Final Results - Yr Ended 30th June 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN MID CAP INVESTMENT TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 30TH JUNE 2023
Legal Entity Identifier: 549300QED7IGEP4UFN49
Information disclosed in accordance with the DTR 4.1.3
The Directors of JPMorgan Mid Cap Investment Trust plc announce the Company's results for the year ended 30th June 2023.
CHAIRMAN'S STATEMENT
Investment Performance
For the year to 30th June 2023 the NAV total return for your Company was +7.5%, ahead of the FTSE 250 Index (excluding investment trusts) return of +3.0%. The Company's share price discount to NAV widened marginally over the year resulting in a share price total return of +6.4%. I will comment further on the share price discount later in this statement.
It is encouraging to be able to report on a year of positive performance in both absolute and relative terms after the difficult year to June 2022. The positive relative performance was driven almost entirely by good stock selection by your managers. Share buyback activity in the period also assisted performance.
A review of the Company's performance for the period and the outlook for the remainder of the year is provided in the Portfolio Managers' report that follows.
Revenue and Dividends
Whilst the Company's principal objective is capital growth the Board recognises that dividends are a welcome component of total shareholder returns. Net revenue after taxation for the 12 months to 30th June 2023 was £8.11 million (2022: £7.94 million) and earnings per share were 36.85 pence (2022: 34.07 pence).The Board is pleased to increase the total dividend this year and is proposing a final dividend of 23.75p, which when added to the interim dividend paid in April 2023 of 8.0 pence, amounts to a total dividend payable of 31.75 pence (2022: 29.5 pence) for the full year, representing a 7.6% increase on the total dividend payable in 2022. It is pleasing to be in a position to both increase the dividend and add to revenue reserves after drawing down a significant portion of revenue reserves to maintain dividend payments to shareholders following the severe reduction in dividend payment levels by UK companies in 2020 during the pandemic.
The final dividend will be paid on 15th November 2023 to shareholders on the register at the close of business on 13th October 2023. Based upon the year end share price of 876.0 pence, the total dividend of 31.75 pence for the year represents a dividend yield of 3.6%.
After the payment of the final dividend the Company will have revenue reserves of approximately 35.6 pence per share (2022: 28.1 pence per share).
Share Price Rating to NAV per Share
The discount at which the Company's shares trade versus its NAV widened to 14.9% over the review period (2022: 13.6%). At its peak the discount reached 15.7%. This is comparable with the discount experience of its immediate peers and also of investment trusts across many asset classes.
The Directors recognise the importance to shareholders that the Company's share price should not differ excessively from the underlying NAV and the Board continuously aims to address any imbalance between supply and demand relative to an overall assessment of general market trends. At the Annual General Meeting ('AGM') held in November 2022, shareholders gave approval for the Company to renew the Directors' authority to repurchase up to 14.99% of the Company's shares for cancellation or to be held in Treasury on an ongoing basis. In the 12 months to 30th June 2023, the Board utilised the Company's authority to buy back shares and repurchased a total of 984,488 shares, representing 4.4% of the issued share capital (excluding shares held in Treasury) on 1st July 2022. These shares were purchased at an average discount to NAV of 13.4%, producing an accretion to the NAV of approximately 6.0 pence per share for continuing shareholders. Shares repurchased are held in Treasury and such treasury shares and any new ordinary shares will only be sold or issued at a premium to NAV.
Gearing and Borrowing Facilities
The Board has determined that in normal circumstances the Company's overall gearing range is 10% net cash to 20% geared. Within this range, and after due consideration at each Board meeting, the Board normally sets a narrower, short term gearing range for the ensuing period. The Company's gearing strategy is implemented using bank borrowing facilities.
Following the expiry of the Company's £25 million revolving credit facility with National Australia Bank in February 2023, the Board resolved to replace the facility with a £25 million, two-year revolving credit facility with ING Bank. This is in addition to the existing facility of £30 million (with an option of further increasing the facility by £20 million, subject to credit approval by the lender) with Bank of Nova Scotia ('Scotia Bank') which is due to expire in February 2024. The Board will be reviewing the options available for the replacement of the £30 million Scotia Bank facility ahead of its expiry in February 2024. When structuring the Company's debt, the Board considers quantum, terms and tenure and endeavours to ensure that the Portfolio Managers have access to a flexible structure to assist with the objective of enhancing shareholder returns.
Revised Management Fee Arrangements
As announced in December 2022, with effect from 1st January 2023, the Company's Manager reduced its investment management fee. There are three key changes to the fee agreement. Fees are now based on net assets (as opposed to total or gross assets) the tier at which the 0.65% fee rate tapers has been reduced from £250 million of net assets to £200 million of net assets and the tapered fee has been reduced from 0.60% to 0.55%.
