Final Results
03/06/2024 07:00
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RNS Number : 7413Q JPMorgan European Grwth & Inc PLC 03 June 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN GROWTH & INCOME PLC
FINAL RESULTS FOR THE YEAR ENDED
31ST MARCH 2024
The Directors of JPMorgan European Growth & Income plc announce the
Company's results
for the year ended 31(st) March 2024
HIGHLIGHTS
- Total return to shareholders 15.6% (Benchmark 12.7%)
- Return on net assets 16.8% (Benchmark 12.7%)
- Dividends per share 4.2p (2023:4.0p)
Legal Entity Identifier: 549300D8SPJFHBDGXS57
Information disclosed in accordance with DTR 4.1
Chair's Statement
Introduction
In this 12-month reporting period to 31st March 2024, I am delighted to report
the Company continued to outperform its benchmark. In what remains a tricky
backdrop of evolving inflation expectations and geopolitical difficulties, the
Board believes the proposition of the Company is robust and effectively
implemented, allowing the Investment Managers the freedom to navigate European
markets, whilst delivering to our shareholders the best of capital growth
combined with a consistent income.
During the reporting period the devastating conflicts in Ukraine and Gaza
raged on engaging hearts and minds across the globe, either without an obvious
long term solution on the horizon. Although neither war seems likely to engulf
other nations, it is not impossible to create a scenario where both escalate
quickly.
In Europe, muted economic growth has been the backdrop of this reporting
period, which is unsurprising given the sharp increases in the level of
interest rates in 2022 and 2023. But this has had the desired effect on
inflation, with rapid declines observed during the last 12 months. The worries
early in the reporting period regarding a wider fallout from the failure of
Credit Suisse and of a 'hard landing' for global economies seem to have
eased. However, Germany, Europe's largest economy, has been particularly
affected by the economic slow down of China and continuing trade tensions with
China, which is an important market for many European companies, lurks in the
background. Despite this melting pot of machinations, European stock markets
have shrugged off these issues producing healthy returns over the period.
Performance
Return on net assets (NAV) and return to shareholders
For the Company's financial year ended 31st March 2024 the total return on net
assets was +16.8% (debt at fair value). This was an outperformance of 4.1%
over its benchmark, which returned +12.7%. Strong relative stock selection was
the main reason for this. In their Report on page 12 of the Company's annual
report and financial statements, the Investment Managers review in more detail
some of the factors underlying the performance of the Company as well as
commenting on the economic and market background over the period in question.
The total return to shareholders, which takes into account the movement of the
share price, over the 12 months delivered a return of +15.6%, which was also
an outperformance of the benchmark although by a smaller margin than the net
assets performance.
For an explanation of the calculation of the Company's total return on net
assets and the total return to shareholders, please see the Glossary of Terms
and Alternative Performance Measures on page 99 of the Company's annual report
and financial statements.
The Company's restructuring in February 2022 has resulted in some of the
performance and dividend data for periods 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 2024, the Company's net revenue
attributable to shareholders (net return after taxation) was 10.8% higher at
£13,683,000 (2023: £12,354,000) following the trajectory of the Company's
performance.
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 2024, the Company's dividend was 4.2 pence per share,
amounting to £18.1 million. This represents an increase from the £17.4
million paid in 2023, as illustrated in note 10(b) on page 75 of the Company's
annual report and financial statements.
For the Company's financial year ending 31st March 2025 the Board is expecting
to adopt the same approach with 4% of the net asset value per share as at 31st
March 2024 being paid as dividend for the year ending 31st March 2025.
On 21st May 2024, the Board declared a first interim dividend of 1.2 pence per
share in respect of the financial year ending 31st March 2025, payable on 5th
July 2024. As was the case for the Company's dividends in respect of the year
ended 31st March 2024, to the extent that brought forward revenue reserves are
not sufficient, dividends will be paid from distributable capital reserves for
the financial year ending 31st March 2025, as permitted by the Company's
Articles.
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 2024 the Company was 4.5% geared (31st March 2023: 3.1%).
