Final Results

RNS Number : 7748T

JPMorgan US Smaller Co. IT

22 March 2019

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN US SMALLER COMPANIES INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED
31ST DECEMBER 2018

Legal Entity Identifier:  549300MDD7SOXDMBN667

Information disclosed in accordance with the DTR 4.1.3

The Directors of JPMorgan US Smaller Companies Investment Trust plc announce the Company's results for the year ended 31st December 2018.

CHAIRMAN'S STATEMENT

Performance

US markets have been volatile through the year driven by uncertainty created around trade policy, global growth, interest rate outlook, stretched valuations in the technology sector and finally the Government shut-down over the year end. With markets under pressure, our net asset value (NAV) fell by 5.8% year on year compared to a decline of 5.7% in the Russell 2000, although this masks a turbulent end to 2018 with markets suffering their sharpest declines in December since the 1930s. Our share price, which fell by more than the NAV (down 11.6% year on year), reflected unhelpful moves in the premium and discount to NAV on the last day of trading in both 2017, when the shares moved to a 3.3% premium, and in 2018 when they traded at a 3.2% discount. This was frustrating as our discount averaged 1.4% during the year.

Revenue and Dividend

The revenue for the year, after taxation, was £1,572,000. The Board is therefore delighted to recommend a dividend of 2.5p in respect of the financial year ended 31st December 2018. Subject to shareholders' approval at the Annual General Meeting ('AGM'), this dividend will be paid on 13th May 2019 to shareholders on the register at the close of business on 12th April 2019. Shareholders should note the Company's objective is unchanged and remains one of capital growth and our dividend policy will reflect the income on the underlying portfolio.

Discount and Premium

Despite the market volatility in US small caps coupled with the US dollar and sterling movements, our share price was closely aligned with the changes in NAV through the year, resulting in a 1.4% average discount for 2018. As has been said in the past, it is always going to be a challenge to align our share price movement with the change in the NAV as US smaller companies are seen as riskier assets and are, as a consequence, more volatile in nature. The relationship between the share price and the NAV is, however, monitored on a daily basis by your Board and our professional advisers. To help the management of the discount, we have in place the authority to repurchase up to 14.99% of the Company's issued share capital and we will be seeking renewal of this authority at the AGM. During the year this authority was exercised and we bought 135,000 shares into Treasury at an average discount of 5.3%. The Company currently holds no shares in Treasury having issued 454,000 from Treasury at an average premium of 1.5%.

Gearing

In April 2018 our revolving credit facility with Scotiabank was renewed at US$25 million with an option to draw a further US$10 million. At the end of 2018 US$20 million was drawn and the portfolio was 5.8% geared. This facility matures in April 2019 and the Board will consider another gearing facility at this point.

Currency Hedging

Both our portfolio and our loan facility are denominated in US dollars and these values need to be converted into sterling on a daily basis for calculating and reporting the NAV which exposes the assets to fluctuations in the US dollar/sterling exchange rate. In 2018 the NAV benefited from its exposure to US dollars as sterling weakened during the year; in local currency the Russell 2000 fell 11.0% whereas in sterling terms this translated into a fall of 5.7%. The Board does have the authority to reduce, or eliminate, the exposure to fluctuating currencies through the use of currency hedging. Our policy on currency hedging is reviewed regularly, but to date we have not carried out any hedging and have no plans to do so in the immediate future.

Board Succession Planning

As part of the Board's succession planning and to smooth over the discontinuity that can be caused by retirements on a board that consists of only 5 non-executive directors a recruitment process was undertaken by an executive search firm during the second half of the year and I am delighted to welcome to the Board two new Directors. Christopher Metcalfe and Dominic Neary are both very experienced investment professionals as can be seen from their biographies in the Annual Report. They have both already started to make a strong contribution to the Board discussions and I would urge shareholders to support their election at the forthcoming AGM. With the arrival of Christopher and Dominic, it is with great sadness that I must report that Chris Galleymore is retiring at the forthcoming AGM. Chris has made an outstanding contribution to the Company during his time as a Director, particularly through the turbulent period in 2008 which resulted in the appointment of the current investment team. Chris's extensive knowledge of the US will be much missed and the Board would like to place on record their thanks to him for his contribution. Following the AGM the Board will consist of six non-executive directors and will continue to have an appropriate balance of skills and diversity.

