Half Yearly Report

RNS Number : 9078F

JPMorgan Japan Smaller Co Tst PLC

16 November 2015

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN JAPAN SMALLER COMPANIES TRUST PLC

UNAUDITED INTERIM RESULTS

FOR THE PERIOD ENDED
30 SEPTEMBER 2015

CHAIRMAN'S STATEMENT

I am pleased to present the Half Year Report and Accounts for the six months ended 30th September 2015. Your Company invests in a diversified portfolio of small and medium sized Japanese companies in order to achieve its investment objective of providing shareholders with long-term capital growth.

Investment Performance

In the half year ended 30th September 2015 the total return on the Company's net assets, net of fees and expenses, was -4.5% compared with -5.7% for the Company's benchmark, the S&P/Citigroup Japan Extended Market Index (Total Return Net) in sterling terms. The total return for ordinary shareholders was -7.9%, reflecting a widening of the discount at which the shares were trading to the cum-income Net Asset Value at the period end.

Japanese equity markets started the period by extending their earlier gains but, by June, international investors became increasingly nervous as the Greek debt crisis escalated. When China unexpectedly devalued its currency in August, the TOPIX index, which is the bellwether for the Japanese equity market, fell by over 10%, eliminating virtually all the gains that it had made for the year to date and causing the portfolio to suffer losses.

Whilst the portfolio's performance in the first half year was better than its benchmark, the Board is disappointed by the overall negative returns. More commentary on the market and portfolio performance is set out in the Investment Managers' Report.

Discount Management

Over the period the shares have traded at a discount ranging from 4.0% to 18.6%, with an average discount over the period of 10.5%. At the time of writing the shares are trading at a discount of 12.0%. The Board recognises that the possibility of a widening discount can serve to discourage investors from putting money into investment trusts. The Board has at its disposal a share repurchase programme which seeks to address imbalances in the supply of, and demand for, the Company's shares within the market. Its aim is to manage the volatility and absolute level of the discount to the NAV per share at which the Company's shares trade in relation to its peers in the sector. The Board regularly considers its discount management policy and has set parameters for the Manager and the Company's broker to follow.

Subscription Shares

In December 2014, shareholders authorised a further bonus issue to Ordinary shareholders of one Subscription share for every five Ordinary shares held. The conversion rights attached to these Subscription shares are exercisable between 30th January 2015 and 30th November 2016 at 243 pence per share. A total of 9,255,764 Subscription shares were duly allotted in December 2014 and, from 31st March 2015 to 30th September 2015, 1,392 Ordinary shares were issued following receipt of valid notices of exercise from Subscription shareholders. Between 1st October 2015 and the date of this report, a further 288 Ordinary shares have been issued on the same basis.

Share Issues and Repurchases

The Company repurchased no Ordinary shares into Treasury or for cancellation during the half year under review. No Ordinary shares were reissued from Treasury during the period and no Ordinary shares were issued other than those issued as a result of the exercise of conversion rights attached to the Subscription shares.

Market and Outlook

The difficulties experienced by economies in Europe and in emerging countries, including China, suggest that the risks to the global economy are skewed to the downside. The uncertainties have led to a disappointing economic performance in Japan. We nevertheless remain optimistic about the Japanese equity market because of the favourable earnings outlook and undemanding valuations. Positive momentum can be expected from the continuing corporate governance reforms, the recently agreed Trans-Pacific Partnership, and the Bank of Japan's commitment to its 2% inflation target. The government of Prime Minister Shinzo Abe is also expected to re-focus on its economic agenda in the lead up to the July 2016 upper house elections.

On this basis, the Manager intends to maintain its bias towards growth stocks with strong balance sheets and cash flows rather than towards cyclical companies. The Board is confident that this strategy will benefit the portfolio and, consequently, shareholder returns.

