Last checked at 17 Mar 2017 15:24
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN US SMALLER COMPANIES INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED31ST DECEMBER 2016
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 2016.
chairman's statement
Performance
The Chairman's Statement should be an easy one to write given the share price increased by over 53% during the financial year. However, looking back over the events of 2016 when markets got off to one of their worst starts to a year since the 1970s (China slowdown, refugee crisis, global terrorist attacks, Iran and Saudi tensions), it is almost impossible to envisage we would have experienced these returns. The backdrop to the dramatic share price rise was an increase of 50.1% in the Company's net asset value (NAV), which compares favourably with the rise of 44.4% in our benchmark, the Russell 2000 in sterling terms. Around half of the gain in the benchmark was down to the weakness of sterling against the US dollar post the Brexit vote (our assets are all priced in US dollars) and the remainder reflects a strong rally in the Russell 2000 in the latter part of 2016, which saw the index (in US dollar terms) rise by 21.3% over the 12 months. The increase in our NAV was further boosted by strong stock selection over the year, which will be discussed in the Investment Managers' Report.
Discount and Premium
At the end of 2016 it was pleasing to see that the outperformance of the share price relative to the NAV meant the shares ended the year on a small premium. The year on year change does however mask a difficult year for keeping the relationship between the share price and the NAV stable. As a reminder halfway through 2016 the discount widened to such an extent that the shares were only up 1.4% against the NAV which had risen by 20.5% and, as was explained in the half year report, the Board was reluctant to buy in shares aggressively at a time when the Investment Managers had made such effective use of the Company's capital, as buybacks can reduce liquidity in the shares which is often quoted as a concern for prospective and existing shareholders.
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 will therefore be volatile in nature. The relationship between the share price and the NAV is, however, monitored on a daily basis by the 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 back 1,689,000 shares into Treasury. Currently the Company holds 534,000 shares in Treasury, having issued 850,000 shares since the year end.
Revenue and Dividend
The revenue for the year, after taxation, was £1,389,000 (2015: £929,000). Despite the Company generating positive revenue during the year, it still has a revenue reserve deficit, albeit now a modest one. Although the rules were changed in 2012 and companies are now allowed to distribute net income despite having a revenue reserve deficit, the Board does not believe it is in shareholders' best interests to propose a dividend payment until this deficit has been cleared. Based on the current revenue run rate and a significant change in attitude to dividends within US small cap company managements (dividends are now an important part of a company's capital allocation priorities) the Board would expect the revenue deficit to be cleared in 2017 and will then be in a position to consider paying a dividend. Shareholders should note the Company's objective remains that of capital growth and thus our dividend policy will simply be to pay out sufficient of our dividend income needed to maintain investment company status, which in turn means it will only be the natural outcome of the Investment Managers' investment style.
Gearing
In April 2016 our revolving credit facility with Scotiabank was renewed at US$20 million with an option to draw a further US$10 million. At the end of 2016 US$20 million was drawn and the portfolio was 4.1% geared. This facility matures in April 2017 and the Board will consider another gearing facility at this point.
Currency Hedging
Our portfolio is denominated in US dollars but is converted into sterling on a daily basis for calculating the NAV which exposes the assets to fluctuations in the US dollar/sterling exchange rate. The Board has the authority to reduce or eliminate the exposure to fluctuating currencies through the use of currency hedging. We review our policy on currency hedging 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
The Board has set in place a succession plan which we believe will smooth over the discontinuity that can be caused by the retirement of non-executive directors after nine years' service when a board consists of only five directors. In November we were delighted to welcome to the Board Dr Shefaly Yogendra who brings a wealth of experience of working with companies in the healthcare and technology sectors, as well as knowledge of the US political scene. It is with great sadness though, as part of the Board refreshment, Mark Ansell will be retiring at the forthcoming AGM. Mark has made an outstanding contribution to the Company during his time as a Director, particularly when the Company went through a turbulent period in 2008 which culminated in the appointment of the current investment management team. His input will be much missed and the Board would like to place on record their thanks to him. Following the AGM, the Board will consist of five directors, of which three will have been appointed since 2012 and we believe we have good diversity and the correct balance of skills.
