of investments, including the related foreign exchange gains and losses of a capital nature, are dealtwith in capital reserves within ‘Gains and losses on sales of investments’. Increases and decreases in the valuation ofinvestments held at the year end are accounted for in capital reserves within ‘Holding gains and losses on investments’.

All purchases and sales are accounted for on a trade date basis.

(c) IncomeDividends receivable from equity shares are included in income on an ex-dividend basis except where, in the opinion of theBoard, the dividend is capital in nature, in which case it is included in capital.

Overseas dividends are shown gross of any withholding tax.

Interest receivable on deposits is taken to revenue on an accruals basis.

(d) ExpensesAll expenses are accounted for on an accruals basis. Expenses are allocated wholly to revenue with the following exceptions:

– the management fee is allocated 20% to revenue and 80% to capital in line with the Board’s expected long term split ofrevenue and capital return from the Company’s investment portfolio.

– expenses incidental to the purchase and sale of an investment are charged to capital. These expenses are commonlyreferred to as transaction costs and comprise mainly brokerage commission. Details of transaction costs are given innote 10 on pages 46 and 47.

(e) Finance costsFinance costs are accounted for on an accruals basis using the effective interest rate method in accordance with the provisionsof FRS 25: ‘Financial Instruments: Presentation’ and FRS 26: ‘Financial Instruments: Measurement’.

Finance costs are allocated 20% to revenue and 80% to capital in line with the Board’s expected long term split of revenueand capital return from the Company’s investment portfolio.

Financial Statements continuedNotes to the Accountsfor the year ended 30th September 2014


(f) Financial instrumentsCash and short term deposits may comprise cash and demand deposits which are readily convertible to a known amount ofcash and are subject to insignificant risk of changes in value.

Other debtors and creditors do not carry any interest, are short term in nature and are accordingly stated at nominal value asreduced by appropriate allowances for estimated irrecoverable amounts.

Interest bearing bank loans and overdrafts are recorded at the proceeds received net of direct issue costs. Finance costs,including any premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis inprofit or loss using the effective interest rate method.

(g) Foreign currencyIn accordance with FRS 23: ‘The effects of changes in Foreign Currency Exchange Rates’ the Company is required to nominatea functional currency, being the currency in which the Company predominantly operates. The Board, having regard to thecurrency of the Company’s share capital and the predominant currency in which its shareholders operate, has determined thefunctional currency to be sterling. Sterling is also the currency in which the accounts are presented.

Transactions denominated in foreign currencies are converted at actual exchange rates at the date of the transaction.Monetary assets, liabilities and equity investments held at fair value, denominated in foreign currencies at the year end aretranslated at the rates of exchange prevailing at the year end.

Any gain or loss arising on monetary assets from a change in exchange rates subsequent to the date of the transaction isincluded as an exchange gain or loss in revenue or capital, depending on whether the gain or loss is of a revenue or capitalnature. Gains and losses on investments arising from a change in exchange rates are included in the Income statement within‘Gains or losses on investments held at fair value through profit or loss’ and charged or credited to capital reserves.

(h) TaxationCurrent tax is provided at the amounts expected to be paid or recovered.

Deferred tax is provided on all timing differences that have originated but not reversed by the balance sheet date. Deferred taxliabilities are recognised for all taxable timing differences but deferred tax assets are only recognised to the extent that it ismore likely than not that taxable profits will be available against which those timing differences can be utilised.

Deferred tax is measured at the tax rate which is expected to apply in the periods in which the timing differences are expectedto reverse, based on tax rates that have been enacted or substantively enacted by the balance sheet date, and is measured onan undiscounted basis.

Tax relief is allocated to expenses charged to capital on the ‘marginal basis’. On this basis, if taxable income is capable of beingentirely offset by revenue expenses, then no tax relief is transferred to capital.

(i) DividendpayableIn accordance with FRS 21: ‘Events after the Balance Sheet Date’, the dividend payable is included in the accounts in the year inwhich it is approved by shareholders.

(j) Repurchases of the Company’s own shares for cancellationThe costs of repurchasing the Company’s own shares for cancellation, including any related stamp duty and transaction costsare charged to Capital Reserves and dealt with in the Reconciliation of Movements in Shareholders’ Funds. Share repurchasetransactions are accounted for on a trade date basis. The nominal value of share capital repurchased and cancelled istransferred out of called up Share Capital and into Capital Redemption Reserve.


2014 2013£’000 £’000

2. (Losses)/gains on investments held at fair value through profit or loss Gains on investments held at fair value through profit or loss based on

historical cost 6,290 21,339Amounts recognised as investment holding gains and losses in the previous year

in respect of investments sold during the year (37,125) (12,373)

(Losses)/gains on sales of investments based on the carrying value at the previous balance sheet date (30,835) 8,966

Net movement in investment holding gains 4,738 115,465Other capital charges (3) (4)

Total capital (losses)/gains on investments held at fair value through profit or loss (26,100) 124,427

2014 2013£’000 £’000

3. Income Income from investmentsDividends from investments listed overseas 5,715 6,041

2014 2013Revenue Capital Total Revenue Capital Total£’000 £’000 £’000 £’000 £’000 £’000

4. Management feeManagement fee 525 2,099 2,624 459 1,835 2,294

Details of the management fee are given in the Directors’ Report on page 22.

2014 2013£’000 £’000

5. Other administrative expensesOther administration expenses 351 364Directors’ fees1 133 133Auditors’ remuneration for audit services2 20 20Other Auditors’ remuneration for audit of New Zealand shareholder register3 2 2

506 519

1Full disclosure is given in the Directors’ Remuneration Report on page 31.2No other payments were made to the Auditors (2013: nil).3Audit services were provided by Grant Thornton (New Zealand).