It is felt that this revised fee structure balances the need for the Company's ongoing charges ratio to remain competitive, whilst rewarding the Manager for its efforts.
Environmental, Social and Governance Considerations
Whilst the Portfolio Managers select stocks based primarily on company fundamentals, they also consider the potential impact of ESG factors on a company's ability to deliver shareholder value. Through the investment process a company's strategy is assessed for dealing with these important factors and the consequent risks arising from them. The analysis helps determine whether relevant ESG factors are financially material and, if so, whether they are reflected in the valuation of the company. Such analysis may influence not only the Portfolio Managers' decision to own a stock but also, if they do, the size of that position in the portfolio. Further information on the Manager's ESG process and engagement is set out in the ESG section in the Company's Annual Report & Financial Statements for the Year Ended 30th June 2023 ('2023 Annual Report').
Task Force on Climate-related Financial Disclosures
As a regulatory requirement JPMorgan Asset Management ('JPMAM') published on 30th June 2023 its first UK Task Force on Climate-related Financial Disclosures ('TCFD') Report for the Company in respect of the year ended 31st December 2022. The report discloses estimates of the Company's portfolio climate-related risks and opportunities according to the Financial Conduct Authority ('FCA') Environmental, ESG Sourcebook and the TCFD. The report is available on the Company's website under the ESG documents section: https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/regional/en/regulatory/esg-information/jpmorgan-mid-cap-investment-trust-plc-esg-fund-report.pdf
The Board is aware that best practice reporting under TCFD is still evolving with regard to metrics and input data quality, as well as the interpretation and implications of the outputs produced, and will continue to monitor developments as they occur.
Stay Informed
The Company delivers email updates on the Company's progress with regular news and views, as well as the latest performance. If you have not already signed up to receive these communications and you wish to do so, you can opt in via https://tinyurl.com/UK-Mid-Cap-Sign-Up or by scanning the QR code in the 2023 Annual Report.
Annual General Meeting ('AGM')
The Company's fifty-first AGM will be held at 60 Victoria Embankment, London EC4Y 0JP on 1st November 2023 at 2.30 p.m.
We are delighted to invite shareholders to join us in person for the Company's AGM, to hear from the Portfolio Managers. Their presentation will be followed by a question-and-answer session. Shareholders wishing to follow the AGM proceedings but who choose not to attend in person will be able to view them live and ask questions (but not vote) through conferencing software. Details on how to register, together with access details, will be available shortly on the Company's website at www.jpmmidcap.co.uk or by contacting the Company Secretary at invtrusts.cosec@morgan.com
My fellow Board members, representatives of JPMorgan and I look forward to the opportunity to meet and speak with shareholders after the formalities of the meeting have been concluded.
Shareholders who are unable to attend the AGM are strongly encouraged to submit their proxy votes in advance of the meeting, so that they are registered and recorded at the AGM. Proxy votes can be lodged in advance of the AGM either by post or electronically and detailed instructions are included in the Notes to the Notice of AGM in the 2023 Annual Report.
Outlook
The positive returns for the year, described above, were generated against an almost uniformly negative background for the UK, and in particular, domestically focused UK equities. In many respects the FTSE 250 has been in the eye of the storm of negativity directed at the UK stock market over the past 12 months.
This has been reflected in a steady reduction in the allocations to UK equities by institutional and private investors alike. Indeed in the year to 30th June 2023 the UK All Company sector of Investment Trusts (in which your Company resides) saw the largest net selling of any investment trust sector. Hardly a resounding vote of confidence in your asset class.
The reasons are not hard to find. Inflation has proved to be higher and more resilient at the higher levels than anticipated. The Bank of England's blunt response of 14 interest rate increases has been hard-hitting, but perhaps there are now signs that this process is at an end. In a consumer orientated economy, such attempts to reduce inflation by squeezing disposable income has contributed to a negative overview for UK equities.
Having been one of the best performing indices in the world for many years, the FTSE 250 Index has stumbled against such a difficult backdrop and produced poor performance versus both larger UK companies and other markets, particularly the US equity market. A dialogue developed which questioned the very future of the market for mid and small cap companies in the UK with competition for capital from private equity and competition for new listings from other markets, notably the US where higher valuations are on offer. However, there are signs of positive actions and policy changes arising from this debate and the Board welcomes proposed reforms to support UK capital markets.
Right now the FTSE 250 Index is trading at a valuation level rarely seen in recent years. Logic suggests that buying an out of favour asset at a discounted valuation should be a good starting point for investment returns. This is particularly the case if the earnings progression of the assets is maintained.