Annual General Meeting

We are holding our AGM at 60 Victoria Embankment, London EC4Y 0JP on Tuesday 30th April at 2.30 p.m. As in previous years, there will be a presentation by one of the investment management team which will cover a review of 2018 as well as the outlook for the current year. Following the meeting some refreshments will be served which will provide shareholders with the opportunity to meet the Directors and the representatives from JPMAM and ask any questions on the portfolio and performance. If you have any detailed or technical questions, it would be helpful if you could raise them in advance of the meeting by writing to the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP.

Outlook

With the prevailing mood of uncertainty in global markets currently it will be a challenge for volatile asset classes, such as US small caps, to make meaningful progress and it would be foolish of me to make predictions over the short term. Over the long term I would like to point to the table in the Annual Report which sets out the Company's Long Term Financial Record and shows how rewarding it can be for patient investors in this area. We have in place an exceptional investment team based in New York under the strong leadership of Don San Jose. The team has a clearly defined investment philosophy, a strong investment process and the support of an asset management business which is both stable and well-resourced. Over the long term, the US economy has a long history of creating exciting growth opportunities in the small cap sector and our Company is well placed to take advantage of these circumstances.

Davina Walter

Chairman

22nd March 2019

investment managers' report

Market Review

The year started off with a short-lived uptick in volatility, partially driven by concerns over interest rate movements, trade policy and the long-term implications of the Tax Cut and Jobs Act. The Russell 2000 Index ended 2018 down 5.7% in GBP terms after a fourth quarter sell-off which saw a more prolonged increase in market volatility. Large cap stocks greatly outperformed small cap stocks and growth outperformed value.

The overall economic environment was strong over the course of the first half of 2018. Economic growth remained stable and monthly data on retail sales, homebuilding, durable goods and other economic indicators all came in at healthy figures. The second half of the year started off strong as earnings growth was driven by record margins, with the majority of companies exceeding earnings and revenue estimates for Q2. Robust corporate profits partially tempered the effects of a flattening yield curve and trade uncertainty over the course of the third quarter.

The last three months of the year, however, witnessed a significant sell-off characterized by heightened volatility. However, yet another strong quarter of earnings growth and still generally positive management commentary has the potential to limit equity downside risk. Economic indicators remain mainly positive, with the exception of the yield curve. The Federal Reserve increased rates four times in 2018 and an inverted yield curve is often interpreted as an indicator for recessions. However, even after a yield curve inversion, it typically takes 14 months on average before the economy enters a recession. While good signs such as consumer and small business confidence remaining at high levels, wages rising across income levels, and December same store retail sales being robust, we remain mindful of the pressure that rising rates, tariffs, and the partial government shutdown could put on stocks.

Performance

The Company's net asset value decreased by 5.8% in 2018. The return was in-line with the benchmark, the Russell 2000 Index (Net), which decreased by 5.7% in GBP. While our stock selection proved beneficial for the year, our sector allocation detracted. Additionally, the portfolio's gearing detracted from the Company's performance during the year.

Our stock selection in the technology and materials & processing sectors proved very beneficial.

In the technology sector, our exposure to Tableau Software contributed strongly. The provider of data visualization software reported strong third quarter earnings as well as an initial 2019 outlook that was better than expected. Furthermore, Tableau Software implemented a strategy centered on lowering barriers to adoption for its products and driving more widespread deployments within customers through thoughtful pricing changes and innovations around ease-of-use. We remain disciplined around position sizing and market cap and think that at current multiples the company is still fairly attractive for what we think will be an attractive growth potential in the next couple of years.

