Final Results
06/06/2023 07:00
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RNS Number : 7149B JPMorgan European Grwth & Inc PLC 06 June 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN GROWTH & INCOME PLC
FINAL RESULTS FOR THE YEAR ENDED
31ST MARCH 2023
The Directors of JPMorgan European Growth & Income plc announce the
Company's results
for the year ended 31(st) March 2023
HIGHLIGHTS
- Total return to shareholders 16.0% (Benchmark 8.6%)
- Ordinary dividend 4.0p
Legal Entity Identifier: 549300D8SPJFHBDGXS57
Information disclosed in accordance with DTR 4.1
CHAIR'S STATEMENT
Introduction
It is pleasing to note that the Company has generated healthy returns in its
first full financial year of its new simplified single portfolio and share
structure. The Board believes that the Company's distinctive proposition
offers the best of capital growth combined with a resilient income
During the Company's financial year ended 31st March 2023, the markets in
which the Company invests, have experienced a turbulent year. The devastating
conflict in Ukraine, continuing effects of the Covid-19 pandemic, tensions
with China and failure of Credit Suisse and some regional banks in the USA,
have combined to create an increasingly uncertain environment. Global energy
prices increased dramatically and supply chain issues added to inflationary
pressures across major economies. Central banks have acted to curb inflation
by increasing interest rates which has the potential to add to existing
financial pressures.
Performance
Return to shareholders and return on net assets
Despite the challenging environment the Company achieved a positive return on
net assets during the financial year ended 31st March 2023 and an
outperformance against the Company's benchmark of 1.3% (debt at par value).
The total return on net assets for the Company's Ordinary shares was +9.9%
(debt at par value) and +12.5% (debt at fair value). Both of these returns
compare well with the benchmark total return in sterling terms of +8.6%. For
an explanation of why the Company's NAV varies when debt is calculated at par
and at fair values, please see the Glossary of Terms and Alternative
Performance Measures on page 91 of the Company's annual report and financial
statements.
The total return to shareholders for the Company's Ordinary shares was +16.0%.
In their Report on page 11 of the Company's annual report and financial
statements, the Investment Managers comment in more detail on some of the
factors underlying the performance of the Company, including strong stock
selection which was the main reason for the out-performance over the
benchmark, as well as commenting on the economic and market background.
The restructuring has resulted in some of the performance and dividend data
for years prior to this reporting period being calculated on a transitional
basis as detailed in various footnotes throughout this report.
Revenue and Dividends
During the 12 months to 31st March 2023, the Company's net revenue
attributable to shareholders (net return after taxation) was 4.8% higher at
£12,354,000 (2022: £11,784,000).
As detailed in the Company's previous annual report, an aim of the Company's
restructuring was to provide shareholders with a predictable dividend income
at a level that is consistent and frequent, based on 4% of the preceding year
end net asset value per share. The Company pays quarterly dividends in July,
October, January and March.
In line with the above aim, in respect of the year ending 31st March 2023, the
Company's dividend was 4.0 pence per share, amounting to £17.4 million.
This represents a significant increase from the £10.2 million paid in 2022,
as illustrated in note 10(b) on page 68 of the Company's annual report and
financial statements.
For the Company's financial year ending 31st March 2024 the Board is expecting
to adopt the same approach with 4% of the year ended 31st March 2023 net asset
value per share being paid as dividend. On 23rd May 2023, the Board declared a
first interim dividend of 1.05 pence per share in respect of the financial
year ending 31st March 2024, payable on 21st July 2023. As in 2023, brought
forward revenue reserves will be utilised to partially cover the dividend for
financial year ending 31st March 2024. Although not expected to be required in
the financial year ending 31st March 2024, the Company's Articles permit the
Company's dividends to be paid from distributable capital reserves.
Gearing
There has been no change in the Investment Manager's permitted gearing range,
as previously set by the Board, of between 10% net cash to 20% geared. At 31st
March 2023 the Company was 3.1% geared (31st March 2022: 2.7%).
Discounts, Share Issuance and Repurchase
As noted in the half year report, during the period under review, discounts
across the Investment Trust sector have widened, in some cases
indiscriminately. The sector in which the Company operates has not been
immune. The Board will continue to address imbalances in the supply of and
demand for the Company's shares. The Board does not wish to see the discount
widen beyond 10% under normal market conditions (using the cum-income NAV with
debt at fair value) on an ongoing basis. The precise level and timing of
repurchases through an active buyback of shares is dependent on a range of
factors including the prevailing market conditions. In the period under
review, 300,000 Ordinary shares were bought back for cancellation and
2,548,683 Ordinary shares were bought into Treasury. From 1st April 2023 to
1st June 2023, 518,906 Ordinary shares were bought into Treasury. No Ordinary
shares were issued.
