JPMorgan Smaller Cos IT PLC Final Results (9938T)

TIDMJMI

RNS Number : 9938T

JPMorgan Smaller Cos IT PLC

18 October 2017

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN SMALLER COMPANIES INVETMENT TRUST PLC

(the 'Company')

FINAL RESULTS FOR THE YEARED 31ST JULY 2017

Legal Entity Identifier: 549300PXALXKUMU9JM18

Information disclosed in accordance with DTR 4.2.2

The Directors announce the Company's results for the year ended 31st July 2017.

CHAIRMAN'S STATEMENT

Investment Performance

Investment returns were strong in the financial year to 31st July 2017 in marked contrast to the previous year. Despite political surprises at home and abroad, underlying improvements in economic conditions led to steadily rising equity markets. The Company's total return on net assets was +31.0%, compared with +23.4% recorded by the benchmark index. The return to Ordinary shareholders was +28.7% reflecting a widening of the share price discount to diluted net asset value from 20.5% to 22.3%. This outperformance is particularly welcome in the light of last year's underperformance.

It is encouraging to note that since the year end, performance has continued to improve, with the Company's net asset value per share (before dilution) increasing 4.8% to 1,270.2p, and the share price 8.4% to 1,021.0p at 13th October 2017. By comparison, the Company's benchmark has risen 0.88%. The current level of discount is 19.6%.

As set out in the Long-Term Performance table on in the Annual Report and Accounts, although the Company underperformed its benchmark over the 3 and 5 year periods, it retains its strong 10 year record, outperforming by 27.3 percentage points.

In their report, the Investment Managers have provided further detail on portfolio performance and attribution, together with a commentary on markets.

Revenue and Dividends

The revenue return per share, calculated on the average number of shares in issue, increased significantly to 24.24p (2016: 18.31p). This improvement is a combination of companies increasing their dividends and changes in the composition of the portfolio. The Directors are recommending a final dividend of 23.0p per share, 25.7% higher than the 18.3p paid last year. If approved, the dividend will be paid on 8th December 2017 to shareholders on the register at close of business on 10th November 2017.

The level of income received each year varies according to economic conditions, the Company's investment stance and gearing. It is our policy to distribute substantially all the available income each year, and shareholders should note that dividends may vary accordingly.

Gearing

Gearing is regularly discussed between the Board and the Manager. A borrowing facility of GBP25 million with Scotiabank is in place until April 2018. This is highly flexible and is used with the aim of enhancing long-term returns at the cost of a small increase in volatility. There is a further option to increase borrowings to GBP35 million subject to certain conditions. At the year end, GBP22 million (2016: GBP19 million) was drawn on the facility with the gearing level of 8.1% (2016: 5.7%) of net assets. Since the year-end gearing has decreased, and as of 13th October 2017 was 7.2%.

Share Repurchases and Issuance

At last year's Annual General Meeting ('AGM'), shareholders granted the Directors authority to repurchase the Company's shares for cancellation. During the financial year the Company repurchased 689,992 Ordinary shares for a total consideration of GBP5,906,000, representing 4.1% of the issued Ordinary share capital at the beginning of the year.

The Board's objective remains to use this authority to manage imbalances between the supply and demand of the Company's shares, with the intention of reducing the volatility of the discount. To date the Board believes this mechanism has been helpful and therefore proposes and recommends that powers to repurchase up to 14.99% of the Company's shares for cancellation be renewed.

During the year, 859,774 Ordinary shares were issued upon exercise of Subscription shares, giving a total consideration received of GBP7,867,000. On 14th July 2017, the Company announced that a Final Subscription Trustee had been appointed to act on behalf of those Subscription Shareholders who had not exercised their Subscription Share Rights on or by the Final Subscription Date, representing a total of 2,695,905 Subscription Shares. These Subscription Shares were redesignated as Deferred Shares and were then repurchased by the Company for a nominal value and cancelled in accordance with the terms of the Subscription Shares. In the days immediately prior to the final subscription share exercise date, the shares unfortunately traded below the exercise price, despite having traded above in the month before and after the exercise date.