Currently your Portfolio Managers are optimistic and seeing opportunities to invest in good businesses at very attractive valuations. Gearing in the Company sits near 10%, towards the upper end of recent levels confirming their optimism and commitment, which is shared by your Board.
John Evans
Chairman
18th September 2023
PORTFOLIO MANAGERS' REPORT
Performance and Market Background
The financial year to June 2023 was a turbulent one. The atrocious war in Ukraine raged on, and geopolitical uncertainties increased. Both the USA and the UK avoided recession, surprising many economists, although the threat of a mild recession in both regions has not completely dissipated. While inflation is believed to have peaked in developed markets the UK became an outlier, with stubbornly higher inflation than in Europe or the USA. Interest rates rose at an astonishingly rapid pace, and the Bank of England has raised rates fourteen times from the absolute low in December 2021. Markets are now pricing in peak rates of 5.5 - 6%, which is notably higher than forecasts one year ago. Public sector strike action grew in the UK in response to the stark cost of living increase over the year, although the decline in energy prices and the increase in nominal wages should provide some relief, as should the very low rate of unemployment.
Against this backdrop, the FTSE 250 Index (excluding investment trusts) was up 3.0% over the year. The Company produced a total return on net asset value of 7.5% in the period, and the share price total return was 6.4%, reflecting a very slight widening of the discount of the share price relative to net assets.
Performance Attribution - Contributions to Total Returns
|
As at 30th June 2023 |
|
|
|
|
12 months to 30th June 2023 |
|
|
|
||
|
|
% |
% |
|
Benchmark returnAPM |
|
3.0 |
|
Stock selection |
5.1 |
|
|
Net cash |
-0.4 |
|
|
Gearing |
+0.1 |
|
|
Investment Manager contribution |
|
4.8 |
|
Portfolio total return |
|
7.8 |
|
Management fees/other expenses |
-0.9 |
|
|
Share repurchases |
0.6 |
|
|
Other effects |
|
-0.3 |
|
Return on net assetsAPM |
|
7.5 |
|
Return to shareholdersAPM |
|
6.4 |
Source: JPMAM and Morningstar. All figures are on a total return basis.
Performance attribution analyses how the Company achieved its recorded performance relative to its benchmark index.
APM Alternative Performance Measure ('APM').
A glossary of terms and APMs can be found in the 2023 Annual Report.
Portfolio
Among the contributors to the outperformance over the year were two of our largest positions in the retail sector, Dunelm and JD Sports Fashion, as these category killers reminded the market of their worth with impressive results and lowly valuations. In addition, our holdings in Bank of Georgia, Ashtead (equipment rental) and 4Imprint (marketer of promotional merchandise) also performed strongly, again supported by impressive results in spite of the economic backdrop. On the negative side, the main detractors included the housebuilder Vistry, Future (media company) and not owning Dechra Pharmaceuticals, which was bid for at a significant premium, so this hurt performance on a relative basis.
The portfolio continued to evolve as we adapted to the changes in the economic environment. New additions included Inchcape, the automotive distributor (following its large South American acquisition), Balfour Beatty, the infrastructure company with significant exposure to US infrastructure, Keller (exposed to both US infrastructure and to the huge urban area project (NEOM) in Saudi Arabia). Finally, Mitchells & Butler, the bar and pub company, was added to the portfolio as the consumer outlook improved and inflationary pressures began to ease. Over the year we also sold out of certain holdings including Marshalls, Spirent, Quilter and National Express, on concerns over current trading and/or balance sheet strength.
Outlook
The trajectory of inflation and interest rates is clearly key for the outlook. While we had expected a mild recession in the UK in the second half of 2023, the economy may avoid this - but UK growth prospects are pedestrian at best. Following the encouraging inflation figures in July we believe inflation has peaked in the UK, and we foresee a significant further decline from the current levels over the course of 2023, which will hopefully bring the UK more in line with other developed markets. Interest rates at 5.25% have risen significantly and we believe they are very close to peak levels. Consumer confidence had staged a significant recovery from its abject lows - largely, we believe, due to continuing very low unemployment rates and the wage increases that have been seen this year - although the very recent spike in mortgage rates has caused a setback in what had been an upward trend.
Clearly the UK stock market is currently focused on the macro-economic outlook. Evidence of this can be seen in the sharp one day upward move of 4% in the FTSE 250 Index when July's inflation figures proved a positive surprise. However, as always, our focus is on the companies themselves. Overall the message we are hearing from them is a positive one. The FTSE 250 is a broad and diverse index, and we continue to find exciting and undervalued investment opportunities, some of which we have described above.