Annual General Meeting
We are holding our AGM at 60 Victoria Embankment, London EC4Y 0JP on Wednesday 26th April 2017 at 2.30pm. As in previous years, there will be a presentation by one of the investment management team which will cover a review of 2016 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
At the end of each year when financial journalists make all their predictions for the coming year it seems there is always a smattering of articles discussing the lack of performance from active managers and whether investors would not be better off investing in the index (passive investment). I would therefore urge our investors to look at the Long Term Financial Record set out in the Annual Report and Accounts, where the Annual Returns to 31st December show that since the current investment team took over managing this portfolio (end of 2008) the team has produced consistent outperformance (return on net assets) of the benchmark after all management fees and other costs. This is an impressive record but it is not an accidental one, as we believe that our Company has in place the key ingredients that should make an investment rewarding, namely: people, investment philosophy, investment process, strong stable ownership and performance. I have listed performance last deliberately as you cannot 'buy' past performance whereas the other factors will be there in the future.
Mindful that my role in the Chairman's Statement is to discuss outlook I am going to leave the market outlook to the experts and remind investors why the Board would hope the Company can continue to deliver superior investment returns over the long term. 'People' is undoubtedly the key factor and with Don San Jose and his co-head Dan Percella the Company has two experienced US small cap managers who, along with three other members of the team, have built a strong team culture around them within the New York-based group. The team has a clearly defined investment philosophy, a disciplined investment process and importantly, with JPMAM being part of one of the strongest financial institutions, the asset management business is both stable and well-resourced. Over the long term the US economy has a long history of creating exciting growth prospects in the small cap sector and our Company should continue to take advantage of these opportunities for the reasons set out above.
Davina Walter
Chairman
17th March 2017
Investment manager's report
Market Review
US equity markets in 2016 can be best described as a tale of two halves. In the first half, volatility was attributable to several factors including the sudden devaluation of the Chinese renminbi (RMB), crude oil prices falling below US$30.00/bbl. and fears of a global economic slowdown. As a result, the S&P 500 Index (S&P 500), which represents large cap equities, reached a closing low of 1829.08 on 11th February, down more than 10% in dollar terms. Small Caps suffered a greater correction, with the Russell 2000 falling roughly 17% before bottoming in mid-February. Equity markets were quite choppy through the spring as investors remained on edge over the sub-par growth of the US economy. As the summer months approached, investor focus turned towards the UK referendum on European Union (EU) membership. The outcome caught investors by surprise as the majority of UK voters voted in favor of leaving the EU which initially threw global equity markets, bond yields and the British pound into a tailspin. As investors slowly realised that the potential economic impact would be more localised to the UK, global equity markets calmed and rebounded. The S&P 500 rallied on June's final three trading days to finish the year's first six months with a gain of 3.8% while the Russell 2000 ended with 2.2% gains in US$. Even though the market's resilience was impressive, the tone of the market remained defensive.
However, improvement in global economic growth, recovering commodity prices and the realization that 'Brexit' was a political crisis rather than a financial crisis contributed to equity markets stabilising during the second half of the year. Improving sentiment led to a shift in market leadership from the defensive to the cyclical sectors. The rotation into cyclicals intensified when, in a surprising turn of events, Donald J. Trump was elected the 45th president of the United States. As investors anticipated a pro-growth, pro-business agenda to be put forth by the incoming president, equity markets rallied, bond yields rose and the US dollar, which had been stable for most of the year, strengthened. The yield on the US 10-year US Treasury bond which had been rising steadily from its July low of 1.36% climbed to 2.45% at year end, with the majority of the increase coming after the election. This fuelled a strong rally in financial stocks, particularly banks and a rotation out of more defensive sectors like REITs.
Despite the S&P 500 making 18 new highs in 2016, the turn in investor sentiment and President elect Trump's proposals favouring US centric companies enabled small cap stocks to be the clear winners in 2016. Small cap stocks as measured by the Russell 2000 rose 21.3% in US$, dramatically outperforming the S&P 500 which advanced a very respectful 12.0%. The outcome looked even better in GBP due to sterling weakness where the Russell 2000 Index (Net) and the S&P 500 Index (Net) gained 44.4% and 33.1% respectively. From a sector point of view, financials and technology bounced back from the worst performing sectors in the first half to the best in the second half. Above all, the energy sector was the winner given the recovery in crude oil prices which closed out 2016 at US$53.72/bbl. On the other hand, real estate was the worst performing sector due to the considerable rise in bond yields.
Performance
The Company's net asset value grew by 50.1% in 2016. The return was ahead of the benchmark, the Russell 2000 Index (Net), which rose by 44.4% in GBP. The majority of the added value was driven by strong stock picking, which is highlighted in more detail in the following paragraphs, as well as our sector allocation in the health care and materials and processing sectors. Additionally, the portfolio's gearing was beneficial to the Company's performance during this period.