Since the year end, and as at the date of this report, an additional 68,432 shares were repurchased for cancellation. The Company's issued share capital now comprises 17,031,374 Ordinary Shares and nil Subscription Shares.

Board of Directors and Corporate Governance

Ivo Coulson will retire from the Board immediately after the forthcoming AGM. Accordingly, he will not stand for reappointment at that meeting. Ivo has served as a non-executive Director of the Company since 2005 and the Board is very grateful to him for his valuable contribution during his tenure.

As part of the Board's succession planning, the Nomination Committee carried out a search process using an independent recruitment consultancy which led to the appointment of Alice Ryder as an independent non-executive Director with effect from 1st February 2017. Alice has more than 25 years of investment experience, a good part of which included the management of smaller UK companies, and the Board is already benefiting from her contribution. We will continue to refresh the Board's composition in an orderly manner and developments will be reported as appropriate.

In accordance with corporate governance best practice, all Directors will stand for reappointment at the forthcoming AGM.

Shareholders who wish to contact the Chairman or other members of the Board directly may do so through the Company Secretary or the Company's website.

Continuation of the Company

The Company's Articles of Association require that shareholders vote on the continuation of the Company at every third AGM. The seventh of these votes falls this year. The Board has evaluated the performance and progress of the Company over the last year and, in particular, the three years since the last continuation vote was passed.

Over the last three years, the total return from the Company's net assets has been +39.0%, compared with a +39.3% return on its benchmark, the FTSE Small Cap Index (excluding investment trusts). During the last twelve months, the Board has undertaken a detailed review of the Manager and their approach, and challenged them on past periods of underperformance. Whilst there has been a marginal level of underperformance over the last three years, the Board has accepted that this is consistent with the Manager's style and approach, and is part of the cyclical nature of markets. The Board has encouraged the Manager to place greater commitment behind their best ideas, and to this end has decided to increase the stock, sector and underwriting limits to ensure that these are not an impediment to backing their judgement.

The Directors believe that long-term investment in UK smaller companies should deliver strong average returns, and that the Company provides access to investments that individual investors would find difficult to replicate on their own. Whilst all investment approaches will deliver cyclical returns, the Board believes that the Manager's approach continues to be appropriate for the Company. The Board therefore recommends that shareholders vote in favour of the resolution at the AGM on 28th November 2017, as the Directors intend to do so in respect of their own holdings.

Annual General Meeting

The Company's twenty seventh AGM will be held on Tuesday, 28th November 2017 at 3.00 p.m. at 60 Victoria Embankment, London EC4Y 0JP. In addition to the formal part of the meeting, there will be a presentation from the Investment Manager who will answer questions on the portfolio and performance. Shareholders who are unable to attend the AGM in person are encouraged to use their proxy votes.

Outlook

Domestic considerations are dominated by negotiations over our withdrawal from the EU, and their ebb and flow will affect the sentiment of investors and companies alike. Inevitably this will result in greater than normal volatility in market levels until arrangements are settled. Despite this uncertainty, well managed, high quality smaller companies can innovate, develop and grow, and deliver strong returns. By giving access to these opportunities, the Board believes that the Company is attractive for long-term investors.

Michael Quicke OBE

Chairman

18th October 2017

INVESTMENT MANAGERS' REPORT

Performance & Market Background

The last twelve months have seen very strong returns for the UK stock market. In part this was due to the rebound following the significant market falls in June 2016 post the Referendum. This was also due to the resilience of the UK economy post the vote. To date, the economy has disproved the doomsayers, (although this may be because as yet nothing has fundamentally changed, aside from a decrease in the value of sterling and an increase in volatility), and this has outweighed wider political concerns. These wider political concerns include the recent UK election, the US election of Donald Trump, the French election, the triggering of article 50 in the UK and the growing nuclear threat by the North Koreans, to name but some of the tumultuous events of the last 12 months.

Despite this backdrop, over the year the FTSE Small Cap (ex Investment Trusts) Index rose by 23.4%. We are very pleased to report that the Company significantly outperformed its benchmark in this period and provided a total return on net assets of 31.0%.

