TIDMJMI
RNS Number : 0956C
JPMorgan Smaller Cos IT PLC
14 October 2020
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN SMALLER COMPANIES INVESTMENT TRUST PLC
(the 'Company')
FINAL RESULTS FOR THE YEARED 31ST JULY 2020
Legal Entity Identifier: 549300PXALXKUMU9JM18
Information disclosed in accordance with DTR 4.2.2
The Directors announce the Company's results for the year ended
31st July 2020
CHAIRMAN'S STATEMENT
Investment Performance
Despite an extremely volatile year, I am delighted to report
positive returns for the year for both the Company's net asset
value ('NAV') and share price which more than compensate for the
modest relative underperformance experienced in the previous year.
During the year the Company's total return on net assets (with net
dividends reinvested) rose by 3.8% which compares favourably to the
return of -8.7% for the Company's benchmark, the Numis Smaller
Companies plus AIM Index (excluding Investment Companies). The
return to shareholders was +3.7% reflecting a steady discount level
over the year as a whole. For context it is worth noting that the
total return of the FTSE 100 Index over the same period was
-19.2%.
It is most pleasing that the Investment Managers have achieved
such good returns in an unusually challenging environment. The
Board believes that this is a reflection of the Managers' skill and
experience and demonstrates the attraction of a well diversified,
actively managed portfolio of smaller companies. We feel that the
change of benchmark, to enhance the available investment universe,
and greater commitment by the managers to their best ideas has also
played its part. I am happy to report that since the year end
performance has continued to be strong. Over the two months to 30th
September 2020 the total return on net assets rose by 9.8% which
was comfortably ahead of the Company's benchmark which rose by
5.2%.
In their report, the Investment Managers provide further detail
on portfolio performance and attribution, together with a
commentary on markets.
COVID-19 and the Company's Key Service Providers
Since the on-set of the pandemic, the Board has been closely
monitoring the Manager and the Company's other service providers
and is pleased to report that these providers have been able to
adjust their business models to accommodate the working from home
requirements with limited disruption. The Board has received
assurances that the Company's operations, to include the management
of the portfolio and the maintenance of a strong controls
environment, have continued as normal with no issues being
identified.
Revenue and Dividends
Shareholders will be aware that the Company's investment policy
does not prioritise income growth. However, after 8 years of
consecutive dividend growth, the revenue return per share,
calculated on the average number of shares in issue, decreased this
year to 3.80p (2019: 6.33p). This reflected the significant
reduction in stock market dividends overall as a result of COVID-19
and means that the company has not produced enough income, after
costs, to cover a maintained dividend. However, despite this
reduction in net revenue, the Directors are recommending a
maintained final dividend of 5.50p per share. This is possible due
to the Company's undistributed income retained from previous years,
known as a Revenue Reserve, which is an advantage of the investment
trust structure. In arriving at this recommendation, the Directors
considered the Manager's revenue projections and, as far as it is
possible, the possible path of economic growth. Clearly this
revenue reserve will only support dividends for a finite period of
time and, if the hoped for economic recovery does not occur, the
Board may need to re-assess the dividend level in future years. If
approved, the dividend will be paid on 7th December 2020 to
shareholders on the register at close of business on 30th October
2020.
Gearing
The Board believes that a moderate level of gearing is an
efficient way to enhance long-term shareholder returns,
particularly in the current low interest rate environment, albeit
at the cost of a small increase in short-term volatility. The level
of gearing is regularly discussed with the Manager and is adjusted
by them to reflect short-term considerations.
On 2nd October 2020, following the financial year end, the
borrowing facility of GBP25 million with Scotiabank was renewed for
a further 12 months. The current facility will expire in October
2021. There is a further option to increase borrowings to GBP35
million subject to certain conditions. At the year end, GBP21
million (2019: GBP24 million) was drawn on the loan facility with
the gearing level of 8.6% (2019: 8.7%) of net assets.
Share Repurchases and Issuance
At last year's Annual General Meeting ('AGM'), shareholders
granted the Directors authority to repurchase the Company's Shares
for cancellation or to be held in Treasury for possible re-sale.
During the financial year the Company repurchased 514,217 Ordinary
Shares into Treasury, for a total consideration of GBP1,140,000.
This amount represented 0.6% of the issued Ordinary Share capital
at the beginning of the year. Treasury Shares will only be sold at
a premium to net asset value thus enhancing shareholder value.