With regards to relative performance, our stock selection in the producer durables sector proved very beneficial. In the sector, Douglas Dynamics, a snow and ice management equipment maker, rose on strong earnings results due to strength at their dealer base which helped their core commercial snow/ice business. The company also benefited from continued strong demand for the products they launched in 2015. We continue to hold a position in the name, but have trimmed it somewhat on strength to manage position sizes and exposure. We have confidence in the company's strong leadership position in the stable core truck-mounted snowplough market, management's strategy to expand into other work truck attachments, and their intense focus on shareholder value creation. Within the same sector, a turf equipment provider, Toro, similarly contributed to performance as it continued to impress investors through strong earnings results while raising their quarterly dividends. We are positive on its solid share gains in both equipment and irrigation industries and overall healthy demand.
On a stand-alone basis, our investment in the energy name Patterson-UTI Energy added the most value for the period. The operator of contract drilling and pressure pumping reported earnings which beat consensus, and proved it can continue to execute in this tough market environment through a strong balance sheet and operational execution. The company benefitted from improving drilling activities as well as increased revenue in their pressure pumping segment. The company also rose on the heels of higher oil prices which helped the overall industry.
In contrast, underweights in the technology and financial services sectors as well as weak stock selection within materials & processing and technology weighed on relative returns.
Our investment in the materials & processing name AptarGroup hurt our performance. The company, which is a leader in dispensing technologies failed to meet investors' expectations. The struggles derived from their Beauty & Home and Food & Beverage segments during challenging market conditions, which weighed on their volumes. The stock price was also pressured on lowered guidance pointing to macro uncertainty. However, we remain positive on the company due to their pharmaceutical segment which is growing with healthy margins and the company continues to be a leader in the niches they participate in. In addition, they possess a strong balance sheet and have demonstrated solid capital allocation over time.
Our position in Sequential Brands, which owns a portfolio of consumer brands, detracted from performance in the consumer discretionary space. Sequential's share price plunged after the company lowered their 2017 EBITDA guidance by 10%. Inconsistent execution on deals, a weaker balance sheet and concerns about the credibility of management led us to adjust our position accordingly. Our position in the health care company Hanger also detracted for the period. The company delayed filing financial statements with the Securities and Exchange Commission and was delisted from the New York Stock Exchange. It initiated an accounting review in 2014 and more recently lawyers have found potential acts of fraud within the lower levels of the company, which sparked a further review of it's financials. The latest update included the possibility of the board pursuing claims against the previous CFO and CAO and making internal changes to rectify accounting control weakness. We did not view Hanger as a core holding and have exited the position.
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 companies to add to the portfolio and the analysts continue to be very productive as 19 companies were added. As you would expect, most of the new ideas were added to the portfolio during periods of market volatility. However, the portfolio's positioning remains relatively unchanged. Similar to the previous year, our main allocations remained in the financial services, consumer discretionary and producer durables sectors, which make up close to 60% of the overall portfolio's allocation. On a relative basis, the financial services sector was among the largest underweights which is mainly due to our underweight exposure to Real Estate Investment Trusts. The financial services sector has rallied strongly post the US election in the hopes of corporate tax reform, less regulation and rising interest rates. At this time, we are comfortable with our relative underweight position as we struggle to add to our exposure mainly due to valuations. The technology sector remains the area where we have had a difficult time finding opportunities that meet our quality and valuation criteria. Lastly, a trend throughout 2016 was the narrowing of the health care relative position due to a combination of new ideas, outperformance of existing holdings and underperformance of the biotech industry, to which we have no direct exposure. The health care sector ended the year as a small underweight.
Market Outlook
So what do we think about 2017? Predictions are very difficult and events in 2016 certainly made the point. We always remind our clients that our key advantage lies in finding investment opportunities and that we build a portfolio from the bottom up, rather than making macroeconomic predictions. Nevertheless, investor sentiment has been as high as ever, accumulating since the US election. We believe that most of President Trump's stated polices are pro-growth and the prospect of corporate tax reform, increased fiscal spending and less regulation are positives for equities. In addition, the future direction of corporate profits looks encouraging while the US economy is in reasonably good shape. Nevertheless, the devil will be in the details and expectations are high for the Trump administration to deliver pro-growth policies that can lead to an acceleration in GDP growth, while making progress on corporate tax reform. From a valuation perspective, comparative values between equities and bonds remain favourable for equities as an asset class. Thus, we continue to believe that US equities can deliver positive returns, though likely less robust than last year's strong pace.
