Final Results

RNS Number : 5845J

JPMorgan Japan Smaller Co Tst PLC

13 June 2014

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN JAPAN SMALLER COMPANIES INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED
31ST MARCH 2014

The Directors of JPMorgan Japan Smaller Companies Trust plc announce the Company's results for the year ended 31^st March 2014.

Chairman's Statement

Investment Performance

During the year to 31st March 2014, the Company's undiluted total return on net assets (or portfolio return) was +3.9%. This exceeded the return of the Company's benchmark, the S&P/Citigroup Japan Extended Market Index (Total Return Net), which fell by 4.1%. The Company's diluted return on net assets, which assumes that all of the Subscription shares in issue were exercised at the rate of 174 pence per share and that all of the Treasury shares were reissued in accordance with the Board's policy on the reissue of Treasury shares, was +3.6%. Over the same period, the Company's Ordinary share price rose by 0.6%, reflecting a modest widening of the discount to the diluted net asset value per share from 10.9% to 13.5%.

Review of Services Provided by the Manager

Your Board is pleased that the revised Portfolio management arrangements put in place in 2012 continue to work effectively. Your Board has again reviewed the performance of the Manager and has concluded that the continued engagement of the Manager remains the best option for the management of the Company's assets.

Gearing

The Company has a Japanese yen 3.0 billion credit facility with ING which gives the Investment Managers the ability to gear tactically. This facility was entered into during the year on the expiry of a loan with Scotiabank for yen 2.0 billion. The level of gearing is reviewed by the Directors at each Board meeting and the Investment Managers have been given the flexibility to operate within the range of 10% net cash to 25% geared. During the year the Company's gearing level ranged between 7% and 15% and at the time of writing was 11.5%.

Subscription Shares

On 5th March 2009 the Company issued 7,798,873 Subscription shares as a bonus issue to Ordinary shareholders on the basis of one Subscription share for every five Ordinary shares held on 3rd March 2009. Each Subscription share conferred the right (but not the obligation) to subscribe for one Ordinary share at predetermined prices on any business day during the period from 1st April 2009 until 31st March 2014. From 1st April 2013 to 31st March 2014, 413,111 Subscription shares were exercised, resulting in Ordinary shares raising proceeds of £719,000.

On 1st April 2014, 4,030,780 Ordinary shares were issued following the exercise of conversion rights by uncertificated shareholders and on 14th April 2014, 6,028 Subscription shares held by certificated holders were converted into Ordinary shares.

As a result, 2,747,739 Subscription shares remained outstanding after the final exercise and a Trustee was appointed and the decision was made to exercise the Subscription rights attaching to these outstanding Subscription shares. This resulted in an issue of a further 2,747,739 Ordinary shares. These Ordinary shares were then sold and, after the deduction of the conversion price of 174 pence per share, together with all associated fees, costs and expenses (including brokerage commission), 7.55 pence per Subscription share was distributed to the Subscription shareholders on whose behalf the Trustee had exercised the Subscription share rights.

Share Issues and Repurchases

The Company did not repurchase any Ordinary shares into Treasury or for cancellation during the year under review. No Ordinary shares were reissued from Treasury during the period and no new Ordinary shares were issued other than the Ordinary shares issued as a result of the exercise of Subscription shares.

Your Board believes that the ability to issue new Ordinary shares and reissue shares from Treasury at a premium, repurchase Ordinary shares for cancellation or into Treasury at a discount is in the interests of shareholders in assisting the Company in managing any imbalance between the supply and demand for the Company's shares and in reducing the volatility of the discount. Accordingly, the Board will be seeking shareholders' approval to renew these authorities at this year's Annual General Meeting. Further details are given in the annual report.

Board of Directors

In accordance with the Company's Articles of Association, Ben Grigsby and I, who have both served as Directors for longer than nine years, will retire at the forthcoming Annual General Meeting and seek reappointment. The Nomination Committee has met to consider the attributes and contributions of each of the Directors and, following this review, recommends their reappointment.

As part of the Board's ongoing succession plan, we were delighted to welcome Yuuichiro Nakajima as a new Director on 1st April 2014. Mr Nakajima seeks reappointment at the forthcoming Annual General Meeting.