As in previous years, the Board's objective is to use the
repurchase authority to manage imbalances between the supply and
demand of the Company's shares, with the intention of reducing the
volatility of the discount. To date the Board believes this
mechanism has been helpful and therefore proposes and recommends
that powers to repurchase up to 14.99% of the Company's Shares
(less shares held in Treasury) be renewed as at the date of the
AGM.
Board of Directors and Succession Planning
As previously announced, Andrew Robson will retire from the
Board immediately after the forthcoming AGM. Accordingly, he will
not stand for reappointment at that meeting. Andrew has served as a
non-executive Director of the Company since 2007 and as Chairman of
the Audit Committee since 2013. The Board is very grateful to him
for his valuable contribution during his tenure and we wish him all
the best for the future.
As part of its succession planning, the Board, through the
Nomination Committee, carried out a search process during the year
using an independent recruitment consultancy. This led to the
appointment of Gordon Humphries as an independent non-executive
Director with effect from 1st July 2020. Gordon is a Chartered
Accountant and has more than 30 years of investment trust
experience, including responsibilities in the areas of risk
management and controls processes, company secretarial and
corporate finance. The Board is looking forward to working with
Gordon and is already benefiting from his contribution. Upon the
retirement of Andrew following the next AGM, Gordon will be
appointed as Chairman of the Audit Committee.
Continuation of the Company
In accordance with the Company's Articles of Association, an
ordinary resolution will be put to shareholders at the forthcoming
AGM that the Company continues in existence as an investment trust
for a further three year period.
The Board believes that long-term investment in UK smaller
companies remains favourable, despite some near term challenges,
and the Company provides access to investments in a controlled risk
environment that individual investors would find difficult to
replicate on their own. Over the last three and ten years to 31st
July 2020, the total return from the Company's net assets has been
+17.8% and +233.3% respectively, significantly outperforming its
benchmark which returned -10.9% and +141.4% over the same
periods.
During the last twelve months, the Board, via the Management
Engagement Committee, has undertaken a detailed review of the
Manager and their investment approach. Whilst all investment styles
will deliver returns that vary over time, the Board believes that
the Manager's approach continues to be appropriate for the Company
and that JPMorgan Asset Management has the appropriate resources to
continue to successfully manage the Company.
Accordingly, the Board believes that the continuation of the
Company is in the best interests of all shareholders and strongly
recommends that shareholders vote in favour of the resolution at
the AGM on 24th November 2020, as the Directors intend to do so in
respect of their own holdings.
Annual General Meeting
The Company's thirtieth AGM will be held on Tuesday 24th
November 2020 at 3.00 p.m. at 60 Victoria Embankment, London EC4Y
0JP. Despite the easing of lockdown measures which were put in
place due to COVID-19, restrictions remain, and given ongoing
uncertainty about the course of this pathogen and due to the
ongoing public health concerns, the Board has most reluctantly
decided to proceed with this year's AGM by limiting attendance in
person to only Directors or their proxies and representatives from
JPMorgan. With a quorum in place the formal business will be able
to proceed.
The Board is aware that many shareholders look forward to
hearing the views of the Investment Managers and perhaps
particularly this year, given the uncertainties that lie ahead for
the UK economy and markets. Accordingly a presentation with the
Investment Managers, which would have been delivered at the AGM,
will be available for shareholders to watch on the Company's
website.
In light of the changed format, the Board strongly encourages
all shareholders to exercise their votes in respect of the meeting
in advance, by completing and returning their proxy forms. This
will ensure that the votes are registered. Shareholders are also
invited to address any questions they have for the Investment
Managers or the Board by writing to the Company Secretary at the
address in the Annual Report or via email to
invtrusts.cosec@jpmorgan.com.
Outlook
After an initial sharp bounce, the recovery in the UK stock
market has stalled as investors wait to see how the nascent
economic recovery develops. This is further complicated by the fact
that economic growth is harder than ever to predict given the
possible imposition of further partial or 'restart' restrictions
and also the tremendous reliance on government and central bank
largesse. Additionally, the UK economy still faces the uncertainty
of how we will leave the European Union. However, we believe these
issues are to some extent already reflected in UK share prices
which have underperformed their international counterparts,
partially due to a greater reliance on the service economy and
consumer behaviour.
Clearly the future remains uncertain and careful stewardship of
investments will be required. However, the Company is invested in a
good spread of well positioned, soundly financed companies, with
both UK and international exposure, which also have strong medium
term growth prospects. The Board remains confident that the Manager
has an appropriate approach to UK smaller company investment and
the long term returns for the Company are testament to this sound
approach.
