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JUSC Jpmorgan Us Smaller Co. Inv Tst Plc

403.00
1.00 (0.25%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Jpmorgan Us Smaller Co. Inv Tst Plc LSE:JUSC London Ordinary Share GB00BJL5F346 ORD 2.5P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  1.00 0.25% 403.00 401.00 405.00 407.00 400.00 405.00 151,632 16:29:54
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Trust,ex Ed,religious,charty -18.75M -25.03M -0.3879 -10.39 259.97M

JPMorgan US Smaller Co. IT Annual Results Dec 2019 (2695J)

08/04/2020 4:40pm

UK Regulatory


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TIDMJUSC

RNS Number : 2695J

JPMorgan US Smaller Co. IT

08 April 2020

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN US SMALLER COMPANIES INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEARED

31ST DECEMBER 2019

   Legal Entity Identifier :   549300MDD7SOXDMBN667 

Information disclosed in accordance with the DTR 4.1.3

CHAIRMAN'S STATEMENT

Performance

I am delighted to report strong returns in 2019 for both the Company's share price and net asset value (NAV) which more than compensate for the negative performance experienced in 2018. During the year the Company's NAV rose by 25.8% which compares favourably with the increase of 20.4% in our benchmark, the Russell 2000 index in sterling terms. Our share price performance was even stronger rising by 33.4% as the shares moved to a small premium to NAV as at the end of the year. These returns are all the more pleasing as they have occurred at a time of recurring concerns over trade wars, politics and the direction of interest rates.

Revenue and Dividend

The revenue for the year, after taxation, was GBP1,590,000. The Board is therefore delighted to recommend a dividend of 2.5p in respect of the financial year ended 31st December 2019. Subject to shareholders' approval at the Annual General Meeting ('AGM'), this dividend will be paid on 17th June 2020 to shareholders on the register at the close of business on 5th June 2020. Shareholders should note the Company's objective is unchanged and remains one of capital growth and our dividend policy will therefore reflect the naturally occurring income on the underlying portfolio.

Discount and Premium

Despite volatility in both the US small cap market and the US dollar sterling exchange rate, our share price was closely aligned with the changes in NAV through the year. As has been said in the past, it is always going to be a challenge to align our share price movement with the change in the NAV as US smaller companies are seen as riskier assets and are, as a consequence, more volatile in nature. The relationship between the share price and the NAV is, however, monitored on a daily basis by the Board and our professional advisers with the result the discount average for 2019 was kept to 2.8%. To help with 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 376,500 shares into Treasury at an average discount of 5.2%. The Company at year end held no shares in Treasury having issued 376,500 from Treasury at an average premium of 1.8%. Since 31st December 2019 the Company has issued a further 960,000 new shares and repurchased 100,000 shares into Treasury.

Change Of Annual Management Fees

In June the Board was delighted to announce, following a review of the Company's investment management fee arrangements with JPMorgan Funds Limited ('JPMF'), a reduction in the annual management fees. With effect from 1st July 2019, the annual investment management fee, which was previously 100bps of gross assets with no tiering, was charged at an annual rate as follows:

- 90bps on the first GBP100 million of gross assets (excluding any holding in the JPM Liquidity Fund);

- 75bps on gross assets in excess of GBP100 million (excluding any holding in the JPM Liquidity Fund).

Both the Board and JPMF worked together constructively in agreeing this new investment management fee arrangement. Whilst determining the appropriate level of fees took into account a range of factors, the overriding focus was our obligation to the Company's shareholders to ensure they receive good value investment management. The Board believes that this new fee structure puts the Company in a competitive position relative to peers, and recognises the expertise and resources that the JPMorgan Asset Management investment team bring to this specialist asset class.

Gearing

In April 2019 our revolving credit facility with Scotiabank was renewed at US$25 million with an option to draw a further US$10 million. During November the Company's revolving line of credit was renewed on the same terms. At the end of 2019 US$20 million was drawn and the portfolio was 5% geared; since the start of 2020 the full $25 million has been drawn. This facility matures in November 2020 and the Board will consider renewing the gearing facility at this point.

