8 Jun 2017 07:00
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN JAPAN SMALLER COMPANIES TRUST PLC
FINAL RESULTS FOR THE YEAR ENDED 31st MARCH 2017
Legal Entity Identifier: 549300KP3CRHPQ4RF811
chairman's statement
Dear Shareholders,
The Company's total return on net assets for the year ended 31st March 2017 was +20.9%, versus +34.6% for the benchmark. The share price total return was +25.2%.
Investment Performance
As you will see from the Investment Managers' Report, despite enjoying good absolute performance the Company's net assets growth was behind our benchmark index return. In essence, this was because of a strong investor move in favour of cyclical and perceived 'value' stocks during the course of the year, which did not benefit our portfolio. Our Managers remain committed to identifying well managed and resourced long term growth companies, although these will from time to time be overlooked by investors in search of shorter term performance opportunities. The Board is pleased to note that our Managers will continue to maintain their low portfolio turnover, growth style, investment process.
Last year saw returns augmented by the impact of a weak sterling exchange rate following the EU Referendum outcome. The favourable effect this provided was also evident in the Company's income statement, where the translation of Japanese yen denominated dividends into sterling saw our 'Income from investments' rise 56% from £2.26 million to £3.53 million. The upshot was the Company's first meaningfully positive net return after taxation of £523,000, albeit that no dividend payments to shareholders are possible because of a substantial deficit carried forward on revenue reserves.
Subscription Shares
In December 2016, the Company issued 7,029,133 new Ordinary shares following the exercise of all the outstanding rights attached to the Subscription shares awarded in December 2014. The conversion raised £17,080,793 for the Company. Following the issue, the Company's issued share capital consisted of 55,944,560 Ordinary shares of 10p each, with each Ordinary share carrying the right to one vote. The Company's current issued share capital less the total number of shares held in Treasury is 54,852,560.
The Board is pleased with the result of the Subscription share offer. It has rewarded subscription shareholders for their commitment to the Company and has raised additional funds, helping to reduce the Company's ongoing costs ratio. This measure of the Company's operating expenses was 1.31% last year, well down from the figure of 1.87% for the year ended 31st March 2012. Further, as already announced, the management fee arrangements were trimmed with effect from 1st January 2017, additionally moderating the costs of running the Company.
During the year, the Company issued 8,618,474 Ordinary shares for a total consideration of £20,943,000 on the conversion of Subscription shares. Following the final exercise of Subscription share rights on 30th November 2016, no subscription shares remain in issue and accordingly the listing of the Subscription shares was cancelled on 30th November 2016.
Also during the year, the Company repurchased 554,500 Ordinary shares into Treasury for a total consideration of £1,771,000. At the year end, a total of 964,000 shares were held in Treasury.
Borrowing
During the year, the Company replaced its Yen 3.0 billion three-year fixed rate loan facility with a one-year revolving floating rate loan of Yen 3.0 billion with Scotiabank.
The new loan was secured on favourable terms and allows the Company to repay the loan as and when required without the penalties associated with a fixed rate loan. It also gives greater flexibility to manage the portfolio's cash better during this current period of negative interest rates in Japan.
The credit facility with Scotiabank provides the Investment Managers with the ability to gear tactically. The Company's investment policy permits gearing within a range of 10% net cash to 25% geared. However, the Board requires the Investment Managers, in normal market conditions, to operate in the range of 5% cash to 15% geared. The level of gearing is reviewed by the Directors at each Board meeting. During the year, the Company's gearing level ranged between 2.5% and 6.3% and finished the fiscal year at this higher level.
Outlook and Conclusion
Growth in Japan's economy is picking up amid strong evidence of improving conditions in the United States and Europe, and better trading too in most of those emerging economies which are important to Japanese companies. There are longstanding constraints on the pace of growth in Japan - including ageing demographics and relatively weak standards of corporate governance - but these are well known and are being successfully addressed by reform initiatives and thoughtful legislation. A set of 'work-style reforms', for example, will come into force soon which will limit excessive overtime, provide for equal pay for equal work, encourage work beyond normal retirement age and so on. Further, recent corporate governance reforms are already resulting in better capital management and shareholder returns.
