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EXCLUSIVE: Ascent Resources ask shareholders for ability to raise funds


Regulatory News


Annual Financial Report

Thu, 8th Nov 2018 13:20


RNS Number : 8122G
JPMorgan Elect PLC
08 November 2018

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN ELECT PLC

FINAL RESULTS FOR THE YEAR ENDED 31ST AUGUST 2018

Legal Entity Identifier: 549300FIUYKKL39ILD07

Information disclosed in accordance with the DTR 4.1.3

CHAIRMAN'S STATEMENT

Dear Shareholders,

I am pleased to report on the results for the year ended 31st August 2018. Performance during the year under review has been mixed. The Managed Growth portfolio return on net assets was +13.6%, outperforming its benchmark. The Managed Income portfolio grew its dividend for the eighth consecutive year but the return on net assets, whilst positive at +1.3%, was below the benchmark.

Over the past 18 months, the Board has strategically reviewed our three share classes. Overall, we have concluded that they remain appropriate but we have implemented some small changes, such as the introduction of gearing and a change of benchmark for Managed Income, and some increased flexibility to invest in non-JPMorgan funds for Managed Growth. We believe that these changes will enhance returns over the longer term.

Managed Growth

The Managed Growth portfolio has delivered a total return on net assets of +13.6%, compared with the portfolio's benchmark which returned +8.1%, an outperformance of 5.5%.

The objective of this share class is long term capital growth delivered by investing in a range of investment trusts and open-ended funds managed principally by JPMorgan Asset Management. During the year the Board, in conjunction with the investment manager, reviewed the proportion of the Managed Growth share class which could be invested in non-JPMorgan investment companies. It was agreed that the percentage be increased from 30% to 40%, thus providing the investment manager with added flexibility. At the year-end, 27% of the portfolio was invested in non-JPMorgan funds.

For the year ended 31st August 2018, the Board declared dividends of 13.1pence per Managed Growth share compared to 11.0pence for the year ended 31st August 2017. Shareholders are reminded that this share class is a growth vehicle. Any income generated during the year is generally distributed in that year and investment decisions are not made with the objective of maintaining or growing income.

Managed Income

The objective of the Managed Income share class is growing income return with potential for long term capital growth. I am pleased to report that dividends for the year ended 31st August 2018 totalled 4.5?pence per share, an increase of 7.1% on 2017 (2017: 4.2 pence per share). However, the Managed Income portfolio delivered a total return on net assets of only +1.3%, compared with the portfolio's benchmark index which returned +4.6%, an underperformance of 3.3%. This is disappointing although the Board remains confident that the portfolio is well positioned to deliver improved returns in the future.

During the year, as agreed at the last Annual General Meeting ('AGM'), the Board negotiated a £20 million, two year floating rate multicurrency credit facility with Scotiabank to be used for the Managed Income share class. As at 31st August 2018, £5 million was drawn down and invested.

In the absence of unforeseen circumstances, the Board intends to declare the first three interim dividends for the year ending 31st August 2019 at 1.1 pence per share. The level of the fourth interim dividend will be determined by the Board towards the end of the Company's 2018/19 financial year and will depend on the level of dividends received and anticipated by the Company. It is the Board's aim to pay not less than the dividend paid for the year ending 31st August 2018 (4.5pence) and increase the total dividends each year by at least inflation.

The Board believes that with the change in benchmark to FTSE All-Share Index (total return) and the introduction of gearing this share class is now managed on a level playing field in relation to competitor funds without materially changing the investment profile of the share class.

Managed Cash

The portfolio's primary objective remains capital preservation through investment in high quality liquidity funds. During the year, the Bank of England base rate was increased to 0.75%. The Managed Cash share class in comparison returned 0.3% on net assets and an interim dividend of 0.35 pence per share was paid for the year ended 31st August 2018.

The Managed Cash portfolio is invested in liquidity funds with AAA ratings as measured by Standard & Poor's, or an equivalent rating agency. The Board considers this class to be an asset allocation tool which continues to benefit shareholders of the Company's other share classes, offering the opportunity to switch into a safer share class in times of market volatility.

Further details of the performance of the three separate share class portfolios are set out on pages 9 to 34 of the Annual Report

Conversions and Redemptions

During the year, shareholders took the opportunity to convert between share classes. This resulted in a decrease in the Managed Growth share class shares in issue of 850,829, an increase in the Managed Income share class shares in issue of 2,652,262 and an increase in the Managed Cash share class shares in issue of 3,940,747. In addition, 1,551,160 Managed Cash shares were redeemed.

The Board

Roger Yates has been a member of the Board for nine years and has indicated his intention to step down at the conclusion of the AGM in December 2018. Roger has a wealth of knowledge and experience in the fund management industry and I would like to take this opportunity to thank him for his significant contribution to the Board over many years.

