REG - JPMorgan Mid Cap - Final Results - Yr Ended 30th June 2023
19/09/2023 07:00
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RNS Number : 8324M JPMorgan Mid Cap Invest Trust PLC 19 September 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 return(APM) 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 assets(APM) 7.5
Return to shareholders(APM) 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 The Board manages these risks by diversification of investments and through Risk is unchanged but remains elevated due to a continuation of unfavourable
exposure, sector allocation, stock selection, undue concentration of holdings, its investment restrictions and guidelines, which are monitored and reported economic conditions (caused by factors such as the geopolitical crisis between
factor risk exposure or the degree of total portfolio risk, may lead to on by the Manager. The Manager provides the Directors with timely and accurate Russia and Ukraine high inflation and interest rates) faced by the UK equities
failure to beat the FTSE 250 index and peer companies. management information, including performance data and attribution analyses, market, making investment decisions to be more challenging for the Portfolio
revenue estimates, liquidity reports and shareholder analyses. The Board Managers.
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.
Discount Control
Investment trust shares often trade at discounts to their underlying NAVs; The Board monitors the share price against the absolute and sector relative Risk remains stable.
they can also trade at a premium. Discounts and premiums can fluctuate premium/discount levels. The Board reviews sales and marketing activity and
considerably leading to volatile returns for shareholders. sector relative performance (considered the primary drivers of the relative The discount at which the Company's shares trade versus its NAV widened to
discount level). The Company also has authority to buy back its existing 14.9% over the review period (2022: 13.6%). At its peak the discount reached
shares to enhance the NAV per share for remaining shareholders and to reduce 15.7%. This is comparable with the discount experience of its immediate peers
the absolute level of discount and discount volatility. 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 This risk is managed to some extent by diversification of investments and by The risk is unchanged but remains highlighted by the quick succession of the
investments, which may reflect underlying uncertainties arising from economic, regular communication with the Manager on matters of investment strategy and events which have unfolded in recent times i.e. Brexit, the outbreak of the
social, fiscal, climate and regulatory changes. In the past few years Brexit portfolio construction which will directly or indirectly include an assessment COVID-19 pandemic and geopolitical crisis in Russia-Ukraine, adding
and the COVID-19 pandemic have been major sources of uncertainty and have of these risks. The Board receives regular reports from the Manager regarding significant pressure on markets and economies.
contributed to elevated levels of market volatility. In recent times, market outlook and gives the Portfolio Managers discretion regarding
geopolitical risks have risen markedly with the Russian invasion of Ukraine. acceptable levels of gearing and/or cash. Currently the Company's gearing
While direct linkage to the UK from Russia tend to be small, the impact of policy is to operate within a range of 10% net cash to 20% geared.
sanctions and the rise in commodity prices has caused disruptions to supply
chains which in turn has led to high inflation and interest rates. The Board considers thematic and factor risks, stock selection and levels of
gearing on a regular basis and has set investment restrictions and guidelines
These risks represent the potential loss the Company might suffer through which are monitored and reported on by the Manager.
holding investments in the face of negative market movements.
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.
Inappropriate Gearing Levels (both over and under gearing of the portfolio)
The Company borrows money for investment purposes. If the investments fall in To mitigate this risk all borrowing arrangements are monitored by the Board Risk remains heightened by the effects of changes made by governments and
value, any borrowings will magnify the extent of this loss. If borrowing and those requiring Board approval, as well as leverage levels, are discussed central banks to monetary policy to combat inflation. This has led to hikes in
facilities are not renewed, either because banks stop lending or the Company with the investment managers at every Board meeting. Covenant levels are interest rates charged by lenders however, there are now signs that rates are
cannot borrow at an appropriate rate or tenor, the Company may have to sell monitored regularly. The Company's investments are in quoted securities that moderating.
investments to repay borrowings and/or a lack of borrowing facilities would are readily realisable. The Board ensures that any renewal or replacement of
leave the Company unable to access potential opportunities and lag behind the such facilities is addressed early; the Manager has regular discussions with
performance of its geared peers. banks on lending appetite and pricing throughout the year.
Further information on leverage can be found in the 2023 Annual Report.
Outsourcing
Disruption to, or failure of, the Manager's accounting, dealing or payments Details of how the Board monitors the outsourced services and the key elements Risk remains stable. The Board continues to monitor the outsourced services.
systems or the Depositary or Custodian's records may cause inaccurate of the risk management and internal control framework governing these services
reporting and monitoring of the Company's financial position or result in a are included within the Risk Management and Internal Controls section of the
misappropriation of assets. 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.
Cyber Crime
The threat of cyber attack is regarded as at least as important as more The Company benefits directly and/or indirectly from all elements of Risk remains stable.
traditional physical threats to business continuity and security. JPMorgan's Cyber Security programme. The information technology controls
around physical security of JPMorgan's data centres, security of its networks To date the Manager's cyber security arrangements have proven robust and the
In addition to threatening the Company's operations, such an attack is likely and security of its trading applications, are tested by independent auditors Company has not been impacted by any cyber attacks threatening its operations.
to raise reputational issues which may damage the Company's share price and and reported every six months against the AAF Standard.
reduce demand for its shares.
ESG Requirements from Investors
The Company's policy on ESG and climate change may be out of line with ESG The Manager has integrated the consideration of ESG factors into the Company's Risk remains stable.
practices which investors are looking to invest in accordance with. investment process.
Investors continue to seek greater ESG oversight in their investment
Further details are set out in the ESG report in the 2023 Annual Report. portfolios.
Regulatory Change
The Company's business model could become non-viable as a result of new or The Board receives regular reports from its broker, depositary, registrar and Risk remains stable.
revised rules or regulations arising from, for example, policy change or Manager as well as its legal advisers and the Association of Investment
financial monitoring pressure. Companies on changes to regulations which could impact the Company and its Changes to the regulatory landscape are expected to be ongoing.
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.
Global Pandemics
COVID-19 has highlighted the speed and extent of economic damage that can The Board receives reports on the business continuity plans of the Manager and Risk has reduced.
arise from a pandemic. There is the risk that emergent strains may not respond other key service providers. The effectiveness of these measures has been
to current vaccines and may be more lethal and that they may spread as global assessed throughout the course of the COVID-19 pandemic and the Board will There are always exogenous risks and consequences arising from a pandemic,
travel increases. continue to monitor developments as they occur and seek to learn lessons which which are difficult to predict and plan for in advance. The Company does what
may be of use in the event of future pandemics. it can to address these risks when they emerge, not least operationally and in
trying to meet its investment objective.
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.
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 reserves(1) reserve(1) 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 (8,331) 107,110
loss
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
(https://secureweb.jpmchase.net/readonly/https:/lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDIsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDA0MDUuMTk3NzA4MDEiLCJ1cmwiOiJodHRwczovL2RhdGEuZmNhLm9yZy51ay8jL25zbS9uYXRpb25hbHN0b3JhZ2VtZWNoYW5pc20ifQ.b7Q7NXHGRA8MjB_Ugl8Tv4JxhiU28TbcoNb04FTTMiY/br/77057565556-l)
The 2023 Annual Report will shortly be available on the Company's website at
www.jpmmidcap.co.uk (http://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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JPMORGAN FUNDS LIMITED
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