The Company's Ordinary share discount as at 31st March 2023 was 10.3%. The
average discount of a peer group of six companies as at the same date was
10.9%. As at 1st June, 2023, the Company's Ordinary share discount was 8.4%,
which compares to the average discount of the same peer group of 9.7%
reflecting variation in strategy and performance across the sector.
Board of Directors
As this is my first annual report as the Company's Chair, I would like to
thank the Board for deciding to appoint me as the Chair on the retirement of
Josephine Dixon, in line with the Board's succession plan in September 2022. I
very much look forward to continuing my predecessor's skillful leadership of
the Company's Board.
During the year, the Board evaluation process reviewed Directors, the Chair,
the Committees and the working of the Board as a whole. It was concluded that
all aspects of the Board and its procedures were operating effectively. In
accordance with corporate governance best practice, all of the Directors
retire by rotation at this year's AGM and will offer themselves for
re-election.
The Company's Directors fees and that of the Chair of the Board and the Chair
of the Audit Committee were last increased with effect from 1st April 2022. To
maintain the fees in line with the increasing demands of time required and
relative to its peers, the Board agreed that the current fee for the Audit
Committee Chair should be increased with effect from 1st April 2023. The other
directors and Chair of the Board's fees would remain unchanged. See page 43 of
the Company's annual report and financial statements for further details.
Environmental, Social and Governance
Environmental, Social and Governance ('ESG') considerations are integrated
into the Investment Managers' investment process as set out in the ESG Report
on page 14 of the Company's annual report and financial statements. The Board
shares the Investment Managers' view of the importance of ESG factors when
making investments for the long term and of the necessity of continued
engagement with investee companies throughout the duration of the investment.
Investment Managers
The performance of the Investment Managers is formally evaluated by the Board
annually. The evaluation of the Manager was undertaken in January 2023 and
based on the data available at that time; the Board concluded that the
performance of the Manager had been satisfactory and that their services in
the new restructured format should be retained.
Annual General Meeting
The Company's ninety fourth Annual General Meeting (AGM) will be held at 60
Victoria Embankment, London EC4Y 0JP at 2.30 p.m. on Thursday, 6th July 2023
as an in-person meeting.
We are pleased that this year we will once again be able to invite
shareholders to join us in-person for the Company's AGM, hear from the
Investment Managers and ask questions. Shareholders wishing to follow the AGM
proceedings but choosing not to attend in person will be able to view
proceedings 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.jpmeuropeangrowthandincome.com or by contacting the Company Secretary at
invtrusts.cosec@jpmorgan.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: detailed instructions are
included in the Notes to the Notice of Annual General Meeting on pages 88 to
90 of the Company's annual report and financial statements.
If there are any changes to these arrangements for the AGM, the Company will
update shareholders via the Company's website and an announcement on the
London Stock Exchange.
Outlook
During the Company's financial year the general market continued to be
buffeted by significant challenges, although at the start of the current
calendar year global markets were performing well following China's emergence
from its zero-Covid policy and the prospect of peaking inflation and interest
rates. However, in recent months this enthusiasm has been swiftly dampened by
the challenges to the financial system caused by the failure of a number of
regional banks in the US and also of Credit Suisse in Switzerland. The
duration of inflationary pressures is uncertain despite the reduction in
energy prices in recent months. The extent of interest rate rises by the
European Central Bank, along with counterparts elsewhere in the world leaves
commentators unclear as to the impact on consumer confidence and the potential
severity of a possible global recession. We hope to see an easing in the
tragic events taking place in Ukraine, but it seems likely that the future
will offer much uncertainty and continued volatility in asset markets, with
tensions with China adding to the concerns around geopolitical risks.
Despite these challenges the Board has confidence that the Company's
Investment Managers have the requisite experience to navigate such a tricky
environment by continuing to adhere to a proven investment process. In
addition, the Board shares the Investment Managers' optimism for European
equities in the long term. The Board believes the new structure and objective
of the Company provides shareholders with the potential for both strong
capital returns and enhanced income through a well constructed portfolio of
European equities.
For and on behalf of the Board
Rita Dhut
Chair
5th June 2023
INVESTMENT MANAGERS' REPORT
Market background
Continental European equity markets rose 8.6% in Sterling terms in the year to
31st March 2023 (MSCI Europe ex UK (total return)) as sentiment improved
sharply in the second half of the Company's financial year. Prior to that the
market had retreated as inflation soared to the highest level for 40 years
and Central Banks, both in Europe and the US, started to hike rates
aggressively. High food and energy prices, both exacerbated by the Russian
invasion of Ukraine, contributed to a collapse in consumer confidence.
Combined with ongoing supply chain issues and China's zero tolerance approach
to Covid-19 signs of economic weakness started to appear, but any suggestion
that Central Banks had completed their tightening cycle was explicitly
rejected by the Chairman of the Federal Reserve.