Within materials & processing, our exposure to AptarGroup was among the top contributors. We think the company has benefited in this market environment due to the defensive nature of the business. The management team has been executing on a transformation plan in some underperforming business lines and remains encouraged going into 2019. We also note the company recently increased prices to help offset inflation, which should be a positive factor in the first half of 2019. AptarGroup's business segments have defensible market positions, mainly driven by patented technological innovations, which allows them to produce stable free cash flows and return on invested capital greater than their cost of capital.

On a standalone basis, our investment in the consumer discretionary name Pool Corp, the largest wholesale distributor of pool equipment and supplies in North America, contributed the most. The company's large base of recurring revenue provides earnings consistency and strong cash flow visibility. In addition, the company's strong competitive position, pricing power and disciplined expense control drive strong returns on invested capital. They also return excess cash to shareholders through buybacks and a steadily growing dividend.

With regards to relative performance, stock selection in the financial services and consumer staples sectors weighed on relative returns.

Within consumer staples, owning Spectrum Brands during the period hurt performance. The diversified consumer products company selling into the home hardware, garden, pet and auto markets underperformed as they missed on revenues, delivering negative organic growth with weakness across all divisions except home hardware. The company struggled due to higher input costs and continued issues with their distribution centre consolidations in home hardware and global auto care, which has led to the CEO being replaced by the Chairman of the Board. We sold our position in November as the company has been plagued by slowing organic growth and also margin compression. They have also undertaken several business divestitures.

Among individual names, our exposure to the energy name Patterson UTI emerged as the top detractor. The provider of land-based drilling services to oil and natural gas companies, struggled throughout the year. Despite better than expected earnings results for the third quarter, driven by the pressure pumping segment, shares fell as investors sought to avoid the energy sector. The energy sector was the worst performing industry group in the Russell 2000 Index in the fourth quarter and oil prices declined more than 30% in that time period alone. We believe shares can eventually recover once oil prices stabilize and the company's solid execution is recognized by the market.

At the security level, our exposure to the producer durables name Evoqua Water Technologies hurt performance. The stock of the developer and manufacturer of water and wastewater treatment systems, traded lower after announcing an earnings shortfall in the second half of the year. Management blamed the product segment's Aquatics Business and the Municipal segment for the shortfall, citing acquisition system integration issues, supply chain disruptions influenced by tariffs and an extended delay on a large aquatics project. We sold our position in December due to two consecutive disappointing quarters in only its first year as a public company. The Municipal business did not prove to be as stable as we thought in our initial thesis, nor did management seem to fully comprehend the steps necessary to improve organic growth and profitability.

Portfolio Positioning

With regards to our portfolio positioning, not much has changed as we continue to focus on finding companies with durable franchises, good management teams and stable earnings that trade at a discount to intrinsic value. During the year we were able to find new names to add to the portfolio and the analysts continue to be very productive as 17 names were added. We eliminated 21 names during the year and ended the period with 89 holdings. The portfolio's sector positioning remains relatively unchanged. Similar to the previous year, our main allocations are in the financial services, producer durables and consumer discretionary sectors, which make up close to 60% of the overall portfolio's allocation.

On a relative basis, our largest overweight positions can be found in the producer durables and materials & processing sectors. We expanded our producer durables exposure throughout the year as we initiated new positions and added to others. On the other hand, our largest relative underweight remains in the healthcare space due to a lack of exposure to biotechnology stocks. The next largest underweight position is in technology as this remains the area where we have had a difficult time finding opportunities that meet our quality and valuation criteria. Lastly, while our largest absolute weight remains in financial services, we are slightly underweight compared to the benchmark due to our underweight exposure to Real Estate Investment Trusts. At this time, we are comfortable with our relative underweight position as we struggle to add to our exposure mainly due to valuations.



Market Outlook

We continue to focus on the fundamentals of the economy and of company earnings. Our analysts estimate continued earnings expansion for 2019. While subject to revision, this forecast reflects our expectations for moderate economic expansion in the underlying economy and includes our best analysis of earnings expectations for this year. The implications of tariffs and Fed policy will be integral to investor sentiment and will likely continue to contribute to the uncertainty.