Andrew Impey
Chairman 14th October 2020
INVESTMENT MANAGERS' REPORT
Performance & Market Background
The financial year to July 2020 was definitively a year of two
halves. The first half of the year, to January 2020, was dominated
in the UK by Brexit (again) and by the General Election. It was our
belief that the decisive Conservative victory in December bode well
for the UK economy and for finality on our departure from the
European Union, and the UK stockmarket, and in particular the Small
Cap market, reacted strongly.
All of this rapidly became irrelevant as COVID-19 spread across
the world, causing misery, death and global economic turmoil.
February and March 2020 witnessed precipitous declines in global
stockmarkets, but the rebound was swift, as is now customary for
stockmarkets, very much pre-empting the cessation of the COVID-19
impact on the world. The peak to trough fall in the FTSE 100 during
the first half of 2020 was -34.9, while for the Numis Smaller
Companies plus AIM Index (excluding Investment Companies) it was
-41.8%. For our financial year as a whole, our index fell -8.7%,
having been up 8.9% at the end of January. The Company strongly
outperformed this decline, producing a positive return on net
assets of 3.8%. The average discount remained fairly static, year
on year, leading to a share price return of +3.7%.
Portfolio
The key contributors to performance in the year were a number of
our largest high conviction holdings. These included Games
Workshop, Dunelm, Avon Rubber, Future, Team 17, Codemasters,
Softcat and Computacenter. We also benefitted from the take-overs
of Eland, EI Group, Huntsworth and more recently RockRose Energy.
The main underperformers were those companies perceived by the
market to be hard hit by Covid, namely Dart Group, Vistry and
OneSavings Bank. We believe the stockmarket has misjudged these
companies; we maintain our holdings in all of them, and added to
both Dart and Vistry after their shareprice declines.
The impact of Covid on the portfolio was significant in March,
as certain sectors such as travel and leisure and retail were
dramatic underperformers, and our index fell by almost 24%. In
response to the pandemic we made a number of changes to the
portfolio. However, key to our approach throughout this turbulent
period has been to maintain a balance within the portfolio. We
aimed to own both those companies that would not be too hard hit by
the lockdown, or indeed might benefit from it, but also those that
despite suffering a significant impact in the period we believed to
be either extremely oversold and hence very undervalued, or those
which we analysed would not only survive, but come out the other
side stronger and with better competitive environments.
Further examples of companies where we increased our position as
prices fell include Future, Pets at Home and Computacenter. New
additions to the portfolio, which should benefit from recent
events, included Halfords and Restaurant Group (both very
oversold), CMC Markets (a beneficiary of volatile stockmarkets) and
the gold producer Centamin. Other new purchases include Premier
Foods, Gamma Communications and LSL, the estate agent. We exited a
number of holdings including the train operator, Go-Ahead, Greggs,
the food-on-the-go outlet, the tour operator On The Beach and TI
Fluids, exposed to the automotive market. In the second half of the
year we also participated in one IPO, Inspecs, a global
manufacturer and distributor of eyewear.
Market Outlook
The initial official estimate for the GDP decline in Q2 2020 is
-20.4% (quarter on quarter). The UK is now in recession. This is no
surprise, given the effective shutdown of much of the economy in
the quarter, and in fact is a less severe decline than was
initially forecast. In August, the Bank of England revised upwards
its estimates for GDP growth for the year to -9.5% for 2020,
followed by +9% in 2021. On this basis, by the end of 2021 the Bank
forecasts that the economy will have recovered to pre-Covid levels.
The Bank also forecasts that at its worst, by the end of this year,
unemployment will be 7.5%. This is substantially less than original
estimates of over 10%, and this is a crucial question for the
outlook. There is clearly huge uncertainty over the length and
depth of this recession and of future unemployment levels after the
end of the Government's furlough scheme.
While markets have recovered significantly from the spring lows
of this year, and indeed in the USA markets are above pre-Covid
levels, the UK stockmarket has been a laggard. From the start of
January to the end of August, the FTSE 100 was down 22%, although
the Numis Small Cap Index was down only 14%. When we look out to
2021 forecast valuations, based upon downgraded expectations for
growth post Covid, our index is on an attractive 13x price/earnings
ratio. We believe these forecasts are sensibly and cautiously
based, and do not contain expectations of a rapid 'V-shaped'
recovery, and are also cognisant of the recession. While clearly
highly volatile, equity markets have carried out their function
during this unprecedented period. Companies have been able to raise
equity to fund holes in their balance sheets. To date this has
mainly been done via placings, but we expect more rights issues to
follow.