Financial Statements continuedNotes to the Accounts continued


2014 2013Revenue Capital Total Revenue Capital Total £’000 £’000 £’000 £’000 £’000 £’000

6. Finance costs Interest on bank loans and overdrafts 149 596 745 151 605 756

7. Taxation (a) Analysis of tax charge for the year


Overseas withholding tax 572 — 572 432 — 432

Current tax charge for the year 572 — 572 432 — 432

(b) Factors affecting the current tax charge for the yearThe tax assessed for the year is higher (2013: lower) than the Company’s applicable rate of corporation tax for the year of22.0% (2013: 23.5%). The factors affecting the current tax charge for the year are as follows:


Net return/(loss) on ordinary activities before taxation 4,535 (22,862) (18,327) 4,912 131,289 136,201

Net return/(loss) on ordinary activities before taxation multiplied by the Company’s applicable rate of corporation tax of 22.0% (2013: 23.5%) 998 (5,030) (4,032) 1,154 30,853 32,007

Effects of:Non taxable overseas dividends (1,225) — (1,225) (1,388) — (1,388)Non taxable capital returns/(losses) — 4,437 4,437 — (31,426) (31,426)Overseas withholding tax 572 — 572 429 — 429Income taxed in different periods — — — 7 — 7Unutilised expenses carried forward to future periods 227 593 820 230 573 803

Current tax charge for the year 572 — 572 432 — 432

(c) Deferred taxationThe Company has an unrecognised deferred tax asset of £5,421,203 (2013: £4,957,273) based on a prospective corporation taxrate of 20.0% (2013: 23%). The reduction in the standard rate of corporation tax was substantively enacted on 3rd July 2013and was effective from 1st April 2014. The deferred tax asset has arisen due to the cumulative excess of deductible expensesover taxable income. Given the composition of the Company’s portfolio, it is not likely that this asset will be utilised in theforeseeable future and therefore no asset has been recognised in the accounts.

Given the Company’s status as an Investment Trust Company and the intention to continue meeting the conditions requiredto obtain approval, the Company has not provided deferred tax on any capital gains or losses arising on the revaluation ordisposal of investments.


8. Dividend(a) Dividends paid and proposed

2014 2013£’000 £’000

Dividend paid2013 final dividend of 2.80p (2012: 3.65p) 4,515 5,888

Dividend proposed2014 final dividend of 2.80p (2013: 2.80p) 4,515 4,515

The final dividend proposed in respect of the year ended 30th September 2014 is subject to approval at the forthcomingAnnual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in theaccounts for the year ending 30th September 2015.

(b) Dividend for the purposes of Section 1158 of the Corporation TaxAct 2010 (‘Section 1158’)The proposed dividend of £4,515,000 (2013: £4,515,000) is the amount on which the requirements of Section 1158 areconsidered. The revenue available for distribution by way of dividend is £3,963,000 (2013: £4,480,000).

9. Return/(loss) per ordinary share

The revenue return per share is based on the revenue earnings attributable to the ordinary shares of £3,963,000 (2013:£4,480,000) and on the weighted average number of shares in issue throughout the year of 161,248,078 (2013: 161,282,215).

The capital loss per share is based on the capital loss attributable to the ordinary shares of £22,862,000 (2013 return:£131,289,000) and on the weighted average number of shares in issue throughout the year of 161,248,078 (2013: 161,282,215).

The total loss per share is based on the total loss attributable to the ordinary shares of £18,899,000 (2013 return:£135,769,000) and on the weighted average number of shares in issue throughout the year of 161,248,078 (2013: 161,282,215).

2014 2013£’000 £’000

10. Investments Investments listed on a recognised stock exchange 459,633 487,941

Opening book cost 365,792 305,170Opening investment holding gains 122,149 19,057

Opening valuation 487,941 324,227

Movements in the year:Purchases at cost 142,289 262,056Sales – proceeds (144,500) (222,773)(Losses)/gains on sales of investments based on the carrying value at the previous

balance sheet date (30,835) 8,966Net movement in investment holding gains 4,738 115,465

Closing valuation 459,633 487,941

Closing book cost 369,871 365,792Closing investment holding gains 89,762 122,149

Total investments held at fair value through profit or loss 459,633 487,941



Transaction costs on purchases during the year amounted to £91,000 (2013: £191,000) and on sales during the year amountedto £83,000 (2013: £151,000). These costs comprise mainly brokerage commission.

During the year, prior year investment holding gains amounting to £37,125,000 have been transferred to Gains and Losses onSales of Investments as disclosed in note 15 on page 48.

2014 2013£’000 £’000

11. Current assetsDebtors Securities sold awaiting settlement 11,291 3,387Dividends and interest receivable 1,863 2,196Other debtors 47 40

13,201 5,623

The Directors consider that the carrying amount of debtors approximates to their fair value.

Cash and short term depositsCash and short term deposits comprises bank balances and short term deposits. The carrying amount of these representstheir fair value. Cash balances in excess of a predetermined amount are placed on short term deposit at market rates ofinterest.

2014 2013£’000 £’000

12. Creditors: amounts falling due within one year Securities purchased awaiting settlement 12,237 2,398Bank loan 67,479 —Other creditors and accruals 119 96

79,835 2,494

The Company has renegotiated its multicurrency loan facility with Scotiabank and the new agreement expires on 29th July2015. Under the terms of this agreement, the Company may draw down up to ¥12 billion with the option to extend the loanfacility further to a total of ¥15 billion at an interest rate of yen LIBOR, as offered in the market for the relevant currency andloan period, plus a margin of 0.95% plus ‘Mandatory costs’, which are the lender’s costs of complying with certain regulatoryrequirements of the Bank of England and the Financial Conduct Authority. The facility is secured against the Company’s assetsby way of a deed of security dated 30th July 2010 and is subject to covenants which are customary for a credit agreement ofthis nature. At 30th September 2013, the Company had drawn down ¥10 billion (£62.9 million) on this facility. In November2013, a further ¥2 billion was drawn down. At 30th September 2014, the Company had drawn down ¥12 billion (£67.5 million)on this facility at an interest rate of 1.03109%.