It is five years since the current investment management team took responsibility for the Company's portfolio and the very satisfactory annualised returns of 18.8% - which are pleasingly ahead of our benchmark - testify to the success of the investment philosophy and process adopted and implemented. The Board is confident that by investing in companies that have strong fundamentals and durable competitive advantages, returns to shareholders will continue to be attractive.
Alan Clifton
Chairman
7 June 2017
Investment managers' report
Market Review
The diluted total return on net assets was 20.9% in sterling terms for the fiscal year that ended in March 2017. The positive return for the fiscal year was attributable to gains in the underlying asset class and the fall in the value of sterling. However, the Company underperformed its benchmark by 13.7% for the fiscal year. Over the same period, the broader Japanese equity market, measured by the bellwether TOPIX index, gained over 14% in Japanese yen terms.
From the end of 2015 to June 2016, Japanese equities were on a downward trend, while the yen strengthened and bond yields fell. On 23rd June 2016, the UK voted in a referendum to leave the European Union. The market's immediate reaction was to buy the yen and sell equities. The Japanese 10-year bond yield fell to as low as -0.3% in July 2016. However, the markets were quick to recover from the shock. Investors' risk aversion receded and the equity market rebounded by 6% during the following three months and by another 15% in the October to December 2016 quarter. In November 2016, Republican nominee Donald Trump won the US Presidential election. Contrary to the market consensus that such an outcome would be negative for the global economy, both the US dollar and equity markets reacted positively and bonds sold off post the election. We believe this is primarily because Republicans won in both the Senate and the House of Representatives. Under this Republican President, the US is more likely to introduce tax cuts, fiscal stimulus and deregulation.
This rally in equity markets was led by financial and cyclical stocks, both of which had underperformed the broader markets in the preceding sell-off. In other words, value stocks rallied strongly, while quality and growth stocks lagged. The reversal in the style performance was very stark. Between July and December 2016 when the market rallied, value as a style outperformed growth by over 20%, as measured by the performance of Russell Nomura style indices. For the 12 months under review, while the outperformance is not as large, it is still close to 10%. In the small-cap universe, the gap was as wide as 15%. This is because the underlying fundamentals of the global economy had been slowly improving aside from the political drama and the valuations of the equity markets in general, and cyclical stocks in particular, started to recover from their extremely depressed levels.
Turning to Japan, the economic performance was mixed. Real GDP growth was positive for four consecutive quarters in 2016, and grew by 1.0% in the year as a whole. We expect GDP to grow steadily throughout 2017. The demographic trend means the supply of labour is increasingly tight. The unemployment rate fell to 2.8% in February 2017. However, this is yet to translate into strong wage growth, and inflation has remained low. As a result, the Bank of Japan kept its aggressive monetary stimulus. At its September 2016 meeting, the Bank of Japan shifted the policy target from quantitative easing towards the yield curve. The Bank of Japan interest rate was maintained at -0.1%.
Performance Review
During the fiscal year, both sector allocation and stock selection detracted from relative performance. The biggest detractors included Invincible Investment Corp (Real Estate), Anicom (Insurance), GMO Payment Gateway (Software & Services), Asahi Intecc (Health Care Equipment and Services) and Sohgo Security Services (Commercial & Professional Services).
In general, the stocks that performed well prior to Brexit underperformed, and vice versa, often with little change in the underlying fundamentals. All five stocks listed above had been strong performers in the previous fiscal year and, with the exception of Asahi Intecc, they were among the top five contributors. While there are company-specific reasons for underperformance, the stocks all suffered from profit-taking:
• Invincible Investment Corp is a real estate investment trust that has increased exposure to hotels through acquisitions. Invincible Investment Corp underperformed because of the slowdown in the growth of inbound tourists. This, coupled with an increase in the supply of hotel rooms in Tokyo, led to a decline in the utilisation rate. This was the largest position in the portfolio at the end of last fiscal year. We reduced the position size firstly in April 2016 due to valuation considerations, then trimmed it further as we reduced our top-line expectations. However, Invincible Investment Corp has continued to underperform. We believe that the valuation reflects excessive pessimism, and we are maintaining the remaining position.
