REG - JPMorganUS Small Cos - Half-year Report
23/08/2024 11:45
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RNS Number : 6223B JPMorgan US Smaller Co. IT 23 August 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN US SMALLER COMPANIES INVESTMENT TRUST PLC
HALF YEAR REPORT & FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30TH JUNE 2024
Legal Entity Identifier: 549300MDD7SOXDMBN667
Information disclosed in accordance with the DTR 4.1.3
The Directors of JPMorgan US Smaller Companies Investment Trust plc (the
'Company') announce the Company's results for the six months ended 30th June
2024.
CHAIR'S STATEMENT
Dear Shareholders,
I am delighted to present my first communication to you since taking over as
Chair at the conclusion of the Company's Annual General Meeting ('AGM') in
April. I would like to take this opportunity to thank my predecessor, David
Ross, on behalf of the Board, for his strong contributions to the Company over
the last nine years.
Performance
In the first half of 2024 US small caps struggled to make much progress in an
environment of tight monetary policy. The Company's return on net assets for
the reporting period was +1.0%, modestly underperforming the Company's
benchmark, the Russell 2000 Index (the 'Benchmark'), which returned 2.5%. A
full analysis of the performance of the Company's investment portfolio is set
out in the Investment Manager's Report.
Discount management
The total return to shareholders was -2.5%. The discrepancy between the return
on net assets and the share price total return was due to a widening of the
share price discount to net asset value, from 7.9% at the end of 2023 to 11.1%
on 30th June 2024. Over the six-month period to 30th June 2024, the discount
averaged 10.5%.
For context, during the last 12 months discounts across the investment trust
universe widened to levels not seen since the 2008 global financial crisis.
The most extreme discounts of over 30% emerged for trusts focused on illiquid
and interest rate sensitive assets such as private equity, infrastructure and
property. The share prices of trusts focused on investment in small cap
markets globally have suffered from similar concerns, albeit to a lesser
extent.
Unsurprisingly, these valuation opportunities have provoked a notable
response. Value-sensitive activist investors have become more prevalent on
share registers, and wide discounts have, in part, contributed to the record
number of investment trust mergers this year. Such developments are of course
necessary for an efficient and well-functioning market. Against this backdrop
the board remains proactive rather than reactive, ensuring that we fulfil our
duty to protect the interests as shareholders. We therefore aim to minimise
the share price discount whilst being aware that our ability to do so will
depend on prevailing market conditions and the behaviour and risk appetite of
investors. Such considerations are particularly important as we approach the
Company's next continuation vote in 2025.
To this end, we have two key levers at our disposal to stimulate demand for
the Company's shares: an active, value-enhancing share buyback programme, and
effective ongoing marketing activities. We have taken action on both fronts.
On buybacks, the Company repurchased 2,000,197 of its own shares into Treasury
at a weighted average discount of 11.4% during the review period. The Company
has purchased an additional 100,000 shares into Treasury since the period end
and at the time of writing, the Company's issued share capital consists of
65,406,275, including 3,836,313 shares in Treasury.
On marketing activities, we continue to improve the promotion of the Company
to shareholders and the broader market. For example, the Board has recently
engaged an adviser to support the Manager in promoting the attractive
characteristics of the Company. Their primary focus is to maximise the impact
of the compelling content generated by the investment team(1) under the
evergreen tagline 'Invest in the Heart of America'. To improve access to this
(1) For example, the recent piece 'The Magnificent 2000.' To view the article,
please visit tinyurl.com/magnificent-2000
content the Company's website has been upgraded and we would strongly
recommend it as the primary source of information on the Company. The Board
continues actively to work on improving the Company's shareholder
communications and PR programme.
I am pleased to report that these actions, alongside the emerging recognition
of the appeal of attractively-valued, high-quality US small cap stocks in a
falling rate environment, mean that the Company's discount has narrowed since
the end of the reporting period. As I write, the discount is in the region of
6%.