Currency Hedging

Both our portfolio and our loan facility are denominated in US dollars and these values need to be converted into sterling on a daily basis for calculating and reporting the NAV which exposes the assets to fluctuations in the US dollar/sterling exchange rate. In 2019 the recovery of sterling against the US dollar had a modestly negative impact on our strong returns. By way of illustration the Russell 2000 returned 25.5% but when reported in sterling terms the return was reduced to 20.4%. The Board has the authority to reduce, or eliminate, the exposure to fluctuating currencies through the use of currency hedging. Our policy on currency hedging is reviewed regularly, but to date we have not carried out any hedging and have no plans to do so in the immediate future.

Board Succession Planning

As I indicated in last year's annual report I will be retiring at the forthcoming AGM. It has been an honour to serve as the Chairman and also to have the opportunity to work with the investment team in New York, all the many people at JPMorgan Asset Management who help support the Company and last, but not least, the current Board, as well as those that have retired. Julia Le Blan, in her role as Senior Independent Director, led the review to find my successor and I am delighted to confirm that David Ross will be taking over from me following the AGM. Following my retirement, the Board will consist of five non-executive directors, all with less than nine years' tenure, providing the Company with a strong and appropriate level of skills.

For the past two years, the Company has used an external evaluator to undertake a comprehensive appraisal of the Board which covers the structure, size and composition of the Board. Following on from this process the Board believes it has in place a well-structured succession plan.

Annual General Meeting and Shareholder Contact

We are holding our AGM at 60 Victoria Embankment, London EC4Y 0JP on Tuesday, 26th May 2020 at 11.00 a.m. Please note that as a result of the COVID-19 pandemic and the imposition of compulsory Stay at Home measures by the UK Government, the AGM will be functional only and follow the minimum legal requirements for an AGM. There will be no investor presentation in person by the investment team and there will be no refreshments. In line with the Stay at Home measures, Shareholders are strongly discouraged from attending the meeting and indeed entry may be refused if Government guidance so requires. Arrangements will be made by the Company to ensure that the minimum number of Shareholders required to form a quorum will attend the meeting in order that the meeting may proceed and the business concluded.

Included in the agenda for this year's AGM is a resolution to continue the Company's existence as an investment trust for a further five years. The past five years, since the last vote was taken, have marked an extraordinary period of outstanding returns for investors. In our case the Company's NAV rose by 96.8% and the share price rose by 108.1%. Whilst these returns should not be used as a guide for the next five years, I would urge shareholders to vote in favour of this resolution as the US smaller companies sector has proved to be more rewarding over the longer term than the large cap sector as it always offers exciting growth opportunities.

In light of the changed format, the Board strongly encourages all shareholders to exercise their votes in respect of the meeting in advance, by completing and returning their proxy forms. This will ensure that the votes are registered in the event that attendance at the AGM is not possible.

In addition, shareholders are encouraged to raise any questions in advance of the AGM via the 'Ask the Question' link found under the 'Contact Us' section on the Company's website. Any questions received will be replied to by the Company Secretary.

In the event that the situation changes the Company will update shareholders through an announcement to the London Stock Exchange and on the Company's website.

Illiquid Holdings

As mentioned in the Company's interim report given the scrutiny on holding unquoted and illiquid investments, it seems appropriate to clarify the Company's current structure for the benefit of our shareholders. The portfolio does not consist of any unquoted investments, nor indeed are there plans to explore this area of the market, as the investment managers believe that there are more than enough investment opportunities in the quoted US small cap company universe. It has to be recognised that small cap companies, by their very nature, can be less easily traded and more risky relative to large cap companies, i.e. those in the S&P500 index, but it is these factors that make the sector more rewarding for long term investors.