Alan Clifton

Chairman                                                                                                                                                                                            16 November 2015

INVESTMENT MANAGERS' REPORT

Market Review

The TOPIX index, the bellwether for the Japanese equity market, fell by over 10% in the six month period under review. The smaller capitalisation stocks outperformed their larger peers, while both groups posted negative returns. Investor sentiment took a turn for the worse in August 2015 when China unexpectedly devalued its currency. The devaluation raised concerns that the Chinese economy may be considerably weaker than widely believed, and that this may lead to a negative spiral similar to that which took hold during the Asian currency crisis. The prospect of a US interest rate increase in September 2015 only added to fears and led to an overall rise in the risk premium for equities, energy and commodities, emerging market currencies and high-yield debt, among other asset classes. Domestic news flow was not supportive for equities during the summer; the April-June quarter GDP contracted by 1.2%, due primarily to weak exports and weak consumption. Prime Minister Shinzo Abe's support ratio fell as his administration tried to push through the controversial national securities bill.

The Japanese equity market extended its gains in April and May 2015. Listed companies reported a strong set of results for the fiscal year ending March 2015. Aggregate pre-tax profits grew by circa 8%, following a near 40% rise the year before. Companies guided analysts to expect profits for the new fiscal year to grow only by single digits; this weaker than expected outlook was largely dismissed by the market as overly conservative. Indeed, first quarter earnings were strong; and analyst projections for the full year continued to be revised up. The January-March 2015 quarter GDP growth was also strong, exceeding expectations. Investor sentiment was further buoyed by the introduction of the Corporate Governance Code; this is perceived to be the catalyst for long-awaited improvements in equity (ROE) and shareholder returns. The strong performance of the US and European equity markets provided a further tailwind.

In June investors became increasingly nervous as the Greek debt crisis escalated and speculation returned that the country might have to leave the Euro. Although default was averted thanks to another bailout package offered by the Eurozone countries, this episode reminded investors of the troubled nature of the Eurozone economy. Investor confidence was further dented by the spectacular rise and then fall of Chinese local equity markets, and perhaps more importantly, by the authorities' failure to stem the decline. In Japan the TOPIX index fell by over 10% between August and September 2015, eliminating virtually all the gains that it had made for the first seven months of the year. Over the six month period under review the best performing sectors were airlines - which benefit from a falling oil price - and domestic sectors such as retail and construction, that are impacted less by external shocks. On the other hand, sectors most exposed to China and other emerging economies, such as steel, shipping and machinery, were at the bottom of the performance table.

Performance Review

Over the six months to September 2015, the fund generated a return of -4.5% in sterling terms, outperforming the benchmark return of -5.7%. The fund has maintained a bias towards domestically-oriented companies with strong balance sheets and a positive growth outlook. During the review period, the fund was most overweight in software and services, real estate and healthcare equipment and services. The largest underweights were banks, food, beverage and tobacco, and transportation. The sector allocation primarily reflects our clear conviction of the outlook for companies, both in terms of the companies we own and those we do not. We lowered the gearing from 10.3% at the end of March to 8.9% at the end of September 2015 as we reduced positions in some of the strong performers. The turnover of the portfolio was circa 18% during the six month period.

Our attribution analysis shows that sector allocation was a modest detractor to the performance relative to the benchmark. The largest negative contributors with respect to the sector allocation were banks (underweight), telecommunication services (overweight) and food, beverage & tobacco (underweight). The fund remained underweight in banks because we find most banks unattractive. Smaller banks operate in regional economies where the demographic headwind, plus the highly competitive environment, mean they are unlikely either to grow earnings or earn sufficient returns on equity. The fund owns Okinawa Cellular in the telecommunication sector. The company commands some 50% share of the mobile telephony market in Okinawa, which is one of the few prefectures enjoying a growing population plus a strong economy. The company, along with other mobile telephony operators, faced a setback caused by political pressure on the pricing of services. We believe that the concerns are overdone since the pricing levels in Japan are not high relative to other countries. Food, beverage and tobacco is another sector where we find few attractive investment opportunities.