Gearing
The Board believes that structural gearing is a key advantage of investment
trusts and should be used to enhance long-term returns. To this end the
Manager has been given the flexibility by the Board to manage gearing
tactically and remain invested within a maximum gearing limit set by the Board
of 15% (±2.5% if as a result of market movements). The Company closed the
six-month period with a gearing level of 3.1%.
During the reporting period, the Company continued to utilise its US$30
million loan facility (with an option to draw a further US$10 million) to
maintain a meaningful but modest level of gearing. The two-year facility
matured on 27th October 2023 but was extended (on the same terms) whilst
certain points of the new facility were discussed and agreed. On 15th March
2024 the Board renewed the loan with Scotiabank, as a secured 364-day facility
for a reduced amount of US$20 million (with an option to draw a further US$10
million).
Board and Succession planning
All of the Directors were re-appointed at the AGM in April this year, with the
exception of David Ross who retired as Chair and Director of the Company.
Therefore, the Board now consists of four non-executive directors, two female
and two male, with diverse skills and a range of tenures from two to eight
years. The Board believes that this is an appropriate number of directors
given the size and complexity of the Company. The Board has a detailed
succession plan in place.
Note on receiving marketing communications from the Company
I would like to highlight that current regulations require that shareholders
and other interested parties must opt in, in order to receive promotional
communications from the Company including our regular newsletter. If you would
like to receive such communications, we would encourage you to opt in if you
have not done so already. This can be done via the QR code in the Half Year
Report, via the Company's website, or by contacting J.P. Morgan Asset
Management directly via email at invtrusts.cosec@jpmorgan.com.
Outlook
The Board continues to have high confidence in the investment team, and their
investment philosophy and process which have been applied consistently to
generate strong long-term returns for the Company. There is no doubt that the
valuations of US small cap stocks currently look extremely appealing relative
to large caps. While the market impact of political and economic developments
may affect the exact timing, it seems inevitable that this discrepancy will be
addressed. We therefore believe that the patient shareholder who chooses to
Invest in the Heart of America through our Company will be handsomely
rewarded.
Dominic Neary
Chair
23rd August 2024
INVESTMENT MANAGER'S REPORT
Market Review
By the halfway mark of 2024, the S&P 500 Index had notched up returns of
15% (in US dollar terms) as US equity markets hit record highs. However, in
this instance, the rising tide did not lift all boats. After showing signs of
broadening out in the first quarter, market leadership reverted to the handful
of large cap growth stocks that had propelled the market higher over much of
2023. The extreme polarisation of the market is evident in the outsized
contribution the so-called 'Magnificent Seven' tech stocks made to total
returns. More than 60% of index returns over the first six months of the year
came from these seven names. Notably, Nvidia, a world leader in the
production of the cutting-edge semiconductors required to power artificial
intelligence (AI) tools, overtook Microsoft to become briefly the world's
most valuable company, before relinquishing pole position at the end of June.
Meanwhile, much of the rest of the market declined in absolute terms,
disappointed by developments on the monetary policy front. The US economy is
still healthy overall but grew at an annualised rate of only 1.6% in the first
quarter of 2024 - the slowest pace in two years. The labour market is also
showing signs of weakness. The unemployment rate rose to 4.3% in July 2024,
its highest level since January 2022. And importantly, inflation continued to
trend downwards. However, despite these developments, the US Federal Reserve
(the 'Fed') reiterated its position that rate decreases would remain on hold
until it is confident that inflation is on a sustainable path towards 2%. US
small caps were worst hit by the Fed's reluctance to cut rates, as this sector
of the market tends to be relatively highly leveraged and is thus the most
vulnerable to high rates.
In all, large cap stocks, as represented by the S&P 500 Index, returned
15% (in US dollar terms), outperforming the small cap Russell 2000 Index,
which returned 2% on the same basis. Value stocks underperformed growth, as
the Russell 3000 Value Index increased by 6%, while the Russell 3000 Growth
Index increased by 20%.