The Directors consider that the carrying amount of creditors falling due within one year approximates to their fair value.


2014 2013£’000 £’000

13. Creditors: amounts falling due after more than one year Bank loan — 62,931

For details of the bank loan, please refer to note 12 above.

2014 2013£’000 £’000

14. Called up share capital Allotted and fully paidShares of 25p each Opening balance of 161,248,078 (2013: 161,318,078) shares 40,312 40,330Repurchase of nil (2013: 70,000) shares for cancellation — (18)

Closing balance1 40,312 40,312

1Represented by 161,248,078 (2013: 161,248,078) shares of 25p each.

Capital reservesCapital Gainsand Holdinggains Capital

redemption Other lossesonsales and losseson reserve– Revenuereserve reserve of investments investments unrealised reserve£’000 £’000 £’000 £’000 £’000 £’000

15. Reserves Opening balance 8,650 166,791 75,392 122,149 11,621 6,961Realised exchange losses on cash and short

term deposits — — (1,723) — — —Losses on sales of investments based on

the carrying value at the previous balance sheet date — — (30,835) — — —

Net movement in investment holding gains — — — 4,738 — —Transfer on disposal of investments — — 37,125 (37,125) — —Management fee and finance costs

charged to capital — — (2,695) — — —Unrealised exchange gain on foreign

currency loan — — — — 7,656 —Other capital charges — — (3) — — —Dividend paid in the year — — — — — (4,515)Net revenue for the year — — — — — 3,963

Closing balance 8,650 166,791 77,261 89,762 19,277 6,409

16. Net asset value per share

The net asset value per share is based on the net assets attributable to the ordinary shareholders of £408,462,000 (2013:£431,876,000) and on the 161,248,078 (2013: 161,248,078) shares in issue at the year end.



2014 2013£’000 £’000

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

Net total (loss)/return on ordinary activities before finance costs and taxation (17,582) 136,957Add capital loss/(return) before finance costs and taxation 22,266 (131,894)Decrease in accrued income 333 939Increase in other debtors (7) (7)Increase in accrued expenses 13 10Overseas taxation (572) (432)Management fee charged to capital (2,099) (1,835)

Net cash inflow from operating activities 2,352 3,738

At At30th September Exchange Other 30th September

2013 Cash flow movements movements 2014£’000 £’000 £’000 £’000 £’000

18. Analysis of changes in net funds/(debt)Cash and short term deposits 3,737 13,449 (1,723) — 15,463Bank loan falling due within one year (62,931) (12,204) 7,656 982 (67,479)

Net debt (59,194) 1,245 5,933 982 (52,016)

19. Contingent liabilities and capital commitments

There were no contingent liabilities or capital commitments at the balance sheet date (2013: £nil).

20. Transactions with the Manager, affiliates of the Manager and related party transactions

Details of the management contract are set out in the Directors’ Report on page 21. The management fee payable to theManager for the year was £2,624,000 (2013: £2,294,000) of which £nil (2013: £nil) was outstanding at the year end.

Included in other administrative expenses in note 5 on page 44 are safe custody fees amounting to £63,000 (2013: £61,000)payable to JPMorgan Investor Services Limited as affiliate of the Manager, of which £17,000 (2013: £17,000) was outstanding atthe year end.

The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out atarms’ length. The commission payable to JPMorgan Securities for the year was £11,000 (2013: £26,000) of which £nil(2013: £nil) was outstanding at the year end.

Handling charges payable on dealing transactions undertaken by overseas sub custodians on behalf of the Company duringthe year amounted to £3,000 (2013: £4,000) of which £nil (2013: £nil) was outstanding at the year end.

At the year end, a bank balance of £15,463,000 (2013: £3,737,000) was held with JPMorgan Chase. A net amount of interestof £153 (2013: £nil) was receivable by the Company during the year from JPMorgan Chase of which £nil (2013: £nil) wasoutstanding at the year end.

Details of Directors’ transactions in the Company’s shares and Directors’ fees are included in the Directors’ RemunerationReport on pages 30 to 32.


21. Disclosures regarding financial instruments measured at fair value

The disclosures required by the amendment to FRS 29: ‘Improving Disclosures about Financial Instruments’ are given below.The Company’s financial instruments within the scope of FRS 29 that are held at fair value comprise its investment portfolioand derivative financial instruments, comprising forward foreign currency contracts.

The investments are categorised into a hierarchy consisting of the following three levels:

Level 1 – valued using quoted prices in active marketsLevel 2 – valued by reference to valuation techniques using observable inputs other than quoted market prices included

within Level 1Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data.

Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fairvalue measurement of the relevant asset. Details of the valuation techniques used by the Company are given in note 1(b) onpage 42.

The following table sets out the fair value measurements using the FRS 29 hierarchy as at 30th September:

2014Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or lossEquity investments 459,633 — — 459,633

Total 459,633 — — 459,633

2013Level 1 Level 2 Level 3 Total£’000 £’000 £’000 £’000

Financial assets held at fair value through profit or lossEquity investments 487,941 — — 487,941

Total 487,941 — — 487,941

There have been no transfers between Levels 1, 2 or 3 during the current or comparative year.

22. Financial instruments’ exposure to risk and risk management policies

As an investment trust, the Company invests in equities and other securities for the long term so as to secure its investmentobjective stated on the ‘Features’ page. In pursuing this objective, the Company is exposed to a variety of risks that couldresult in a reduction in the Company’s net assets or a reduction in the profits available for dividends. These risks includemarket risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. The Directors’ policyfor managing these risks is set out below. The Company Secretary, in close cooperation with the Board and the Manager,coordinates the Company’s risk management strategy.

The objectives, policies and processes for managing the risks and the methods used to measure the risks that are set outbelow, have not changed from those applying in the comparative year.