Despite the fact that Central Banks remained trapped between the competing
dilemmas of rampant inflation requiring higher interest rates and a looming
recession if they kept their foot on the brake for too long, equity markets
rallied sharply in the second half of the financial year. As the headline
level inflation started to come down as base effects kicked in fears of a
recession, which had seemed almost inevitable last summer, gradually receded.
Consumer confidence recovered, helped by lower energy prices and government
subsidies, and the labour market across Europe remained strong. In general
consumer services companies have recovered well. The prospect of China backing
away from its restrictive Covid-19 lockdown protocols was also an
unanticipated boost for European exporters, particularly the luxury goods
companies. Throughout the year corporate results, in aggregate, continued to
surprise on the upside.
Towards the end of the Company's financial year markets were faced with the
possibility of another banking crisis with the failure of Silicon Valley Bank
in the US. It suffered from an over reliance on corporate, particularly
Venture Capital related, deposits coupled with the asset side of its balance
sheet having too many long duration bonds in its 'hold-to-maturity' portfolio
that were bought when yields were low. The combination of rising yields
hitting the value of these bonds and corporates suddenly withdrawing their
deposits proved toxic. Subsequent to this First Republic Bank was taken over
by JPMorgan Chase Bank, N.A after an earlier rescue attempt failed. In Europe
Credit Suisse has been taken over by UBS although this has been a more
drawn-out issue following a series of scandals over many years and its lack of
profitability. So far European banks generally have proved resilient but if
there is one lesson from the recent problems in the US it is the speed with
which liquidity issues in the banking sector can arise.
Portfolio Positioning
As equity markets derated in the early part of the year, the earnings recovery
gave us conviction in re-building positions in some of the more cyclical parts
of the market. This included stocks within the Capital Goods and Automobile
sectors, while we remained overweight in Semiconductor stocks. A common theme
around many of the companies in these sectors was their ability to demonstrate
pricing power. We also reduced our underweight to Retail by starting a
position in Inditex, the fashion retailer which owns brands such as Zara and
Massimo Dutti. We funded some of these positions from areas of the market
where we had lower conviction. This included some stocks within Materials,
where higher input costs became more of an issue, as well as Pharmaceuticals,
where despite valuation support some of the stocks lacked positive catalysts.
Within Capital Goods, one of our largest active positions in the sector is
Vinci, a French listed stock with exposure to toll roads, airport concessions,
construction, and more recently energy contracting. Apart from an attractive
valuation supported by strong free cash flow generation, the prospect for
earnings growth is also high, driven by a recovery in passenger numbers. We
have also become more positive on their potential growth in developing
renewable energy concession projects given their expertise in electrical
engineering and following the Cobra acquisition.
We participated in the Porsche IPO within the Automobiles sector. The luxury
auto group is benefitting from secular growth, with its addressable market
growing 8-10% p.a. The company is also well positioned within the trend
towards electrification with plug-in hybrids, full electrics, and ICE vehicles
using e-fuels. While the stock trades at a premium to other European autos,
its profitability, evidenced by its mid-teens margin, is also much higher than
its mass market competitors.
We funded these purchases by selling some healthcare stocks where operating
fundamentals had disappointed. For instance, we sold out of Merck KGaA. While
their pharmaceuticals business appears to be on track, their Life Science and
Electronics businesses were being affected by customer destocking and demand
pressures in consumer electronics, respectively. We also trimmed the position
in Roche following poor momentum with their pipeline development, such as for
their drug treating Alzheimers.
Our overall sector positioning is driven by bottom-up stock selection rather
than any top-down asset allocation. As a result of these position changes, our
two main sector overweights at the end of the year under review were Capital
Goods and Semiconductors, while the biggest underweights were Healthcare
Equipment & Services and Materials. As ever, and in line with our
investment process, the portfolio as a whole remains cheaper than the
benchmark while exhibiting better quality and momentum characteristics.
Portfolio Performance
Year ended 31st March 2023
% %
Contributions to total returns
Benchmark return 8.6
Asset allocation 0.6
Stock selection 1.5
Currency 0.3
Gearing/cash -0.5
Investment manager contribution 1.9
Portfolio return 10.5
Management fee/other expenses -0.7
Share buyback 0.1
Other effects -0.6
Return on net assets with debt at par value(A) 9.9
Impact of debt at fair value(1) 2.6
Return on net assets with debt at fair value(A) 12.5
Effect of movement in discount 3.5
Return to shareholders(A) 16.0
Source: B-One/JPMAM/AIC/Morningstar.
All figures are on a total return basis. Performance attribution analyses how
the portfolio achieved its recorded performance relative to its benchmark.