Performance
Given this unconducive background, the portfolio's net asset value ('NAV')
increased by 1.0% (in sterling terms) in the first half of 2024. The Company
underperformed its benchmark, the Russell 2000 Index (Net) (the 'Benchmark'),
which rose by 2.5% on the same basis. Stock selection was the primary driver
of underperformance, with technology and industrial stocks being the largest
detractors.
This near-term underperformance is disappointing. However, the longer-term
investment case for US small caps remains compelling. This sector of the
market is home to some of the world's most innovative, nimble businesses, and
offers early access, at attractive valuations, to companies with
the potential to grow very rapidly over the medium to longer term. Indeed, US
small-caps have outperformed US large-caps by 2.85% per year on average since
1926 (the earliest date for which this dataset is available). They have also
posted positive trailing 10-year returns for more than two-thirds of the same
period.
It is clear from these statistics that investment in small cap companies does
require some patience and a long-term perspective. Given this, it is more
meaningful for investors to assess the Company's performance over longer
timeframes. On this basis, the Company has delivered outright gains and
outperformed the Benchmark in NAV terms over the three years ended 30th June
2024, almost matched the Benchmark over five years, and outpaced it over ten
years.
During the six-month review period, our stock selection in the consumer
staples and financial sectors contributed to performance. Within consumer
staples, our overweight in Primo Water proved beneficial. This company is a
leading provider of multi-gallon drinking water solutions for US businesses
and consumers. The stock outperformed following strong results during the
first quarter of 2024, with revenues and earnings beating estimates. Organic
revenues grew by more than 8%, thanks to increases in both volumes and price.
Cost controls also helped push up EBITDA margins. We believe Primo Water
should continue to benefit from improving fundamentals, long-term secular
trends towards water consumption (over sugary drinks) and an attractive
valuation. As a result, while we reduced our position modestly on
outperformance and to manage position sizes, we remain comfortable with our
remaining holding.
Among our financial holdings, our overweight position in StepStone Group, a
global private markets investment firm, enhanced returns. The company's shares
rallied as the company reported strong fiscal results for the fourth quarter
of 2024 with a fee-related earnings beat. The outperformance was driven by an
improving fundraising and deployment environment, in addition to strengthening
private markets sentiment. The company's undeployed fee-earning capital is at
record levels, which management expects to be able to put to work at a good
pace as capital markets loosen. We believe the company remains well positioned
to capitalise on the secular growth in private markets, so we are happy to
continue holding this name.
At the stock level, our exposure to BJ's Wholesale Club ('BJ's'), a warehouse
club selling groceries, household items and gasoline, was the largest
contributor, following strong results for the first quarter of 2024. Despite a
challenged consumer environment, BJ's discount offering has attracted
increasing online traffic, and sales slightly exceeded expectations. Our
ongoing conviction in the stock is supported by the company's strong business
model and the upward trend in its membership programme.
Within the tech sector, our decision not to own certain AI and cryptocurrency
related names accounted for the bulk of the underperformance. Specifically,
our lack of exposure to Super Micro Computer was the largest detractor. Super
Micro Computer is a manufacturer of server solutions for data centres. Its
shares outperformed as the company benefited from AI-related server purchases
and overall investor optimism around the AI theme. Our decision to avoid this
name is based on the company's failure to meet our quality threshold and the
stock's extended valuation. As a result of elevated valuation levels, Super
Micro Computer is no longer a small cap stock or member of the Russell 2000
Index.
In the industrials sector, our exposure to WillScot Mobile Mini proved
lacklustre. The stock underperformed on macro concerns, given a weaker
industrial backdrop. Additionally, delays around the McGrath RentCorp
acquisition due to the US Federal Trade Commission deal scrutiny further
weighted the stock. We continue to like the business and believe the company
is a high-quality asset with favourable risk/reward, hence we maintain
conviction in the stock.