Regulatory Changes

Following recent regulatory changes, this Chairman's Statement now forms part of the new Strategic Report. Shareholders will also note other changes to the format of the Annual Report which have been implemented as a result of these new regulatory requirements, including a re-ordering of information previously disclosed in separate sections on Strategy and Governance, an enhanced Directors' Remuneration Report and a more detailed and bespoke Independent Auditor's Report.

Alternative Investment Fund Managers Directive ('AIFMD')

Further to my statement in the half year report, as required by the AIFMD, the Company is required to appoint an Alternative Investment Fund Manager ('AIFM'). Due to other regulatory reasons, it is not possible to appoint JPMorgan Asset Management (Japan) Limited as AIFM to the Company. Therefore, another JPMorgan company, JPMorgan Funds Limited, will be appointed as the Company's AIFM. From a portfolio management perspective, I am pleased to report that there will be no change, because JPMorgan Funds Limited will delegate the portfolio management, such that Shoichi Mizusawa, Nicholas Weindling and Naohiro Ozawa will continue as Investment Managers to the portfolio. The Company has decided to appoint Bank of New York Mellon as its Depositary (an appointment also required under the AIFMD) and Custody services will continue to be provided by JPMorgan.

Foreign Account Tax Compliance Act ('FATCA')

FATCA was enacted in 2010 to combat tax evasion by US persons and the Company has opted to make arrangements to be registered for FATCA purposes.

Auditor

Deloitte LLP have served the Company well for many years and I would like to take this opportunity to thank them for their work. However, after undertaking a review of audit service providers, the Audit Committee recommended to the Board that Grant Thornton UK LLP be appointed as Auditor to the Company with effect from the close of the forthcoming Annual General Meeting. Deloitte LLP will retire and are not seeking reappointment. The first audit by Grant Thornton UK LLP will be in respect of the year ending 31st March 2015.

Annual General Meeting

This year's Annual General Meeting will be held at 60 Victoria Embankment, London EC4Y 0JP on Friday, 25th July 2014 at 10.00 a.m. In addition to the formal proceedings there will be a presentation by one of your Investment Managers, who will review the past year and comment on the outlook for the current period. I look forward to seeing as many of you as possible at the meeting.

If you have any detailed questions, you may wish to raise these in advance with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the Company's website at www.jpmjapansmallercompanies.co.uk. Shareholders who are unable to attend the Annual General Meeting in person are encouraged to use their proxy votes. Shareholders who hold their shares through CREST are able to lodge their proxy votes electronically. More details are given in the notes to the Notice of Meeting in the annual report.

Outlook

Japan is enjoying a recent and rare period of political stability, with Prime Minister Shinzo Abe achieving high levels of popular support and working with a settled Cabinet of ministerial colleagues. The economy looks to have emerged from its deflationary past and nominal GDP is growing again, with both prices and wages gently moving ahead. There are undoubtedly challenges to meet and question marks over the durability of the economy's present course but your Board considers that optimism regarding Japan's economic prospects is justified.

The stock market has experienced a period of consolidation after its strong gains at the start of 2013. Corporate earnings, meanwhile, particularly among smaller and medium sized companies, have been robust and their market valuation basis is not especially demanding. Indeed, the rating of Japanese shares is at a relatively low level compared to other major exchanges and future profit growth projections are also favourable. The Board, having recently returned from a very productive visit to Japan, shares our Investment Managers' confidence towards the market and believes that worthwhile opportunities exist to achieve strong returns for shareholders. Our Investment Managers will work hard, I am sure, to realise these.

Alan Clifton

Chairman

13th June 2014

For further information, please contact:

Rebecca Burtonwood

For and on behalf of

JPMorgan Asset Management (UK) Limited, Secretary

020 7742 4000

Investment Managers' Report

Market Review

The Japanese equity market delivered another strong return in local currency terms during the year ended 31st March 2014. However, the gain in sterling terms was offset due to a rise in sterling against the yen of almost 20%. For the financial year, the Company delivered a return on net assets of +3.9% in sterling terms, compared with the benchmark return of -4.1%.

The Japanese market started the 2013/2014 fiscal year strongly, following the rally that had commenced at the end of 2012 on the back of the landslide victory by the Liberal Democratic Party ('LDP') in the Lower House election. The yen continued its slide against other currencies, falling below 100 yen to the US dollar and 150 yen to sterling in May. The trigger for the extended rally was the announcement of aggressive monetary easing by the Bank of Japan ('BoJ') under the leadership of the new governor Kuroda. The BoJ's new aim is to promote 2% inflation within two years by doubling its balance sheet through purchases of government bonds as well as ETFs (exchange traded funds) and REITs (real estate investment trusts).