Portfolio

The key to the Company's outperformance over the year was stock selection. It is pleasing to be able to report that the process by which we invest, and the factors we focus on, have produced strong returns, after last year's disappointment. Among the strongest performers were our large positions in both Fevertree Drinks and OneSavings Bank (both of which we have owned since the initial public offering ('IPO')). Other strong contributors included our holding in Victoria, the carpet manufacturer, and a more recent purchase, Microgen, a software company. On the negative side, two of our main detractors, Plus500 and NAHL, were both hit by regulatory changes (although it should be noted that we have made over nine times our original investment at IPO in Plus500).

We made significant changes to the portfolio following the Referendum vote. This can be seen in the portfolio analysis in the Annual Report and Accounts. Most notable are the move from underweight to very overweight in the Industrials sector, and conversely the move from a large overweight to underweight in the Consumer Services sector, as we focussed more on overseas earners and exporters, and underweighted the UK consumer.

Corporate activity, by which we mean take-overs, placings and IPOs (or new companies floating on the market), has played a big part in the last year. The Company has benefitted from take-overs in Cape, Novae, Lavendon, Exova, Ithaca Energy and 32Red this year. At the same time we have made new investments into a number of IPOs and placings, including Eddie Stobart (the eponymous logistics company), Luceco (LED lighting) and Quiz (an online and offline fashion clothing retailer).

Lastly, it would be remiss not to mention the increase in our AIM holdings, following the approval granted at our last AGM to increase significantly the guideline limit. At our last AGM approximately 18% of the fund was invested in AIM-listed companies. At the time of writing we now have 23%, despite both Ithaca Energy and 32Red being taken over, as mentioned above. New additions over the period include Keywords Studios (a service provider to the video gaming industry), ULS Technology (conveyancing solutions) and Nexus Infrastructure (an infrastructure play on new homebuilding) - to name but some.

Outlook

The outlook for the UK economy is mixed. It is all too easy to paint a gloomy picture in the short-term. Consumer confidence is down, consumer spending is down, GDP forecasts have recently been reduced, and business investment is down. Add to this rising inflation and rising consumer debt levels, all against the backdrop of a destabilising UK election which provided a minority Government, and a further 18 months of Brexit negotiations.

However, few of these are surprises (bar the election outcome). On the positive side, it is clear that interest rates will continue to remain accommodating for some time to come. Unemployment is at a 40 year low at 4.3% and the employment rate (the proportion of people of working age who are in employment) is over 75%, which is the highest figure since records began in 1971. Foreign direct investment into the UK continues to be strong; and as predicted, our weakened currency is proving a boon to UK exporters.

As discussed above, we believe we have repositioned the portfolio to take advantage of these positives and reduced our exposure to the potential negatives. We have emphasised the niche growth companies in the portfolio, which we believe to be relatively immune from the economic backdrop, and significantly reduced our exposure to the more consumer-facing companies.

Post the Referendum vote, the smaller companies arena has been extremely sanguine regarding the eventual outcome. While this might raise questions as the eventual outcome is debated and negotiated, a number of factors give us comfort. First and foremost are valuations for smaller companies - the index remains compelling at 12.9x P/E ratio (12 month forward number). Secondly, as mentioned above, the amount of M&A we have seen within the portfolio over the last year provides a strong level of comfort - acquirers clearly see value at this level. And lastly, we would continue to stress that a significant benefit of smaller companies is their comparative immunity to the broader economy. Niche growth companies should be able to continue to grow, and grow significantly, whatever the backdrop, as many of our companies continually demonstrate. We believe we have positioned ourselves to benefit from the growth of such companies and also believe that we will continue to see and hopefully benefit from further M&A.

Georgina Brittain

Katen Patel

Investment Managers

18th October 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.

With the assistance of the Manager, the Board has completed a robust risk assessment and drawn up a risk matrix, which identifies the key risks to the Company. In assessing the risks and how they can be mitigated, the Board has given particular attention to those issues that threaten the viability of the Company. These key risks remain unchanged since last year and fall broadly under the following categories:

-- Investment and Strategy: An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to under-performance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Manager, who attend Board meetings, and reviews data which shows statistical measures of the Company's risk profile. The Investment Manager employs the Company's gearing, within a strategic range set by the Board.