At the security level, the two most significant detractors was our exposure to
QuidelOrtho, and an overweight position in Shoals Technologies. QuidelOrtho is
a medical devices company providing diagnostic testing solutions. The stock
fell due to weak earnings and guidance for its 2024 financial year, including
a significant reduction in expected COVID testing revenues that carry
above-average margins. The company's longstanding CEO was removed as part of
efforts to enhance operational efficiency and revenue growth and deliver
shareholder value. We remain comfortable with our position in the stock, given
its heavily discounted valuation, significant private equity ownership and the
potential for better execution under the new leadership team.
Shoals Technologies is a leading US provider of solar system components. Its
shares lagged on weak guidance for its 2024 financial year, driven by project
delays and customer sensitivity to higher interest rates, which resulted in
slower top-line growth. Legal uncertainty relating to the quality of a
supplier, and a separate intellectual property infringement, also weighed on
the stock price. Despite the disappointing near-term outlook, we maintain
conviction in the stock, as its valuation is compelling and the longer-term
fundamentals for utility scale solar energy remain constructive and should
support demand for Shoals' products.
Portfolio Positioning
We have maintained our focus on quality stocks, as we continue to believe that
quality companies with durable franchises, good management teams and stable
earnings, that trade at a discount to their intrinsic value can add more
stability in investors' portfolios over the long term. We continue to believe
that smaller companies are worth investing in for long term investors as they
include innovative companies that serve market niches and thereby can provide
early access to exciting and innovative technologies and solutions.
During the first half of 2024, we initiated new, high-quality cyclical
positions in the industrials and consumer discretionary sectors. Among
industrial names, we initiated a position in AAON, a leading manufacturer of
heating, ventilation, and air conditioning (HVAC) systems that primarily
serves commercial and industrial markets. The company sells equipment to
property owners and contractors that are looking for a higher quality and more
energy efficient solution. Favourable secular tailwinds including
decarbonisation, electrification, and government regulations are helping to
accelerate growth as AAON shifts from a niche manufacturer into a premium
mainstream equipment provider. We like the company for their attractive
valuation, which screens reasonably well versus history and particularly
versus peers.
Within consumer discretionary, we added Five Below to the portfolio. Five
Below is a value retailer with a focus on tween/teen customers. We like the
differentiated concept in retail that has a niche customer focus and provides
good value with price points typically around US$5. The business model has
historically proven durable through cycles and we see potential for the
company to continue to expand its stores, which come with industry-leading
unit economics as they tend to deliver attractive returns on invested capital.
We also like the name for its low double-digit operating margins and high
return on capital.
These acquisitions were funded by profit-taking on some of the Company's best
performers. For example, we trimmed positions in the consumer staples name
Primo Water as well as the technology firm Macom Technology Solutions. Primo
Water is a water delivery company that has had a sizeable divestiture of its
international operations, which repositioned the company as a domestic
pure-play. The company recently announced a transformative merger of equals
transaction with the next largest player in the space, hence we used that
announcement, as well as its strong performance year to date, to trim back our
position modestly.
Macom Technology Solutions is a designer and manufacturer of semiconductors
that facilitate rapid and accurate movement of data for applications in the
Telecom, Industrial & Defense and Data Centre end markets. The company
benefited from its data centre exposure as the AI theme continued to drive
markets in the second quarter. While Macom expressed confidence for further
data centre growth in 2025 and we continue to like the company's market
exposure, we have taken some profits as valuations have expanded with a
healthy earnings recovery embedded in estimates. We also exited positions in
the portfolio due to merger and acquisition activities. Stericycle, a medical
waste disposal company announced being acquired by Waste Management, a
provider of comprehensive waste management services. AssetMark, key asset
management platform for financial advisers, announced an acquisition by GTCY,
a private equity firm.