The Company’s financial instruments may comprise the following:

– investments in equity shares of Japanese companies which are held in accordance with the Company’s investmentobjective;

– short term debtors, creditors and cash arising directly from its operations; and

– a floating rate loan facility with Scotiabank.

(a) Market risk The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in marketprices. This market risk comprises three elements – currency risk, interest rate risk and other price risk. Information to enablean evaluation of the nature and extent of these three elements of market risk is given in parts (i) to (iii) of this note 22(a),together with sensitivity analyses where appropriate. The Board reviews and agrees policies for managing these risks andthese policies have remained unchanged from those applying in the comparative year. The Manager assesses the exposure tomarket risk when making each investment decision and monitors the overall level of market risk on the whole of theinvestment portfolio on an ongoing basis.

(i) Currency risk The Company’s functional currency and the currency in which it reports, is sterling. However the Company’s assets,liabilities and income are almost entirely denominated in yen. As a result, movements in exchange rates will affect thesterling value of those items.

Management of currency risk The Manager monitors the Company’s exposure to foreign currencies on a daily basis and reports to the Board, whichmeets on at least four occasions each year. The Manager measures the risk to the Company of the foreign currencyexposure by considering the effect on the Company’s net asset value and income of a movement in the yen/sterlingexchange rate. Yen denominated borrowing may be used to limit the exposure of the Company’s portfolio to theyen/sterling exchange rate. Income is converted to sterling on receipt. The Company may use short term forward currencycontracts to manage working capital requirements. It is currently not the Company’s policy to hedge against foreigncurrency risk.

Foreign currency exposure The fair value of the Company’s monetary items that have exposure to the yen at 30th September are shown below.The Company’s investments (which are not monetary items) have been included separately in the analysis so as to showthe overall level of exposure.

2014 2013Yen NZD Total Yen NZD Total

£’000 £’000 £’000 £’000 £’000 £’000

Current assets 28,574 1 28,575 9,228 2 9,230Creditors (79,717) — (79,717) (65,329) — (65,329)

Foreign currency exposure on net monetary items (51,143) 1 (51,142) (56,101) 2 (56,099)Investments held at fair value through profit or loss that

are equities 459,633 — 459,633 487,941 — 487,941

Total net foreign currency exposure 408,490 1 408,491 431,840 2 431,842

The above year end amounts are not representative of the exposure to foreign currency risk during the current orcomparative year due to fluctuation in drawings on the yen loan facility.


22. Financial instruments’ exposure to risk and risk management policies continued

(a) Market risk continued(i) Currency risk continued

Foreign currency sensitivityThe following tables illustrate the sensitivity of return after taxation for the year and net assets with regard to theCompany’s monetary financial assets and financial liabilities and exchange rates. The sensitivity analysis is based on theCompany’s monetary currency financial instruments held at each balance sheet date and assumes a 10% (2013: 10%)appreciation or depreciation in sterling against the yen, which is considered to be a reasonable illustration based on thevolatility of exchange rates during the year.

If sterling had weakened by 10% this would have had the following effect:

2014 2013£’000 £’000

Income statement return after taxationRevenue return 571 604Capital return (5,114) (5,610)

Total return after taxation for the year (4,543) (5,006)

Net assets (4,543) (5,006)

Conversely if sterling had strengthened by 10% this would have had the following effect:

2014 2013£’000 £’000

Income statement return after taxationRevenue return (571) (604)Capital return 5,114 5,610

Total return after taxation for the year 4,543 5,006

Net assets 4,543 5,006

In the opinion of the Directors, the above sensitivity analysis is not representative of the whole of the current orcomparative year due to fluctuation in drawings on the yen loan facility.

(ii) Interest rate risk Interest rate movements may affect the level of income receivable on cash deposits and the interest payable on theCompany’s variable rate cash borrowings.

Management of interest rate risk The Company does not normally hold significant cash balances. Short term borrowings are used when required.The Company may finance part of its activities through borrowings at levels approved and monitored by the Board.The possible effects on cash flows that could arise as a result of changes in interest rates are taken into account when theCompany borrows on the loan facility. However, amounts drawn down on this facility are for short term periods andtherefore exposure to interest rate risk is not significant.



Interest rate exposure The exposure of financial assets and liabilities to floating interest rates, giving cash flow interest rate risk when rates arereset, is shown below.

2014 2013£’000 £’000

Exposure to floating interest rates:Cash and short term deposits 15,463 3,737

Creditors: amounts falling due within one yearBank loan (67,479) —

Creditors: amounts falling due after more than one year Bank loan — (62,931)

Total exposure (52,016) (59,194)

Interest receivable on cash balances is at a margin below LIBOR.

The exposure to floating interest rates has fluctuated during the year between net cash and loan balances as follows:

2014 2013£’000 £’000

Minimum debit interest rate exposure to floating rates – net loan balances (44,096) (24,780)Maximum debit interest rate exposure to floating rates – net loan balances (62,014) (59,194)

Interest rate sensitivity The following table illustrates the sensitivity of return after taxation for the year and net assets to a 1% (2013: 1%) increase ordecrease in interest rates in regards to the Company’s monetary financial assets and financial liabilities. This level of changeis considered to be a reasonable illustration based on observation of current market conditions. The sensitivity analysis isbased on the Company’s monetary financial instruments held at the balance sheet date, with all other variables heldconstant.

2014 20131% increase 1%decrease 1% increase 1% decrease

in rate in rate in rate in rate £’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return 20 (20) (89) 89Capital return (540) 540 (503) 503

Total return after taxation for the year (520) 520 (592) 592

Net assets (520) 520 (592) 592

In the opinion of the Directors, the above sensitivity analysis may not be representative of the Company’s future exposureto interest rate changes due to fluctuation in drawings on the loan facility.


22. Financial instruments’ exposure to risk and risk management policies continued(a) Market risk continued

(iii) Other price risk Other price risk includes changes in market prices, other than those arising from interest rate risk or currency risk, whichmay affect the value of investments.