While continued earnings growth and strength in economic indicators should provide support to the equity market, we are monitoring possible risks that could represent headwinds for US stocks. In particular, we continue to watch closely the trade narrative, global economic growth, and the implications of rising rates, all of which have the potential to add to volatility. We are cognizant of heightened risks in the market as we are much more likely to be at the end of the economic/market cycle than at the beginning. With the Russell 2000 Index trading at a below-average P/E multiple, we think these risks are somewhat priced in, though sentiment is fragile. Longer term, we continue to see opportunity for US smaller capitalization stocks to outperform larger cap stocks due to relatively attractive earnings growth rates, greater leverage to rising interest rates and relatively attractive current valuation levels as compared to larger capitalization stocks.

Don San Jose

Dan Percella

Jon Brachle

Investment Managers

22nd March 2019

Principal Risks

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risks identified have not changed over the year under review and the ways in which they are managed or mitigated are summarised as below:

With the assistance of the Manager, 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:

•   Investment and Strategy

     An inappropriate investment strategy, for example excessive concentration of sector selection 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. The Manager, JPMF, 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 participate at all Board meetings, and reviews data which show 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 reviews of investment strategy, the Board holds a separate meeting devoted to strategy each year.

•   Loss of Investment Team or Investment Managers

A sudden departure of the investment managers, or several 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.

•   Discount

A disproportionate widening of the discount could result in a loss of value for shareholders. In order to manage the Company's discount, which can be volatile, the Company operates a share repurchase programme.

•   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 JPMAM. The Board monitors the implementation and results of the investment process with the Manager.

•   Political and Economic

Changes in financial or tax legislation, including in the UK as a result of BREXIT, and in the European Union and the US, may adversely affect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

•   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 'Structure of the Company' above. Should the Company breach Section 1158, it may lose investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are monitored continually by JPMAM 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 Guidance 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, the Manager, and its professional advisers to ensure compliance with the Companies Act 2006 and 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 accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. The Company has appointed Bank of New York Mellon (International) Limited to act as its depositary, responsible for oversight of the custody of the Company's assets and for monitoring its cash flows.

Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included within the Risk Management and Internal Control section of the Corporate Governance report in the Annual Report.

•   Cybercrime

The threat of cyber attack, in all its guises and including cyber risk and risk of data loss, is regarded as at least as important as more traditional physical threats to business continuity and security. JPMF has assured Directors that the Company benefits directly or indirectly from all elements of 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 independent reporting accountants and reported every six months against the AAF Standard. Equiniti, the Company's Registrar, also produces an AAF report which is reported on at the Company's Audit Committee meeting.

•   Foreign currency

The Company has exposure to foreign currency as part of the risk reward inherent in a company that invests overseas. The income and capital value of the Company's investments can be affected by exchange rate movements as the majority of the Company's assets and income are denominated in currencies other than sterling which is the reporting currency. The Company's loan facility is denominated in US dollars.

The Board has the authority to reduce or eliminate the exposure to fluctuating currencies through the use of currency hedging. It reviews its policy on this matter regularly; to date no hedging has been carried out and there are no plans to do so in the immediate future.

•   Going concern

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.

•   Financial

The financial risks faced by the Company include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Further details are disclosed in note 21 to the financial statements in the Annual Report.

TRANSACTIONS WITH THE MANAGER

Details of the management contract are set out in the Directors' Report in the Annual Report. The management fee payable to the Manager for the year was £1,909,000 (2017: £1,740,000) of which £nil (2017: £nil) was outstanding at the year end.

During the year £29,000 (2017: £nil), including VAT, was payable to the Manager for the administration of savings scheme products, of which £nil (2017: £nil) was outstanding at the year end.

Included in administration expenses in note 6 in the Annual Report are safe custody fees amounting to £2,000 (2017: £2,000) payable to JPMorgan Chase Bank, N.A. of which £nil (2017: £nil) was outstanding at the year end.

The Company also holds cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMorgan. At the year end this was valued at £5.4 million (2017: £5.7 million). Income amounting to £132,000 (2017: £92,000) was receivable during the year of which £nil (2017: £7,000) was outstanding at the year end. The JPMorgan US Dollar Liquidity Fund does not charge a fee and the Company does not invest in any other investment fund managed or advised by JPMorgan.