Outlook

At the time of writing this Statement, a significant portion of the world's population is in 'lockdown' causing a sharp reversal in economic growth and at the same time there is a lack of visibility as to when 'normal life' can resume. Investors do not like uncertainty and this has made US small cap companies particularly vulnerable to profit-taking after the strong recovery experienced in 2019. US small cap companies, however, are best judged over the long term and a good start point is to review the Company's Long Term Financial Record on page 13 as it shows how rewarding this area of the market can be for patient investors. We have in place an exceptional, award-winning investment team based in New York under the strong leadership of Don San Jose. The team has a clearly defined investment philosophy, a strong investment process and the support of an asset management business which is both stable and well-resourced. Over the long term, the US economy has a long history of creating exciting growth businesses in the small cap sector and our Company is well placed to take advantage of these opportunities.

Davina Walter

Chairman

8th April 2020

INVESTMENT MANAGERS' REPORT

Review

The Russell 2000 Index ended 2019 with a return of 25.5% in US dollar terms and 20.4% in sterling terms, an impressive result given the negative environment in which 2018 ended.

Despite the strong market performance in 2019, it was not all smooth sailing as investors faced a number of concerns, particularly in the spring and summer, including a 3-month/10-year yield curve inversion, which has historically been a reliable leading indicator of pending recessions. In addition, the US and China trade war continued to fan anxiety throughout much of the year, driving further volatility. The fourth quarter brought about renewed optimism, as the Federal Reserve became dovish, trade tensions eased and global PMI data appeared to be bottoming, resulting in a return of +9.9% in US dollar terms for the Russell 2000 in the fourth quarter alone.

In terms of style and market capitalisation, growth outperformed value, a trend that has been in place for a few years and large stocks outperformed their small cap peers.

Performance

The Company's net asset value increased by 25.8% in 2019. The trust's benchmark, the Russell 2000 Index (Net), returned 20.4% for the year, resulting in outperformance of 5.4% in sterling terms. Our stock selection and sector allocation proved beneficial for the year. Additionally, the portfolio's gearing contributed to the Company's performance during the year.

With regards to relative performance, stock selection in the producer durables and financial services sectors added the most value.

Within producer durables, our overweight position in Douglas Dynamics during the period proved beneficial. Douglas Dynamics is a premier manufacturer and up-fitter of work truck attachments, including snowploughs. Shares outperformed in 2019 as its business outpaced expectations. In spite of a below average snowfall season in 2018 and 2019, the company reported solid earnings and demand remained robust. That demand coupled with strong operational performance, particularly within the Work Truck Solutions segment, sent shares higher. These demand trends continued into Q3 2019 earnings, with the company reporting continued strength in pre-season orders and decent field inventory levels.

Within financial services, our overweight position in Kinsale Capital Group added to performance. The company is a property and casualty insurer that focuses on coverage for newly established companies, higher risk operations, or companies with a history of losses. As some of the larger insurers exit unprofitable business lines, the company has been able to take market share, grow gross written premiums faster than anticipated, and increase pricing selectively. Another contributor to outperformance is the insurance sector's more defensive characteristics which were rewarded for much of the year.

Among individual names, our exposure to Catalent within the health care sector emerged as the top contributor. Catalent is a leading provider of advanced drug delivery solutions to the biotechnology and pharma industries. Shares moved higher in mid-April after the company's USD 1.2 billion acquisition of gene therapy company, Paragon. Paragon gives Catalent exposure to a faster growing, higher margin drug development business. Catalent's strength over the course of the year has been mostly broad based across business segments, with good organic growth.

On the other hand, our stock selection in the technology and health care sectors weighed on relative returns.

Our exposure to Grubhub within the technology sector detracted from performance. Grubhub is the leading online and mobile platform for restaurant pick-up and delivery orders for independent and chain restaurants in the US. The company announced disappointing Q3 2019 earnings along with slower expected industry growth and significant investments to combat competition from the likes of DoorDash, Uber Eats, and others. We are concerned about the growing competitive intensity in the industry and have not added to our position.

In the healthcare sector, our exposure to ICU Medical was the top detractor in 2019. The medical device company experienced a steep sell off in its shares after reporting Q2 2019 results in early August. The company had to reduce annual guidance driven by their IV bag business. Given excess supply and irrational competitor behaviour, the company had to slow down production and make some supply chain adjustments. We still find the business attractive, though acknowledge it will take time to fix some of the near term headwinds.