-- Discount: A disproportionate widening of the discount relative to the Company's peers could result in loss of value for shareholders. The Board regularly discusses discount management policy and has set parameters for the Manager and the Company's broker to follow.

-- Smaller Company Investment: Investing in smaller companies is inherently more risky and volatile, partly due to lack of liquidity in some shares, plus AIM stocks are less regulated. The Board discusses these risk factors regularly at each Board meeting with the Investment Managers. The Board has placed investment restrictions and guidelines to limit these risks.

-- Political and Economic: Changes in financial or tax legislation, including in the European Union, and the impact of the EU Referendum result, may adversely affect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies, and seeks external advice where appropriate.

-- 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 25 to 28 of the Annual Report. The Board receives regular reports from the Manager and the Company's broker about shareholder communications, their views and their activity.

-- Market: Market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by the Manager. The Board monitors the implication and results of the investment process with the Manager.

-- Accounting, Legal and Regulatory: In order to qualify as an investment trust, the Company must comply with Section 1158 of the Income and Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under 'Business of the Company' above. Should the Company breach Section 1158, it may lose its investment trust status and as a consequence capital gains within the Company's portfolio would be subject to Capital Gains Tax. The Section 1158 qualification criteria are 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, as its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure and Transparency Rules ('DTRs'). A breach of the Companies Act 2006 could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs may result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, JPMorgan Funds Limited, and its professional advisers to monitor compliance with all relevant requirements.

-- Operational and Cybercrime: Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records may prevent accurate reporting and monitoring of the Company's financial position. On 1st July 2014, the Company appointed BNY Mellon Trust & Depositary (UK) Limited to act as the depositary, responsible for overseeing the operations of the custodian, JPMorgan Chase Bank, N.A., and the Company's cash flows. Details of how the Board monitors the services provided by the Manager, its associates and depositary and the key elements designed to provide effective internal control are included within the Risk Management and Internal Control section of the Directors' Report on pages 27 and 28 of the Annual Report. 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 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 independently.

-- Financial: The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk and credit risk. Counterparties are subject to daily credit analysis by the Manager and regular consideration at meetings of the Board. In addition the Board receives reports on the Manager's monitoring and mitigation of credit risks on share transactions carried out by the Company. Further details are disclosed in note 21 on pages 58 to 60 of the Annual Report.

RELATED PARTY TRANSACTIONS

During the financial year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company during the year.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the annual report and the 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 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 the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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.jpmsmallercompanies.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the auditor accepts no responsibility for any changes that have occurred to the 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 and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed on pages 21 and 22 of the Annual Report confirm that, to the best of their knowledge:

-- the financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland', and applicable law (United Kingdom Generally Accepted Accounting Practice) give a true and fair view of the assets, liabilities, financial position and 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 provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

For and on behalf of the Board

Michael Quicke OBE

Chairman

18th October 2017

FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEARED 31ST JULY 2017

 
                                              2017                             2016 
                                  Revenue    Capital      Total   Revenue     Capital       Total 
                                  GBP'000    GBP'000    GBP'000   GBP'000     GBP'000     GBP'000 
-------------------------------  --------  ---------  ---------  --------  ----------  ---------- 
 Gains/(losses) on investments 
  held at 
 fair value through profit 
  or loss                               -     44,934     44,934         -    (16,063)    (16,063) 
 Net foreign currency gains             -         22         22         -           5           5 
 Income from investments            5,133          -      5,133     4,263           -       4,263 
 Interest receivable and 
  similar income                       50          -         50        21           -          21 
-------------------------------  --------  ---------  ---------  --------  ----------  ---------- 
 Gross return/(loss)                5,183     44,956     50,139     4,284    (16,058)    (11,774) 
 Management fee                     (474)    (1,106)    (1,580)     (463)     (1,081)     (1,544) 
 Other administrative expenses      (452)          -      (452)     (487)           -       (487) 
-------------------------------  --------  ---------  ---------  --------  ----------  ---------- 
 Net return/(loss) on ordinary 
  activities 
 before finance costs 
  and taxation                      4,257     43,850     48,107     3,334    (17,139)    (13,805) 
 Finance costs                       (66)      (154)      (220)      (82)       (192)       (274) 
-------------------------------  --------  ---------  ---------  --------  ----------  ---------- 
 Net return/(loss) on ordinary 
  activities 
 before taxation                    4,191     43,696     47,887     3,252    (17,331)    (14,079) 
 Taxation                           (141)          -      (141)     (114)           -       (114) 
-------------------------------  --------  ---------  ---------  --------  ----------  ---------- 
 Net return/(loss) on ordinary 
  activities 
 after taxation                     4,050     43,696     47,746     3,138    (17,331)    (14,193) 
-------------------------------  --------  ---------  ---------  --------  ----------  ---------- 
 Return/(loss) per share 
  - undiluted (note 3)             24.24p    261.48p    285.72p    18.31p   (101.14)p    (82.83)p 
 Return/(loss) per share 
  - diluted(1) (note 3)            24.24p    261.48p    285.72p    18.31p   (101.14)p    (82.83)p 
 