This leads us to valuations. While the environment remains difficult for businesses and consumers to navigate, a lot of this is already reflected in valuations. At the time of writing, the FTSE 100 is on a forecast P/E for 2024 of 10.5x, and FTSE 250 is similar on a 10.8x forecast. The Mid Cap index premium has almost completely disappeared; and 10.8x compares to a 20 year P/E average of 13.7x (source: Investec). The Bank of America chief investment strategist, Michael Hartnett, has called out UK mid cap stocks as being at their cheapest versus global stocks since 2003. Within the portfolio, we own a number of dominant players in their markets which we view as simply being valued wrongly. To give just one example, Jet2, the UK's number one holiday company, is currently being valued by the market at 7x P/E. As we have said before, acquirors of UK businesses are recognising this and M&A is set to continue. The current gearing level of just under 10% in the portfolio reflects our view of the compelling valuations currently available.
Georgina Brittain
Katen Patel
Portfolio Managers
18th September 2023
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 JPMF, the Audit & Risk Committee has drawn up a risk matrix, which identifies the key risks to the Company. These are reviewed and noted by the Board. The risks identified and the broad categories in which they fall, and the ways in which they are managed or mitigated are summarised below.
|
Principal risk description |
Mitigating activities |
Movement from prior year |
|
Underperformance |
||
|
Poor implementation of the investment strategy, for example as to thematic exposure, sector allocation, stock selection, undue concentration of holdings, factor risk exposure or the degree of total portfolio risk, may lead to failure to beat the FTSE 250 index and peer companies. |
The Board manages these risks by diversification of investments and through its investment restrictions and guidelines, which are monitored and reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Portfolio Managers, at least one of whom attends all Board meetings, and reviews data which show measures of the Company's risk profile. The Portfolio Managers employ the Company's gearing tactically, within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year. |
Risk is unchanged but remains elevated due to a continuation of unfavourable economic conditions (caused by factors such as the geopolitical crisis between Russia and Ukraine high inflation and interest rates) faced by the UK equities market, making investment decisions to be more challenging for the Portfolio Managers.
|
|
Discount Control |
||
|
Investment trust shares often trade at discounts to their underlying NAVs; they can also trade at a premium. Discounts and premiums can fluctuate considerably leading to volatile returns for shareholders. |
The Board monitors the share price against the absolute and sector relative premium/discount levels. The Board reviews sales and marketing activity and sector relative performance (considered the primary drivers of the relative discount level). The Company also has authority to buy back its existing shares to enhance the NAV per share for remaining shareholders and to reduce the absolute level of discount and discount volatility. |
Risk remains stable. The discount at which the Company's shares trade versus its NAV widened to 14.9% over the review period (2022: 13.6%). At its peak the discount reached 15.7%. This is comparable with the discount experience of its immediate peers and also of investment trusts across many asset classes. During the year the Company continued to conduct share buybacks. |
|
Market and Economic Risk |
||
|
Market risk arises from uncertainty about the future prices of the Company's investments, which may reflect underlying uncertainties arising from economic, social, fiscal, climate and regulatory changes. In the past few years Brexit and the COVID-19 pandemic have been major sources of uncertainty and have contributed to elevated levels of market volatility. In recent times, geopolitical risks have risen markedly with the Russian invasion of Ukraine. While direct linkage to the UK from Russia tend to be small, the impact of sanctions and the rise in commodity prices has caused disruptions to supply chains which in turn has led to high inflation and interest rates. These risks represent the potential loss the Company might suffer through holding investments in the face of negative market movements. |
This risk is managed to some extent by diversification of investments and by regular communication with the Manager on matters of investment strategy and portfolio construction which will directly or indirectly include an assessment of these risks. The Board receives regular reports from the Manager regarding market outlook and gives the Portfolio Managers discretion regarding acceptable levels of gearing and/or cash. Currently the Company's gearing policy is to operate within a range of 10% net cash to 20% geared. The Board considers thematic and factor risks, 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 can, with shareholder approval, look to amend the investment policy and objectives of the Company to gain exposure to or mitigate the risks arising from geopolitical instability. |
The risk is unchanged but remains highlighted by the quick succession of the events which have unfolded in recent times i.e. Brexit, the outbreak of the COVID-19 pandemic and geopolitical crisis in Russia-Ukraine, adding significant pressure on markets and economies.