Within materials & processing, our overweight position in Quaker Chemical was among the top detractors. Quaker Chemical is a global provider of process fluids and lubricants for the steel and automotive industries. Shares of Quaker Chemical traded lower on weaker than expected results as revenues and EBITDA came in below consensus estimates in Q3 2019. The weaker results were somewhat expected, as demand for the company's products faced headwinds from slowing automotive and steel markets, particularly in Europe and China. We remain optimistic on the long term prospects for the company, as the high quality business model generates stable cash flow, further helped by synergies from the acquisition of Houghton International, which closed in August.

Portfolio Positioning

With regards to our portfolio positioning, not much has changed as we continue to focus on finding companies with durable franchises, good management teams and stable earnings that trade at a discount to intrinsic value. During the year, we were able to find new names to add to the portfolio, albeit more selectively, and 13 names were added. However, the portfolio's sector positioning remains relatively unchanged. Similar to the previous year, our main allocations are in the financial services, producer durables and consumer discretionary sectors, which make up close to 60% of the overall portfolio's allocation.

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

ESG Update

As we have discussed previously, we focus on identifying companies that possess a sustainable competitive advantage, have a durable business model, and are overseen by a competent management team with a track record of success. In recent years there has been an increasing focus on environmental, social and governance (ESG) issues when it comes to investing. We agree that these are important components in determining the sustainability of any business. When we have talked about our investment process, we have not explicitly talked about ESG considerations even though these are things we consider in terms of how they impact a company's future earnings and cash flow streams. For a number of years, we have excluded from our investment universe companies that have been identified by an independent third party provider as being involved in the manufacture, production or supply of cluster munitions, depleted uranium ammunition and armour and/or anti-personnel mines. In addition, we have always had robust governance engagement with companies, particularly given our high ownership levels of many companies. More recently, we have started to articulate how we think about ESG in our investment approach and how we partner with our Stewardship specialists when engaging with companies on these issues.

J.P.Morgan Asset Management recently incorporated a global ESG framework across Equities which includes a checklist questionnaire with questions on Environmental, Social and Governance. We will be incorporating this checklist as part of our fundamental research process. The checklist is not a 'pass/fail' exercise. Rather, it is a tool to inform discussions between portfolio managers and analysts and an important driver behind our engagement with the companies we cover. The checklist is not an exclusionary approach and the portfolio management team can still choose to take a position in the stock. A strong ESG focus will not be at the expense of capital returns. Ultimately we believe both factors are interlinked, especially given we are long term investors. In formulating our ESG policy, we have endeavoured not to discriminate against individual companies or sectors purely on the grounds of the particular business sector in which they are involved. As we continue on this journey we look forward to sharing more with you on these considerations.

Market Outlook

We continue to focus on the fundamentals of the economy and of company earnings. Our expectation entering the year was for moderate economic expansion and continued earnings growth predicated in particular on a healthy US consumer. The outbreak of the COVID-19 virus in China, and subsequent rapid expansion globally has injected significant near-term uncertainty into our near term outlook in particular, though we believe the economy entered this period of uncertainty in a strong fundamental position. While nearly impossible to quantify at this point, we expect economic growth to be materially impacted in the first half of 2020, despite emergency rate cuts by the Fed and growing fiscal and monetary stimulus globally. If the virus is contained in the near term, there's a possibility for re-acceleration in the second half of the year as pent up demand is released, though the bottom is unclear at this point.

We continue to monitor COVID-19 developments closely, and remain steadfast in our focus on owning high quality businesses with durable competitive advantages and robust cash flow generation, which we believe will continue to provide investors with downside protection should uncertainty persist and economic fundamentals deteriorate.

Don San Jose

Dan Percella

Jon Brachle

Investment Managers

8th April 2020

Principal AND EMERGING Risks

The Directors confirm that they have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The risks identified and the ways in which they are managed or mitigated are summarised below:

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the principal and emerging risks to the Company. These risks are reviewed and discussed on a regular basis by the Board and 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.