• Anicom specialises in pet insurance, a market that is still in its infancy in Japan and one continuing to grow strongly. The ageing population is a tailwind for the company as an increasing number of elderly people live with pets and they have a high propensity to spend on their pets. Its earnings growth decelerated in 2016 as the company invested aggressively in new business initiatives, which was not received well by the market. We disagree with that view since we consider that the market is still underpenetrated and their opportunity set will expand significantly if any one of them succeeds. We have not made any change to the position.
• GMO Payment Gateway provides a payment processing service, with the primary focus on credit card payments for online shopping. It dominates the small merchandiser space and has grown strongly on the back of increasing diffusion of e-commerce. It is diversifying its customer base to larger firms and public entities, into overseas markets, and also into new lines of business. We believe the company can continue to grow earnings by 20%-30% per annum over the medium term. In our view there is no reason for the underperformance other than profit-taking.
• Asahi Intecc is a medical equipment manufacturer. Its main products are PTCA guide wires and catheters. The market is growing by taking share from highly invasive bypass surgery. Asahi Intecc has outgrown the market by increasing its market share with innovative new products. We are confident that the company will continue to offer huge growth potential and we are maintaining it as the portfolio's top holding as of March 2017.
• Sohgo Security Services is the second-largest operator of home and office security services in Japan after Secom. The company has grown strongly under the new management team that took charge in 2012, following many years of stagnation. Its profit margin still lags that of Secom and we believe there is further scope for the company to expand its margins and therefore profit. We reduced the position size in early 2016 as the stock had done very well and the valuation became less compelling.
On the other hand, both Nittoku Engineering (Capital Goods), M3 (Health Care Equipment & Services) and Tokyo Individualized Educational Institute (Consumer Services) contributed most positively to performance:
• Nittoku Engineering is the global leader in coil-winding machines for a variety of motors for smartphones and home appliances, as well as for sensors. The automobile sector represents a growth opportunity for the Company as the number of sensors per vehicle continues to grow. In the long run, we think the company is very well positioned to benefit from the proliferation of the 'internet of things' (IoT) as the infrastructures require a large number of sensors.
• M3 operates websites used by doctors and helps pharmaceutical companies to reduce their marketing expenses. It is the number one site in Japan and the United Kingdom, amongst other regions. We sold M3 in July after its market capitalisation rose to one of the top 100. This follows Sysmex (medical equipment) that we sold in March 2015 when its market capitalisation also rose to one of the top 100. We owned both M3 and Sysmex for extended periods and rode the volatility in share price in the interim with strong conviction on their long-term growth outlooks. We aspire to repeat the same with many other holdings in the portfolio.
• Tokyo Individualized Educational Institute operates intensive study schools and has steadily grown earnings under a new management team since 2012. We sold the entire position in March as valuations became demanding.
At a sector level, the bottom contributors include insurance (overweight), software & services (overweight), materials (underweight) and banks (underweight):
• Insurance (overweight) performed poorly due to its largest constituent, Anicom, which is held in the portfolio.
• There are two main subsets within the software & services sector: domestic-orientated services companies, which tend to be defensive in terms of both their earnings and share price performance; and internet companies. Both groups underperformed in general in a rally led by riskier financials and cyclicals.
• Materials and banks (both underweight) outperformed thanks to increased optimism on the global economy.
Portfolio Activity
There has been little change in the overall structure of the portfolio. The turnover for the year was 14.9%. The low turnover reflects the strong conviction we have over the stocks that we own in the portfolio. The gearing rose from 4.7% at the beginning of the fiscal year to 6.2% at the end of March 2017, after investing all the proceeds from the subscription shares exercise.