The Board engaged an independent consultant, Nurole, to assist with the recruitment of a new Director and the Directors recommend that Rupert Dickinson be appointed as a Director of the Company by the shareholders at the forthcoming AGM. Rupert is new to Investment Trust boards, having retired from his executive role earlier this year, but he has extensive experience of financial services and in the development of the UK investment platform industry. I am confident that Rupert will make an excellent addition to the JPMorgan Elect board and I will look forward to introducing him to you at the AGM.

Annual General Meeting

The Company's AGM will be held on 19th December 2018 at 12.30pm at 60 Victoria Embankment, London EC4Y 0JP. In addition to the formal part of the meeting, there will be presentations from the Investment Managers of each share class and a question and answer session.

If you have any detailed technical questions, it would be helpful if you could raise them in advance with the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP or via the 'Ask a Question' link on the Company's website. Shareholders who are unable to attend the AGM are encouraged to use their proxy votes.

Outlook

For several years it has been easy to highlight heightened investment risks but markets have generally continued to perform well. 2018 has seen increased volatility, with material falls in the Spring, followed by all-time highs for the UK market in May and the US in September. More recently, we have seen further significant declines. This volatility may continue as markets struggle with political and economic uncertainty but corporate earnings and dividends have been robust and markets are generally not expensive. Our managers still see value in equities and remain cautiously optimistic.

Alan Hodson

Chairman 8th November 2018

INVESTMENT MANAGERS' REPORT - MANAGED GROWTH

Performance Review

The Managed Growth portfolio outperformed its benchmark over the last year, returning +13.6% versus the benchmark return of +8.1%. The discount narrowed slightly, delivering a total return of 14.1% to shareholders. The short- and long-term performance of the Growth portfolio is shown in the table below.

Managed Growth (%)

1 Yr

3 Yrs pa

5 Yrs pa

10 Yrs pa

Total return on net assets

13.6

14.8

12.6

11.1

Total return to shareholders

14.1

15.0

12.6

11.2

Benchmark total return

8.1

14.5

10.9

9.3

FTSE All-Share Index

4.7

10.2

7.6

7.5

FTSE World ex UK

12.1

19.7

14.9

11.5

A combination of strong stock selection combined with narrowing discounts drove the outperformance of the Managed Growth portfolio.

Our holdings in North America had a particularly strong year both in absolute and relative terms. The single largest contributor to returns was the portfolio's holding of Allianz Technology Trust, which was buoyed by the continued growth in technology companies, boosted further by good stock selection. Our holdings in the UK also performed strongly. Two examples in the UK are JPMorgan Claverhouse Investment Trust (which is the portfolio's largest holding) and Finsbury Growth & Income Trust.

Some strategies, including BlackRock Frontiers Investment Trust and JPMorgan Chinese Investment Trust, underperformed their benchmarks. However, each of the 10 largest holdings outperformed their own benchmarks over the 12 month period.


12 Mths to

Top 5 by absolute performance (%)

31st August 2018

Allianz Technology Trust

41.5

JPMorgan US Smaller Companies

23.9

JPM US Equity All Cap Fund

21.2

JPMorgan American

20.5

JPMorgan Japanese

20.4


12 Mths to

Bottom 5 by absolute performance (%)

31st August 2018

BlackRock Frontiers

-5.7

JPMorgan Chinese

-2.1

The Biotech Growth Trust

-1.4

JPMorgan Indian

-1.2

JPMorgan European Investment Trust - Growth

1.8

Performance Attribution

Year ended 31st August 2018

Contributions to cum income total returns for Managed Growth


Benchmark Total Return


8.1%

Asset Allocation

0.4%


Stock Selection

5.8%


Gearing/Cash

-0.2%


Investment Manager Contribution


6.0%

Portfolio Total Return


14.1%

Management fees / Other expenses

-0.6%


Share buy back / Issuance

0.1%


Other effects


-0.5%

Net Asset Value Cum Income Total Return


13.6%

Share Price Total Return


14.1%

Source: B-One, JPMAM and Morningstar. All figures are on a total return basis.

Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.

At the year end, the investment trust sector (excluding private equity, hedge funds and direct property) average discount was -4.6%, compared with -5.1% at the previous year end (Source: Winterflood).

We estimate that discount narrowing contributed approximately 2.0% to the portfolio return.

Portfolio activity

At the year end, 44% of the portfolio was invested in JPMorgan-managed investment trusts, 29% in JPMorgan-managed open-ended funds, 27% in investment trusts managed by third party managers, with the balance held in futures and cash.

We have made meaningful changes to the asset allocation in the last year. We sold European equities, moving from overweight to underweight in this region. We increased our overweight to the US. The US is our most favoured region, given solid economic growth and a strong earnings backdrop, while the defensive nature of the US market should help in both upside and downside scenarios relative to other regions.