Our largest absolute and relative overweight position remains in industrials,
followed by our second largest overweight in technology. Industrials have
historically been our largest overweight, as we tend to find high quality
businesses with solid market share in niche markets that offer stable growth
and strong profitability. The sector is also benefitting from a strong US
economy, generating close to 70% of their revenues domestically. Our
technology overweight is driven by semiconductors, where we have a diverse
exposure to several attractive end markets including autos, industrials and
data centres with competitively advantaged businesses that generate solid free
cash flows. Our largest underweights remain in the health care and energy
sectors. While we have struggled to find high quality, attractively priced
assets within healthcare, and most segments of the energy sector, the
transition to renewable energy sources is creating some interesting investment
opportunities within the alternative energy and midstream areas. Our position
in Shoals Technologies, mentioned above, is a case in point.
Market Outlook
The performance of the US economy is crucial for smaller companies, as they
tend to generate more of their earnings domestically than larger cap
companies. Small cap companies also tend to be more exposed to the economic
cycle and high interest rates, relative to larger caps, which tend to have
stronger balance sheets and lower gearing.
Despite some recent slowing in growth and a weakening in labour market
conditions, we expect the economy to remain in good shape, supported by
eventual rate cuts and ongoing strong consumer demand. Households, that make
up 70% of US GDP, continue to be in good shape with solid earnings power,
which benefits corporate America. This should benefit consumer and business
spending and provide support for small cap earnings, which appear poised to
grow faster than large cap earnings, after two consecutive years of declines.
Furthermore, small cap valuations are currently at historic lows relative to
large caps, and institutional investors remain under allocated, so any
improvement in sentiment towards this sector may encourage institutional
investors to increase their exposure. In all, we see several reasons to be
optimistic about the outlook for US small caps.
However, there is some risk that the US economic backdrop will become more
volatile, especially given the forthcoming US presidential election. While we
do not construct our portfolios based on top-down forecasts of macro or
geopolitical factors, as these are beyond our and the investee companies'
management teams' control, we are evaluating the impact that certain political
decisions could have on company fundamentals. We will also continue monitoring
incremental risks, which may create headwinds for US equities. That said, we
maintain a balanced approach between cyclical and defensive companies, with a
focus on fundamental bottom-up stock picking in the portfolio. It is important
to remember that volatility also creates opportunities, and we remain ready to
take advantage of any market dislocations to acquire innovative, high-quality
companies with attractive investment cases, with a view to maintaining the
Company's track record of capital growth and excess returns over the long
term.
For and on behalf of the
Investment Manager
Don San Jose
Jon Brachle
Dan Percella
Portfolio Managers
23rd August 2024
INTERIM MANAGEMENT REPORT
The Company is required to make the following disclosures in its Half Year
Report:
Principal and Emerging Risks and Uncertainties
The principal risks and uncertainties faced by the Company fall into the
following broad categories: underperformance; market and economic; discount
control; shareholder demand; loss of investment team or portfolio manager;
outsourcing; cyber crime; statutory and regulatory compliance; and climate
change. In addition, the following were identified as emerging risks:
political and economic; global pandemics; market risk; and ongoing shareholder
demand. The Board continues to closely consider and monitor these risks.
Information on each of these areas is given in the Strategic Report within the
Annual Report and Financial Statements for the year ended 31st December 2023.
In the view of the Board, these principal risks and uncertainties are as much
applicable to the remaining six months of the financial year as they were to
the six months under review.
Related Parties Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected the
financial position or the performance of the Company.