We maintained a bias towards quality and growth - as opposed to cyclical - companies with strong balance sheets and cash flows. We continued to allocate a large part of the capital to our long-standing investment themes, including healthcare, factory automation, e-commerce/ mobile internet and infrastructure. Within healthcare, we own stocks that offer growth through innovation. Although the ageing population is positive for the sector, the fiscal constraints mean most pharmaceutical companies face severe pricing pressure from governments. Factory automation benefits from rising wages in emerging countries, as well as the falling working age population in Japan.
During the fiscal year, we added exposure to semiconductors. The key here is the exponential growth in demand for data as the cloud and IoT become integral to society. In addition, many semi-conductor companies are enjoying strong demand growth from automobiles as the quantity of chips per vehicle increases. Staffing services is another area where we are finding new opportunities. The diminishing and ageing population is a tailwind for the related companies because employers are finding it increasingly difficult to hire and retain people. There are now 1.43 jobs on offer per jobseeker. This reading is the highest since 1991 at the height of the economic bubble in Japan.
On the other hand, we avoided companies that operate in industries plagued by excess supply. Many stocks in the regional banking and materials sector fall into this category.
We would like to highlight two of our largest purchases during the year:
• Yamabiko is a manufacturer of professional gardening equipment with over 50% of its sales in the US. More importantly, about two-thirds of the profit comes from recurring revenues from parts, accessories and servicing. We believe the company will compound steady growth in profits as the installed base grows over time. The shares trade on price-to-earnings ratios in the low teens, which is a significant discount to similar growth businesses.
• TEMP Holdings is the second largest provider of staffing services in Japan. We believe its depth and breadth of services will pave the way for market share gains. In the staffing and related services sector, we also own SMS, Benefit One and Atrae.
Outlook and Strategy
Japan's economy continues to expand at a reasonable pace, although the growth rate remains constrained by the demographics. We believe that the global economic growth will accelerate as fiscal policies turn from a headwind to at least neutral, and possibly to a tailwind. The strong growth is broadening beyond the US to Europe and the emerging economies. Encouragingly, earnings expectations have been improving across regions and sectors after several years of earnings recession in Europe and emerging markets. Our base case is that corporate earnings in aggregate will grow strongly in 2017. Corporate governance reforms in terms of better capital management and shareholder returns, combined with unwinding of cross shareholdings, are slowly but steadily taking hold. Listed companies generally have healthy balance sheets and can afford much higher payout ratios. The valuations are not at all demanding in our opinion. The TOPIX trades on around 14x prospective earnings and 1.2x book value, and is cheap relative to its own history and relative to the rest of the world.
Our strategy is unchanged from last fiscal year, as explained in detail in the Portfolio Activity section above. The last fiscal year was difficult for us, as is clear from the underperformance of the portfolio. This highlights the risk associated with our investment style, which is quality growth when market sentiment favours more cyclical stocks. We aim to achieve superior long-term performance by investing in companies that have strong economics with durable competitive advantage. These companies grow their intrinsic value by compounding over a long period of time and, combined with a proper governance structure, will reward minority shareholders.
However, there are periods during which our investment style does not produce positive short-term performance. Typically, this happens when there is a significant reversal in the market direction in a short space of time. We believe our investment process is capable of overcoming short-term setbacks to produce superior performance over the long term. The Company has delivered an 18.8% annualised return over the last five years, more than 4% per annum ahead of the benchmark and almost 3% better than simply investing in a growth index such as the Russell Nomura Small Cap Growth Index. Compared to the TOPIX, which is dominated by large-cap stocks, the performance of the portfolio is 5.7% per annum higher over five years.
Annualised Performance | 1 year | 3 years | 5 years |
JPM Japan Smaller Companies Trust | 20.9% | 21.6% | 18.8% |
S&P Japan Small Cap | 34.6% | 20.8% | 14.6% |
Russell Nomura Small Cap Growth Index | 25.1% | 21.2% | 16.1% |
TOPIX | 33.0% | 18.1% | 13.1% |
We are in a strong position to deliver above-benchmark returns through investments in smaller companies in Japan. We have local expertise with strong internal research resources. Smaller companies in Japan are often under-researched compared to other large markets and our focus on long-term growth is a differentiator from many of our competitors.