|
|
Inappropriate Gearing Levels (both over and under gearing of the portfolio) |
||
|
The Company borrows money for investment purposes. If the investments fall in value, any borrowings will magnify the extent of this loss. If borrowing facilities are not renewed, either because banks stop lending or the Company cannot borrow at an appropriate rate or tenor, the Company may have to sell investments to repay borrowings and/or a lack of borrowing facilities would leave the Company unable to access potential opportunities and lag behind the performance of its geared peers.
|
To mitigate this risk all borrowing arrangements are monitored by the Board and those requiring Board approval, as well as leverage levels, are discussed with the investment managers at every Board meeting. Covenant levels are monitored regularly. The Company's investments are in quoted securities that are readily realisable. The Board ensures that any renewal or replacement of such facilities is addressed early; the Manager has regular discussions with banks on lending appetite and pricing throughout the year. Further information on leverage can be found in the 2023 Annual Report. |
Risk remains heightened by the effects of changes made by governments and central banks to monetary policy to combat inflation. This has led to hikes in interest rates charged by lenders however, there are now signs that rates are moderating.
|
|
Outsourcing |
||
|
Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the Depositary or Custodian's records may cause inaccurate reporting and monitoring of the Company's financial position or result in a misappropriation of assets. |
Details of how the Board monitors the outsourced services and the key elements of the risk management and internal control framework governing these services are included within the Risk Management and Internal Controls section of the Corporate Governance Statement in the 2013 Annual Report. Furthermore, the Manager has a comprehensive business continuity plan to safeguard the continued operation of the business in the event of a service disruption as evidenced during the outbreak of the COVID-19 pandemic. |
Risk remains stable. The Board continues to monitor the outsourced services.
|
|
Cyber Crime |
||
|
The threat of cyber attack is regarded as at least as important as more traditional physical threats to business continuity and security. In addition to threatening the Company's operations, such an attack is likely to raise reputational issues which may damage the Company's share price and reduce demand for its shares. |
The Company benefits directly and/or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around physical security of JPMorgan's data centres, security of its networks and security of its trading applications, are tested by independent auditors and reported every six months against the AAF Standard. |
Risk remains stable. To date the Manager's cyber security arrangements have proven robust and the Company has not been impacted by any cyber attacks threatening its operations.
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|
ESG Requirements from Investors |
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|
The Company's policy on ESG and climate change may be out of line with ESG practices which investors are looking to invest in accordance with. |
The Manager has integrated the consideration of ESG factors into the Company's investment process. Further details are set out in the ESG report in the 2023 Annual Report. |
Risk remains stable. Investors continue to seek greater ESG oversight in their investment portfolios.
|
|
Regulatory Change |
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|
The Company's business model could become non-viable as a result of new or revised rules or regulations arising from, for example, policy change or financial monitoring pressure. |
The Board receives regular reports from its broker, depositary, registrar and Manager as well as its legal advisers and the Association of Investment Companies on changes to regulations which could impact the Company and its industry. The Company monitors events and relies on the Manager and its other key third party providers to manage this risk by preparing for any changes, adverse or otherwise. |
Risk remains stable. Changes to the regulatory landscape are expected to be ongoing.
|
|
Global Pandemics |
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|
COVID-19 has highlighted the speed and extent of economic damage that can arise from a pandemic. There is the risk that emergent strains may not respond to current vaccines and may be more lethal and that they may spread as global travel increases. |
The Board receives reports on the business continuity plans of the Manager and other key service providers. The effectiveness of these measures has been assessed throughout the course of the COVID-19 pandemic and the Board will continue to monitor developments as they occur and seek to learn lessons which may be of use in the event of future pandemics. The Board is mindful that implications arising from future pandemics will vary and hence the ability to assess mitigation activities is limited. But the Board seeks to manage these risks through: a broadly diversified equity portfolio, appropriate asset allocation, reviewing key economic and political events and regulatory changes, active management of risk and the application of relevant policies on gearing and liquidity. |
Risk has reduced. There are always exogenous risks and consequences arising from a pandemic, which are difficult to predict and plan for in advance. The Company does what it can to address these risks when they emerge, not least operationally and in trying to meet its investment objective.
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EMERGING RISKS
The AIC Code of Corporate Governance also requires the Audit & Risk Committee to put in place procedures to identify emerging risks. Emerging risks, which are not deemed to represent an immediate threat, are considered by Audit & Risk Committee as they come into view and are incorporated into the existing review of the Company's risk register. However, since emerging risks are likely to be more dynamic in nature, they are considered on a more frequent basis, through the remit of Board when the Audit & Risk Committee does not meet. The Board considers that the following are emerging risks:
Economic Contraction - A long term reduction in returns available from investments as a result of recession, stagnation, inflation or other extended exogenous factor which may render the achievement of the Company's investment objectives and policies more challenging.