Handling charges on dealing transactions amounting to £6,000 (2017: £5,000) were payable to JPMorgan Chase Bank, N.A. during the year of which £1,000 (2017: £2,000) was outstanding at the year end.

At the year end, total cash of £18,000 (2017: £152,000) was held with JPMorgan Chase Bank, N.A. A net amount of interest of £nil (2017: £nil) was receivable by the Company during the year from JPMorgan Chase Bank, N.A. of which £nil (2017: £nil) was outstanding at the year end.

TRANSACTIONS WITH RELATED PARTIES

Full details of Directors' remuneration and shareholdings can be found in the Directors' Remuneration Report and in note 6 of the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared 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 they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

•   select suitable accounting policies and then apply them consistently;

•   state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;

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

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.

The Directors 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 Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements 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 Directors' Remuneration Report that comply with the law and those regulations.

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' 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 Directors consider 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 position and performance, business model and strategy.

For and on behalf of the Board

Davina Walter

Chairman

22nd March 2019

STATEMENT OF COMPREHENSIVE INCOME 

FOR THE YEAR ENDED 31ST DECEMBER 2018

	2018			2017
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments held at
fair value through profit or loss	-	(8,913)	(8,913)	-	9,134	9,134
Net foreign currency (losses)/gains on
cash and loans	-	(471)	(471)	-	845	845
Income from investments	2,561	-	2,561	2,460	-	2,460
Interest receivable	132	-	132	92	-	92
Gross return/(losses)	2,693	(9,384)	(6,691)	2,552	9,979	12,531
Management fee	(191)	(1,718)	(1,909)	(174)	(1,566)	(1,740)
Other administrative expenses	(477)	-	(477)	(385)	-	(385)
Net return/(losses) before finance costs
and taxation	2,025	(11,102)	(9,077)	1,993	8,413	10,406
Finance costs	(47)	(425)	(472)	(30)	(265)	(295)
Net return/(losses) before taxation	1,978	(11,527)	(9,549)	1,963	8,148	10,111
Taxation	(406)	-	(406)	(396)	-	(396)
Net return/(losses) after taxation	1,572	(11,527)	(9,955)	1,567	8,148	9,715
Return/(loss) per share (note 2)	2.75p	(20.17)p	(17.42)p	2.79p	14.48p	17.27p

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST DECEMBER 2018

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	Premium	reserve	reserves1	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2016	1,424	8,998	1,851	141,567	(16)	153,824
Shares reissued from Treasury	-	1,423	-	2,393	-	3,816
Repurchase of shares into Treasury	-	-	-	(668)	-	(668)
Net return for the year	-	-	-	8,148	1,567	9,715
At 31st December 2017	1,424	10,421	1,851	151,440	1,551	166,687
Issue of new ordinary shares	21	2,522	-	-	-	2,543
Shares reissued from Treasury	-	348	-	1,054	-	1,402
Repurchase of shares into Treasury	-	-	-	(424)	-	(424)
Net return for the year	-	-	-	(11,527)	1,572	(9,955)
Dividends paid in the year (note 3)	--	-	-	-	(1,422)	(1,422)
At 31st December 2018	1,445	13,291	1,851	140,543	1,701	158,831

¹    These reserves form the distributable reserves of the Company and may be used to fund distributions of profits to investors via dividend payments.