Management of other price risk The Board meets on at least four occasions each year to consider the asset allocation of the portfolio and the riskassociated with particular industry sectors. The investment management team has responsibility for monitoring theportfolio, which is selected in accordance with the Company’s investment objective and seeks to ensure that individualstocks meet an acceptable risk/reward profile.

Other price risk exposure The Company’s exposure to changes in market prices at 30th September comprises its holdings in equity investments asfollows:

2014 2013£’000 £’000

Equity investments held at fair value through profit or loss 459,633 487,941

The above data is broadly representative of the exposure to Other price risk during the year.

Concentration of exposure to other price risk An analysis of the Company’s investments is given on pages 10 to 13 and this shows that all of the investments are inJapanese listed equities. Accordingly there is a concentration of exposure to that country. However it should be noted thatan investment may not necessarily be wholly exposed to the economic conditions in its country of domicile or of listing.

Other price risk sensitivity The following table illustrates the sensitivity of return after taxation for the year and net assets to an increase or decreaseof 10% (2013: 10%) in the fair value of the Company’s equities. This level of change is considered to be a reasonableillustration based on observation of current market conditions. The sensitivity analysis is based on the Company’s equitiesand adjusting for change in the management fee, but with all other variables held constant.

2014 201310% increase in 10% decrease in 10% increase in 10% decrease in

fair value fair value fair value fair value £’000 £’000 £’000 £’000

Income statement – return after taxationRevenue return (60) 60 (62) 62Capital return 45,724 (45,724) 48,543 (48,543)

Total return after taxation for the year and net assets 45,664 (45,664) 48,481 (48,481)



(b) Liquidity risk This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that aresettled by delivering cash or another financial asset.

Management of the risk Liquidity risk is not significant as the Company’s assets comprise readily realisable securities, which can be sold to meetfunding requirements if necessary. Short term flexibility is achieved through the use of overdraft facilities. The Board’s policyis for the Company to remain fully invested in normal market conditions and that short term borrowings be used to manageshort term liabilities, working capital requirements and to gear the Company as appropriate. Details of the current loan facilityare given in part (a)(ii) to this note on pages 52 and 53.

Liquidity risk exposure Contractual maturities of the financial liabilities at the year end, based on the earliest date on which payment can be requiredby the lender are as follows:

2014More than

Three three monthsmonths but not more More thanor less than one year one year Total£’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearSecurities purchased awaiting settlement 12,237 — — 12,237Other creditors and accruals 119 — — 119Bank loan – including interest 172 67,883 — 68,055

12,528 67,883 — 80,411

2013More than

Three three monthsmonths but not more More thanor less than one year one year Total£’000 £’000 £’000 £’000

Creditors: amounts falling due within one yearSecurities purchased awaiting settlement 2,398 — — 2,398Other creditors and accruals 96 — — 96Bank loan – including interest 166 506 63,486 64,158

2,660 506 63,486 66,652


22. Financial instruments’ exposure to risk and risk management policies continued(c) Credit risk

Credit risk is the risk that the counterparty to a transaction fails to discharge its obligations under that transaction which couldresult in a loss to the Company.

Management of credit risk Portfolio dealingThe Company invests in markets that operate DVP (Delivery Versus Payment) settlement. The process of DVP mitigates therisk of losing the principle of a trade during the settlement process. The Manager continuously monitors dealing activity toensure best execution, a process that involves measuring various indicators including the quality of trade settlement andincidence of failed trades. Counterparty lists are maintained and adjusted accordingly.

CashCounterparties are subject to daily credit analysis by the Manager and trades can only be placed with counterparties that havea minimum rating of A1/P1 from Standard & Poor’s and Moody’s respectively.

Exposure to JPMorgan ChaseJPMorgan Chase is the custodian of the Company’s assets. The custody agreement grants a general lien over the securitiescredited to the securities account. The Company’s assets are segregated from JPMorgan’s own trading assets. Therefore, theseassets are designed to be protected from creditors in the event that JPMorgan Chase were to cease trading. However, noabsolute guarantee can be given to investors on the protection of all assets of the Company.

Credit risk exposure The amounts shown in the balance sheet under debtors and cash and short term deposits represent the maximum exposureto credit risk at the current and comparative year end.

Cash and short term deposits comprises balances held at banks that have a minimum rating of A1/P1 (2013: A1/P1) fromStandard & Poor’s and Moody’s respectively.

There were no stocks on loan at 30th September 2014 (2013: nil). There has been no stock lending during the current orcomparative year.

(d) Fair values of financial assets and financial liabilitiesAll financial assets and liabilities are either included in the balance sheet at fair value or the carrying amount in the balancesheet is a reasonable approximation of fair value.



23. Capital management policies and procedures

The Company’s debt and capital structure comprises the following:

2014 2013£’000 £’000

DebtBank loan 67,479 62,931

EquityShare capital 40,312 40,312Reserves 368,150 391,564

Total equity 408,462 431,876

Total debt and equity 475,941 494,807

The Company’s capital management objectives are to ensure that it will continue as a going concern and to maximise capitalreturn to its equity shareholders through an appropriate level of gearing.

The Board’s policy is to limit gearing within the range of 5% net cash to 15% geared. Gearing for this purpose is defined as totalassets expressed as a percentage of the shareholders’ funds. Total assets include total investments and net currentassets/liabilities less cash/cash equivalents and excluding bank loans of less than one year.

2014 2013£’000 £’000

Investments excluding liquidity holdings 459,633 487,941Current assets excluding cash 13,201 5,623Current liabilities excluding bank loans (12,356) (2,494)

Total assets 460,478 491,070

Net assets 408,462 431,876

Gearing/(net cash) 12.7% 13.7%

The Board, with the assistance of the Manager, monitors and reviews the broad structure of the Company’s capital on anongoing basis. This review includes:

– the ability to employ gearing when the Manager believes it to be appropriate;

– the need to buy back equity shares, either for cancellation or to hold in Treasury, which takes into account the share pricediscount or premium; and

– the need for issues of new shares, including issues from Treasury.