1 See note 14 on page 70 of the Company's annual report and financial
statements for reference to fair value of debt.
A Alternative Performance Measure ('APM').
A glossary of terms and APMs is provided on page 91 of the Company's annual
report and financial statements.
Portfolio Performance and Attribution
The portfolio outperformed its benchmark index by 1.3% with the NAV rising
9.9% (with debt valued at par), with most of the excess performance coming
from stock selection. Novo Nordisk, a Danish pharmaceutical company focusing
on diabetes therapies and obesity treatments, performed strongly again this
year driven by strong demand for their weight loss drug Wegovy. This condition
affects over 750 million people globally but with only 2% of those treated
with medication. Novo is leading the market with innovative drugs that can
help people reduce weight effectively and is seeing exceptional demand for
their products as a result. Deutsche Telekom, the German telecoms operator
with significant operations in the US was another positive performer for the
portfolio, with strong operating trends in their European and US businesses
and impressive free cashflow generation. LVMH, the diversified luxury group,
beat analyst expectations throughout the year helped by the specific strength
of their brands including Louis Vuitton and Dior. Unicredit, the Italian bank,
is an example where we rebuilt the position in a more cyclical name in the
second half of the year and were rewarded for that as earnings continued to
recover. Rising interest rates helped their net interest margin expand which,
combined with a strong balance sheet, meant the company has been able to
return excess capital to shareholders through both dividends and share
buybacks. The portfolio also benefitted, in relative terms, from not owning
Credit Suisse, where despite a seemingly cheap valuation, the poor
profitability and lack of earnings recovery ultimately led to its takeover by
UBS.
On the negative side, Boliden, a Swedish mining company, which had been a
strong contributor to the performance last year, detracted from relative
performance this year. The stock underperformed on a combination of falling
commodity prices, weaker volume output from their mines and higher costs
impacted by broad-based inflation.
Outlook
The market is facing ongoing uncertainty about the inflation outlook and
whether Central Banks can engineer a soft landing in which inflation is
reduced without tipping economies into recession. While we continue to believe
that the European banking sector is much more robust than it was during
previous financial crises, we remain alert to the speed with which things can
change and will act accordingly if required. On a more positive note, the
concerns mentioned above are well known to the market and may already be
priced in. On a longer term view the Company's Managers continue to believe
that the investment universe of European companies contains many high quality
enterprises across different sectors and often with global reach. Moreover,
the valuation of European markets continues to look attractive, particularly
in comparison with the US, but importantly within the market too. Valuation
spreads remain wide which suggests that there will be opportunities for stock
selection to continue to add value.
Alexander Fitzalan Howard
Zenah Shuhaiber
Tim Lewis
Investment
Managers
5th June 2023
PRINCIPAL AND EMERGING RISKS
The Directors have carried out a robust assessment of the principal and
emerging risks facing the Company, including climate change and those that
would threaten its business model, future performance, solvency or liquidity.
With the assistance of the Manager, the Audit Committee has drawn up a risk
matrix, which identifies the key and emerging 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. The AIC Code of Corporate Governance requires the Audit
Committee to put in place procedures to identify emerging risks. The key
emerging risks identified are also summarised below.
Principal Risk Description Mitigating Activities
Investment The Board recognises that performance of the Company's investment portfolio is In order to achieve the objectives given the risks inherent in investment such
fundamental to the success of the Company. as market, gearing, currency and interest rates, investment guidelines,
policies and processes are in place which aim to mitigate these risks. They
Investment includes market risk and this arises from uncertainty about the are designed to ensure that the portfolios are managed in a way which is aimed
future prices of the Company's investments. It represents the potential loss at identifying the best stocks and diversifying risk. Regular reports are
the Company might suffer through holding investments in the face of negative received by the Board from the Manager on stock selection, asset allocation,
market movements. Market risk is currently heightened due to various factors gearing, hedging and costs of running the Company and these are reviewed at
highlighted in the Chair and Investment Managers' report, these include each Board meeting in detail. Compliance with investment guidelines and
interest rates rises, ongoing supply chain issues and sustained inflation. policies are reviewed by the Manager and the Board, and discussed at each
Geopolitical concerns will also impact the market; the current conflict in board meeting in detail together with an analysis of market parameters
Ukraine and tensions with China are causing increased volatility in the affecting the business.
markets.
The Board considers asset allocation, stock selection and levels of gearing on
a regular basis and has set Investment Restrictions and Guidelines which are
monitored and reported on by JPMF. The Board monitors the implementation and
results of the investment process with the Manager.
Further details regarding financial instruments are disclosed in note 21 on
pages 75 to 81 of the Company's annual report and financial statements.