The BoJ's commitment to end deflation is potentially the most important of the policies that are now famously called 'Abenomics'. In a deflationary environment, both corporates and households were incentivised to hold cash since cash offered a high real return. However, if inflation comes back to the economy, the real return on cash will fall to below zero and people will be incentivised to spend sooner rather than later. There are already tentative signs of inflation. The value of land has started to rise and headline inflation data has turned positive. Most importantly, the labour market has started to show signs of strength and wages are on the rise, albeit at a slow pace. The LDP won the Upper House election in July and secured a majority in both Upper and Lower Houses. This gave Prime Minister Shinzo Abe a clear mandate and strong political base to push through with his policies, including painful structural reform. In September, Tokyo won the race to host the 2020 Olympics which is expected to boost demand for construction and associated industries.

In the first three months of 2014, the Japanese market came under selling pressure, resulting in a fall of over 5%. Foreign investors have turned into net sellers in 2014 as many of them were disappointed by the lack of additional monetary easing by the BoJ. Other potential explanations for the sell-off include a perceived lack of progress on structural reform and concerns about the adverse impact of the April consumption tax rise on the economy. External factors also weighed on investor confidence. US economic data has been weak although much of this can be attributed to the severe weather. Sentiment toward the Chinese economy deteriorated further as an increasing number of people started to question the health of the financial system in that country. The geopolitical tension in Ukraine between Russia and western countries also undermined confidence.

The bellwether TOPIX index for Japan finished the fiscal year some 70% higher than the lows of 2012, but 7% lower than the highs of 2013. Small cap stocks performed more strongly than the wider market, delivering a return of around 80% in yen terms from the 2012 low to the 2014 peak, although some ground has since been lost. The rally can be justified by strong corporate earnings growth. For the year ended 31st March 2014, Japanese companies' aggregate pre-tax profits are expected to have grown by over 40%. For the 2014 financial year, aggregate earnings are expected to surpass those achieved in 2007, just before the global financial crisis. In 2007, TOPIX traded at around 1800 points, or 50% higher than the current level. Smaller companies have followed a slightly different pattern to the wider market, having peaked at the beginning of 2006 and recovered to within 20% of the peak.

Outlook

Company fundamentals are strong and valuations are compelling. We expect that the impact of the consumption tax rise will prove to be relatively small and that the economy will return to its growth path in the third quarter. We continue to be optimistic on the outlook for Japanese equities, for several reasons:

Strong corporate fundamentals and compelling valuations

The consensus earnings forecast for the 2014 financial year currently stands at a 10% growth compared to the previous year, with a similar growth expected in 2015. The return on equity is also expected to rise further towards 10%. TOPIX has a trailing price-to-earnings (P/E) ratio of 14x, versus 17x for the S&P 500. We have never before seen a Japan versus US P/E valuation gap at a three point discount. Smaller companies offer equally attractive valuations, with the trailing price/earnings ratio of sub 15x and price to book value of 1x.

The BoJ remains committed to fighting deflation

The BoJ has come under criticism for perceived inaction this year, but it has held a firm line in terms of its commitment to promote the reintroduction of inflation into the Japanese economy. We believe that the BoJ will be willing to use the tools at its disposal, including an increase in its quantitative easing programme, as and when required.

Global growth led by the US

We expect that global demand will continue to be led by US economic growth momentum. The European economy appears to have stabilised and there are tentative signs that recovery is starting, albeit from a depressed base. The fortunes for the Japanese economy have historically depended on global economic growth and we believe that this will continue to hold true. This is positive for corporate earnings and, ultimately, the Japanese equity market.

Signs of improvements in the domestic economy

In February of this year, consumer price index inflation (excluding fresh food and energy) rose to 0.8%, the highest reading since 1998. This is a key change. We are also encouraged by announcements from large companies that they are going to increase base wages this year. Wages remain one of the key drivers of sustained growth and inflation and it is important that this trend spreads, not only among large companies but also among small and medium enterprises ('SMEs') which account for 70% of the Japanese workforce. Greater corporate profitability at large firms and a more robust economic outlook should filter through to SMEs gradually over the next few years.