Shoichi Mizusawa
Nicholas Weindling
Eiji Saito
Investment Managers
7 June 2017
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. The principal risks and how they are being managed or mitigated are summarised as follows:
Operational and Cyber Crime:
Disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included within the Risk Management and Internal Control section of the Corporate Governance report.
The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. The Company benefits directly or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by independent reporting accountants and reported on every six months against the AAF Standard.
The Board also reviews the cyber security standards of each of its key service providers.
Investment Underperformance and Strategy
An inappropriate investment strategy, for example asset allocation or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, resulting in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and regularly reported on by the Manager. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses.
The Board monitors the implementation and results of the investment process with the Investment Managers, who attend all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Managers employ the Company's gearing within a strategic range set by the Board. The Board holds a separate meeting devoted to strategy each year.
Loss of Investment Team or Investment Manager:
Loss of key staff by the Manager, such as the Investment Managers, could affect the performance of the Company. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team based approach.
Share Price Relative to Net Asset Value ('NAV') per Share:
If the share price of an investment trust is lower than the NAV per share, the shares are said to be trading at a discount. Throughout the year ended 31 March 2017, the Company's shares traded at a discount. The Board monitors the Company's discount level and, although the rating largely depends upon the relative attractiveness of the portfolio, the Board will seek to address imbalances in the supply and demand of the Company's shares through a programme of share issuance and buybacks.
Political and Regulatory:
Changes in financial or tax legislation, including in Japan and the UK may adversely affect the Company either directly or because of restrictions or enforced changes on the operations of the Manager. JPMF makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate.
In addition, the Company is subject to political risks, such as the imposition of restrictions on the free movement of capital. The Company is therefore at risk from changes to the regulatory, legislative and taxation framework within which it operates, whether such changes were designed to affect it or not. The Board will continue to keep under review the impact of the UK's decision to leave the European Union. The negotiations between the UK and European Union are likely to introduce further currency volatility which may impact portfolio returns.
statement of directors' responsibilities
The Directors are responsible for preparing the annual report and financial statements in accordance with applicable law and regulations.
The Companies Act 2006 requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and financial statements are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business;
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The financial statements are published on the Company's website, www.jpmjapansmallercompanies.co.uk which is maintained by the Company's Manager. The maintenance and integrity of the website is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. The financial statements are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.
Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.
Each of the Directors confirm that, to the best of their knowledge:
• the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and return or loss of the Company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
The Board confirms that it is satisfied that the annual report and financial statements taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the position and performance, strategy and business model of the Company.
The Board also confirms that it is satisfied that the Strategic Report and Directors' Report include a fair review of the development and performance of the business, and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
For and on behalf of the BoardDeborah Guthrie