Whilst the UK continues to be a large allocation to the portfolio, we have maintained an underweight to the region relative to the benchmark over the period. Among the developed market economies, the UK faces a unique set of secular and shorter-term uncertainties. The UK's impending departure from the European Union (EU) already seems to be affecting the country's medium-term prospects. Immigration from the rest of the EU has slowed sharply, a direct hit to the economy's potential growth rate. Meanwhile, since the referendum the economy appears to have moved further into late-cycle territory, with the unemployment rate at its lowest level since the 1970s and inflation running close to the Bank of England's target. Continued growth has come at the expense of the private sector's financial position, now the most stretched in several decades, largely reflecting a very low household saving rate. The UK economy thus looks vulnerable to retrenchment in the face of shocks.

We continue to be constructive on Japanese equities, although we have reduced our overweight over the period. The change is centred around our preference to have a distinct overweight to US equities, as opposed to a negative view on Japanese equities.

Outlook

After the very strong start to the year, we have seen a divergence in global equity returns. The US has continued to outperform versus the rest of the world and the gap between the most expensive and cheapest stocks in the market, within both sectors and countries, is reaching historical extremes. However, the economic momentum has certainly slowed from the highs witnessed in 2017, especially outside the US. Our view is that global growth is set to remain above trend, but changes to US trade policy and the impact of higher US rates have increased the risks in our outlook. We expect US policy rates to continue steadily tightening over coming quarters, but even then monetary policy will remain accommodative and supportive for risky assets into early 2019

We would note that investment trust discounts to net asset value have continued to narrow, and this warrants some caution. However, valuations of equities are not at extreme levels, and economic growth should be sustained despite tightening monetary policy.

Katy Thorneycroft

Investment Manager 8th November 2018

INVESTMENT MANAGERS' REPORT - MANAGED INCOME

Performance Review

During the year ended 31st August 2018, the Managed Income portfolio underperformed: it delivered a total return of +1.3%, in comparison to the benchmark return of +4.6%. The underperformance largely occurred during the final quarter of the year.

The benchmark for the Managed Income is the FTSE All-Share Index (total return). Prior to 1st March 2018, the benchmark was a composite comprising 85% of the FTSE All-Share Index (total return) and 15% of the Bloomberg Barclays Capital Global Corporate Bond Index (hedged in sterling).

Managed Income (%)

1 Yr pa

3 Yrs pa

5 Yrs pa

10 Yrs pa

Total return on net assets

1.3

7.3

7.7

7.3

Total return to shareholders

2.9

8.1

7.7

7.4

Benchmark total return1

4.6

9.4

7.2

7.2

Source: Morningstar/J.P. Morgan, using cum income net asset value per share.

1 Benchmark: FTSE All-Share Index (total return). Prior to 1st March 2018, benchmark was a composite comprising 85% FTSE All-Share Index (total return) and 15% Bloomberg Barclays Capital Global Corporate Bond Index (hedged) in sterling terms.

Performance Attribution

Year ended 31st August 2018

Contributions to cum income Total Returns for Managed Income


Benchmark Total Return


4.6%

Bond Returns

0.8%


Sector Effect - Bonds

0.9%


Stock Selection - Bonds

- 0.1%


Equity Returns

-2.6%


Sector Effect - Equities

-1.5%


Stock Selection - Equities

-1.1%


Currency / Cash

-0.9%


Investment Manager Contribution


-2.7%

Portfolio Total Return


1.9%

Management fees / Other expenses

-0.7%


Share buy back / Issuance

0.1%


Other effects


-0.6%

Net Asset Value Cum Income Total Return


1.3%

Share Price Total Return


2.9%

Performance relative to the benchmark was negatively affected by our holdings in Just Group, Carnival and Card Factory.

Just Group provides an equity release product, offering property owners a means to withdraw capital from their homes, provided there is sufficient equity in the customer's house. The company has consistently grown sales faster than the market expected. However, the shares fell substantially when the company highlighted that a consultation paper by the UK regulator could require more capital than previously budgeted.

Carnival, a cruise ship operator, fell as a result of the strengthening oil price. Since fuel is one of Carnival's biggest costs, the rising oil price meant the company had to lower its profitability guidance.

Budget greetings card retailer, Card Factory, performed very poorly as sales growth failed to live up to expectations.

The single biggest positive contributor to performance was Games Workshop. The company sells table-top war game systems and miniatures through its global store network and online presence. From the time of original purchase to the year end, the shares have risen over 70% as a result of consistently surprising the market with growth of revenues and profits.

Evraz, a UK domiciled-holding company for one of Russia's largest steel producers has also performed strongly since we acquired our holding. Strong cash generation allowed for a higher-than-expected interim dividend.