Notice is hereby given that the eighty sixth Annual GeneralMeeting of JPMorgan Japanese Investment Trust plc will beheld at 60 Victoria Embankment, London EC4Y 0JP on Friday,19th December 2014 at 2.00 p.m. for the following purposes:

1. To receive the Directors’ Report & Accounts and theAuditors’ Report for the year ended 30th September 2014.

2. To approve the Director’s Remuneration Policy.

3. To approve the Directors’ Remuneration Report for theyear ended 30th September 2014.

4. To approve a final dividend of 2.80p per share.

5. To reappoint Alan Barber as a Director of the Company.

6. To reappoint Andrew Fleming as a Director of the Company.

7. To reappoint Keith Percy as a Director of the Company.

8. To reappoint PricewaterhouseCoopers LLP as the Auditorsof the Company and to authorise the Directors to determinetheir remuneration.

Special Business

To consider the following resolutions:

Authority to allot new shares – Ordinary Resolution9. THAT the Directors of the Company be and they are hereby

generally and unconditionally authorised, (in substitution ofany authorities previously granted to the Directors),pursuant to and in accordance with Section 551 of theCompanies Act 2006 (the ‘Act’) to exercise all the powersfor the Company to allot shares in the Company and togrant rights to subscribe for, or to convert any security into,shares in the Company (‘Rights’) up to an aggregatenominal amount of £2,015,600 or, if different the aggregatenominal amount representing approximately 5% of theCompany’s issued Ordinary share capital as at the date ofthe passing of this resolution, provided that this authorityshall expire at the conclusion of the Annual GeneralMeeting of the Company to be held in 2015 unless renewedat a general meeting prior to such time, save that theCompany may before such expiry make offers oragreements which would or might require shares to beallotted or Rights to be granted after such expiry and sothat the Directors of the Company may allot shares andgrant Rights in pursuance of such offers or agreements asif the authority conferred hereby had not expired.

Authority to disapply pre-emption rights on allotment of relevantsecurities – Special Resolution10. THAT subject to the passing of Resolution 9 set out above,

the Directors of the Company be and they are herebyempowered pursuant to Sections 570 and 573 of the Act toallot equity securities (within the meaning of Section 560 ofthe Act) for cash pursuant to the authority conferred byResolution 9 or by way of a sale of Treasury shares as ifSection 561(1) of the Act did not apply to any suchallotment, provided that this power shall be limited to theallotment of equity securities for cash up to an aggregatenominal amount of £2,015,600 or, if different the aggregatenominal amount representing approximately 5% of theissued share capital as at the date of the passing of thisresolution at a price of not less than the net asset value pershare and shall expire upon the expiry of the generalauthority conferred by Resolution 9 above, save that theCompany may before such expiry make offers oragreements which would or might require equity securitiesto be allotted after such expiry and so that the Directors ofthe Company may allot equity securities in pursuance ofsuch offers or agreements as if the power conferred herebyhad not expired.

Authority to repurchase the Company’s shares – Special Resolution11. THAT the Company be generally and, subject as hereinafter

appears, unconditionally authorised in accordance withSection 701 of the Act to make market purchases (withinthe meaning of Section 693 of the Act) of its issued Ordinaryshares of 25p each in the capital of the Company on suchterms and in such manner as the Directors may from timeto time determine.

PROVIDED ALWAYS THAT

(i) the maximum number of Ordinary shares herebyauthorised to be purchased shall be 24,171,000 or, ifless, that number of Ordinary shares which is equal to14.99% of the Company’s issued share capital as at thedate of the passing of this resolution;

(ii) the minimum price which may be paid for an Ordinaryshare shall be 25p;

(iii) the maximum price which may be paid for an Ordinaryshare shall be an amount equal to the highest of:(a) 105% of the average of the middle marketquotations for an Ordinary share taken from andcalculated by reference to the London Stock ExchangeDaily Official List for the five business days immediately

Shareholder InformationNotice of Annual General Meeting


preceding the day on which the Ordinary share iscontracted to be purchased; or (b) the price of the lastindependent trade; or (c) the highest currentindependent bid;

(iv) any purchase of Ordinary shares will be made in themarket for cash at prices below the prevailing net assetvalue per Ordinary share (as determined by theDirectors);

(v) the authority hereby conferred shall expire on18th June 2016 unless the authority is renewed at theCompany’s Annual General Meeting in 2015 or at anyother general meeting prior to such time; and

(vi) the Company may make a contract to purchaseOrdinary shares under the authority hereby conferredprior to the expiry of such authority which contract willor may be executed wholly or partly after the expiry ofsuch authority and may make a purchase of Ordinaryshares pursuant to any such contract.

By order of the BoardRebecca Burtonwood, for and on behalf of JPMorgan Funds Limited, Company Secretary

12th November 2014

Notes

These notes should be read in conjunction with the notes on thereverse of the proxy form.

1. A member entitled to attend and vote at the Annual GeneralMeeting (the ’Meeting’) may appoint another person(s) (who neednot be a member of the Company) to exercise all or any of hisrights to attend, speak and vote at the Meeting. A member canappoint more than one proxy in relation to the Meeting, providedthat each proxy is appointed to exercise the rights attaching todifferent shares held by him.

2. A proxy does not need to be a member of the Company but mustattend the Meeting to represent you. Your proxy could be theChairman, another Director of the Company or another personwho has agreed to attend to represent you. Details of how toappoint the Chairman or another person(s) as your proxy orproxies using the proxy form are set out in the notes to the proxyform. If a voting box on the proxy form is left blank, the proxy orproxies will exercise his/their discretion both as to how to vote andwhether he/they abstain(s) from voting. Your proxy must attendthe Meeting for your vote to count. Appointing a proxy or proxiesdoes not preclude you from attending the Meeting and voting inperson.