Going Concern
In accordance with The Financial Reporting Council's guidance on going concern
and liquidity risk, the Directors have undertaken a rigorous review of the
Company's ability to continue as a going concern. The Board has, in
particular, considered the impact of heightened market volatility since the
Russian invasion of Ukraine and the unrest in the Middle East, the
inflationary environment and other geopolitical and financial risks. However,
it does not believe the Company's going concern status is affected. The
Company's assets, the vast majority of which are investments in quoted
securities which are readily realisable, exceed its liabilities significantly
under all stress test scenarios reviewed by the Board. Gearing levels and
compliance with borrowing covenants are reviewed by the Board on a regular
basis. Furthermore, the Directors are satisfied that the Company and its key
third party service providers have in place appropriate business continuity
plans. Accordingly, having assessed the principal and emerging risks and other
matters, the Directors believe that there are no material uncertainties
pertaining to the Company that would prevent its ability to continue in such
operational existence for at least 12 months from the date of the approval of
this half yearly financial report.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the
half year financial report has been prepared in accordance with FRS 104
'Interim Financial Reporting' and gives a true and fair view of the state of
affairs of the Company, and of the assets, liabilities, financial position and
net return of the Company as at 30th June 2024 as required by the Disclosure
Guidance and Transparency Rules 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the Disclosure Guidance and
Transparency Rules.
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 accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business;
and the Directors confirm that they have done so.
For and on behalf of the Board
Dominic Neary
Chair 23rd August 2024
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30th June 2024
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th June 2024 30th June 2023 31st December 2023
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments
held at fair value through
profit or loss - 1,454 1,454 - (146) (146) - 10,889 10,889
Net foreign currency gains on
cash and loans - 3 3 - 1,020 1,020 - 825 825
Income from investments 1,736 - 1,736 2,135 - 2,135 3,865 381 4,246
Interest receivable 377 - 377 154 - 154 500 - 500
Gross return 2,113 1,457 3,570 2,289 874 3,163 4,365 12,095 16,460
Management fee (195) (779) (974) (207) (828) (1,035) (401) (1,602) (2,003)
Other administrative expenses (258) - (258) (212) - (212) (520) - (520)
Net return before finance costs
and taxation 1,660 678 2,338 1,870 46 1,916 3,444 10,493 13,937
Finance costs (150) (599) (749) (145) (579) (724) (304) (1,218) (1,522)
Net return/(loss) before taxation 1,510 79 1,589 1,725 (533) 1,192 3,140 9,275 12,415
Taxation (229) - (229) (314) - (314) (573) (57) (630)
Net return/(loss) after taxation 1,281 79 1,360 1,411 (533) 878 2,567 9,218 11,785
Return/(loss) per share (note 3) 2.03p 0.13p 2.16p 2.18p (0.82)p 1.36p 3.98p 14.30p 18.28p
All revenue and capital items in the above statement derive from continuing
operations.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies.
The net return/(loss) after taxation represents the profit/(loss) for the
period/year and also the total comprehensive income for the period/year.
CONDENSED STATEMENT OF CHANGES IN EQUITY
Called up Capital
share Share redemption Capital Revenue
capital premium reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000
Six months ended 30th June 2024 (Unaudited)
At 31st December 2023 1,638 45,758 1,851 226,987 3,491 279,725
Repurchase of shares into Treasury - - - (7,885) - (7,885)
Repurchase of share for cancellation (3) - - (397) - (400)
Proceeds from share forfeitures(2) - - - 358 - 358
Net return for the period - - - 79 1,281 1,360
Dividends paid in the period (note 4) - - - - (1,890) (1,890)
Forfeiture of unclaimed dividends (note 4)(2) - - - - 17 17
At 30th June 2024 1,635 45,758 1,851 219,142 2,899 271,285
Six months ended 30th June 2023 (Unaudited)
At 31st December 2022 1,638 45,758 1,851 221,271 2,539 273,057
Repurchase of shares into Treasury - - - (734) - (734)
Net (loss)/return for the period - - - (533) 1,411 878
Dividends paid in the period (note 4) - - - - (1,615) (1,615)
At 30th June 2023 1,638 45,758 1,851 220,004 2,335 271,586
Year ended 31st December 2023 (Audited)
At 31st December 2022 1,638 45,758 1,851 221,271 2,539 273,057
Repurchase of shares into Treasury - - - (3,502) - (3,502)
Net return for the year - - - 9,218 2,567 11,785
Dividends paid in the year (note 4) - - - - (1,615) (1,615)
At 31st December 2023 1,638 45,758 1,851 226,987 3,491 279,725
(1) These reserves form the distributable reserves of the Company and
may be used to fund distributions to shareholders.