   --   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 FCA 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 FCA 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 FCA Listing Rules and DTRs.

   --   Corporate Governance and Shareholder Relations 

Details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report in the Annual Report.

   --   Operational 

Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. The Company has appointed Bank of New York Mellon (International) Limited to act as its depositary, responsible for oversight of the custody of the Company's assets and for monitoring its cash flows.

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

   --   Cybercrime 

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

   --   Foreign currency 

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

The Board has the authority to reduce or eliminate the exposure to fluctuating currencies through the use of currency hedging. It reviews its policy on this matter regularly.

   --   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 in the Annual Report

   --   Financial 

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

   --   Political and Economic 

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

   --   Climate Change 

Climate change, which barely registered with investors a decade ago, has today become one of the most critical issues confronting asset managers and their investors. Investors can no longer ignore the impact that the world's changing climate will have on their portfolios, with the impact of climate change on returns now inevitable.

The Board is overseeing the Manager to ensure the formal integration of ESG factors into its investment process over the course of the coming year. Financial returns for long-term diversified investors should not be jeopardised given the investment opportunities created by the world's transition to a low-carbon economy. The Board is also considering the threat posed by the direct impact on climate change on the operations of the Manager and other major service providers. As extreme weather events become more common, the resiliency, business continuity planning and the location strategies of our services providers will come under greater scrutiny.

   --   Global Pandemics 

The recent emergence and spread of coronavirus (COVID-19) has raised the emerging risk of global pandemics, in whatever form a pandemic takes. COVID-19 poses a significant risk to the Company's portfolio. At the date of this report, the virus has contributed to significant volatility in trading recently, however, the Board and Manager expect that the portfolio's holdings will not suffer a material long-term impact and should recover quickly once containment measures ease. Should the virus spread more aggressively or become more virulent, it may present risks to the operations of the Company, its Manager and other major service providers. The Board and the Manager will continue to monitor developments as they occur and seek to learn lessons which may be of use in the event of future pandemics.

TRANSACTIONS WITH THE MANAGER

Details of the management contract are set out in the Directors' Report in the Annual Report. The management fee payable to the Manager for the year was GBP1,781,000 (2018: GBP1,909,000) of which GBPnil (2018: GBPnil) was outstanding at the year end.

During the year GBP21,000 (2018: GBP29,000), including VAT, was payable to the Manager for the administration of savings scheme products, of which GBPnil (2018: GBPnil) was outstanding at the year end.

Included in administration expenses in note 6 of the Annual Report are safe custody fees amounting to GBP2,000 (2018: GBP2,000) payable to JPMorgan Chase Bank, N.A. of which GBPnil (2018: GBPnil) was outstanding at the year end.

The Company also holds cash in the JPMorgan US Dollar Liquidity Fund, which is managed by JPMorgan. At the year end this was valued at GBP4.6 million (2018: GBP5.4 million). Income amounting to GBP195,000 (2018: GBP132,000) was receivable during the year of which GBPnil (2018: GBPnil) was outstanding at the year end. The JPMorgan US Dollar Liquidity Fund does not charge a fee and the Company does not invest in any other investment fund managed or advised by JPMorgan.

Handling charges on dealing transactions amounting to GBP5,000 (2018: GBP6,000) were payable to JPMorgan Chase Bank, N.A. during the year of which GBP1,000 (2018: GBP1,000) was outstanding at the year end.

At the year end, total cash of GBP10,000 (2018: GBP18,000) was held with JPMorgan Chase Bank, N.A. A net amount of interest of GBPnil (2018: GBPnil) was receivable by the Company during the year from JPMorgan Chase Bank, N.A of which GBPnil (2018: GBPnil) was outstanding at the year end.

TRANSACTIONS WITH RELATED PARTIES

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

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare the Annual Report and 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 Financial Statements 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;

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

-- notify the Company's shareholders in writing about the use, if any, of disclosure exemptions in FRS 102 in the preparation of the financial statements

and the Directors confirm that they have done so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and 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.

Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report 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 confirm 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 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 and emerging risks and uncertainties that it faces.

The Board confirms that it is satisfied that the Annual Report and Financial Statements 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 Company, together with a description of the principal risks and uncertainties that it faces.

The Financial Statements are published on the www.jpmussmallercompanies.co.uk website, which is maintained by the 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 Auditors 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 to the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

For and on behalf of the Board

Davina Walter

Chairman

8th April 2020

FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31st December 2019

 
                                             2019                            2018 
                                  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                         -         40,506    40,506    -         (8,913)    (8,913) 
 Net foreign currency 
  gains/(losses) on 
 cash and loans                   -         492       492       -         (471)      (471) 
 Income from investments          2,828     -          2,828    2,561     -          2,561 
 Interest receivable               195      -          195      132       -          132 
-------------------------------  --------  --------  --------  --------  ---------  --------- 
 Gross return/(losses)            3,023     40,998    44,021    2,693     (9,384)    (6,691) 
 Management fee                   (356)     (1,425)   (1,781)   (191)     (1,718)    (1,909) 
 Other administrative 
  expenses                         (521)    -          (521)    (477)      -         (477) 
-------------------------------  --------  --------  --------  --------  ---------  --------- 
 Net return/(loss) before 
  finance costs 
 and taxation                     2,146     39,573    41,719    2,025     (11,102)   (9,077) 
 Finance costs                     (100)     (398)     (498)    (47)      (425)      (472) 
-------------------------------  --------  --------  --------  --------  ---------  --------- 
 Net return/(loss) before 
  taxation                         2,046     39,175    41,221   1,978     (11,527)   (9,549) 
 Taxation                          (456)    -          (456)    (406)      -         (406) 
-------------------------------  --------  --------  --------  --------  ---------  --------- 
 Net return/(loss) after 
  taxation                         1,590     39,175    40,765   1,572     (11,527)   (9,955) 
-------------------------------  --------  --------  --------  --------  ---------  --------- 
 Return/(loss) per share 
  (note 2)                        2.76p     67.96p    70.72p    2.75p     (20.17)p   (17.42)p 
 

Dividend declared in respect of the financial year ended 31st December 2019 total 2.5p (2018: 2.5p) per share

amounting to GBP1,445,000   (2018: 

GBP1,445,000). Further information on dividends is given in note 10 of the Annual Report.

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued

in the year.

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) after taxation represents the profit/(loss) for the year and also Total Comprehensive Income.

STATEMENT OF CHANGES IN EQUITY

for the year ended 31st December 2019

 
                                  Called              Capital 
                                   up 
                                  share     Share     redemption   Capital       Revenue 
                                  capital   Premium   reserve      reserves(1)   reserve(1)   Total 
                                  GBP'000   GBP'000   GBP'000      GBP'000       GBP'000      GBP'000 
-------------------------------  --------  --------  -----------  ------------  -----------  --------- 
 At 31st December 2017             1,424     10,421    1,851        151,440       1,551        166,687 
 Issue of new Ordinary shares      21       2,522     -            -             -            2,543 
 Shares reissued from Treasury    -         348       -            1,054         -            1,402 
 Repurchase of shares into 
  Treasury                        -         -         -            (424)         -            (424) 
 Net (loss)/return for the 
  year                            -         -         -            (11,527)      1,572        (9,955) 
 Dividends paid in the year 
  (note 3)                        --        -         -            -             (1,422)       (1,422) 
-------------------------------  --------  --------  -----------  ------------  -----------  --------- 
 At 31st December 2018            1,445     13,291    1,851        140,543       1,701        158,831 
 Shares reissued from Treasury    -         101       -            1,206         -            1,307 
 Repurchase of shares into 
  Treasury                        -         -         -            (1,206)       -            (1,206) 
 Net return for the year          -         -         -            39,175        1,590        40,765 
 Dividends paid in the year 
  (note 3)                        -         -         -            -             (1,445)      (1,445) 
-------------------------------  --------  --------  -----------  ------------  -----------  --------- 
 At 31st December 2019            1,445     13,392    1,851        179,718       1,846        198,252 
-------------------------------  --------  --------  -----------  ------------  -----------  --------- 
 

(1) These reserves form the distributable reserves of the Company and may be used to fund distributions to investors.