However, some caution is warranted regarding the post-election enthusiasm. There remains a large degree of uncertainty as to what the final outcome of President Trump's broad agenda will be and to the timing of when proposals will become law. The process of putting significant reforms through Congress is expected to be lengthy and quite contentious. President Trump's ambitious proposals may be scaled back and implemented later than expected as the legislative process unfolds. This uncertainty leads us to believe 2017 will see a trend of increasing market volatility throughout the year. We plan to navigate these markets in the way we always do - with discipline and adherence to our investment process that focuses on high quality companies, durable business models with a sustainable competitive advantage, consistent profitability and run by strong management teams with a track record of value creation. We will look to acquire stakes in these companies when they are trading below their intrinsic value, offering a margin of safety in case our investment thesis does not play out exactly as expected.
Don San Jose
Dan Percella
Investment Managers
17th March 2017
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 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 and Accounts.
• 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 BNY Mellon Trust & Depositary (UK) 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 and Accounts.
• Cybercrime: 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. 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 and Accounts.
• 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 20 to the financial statements.
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, comprising Financial Reporting Standard 102, The Financial Reporting Standard Applicable in the UK and Republic of Ireland (FRS 102)) 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 position and 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, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;
• notify the Company's shareholders in writing about the use of disclosure exemptions, if any, in FRS 102 used in the preparation of 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.jpmussmallercompanies.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 in the Annual Report and Accounts, 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 net return or loss of the Company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
The Board confirms that it is satisfied that the annual report and accounts, taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
The Board also confirms that it is satisfied that 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 the Company faces.
For and on behalf of the BoardDavina WalterChairman
17th March 2017
statement of comprehensive income
for the year ended 31st December 2016
2016 | 2015 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Gains on investments held at fair value through profit or loss | - | 52,175 | 52,175 | - | 5,007 | 5,007 |
Net foreign currency losses on cash and loans | - | (1,736) | (1,736) | - | (688) | (688) |
Income from investments | 2,279 | - | 2,279 | 1,718 | - | 1,718 |
Interest receivable | 38 | - | 38 | 10 | - | 10 |
Gross return | 2,317 | 50,439 | 52,756 | 1,728 | 4,319 | 6,047 |
Management fee | (134) | (1,208) | (1,342) | (135) | (1,216) | (1,351) |
Other administrative expenses | (438) | - | (438) | (407) | - | (407) |
Net return before finance costs and taxation | 1,745 | 49,231 | 50,976 | 1,186 | 3,103 | 4,289 |
Finance costs | (20) | (182) | (202) | (11) | (99) | (110) |
Net return before taxation | 1,725 | 49,049 | 50,774 | 1,175 | 3,004 | 4,179 |
Taxation | (336) | - | (336) | (246) | - | (246) |
Net return after taxation | 1,389 | 49,049 | 50,438 | 929 | 3,004 | 3,933 |
Return per share | 2.51p | 88.76p | 91.27p | 1.66p | 5.35p | 7.01p |
statement of changes in equity�
for the year ended 31st December 2016
Called up | Capital | |||||
share | Share | redemption | Capital | Revenue | ||
capital | premium | reserve | reserves1 | reserve1 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 31st December 2014 | 1,424 | 7,936 | 1,851 | 90,471 | (2,334) | 99,348 |
Shares issued from Treasury | - | 110 | - | 414 | - | 524 |
Net return for the year | - | - | - | 3,004 | 929 | 3,933 |
At 31st December 2015 | 1,424 | 8,046 | 1,851 | 93,889 | (1,405) | 103,805 |
Shares issued from Treasury | - | 952 | - | 1,671 | - | 2,623 |
Repurchase of shares into Treasury | - | - | - | (3,042) | - | (3,042) |
Net return for the year | - | - | - | 49,049 | 1,389 | 50,438 |
At 31st December 2016 | 1,424 | 8,998 | 1,851 | 141,567 | (16) | 153,824 |
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
at 31st December 2016
2016 | 2015 | |
£'000 | £'000 | |
Fixed assets | ||
Investments held at fair value through profit or loss | 160,194 | 113,980 |
Current assets | ||
Debtors | 651 | 180 |
Cash and cash equivalents1 | 9,408 | 3,298 |
10,059 | 3,478 | |
Creditors: amounts falling due within one year | (16,429) | (13,653) |
Net current liabilities | (6,370) | (10,175) |
Total assets less current liabilities | 153,824 | 103,805 |
Net assets | 153,824 | 103,805 |
Capital and reserves | ||
Called up share capital | 1,424 | 1,424 |
Share premium | 8,998 | 8,046 |
Capital redemption reserve | 1,851 | 1,851 |
Capital reserves | 141,567 | 93,889 |
Revenue reserve | (16) | (1,405) |
Total shareholders' funds | 153,824 | 103,805 |
Net asset value per share | 276.7p | 184.3p |
1 This line item combines the two lines of 'Investment in liquidity fund held at fair value through profit or loss' and 'Cash and short term deposits' in the financial statements for the year ended 31st December 2015 into one. Under FRS 102, liquidity funds are considered cash equivalents as they are held for cash management purposes as explained in note 1(a) to the financial statements.