The portfolio's top contributors to performance were software and services (overweight) and insurance (overweight). The constituents of software and services are mostly domestic economy oriented and are therefore somewhat insulated from the negative impact of any slowdown in emerging countries. There are a number of internet companies which have continued to deliver strong earnings growth and as a result have seen their shares perform well. We own Anicom in the insurance sector. It is dominant in the pet insurance market in Japan, which is still at an early stage of growth. Anicom continued to deliver strong growth in terms of both the number of insurance policies in force and also of earnings, and it was rewarded with a rising share price.

While the sector allocation detracted from the relative performance, this was offset by the positive contribution of stock selection. The stocks which contributed most positively include Sohgo Security Services (commercial & professional services), Anicom (insurance), Yonex (consumer durables & apparel) and Kaken Pharmaceutical (pharmaceuticals, biotechnology & life sciences). Sohgo Security Services is the second largest operator of home and office security services in Japan after Secom. The company has grown strongly over the last few years under the new management team that took charge in 2012 following many years of stagnation. Its profit margin still lags that of Secom and we believe there is further scope for the company to expand its margin and therefore profit. Yonex is a new holding. The company has a strong global brand in badminton equipment from which it generates over 50% of its revenue. The majority of badminton equipment sales come from Asia where the sport is very popular and the market is growing strongly. The company started to place greater emphasis on this core business in 2013, and allocated resources away from less important businesses such as golf equipment. This change is resulting in stronger top-line growth and higher profitability, and investors have taken note. Kaken Pharmaceutical is another new holding. The investment case for Kaken Pharmaceutical rests largely with a drug called Jublia/Clenafin (which treats toenail fungus), launched in 2014. We believe the drug has potential peak sales of over US$1 billion. At the time of the purchase, the market capitalisation of Kaken was only US$3 billion and we believed the risk/reward equation was compelling.

On the other hand, Iriso Electrics (technology hardware & equipment) and Aida Engineering (capital goods) underperformed and detracted most from the performance. Iriso Electrics manufactures connectors for electric components and has one of the leading positions in automobile components. We believe automobiles will be equipped with an increasing number of electric components as the advanced driver assistance system proliferates. The shares reacted badly when the company announced poor quarterly results. We believe this is a temporary setback and continue to own the shares. Aida Engineering manufactures press machines for the auto industry. It has enjoyed strong order growth, reflecting the increasing complexity of materials that form the bodies of automobiles, and there is also volume growth in emerging markets. The stock's poor performance reflects concerns about the emerging economies in general, poor auto sales in particular in China, and the potential negative implication for automobile capex. We see no immediate change in the outlook for Aida but continue to own the stock given its medium and longer term growth potential.

Outlook and Portfolio Strategy

We remain optimistic about the Japanese equity market because of the positive earnings outlook and undemanding valuations. We believe that corporate governance reform will gain momentum in Japan, albeit slowly. After a long Diet session, the Abe administration finally passed the national security bill. We expect the administration to re-focus efforts on its economic agenda, not least because it needs to restore popularity in order to win the House of Councillors election in July 2016. Earlier in October, twelve Pacific Rim nations reached an agreement on the Trans-Pacific Partnership that encompasses some 40% of global GDP. Moreover the Bank of Japan is committed to its 2% inflation target and will not, we believe, hesitate to act further if necessary in order to bring this about.

While the above reasoning forms the base case for our positive outlook, we recognise that there are risks both externally and internally. The fragility of the economies in Europe and emerging countries including China suggests that the risk to the global economy is skewed to the downside. In Japan, both households and corporations appear unwilling to increase spending materially. This has led to disappointing economic performance in both corporate capital expenditure and private consumption. It is worth noting, however, that the labour market remains tight in Japan and we believe this will eventually feed through to higher wages and rising real incomes.

Based upon the above, we do not intend to alter our investment strategy. We maintain a bias towards growth companies which have strong balance sheets and cash flows as opposed to cyclical companies. While such companies tend to command valuation premia, we believe these are likely to be sustained in the current environment of slow growth and low inflation. The growth bias of the portfolio reflects our desire to invest in companies with durable competitive advantages and thus long-term growth opportunities for both superior earnings and shareholder returns. We continue to allocate a large proportion of capital to our long-standing investment themes, including factory automation and e-commerce/mobile/internet.