Non-Executive Director
7 June 2017
statement of comprehensive income
for the year ended 31st March 2017
2017 | 2016 | |||||
Revenue | Capital | Total | Revenue | Capital | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
Gains on investments held at fair value through profit or loss | - | 36,931 | 36,931 | - | 19,822 | 19,822 |
Net foreign currency losses | - | (1,544) | (1,544) | - | (744) | (744) |
Income from investments | 3,528 | - | 3,528 | 2,259 | - | 2,259 |
Gross return | 3,528 | 35,387 | 38,915 | 2,259 | 19,078 | 21,337 |
Management fee | (1,928) | - | (1,928) | (1,510) | - | (1,510) |
Other administrative expenses | (447) | - | (447) | (398) | - | (398) |
Net return before finance costs and taxation | 1,153 | 35,387 | 36,540 | 351 | 19,078 | 19,429 |
Finance costs | (275) | - | (275) | (261) | - | (261) |
Net return before taxation | 878 | 35,387 | 36,265 | 90 | 19,078 | 19,168 |
Taxation | (355) | - | (355) | (224) | - | (224) |
Net return/(loss) after taxation | 523 | 35,387 | 35,910 | (134) | 19,078 | 18,944 |
Return/(loss) per Ordinary share - undiluted | 1.04p | 70.69p | 71.73p | (0.29)p | 40.76p | 40.47p |
Return/(loss) per Ordinary share - diluted | 1.01p | 68.67p | 69.68p | (0.29)p | 40.57p | 40.28p |
Statement of Changes in equity
for the year ended 31st March 2017
Called | Capital | ||||||
up share | Share | redemption | Other | Capital | Revenue | ||
capital | premium | reserve | reserve1 | reserves | reserve2 | Total | |
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
At 31st March 2015 | 4,678 | 12,414 | 1,836 | 314,775 | (188,247) | (13,224) | 132,232 |
Conversion of Subscription shares into Ordinary shares3 | (1) | 1 | - | - | - | - | - |
Issue of Ordinary shares on exercise of Subscription shares4 | 64 | 1,474 | - | - | - | - | 1,538 |
Net return/(loss) for the year | - | - | - | - | 19,078 | (134) | 18,944 |
At 31st March 2016 | 4,741 | 13,889 | 1,836 | 314,775 | (169,169) | (13,358) | 152,714 |
Repurchase of shares into Treasury | - | - | - | (1,771) | - | - | (1,771) |
Conversion of Subscription shares into Ordinary shares5 | (8) | 8 | - | - | - | - | - |
Issue of Ordinary shares on exercise of Subscription shares6 | 862 | 20,081 | - | - | - | - | 20,943 |
Net return for the year | - | - | - | - | 35,387 | 523 | 35,910 |
At 31st March 2017 | 5,595 | 33,978 | 1,836 | 313,004 | (133,782) | (12,835) | 207,796 |
1 The share premium was cancelled in the period ended 31st March 2001 and redesignated as 'other reserve' for the purpose of financing share buybacks.
2 This reserve forms the distributable reserve of the Company and may be used to fund distribution of profits to investors via dividend payments.
3 Comprises £634 for conversion of the 634,004 Subscription shares of 0.1p each issued on 16th December 2014.
4 Comprises £1,540,630 received upon the conversion into Ordinary shares of the 634,004 Subscription shares of 0.1p each issued issued on 16th December 2014, less the costs associated with the conversion of Subscription shares in December 2014 of £2,655.
5 Comprises £8,618 for conversion of the remaining 8,618,474 Subscription shares of 0.1p each issued on 16th December 2014.
6 Comprises £20,942,892 received upon the conversion into Ordinary shares of the remaining 8,618,474 Subscription shares of 0.1p each issued on 16th December 2014.
statement of financial position
at 31st March 2017
2017 | 2016 | |
£'000 | £'000 | |
Fixed assets | ||
Investments held at fair value through profit or loss | 220,785 | 160,080 |
Current assets | ||
Derivative financial instruments | 4 | - |
Debtors | 1,461 | 1,005 |
Cash and cash equivalents | 4,895 | 10,643 |
6,360 | 11,648 | |
Creditors: amounts falling due within one year | (19,349) | (19,014) |
Net current liabilities | (12,989) | (7,366) |
Total assets less current liabilities | 207,796 | 152,714 |
Net assets | 207,796 | 152,714 |
Capital and reserves | ||
Called up share capital | 5,595 | 4,741 |
Share premium | 33,978 | 13,889 |
Capital redemption reserve | 1,836 | 1,836 |
Other reserve | 313,004 | 314,775 |
Capital reserves | (133,782) | (169,169) |
Revenue reserve | (12,835) | (13,358) |
Total shareholders' funds | 207,796 | 152,714 |
Net asset value per Ordinary share - undiluted | 377.9p | 325.5p |
Net asset value per Ordinary share - diluted1 | 377.9p | 312.7p |
1 As at 31st March 2017 there was no dilution effect as all of the Subscription shares were exercised on or before 30th November 2016.