STATEMENT OF FINANCIAL POSITION

as at 31st December 2019

 
                                                     2019       2018 
                                                     GBP'000    GBP'000 
--------------------------------------------------  ---------  ---------- 
 Fixed assets 
 Investments held at fair value through profit or 
  loss                                               208,253    168,014 
--------------------------------------------------  ---------  ---------- 
 Current assets 
 Debtors                                             655        1,211 
 Cash and cash equivalents                           4,605      5,382 
--------------------------------------------------  ---------  ---------- 
                                                     5,260      6,593 
 Creditors: amounts falling due within one year      (15,260)    (15,776) 
 Derivative financial liabilities                    (1)        - 
--------------------------------------------------  ---------  ---------- 
 Net current liabilities                             (10,001)    (9,183) 
--------------------------------------------------  ---------  ---------- 
 Total assets less current liabilities               198,252    158,831 
--------------------------------------------------  ---------  ---------- 
 Net assets                                          198,252    158,831 
--------------------------------------------------  ---------  ---------- 
 Capital and reserves 
 Called up share capital                             1,445      1,445 
 Share premium                                       13,392     13,291 
 Capital redemption reserve                          1,851      1,851 
 Capital reserves                                    179,718    140,543 
 Revenue reserve                                     1,846      1,701 
--------------------------------------------------  ---------  ---------- 
 Total shareholders' funds                           198,252    158,831 
--------------------------------------------------  ---------  ---------- 
 Net asset value per share (note 4)                  343.0p     274.8p 
--------------------------------------------------  ---------  ---------- 
 

STATEMENT OF CASH FLOWS

for the year ended 31st December 2019

 
                                                        2019       2018 
                                                        GBP'000    GBP'000 
-----------------------------------------------------  ---------  ---------- 
 Net cash outflow from operations before dividends 
  and interest                                          (2,297)    (2,385) 
 Dividends received                                     2,376      2,186 
 Interest received                                      195        139 
 Overseas tax recovered                                 23         24 
 Interest paid                                          (425)      (531) 
-----------------------------------------------------  ---------  ---------- 
 Net cash outflow from operating activities              (128)      (567) 
-----------------------------------------------------  ---------  ---------- 
 Purchases of investments                               (46,362)    (55,685) 
 Sales of investments                                   47,557      53,196 
 Settlement of foreign currency contracts               14          (2) 
-----------------------------------------------------  ---------  ---------- 
 Net cash inflow/(outflow) from investing activities    1,209       (2,491) 
-----------------------------------------------------  ---------  ---------- 
 Dividends paid                                          (1,445)    (1,422) 
 Issue of new ordinary shares                           -          2,543 
 Shares reissued from Treasury                          921        1,402 
 Repurchase of shares into Treasury                     (1,206)     (424) 
-----------------------------------------------------  ---------  ---------- 
 Net cash (outflow)/inflow from financing activities    (1,730)    2,099 
-----------------------------------------------------  ---------  ---------- 
 Decrease in cash and cash equivalents                  (649)      (959) 
-----------------------------------------------------  ---------  ---------- 
 Cash and cash equivalents at start of year             5,382      5,891 
 Exchange movements                                     (128)       450 
 Cash and cash equivalents at end of year               4,605      5,382 
-----------------------------------------------------  ---------  ---------- 
 Decrease in cash and cash equivalents                  (649)      (959) 
-----------------------------------------------------  ---------  ---------- 
 Cash and cash equivalents consist of: 
 Cash and short term deposits                           10         18 
 Cash held in JPMorgan US Dollar Liquidity Fund         4,595      5,364 
-----------------------------------------------------  ---------  ---------- 
 Total                                                  4,605      5,382 
-----------------------------------------------------  ---------  ---------- 
 