We also own a number of companies which we believe will benefit from increasing demand for domestic infrastructure investments. Infrastructure in Japan is approaching a significant replacement cycle as many major projects were completed around the time of the 1964 Tokyo Olympic Games. On the other hand, we will continue to avoid companies that operate in industries plagued by excess capacity. A number of commodities and commodity-related goods and service stocks fall into this category. We are also underweight in companies with significant exposure to emerging countries. Although these companies' share prices have fallen, and in some cases may appear cheap on traditional valuation measures, we find limited upside at present because their earnings prospects continue to deteriorate. We will carefully monitor developments on this front together with our colleagues in Asia. Above all, we shall continue to seek out company-specific growth opportunities which can withstand external shocks and be sustained over the long term.

Shoichi Mizusawa-

Nicholas Weindling

Naohiro Ozawa

Investment Managers                                                                                                                                                                              16 November 2015

INTERIM MANAGEMENT REPORT

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

Principal Risks and Uncertainties

The principal risks and uncertainties faced by the Company have not changed and fall into the following broad categories: investment and strategy; market; liquidity; credit; discount; accounting, legal and regulatory; corporate governance and shareholder relations; operational; loss of investment team; political and economic; and going concern. Information on each of these areas is given in the Business Review within the Annual Report and Accounts for the year ended 31st March 2015.

Related Parties Transactions

During the first six months of the current 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 period.

Going Concern

The Directors believe, having considered the Company's investment objectives, risk management policies, capital management policies and procedures, nature of the portfolio and expenditure projections, that the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence for the foreseeable future and, more specifically, that there are no material uncertainties pertaining to the Company that would prevent its ability to continue in such operation existence for at least twelve months from the date of the approval of this half yearly financial report. For these reasons, they consider there is reasonable evidence to continue to adopt the going concern basis in preparing the accounts.

Directors' Responsibilities

The Board of Directors confirms that, to the best of its knowledge:

(i)   the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with FRS 104 'Interim Financial Reporting' and gives a true and fair view of the state of the affairs of the Company and of the assets, liabilities, financial position and net return of the Company as at 30th September 2015, as required by the UK Listing Authority Disclosure and Transparency Rule 4.2.4R; and

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

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

•     select suitable accounting policies and then apply them consistently;

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

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

•     prepare the financial statements on the 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.

For and on behalf of the Board

Alan Clifton

Chairman

16 November 2015

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30th September 2015

	(Unaudited)			(Unaudited)			(Audited)
	Six months ended			Six months ended			Year ended
	30th September 2015			30th September 2014			31st March 2015
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments
held at fair value through
profit or loss	-	(7,204)	(7,204)	-	9,919	9,919	-	33,784	33,784
Net foreign currency gains	-	539	539	-	521	521	-	609	609
Income from investments	941	-	941	684	-	684	1,640	-	1,640
Gross return/(loss)	941	(6,665)	(5,724)	684	10,440	11,124	1,640	34,393	36,033
Management fee	(735)	-	(735)	(586)	-	(586)	(1,233)	-	(1,233)
Other administrative expenses	(290)	-	(290)	(211)	-	(211)	(414)	-	(414)
Net (loss)/return on
ordinary activities before
finance costs and taxation	(84)	(6,665)	(6,749)	(113)	10,440	10,327	(7)	34,393	34,386
Finance costs	(127)	-	(127)	(136)	-	(136)	(270)	-	(270)
Net (loss)/return on ordinary
activities before taxation	(211)	(6,665)	(6,876)	(249)	10,440	10,191	(277)	34,393	34,116
Taxation	(94)	-	(94)	(68)	-	(68)	(164)	-	(164)
Net (loss)/return on ordinary
activities after taxation	(305)	(6,665)	(6,970)	(317)	10,440	10,123	(441)	34,393	33,952
(Loss)/return per Ordinary
share (note 3)
- undiluted	(0.65)p	(14.26)p	(14.91)p	(0.69)p	22.58p	21.89p	(0.95)p	74.32p	73.37p
- diluted	(0.65)p	(14.26)p	(14.91)p	(0.69)p	22.58p	21.89p	(0.95)p	74.32p	73.37p

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

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.