Risks

Although we believe that the global economy will continue to recover, it is still far away from being on a sound and sustainable footing. The geopolitical background remains uncertain. The risk specific to Japan is a lack of progress in structural reform, also known as the 'third arrow' of Abenomics. An increasing number of investors and commentators are starting to doubt Abe's commitment to reform. It has been over a year since Prime Minister Abe took office and he has to start to deliver soon, not only for investor sentiment but more fundamentally in order to address the structural issues, such as the declining population and unsustainable level of public debt that pose threats to the long term health of the Japanese economy. For this reason, we will monitor closely the progress of structural reform.

Portfolio Review and Strategy

We are pleased to report that performance for the year ended 31st March 2014 is ahead of the benchmark. This was achieved primarily through bottom-up stock selection. Sector allocation was virtually neutral in terms of its contribution to relative performance. Combined with the above-benchmark return in the previous year, portfolio performance is now ahead of the benchmark over one, two, three and five years.

We did not make significant changes to the overall structure of the portfolio during the year, and maintained a bias towards domestic sectors that benefit from aggressive monetary easing; most notably financials and real estate. Within financials, our holdings are concentrated in leasing and consumer finance companies that have higher operational leverage to economic expansion than traditional banks. The real estate market has already started to benefit from the monetary policy and both transaction volumes and property values are rising. In the office property market, vacancy rates are gradually falling and advertised rental rates are on the rise. We also have exposure to logistics centres through our holdings in REITs. The rising demand for online retailing and an improving economy are clear tailwinds for logistics centres. The domestic infrastructure is another area where we have a number of holdings ranging from construction to construction materials.

The other pillar of the portfolio comprises companies that we believe will deliver long term, sustained growth thanks to a combination of secular trends, quality management and strong balance sheets. In terms of secular trends, our focus remains unchanged; namely, factory automation, growth in e-commerce, greater use of mobile devices such as smart phones and consolidation in retail.

Japanese companies are among the global leaders in factory automation. As wages rise, many companies in Asia are increasing investment in factory automation.

The uptake of online shopping is very low by global standards. We see no reason why this should remain so low, and expect the growth of e-commerce to remain strong for a number of years to come. There is a large number of companies that have introduced new services on smartphones. This has happened at a time when people are spending an increasing amount of time on mobile devices at the expense of, among other media, PCs.

The obvious implication of the ageing population is that a large number of small businesses, many of which are family owned, are either giving up or looking to sell because they do not have successors. On the other hand, larger peers with strong financial and operational resources are looking to consolidate fragmented industries by acquiring smaller competitors.

We continue to avoid companies whose products and services have been commoditised thereby not commanding sufficiently strong pricing power. Consumer durables such as TVs, white goods and even mobile devices are examples of these. We also avoid most defensives and staples on the basis that they are expensive and do not offer an attractive growth profile.

We started the fiscal year with gearing of some 6% and raised it to around 13% in the October-December quarter reflecting the number of investment ideas suiting our bottom-up stockpicking approach.

For the new financial year, our strategy is unchanged, as we have outlined above. Our objective remains to deliver long term performance that is ahead of both the benchmark and the peer group in a sustainable manner. At JPMorgan we have a strong team based on the ground in Tokyo, conducting many company visits each year - around 2,500 company meetings in 2013-2014 - to try to identify significant changes in sectors and companies. We expect our approach to lead to a continued improvement in performance.

Shoichi Mizusawa

Nicholas Weindling

Naohiro Ozawa

Investment Managers

13th June 2014

Principal Risks

With the assistance of the Manager, JPMAM UK, and the Company Secretary, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories and have not changed since the date of the last annual report and are not expected to change in the forthcoming year:

•     Investment and Strategy: An inappropriate investment strategy, for example excessive concentration of investments, asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, which may result in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on by the Manager and JPMAM UK. The Company Secretary provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and reviews data which shows statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing tactically, within a strategic range set by the Board. In addition to regular Board meetings, the Board visits the offices of JPMAM Japan in Tokyo on an annual basis to discuss strategy and consider all other relevant aspects of the Investment Management operations.

•     Market: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by the Manager and JPMAM UK. The Board monitors the implementation and results of the investment process with the Manager. The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - currency risk, interest rate risk and other price risk. Information to enable an evaluation of the nature and extent of these three elements of market risk is given in note 21(a) in the annual report, together with details of how the Board manages these risks.

•     Liquidity: This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Details of how the Board manages these risks can be found in note 21(b) in the annual report.