Our focus over the next eighteen months is firstly on the
trajectory of Covid, and how that will affect our companies and the
broader economy. Messages are mixed, but recent Purchasing Managers
Indices and inventory levels have been encouraging. Second is the
shape and length of the recession, and how that will impact the
consumer. And third is Brexit, where our working assumption is that
the UK will trade with Europe on WTO terms after the end of the
transition period on 31 December 2020. There are so many unknowns
at present, but one key point of clarity from the Government is
that we are not going to pursue the austerity route imposed after
the last recession. There has been a huge amount of Government
support for the economy over the last several months, and we do not
expect this approach to change. The opportunity set that we
currently see, the Government support, and current valuations have
led to gearing currently sitting at close to 8%. Our role as
managers of the Company is to be adaptable to changing
circumstances, but, as ever, to focus on the winners. We have
outlined above in the portfolio section a number of the changes we
have made in order to benefit from the new environment we all live
in. These include both those companies that have traded strongly
throughout the pandemic but also those where we believe the
stockmarket has mispriced their future trading. These are the
companies that we believe will not only survive but thrive in the
post Covid world, adapting to fit the new climate, as their
competition falters.
Georgina Brittain
Katen Patel
Investment Managers 14th October 2020
PRINCIPAL AND EMERGING RISKS
The Directors confirm that they have carried out a robust
assessment of the principal and emerging risks facing the Company,
including those that would threaten its business model, future
performance, solvency or liquidity. The risks identified and the
ways in which they are managed or mitigated are summarised
below.
With the assistance of the Manager, the Board has completed a
robust risk assessment and drawn up a risk matrix, which identifies
the key risks to the Company. In assessing the risks and how they
can be mitigated, the Board has given particular attention to those
issues that threaten the viability of the Company. These key risks
fall broadly under the following categories:
-- Corporate Strategy
The corporate strategy, including the investment objectives and
policies, may not be of sufficient interest to current or
prospective shareholders. Other factors, such as the size of the
Company and level of liquidity in its shares, may also deter
shareholder interest, resulting in the shares trading at an
increased discount to net asset value. The Board regularly reviews
its strategy, and assesses, with its brokers, shareholder
views.
-- Investment and Performance
Poor investment performance, for example due to poor stock
selection, asset allocation or an inappropriate level of gearing,
may lead to under-performance against the Company's benchmark index
and peer companies, resulting 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. The Manager provides the
Directors with timely and accurate management information,
including performance data and attribution analyses, revenue
estimates and liquidity reports. The Board monitors the
implementation and results of the investment process with the
Investment Manager, who attend Board meetings, and reviews data
which shows statistical measures of the Company's risk profile. The
Investment Manager employs the Company's gearing, within a
strategic range set by the Board.
-- Discount
A disproportionate widening of the discount relative to the
Company's peers could result in loss of value for shareholders. In
order to manage the volatility of the Company's discount the
Company operates a share repurchase programme and the Board
regularly discusses discount management policy and has set
parameters for the Manager and the Company's broker to follow. The
Board receives regular reports and is actively involved in the
discount management process.
-- Smaller Company Investment
Investing in smaller companies is inherently more risky and
volatile, partly due to a lack of liquidity in the shares, plus AIM
stocks are less regulated. The Board discusses these risk factors
at each Board meeting with the Investment Managers. The Board has
placed investment restrictions and guidelines to limit these
risks.
-- Political and Economic
Changes in financial or tax legislation, uncertainty about the
UK's future relationship with the EU, and changes in government
policies may each adversely affect the Company. The Manager makes
recommendations to the Board on accounting, dividend and tax
policies, and seeks external advice where appropriate.
-- Investment Management Team
Investment performance may suffer if the designated investment
managers were to leave. The Board considers that, though there may
be short-term disruption, the risk would be mitigated by the
substantial investment management resources of JPMorgan, and the
use of an established investment methodology.
-- 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. The Board monitors the implication and
results of the investment process with the Manager.