(1) As at 31st July 2017 there was no dilution effect as the rights attached to the Subscription shares lapsed during the year. As at 31st July 2016, the Subscription

shares had no dilutive effect as the conversion price for these shares exceeded the average market price of the Ordinary shares from the date of issue to 31st July 2016.

A final dividend of 23.0p per share (2016: 18.3p per share) is proposed in respect of the year ended 31st July 2017 amounting to

GBP3,933,000 (2016: GBP3,098,000). Further information on dividends is given in note 2.

All revenue and capital items in the above statement derive from continuing operations.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent

supplementary information prepared under guidance issued by the Association of Investment Companies. Net return/(loss) on ordinary activities after taxation represents the profit/(loss) for the year and also Total Comprehensive Income.

STATEMENT OF CHANGES IN EQUITY FOR THE YEARED 31ST JULY 2017

 
                                  Called                Capital 
                                      up 
                                   share     Share   redemption     Capital    Revenue 
                                 capital   premium      reserve    reserves    Reserve       Total 
                                                                                   (1) 
                                 GBP'000   GBP'000      GBP'000     GBP'000    GBP'000     GBP'000 
------------------------------  --------  --------  -----------  ----------  ---------  ---------- 
 At 31st July 2015                 4,324    18,190        2,347     151,286      3,450     179,597 
 Repurchase and cancellation 
  of the 
 Company's own shares               (90)         -           90     (2,936)          -     (2,936) 
 Issue of Ordinary shares 
  on exercise of 
 Subscription shares                   2        52            -           -          -          54 
 Net (loss)/return on 
  ordinary activities                  -         -            -    (17,331)      3,138    (14,193) 
 Dividend paid in the 
  year                                 -         -            -           -    (1,889)     (1,889) 
------------------------------  --------  --------  -----------  ----------  ---------  ---------- 
 At 31st July 2016                 4,236    18,242        2,437     131,019      4,699     160,633 
 Repurchase and cancellation 
  of the 
 Company's own shares              (172)         -          172     (5,906)          -     (5,906) 
 Conversion of Subscription 
  shares into 
 Ordinary shares                     (1)         1            -           -          -           - 
 Issue of Ordinary shares 
  on exercise of 
 Subscription shares                 215     7,652            -           -          -       7,867 
 Cancellation of Subscription 
  Shares                             (3)         -            -           3          -           - 
 Net return on ordinary 
  activities                           -         -            -      43,696      4,050      47,746 
 Dividends paid in the 
  year                                 -         -            -           -    (3,055)     (3,055) 
------------------------------  --------  --------  -----------  ----------  ---------  ---------- 
 At 31st July 2017                 4,275    25,895        2,609     168,812      5,694     207,285 
------------------------------  --------  --------  -----------  ----------  ---------  ---------- 
 