Operational In common with most investment trusts the Board delegates the operation of the Details of how the Board monitors the services provided by JPMF and its
business to third parties, the principal delegate being the Manager JPMF. associates and the Depositary and Custodian and the key elements designed to
Disruption to, failure of, or fraud in JPMF's accounting, dealing or payments provide effective internal control are included within the Internal Control
systems or the Depositary or Custodian's records could prevent timely section of the Corporate Governance report on page 35 of the Company's annual
implementation of investment decisions, and potentially shortfalls in the report and financial statements. The Board has received the cyber security
accuracy of reporting and monitoring of the Company's financial position and policies of its key third party service providers and JPMF has provided
loss. Cyber crime is a threat to businesses continuity and security. assurance to the Directors that 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 trading applications are tested and reported on
every six months against the AAF standard.
Regulatory The Company operates in an environment with significant regulation including The Board relies on the services of its Company Secretary, the Manager and its
the FCA Listing Rules, The UK Companies Act, the Corporation Taxes Act, Market professional advisers to ensure compliance with the Companies Act 2006, the
Abuse Regulation, Disclosure Guidance and Transparency Regulations and the FCA Prospectus Rules, Listing Rules, DTRs and the Alternative Investment Fund
Alternative Investment Fund Managers Directive (AIFMD). Managers Directive.
There has been no significant change to this risk during the year though the
environment as a whole is considered to be one of increasing costs for
compliance. The Company also operates under the requirements of the Bribery
Act 2010 as referred to in the Directors Report on page 34 of the Company's
annual report and financial statements.
Discount premium to NAV Share price discount or premium to net asset value per share could lead to The Board monitors the Company's discount level and seeks, where deemed
high levels of uncertainty and reduced shareholder confidence. prudent, to address imbalances in the supply and demand of the Company's
shares through share buybacks. For details of the Company's Continuation Vote
and Tender Offer and Discount Control arrangements, including recent updates,
see Key Features at the front of this document.
Strategy An inappropriate investment strategy, for example asset allocation may lead to The Board reviews the overall strategy and structure of the Company in
underperformance against the Company's benchmark index and peer companies. comparison to performance against benchmark, peer group and share activity.
The Board holds a separate meeting devoted to strategy each year which
includes consideration of whether the Company's objectives and structures are
appropriate for the long term interests of shareholders.
Pandemic Risk Whilst noting that in May 2023 the World Health Organization announced that The Board monitors effectiveness and efficiency of service providers'
Covid-19 no longer qualified as a global emergency, the outbreak and spread of processes through ongoing compliance and operational reporting and there were
Covid-19 demonstrated the risk of global pandemics, in whatever form a no disruptions to the services provided to the Company in the year under
pandemic takes. Should a new variant of the virus spread more aggressively or review. The Company's service providers are capable of implementing business
become more virulent, it may present risks to the operations of the Company, continuity plans which include working almost entirely remotely. The Board
its Manager and other major service providers. The recent 'Zero Covid' policy continues to receive regular reporting on operations from the Company's major
in China illustrates the continuing potential for Covid-19 to cause service providers and would not anticipate a fall in the level of service in
disruption. The 'Zero Covid' policy in China that was in place during the year the event of a reemergence of a pandemic.
(although recently withdrawn) illustrates the negative impact that a pandemic
can have on the global economy.
Climate Change Climate change, which barely registered with investors a decade ago, has today The Company's investment process integrates considerations of environmental,
become one of the most critical issues confronting asset managers and their social and governance factors into decisions on which stocks to buy, hold or
investors. Investors can no longer ignore the impact that the world's changing sell.
climate will have on their portfolios, with the impact of climate change on
returns now inevitable. This includes the approach investee companies take to recognising and
mitigating climate change risks. The Board is also considering the threat
posed by the direct impact on climate change on the operations of the Manager
and other major service providers. As extreme weather events become more
common, the resiliency, business continuity planning and the location
strategies of our services providers will come under greater scrutiny.
Emerging Risks Description Mitigating Activities
Geopolitical and Economic concerns The recent trade tensions between western economies and China and Russia's The Company addresses these global developments in regular questioning of the
invasion of Ukraine in February 2022 may cause long term changes in global Manager and with external expertise as required will continue to monitor these
trade and technology. This may challenge future growth potential and increased issues, should they develop. The Manager regularly monitors the Company's
frictions in accessing global markets. Changes in financial or tax legislation portfolio holdings to ensure compliance with any applicable sanctions.
in the UK or in some of the countries in which the Company invests may impact
the operating model of the Company. In addition policies adopted by
Governments/Central banks in response to the issues being seen in markets
(e.g. inflation and interest rates) may lead to adverse movements in asset
prices and could result in concerns for the ongoing exposure to specific
investee markets.
