TIDMJMF
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 YEARED 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 GBP8.11 million (2022: GBP7.94 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 GBP25 million revolving
credit facility with National Australia Bank in February 2023, the
Board resolved to replace the facility with a GBP25 million,
two-year revolving credit facility with ING Bank. This is in
addition to the existing facility of GBP30 million (with an option
of further increasing the facility by GBP20 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 GBP30
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 GBP250
million of net assets to GBP200 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 Board manages these risks Risk is unchanged but
the investment strategy, by diversification of investments remains elevated due
for example as to thematic and through its investment to a continuation of
exposure, sector allocation, restrictions and guidelines, unfavourable economic
stock selection, undue which are monitored and reported conditions (caused by
concentration of holdings, on by the Manager. The Manager factors such as the geopolitical
factor risk exposure provides the Directors with crisis between Russia
or the degree of total timely and accurate management and Ukraine high inflation
portfolio risk, may lead information, including performance and interest rates) faced
to failure to beat the data and attribution analyses, by the UK equities market,
FTSE 250 index and peer revenue estimates, liquidity making investment decisions
companies. reports and shareholder analyses. to be more challenging
The Board monitors the implementation for the Portfolio Managers.
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 The Board monitors the share Risk remains stable.
often trade at discounts price against the absolute The discount at which
to their underlying NAVs; and sector relative premium/discount the Company's shares
they can also trade at levels. The Board reviews trade versus its NAV
a premium. Discounts sales and marketing activity widened to 14.9% over
and premiums can fluctuate and sector relative performance the review period (2022:
considerably leading (considered the primary drivers 13.6%). At its peak the
to volatile returns for of the relative discount level). discount reached 15.7%.
shareholders. The Company also has authority This is comparable with
to buy back its existing shares the discount experience
to enhance the NAV per share of its immediate peers
for remaining shareholders and also of investment
and to reduce the absolute trusts across many asset
level of discount and discount classes. During the year
volatility. the Company continued
to conduct share buybacks.
--------------------------------------- ----------------------------------
Market and Economic Risk
Market risk arises from This risk is managed to some The risk is unchanged
uncertainty about the extent by diversification but remains highlighted
future prices of the of investments and by regular by the quick succession
Company's investments, communication with the Manager of the events which have
which may reflect underlying on matters of investment strategy unfolded in recent times
uncertainties arising and portfolio construction i.e. Brexit, the outbreak
from economic, social, which will directly or indirectly of the COVID-19 pandemic
fiscal, climate and regulatory include an assessment of these and geopolitical crisis
changes. In the past risks. The Board receives in Russia-Ukraine, adding
few years Brexit and regular reports from the Manager significant pressure
the COVID-19 pandemic regarding market outlook and on markets and economies.
have been major sources gives the Portfolio Managers
of uncertainty and have discretion regarding acceptable
contributed to elevated levels of gearing and/or cash.
levels of market volatility. Currently the Company's gearing
In recent times, geopolitical policy is to operate within
risks have risen markedly a range of 10% net cash to
with the Russian invasion 20% geared.
of Ukraine. While direct The Board considers thematic
linkage to the UK from and factor risks, stock selection
Russia tend to be small, and levels of gearing on a
the impact of sanctions regular basis and has set
and the rise in commodity investment restrictions and
prices has caused disruptions guidelines which are monitored
to supply chains which and reported on by the Manager.
in turn has led to high The Board can, with shareholder
inflation and interest approval, look to amend the
rates. investment policy and objectives
These risks represent of the Company to gain exposure
the potential loss the to or mitigate the risks arising
Company might suffer from geopolitical instability.
through holding investments
in the face of negative
market movements.
--------------------------------------- ----------------------------------
Inappropriate Gearing Levels (both over and under gearing of the portfolio)
The Company borrows money To mitigate this risk all Risk remains heightened
for investment purposes. borrowing arrangements are by the effects of changes
If the investments fall monitored by the Board and made by governments and
in value, any borrowings those requiring Board approval, central banks to monetary
will magnify the extent as well as leverage levels, policy to combat inflation.
of this loss. If borrowing are discussed with the investment This has led to hikes
facilities are not renewed, managers at every Board meeting. in interest rates charged
either because banks Covenant levels are monitored by lenders however, there
stop lending or the Company regularly. The Company's investments are now signs that rates
cannot borrow at an appropriate are in quoted securities that are moderating.
rate or tenor, the Company are readily realisable. The
may have to sell investments Board ensures that any renewal
to repay borrowings and/or or replacement of such facilities
a lack of borrowing facilities is addressed early; the Manager
would leave the Company has regular discussions with
unable to access potential banks on lending appetite
opportunities and lag and pricing throughout the
behind the performance year.
of its geared peers. Further information on leverage
can be found in the 2023 Annual
Report.