•     Credit: Credit risk is the risk that the failure of the counterparty to a transaction to discharge its obligations under that transaction could result in loss to the Company. Details of the Company's exposure to credit risk and how the Board manages this risk can be found in note 21(c) in the annual report.

•     Discount: In order to try to manage the Company's discount, which can be volatile, the Company operates a share issuance and repurchase programme.

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

•     Corporate Governance and Shareholder Relations: Details of the Company's compliance with corporate governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report in the annual report.

•     Operational: Disruption to, or failure of, the Manager's or JPMAM UK's accounting, dealing or payments systems or the Custodian's records may prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by the Manager and JPMAM UK and their associates and the key elements designed to provide effective internal controls are included within the Risk Management and Internal Controls section of the Corporate Governance report in the annual report.

•     Loss of Investment Team: A sudden departure of members of the investment management team could result in a short term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team-based approach.

•     Political and Economic: Administrative risks, such as the imposition of restrictions on the free movement of capital.

•     Going Concern: Pursuant to the Sharman Report, Boards are now advised to consider going concern as a potential risk, whether or not there is an apparent issue arising in relation thereto. Going concern is considered rigorously on an ongoing basis and the Board's statement on going concern is detailed in the annual report.

Related Parties Transactions

During the financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the year.

Statement of Directors' Responsibilities

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law. Under Company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and estimates that are reasonable and prudent;

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

•     prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business and the Directors confirm that they have done so.

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

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

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

Each of the Directors, whose names and functions are listed in the annual report, confirms that, to the best of their knowledge:

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

•     the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

For and on behalf of the Board

Alan Clifton

Chairman

13th June 2014

Income Statement

for the year ended 31st March 2014

		2014			2013
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair value through   profit or loss		-	2,340	2,340	-	17,176	17,176
Net foreign currency gains/(losses)		-	1,632	1,632	-	(19)	(19)
Income from investments		1,242	-	1,242	1,261	-	1,261
Gross return		1,242	3,972	5,214	1,261	17,157	18,418
Management fee		(1,018)	-	(1,018)	(708)	-	(708)
Other administrative expenses		(402)	-	(402)	(357)	-	(357)
Net (loss)/return on ordinary activities before   finance costs and taxation		(178)	3,972	3,794	196	17,157	17,353
Finance costs		(246)	-	(246)	(93)	-	(93)
Net (loss)/return on ordinary activities before taxation		(424)	3,972	3,548	103	17,157	17,260
Taxation		(110)	-	(110)	(89)	-	(89)
Net (loss)/return on ordinary activities after taxation		(534)	3,972	3,438	14	17,157	17,171
(Loss)/return per Ordinary share - undiluted (note 2)		(1.36)p	10.13p	8.77p	0.04p	43.67p	43.71p
(Loss)/return per Ordinary share - diluted (note 2)		(1.36)p	9.95p	8.61p	0.04p	43.67p	43.71p

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

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

Reconciliation of Movements in Shareholders' Funds

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 31st March 2012	4,017	716	1,836	314,775	(243,203)	(12,263)	65,878
Repurchase of shares into Treasury	-	-	-	-	(565)	-	(565)
Issue of Ordinary shares on exercise of   Subscription shares	4	48	-	-	-	-	52
Net return on ordinary activities	-	-	-	-	17,157	14	17,171
At 31st March 2013	4,021	764	1,836	314,775	(226,611)	(12,249)	82,536
Repurchase of shares into Treasury1	-	-	-	-	(1)	-	(1)
Conversion of Subscription shares into   Ordinary shares	(4)	4	-	-	-	-	-
Issue of Ordinary shares on exercise of   Subscription shares	41	678	-	-	-	-	719
Net return/(loss) on ordinary activities	-	-	-	-	3,972	(534)	3,438
At 31st March 2014	4,058	1,446	1,836	314,775	(222,640)	(12,783)	86,692

¹Relates to prior year stamp duty.