STATEMENT OF FINANCIAL POSITION

AS AT 31ST DECEMBER 2018

	2018	2017
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	168,014	175,408
Current assets
Debtors	1,211	298
Cash and cash equivalents	5,382	5,891
	6,593	6,189
Creditors: amounts falling due within one year	(15,776)	(14,910)
Net current liabilities	(9,183)	(8,721)
Total assets less current liabilities	158,831	166,687
Net assets	158,831	166,687
Capital and reserves
Called up share capital	1,445	1,424
Share premium	13,291	10,421
Capital redemption reserve	1,851	1,851
Capital reserves	140,543	151,440
Revenue reserve	1,701	1,551
Total shareholders' funds	158,831	166,687
Net asset value per share (note 4)	274.8p	294.2p

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST DECEMBER 2018

	2018	2017
	£'000	£'000
Net cash outflow from operations before dividends and interest	(2,385)	(2,113)
Dividends received	2,186	2,189
Interest received	139	91
Overseas tax recovered	24	13
Interest paid	(531)	(290)
Net cash outflow from operating activities	(567)	(110)
Purchases of investments	(55,685)	(57,705)
Sales of investments	53,196	51,707
Settlement of foreign currency contracts	(2)	13
Net cash outflow from investing activities	(2,491)	(5,985)
Dividends paid	(1,422)	-
Issue of new ordinary shares	2,543	-
Shares reissued from Treasury	1,402	3,816
Repurchase of shares into Treasury	(424)	(668)
Net cash inflow from financing activities	2,099	3,148
Decrease in cash and cash equivalents	(959)	(2,947)
Cash and cash equivalents at start of year	5,891	9,407
Exchange movements	450	(569)
Cash and cash equivalents at end of year	5,382	5,891
Decrease in cash and cash equivalents	(959)	(2,947)
Cash and cash equivalents consist of:
Cash and short term deposits	18	152
Cash held in JPMorgan US Dollar Liquidity Fund	5,364	5,739
Total	5,382	5,891

NOTES TO THE FINANCIAL STATEMENTS

1.       Accounting policies

         Basis of accounting

          The financial statements are prepared under the historic cost convention, modified to include fixed asset investments at fair value, 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, updated in February 2018.

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

          The financial statements have been prepared on a going concern basis. The disclosures on going concern in the Audit Committee Report form part of these financial statements.

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

2.      Return/(loss) per share

	2018	2017
	£'000	£'000
Revenue return	1,572	1,567
Capital (losses)/return	(11,527)	8,148
Total (losses)/return	(9,955)	9,715
Weighted average number of shares in issue during the year	57,156,038	56,256,353
Revenue return per share	2.75p	2.79p
Capital (losses)/return per share	(20.17)p	14.48p
Total (losses)/return per share (basic and diluted)	(17.42)p	17.27p

3.      Dividends

(a)    Dividends paid and declared

	2018	2017
	£'000	£'000
Dividend paid
2017 final dividend of 2.5p (2016: £nil) paid to shareholders in May 2018	1,422	-
Dividend declared
2018 final dividend of 2.5p (2017: 2.5p) declared	1,445	1,416

         All dividends paid and declared in the year have been funded from the revenue reserve.

         The dividend proposed in respect of the year ended 31st December 2017 amounted to £1,416,000. However the amount paid amounted to £1,422,000 due to shares issued after the balance sheet date but prior to the share register record date.

         The final dividend has been declared in respect of the year ended 31st December 2018. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st December 2019.

(b)    Dividends 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 as shown below. The revenue available for distribution by way of dividend for the year is £1,572,000 (2017: £1,567,000).

                                                                                                                                               
                                                                                                                                        2018                  2017
                                                                                                                                      £'000               £'000

2018 final dividend of 2.5p (2017: 2.5p) declared

1,445

1,416

4.       Net asset value per share

	2018	2017
Net assets (£'000)	158,831	166,687
Number of shares in issue	57,791,928	56,651,928
Net asset value per share	274.8p	294.2p

5.      Status of results announcement

2017 Financial Information

The figures and financial information for 2017 are extracted from the published Annual Report and Financial Statements for the year ended 31st December 2017 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements 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.

2018 Financial Information

The figures and financial information for 2018 are extracted from the Annual Report and Financial Statements for the year ended 31st December 2018 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.

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.

22nd March 2019

For further information:

Lucy Dina,

JPMorgan Funds Limited                                 020 7742 4000

ENDS

A copy of the Annual Report and Financial Statements 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 will shortly be available on the Company's website at www.jpmussmallercompanies.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

 

END

 

 

FR SEFFIEFUSESD