Our holdings in high yielding oil stocks, Royal Dutch Shell and BP, contributed meaningfully to performance as oil prices rose throughout the year, partly due to the deterioration in relations between the US and Iran.

Dividend Review

The Managed Income portfolio benefited from robust dividend growth in our underlying holdings. This allowed the Board to increase the dividend by 7%, whilst also strengthening revenue reserves. Dividend growth was helped significantly by higher pay-outs in holdings in the mining sector, via Glencore and Anglo American. Two of our holdings in the insurance sector, Aviva and Legal & General also contributed positively to the portfolio's income growth. Special dividends from our holdings in PageGroup, Jupiter Fund Management and Taylor Wimpey continued to benefit income generation for the portfolio.

The disappointments in dividend growth were the result of the exchange rate. The pound rose against the dollar over the course of our financial year, reducing dividends received from HSBC, BP and Royal Dutch Shell.

Portfolio Review

As at the year end, the equity exposure of the Managed Income portfolio was 96.2%. Including positions in the JPM European Investment Trust and the JPM Global High Yield Bond Fund, our exposure to markets is marginally greater than 100% as we have begun to utilise the facility to gear the portfolio. We expect the level of gearing to be primarily influenced by individual stock opportunities.

We established new positions in Cineworld, Ashtead, Somero, TBC Bank Group and International Consolidated Airlines (IAG). We acquired Cineworld primarily on the prospect of cost savings after the company acquired Regal Cinemas in the US. Earnings also benefited from improving box office revenue in the US thanks to a strong film line-up over the last year. Cineworld shares have a prospective dividend yield of 3.7% and we expect its dividend to grow by more than 20% per annum.

We purchased Ashtead - a construction equipment rental business - following a financial update from the company revealing faster-than-anticipated progress in their 5-year growth plan and robust customer demand, particularly in the US. The dividend yield is low at 1.2%, despite significant surplus capital generation, as management prefer share buy-backs as a form of distribution.

TBC Bank Group is a UK-listed commercial bank based in Georgia. The company's lending growth is strong as residential mortgage penetration in Georgia rises from low levels leading to an increase in payment and transaction volumes which are driving strong fee growth. We forecast a dividend yield of 4%, with dividends growing in excess of 10% per annum.

The catalyst for our purchase of IAG was supportive trading along with growing free cash flow generation. The free cash flow supports a regular dividend equal to a prospective 5% yield. The company's cash flow in excess of that required for the regular dividend will either be used to fund new investments or be returned to shareholders.

We purchased Somero, a small AIM-listed company manufacturing construction equipment, following a better-than-expected trading statement with management citing encouraging market conditions and robust finances. Somero has a net cash position and robust free-cash-flow generation should allow for further special dividends, contributing to an overall prospective yield of 5%.

Our purchases were funded by the sale of Headlam (slowing sales growth), Jupiter (deteriorating earnings profiles due to bond fund outflows) and Lancashire (share price recovery post February falls). Other sales included tactical reductions of BAE Systems, BP, British American Tobacco and Royal Dutch Shell. We also sold our holding in Berkeley Group as uncertainty over the outcome of the Brexit negotiations may lead to lower sales of the company's luxury London apartments.

Outlook

The domestic economic and political outlook remains unclear and is not helped by the uncertainty around the Brexit negotiations. Underlying momentum in the domestic economy remains subdued, whilst the threat of continued global trade tensions adds to the negative risks.

However, whilst UK economic growth is subdued, it is still positive. Additionally, growth in the rest of Europe has stabilised following a period of slower momentum earlier in the year and the US economy continues to do well, fuelled by fiscal stimulus.

The UK equity market continues to offer an attractive dividend yield of 3.9%. This provides some cushion, even in the event of a negative outcome to the Brexit negotiations. The floating exchange rate could take the strain if there is a no-deal outcome. Given the proportion of UK dividends earned overseas, a weak exchange rate would boost dividend-paying capacity.

John Baker

Katen Patel

Investment Managers 8th November 2018

INVESTMENT MANAGERS' REPORT - MANAGED CASH

During the financial year, the Bank of England's (BoE) Monetary Policy Committee voted to increase interest rates by a quarter of a percentage point on two separate occasions. The first rate rise in a decade came in November 2017 and was widely expected by markets. The BoE Governor Mark Carney stated that the economy was operating with limited spare capacity and that low unemployment was expected to start to translate into higher wage growth. This was followed by another increase in August 2018 to 0.75%, which again was priced in to the markets, although it came as a surprise that the vote was unanimous. Governor Mark Carney stressed that further increases would be gradual, highlighting three particular headwinds: household and government deleveraging, low productivity and a higher degree of uncertainty of Brexit.