3. Any instrument appointing a proxy, to be valid, must be lodgedin accordance with the instructions given on the proxy form nolater than 2.00 p.m. two business days prior to the Meeting (i.e.excluding weekends and bank holidays).

4. You may change your proxy instructions by returning a new proxyappointment. The deadline for receipt of proxy appointments(see above) also applies in relation to amended instructions.Any attempt to terminate or amend a proxy appointment receivedafter the relevant deadline will be disregarded. Where two or morevalid separate appointments of proxy are received in respect of thesame share in respect of the same Meeting, the one which is lastreceived (regardless of its date or the date of its signature) shall betreated as replacing and revoking the other or others as regardsthat share; if the Company is unable to determine which was lastreceived, none of them shall be treated as valid in respect of thatshare.

5. To be entitled to attend and vote at the Meeting (and for thepurpose of the determination by the Company of the number ofvotes they may cast), members must be entered on theCompany’s register of members as at 6.00 p.m. two businessdays prior to the Meeting (the ‘specified time’). If the Meeting isadjourned to a time not more than 48 hours after the specifiedtime applicable to the original Meeting, that time will also applyfor the purpose of determining the entitlement of members toattend and vote (and for the purpose of determining the numberof votes they may cast) at the adjourned Meeting. If however theMeeting is adjourned for a longer period then, to be so entitled,members must be entered on the Company’s register ofmembers as at 6.00 p.m. two business days prior to theadjourned Meeting or, if the Company gives notice of theadjourned Meeting, at the time specified in that notice. Changesto entries on the register after this time shall be disregarded indetermining the rights of persons to attend or vote at theMeeting or adjourned Meeting.

6. Entry to the Meeting will be restricted to shareholders and theirproxy or proxies, with guests admitted only by prior arrangement.

7. A corporation, which is a shareholder, may appoint an individual(s)to act as its representative(s) and to vote in person at the Meeting(see instructions given on the proxy form). In accordance with theprovisions of the Companies Act 2006, each such representative(s)may exercise (on behalf of the corporation) the same powers as thecorporation could exercise if it were an individual member of theCompany, provided that they do not do so in relation to the sameshares. It is therefore no longer necessary to nominate adesignated corporate representative.

Representatives should bring to the Meeting evidence of theirappointment, including any authority under which it is signed.

8. Members that satisfy the thresholds in Section 527 of theCompanies Act 2006 can require the Company to publisha statement on its website setting out any matter relating to(a) the audit of the Company’s accounts (including the Auditors’report and the conduct of the audit) that are to be laid beforethe Meeting; or (b) any circumstances connected with Auditorsof the Company ceasing to hold office since the previous AGM,which the members propose to raise at the Meeting. TheCompany cannot require the members requesting thepublication to pay its expenses. Any statement placed on thewebsite must also be sent to the Company’s Auditors no laterthan the time it makes its statement available on the website.The business which may be dealt with at the Meeting includesany statement that the Company has been required to publishon its website pursuant to this right.

9. Pursuant to Section 319A of the Companies Act 2006, the Companymust cause to be answered at the Meeting any question relating tothe business being dealt with at the Meeting which is put by amember attending the Meeting except in certain circumstances,including if it is undesirable in the interests of the Company or thegood order of the Meeting or if it would involve the disclosure ofconfidential information.

10. Under Sections 338 and 338A of the 2006 Act, members meetingthe threshold requirements in those sections have the right torequire the Company: (i) to give, to members of the Companyentitled to receive notice of the Meeting, notice of a resolutionwhich those members intend to move (and which may properly bemoved) at the Meeting; and/or (ii) to include in the business to bedealt with at the Meeting any matter (other than a proposedresolution) which may properly be included in the business at theMeeting. A resolution may properly be moved, or a matter properlyincluded in the business unless: (a) (in the case of a resolution only)it would, if passed, be ineffective (whether by reason of anyinconsistency with any enactment or the Company’s constitution orotherwise); (b) it is defamatory of any person; or (c) it is frivolous orvexatious. A request made pursuant to this right may be in hardcopy or electronic form, must identify the resolution of whichnotice is to be given or the matter to be included in the business,must be accompanied by a statement setting out the grounds forthe request, must be authenticated by the person(s) making it andmust be received by the Company not later than the date that is

six clear weeks before the Meeting, and (in the case of a matter tobe included in the business only) must be accompanied by astatement setting out the grounds for the request.

11. A copy of this Notice of Meeting has been sent for information onlyto persons who have been nominated by a member to enjoyinformation rights under Section 146 of the Companies Act 2006(a ‘Nominated Person’). The rights to appoint a proxy cannot beexercised by a Nominated Person: they can only be exercised bythe member. However, a Nominated Person may have a rightunder an agreement between him and the member by whom hewas nominated to be appointed as a proxy for the Meeting or tohave someone else so appointed. If a Nominated Person does nothave such a right or does not wish to exercise it, he may have aright under such an agreement to give instructions to the memberas to the exercise of voting rights.

12. In accordance with Section 311A of the Companies Act 2006, thecontents of this Notice of Meeting, details of the total number ofshares in respect of which members are entitled to exercise votingrights at the Meeting, the total voting rights members are entitledto exercise at the Meeting and, if applicable, any members’statements, members’ resolutions or members’ matters ofbusiness received by the Company after the date of this Notice willbe available on the Company’s website www.jpmjapanese.co.uk.

13. The register of interests of the Directors and connected persons inthe share capital of the Company and the Directors’ letters ofappointment are available for inspection at the Company’sregistered office during usual business hours on any weekday(Saturdays, Sundays and public holidays excepted). It will also beavailable for inspection at the Meeting. No Director has anycontract of service with the Company.

14. You may not use any electronic address provided in this Notice ofMeeting to communicate with the Company for any purposes otherthan those expressly stated.