STATEMENT OF CHANGES IN EQUITY

for the six months ended 30th September 2015

	Called up		Capital
	share	Share	redemption	Other	Capital	Revenue
	capital	premium	reserve	reserve	reserves	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Six months ended 30th September 2015 (Unaudited)
At 31st March 2015	4,678	12,414	1,836	314,775	(188,247)	(13,224)	132,232
Conversion of Subscription shares
into Ordinary shares	(1)	1	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares - net of cost	56	1,305	-	-	-	-	1,361
Net loss on ordinary activities	-	-	-	-	(6,665)	(305)	(6,970)
At 30th September 2015	4,733	13,720	1,836	314,775	(194,912)	(13,529)	126,623
Six months ended 30th September 2014 (Unaudited)
At 31st March 2014	4,058	1,446	1,836	314,775	(222,640)	(12,783)	86,692
Conversion of Subscription shares
into Ordinary shares	(68)	68	-	-	-	-	-
Issue of Ordinary shares on exercise
of Subscription shares - net of cost	678	11,115	-	-	-	-	11,793
Net return/(loss) on ordinary activities	-	-	-	-	10,440	(317)	10,123
At 30th September 2014	4,668	12,629	1,836	314,775	(212,220)	(13,100)	108,608
Year ended 31st March 2015 (Audited)
At 31st March 2014	4,058	1,446	1,836	314,775	(222,640)	(12,783)	86,692
Bonus issue of Subscription shares	9	(9)	-	-	-	-	-
Conversion of Subscription shares into
Ordinary shares2	(68)	68	-	-	-	-	-
Issue of Ordinary shares on exercise of
Subscription shares - net of cost3	679	10,909	-	-	-	-	11,588
Net return/(loss) on ordinary activities	-	-	-	-	34,393	(441)	33,952
At 31st March 2015	4,678	12,414	1,836	314,775	(188,247)	(13,224)	132,232

¹     This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.

²     Comprises £67,455 for conversion of the remaining 6,784,547 old Subscription shares of 1p each issued on 5th March 2009, plus £3 for the conversion of 3,286 new Subscription shares of 0.1p each issued on 16th December 2014.

³     Comprises £11,805,112 received upon the conversion into Ordinary shares of the remaining 6,784,547 old Subscription shares of 1p each issued on 5th March 2009, plus £7,985 received upon conversion into Ordinary shares of 3,286 new Subscription shares of 0.1p each issued on 16th December 2014, less the costs associated with the bonus issue of new Subscription shares in December 2014 of £225,324.

STATEMENT OF FINANCIAL POSITION

at 30th September 2015

	(Unaudited)	(Unaudited)	(Audited)
	30th September 2015	30th September 2014	31st March 2015
	£'000	£'000	£'000
Fixed assets
Investments held at fair value through
profit or loss	137,468	119,474	145,730
Current assets
Debtors	668	475	690
Cash and short term deposits	5,253	5,723	3,252
	5,921	6,198	3,942
Creditors: amounts falling due within one year	(229)	(194)	(589)
Net current assets	5,692	6,004	3,353
Total assets less current liabilities	143,160	125,478	149,083
Creditors: amounts falling due after
more than one year	(16,537)	(16,870)	(16,851)
Net assets	126,623	108,608	132,232
Capital and reserves
Called up share capital	4,733	4,668	4,678
Share premium	13,720	12,629	12,414
Capital redemption reserve	1,836	1,836	1,836
Other reserve	314,775	314,775	314,775
Capital reserves	(194,912)	(212,220)	(188,247)
Revenue reserve	(13,529)	(13,100)	(13,224)
Total equity shareholders' funds	126,623	108,608	132,232
Net asset value per Ordinary share (note 4)
- undiluted	270.3p	234.7p	285.7p
- diluted	266.0p	234.7p	278.6p

The Company's registration number is 3916716.