Discounts, Share Issuance and Repurchase
During the period under review, the average discount across the Investment
Trust sector has remained at gaping levels. Although the initial widening was
indiscriminate, particular signs of stress is evident in those Trusts with
significant alternative investments with worries over liquidity, realisation
and valuation of the underlying positions. The Board remain confident in the
liquidity and transparency of the markets in which your Company invests,
however we remain alive to dislocations beyond our comfort levels, addressing
imbalances in the supply of and demand for the Company's shares through a
buy-back of 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) on an ongoing basis. The precise level and timing of repurchases is
dependent on a range of factors including prevailing market conditions. In the
period under review, 5,268,397 Ordinary shares were bought into Treasury. From
1st April 2024 to 29th May 2024, 200,000 Ordinary shares were bought into
Treasury. No Ordinary shares were issued.
The Company's Ordinary share discount as at 31st March 2024 was 12.1% to NAV
with debt at fair value. The average discount of a peer group of six companies
as at the same date was 10.0%. On 29th May, 2024, the Company's Ordinary share
discount was 10.3%, which compares to an average discount of the same peer
group of 8.7% as at the same date, though this hides variation in strategy and
performance across the sector. It also masks the corporate activity that has
occurred in the sector this past year which your Board is conscious of
monitoring thoughtfully for any implications for the Company.
Marketing and Shareholder Interaction
The Company continues to raise its profile with shareholders and potential
investors. It is the Board's view that enhancing the Company's profile will
benefit all shareholders, by creating sustained demand for its shares, thereby
improving liquidity and scale. Our range of activity is broad seeking to
showcase the Company to as wide a relevant audience as possible. The Manager
follows an established marketing and investor relations programme targeting
institutions, private client stockbrokers and platforms via video conferences,
podcasts and in-person meetings. Additionally, we have on-going interaction
with national and investment industry journalists demonstrating the knowledge
and insight of our managers.
We are careful to undertake this promotional activity in the most effective
and controlled manner.
The Board and the Investment Managers maintain a dialogue with the Company's
shareholders via regular email updates, which deliver news and views, and
discuss 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/JEGI-Sign-Up or by scanning the QR code in the margin.
It is the Board's hope that these initiatives will give many more of the
Company's investors and potential shareholders the opportunity to interact
with the Board and Investment Managers.
As referred to in my report included in the Company's half year report
released in November 2023, I am delighted that the Company was voted the best
investment company in the European sector at the annual AIC Investment Week
Award ceremony held during the year. The judges commended the Company's
performance and the benefits provided by its simplified and shareholder
focused structure.
Board of Directors
The Board are delighted that, as previously announced, Andrew Robson was
appointed as an independent Non-executive Director of the Company on 6th
February 2024. The intention is that Andrew will be appointed as the Company's
Audit Committee Chair when Jutta af Rosenborg, the current incumbent, retires
at the Company's next Annual General Meeting, scheduled for 3rd July 2024.
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/election.
Environmental, Social and Governance
The Board shares the Investment Managers' view of the importance of taking
into account the financial impact of ESG considerations in their investment
process 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 2024 and
based on the data available at that time; the Board concluded that the
performance of the Manager was of a high standard and that their services in
the new restructured format should be retained.
Annual General Meeting
The Company's ninety fifth Annual General Meeting (AGM) will be held at 60
Victoria Embankment, London EC4Y 0JP at 2.30 p.m. on Wednesday, 3rd July 2024.
We are pleased 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
If you hold your shares via an online platform, for further details of how to
vote your shares and/or attend the Company's AGM, please see the 'Investing in
JPMorgan European Growth & Income plc' on page 103 of the Company's annual
report and financial statements.
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 95 to
98 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
Despite the backdrop of geopolitical conflicts and uncertainty over the
trajectory of inflation, the Euro zone has remained relatively resilient. For
the first quarter of 2024 economic growth in the Euro zone was higher than
expected helped by an improved performance from the economies of Germany and
some of the zone's southern European countries. Inflation has fallen rapidly,
though the rate of decline has eased somewhat with a resilient labour market
and rising consumer sentiment, suggesting interest rate reductions by the ECB
are likely to be later than expected. With an unprecedented number of
elections around the world this year, the near term could hold significant
regime change. Throw in the emergence of generative AI impacting corporate
business models and there is a lot to be mindful of.