(2) During the period, the Company undertook an Asset Reunification
Programme to reunite inactive shareholders with their shares and unclaimed
dividends. In accordance with the Company's Articles of Association, the
Company exercised its right to forfeit the shares belonging to untraced
shareholders for a period of 12 years or more. These shares were bought back
by the Company and cancelled. The proceeds, net of costs, were returned to the
Company. In addition, any unclaimed dividend for 12 years from the date of
payment of such dividend were forfeited and returned to the Company.
CONDENSED STATEMENT OF FINANCIAL POSITION
At 30th June 2024
(Unaudited) (Unaudited) (Audited)
At At At
30th June 2024 30th June 2023 31st December 2023
£'000 £'000 £'000
Fixed assets
Investments held at fair value through profit or loss 279,804 288,233 283,986
Current assets
Debtors 561 1,615 308
Cash and cash equivalents 7,334 6,810 19,237
7,895 8,425 19,545
Current liabilities
Creditors: amounts falling due within one year (16,414) (25,072) (23,806)
Net current liabilities (8,519) (16,647) (4,261)
Total assets less current liabilities 271,285 271,586 279,725
Net assets 271,285 271,586 279,725
Capital and reserves
Called up share capital 1,635 1,638 1,638
Share premium 45,758 45,758 45,758
Capital redemption reserve 1,851 1,851 1,851
Capital reserves 219,142 220,004 226,987
Revenue reserve 2,899 2,335 3,491
Total shareholders' funds 271,285 271,586 279,725
Net asset value per share (note 5) 439.9p 420.7p 438.6p
CONDENSED STATEMENT OF CASH FLOWS
For the six months ended 30th June 2024
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th June 2024 30th June 2023 31st December 2023
£'000 £'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 2,338 1,916 13,937
Adjustment for:
Net (gains)/losses on investments held at fair value through
profit or loss (1,454) 146 (10,889)
Net foreign currency exchange gains (3) (1,020) (825)
Dividend income (1,736) (2,135) (4,246)
Interest income (377) (154) (500)
Realised foreign currency exchange losses/(gains) on
transactions 45 - (1)
Realised foreign currency exchange losses on
JPMorgan USD Liquidity Fund (291) (297) (344)
Decrease in accrued income and other debtors 6 1 10
(Decrease)/increase in accrued expenses (88) (6) 77
Net cash outflow from operations before dividends, interest
and taxation (1,560) (1,549) (2,781)
Dividends received 1,452 1,637 3,469
Interest received 455 179 447
Overseas withholding tax recovered 29 173 116
Net cash inflow from operating activities 376 440 1,251
Purchases of investments (39,427) (37,763) (70,750)
Sales of investments 44,988 40,521 89,062
Net cash inflow from investing activities 5,561 2,758 18,312
Dividends paid (1,890) (1,615) (1,615)
Forfeiture of unclaimed dividends 17 - -
Repurchase of shares into Treasury (7,669) (734) (3,502)
Repurchase of share for cancellation (400) - -
Proceeds from share forfeitures 358 - -
Repayment of bank loan (7,850) - -
Loan interest paid (794) (665) (1,625)
Net cash outflow from financing activities (18,228) (3,014) (6,742)
(Decrease)/increase in cash and cash equivalents (12,291) 184 12,821
Cash and cash equivalents at start of period/year 19,237 6,652 6,652
Foreign currency exchange movements 388 (26) (236)
Cash and cash equivalents at end of period/year 7,334 6,810 19,237
Cash and cash equivalents consist of:
Cash and short term deposits - 61 42
Cash held in JPMorgan USD Liquidity Fund 7,334 6,749 19,195
Total 7,334 6,810 19,237
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the six months ended 30th June 2024.