STATEMENT OF CASH FLOWS

for the six months ended 30th September 2015

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th September 2015	30th September 2014	31st March 2015
	£'000	£'000	£'000
Cash inflow from operations (Note 5)	(109)	(84)	(242)
Interest paid	(128)	(135)	(268)
Net cash outflow from operating activities	(237)	(219)	(510)
Purchases of investments	(26,245)	(30,855)	(52,369)
Sales of investments	26,896	19,440	38,913
Other capital credit/(charges)	2	(2)	(6)
Net cash inflow/(outflow) from investing activities	653	(11,417)	(13,462)
Issue of Ordinary shares on exercise of
Subscription shares - net of cost	1,361	11,793	11,588
Net cash inflow from financing activities	1,361	11,793	11,588
Increase/(decrease) in cash and cash equivalents	1,777	157	(2,384)
Cash and cash equivalents at the start of
the period	3,252	5,649	5,649
Exchange movements	224	(83)	(13)
Cash and cash equivalents at the end of the period	5,253	5,723	3,252
Increase/(decrease) in cash and cash equivalents	1,777	157	(2,384)
Cash and cash equivalents consist of:
Cash and short term deposits	5,253	5,723	3,252
	5,253	5,723	3,252

NOTES TO THE FINANCIAL STATEMENTS

for the six months ended 30th September 2015

1.   Financial statements

The information contained within the Financial Statements in this half year report has not been audited or reviewed by the Company's auditors.

The figures and financial information for the year ended 31st March 2015 are extracted from the latest published financial statements of the Company and do not constitute statutory accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included the report of the auditors which was unqualified and did not contain a statement under either section 498(2) or 498(3) of the Companies Act 2006.

2.   Accounting policies

The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' of the United Kingdom Generally Accepted Accounting Practice and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the revised 'SORP') issued by the Association of Investment Companies in November 2014.

FRS 104 'Interim Financial Reporting', issued by the Financial Reporting Council in March 2015 has been applied in preparing this condensed set of financial statements for the six months ended 30th September 2015.

As a result of the first time adoption of FRS 102 and the revised SORP, comparative numbers and presentational formats have been restated where required.

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

The accounting policies applied to this condensed set of financial statements are consistent with those applied in the financial statements for the year ended 31st March 2015 with the following exceptions and amendments:

Valuation of investments

Investments are designated as at fair value through profit or loss in accordance with FRS 102.

Finance costs

Finance costs are accounted for on an accruals basis using the effective interest method and in accordance with the provisions of FRS 102.

Financial instruments

Cash and cash equivalents may comprise cash (including demand deposits which are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value) as well as cash equivalents

Taxation

Current tax is provided at the amounts expressed to be received or paid.

Foreign currency

In accordance with FRS 102 the Company is required to identify its functional currency, being the currency of the primary economic environment in which the Company operates. The Board, having regard to the currency of the Company's share capital and the predominant currency in which its shareholders operate, has determined that sterling is the functional currency. Sterling is also the currency in which the financial statements are presented.

Repurchase of Ordinary shares to hold in Treasury

The cost of repurchasing Ordinary shares into Treasury, including the related stamp duty and transaction costs is charged to capital reserves and dealt with in the Statement of Changes in Equity. Share repurchase transactions are accounted for on a trade date basis. Where shares held in Treasury are subsequently cancelled, the nominal value of those shares is transferred out of called up share capital and into the capital redemption reserve.

Only the relevant section of the applicable policies from the last year end financial statements which have changed as a result of the application of the 2014 AIC SORP and FRS 102 have been reproduced above - all other aspects of those policies remain the same. The impact of the changes is substantially in relation to presentational, disclosure and non-quantifiable aspects.