(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 JULY 2017

 
                                                         2017       2016 
                                                      GBP'000    GBP'000 
-------------------------------------------------  ----------  --------- 
 Fixed assets 
 Investments held at fair value through profit 
  or loss                                             224,092    169,806 
 Current assets 
 Debtors                                                  738        485 
 Cash and cash equivalents                              8,649     10,575 
-------------------------------------------------  ----------  --------- 
                                                        9,387     11,060 
 Current liabilities 
 Creditors: amounts falling due within one 
  year                                               (26,194)   (20,233) 
-------------------------------------------------  ----------  --------- 
 Net current liabilities                             (16,807)    (9,173) 
-------------------------------------------------  ----------  --------- 
 Total assets less current liabilities                207,285    160,633 
-------------------------------------------------  ----------  --------- 
 Net assets                                           207,285    160,633 
-------------------------------------------------  ----------  --------- 
 Capital and reserves 
 Called up share capital                                4,275      4,236 
 Share premium                                         25,895     18,242 
 Capital redemption reserve                             2,609      2,437 
 Capital reserves                                     168,812    131,019 
 Revenue reserve                                        5,694      4,699 
-------------------------------------------------  ----------  --------- 
 Total shareholders' funds                            207,285    160,633 
-------------------------------------------------  ----------  --------- 
 Net asset value per Ordinary share - undiluted      1,212.2p     948.8p 
 Net asset value per Ordinary share - diluted(1)     1,212.2p     942.9p 
 

(1) As at 31st July 2017 there was no dilution effect as the rights attached to the Subscription shares lapsed during the year.

STATEMENT OF CASH FLOWS FOR THE YEARED 31ST JULY 2017

 
                                                              2017       2016 
                                                           GBP'000    GBP'000 
------------------------------------------------------  ----------  --------- 
 Net cash outflow from operations before dividends 
  and interest                                             (1,956)    (2,041) 
 Dividends received                                          4,696      3,902 
 Interest received                                              21         17 
 Interest paid                                               (220)      (278) 
 Taxation                                                        2          1 
------------------------------------------------------  ----------  --------- 
 Net cash inflow from operating activities                   2,543      1,601 
------------------------------------------------------  ----------  --------- 
 Purchases of investments                                 (77,062)   (78,352) 
 Sales of investments                                       70,724     87,897 
 Settlement of foreign currency contracts                      (2)          6 
------------------------------------------------------  ----------  --------- 
 Net cash (outflow)/inflow from investing activities       (6,340)      9,551 
------------------------------------------------------  ----------  --------- 
 Dividends paid                                            (3,055)    (1,889) 
 Repurchase and cancellation of the Company's 
  own shares                                               (5,941)    (2,574) 
 Issue of Ordinary shares on exercise of Subscription 
  shares                                                     7,867         54 
 Drawdown of loans                                           3,000          - 
------------------------------------------------------  ----------  --------- 
 Net cash inflow/(outflow) from financing activities         1,871    (4,409) 
------------------------------------------------------  ----------  --------- 
 (Decrease)/increase in cash and cash equivalents          (1,926)      6,743 
------------------------------------------------------  ----------  --------- 
 Cash and cash equivalents at start of year                 10,575      3,832 
 Cash and cash equivalents at end of year                    8,649     10,575 
------------------------------------------------------  ----------  --------- 
 (Decrease)/increase in cash and cash equivalents          (1,926)      6,743 
------------------------------------------------------  ----------  --------- 
 Cash and cash equivalents consist of: 
 Cash and short-term deposits                                  370        249 
 Cash held in JPMorgan Sterling Liquidity Fund               8,279     10,326 
------------------------------------------------------  ----------  --------- 
 Total                                                       8,649     10,575 
------------------------------------------------------  ----------  --------- 
 

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARED 31ST JULY 2017

   1.       Accounting policies 
   (a)     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 'the Financial Reporting Standard applicable in the UK and Republic of Ireland' ('FRS 102') 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 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 on page 29 of 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.

   2.       Dividends 
   (a)     Dividends paid and proposed 
 
                                                    2017      2016 
                                                 GBP'000   GBP'000 
----------------------------------------------  --------  -------- 
 Dividend paid 
 2016 final dividend of 18.3p (2015: 11.0p) 
  per share                                        3,055     1,889 
----------------------------------------------  --------  -------- 
 Dividend proposed 
 2017 final dividend proposed of 23.0p (2016: 
  18.3p) per share                                 3,933     3,098 
----------------------------------------------  --------  -------- 
 

All dividends paid and proposed in the period have been and will be funded from the revenue reserve.