Balance Sheet

at 31st March 2014

		2014	2013
		£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		97,287	88,488
Current assets
Debtors		1,473	596
Cash and short term deposits		5,649	1,239
		7,122	1,835
Creditors: amounts falling due within one year		(244)	(7,787)
Net current assets/(liabilities)		6,878	(5,952)
Total assets less current liabilities		104,165	82,536
Creditors: amounts falling after more than one year		(17,473)	-
Net assets		86,692	82,536
Capital and reserves
Called up share capital		4,058	4,021
Share premium		1,446	764
Capital redemption reserve		1,836	1,836
Other reserve		314,775	314,775
Capital reserves		(222,640)	(226,611)
Revenue reserve		(12,783)	(12,249)
Total equity shareholders' funds		86,692	82,536
Net asset value per Ordinary share - undiluted (note 3)		219.5p	211.2p
Net asset value per Ordinary share - diluted (note 3)		212.8p	205.4p

The accounts were approved and authorised for issue by the Directors on 13th June 2014 and were signed on their behalf by:

Chris Russell

Director

The Company's registration number is 3916716

Cash Flow Statement

for the year ended 31st March 2014

		2014	2013
		£'000	£'000
Net cash (outflow)/inflow from operating activities		(302)	139
Returns on investments and servicing of finance
Interest paid		(137)	(96)
Net cash outflow from returns on investments and servicing of finance		(137)	(96)
Capital expenditure and financial investment
Purchases of investments		(45,963)	(35,747)
Sales of investments		37,645	34,839
Other capital charges		(5)	(6)
Net cash outflow from capital expenditure and financial investment		(8,323)	(914)
Net cash outflow before financing		(8,762)	(871)
Financing
Net drawdown of loans		13,411	2,243
Issue of Ordinary shares on exercise of Subscription shares		719	52
Repurchase of shares into Treasury		(208)	(358)
Net cash inflow from financing		13,922	1,937
Increase in cash in the year		5,160	1,066

Notes to the Accounts for the year ended 31st March 2014

1.    Accounting policies

Basis of accounting

The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the AIC in January 2009. 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 the revaluation of investments at fair value. The disclosures on going concern in the Directors' Report form part of these financial statements.

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

2.   (Loss)/return per Ordinary share

	2014	2013
	£'000	£'000
(Loss)/return per Ordinary share is based on the following:
Revenue (loss)/return	(534)	14
Capital return	3,972	17,157
Total return	3,438	17,171
Weighted average number of Ordinary shares in issue during the year used for the purpose   of the undiluted calculation	39,200,194	39,289,157
Weighted average number of Ordinary shares in issue during the year used for the purpose   of the diluted calculation	39,929,867	39,289,157
Undiluted
Revenue (loss)/return per share	(1.36)p	0.04p
Capital return per share	10.13p	43.67p
Total return per share	8.77p	43.71p
Diluted
Revenue (loss)/return per share1	(1.36)p	0.04p
Capital return per share	9.95p	43.67p
Total return per share	8.61p	43.71p

¹The revenue loss per ordinary share for year ended 31st March 2013 was antidilutive in accordance with the requirements of Financial Reporting Standard 22 'Earnings per share'.

The diluted return/(loss) per Ordinary share represents the return/(loss) on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the year as adjusted in accordance with the requirements of Financial Reporting Standard 22 'Earnings per share'.

3.   Net asset value per Ordinary share

	2014	2013
Undiluted
Ordinary shareholders' funds (£'000)	86,692	82,536
Number of Ordinary shares in issue	39,494,749	39,081,638
Net asset value per Ordinary share	219.5p	211.2p
Diluted
Ordinary shareholders' funds assuming exercise of dilutive Subscription shares and reissuance   of any dilutive Treasury shares (£'000)	98,497	95,060
Number of potential dilutive Ordinary shares in issue	46,279,296	46,279,296
Net asset value per Ordinary share	212.8p	205.4p

The last date on which holders of Subscription shares were permitted to exercise their Subscription Share Rights was 31st March 2014.

The diluted net asset value per Ordinary share assumes that all outstanding dilutive Subscription shares were converted into Ordinary shares at the year end and all shares held in Treasury at the year end were reissued, where this has a dilutive effect. The Company policy on the reissuance of Treasury shares is that Treasury shares will only be reissued at a premium to net asset value per share. Hence, the shares held in Treasury at 31st March 2014 had no dilutive effect.

4.   Status of announcement

2013 Financial Information

The figures and financial information for 2013 are extracted from the published Annual Report and Accounts for the year ended 31st March 2013 and do not constitute the statutory accounts for that year.  The Annual Report and Accounts have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2014 Financial Information

The figures and financial information for 2014 are extracted from the Annual Report and Accounts for the year ended 31st March 2014 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

ENDS

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

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

JPMORGAN ASSET MANAGEMENT (UK) LIMITED

 

END

 

 

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