Artificial Intelligence (AI) While it might equally be deemed a great opportunity and force for good, there The Board will work with the Manager to monitor the developments concerning AI
appears also to be an increasing risk to business and society more widely from and its potential impact on the portfolio, our service providers and the wider
AI. Advances in computing power means that AI has become a powerful tool that market.
will impact a huge range of areas. AI could be a significant driver for new
business as well as a disrupter to current business and processes leading to
added uncertainty in corporate valuations.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report on
page 34 of the Company's annual report and financial statements. The
management fee payable to the Manager for the year was £2,228,000 (2022:
£3,343,000), of which £nil (2022: £nil) was outstanding at the year end.
Included in administration expenses in note 6 on page 65 of the Company's
annual report and financial statements. are safe custody fees amounting to
£46,000 (2022: £52,000) payable to JPMorgan Chase Bank, N.A of which
£16,000 (2022: £9,000) 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. Commission
amounting to £21,000 (2022: £15,000) was payable to JPMorgan Securities
Limited for the year of which £nil (2022: £nil) was outstanding at the year
end.
The Company holds investments in funds managed by JPMAM. At 31st March 2023
these were valued at £10.6 million (2022: £11.3 million) and represented
2.3% (2022: 2.5%) of the Company's investment portfolio. During the year the
Company made £nil purchases of such investments (2022: £nil) and sales with
a total value of £nil (2022: £3,389,000).
Income amounting to £168,000 (2022: £170,000) was receivable from these
investments during the year of which £nil (2022: £nil) was outstanding at
the year end.
The Company also holds cash in the JPMorgan Euro Liquidity Fund, managed by
JPMF. At the year end this was valued at £25.2 million (2022: £24.3
million). Interest amounting to £nil (2022: £nil) was payable during the
year of which £nil (2022: £nil) was outstanding at the year end.
Stock lending income amounting to £46,000 (2022: £74,000) was receivable by
the Company during the year. JPMAM commissions in respect of such transactions
amounted to £5,000 (2022: £8,000).
Handling charges on dealing transactions amounting to £13,000 (2022:
£34,000) were payable to JPMorgan Chase Bank N.A. during the year of which
£5,000 (2022: £6,000) was outstanding at the year end.
At the year end, total cash of £0.3 million (2022: £5.4 million) was held
with JPMorgan Chase Bank N.A. A net amount of interest of £2,000 (2022:
£2,000) was receivable by the Company during the year from JPMorgan Chase
Bank, N.A of which £nil (2022: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on page
43 and in note 6 on page 65 of the Company's annual report and financial
statements.
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL
STATEMENTS
The Directors are responsible for preparing the Annual Report & the
Financial Statements 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, 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 maintenance and integrity of the website maintained by the Manager is, so
far as it relates to the Company, the responsibility of the Manager.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Directors' confirmations
The Directors consider that the annual report and accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the company's position and performance, business
model and strategy.
Each of the directors, whose names and functions are listed in page 34 of the
Company's annual report and financial statements 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 and the Directors' Report include 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
Rita Dhut
Chair
5th June 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st March
2023 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments and derivatives held at
fair value through profit or loss - 32,295 32,295 - 25,076 25,076
Foreign exchange gains/(losses) on liquidity fund - 1,141 1,141 - (206) (206)
Net foreign currency (losses)/gains - (2,795) (2,795) - 332 332
Income from investments 15,138 - 15,138 15,568 - 15,568
Interest receivable and similar income 48 - 48 76 - 76
Gross return 15,186 30,641 45,827 15,644 25,202 40,846
Management fee (668) (1,560) (2,228) (1,170) (2,173) (3,343)
Other administrative expenses (557) - (557) (649) - (649)
Net return before finance costs and taxation 13,961 29,081 43,042 13,825 23,029 36,854
Finance costs (359) (837) (1,196) (405) (751) (1,156)
Net return before taxation 13,602 28,244 41,846 13,420 22,278 35,698
Taxation (1,248) - (1,248) (1,636) - (1,636)
Net return after taxation 12,354 28,244 40,598 11,784 22,278 34,062
Return per share: 2.83p 6.48p 9.31p 2.69p 5.08p 7.77p
All revenue and capital items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the year.
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 after taxation represents the profit for the year and
also Total Comprehensive Income.