The dividend proposed in respect of the year ended 31st July 2016 amounted to GBP3,098,000. However the amount paid amounted to GBP3,055,000 due to shares repurchased after the balance sheet date but prior to the share register record date.

The dividend proposed in respect of the year ended 31st July 2017 is subject to shareholder approval at the forthcoming AGM. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 31st July 2018.

   (b)    Dividend for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158') 

The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is GBP4,050,000 (2016: GBP3,138,000). The revenue reserve after payment of the final dividend will amount to GBP1,761,000 (2016: GBP1,601,000).

 
                                             2017      2016 
                                          GBP'000   GBP'000 
---------------------------------------  --------  -------- 
 Final dividend of 23.0p (2016: 18.3p) 
  per share                                 3,933     3,098 
---------------------------------------  --------  -------- 
 

3. Return/(loss) per share

 
                                                         2017           2016 
                                                      GBP'000        GBP'000 
----------------------------------------------  -------------  ------------- 
 Revenue return                                         4,050          3,138 
 Capital return/(loss)                                 43,696       (17,331) 
----------------------------------------------  -------------  ------------- 
 Total return/(loss)                                   47,746       (14,193) 
----------------------------------------------  -------------  ------------- 
 Weighted average number of shares in 
  issue during the year used for the purposes 
  of the undiluted calculation                     16,710,754     17,136,321 
 Weighted average number of shares in 
  issue during the year used for the purposes 
  of the diluted calculation                       16,710,754     17,136,321 
 Undiluted 
 Revenue return per share                              24.24p         18.31p 
 Capital return/(loss) per share                      261.48p      (101.14)p 
----------------------------------------------  -------------  ------------- 
 Total return/(loss) per share                        285.72p       (82.83)p 
----------------------------------------------  -------------  ------------- 
 Diluted(1,2) 
 Revenue return per share                              24.24p         18.31p 
 Capital return/(loss) per share                      261.48p      (101.14)p 
----------------------------------------------  -------------  ------------- 
 Total return/(loss) per share                        285.72p       (82.83)p 
----------------------------------------------  -------------  ------------- 
 

(1) As at 31st July 2017 there was no dilution effect as the rights attached to the Subscription shares lapsed during the year.

(2) As at 31st July 2016, the Subscription shares had no dilutive effect as the conversion price for these shares exceeded the average market price of the Ordinary shares from the date of issue to 31st July 2016.

The diluted return/(loss) per share represents the return/(loss) on ordinary activities after taxation divided by the weighted average number of Ordinary shares in issue during the year as adjusted in accordance with IAS 33, as required by FRS 102.

4. Net asset value per share

 
                                                 2017         2016 
----------------------------------------  -----------  ----------- 
 Undiluted 
 Net assets (GBP'000)                         207,285      160,633 
 Number of shares in issue                 17,099,806   16,930,024 
----------------------------------------  -----------  ----------- 
 Net asset value per Ordinary share          1,212.2p       948.8p 
----------------------------------------  -----------  ----------- 
 Diluted(1) 
 Net assets (GBP'000)                         207,285      193,168 
 Number of potential Ordinary shares in 
  issue                                    17,099,806   20,485,703 
 Net asset value per Ordinary share          1,212.2p       942.9p 
----------------------------------------  -----------  ----------- 
 

(1) As at 31st July 2017 there was no dilution effect as the rights attached to the Subscription shares lapsed during the year.

   5.       Status of results announcement 

2016 Financial Information

The figures and financial information for 2016 are extracted from the Annual Report and Accounts for the year ended 30th June 2016 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.

2017 Financial Information

The figures and financial information for 2017 are extracted from the published Annual Report and Accounts for the year ended 30th June 2017 and do not constitute the statutory accounts for that year. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course and includes 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.

JPMORGAN FUNDS LIMITED

18th October 2017

For further information, please contact:

Divya Amin

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

ENDS

A copy of the half year will be submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/uk/NSM

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

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR FFEFIAFWSEFS

(END) Dow Jones Newswires

October 18, 2017 11:19 ET (15:19 GMT)