On the economic front, GDP growth for the second quarter came in at 1.5% on an annualised basis, which was in line with expectations but slightly lower than the BoE's forecasts. Inflation also came in lower than the BoE's forecasts, with the consumer price index (CPI) at 2.5% year on year and core CPI at 1.9% year on year in July.

The Managed Cash portfolio returned 0.3% on net assets for the period. The Company continues to retain its broad diversification across a range of the UK's leading AAA-rate sterling liquidity funds. The primary aim of the funds the Managed Cash portfolio invests in is to provide preservation of capital and liquidity with a yield in line with money market rates as a secondary aim.

The UK faces a unique set of secular and shorter-term uncertainties. The UK's impending departure from the European Union (EU) already seems to be affecting the country's medium-term prospects. Immigration from the rest of the EU has slowed sharply, a direct hit to the economy's potential growth rate. Persistent weakness in capital expenditure may also partly reflect Brexit uncertainty. Meanwhile, since the referendum the economy appears to have moved further into late-cycle territory, with the unemployment rate at its lowest level since the 1970s and inflation running close to the BoE's target. Continued growth has come at the expense of the private sector's financial position, now the most stretched in several decades, largely reflecting a very low household saving rate. The UK economy thus looks vulnerable to retrenchment in the face of shocks. This set of circumstances sets up a tricky challenge for the BoE. Purely cyclical considerations argue for steady monetary tightening even as the economy prepares for a leap into the unknown. We see an elevated risk of poor outcomes for the UK, even assuming Brexit negotiations conclude more or less successfully, and think a weakening of the currency will help the economy re-adjust in the new world.

Katy Thorneycroft

Investment Manager 8th November 2018

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.

With the assistance of the Manager, the Board has 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:

Investment Strategy

An inappropriate investment strategy, for example asset allocation, or the level of indirect gearing, may lead to underperformance against the relevant 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 by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, transaction reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Managed Income share class may utilise gearing to achieve its investment exposure. The Board also monitors closely the level of indirect gearing through the underlying investments. The Board holds a strategy meeting each year.

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 indirect 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 implementation 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 Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under 'Structure and Objective of the Company' above. Were the Company to breach Section 1158, it might lose investment trust status and, as a consequence, gains within the Company's portfolios could be subject to UK capital gains tax. The Section 1158 qualification criteria are continually 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, since its shares have premium listings on the London Stock Exchange, the UKLA Listing Rules, the Disclosure Guidance and Transparency Rules ('DTRs'), the Market Abuse Regulations ('MAR') and, as an investment trust, the Alternative Investment Fund Managers Directive ('AIFMD'). A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or being 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, the UKLA Listing Rules, DTRs, MAR and AIFMD. The Board conducts an annual evaluation of the Company Secretary and the Manager, further details can be found on page 47 of the Annual Report.

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 45 to 49 or the Annual Report.

Operational

Loss of key staff by the Manager or JPMorgan Asset Management (UK) Limited, such as the Investment Managers, could affect the performance of the Company. Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary or Custodian's records could 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. Details of how the Board monitors the services provided by JPMF and its associates and the key elements designed to provide effective internal controls are included within the Risk Management and Internal Controls section of the Corporate Governance Statement on pages 45 to 49 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 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 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. Further details are disclosed in note 22 on pages 86 to 91 of the Annual Report.

TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the management contracts are set out in the Directors' Report on page 38. The total amount payable to the Manager for the year in respect of these contracts was £1,514,000 (2017: £1,319,000) net of rebates, of which £nil (2017: £nil) was outstanding at the year end. In addition £26,000 (2017: £100,000) was payable to the Manager for the administration of savings scheme products of which £17,000 (2017: £48,000) was outstanding at the year end.

Included in other administration expenses in note 6 on page 74 are safe custody fees amounting to £5,000 (2017: £4,000) payable to JPMorgan Chase of which £1,000 (2017: £1,000) 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. Commission amounting to £18,000 (2017: £9,000) was payable to JPMorgan Securities Limited for the year of which £nil (2017: £nil) was outstanding at the year end.

The Company holds investments in funds managed by JPMAM. At 31st August 2018 these were valued at £207.7 million (2017: £191.5 million) and represented 56.64% (2017: 55.39%) of the Company's investment portfolio. During the year the Company made £20.9 million purchases of such investments (2017: £11.8 million) and sales with a total value of £26.8 million (2017: £10.6 million). Income amounting to £3.8 million (2017: £3.7 million) was receivable from these investments during the year of which £940,000 (2017: £775,000) was outstanding at the year end.

The Managed Growth and Income pools also hold cash in JPM Sterling Liquidity Fund, managed by JPMorgan. At the year end this was valued at £4.1 million (2017: £5.1 million). Interest amounting to £26,000 (2017: £18,000) was receivable during the year of which £nil (2017: £nil) was outstanding at the year end.