1. Financial statements
The information contained within the condensed financial statements in this
half year report has not been audited or reviewed by the Company's Auditor.
The figures and financial information for the year ended 31st December 2023
are extracted from the latest published financial statements of the Company
and do not constitute statutory accounts for that year. Those financial
statements have been delivered to the Registrar of Companies, including the
report of the Auditor which was unqualified and did not contain a statement
under either section 498(2) or 498(3) of the Companies Act 2006.
2. Accounting policies
The condensed financial statements have been prepared in accordance with the
Companies Act 2006, FRS 102 'The Financial Reporting Standard applicable in
the UK and Republic of Ireland' of the United Kingdom Generally Accepted
Accounting Practice ('UK GAAP') and with the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies and Venture Capital
Trusts' (the revised 'SORP') issued by the Association of Investment Companies
in July 2022.
FRS 104, 'Interim Financial Reporting', issued by the Financial Reporting
Council (FRC) in March 2015 has been applied in preparing this condensed set
of financial statements for the six months ended 30th June 2024.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of financial statements
are consistent with those applied in the financial statements for the year
ended 31st December 2023.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th June 2024 30th June 2023 31st December 2023
£'000 £'000 £'000
Return/(loss) per share is based on the following:
Revenue return 1,281 1,411 2,567
Capital return/(loss) 79 (533) 9,218
Total return 1,360 878 11,785
Weighted average number of shares in issue 63,000,907 64,621,432 64,460,117
Revenue return per share 2.03p 2.18p 3.98p
Capital return/(loss) per share 0.13p (0.82)p 14.30p
Total return per share 2.16p 1.36p 18.28p
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th June 2024 30th June 2023 31st December 2023
Pence £'000 Pence £'000 Pence £'000
Dividend paid
Final dividend in respect of prior year 3.00 1,890 2.50 1,615 2.50 1,615
Total dividends paid in the period/year 3.00 1,890 2.50 1,615 2.50 1,615
Forfeiture of unclaimed dividends over 12 years - (17) - - - -
Net dividends paid in the period/year - 1,873 - 1,615 - 1,615
The dividend paid in the period/year has been funded from the revenue
earnings.
No interim dividend has been declared in respect of the six months ended 30th
June 2024 (2023: nil)
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th June 2024 30th June 2023 31st December 2023
£'000 £'000 £'000
Net assets (£'000) 271,285 271,586 279,725
Number of shares in issue at period/year end 61,669,962 64,558,532 63,770,149
Net asset value per share 439.9p 420.7p 438.6p
6. Fair valuation of instruments
The fair value hierarchy analysis for financial instruments held at fair value
at the period end is as follows:
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30th June 2024 30th June 2023 31st December 2023
Assets Liabilities Assets Liabilities Assets Liabilities
£'000 £'000 £'000 £'000 £'000 £'000
Level 1 279,804 - 288,233 - 283,986 -
Total value of investments 279,804 - 288,233 - 283,986 -
7. Analysis of changes in net debt
As at Other As at
31st December 2023 Cash flows non-cash charges 30th June 2024
£'000 £'000 £'000 £'000
Cash and cash equivalents
Cash and short term deposits 42 (42) - -
Cash held in JPMorgan USD Liquidity Fund 19,195 (12,249) 388 7,334
19,237 (12,291) 388 7,334
Borrowings
Debt due within one year (23,533) 7,850 (139) (15,822)
Net debt (4,296) (4,441) 249 (8,488)
Other non-cash charges relate to foreign currency exchange gains/(losses).
JPMORGAN FUNDS LIMITED
23rd August 2024
For further information, please contact:
Lucy Dina
For and on behalf of
JPMorgan Funds Limited
0800 20 40 20
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.
ENDS
A copy of the Half Year 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
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Half Year Report will also shortly be available on the Company's website
at www.jpmussmallercompanies.co.uk (http://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.
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