STATEMENT OF CHANGES IN EQUITY
Called up Share Capital
share premium redemption Capital Revenue
capital account reserve reserves reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31st March 2021 4,667 131,528 15,791 255,912 11,705 419,603
Repurchase and cancellation of the Company's own shares (note 15)
(62) - 62 (4,314) - (4,314)
Project costs in relation to restructure - (365) - - - (365)
Net return - - - 22,278 11,784 34,062
Dividends paid in the year (note 10) - - - - (9,652) (9,652)
At 31st March 2022 4,605 131,163 15,853 273,876 13,837 439,334
Reclassification of shares cancelled in respect of the restructure in the (2,418) - 2,418 - - -
prior year (note 15)
Repurchase and cancellation of the Company's own shares (note 15)
(2) - 2 (258) - (258)
Repurchase of shares into Treasury (note 15) - - - (2,183) - (2,183)
Net return - - - 28,244 12,354 40,598
Dividends paid in the year (note 10) - - - - (22,245) (22,245)
At 31st March 2023 2,185 131,163 18,273 299,679 3,946 455,246
STATEMENT OF FINANCIAL POSITION
At 31st March
2023 2022
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 469,173 451,154
Current assets
Derivative financial assets 12 137
Debtors 4,782 3,926
Cash and cash equivalents 25,523 29,685
30,317 33,748
Current liabilities
Creditors: amounts falling due within one year (364) (3,334)
Derivative financial liabilities (101) (142)
Net current assets 29,852 30,272
Total assets less current liabilities 499,025 481,426
Creditors: amounts falling due after more than one year (43,779) (42,092)
Net assets 455,246 439,334
Capital and reserves
Called up share capital 2,185 4,605
Share premium account 131,163 131,163
Capital redemption reserve 18,273 15,853
Capital reserves 299,679 273,876
Revenue reserve 3,946 13,837
Total shareholders' funds 455,246 439,334
Net asset value per share 104.8p 100.5p
STATEMENT OF CASH FLOWS
For the year ended 31st March
2023 2022(1)
£'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 43,042 36,854
Adjustment for:
Net gains on investments held at fair value through profit or loss (32,295) (25,076)
Foreign exchange (gains)/losses on Liquidity fund (1,141) 206
Net foreign currency losses/(gains) 2,795 (332)
Dividend income (15,138) (15,567)
Interest income (2) (2)
Realised gain on foreign exchange transactions 494 221
Realised exchange gains/(losses) on Liquidity 648 (707)
Decrease/(increase) in accrued income and other debtors 27 (28)
(Decrease)/increase in accrued expenses (41) 63
(1,611) (4,368)
Dividends received 12,264 11,921
Interest received 2 2
Overseas withholding tax recovered 661 2,073
Net cash inflow from operating activities 11,316 9,628
Purchases of investments and derivatives (120,395) (229,228)
Sales of investments and derivatives 131,716 234,721
Settlement of forward foreign currency contracts (1,531) (317)
Settlement of future contracts - (874)
Net cash inflow from investing activities 9,790 4,302
Equity dividends paid (22,245) (9,652)
Repurchase of shares for Cancellation (258) (4,632)
Repurchase of shares into Treasury (2,089) -
Project costs - (365)
Interest paid (1,170) (1,156)
Net cash outflow from financing activities (25,762) (15,805)
Decrease in cash and cash equivalents (4,656) (1,875)
Cash and cash equivalents at start of year 29,685 31,032
Unrealised gain on foreign currency cash and cash equivalents 494 528
Cash and cash equivalents at end of year 25,523 29,685
Cash and cash equivalents consist of:
Cash and short term deposits 280 5,402
Cash held in Liquidity fund 25,243 24,283
Total 25,523 29,685
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
before finance costs and taxation' to 'cash inflow from operating
activities' on the face of the Cash Flow Statement. Previously, this was shown
by way of note to the Cash Flow Statement. Other than consequential changes in
the presentation of certain cash flow items, there is no change to the cash
flows as presented in previous periods.
Reconciliation of net debt
As at Other As at
31st March Exchange non-cash 31st March
2022 Cash flows movements changes 2023
£'000 £'000 £'000 £'000 £'000
Cash and cash equivalents
Cash 5,402 (5,123) 1 - 280
Cash equivalents 24,283 467 493 - 25,243
29,685 (4,656) 494 - 25,523
Borrowings
Debt due after one year (42,092) - (1,675) (12) (43,779)
Net debt (12,407) (4,656) (1,181) (12) (18,256)
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31st March 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 'the Financial Reporting Standard applicable
in the UK and Republic of Ireland' ('FRS 102') 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. In
forming this opinion, the Directors have considered as part of its risk
assessment: the nature of the Company, its business model and related risks
including the continuing impact of the Covid-19 pandemic and the ongoing
conflict between Ukraine and Russia, the requirements of the applicable
financial reporting framework, the covenants in respect of the Company's
private placement debt and the system of internal control.
The Directors believe that, having considered the Company's investment
objectives, future cash flow projections, risk management policies, liquidity
risk, principal and emerging risks, capital management policies and
procedures, nature of the portfolios and expenditure projections, the Company
has adequate resources, an appropriate financial structure and suitable
management arrangements in place to continue in operational existence to 30th
June 2024, being at least 12 months from approving this annual report and
financial statements.
For these reasons, they consider that there is reasonable evidence to continue
to adopt the going concern basis in preparing the report.