-- Accounting, Legal and Regulatory
In order to qualify as an investment trust, the Company must
comply with Section 1158 of the Income and Corporation Tax Act 2010
('Section 1158'). Details of the Company's approval are given on
page 18 of the Annual Report. Should the Company breach Section
1158, it may lose its investment trust status and as a consequence
capital gains within the Company's portfolio would be subject to
Capital Gains Tax. The Section 1158 qualification criteria are
regularly monitored by the Manager and the results reported to the
Board each month. The Company must also comply with the provisions
of The Companies Act 2006 and, as 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 2006
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 may 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, JPMFL and its
professional advisers to monitor compliance with all relevant
requirements.
-- 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 Statement on
pages 28 to 33 of the Annual Report. The Board receives regular
reports from the Manager and the Company's broker about shareholder
communications, their views and their activity.
-- Operational and Counterparty Failure
Disruption to, or failure of, the Manager's or a counterparty's
accounting, dealing or payments systems or the Depositary or
Custodian's records may prevent accurate reporting and monitoring
of the Company's financial position. Under the terms of its
agreement, the Depositary has strict liability for the loss or
misappropriation of assets held in custody. See note 21(c) for
further details on the responsibilities of the Depositary. Details
of how the Board monitors the services provided by JPMF and its
associates and the key elements designed to provide effective risk
management and internal controls are included within the Risk
Management and Internal Controls section of the Corporate
Governance Statement on pages 32 and 33 of the Annual Report.
-- Cyber Crime
The threat of cyber attack, in all its guises, is regarded as at
least as important as more traditional physical threats to business
continuity and security. The Board has received the cyber security
policies for its key third party service providers and JPMF has
assured Directors that the Company benefits directly or indirectly
from JPMorgan's Cyber Security programme. The information
technology controls around the physical security of JPMorgan's data
centres, security of its networks and security of its trading
applications are tested by an independent third party and reported
every six months against the AAF Standard.
-- Financial
The financial risks faced by the Company include market price
risk, interest rate risk, liquidity risk and credit risk.
Counterparties are subject to daily credit analysis by the Manager.
In addition the Board receives reports on the Manager's monitoring
and mitigation of credit risks on share transactions carried out by
the Company. Further details are disclosed in note 21 on pages 64
to 68 of the Annual Report.
The Board also considered the status of emerging risks and
identified the following principal emerging risks.
-- Climate Change
Climate change, which barely registered with investors a decade
ago, has today become one of the most critical issues confronting
asset managers and their investors. Investors can no longer ignore
the impact that the world's changing climate will have on their
portfolios, with the impact of climate change on returns now
inevitable. Financial returns for long-term diversified investors
should not be jeopardised given the investment opportunities
created by the world's transition to a low-carbon economy. The
Board is also considering the threat posed by the direct impact on
climate change on the operations of the Manager and other major
service providers. As extreme weather events become more common,
the resiliency, business continuity planning and the location
strategies of our services providers will come under greater
scrutiny.
-- Global Pandemics
The recent emergence and spread of coronavirus (COVID-19) has
raised the emerging risk of global pandemics, in whatever form a
pandemic takes. COVID-19 poses a significant risk to the Company's
portfolio. At the date of this report, the virus has contributed to
significant volatility in trading recently. The global reach and
disruption to markets of this pandemic is unprecedented, so there
are no direct comparatives from history to learn from. However,
seismic events and situations in the past have also been the
catalyst for violent market contractions. Time after time, markets
have recovered, albeit over varying and sometimes extended time
periods, and so the Board does have an expectation that the
portfolio's holdings will not suffer a material long-term impact
and should recover once containment measures ease. Since the on-set
of the pandemic and throughout, the Manager and the Company's other
service providers have been able to adjust their business models to
accommodate working from home requirements. The Board has been
closely monitoring all service arrangements and has received
assurances that the Company's operations, to include the management
of the portfolio, have continued as normal with no reduction in the
level of service provided nor any issues being identified to date.
Should the virus become more virulent than is currently the case,
it may present risks to the operations of the Company, its Manager
and other major service providers.
Should efforts to control a pandemic prove ineffectual or meet
with substantial levels of public opposition, there is the risk of
social disorder arising at a local, national or international
level. Even limited or localised societal breakdown may threaten
both the ability of the Company to operate, the ability of
investors to transact in the Company's securities and ultimately
the ability of the Company to pursue its investment objective and
purpose.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors'
Report on page 26 of the Annual Report. The management fee payable
to the Manager for the year was GBP1,735,000 (2019: GBP1,779,000)
of which GBPnil (2019: GBPnil) was outstanding at the year end.