RECONCILIATION OF NET DEBT

 
                                       As at                            Other            As at 
                               31st December                 non-cash charges    31st December 
                                        2018   Cash flows                                 2019 
                                     GBP'000      GBP'000             GBP'000          GBP'000 
---------------------------  ---------------  -----------  ------------------  --------------- 
 Cash and cash equivalents 
 Cash                                     18          (8)                   -               10 
 Cash equivalents                      5,364        (641)               (128)            4,595 
---------------------------  ---------------  -----------  ------------------  --------------- 
                                       5,382        (649)               (128)            4,605 
 Borrowings 
 Debt due within one year           (15,704)            -                 607         (15,097) 
 Total                              (10,322)        (649)                 479         (10,492) 
---------------------------  ---------------  -----------  ------------------  --------------- 
 

NOTES TO THE FINANCIAL STATEMENTS

   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 '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 October 2019.

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 in the Audit Committee Report 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.     Return/(loss) per share 
 
                                                      2019          2018 
                                                      GBP'000       GBP'000 
---------------------------------------------------  ------------  ----------- 
 Revenue return                                        1,590        1,572 
 Capital return/(loss)                                39,175        (11,527) 
---------------------------------------------------  ------------  ----------- 
 Total return/(loss)                                   40,765        (9,955) 
---------------------------------------------------  ------------  ----------- 
 Weighted average number of shares in issue during 
  the year                                             57,641,214   57,156,038 
 Revenue return per share                             2.76p         2.75p 
 Capital return/(loss) per share                      67.96p        (20.17)p 
---------------------------------------------------  ------------  ----------- 
 Total return/(loss) per share                        70.72p        (17.42)p 
---------------------------------------------------  ------------  ----------- 
 
   3.     Dividends 
   (a)   Dividends paid and declared 
 
                                                                       2019          2018 
                                                                       GBP'000       GBP'000 
--------------------------------------------------------------------  ------------  ----------- 
      Dividend paid 
      2018 final dividend of 2.5p (2017: 2.5p) paid to shareholders 
       in May 2019                                                           1,445        1,422 
--------------------------------------------------------------------  ------------  ----------- 
      Dividend declared 
      2019 final dividend of 2.5p (2018: 2.5p) declared                     1,445         1,445 
--------------------------------------------------------------------  ------------  ----------- 
 

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

The final dividend has been declared in respect of the year ended 31st December 2019. In accordance with the accounting policy of the Company, this dividend will be reflected in the accounts for the year ending 31st December 2020.

(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 the dividend proposed in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is GBP1,590,000 (2018: GBP1,572,000).

 
                                                         2019        2018 
                                                      GBP'000     GBP'000 
 2019 final dividend of 2.5p (2018: 2.5p) declared      1,445     1,445 
-----------------------------------------------------  ------  -------- 
 
 
   4.     Net asset value per share 
 
                                    2019         2018 
---------------------------  -----------  ----------- 
 Net assets (GBP'000)            198,252      158,831 
 Number of shares in issue    57,791,928   57,791,928 
---------------------------  -----------  ----------- 
 Net asset value per share        343.0p       274.8p 
---------------------------  -----------  ----------- 
 
   5.      Status of results announcement 

2018 Financial Information

The figures and financial information for 2018 are extracted from the published Annual Report and Financial Statements for the year ended 31st December 2018 and do not constitute the statutory accounts for that year. The Annual Report and Financial Statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2019 Financial Information

The figures and financial information for 2019 are extracted from the Annual Report and Financial Statements for the year ended 31st December 2019 and do not constitute the statutory accounts for the year. The Annual Report and Financial Statements include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Financial Statements will be delivered to the Register of Companies in due course.

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

8th April 2020

For further information, please contact:

Lucy Dina

For and on behalf of

JPMorgan Funds Limited

020 7742 4000

ENDS

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

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

JPMORGAN FUNDS LIMITED

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 SSMFIAESSEDL

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April 08, 2020 11:40 ET (15:40 GMT)

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