3.   (Loss)/return per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th September 2015	30th September 2014	31st March 2015
	£'000	£'000	£'000
(Loss)/return per Ordinary share is based
on the following:
Revenue loss	(305)	(317)	(441)
Capital (loss)/return	(6,665)	10,440	34,393
Total (loss)/return	(6,970)	10,123	33,952
Weighted average number of Ordinary shares
in issue during the period used for the purpose
of the undiluted calculation	46,741,703	46,241,998	46,279,583
Weighted average number of Ordinary shares
in issue during the period used for the purpose
of the diluted calculation	46,741,703	46,241,998	46,279,583
Undiluted
Revenue loss per Ordinary share	(0.65)p	(0.69)p	(0.95)p
Capital (loss)/return per Ordinary share	(14.26)p	22.58p	74.32p
Total (loss)/return per Ordinary share	(14.91)p	21.89p	73.37p
Diluted1,2
Revenue loss per Ordinary share	(0.65)p	(0.69)p	(0.95)p
Capital (loss)/return per Ordinary share	(14.26)p	22.58p	74.32p
Total (loss)/return per Ordinary share	(14.91)p	21.89p	73.37p

¹     Please refer to the Chairman's Statement for a detailed description of transactions relating to the Subscription shares.

²     As at 30th September 2014, there were no Subscription shares in issue. The 31st March 2015 and 30th September 2015 dilution has been calculated using the Subscription shares issued on 16th December 2014. However, there is no dilutive effect as the conversion price for these shares exceeded the average market price of the Ordinary shares during the period.

The diluted (loss)/return per Ordinary share represents the (loss)/return on ordinary activities after taxation for the period divided by the weighted average number of Ordinary shares in issue during the period, as adjusted in accordance with the requirements of Financial Reporting Standard 102.

4.   Net asset value per Ordinary share

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th September 2015	30th September 2014	31st March 2015
Undiluted
Ordinary shareholders' funds (£'000)	126,623	108,608	132,232
Number of Ordinary shares in issue	46,843,971	46,279,296	46,282,582
Net asset value per Ordinary share	270.3p	234.7p	285.7p
Diluted1
Ordinary shareholders' funds assuming conversion
of dilutive Subscription shares (£'000)	147,743	108,608	154,715
Number of potential Ordinary shares in issue	55,535,060	46,279,296	55,535,060
Net asset value per Ordinary share	266.0p	234.7p	278.6p

¹     Please refer to the Chairman's Statement for a detailed description of transactions relating to the Subscription shares.

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

	(Unaudited)	(Unaudited)	(Audited)
	Six months ended	Six months ended	Year ended
	30th September 2015	30th September 2014	31st March 2015
	£'000	£'000	£'000
Net (loss)/return on ordinary activities before
finance costs and taxation	(6,749)	10,327	34,386
Add capital loss/(less capital return) before
finance costs and taxation	6,665	(10,440)	(34,393)
Decrease/(increase) in accrued income	15	91	(88)
Decrease in other debtors	7	43	6
Increase/(decrease) in accrued expenses	47	(37)	11
Overseas withholding tax	(94)	(68)	(164)
Net cash outflow from operating activities	(109)	(84)	(242)

6.   Fair valuation of investments

The fair value hierarchy analysis for investments held at fair value at the period end is as follows:

	(Unaudited)		(Unaudited)		(Audited)
	30th September 2015		30th September 2014		31st March 2015
	Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
	£'000	£'000	£'000	£'000	£'000	£'000
Quoted prices for identical instruments
in active markets	137,468	-	119,474	-	145,730	-
Total value of investments	137,468	-	119,474	-	145,730	-

For further information, please contact:

Rhys Williams

For and on behalf of

JPMorgan Funds Limited, Secretary

020 7742 4000

Please note that up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can be found at www.jpmjapansmallercompanies.co.uk

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

JPMORGAN FUNDS LIMITED

ENDS

A copy of the Half Year Report has been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM The Half Year Report will also shortly be 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.

 

END

 

 

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