Stock lending income amounting to £5,000 (2017: £nil) was receivable by the Company during the year. JPMAM commissions in respect of such transactions amounted to £1,000 (2017: £nil).

Handling charges on dealing transactions amounting to £9,000 (2017: £10,000) were payable to JPMorgan Chase during the year of which £1,000 (2017: £2,000) was outstanding at the year end.

At the year end, total cash of £1,928,000 (2017: £746,000) was held with JPMorgan Chase. A net amount of interest of £nil (2017: £1,000) was receivable by the Company during the year from JPMorgan Chase of which £nil (2017: £nil) was outstanding at the year end.

Full details of Directors' remuneration and shareholdings can be found on page 42 and in note 6 on page 74 of the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards), including 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 order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and estimates that are reasonable and prudent;

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

• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business

and the Directors confirm that they have done so.

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

The accounts are published on the www.jpmelect.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 accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

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

Each of the Directors, whose names and functions are listed on page 42 of the Annual Report, confirms that, to the best of their knowledge:

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

• the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the strategy and business model of the Company.

For and on behalf of the Board

Alan Hodson

Chairman

8th November 2018

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST AUGUST 2018


2018

2017


Revenue

Capital

Total

Revenue

Capital

Total


£'000

£'000

£'000

£'000

£'000

£'000

Gains on investments held at fair value







through profit or loss

-

28,339

28,339

-

48,656

48,656

Net foreign currency gains

-

9

9

-

18

18

Income from investments

9,348

-

9,348

8,431

-

8,431

Interest receivable and similar income

36

-

36

22

-

22

Gross return

9,384

28,348

37,732

8,453

48,674

57,127

Management fee

(497)

(1,017)

(1,514)

(425)

(894)

(1,319)

Other administrative expenses

(551)

-

(551)

(554)

-

(554)

Net return on ordinary activities







before finance costs and taxation

8,336

27,331

35,667

7,474

47,780

55,254

Finance costs

(24)

(25)

(49)

(1)

(2)

(3)

Net return on ordinary activities







before taxation

8,312

27,306

35,618

7,473

47,778

55,251

Taxation credit/(charge)

2

-

2

(9)

-

(9)

Net return on ordinary activities







after taxation

8,314

27,306

35,620

7,464

47,778

55,242

Return/(loss) per share:







Managed Growth

14.07p

90.78p

104.85p

12.63p

119.11p

131.74p

Managed Income

5.10p

(3.40)p

1.70p

4.83p

11.43p

16.26p

Managed Cash

0.30p

0.00p

0.30p

0.22p

0.00p

0.22p

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST AUGUST 2018


Called up


Capital






share

Share

redemption

Other

Capital

Revenue



capital

premium

reserve

reserve

reserves

Reserve1

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

At 31st August 2016

24

85,425

-

44,694

148,307

4,550

283,000

Repurchase and cancellation of the Company's








own shares

-

-

-

(816)

-

-

(816)

Repurchase of shares into Treasury

-

-

-

(12,388)

-

-

(12,388)

Shares issued as a result of Company








Rollovers (net of costs)

-

35,190

-

-

-

-

35,190

Share conversions during the year

-

2,253

-

(2,253)

-

-

-

Adjustment on repurchase of deferred shares








issued arising from share conversions

(8)

-

8

-

-

-

-

Net return on ordinary activities

-

-

-

-

47,778

7,464

55,242

Dividends paid in the year (note 3)

-

-

-

-

-

(6,104)

(6,104)

At 31st August 2017

16

122,868

8

29,237

196,085

5,910

354,124

Repurchase and cancellation of the Company's








own shares

-

-

-

(1,579)

-

-

(1,579)

Repurchase of shares into Treasury

-

-

-

(11,050)

-

-

(11,050)

Share conversions during the year

-

11,846

-

(11,846)

-

-

-

Project costs in relation to shares as a result of








Company rollover

-

(41)

-

-

-

-

(41)

Net return on ordinary activities

-

-

-

-

27,306

8,314

35,620

Dividends paid in the year (note 3)

-

-

-

-

-

(7,511)

(7,511)

At 31st August 2018

16

134,673

8

4,762

223,391

6,713

369,563

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

STATEMENT OF FINANCIAL POSITION

AT 31ST AUGUST 2018


2018

2017





Audited

Audited


Growth

Income

Cash

Total

Total


£'000

£'000

£'000

£'000

£'000

Fixed assets






Investments held at fair value through






profit or loss

277,143

81,311

6,547

365,001

345,671

Current assets






Derivative financial assets

168

-

-

168

119

Debtors

2,327

770

1

3,098

1,987

Cash and cash equivalents

1,244

4,115

1,458

6,817

6,562


3,739

4,885

1,459

10,083

8,668

Current liabilities






Creditors: amounts falling due within one year

(93)