Societal Breakdown - Modern society has contributed to rising inequality, resource depletion and increasingly complex and interrelated financial, political and technological systems. Looking over history, these factors have been the precursors to societal collapses resulting in periods of wide-ranging disruption and economic simplification. Even limited or localised societal breakdown may threaten both the ability of the Company to operate, the ability of investors to transact in the Company's securities and ultimately the valuations and operations of investee companies and the ability of the Company to pursue its investment objective and purpose.
Technology - the emergence of technology (i.e. artificial intelligence) or new technological standards which are incompatible with existing procedures and practices within the industry or sector may have the potential to increase the complexity of the systemic dependencies and interactions across various sectors.
Structural Changes - Potential structural changes to the UK stock market resulting from merger and acquisition activity could drive a decline in the number of listed companies in the market and investment opportunities particularly in the mid-cap area. Furthermore, attractiveness of the UK market could be impacted by structural changes to the way investors access the market, including changes within the platform channels.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTY TRANSACTIONS
Details of the management contract are set out in the Directors' Report in the 2023 Annual Report. The management fee payable to the Manager for the year was £1,484,000 (2022: £2,244,000) of which £nil (2022: £nil) was outstanding at the year end.
Included in administration expenses in note 6 in the 2023 Annual Report are safe custody fees amounting to £4,000 (2022: £8,000) payable to JPMorgan Chase, N.A. of which £2,000 (2022: £1,000) was outstanding at the year end.
The Manager may carry out some of its dealing transactions through group subsidiaries. These transactions are carried out at arm's length. The commission payable to JPMorgan Securities Limited for the year was £nil (2022: nil) of which £nil (2022: £nil) was outstanding at the year end.
The Company also holds cash in the JPM GBP Liquidity LVNAV Fund, which is managed by JPMorgan. At the year end this was valued at £2,226,000 (2022: £15,559,000). Interest amounting to £114,000 (2022: £36,000) was receivable during the year of which £nil (2022: £nil) was outstanding at the year end.
Handling charges on dealing transactions amounting to £11,000 (2022: £3,000) were payable to JPMorgan Chase, N.A. during the year of which £3,000 (2022: £1,000) was outstanding at the year end.
At the year end, total cash of £258,000 (2022: £272,000) was held with JPMorgan Chase, N.A. A net amount of interest of £nil (2022: £5,000) was payable by the Company during the year from JPMorgan Chase, N.A. of which £nil (2022: £nil) was outstanding at the year end.
The Directors are related parties and full details of their remuneration and shareholdings can be found in the 2023 Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the 2023 Annual Report in accordance with applicable law and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland', and applicable law). Under Company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable United Kingdom Accounting Standards, comprising FRS 102, have been followed, subject to any material departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed in the Directors' Report in the 2023 Annual Report confirm that, to the best of their knowledge:
• the Company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102, give a true and fair view of the assets, liabilities, financial position and return 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.
For and on behalf of the Board
John Evans
Chairman
18th September 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30th June 2023
|
|
2023 |
2022 |
|
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Gains/(losses) on investments held at fair |
|
|
|
|
|
|
|
|
value through profit or loss |
- |
8,331 |
8,331 |
- |
(107,110) |
(107,110) |
|
|
Net foreign currency gains/(losses) |
- |
3 |
3 |
- |
(7) |
(7) |
|
|
Income from investments |
9,402 |
- |
9,402 |
9,516 |
- |
9,516 |
|
|
Interest receivable and similar income |
114 |
- |
114 |
41 |
- |
41 |
|
|
Gross return/(loss) |
9,516 |
8,334 |
17,850 |
9,557 |
(107,117) |
(97,560) |
|
|
Management fee |
(445) |
(1,039) |
(1,484) |
(673) |
(1,571) |
(2,244) |
|
|
Other administrative expenses |
(616) |
- |
(616) |
(675) |
- |
(675) |
|
|
Net return/(loss) before finance costs and taxation |
8,455 |
7,295 |
15,750 |
8,209 |
(108,688) |
(100,479) |
|
|
Finance costs |
(358) |
(835) |
(1,193) |