During the year GBPnil, including VAT, was payable to (2019:
GBP32,000, was refunded by) the Manager for the administration of
savings scheme products, of which GBPnil (2019: GBPnil) was
outstanding at the year end.
Included in administration expenses in note 6 on page 58 of the
Annual Report are safe custody fees amounting to GBP4,000 (2019:
GBP3,000) payable to JPMorgan Chase of which GBP1,000 (2019:
GBP1,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions
through group subsidiaries. These transactions are carried out at
arm's length. The commission payable to JPMorgan Securities Limited
for the year was GBPnil (2019: GBPnil) of which GBPnil (2019:
GBPnil) was outstanding at the year end.
The Company also holds cash in the JPMorgan Sterling Liquidity
Fund, which is managed by JPMorgan. At the year end this was valued
at GBP4.7 million (2019: GBP4.9 million). Interest amounting to
GBP40,000 (2019: GBP57,000) was receivable during the year of which
GBPnil (2019: GBPnil) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP11,000
(2019: GBP11,000) were payable to JPMorgan Chase during the year of
which GBP2,000 (2019: GBP2,000) was outstanding at the year
end.
At the year end, total cash of GBP303,000 (2019: GBP722,000) was
held with JPMorgan Chase. A net amount of interest of GBPnil (2019:
GBP78) was receivable by the Company during the year from JPMorgan
Chase of which GBPnil (2019: GBP28) was outstanding at the year
end.
Full details of Directors' remuneration and shareholdings can be
found on page 38 and in note 6 on page 58 of the Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report
and financial statements 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), comprising FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland'
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 preparing these financial statements,
the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- state whether applicable UK Accounting Standards, comprising
FRS 102, have been followed, subject to any material departures
disclosed and explained in the financial statements;
-- make judgments and accounting estimates that are reasonable and prudent; 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 adequate 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 enable them to ensure that
the financial statements and the Directors' Remuneration Report
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.jpmsmallercompanies.co.uk
website, which is maintained by the Company's Manager. The
maintenance and integrity of the website maintained by the Manager
is, so far as it relates to the Company, the responsibility of the
Manager. 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 Annual Report since it was initially
presented on the website. The Annual Report is 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 Strategic Report, a Directors' Report
and a Directors' Remuneration Report that comply with that law and
those regulations. The Strategic Report and the Directors' report
include a fair review of the development and performance of the
business and the position of the issuer, together with a
description of the principal risks and uncertainties that they
face.
Each of the Directors, whose names and functions are listed in
Directors' Report confirm that, to the best of their knowledge:
-- the Company's financial statements, which have been prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 102
'The Financial Reporting Standard applicable in the UK and Republic
of Ireland', and applicable law), give a true and fair view of the
assets, liabilities, financial position and profit of the Company;
and
-- the Directors' 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 Financial Statements taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's performance, business model
and strategy.
For and on behalf of the Board
Andrew Impey
Chairman
14th October 2020
FINANCIAL STATEMENTS
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31ST JULY
2020
2020 2019
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- --------- --------- -------- ---------- ---------
Gains/(losses) on investments
held at
fair value through profit
or loss - 6,130 6,130 - (15,909) (15,909)
Net foreign currency gains/(losses) - 11 11 - (4) (4)
Income from investments 3,940 - 3,940 6,376 - 6,376
Interest receivable and similar
income 40 - 40 71 - 71
------------------------------------- -------- --------- --------- -------- ---------- ---------
Gross return/(loss) 3,980 6,141 10,121 6,447 (15,913) (9,466)
Management fee (520) (1,215) (1,735) (534) (1,245) (1,779)
Other administrative expenses (393) (66) (459) (441) - (441)
------------------------------------- -------- --------- --------- -------- ---------- ---------
Net return/(loss) before finance
costs
and taxation 3,067 4,860 7,927 5,472 (17,158) (11,686)
Finance costs (83) (193) (276) (166) (387) (553)
------------------------------------- -------- --------- --------- -------- ---------- ---------
Net return/(loss) before taxation 2,984 4,667 7,651 5,306 (17,545) (12,239)
Taxation (19) - (19) (268) - (268)
------------------------------------- -------- --------- --------- -------- ---------- ---------
Net return/(loss) after taxation 2,965 4,667 7,632 5,038 (17,545) (12,507)
------------------------------------- -------- --------- --------- -------- ---------- ---------
Return/(loss) per share 3.80p 5.98p 9.78p 6.33p (22.05)p (15.72)p
STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31ST JULY 2020
Called Capital
up
share Share redemption Capital Revenue