statement of cash flows
for the year ended 31st December 2016
2016 | 2015 | |
£'000 | £'000 | |
Net cash outflow from operations before dividends and interest | (1,801) | (1,751) |
Dividends received | 1,687 | 1,494 |
Interest received | 32 | 10 |
Overseas tax recovered | 7 | 16 |
Interest paid | (239) | (341) |
Net cash inflow/(outflow) from operating activities | 635 | (96) |
Purchases of investments | (29,098) | (27,297) |
Sales of investments | 34,985 | 23,705 |
Settlement of foreign currency contracts | 6 | 2 |
Net cash inflow/(outflow) from investing activities | 5,893 | (3,590) |
Drawdown of bank loan | - | 3,289 |
Shares re-issued from Treasury | 2,623 | 524 |
Repurchase of shares into Treasury | (3,042) | - |
Net cash (outflow)/inflow from financing activities | (419) | 3,813 |
Increase/(decrease) in cash and cash equivalents | 5,235 | (118) |
Cash and cash equivalents at start of year | 3,298 | 3,171 |
Foreign exchange gains | 874 | 245 |
Cash and cash equivalents at end of year | 9,407 | 3,298 |
Increase /(decrease) in cash and cash equivalents | 5,235 | (118) |
Cash and cash equivalents consist of: | ||
Cash and short term deposits | - | 5 |
Bank overdraft | (1) | - |
Cash held in JPMorgan US Dollar Liquidity Fund | 9,408 | 3,293 |
Total | 9,407 | 3,298 |
Notes to the financial statements
for the year ended 31st December 2016
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared 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 January 2017.
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 Directors' Report of the Annual Report and Accounts form part of these financial statements.
The policies applied in these financial statements are consistent with those applied in the preceding year, except for the following matters:
The investment in liquidity fund has been presented as a cash and cash equivalent in the current year to better reflect the fact that the position is held as an alternative to cash. It was previously held as a non-current asset, and the comparative figures in the relevant primary financial statements and notes have been similarly amended. The impact on the previous year was to increase current assets by £3,293,000 while decrease fixed assets by the same amount on the Statement of Financial Position. There was no impact on reported profit or net assets. The following corresponding notes to the financial statements have been impacted: note 10 investments, note 11 current assets, note 19 disclosures regarding financial instruments measured at fair value, and note 20 financial instruments' exposure to risk and risk management policies.
In March 2016, the FRC published amendments to FRS 102 concerning the fair value hierarchy disclosures. These amendments are effective for accounting periods beginning on or after 1st January 2017. The Company has early adopted the amendment and full disclosure is given in note 19 of the Annual Report and Accounts.
2. Return per share
2016 | 2015 | ||
£'000 | £'000 | ||
Revenue return | 1,389 | 929 | |
Capital return | 49,049 | 3,004 | |
Total return | 50,438 | 3,933 | |
Weighted average number of shares in issue during the year | 55,258,808 | 56,159,613 | |
Revenue return per share | 2.51p | 1.66p | |
Capital return per share | 88.76p | 5.35p | |
Total return per share | 91.27p | 7.01p |
3. Net asset value per share
2016 | 2015 | ||
Net assets (£'000) | 153,824 | 103,805 | |
Number of shares in issue | 55,586,928 | 56,325,928 | |
Net asset value per share | 276.7p | 184.3p |
4. Status of results announcement
2015 Financial Information
The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 30th December 2015 and do not constitute the statutory accounts for the year. The Annual Report and Accounts 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 Accounts will be delivered to the Register of Companies in due course.
2016 Financial Information
The figures and financial information for 2016 are extracted from the published Annual Report and Accounts for the year ended 30th December 2016 and do not constitute the statutory accounts for that year. The Annual Report and Accounts 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.
17th March 2017
For further information:
Lucy Dina,
JPMorgan Funds Limited 020 7742 4000
ENDS
A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM
The annual report 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