(204) |
(476) |
(680) |
|
|
Net return/(loss) before taxation |
8,097 |
6,460 |
14,557 |
8,005 |
(109,164) |
(101,159) |
|
|
Taxation credit/(charge) |
13 |
- |
13 |
(68) |
- |
(68) |
|
|
Net return/(loss) after taxation |
8,110 |
6,460 |
14,570 |
7,937 |
(109,164) |
(101,227) |
|
|
Return/(loss) per share |
36.85p |
29.35p |
66.20p |
34.07p |
(468.65)p |
(434.58)p |
|
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
|
|
Called up |
|
Capital |
|
|
|
|
|
share |
Share |
redemption |
Capital |
Revenue |
|
|
|
capital |
premium |
reserve |
reserves1 |
reserve1 |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
At 30th June 2021 |
6,350 |
454 |
3,650 |
319,752 |
10,155 |
340,361 |
|
Repurchase of shares into Treasury |
- |
- |
- |
(9,317) |
- |
(9,317) |
|
Net (loss)/return |
- |
- |
- |
(109,164) |
7,937 |
(101,227) |
|
Dividends paid in the year (note 3) |
- |
- |
- |
- |
(6,909) |
(6,909) |
|
At 30th June 2022 |
6,350 |
454 |
3,650 |
201,271 |
11,183 |
222,908 |
|
Repurchase of shares into Treasury |
- |
- |
- |
(9,000) |
- |
(9,000) |
|
Net return |
- |
- |
- |
6,460 |
8,110 |
14,570 |
|
Dividends paid in the year (note 3) |
- |
- |
- |
- |
(6,507) |
(6,507) |
|
At 30th June 2023 |
6,350 |
454 |
3,650 |
198,731 |
12,786 |
221,971 |
1 The capital and revenue reserves are distributable. The amount of these reserves that are distributable is not necessarily the full amount of the reserves as disclosed in these financial statements. These reserves may be used to fund distributions to investors.
STATEMENT OF FINANCIAL POSITION
At 30th June 2023
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Fixed assets |
|
|
|
Investments held at fair value through profit or loss |
241,636 |
235,322 |
|
Current assets |
|
|
|
Debtors |
1,694 |
6,921 |
|
Cash and cash equivalents |
2,484 |
15,831 |
|
|
4,178 |
22,752 |
|
Current liabilities |
|
|
|
Creditors: amounts falling due within one year |
(23,843) |
(20,166) |
|
Net current (liabilities)/assets |
(19,665) |
2,586 |
|
Total assets less current liabilities |
221,971 |
237,908 |
|
Creditors: amounts falling due after more than one year |
- |
(15,000) |
|
Net assets |
221,971 |
222,908 |
|
Capital and reserves |
|
|
|
Called up share capital |
6,350 |
6,350 |
|
Share premium |
454 |
454 |
|
Capital redemption reserve |
3,650 |
3,650 |
|
Capital reserves |
198,731 |
201,271 |
|
Revenue reserve |
12,786 |
11,183 |
|
Total shareholders' funds |
221,971 |
222,908 |
|
Net asset value per share |
1,029.6p |
988.8p |
Company registration number: 1047690.
The Company is registered in England and Wales.
STATEMENT OF CASH FLOWS
For the year ended 30th June 2023
|
|
2023 |
20221 |
|
|
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
Net return/(loss) before finance costs and taxation |
15,750 |
(100,479) |
|
Adjustment for: |
|
|
|
Net (gains)/losses on investments held at fair value through profit or loss |
(8,331) |
107,110 |
|
Net foreign currency (gains)/losses |
(3) |
7 |
|
Dividend income |
(9,379) |
(9,516) |
|
Interest income |
(114) |
(41) |
|
Scrip dividends received as income |
(23) |
- |
|
Realised loss/(gain) on foreign exchange transactions |
3 |
(7) |
|
Increase in accrued income and other debtors |
(52) |
(5) |
|
Decrease/(increase) in accrued expenses |
158 |
(17) |
|
|
(1,991) |
(2,948) |
|
Dividends received |
8,752 |
9,286 |
|
Interest received |
114 |
41 |
|
Overseas tax recovered/(paid) |
72 |
(15) |
|
Net cash inflow from operating activities |
6,947 |
6,364 |
|
Purchases of investments |
(107,045) |
(113,532) |
|
Sales of investments |
110,031 |
142,071 |
|
Net cash inflow from investing activities |
2,986 |
28,539 |
|
Dividends paid |
(6,507) |
(6,909) |
|
Repurchase of shares into Treasury |
(8,737) |
(9,317) |
|
Repayment of bank loan |
(28,000) |
(15,000) |
|
Drawdown of bank loan |
21,000 |
- |
|
Interest paid |
(1,036) |
(693) |
|
Net cash outflow from financing activities |
(23,280) |
(31,919) |
|
(Decrease)/increase in cash and cash equivalents |
(13,347) |
2,984 |
|
Cash and cash equivalents at start of year |
15,831 |
12,847 |
|
Cash and cash equivalents at end of year |
2,484 |
15,831 |
|
Cash and cash equivalents consist of: |
|
|
|
Cash and short term deposits |
258 |
272 |
|
Cash held in JPMorgan Sterling Liquidity Fund |
2,226 |
15,559 |
|
Total |
2,484 |
15,831 |
1 The presentation of the Cash Flow Statement, as permitted under FRS 102, has been changed so as to present the reconciliation of 'net return/(loss) before finance costs and taxation' to 'net cash inflow from operating activities' on the face of the Cash Flow Statement. Previously, this was shown by way of note. Other than consequential changes in presentation of the certain cash flow items, there is no change to the cash flows as presented in previous periods.