--------------------------------------- ----------------------------------
Outsourcing
Disruption to, or failure Details of how the Board monitors Risk remains stable.
of, the Manager's accounting, the outsourced services and The Board continues to
dealing or payments systems the key elements of the risk monitor the outsourced
or the Depositary or management and internal control services.
Custodian's records may framework governing these
cause inaccurate reporting services are included within
and monitoring of the the Risk Management and Internal
Company's financial position Controls section of the Corporate
or result in a misappropriation Governance Statement in the
of assets. 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 The Company benefits directly Risk remains stable.
is regarded as at least and/or indirectly from all To date the Manager's
as important as more elements of JPMorgan's Cyber cyber security arrangements
traditional physical Security programme. The information have proven robust and
threats to business continuity technology controls around the Company has not been
and security. physical security of JPMorgan's impacted by any cyber
In addition to threatening data centres, security of attacks threatening its
the Company's operations, its networks and security operations.
such an attack is likely of its trading applications,
to raise reputational are tested by independent
issues which may damage auditors and reported every
the Company's share price six months against the AAF
and reduce demand for Standard.
its shares.
--------------------------------------- ----------------------------------
ESG Requirements from Investors
The Company's policy The Manager has integrated Risk remains stable.
on ESG and climate change the consideration of ESG factors Investors continue to
may be out of line with into the Company's investment seek greater ESG oversight
ESG practices which investors process. in their investment portfolios.
are looking to invest Further details are set out
in accordance with. in the ESG report in the 2023
Annual Report.
--------------------------------------- ----------------------------------
Regulatory Change
The Company's business The Board receives regular Risk remains stable.
model could become non-viable reports from its broker, depositary, Changes to the regulatory
as a result of new or registrar and Manager as well landscape are expected
revised rules or regulations as its legal advisers and to be ongoing.
arising from, for example, the Association of Investment
policy change or financial Companies on changes to regulations
monitoring pressure. 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.
--------------------------------------- ----------------------------------
Global Pandemics
COVID-19 has highlighted The Board receives reports Risk has reduced.
the speed and extent on the business continuity There are always exogenous
of economic damage that plans of the Manager and other risks and consequences
can arise from a pandemic. key service providers. The arising from a pandemic,
There is the risk that effectiveness of these measures which are difficult to
emergent strains may has been assessed throughout predict and plan for
not respond to current the course of the COVID-19 in advance. The Company
vaccines and may be more pandemic and the Board will does what it can to address
lethal and that they continue to monitor developments these risks when they
may spread as global as they occur and seek to emerge, not least operationally
travel increases. learn lessons which may be and in trying to meet
of use in the event of future its investment objective.
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.
--------------------------------------- ----------------------------------
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 GBP1,484,000 (2022: GBP2,244,000) of which
GBPnil (2022: GBPnil) was outstanding at the year end.
Included in administration expenses in note 6 in the 2023 Annual
Report are safe custody fees amounting to GBP4,000 (2022: GBP8,000)
payable to JPMorgan Chase, N.A. of which GBP2,000 (2022: GBP1,000)
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 GBPnil (2022: nil) of which GBPnil (2022: GBPnil)
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
GBP2,226,000 (2022: GBP15,559,000). Interest amounting to
GBP114,000 (2022: GBP36,000) was receivable during the year of
which GBPnil (2022: GBPnil) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP11,000
(2022: GBP3,000) were payable to JPMorgan Chase, N.A. during the
year of which GBP3,000 (2022: GBP1,000) was outstanding at the year
end.
At the year end, total cash of GBP258,000 (2022: GBP272,000) was
held with JPMorgan Chase, N.A. A net amount of interest of GBPnil
(2022: GBP5,000) was payable by the Company during the year from
JPMorgan Chase, N.A. of which GBPnil (2022: GBPnil) 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 Capital
up
share Share redemption Capital Revenue
capital premium reserve reserves(1) reserve(1) Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------- -------- ----------- ------------ ----------- -----------
At 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
GBP'000 GBP'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
GBP'000 GBP'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 Cash flows charges 30th June
2022 2023
GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'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 GBP4,847,000. However, the amount paid
amounted to GBP4,767,000 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 GBP8,110,000 (2022: GBP7,937,000). The revenue reserve
after payment of the final dividend will amount to GBP7,668 (2022:
GBP6,336,000).
2023 2022
GBP'000 GBP'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 (GBP'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.
Stay Informed
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END
FR VVLFFXKLFBBE
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September 19, 2023 02:00 ET (06:00 GMT)
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