2. Dividends
(a) Dividends paid and declared
2023 2022
£'000 £'000
Dividends paid
Unclaimed Growth dividends refunded to the Company - (303)
2023 and 2022 Growth second interim dividend of nil (2021: 3.20p) per share(1) - 2,348
2023 Growth first interim dividend of nil (2022: 2.50p) per share - 1,801
2023 and 2022 Income fourth quarterly dividend of nil (2021: 2.50p) per - 2,211
share(1)
2023 Income first quarterly dividend of nil (2022: 1.40p) per share - 1,195
2023 Income second quarterly dividend of nil (2022: 1.40p) per share - 1,201
2023 Income third quarterly dividend of nil (2022: 1.40p) per share - 1,199
2022 Growth & Income first interim dividend of 1.10p 4,812 -
2023 Growth & Income first interim dividend of 1.00p 4,369 -
2023 Growth & Income second interim dividend of 1.00p 4,358 -
2023 Growth & Income third interim dividend of 1.00p 4,354 -
2023 Growth & Income fourth interim dividend of 1.00p 4,352 -
Total dividends paid in the year 22,245 9,652
Dividends declared
2024 Growth & Income first interim dividend of 1.05 (2023: 1.00p) per 4,556 4,369
share
Total dividends declared(2) 4,556 4,369
1. These dividends were incorrectly included as paid in 2021 and have now
been corrected as they were paid in 2022 (on 1st April 2022).
2 In accordance with the accounting policy of the Company, these
dividends will be reflected in the financial statements of the following year.
The first interim dividend of 1.05 pence per share in respect of the Company's
financial year ending 31st March 2024 was declared on 23rd May 2023 for
shareholders on the register on 2nd June 2023, with payment on 21st July 2023.
All dividends paid and declared in the financial year have been funded from
the Revenue Reserve.
(b) Dividend 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, as follows:
The revenue available for distribution by way of dividend for the year is
£12,354,000 (2022: £11,784,000).
2023 2022
£'000 £'000
2023 Growth first interim dividend of nil (2022: 2.50p) per share - 1,801
2023 Income first quarterly dividend of nil (2022: 1.40p) per share - 1,195
2023 Income second quarterly dividend of nil (2022: 1.40p) per share - 1,201
2023 Income third quarterly dividend of nil (2022: 1.40p) per share - 1,199
2022 Growth & Income first interim dividend of 1.10p (2021: nil) per share - 4,812
2023 Growth & Income first interim dividend of 1.00p (2022: nil) per share 4,369 -
2023 Growth & Income second interim dividend of 1.00p (2022: nil) per 4,358 -
share
2023 Growth & Income third interim dividend of 1.00p (2022: nil) per share 4,354 -
2023 Growth & Income fourth interim dividend of 1.00p (2022: nil) per 4,352 -
share
Total 17,433 10,208
The revenue reserve after payment of the fourth interim dividend amounts to
£3,946,000 (2022: £9,027,000 after payment of the first interim Growth &
Income dividend).
3. Return per share
2023 2022(1)
£'000 £'000
Return per share is based on the following:
Revenue return 12,354 11,784
Capital return 28,244 22,278
Total return 40,598 34,062
Weighted average number of shares in issue during the year 435,967,427 438,868,316
Revenue return per share 2.83p 2.69p
Capital return per share 6.48p 5.08p
Total return per share 9.31p 7.77p
(1 ) A transitional basis has been adopted for the calculation of
the Return per share for the year ended 31st March 2022.
4. Net asset value per share
2023 2022
Ordinary shareholders' funds (£'000) 455,246 439,334
Number of shares in issue 434,437,846 437,286,529
Net asset value per share 104.8p 100.5p
2022 Financial Information
The figures and financial information for 2022 are extracted from the
published Annual Report and Financial Statements for the year ended 31st March
2022 and do not constitute the statutory accounts for that year. The Annual
Report and Financial Statements 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.
2023 Financial Information
The figures and financial information for 2023 are extracted from the Annual
Report and Financial Statements for the year ended 31st March 2023 and do not
constitute the statutory accounts for the year. The Annual Report and
Financial Statements includes 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 Financial
Statements will be delivered to the Registrar of Companies in due course.
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
Annual Report and Financial Statements
The Annual Report and Financial Statements will be posted to shareholders on
or around 8th June 2023 and will shortly be available on the Company's website
www.jpmeuropeangrowthandincome.com or in hard copy format from the Company's
Registered Office, 60 Victoria Embankment London EC4Y 0JP.
A copy of the 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
Up to date information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found on the Company's
website at www.jpmeuropeangrowthandincome.com
For further information:
Paul Winship,
JPMorgan Funds Limited, Secretary - 020 7742 4000
6th June 2023
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