RECONCILIATION OF NET DEBT
|
|
As at |
|
Other non-cash |
As at |
|
|
30th June 2022 |
Cash flows |
charges |
30th June 2023 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cash and cash equivalents |
|
|
|
|
|
Cash |
272 |
(14) |
- |
258 |
|
Cash equivalents |
15,559 |
(13,333) |
- |
2,226 |
|
|
15,831 |
(13,347) |
- |
2,484 |
|
Borrowings |
|
|
|
|
|
Debt due within one year |
(15,000) |
(8,000) |
- |
(23,000) |
|
Debt due after one year |
(15,000) |
15,000 |
- |
- |
|
|
(30,000) |
7,000 |
- |
(23,000) |
|
Net debt |
(14,169) |
(6,347) |
- |
(20,516) |
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30th June 2023
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 FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in July 2022.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. The disclosures on going concern in the 2023 Annual Report of the Directors' 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
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Revenue return |
8,110 |
7,937 |
|
Capital return/(loss) |
6,460 |
(109,164) |
|
Total return/(loss) |
14,570 |
(101,227) |
|
Weighted average number of shares in issue during the year |
22,008,413 |
23,293,115 |
|
Revenue return per share |
36.85p |
34.07p |
|
Capital return/(loss) per share |
29.35p |
(468.65)p |
|
Total return/(loss) per share |
66.20p |
(434.58)p |
3. Dividends
(a) Dividends paid and proposed
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Dividends paid |
|
|
|
2022 Final dividend of 21.5p (2021: 21.5p) per share |
4,767 |
5,044 |
|
2023 Interim dividend of 8.0p (2022: 8.0p) per share |
1,740 |
1,865 |
|
Total dividends paid in the year |
6,507 |
6,909 |
|
|
|
|
|
Dividend proposed |
|
|
|
2023 Final dividend proposed of 23.75p (2022: 21.5p) per share |
5,118 |
4,847 |
|
Total dividends proposed for year |
5,118 |
4,847 |
All dividends paid and proposed in the year have been funded from the revenue reserve.
The Final dividend proposed in respect of the year ended 30th June 2022 amounted to £4,847,000. However, the amount paid amounted to £4,767,000 due to shares bought back after the balance sheet date but prior to the record date.
The dividend proposed in respect of the year ended 30th June 2023 is subject to shareholder approval at the forthcoming Annual General Meeting. In accordance with the accounting policy of the Company, this dividend will be reflected in the financial statements for the year ending 30th June 2024.
(b) Dividends for the purposes of Section 1158 of the Corporation Tax Act 2010 ('Section 1158')
The requirements of Section 1158 are considered on the basis of dividends declared in respect of the financial year, shown below. The revenue available for distribution by way of dividend for the year is £8,110,000 (2022: £7,937,000). The revenue reserve after payment of the final dividend will amount to £7,668 (2022: £6,336,000).
|
|
2023 |
2022 |
|
|
£'000 |
£'000 |
|
Interim dividend of 8.0p (2022: 8.0p) per share |
1,740 |
1,865 |
|
Final dividend of 23.75p (2022: 21.5p) per share |
5,118 |
4,847 |
|
|
6,858 |
6,712 |
4. Net asset value per share
|
|
2023 |
2022 |
|
Net assets (£'000) |
221,971 |
222,908 |
|
Number of shares in issue |
21,559,242 |
22,543,730 |
|
Net asset value per share |
1,029.6p |
988.8p |
5. Status of results announcement
2022 Financial Information
The figures and financial information for 2022 are extracted from the Annual Report and Accounts for the year ended 30th June 2022 and do not constitute the statutory accounts for the year. The Annual Report and Accounts include the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Register of Companies in due course.
2023 Financial Information
The Figures and financial information for 2023 are extracted from the published Annual Report and Accounts for the year ended 30th June 2022 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.
Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.
18th September 2023
For further information:
Alison Vincent,
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the 2023 Annual Report will shortly be submitted to the FCA's National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The 2023 Annual Report will shortly be available on the Company's website at www.jpmmidcap.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.
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