capital premium reserve reserves reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- ----------- --------- ----------- ---------
At 31st July 2018 3,985 25,895 2,899 187,547 6,782 227,108
Repurchase and cancellation
of the
Company's own shares (4) - 4 (190) - (190)
Repurchase of shares into
Treasury - - - (2,354) - (2,354)
Costs relating to sub-division
of shares - - - (18) - (18)
Net (loss)/return - - - (17,545) 5,038 (12,507)
Dividend paid in the year
(note 3) - - - - (4,299) (4,299)
-------------------------------- -------- -------- ----------- --------- ----------- ---------
At 31st July 2019 3,981 25,895 2,903 167,440 7,521 207,740
Repurchase of shares into
Treasury - - - (1,142) - (1,142)
Net return - - - 4,667 2,965 7,632
Dividends paid in the year
(note 3) - - - - (4,293) (4,293)
-------------------------------- -------- -------- ----------- --------- ----------- ---------
At 31st July 2020 3,981 25,895 2,903 170,965 6,193 209,937
-------------------------------- -------- -------- ----------- --------- ----------- ---------
(1) This reserve forms the distributable reserve of the Company
and may be used to fund distribution of profits to investors.
STATEMENT OF FINANCIAL POSITION AT 31ST JULY 2020
2020 2019
GBP'000 GBP'000
------------------------------------------------------- ---------- ---------
Fixed assets
Investments held at fair value through profit or loss 228,054 225,773
------------------------------------------------------- ---------- ---------
Current assets
Debtors 531 2,489
Cash and cash equivalents 5,025 5,589
------------------------------------------------------- ---------- ---------
5,556 8,078
Current liabilities
Creditors: amounts falling due within one year (23,673) (26,111)
------------------------------------------------------- ---------- ---------
Net current liabilities (18,117) (18,033)
------------------------------------------------------- ---------- ---------
Total assets less current liabilities 209,937 207,740
------------------------------------------------------- ---------- ---------
Net assets 209,937 207,740
------------------------------------------------------- ---------- ---------
Capital and reserves
Called up share capital 3,981 3,981
Share premium 25,895 25,895
Capital redemption reserve 2,903 2,903
Capital reserves 170,965 167,440
Revenue reserve 6,193 7,521
------------------------------------------------------- ---------- ---------
Total shareholders' funds 209,937 207,740
------------------------------------------------------- ---------- ---------
Net asset value per ordinary share 269.0p 264.4p
STATEMENT OF CASH FLOWS FOR THE YEARED 31ST JULY 2020
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ---------- -----------
Net cash outflow from operations before dividends
and interest (1,994) (2,264)
Dividends received 4,168 6,079
Interest received (94) 119
Interest paid (346) (355)
--------------------------------------------------- ---------- -----------
Net cash inflow from operating activities 1,734 3,579
--------------------------------------------------- ---------- -----------
Purchases of investments (94,402) (104,183)
Sales of investments 100,601 110,307
--------------------------------------------------- ---------- -----------
Net cash inflow from investing activities 6,199 6,124
--------------------------------------------------- ---------- -----------
Dividends paid (4,293) (4,299)
Repurchase and cancellation of the Company's
own shares - (190)
Repurchase of shares into Treasury (1,171) (2,325)
Costs relating to sub-division of shares - (18)
Fees in relation to aborted CULS issue (33) (99)
Drawdown of loans 10,000 5,000
Repayment of bank loans (13,000) (6,000)
--------------------------------------------------- ---------- -----------
Net cash outflow from financing activities (8,497) (7,931)
--------------------------------------------------- ---------- -----------
(Decrease)/increase in cash and cash equivalents (564) 1,772
Cash and cash equivalents at start of year 5,589 3,817
Cash and cash equivalents at end of year 5,025 5,589
--------------------------------------------------- ---------- -----------
(Decrease)/increase in cash and cash equivalents (564) 1,772
--------------------------------------------------- ---------- -----------
Cash and cash equivalents consist of:
Cash and short-term deposits 303 722
Cash held in JPMorgan Sterling Liquidity Fund 4,722 4,867
--------------------------------------------------- ---------- -----------
Total 5,025 5,589
--------------------------------------------------- ---------- -----------
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 31ST JULY 2020
1. Accounting policies
Basis of accounting
The financial statements are prepared under the historical cost
convention, modified to include fixed asset investments at fair
value, and in accordance with the Companies Act 2006, United
Kingdom Generally Accepted Accounting Practice ('UK GAAP'),
including FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland' and with the Statement of
Recommended Practice 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (the 'SORP') issued by the
Association of Investment Companies in November 2014, and updated
in October 2019.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern
basis. In forming this opinion, the directors have considered the
potential impact of COVID-19 pandemic on the going concern and
viability of the Company, including the mitigation measures which
key service providers, including the Manager, have in place to
maintain operational resilience, particularly in light of COVID-19.