15. As an alternative to completing a hard copy Form of Proxy/VotingInstruction Form, you can appoint a proxy or proxies electronicallyby visiting www.sharevote.co.uk. You will need your Voting ID,Task ID and Shareholder Reference Number (this is the series ofnumbers printed under your name on the Form of Proxy/VotingInstruction Form). Alternatively, if you have already registered withEquiniti Limited’s online portfolio service, Shareview, you cansubmit your Form of Proxy at www.shareview.co.uk. Fullinstructions are given on both websites.

16. As at 10th November 2014 (being the latest business day prior tothe publication of this Notice), the Company’s issued share capitalconsists of 161,248,078 ordinary shares carrying one vote each.Therefore the total voting rights in the Company are 161,248,078.

Electronic appointment – CREST membersCREST members who wish to appoint a proxy or proxies by utilising theCREST electronic proxy appointment service may do so for the Meetingand any adjournment(s) thereof by using the procedures described inthe CREST Manual. See further instructions on the proxy form.


Shareholder Information continuedNotice of Annual General Meeting continued


Return to ShareholdersTotal 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 on Net AssetsTotal return on net asset value (‘NAV’) per share, on a bid valueto bid value basis, assuming that all dividends paid out by theCompany were reinvested, without transaction costs, into theshares of the Company at the NAV per share at the time theshares 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 when calculating the totalreturn on net assets.

Benchmark ReturnTotal 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 the 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 doesnot track this index and consequently, there may be somedivergence between the Company’s performance and thatof the benchmark.

Gearing/Net CashGearing represents the excess amount above shareholders’funds of total assets (including net current assets/(liabilities))less cash/cash equivalents, expressed as a percentage ofshareholders’ funds. If the amount calculated is negative, this isshown as a ‘net cash’ position.

LeverageFor the purposes of the Alternative Investment Fund ManagersDirective (‘AIFMD’), leverage is any method which increases theCompany’s exposure, including the borrowing of cash and theuse of derivatives. It is expressed as a ratio between theCompany’s exposure and its net asset value and can becalculated on a gross and a commitment method. Under thegross method, exposure represents the sum of the Company’s

positions after the deduction of sterling cash balances, withouttaking into account any hedging and netting arrangements.Under the commitment method, exposure is calculated withoutthe deduction of sterling cash balances and after certainhedging and netting positions are offset against each other.

Ongoing ChargesThe ongoing charges represent the Company’s managementfee and all other operating expenses excluding interestpayable, expressed as a percentage of the average of thedaily net assets during the year.

Share Price Discount/Premium to Net Asset Value (‘NAV’) Per ShareIf 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 foran investment trust’s shares to trade at a discount than ata premium.

Performance AttributionAnalysis of how the Company achieved its recordedperformance relative to its benchmark.

– Stock/SectorMeasures the effect of investing in securities/sectors to agreater or lesser extent than their weighting in the benchmark,or of investing in securities which are not included in thebenchmark.

– Currency EffectMeasures the effect of currency exposure differences betweenthe Company’s portfolio and its benchmark.

– Gearing/CashMeasures the impact on returns of borrowings or cashbalances on the Company’s relative performance.

–Management Fee/Other ExpensesThe payment of fees and expenses reduces the level of totalassets, and therefore has a negative effect on relativeperformance.

– Share RepurchasesMeasures the effect on relative performance of repurchasingand cancelling the Company’s own shares, or holding them inTreasury, at a price which is less than the net asset value per share.

Glossary of Terms and Definitions

Alternative Investment Fund Managers — Leverage

The Company’s maximum and actual leverage levels at 30th September 2014 are shown below:Gross Commitment

Leverage Exposure method method

Maximum limit 200% 200%Actual 116% 116%


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


HistoryThe 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.

Company NumbersCompany registration number: 223583 London Stock Exchange number: 0174002ISIN: GB0001740025Bloomberg code: JFJ LN

Market InformationThe Company’s unaudited net asset value (‘NAV’) is published daily viathe London Stock Exchange.

The Company’s shares are listed on the London Stock Exchange and theNew Zealand Stock Exchange. The market price is shown daily in theFinancial Times, The Times, The Daily Telegraph, The Scotsman and onthe Company’s website at www.jpmjapanese.co.uk, where the shareprice is updated every fifteen minutes during trading hours.

Websitewww.jpmjapanese.co.uk

Share TransactionsThe 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 SecretaryJPMorgan Funds Limited

Company’s Registered Office60 Victoria EmbankmentLondon EC4Y 0JPTelephone: 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 employs JPMorgan Chase Bank, N.A. as the Company’scustodian.

Registrars (UK)Equiniti LimitedReference 1090Aspect HouseSpencer RoadLancingWest Sussex BN99 6DATelephone number: 0871 384 2317

Calls to this number cost 8p per minute plus network charges. Lines open8.30 a.m. to 5.30 p.m. Monday to Friday. The overseas helpline number is+44 (0)121 415 7047.

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 obtainfurther details on their holdings on the internet by visitingwww.shareview.co.uk.

Registrars (New Zealand)Computershare Investor Services LimitedPrivate Bag 92119, Victoria Street WestAuckland 1142 Level 2, 159 Hurstmere RoadTakapuna, AucklandNew ZealandTelephone number: 09 488 8777

Independent Auditors (UK)PricewaterhouseCoopers LLPChartered Accountants and Statutory Auditors7 More London RiversideLondon SE1 2RT

BrokersCanaccord Genuity88 Wood StreetLondon EC2V 7QR

Savings Product AdministratorsFor queries on the J.P. Morgan Investment Account, J.P. Morgan ISA andJ.P. Morgan SIPP, see contact details on the back cover of this report.

Information about the Company

Financial CalendarFinancial year end 30th SeptemberFinal results announced NovemberHalf year end 31st MarchHalf year results announced May/JuneDividend on ordinary shares paid DecemberAnnual General Meeting December

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