(58)

(168)

(319)

(184)

Derivative financial liabilities

(202)

-

-

(202)

(31)

Net current assets

3,444

4,827

1,291

9,562

8,453

Total assets less current liabilities

280,587

86,138

7,838

374,563

354,124

Creditors: amounts falling due after more






than one year

-

(5,000)

-

(5,000)

-

Net assets

280,587

81,138

7,838

369,563

354,124

Capital and reserves






Called up share capital

15

1

-

16

16

Share premium

40,393

67,374

26,906

134,673

122,868

Capital redemption reserve

3

3

2

8

8

Other reserve

28,450

(4,542)

(19,146)

4,762

29,237

Capital reserves

209,579

13,823

(11)

223,391

196,085

Revenue reserve

2,147

4,479

87

6,713

5,910

Total shareholders' funds

280,587

81,138

7,838

369,563

354,124

31st August 2018

31st August 2017


Net asset value

Net assets

Net asset value

Net assets


per share

attributable

per share

attributable


(pence)

£'000

(pence)

£'000

Managed Growth

879.3

280,587

785.6

264,942

Managed Income

114.0

81,138

117.2

83,784

Managed Cash

102.2

7,838

102.2

5,398

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST AUGUST 2018


2018

2017


£'000

£'000

Net cash outflow from operations before dividends and interest

(2,119)

(1,779)

Dividends received

9,067

8,019

Interest received

44

34

Interest paid

(21)

(3)

Overseas tax recovered

41

20

Net cash inflow from operating activities

7,012

6,291

Purchases of investments and derivatives

(49,269)

(73,865)

Sales of investments and derivatives

56,916

43,766

Settlement of future contracts

222

1,549

Settlement of foreign currency contracts

4

(13)

Net cash inflow/(outflow) from investing activities

7,873

(28,563)

Dividends paid

(7,511)

(6,104)

Repurchase of shares into Treasury

(11,050)

(12,388)

Repurchase and cancellation of the Company's own shares

(1,028)

(1,201)

Drawdown of bank loan

5,000

-

Shares issued as a result of Company rollover (net of costs)

-

35,190

Project costs in relation to shares as a result of Company rollover

(41)

-

Net cash (outflow)/inflow from financing activities

(14,630)

15,497

Increase/(decrease) in cash and cash equivalents

255

(6,775)

Cash and cash equivalents at start of year

6,562

13,334

Exchange movements

-

3

Cash and cash equivalents at end of year

6,817

6,562

Increase/(decrease) in cash and cash equivalents

255

(6,775)

Cash and cash equivalents consist of:



Cash and short term deposits

2,757

1,435

Cash held in JPMorgan Sterling Liquidity Fund

4,060

5,127

Total

6,817

6,562

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST AUGUST 2018

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 February 2018.

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

The financial statements for the Company comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the 'Total' column of the Statement of Financial Position, the Statement of Cash Flows, and the 'Total' column within the Notes to the financial statements.

The Managed Growth, Managed Income and Managed Cash Statement of Comprehensive Income and Statement of Financial Position, together with the notes to those statements are not required under UK GAAP or the SORP, and have not been audited but have been disclosed to assist shareholders' understanding of the net assets and liabilities, and income and expenses of the different share classes.

The financial statements have been prepared on a going concern basis. The disclosures on going concern on page 40 of the Directors' Report in the Annual Report form part of these financial statements.

The policies applied in these financial statements are consistent with those applied in the preceding year, except in the previous year the Company elected not to prepare a Statement of Cash Flows, applying the exemption from disclosure available under FRS 102 Section 7.1A(c). The Company has since reviewed the application of the exemption and has resolved not to apply it this year as the inclusion of the Statement of Cash Flows supports fuller financial analysis for the benefit of all stakeholders.

2. Return per share


2018

2017


£'000

£'000

Managed Growth



Return per Managed Growth share is based on the following:



Revenue return

4,613

4,268

Capital return

29,764

40,242

Total return

34,377

44,510

Weighted average number of shares in issue during the year

32,786,405

33,786,098

Revenue return per share

14.07p

12.63p

Capital return per share

90.78p

119.11p

Total return per share

104.85p

131.74p


2018

2017


£'000

£'000

Managed Income



Return per Managed Income share is based on the following:



Revenue return

3,685

3,186

Capital (loss)/return

(2,458)

7,536

Total return

1,227

10,722

Weighted average number of shares in issue during the year

72,267,350

65,954,477

Revenue return per share

5.10p

4.83p

Capital (loss)/return per share

(3.40)p

11.43p

Total return per share

1.70p

16.26p


2018

2017


£'000

£'000

Managed Cash



Return per Managed Cash share is based on the following:



Revenue return

16

10

Capital return

-

-

Total return

16

10

Weighted average number of shares in issue during the year

5,437,542

4,527,799

Revenue return per share

0.30p

0.22p

Capital return per share

0.00p

0.00p

Total return per share

0.30p

0.22p

3. Dividends

(a) Dividends paid


2018

2017


£'000

£'000

Managed Growth shares 2017 4th interim dividend paid of 3.00p (2016: 3.15p)

1,011

1,066

Managed Growth shares 2018 1st interim dividend paid of 2.90p (2017: 2.90p)

971

974

Managed Growth shares 2018 2nd interim dividend paid of 2.80p (2017: 2.55p)

919

855

Managed Growth shares 2018 3rd interim dividend paid of 3.50p (2017: 2.55p)

1,135

869

Managed Income shares 2017 4th interim dividend paid of 1.65p (2016: 1.35p)

1,182

692

Managed Income shares 2018 1st interim dividend paid of 1.05p (2017: 0.85p)

746

436

Managed Income shares 2018 2nd interim dividend paid of 1.05p (2017: 0.85p)

766

584

Managed Income shares 2018 3rd interim dividend paid of 1.05p (2017: 0.85p)

764

614

Managed Cash 2017 interim dividend of 0.35p (2016: 0.35p)

17

14

Total dividends paid in the year

7,511

6,104

In respect of dividends paid during the year ended 31st August 2018:

The 2017 4th interim dividends were paid on 20th September 2017 to shareholders on the register as at the close of business on 25th August 2017.

The 1st interim dividends were paid on 20th December 2017 to shareholders on the register as at the close of business on 24th November 2017.

The 2nd interim dividends were paid on 21st March 2018 to shareholders on the register as at the close of business on 16th February 2018.

The 3rd interim dividends were paid on 21st June 2018 to shareholders on the register as at the close of business on 18th May 2018.

(b) Dividends declared


2018

2017


£'000

£'000

Managed Growth shares 2018 4th interim dividend payable of 3.90p (2017: 3.00p)

1,254

1,012

Managed Income shares 2018 4th interim dividend payable of 1.35p (2017: 1.65p)

961

1,182

Managed Cash shares 2018 interim dividend of 0.35p (2017: 0.35p)

22

17

Total dividends declared

2,237

2,211

In respect of the dividends declared, but not paid, during the year ended 31st August 2018, the dividends were paid on 21st September 2018 to shareholders on the register as at the close of business on 24th August 2018.

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

(c) 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 paid and declared in respect of the financial year, as follows:


2018

2017


£'000

£'000

Managed Growth shares 2018 1st interim dividend paid of 2.90p (2017: 2.90p)

971

974

Managed Growth shares 2018 2nd interim dividend paid of 2.80p (2017: 2.55p)

919

855

Managed Growth shares 2018 3rd interim dividend paid of 3.50p (2017: 2.55p)

1,135

869

Managed Growth shares 2018 4th interim dividend payable of 3.90p (2017: 3.00p)

1,254

1,012

Managed Income shares 2018 1st interim dividend paid of 1.05p (2017: 0.85p)

746

436

Managed Income shares 2018 2nd interim dividend paid of 1.05p (2017: 0.85p)

766

584

Managed Income shares 2018 3rd interim dividend paid of 1.05p (2017: 0.85p)

764

614

Managed Income shares 2018 4th interim dividend payable of 1.35p (2017: 1.65p)

961

1,182

Managed Cash shares interim dividend payable of 0.35p (2017: 0.35p)

22

17

Total dividends for Section 1158 purposes

7,538

6,543

The revenue available for distribution by way of dividend for the year is £8,314,000 (2017: £7,464,000). The revenue reserve after payment of the final dividends will amount to £4,476,000 (2017: £3,699,000).

4. Net asset value per share

The net asset values per share are calculated as follows:


2018

2017


Managed

Managed

Managed

Managed

Managed

Managed


Growth

Income

Cash

Growth

Income

Cash

Net assets (£'000)

280,587

81,138

7,838

264,942

83,784

5,398

Number of shares in issue (excluding shares







held in Treasury)

31,911,803

71,143,249

7,670,009

33,725,314

71,482,274

5,280,422

Net asset value per share

879.3p

114.0p

102.2p

785.6p

117.2p

102.2p

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 Annual Report and Financial Statements will be submitted to the National Storage Mechanism and will be available shortly for inspection at www.morningstar.co.uk/uk/NSM

The Annual Report and Financial Statements will also be available shortly on the Company's website at www.jpmelect.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

8th November 2018


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.
END
FR FKFDDNBDDBDK





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