The Directors have reviewed the compliance with loan covenants in
assessing the going concern and viability of the Company. The
Directors have reviewed income and expense projections and the
liquidity of the investment portfolio in making their
assessment.
The policies applied in these financial statements are
consistent with those applied in the preceding year.
2. Return/(loss) per share
2020 2019
GBP'000 GBP'000
--------------------------------------------------- ------------ -----------
Revenue return 2,965 5,038
Capital return/(loss) 4,667 (17,545)
--------------------------------------------------- ------------ -----------
Total return/(loss) 7,632 (12,507)
--------------------------------------------------- ------------ -----------
Weighted average number of shares in issue during
the year 78,102,148 79,561,385
Revenue return per share 3.80p 6.33p
Capital return/(loss) per share 5.98p (22.05)p
--------------------------------------------------- ------------ -----------
Total return/(loss) per share 9.78p (15.72)p
--------------------------------------------------- ------------ -----------
3. Dividends
(a) Dividends paid and proposed
2020 2019
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Dividend paid
2019 final dividend of 5.5p (2018: 5.4p(1) ) per
share 4,293 4,299
--------------------------------------------------- -------- --------
Dividend proposed
2020 final dividend proposed of 5.5p (2019: 5.5p)
per share 4,293 4,321
--------------------------------------------------- -------- --------
(1) The dividend rate has been restated following the
sub-division of each existing ordinary share of 25p into 5p each on
30th November 2018.
All dividends paid and proposed in the period have been and will
be funded from the revenue reserve.
The dividend proposed in respect of the year ended 31st July
2020 is subject to shareholder approval at the forthcoming AGM. In
accordance with the accounting policy of the Company, this dividend
will be reflected in the financial statements for the year ending
31st July 2021.
(b) Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of
dividends declared in respect of the financial year, shown below.
The revenue available for distribution by way of dividend for the
year is GBP2,964,000 (2019: GBP5,038,000). The revenue reserve
after payment of the final dividend will amount to GBP1,891,000
(2019: GBP3,229,000).
2020 2019
GBP'000 GBP'000
---------------------------------------------------- -------- --------
2020 final dividend of 5.5p (2019: 5.5p) per share 4,293 4,293
---------------------------------------------------- -------- --------
4. Net asset value per share
2020 2019
------------------------------------ ----------- -----------
Net assets (GBP'000) 209,937 207,740
Number of shares in issue 78,051,669 78,565,886
------------------------------------ ----------- -----------
Net asset value per ordinary share 269.0p 264.4p
------------------------------------ ----------- -----------
5. Status of results announcement
2019 Financial Information
The figures and financial information for 2019 are extracted
from the Annual Report and Financial Statements for the year ended
31st July 2019 and do not constitute the statutory accounts for the
year. The Annual Report and Financial Statements include 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 Financial
Statements will be delivered to the Register of Companies in due
course.
2020 Financial Information
The figures and financial information for 2020 are extracted
from the published Annual Report and Financial Statements for the
year ended 31st July 2020 and do not constitute the statutory
accounts for that year. The Annual Report and Financial Statements
has 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.
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.
14th October 2020
For further information, please contact:
Lucy Dina
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the 2020 Annual Report will shortly be submitted to
the FCA's National Storage Mechanism and will be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The 2020 Annual Report will shortly be available on the
Company's website at www.jpmsmallercompanies.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 FUNDS LIMITED
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FFDFELESSELS
(END) Dow Jones Newswires
October 14, 2020 08:52 ET (12:52 GMT)
Jpmorgan Uk Smaller Comp... (LSE:JMI)
Historical Stock Chart
From Apr 2024 to May 2024
Jpmorgan Uk Smaller Comp... (LSE:JMI)
Historical Stock Chart
From May 2023 to May 2024