Deborah Guthrie
Non-Executive Director
Company registration number: 3916716.
statement of cash flows
for the year ended 31st March 2017
2017 | 2016 | |
£'000 | £'000 | |
Net cash outflow from operations before dividends and interest (note 16) | (848) | (1,032) |
Dividends received | 2,647 | 1,793 |
Interest paid | (371) | (254) |
Net cash inflow from operating activities | 1,428 | 507 |
Purchases of investments | (62,298) | (44,433) |
Sales of investments | 40,244 | 49,571 |
Settlement of foreign currency contracts | (78) | (11) |
Net cash (outflow)/inflow from investing activities | (22,132) | 5,127 |
Issue of Ordinary shares on exercise of Subscription shares (net of costs) | 20,943 | 1,538 |
Repurchase of shares into Treasury | (1,771) | - |
Repayment of bank loan | (23,208) | - |
Drawdown of bank loans | 18,993 | - |
Net cash inflow from financing activities | 14,957 | 1,538 |
(Decrease)/increase in cash and cash equivalents | (5,747) | 7,172 |
Cash and cash equivalents at start of year | 10,643 | 3,252 |
Exchange movements | (1) | 219 |
Cash and cash equivalents at end of year | 4,895 | 10,643 |
(Decrease)/increase in cash and cash equivalents | (5,747) | 7,172 |
Cash and cash equivalents consist of: | ||
Cash and short term deposits | 4,895 | 10,643 |
Total | 4,895 | 10,643 |
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared 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 November 2014 and updated in January 2017.
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 Directors' Report form part of these financial statements.
2. Return/(loss) per Ordinary share
2017 | 2016 | ||
£'000 | £'000 | ||
Return/(loss) per Ordinary share is based on the following: | |||
Revenue return/(loss) | 523 | (134) | |
Capital return | 35,387 | 19,078 | |
Total return | 35,910 | 18,944 | |
Weighted average number of Ordinary shares in issue during the year used for the purpose of the undiluted calculation | 50,056,102 | 46,809,711 | |
Weighted average number of Ordinary shares in issue during the year used for the purpose of the diluted calculation | 51,532,925 | 47,030,398 | |
Undiluted | |||
Revenue return/(loss) per share | 1.04p | (0.29)p | |
Capital return per share | 70.69p | 40.76p | |
Total return per share | 71.73p | 40.47p | |
Diluted | |||
Revenue return/(loss) per share | 1.01p | (0.29)p | |
Capital return per share | 68.67p | 40.57p | |
Total return per share | 69.68p | 40.28p |
The diluted return/(loss) per Ordinary share represents the return/(loss) after taxation divided by the weighted average number of Ordinary shares in issue during the year as adjusted in accordance with IAS 33, as required by FRS 102.
3. Net asset value per Ordinary share
2017 | 2016 | ||
Undiluted | |||
Ordinary shareholders' funds (£'000) | 207,796 | 152,714 | |
Number of Ordinary shares in issue | 54,980,560 | 46,916,586 | |
Net asset value per Ordinary share | 377.9p | 325.5p | |
Diluted1 | |||
Ordinary shareholders' funds assuming exercise of dilutive Subscription shares and reissuance of any dilutive Treasury shares (£'000) | 207,796 | 173,657 | |
Number of potential Ordinary shares in issue | 54,980,560 | 55,535,060 | |
Net asset value per Ordinary share | 377.9p | 312.7p |
1 As at 31st March 2017 there was no dilution effect as all of the Subscription shares were exercised on or before 30th November 2016.
The diluted net asset value per Ordinary share assumes that all outstanding dilutive Subscription shares were converted into Ordinary shares at the year end and all shares held in Treasury at the year end were reissued, where this has a dilutive effect. The Company policy on the reissuance of Treasury shares is that Treasury shares will only be reissued at a premium to net asset value per share. Hence, the shares held in Treasury at 31st March 2017 had no dilutive effect (2016: none).
4. Status of results announcement
2016 Financial Information
The figures and financial information for 2016 are extracted from the Annual Report and Accounts for the year ended 31st March 2016 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.
2017 Financial Information
The figures and financial information for 2017 are extracted from the published Annual Report and Accounts for the year ended 31st March 2017 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
JPMORGAN FUNDS LIMITED
ENDS
A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM
The annual report will shortly be available on the Company's website at www.jpmjapansmallercompanies.co.uk where up-to-date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.
JPMORGAN FUNDS LIMITED