It is your Board's belief the merits of investing in European stock markets
are yet to be fully realised. Europe has truly world class companies
attractively valued particularly in relation to the US equity market. This
continues to present an exciting opportunity on which our Investment managers
remain focussed. As always dedication to delivering good returns through
careful stock selection and a diversified portfolio remain core to the
approach. The Board remain confident in the abilities of the Investment
Managers to do so.
For and on behalf of the Board
Rita Dhut
Chair
31st May 2024
Investment Managers' Report
Market Background
Following a somewhat muted first half performance from Continental European
equities as economic growth slowed in the face of a series of interest rate
hikes, the market bottomed in late October and ended the Company's financial
year up 12.7% in Sterling terms. Investors started to believe inflation was
back on a downward trend due to a series of softer inflation prints. This
boosted market expectation in the ECB potentially reducing interest rates
sooner than expected. The ECB's last hike was in September, by December its
outlook statement was more nuanced and by April this year the market was
expecting the ECB to be the first Central bank to start cutting rates again.
At the same time, it started to look possible the tightening cycle would not
tip the economy into recession. As real wages have turned positive consumer
confidence has improved which has been reflected in stronger PMI releases from
the service side of the economy. Meanwhile it appears as though manufacturing
destocking has run its course and new orders have shown signs of picking up
again. With this backdrop, investors began to hope Central Banks were on track
to successfully lower inflation while engineering a soft landing.
Portfolio positioning
Our investment process focuses on identifying companies with improving
operational momentum, higher quality characteristics, and lower valuations.
Not every company in the portfolio ticks all three boxes but the portfolio as
a whole does. During the year under review this has resulted in a clear tilt
towards cyclicals and financials. Within retailers we increased the position
in Industria de Diseno Textil (Inditex), the fashion retailer which owns
brands such as Zara and Massimo Dutti. Inditex's sourcing model and ongoing
reinvestment in its stores and technology has allowed it to steadily compound
growth and free cash flow despite the emergence of more competition from
online and discount players.
The Company remains exposed to the technology sectors. Within semiconductors
it has a position in ASML which manufactures tools to produce the chips
required, for example, in the emerging Artificial Intelligence market. ASML's
order intake continues to beat expectations and gives some visibility on
future earnings. Within software we increased the holding in SAP which has
seen clients accelerate their migration to its S4/HANA enterprise resource
planning software as well as a more widespread move towards the Cloud. SAP
specifically cites clients' demand for AI as a key development.
We also increased exposure to the bank sector by adding names such as Danske
Bank and BAWAG. Many bank stocks have been trading at low valuations but at
the same time have well capitalised balance sheets delivering steadily rising
earnings estimates and generating double digit returns on tangible equity.
This has allowed the sector to return significant amounts of capital to
shareholders through both dividends and share buybacks.
To view the graph of MSCI Europe Banks vs MSCI Europe exUK Total Return please
see the Company's annual report and financial statements, which will be
available to view on the Company's website shortly after release of this
announcement.
The Company's biggest underweight is to the healthcare sector. Many of the
equipment and services names have seen estimates downgraded quite dramatically
and also trade on expensive valuations. Within the pharmaceutical sector we
have focused on those companies where the operational momentum continues to
improve, Novo Nordisk and Novartis in particular, and avoiding those with
relentless downgrades such as Bayer and Lonza.
To view the graph of Novo Nordisk vs MSCI Europe exUK Total Return please see
the Company's annual report and financial statements, which will be available
to view on the Company's website shortly after release of this announcement.
One of the advantages of using both quantitative and fundamental analysis in
our investment process is that it allows us to consider a wide range of
potential investments before determining which companies to investigate in
more fundamental detail. It is noticeable certain smaller companies are
gathering interest after a prolonged period of underperformance. We have added
a number of names in this area such as Danieli which manufactures machines
for steel production including electric arc furnaces which are more
eco-friendly, and Bilfinger which has focused its business away from
construction projects towards buildings and facilities management and
services.
To view the bar chart of the Company's active and absolute sector positions
relative to benchmark please see the Company's annual report and financial
statements, which will be available to view on the Company's website shortly
after release of this announcement.
Portfolio performance and attribution
The portfolio outperformed its benchmark index by 4.1% with the NAV rising
16.8% (with debt valued at fair) with most of this coming from stock
selection. Novo Nordisk was again the top contributor to performance as it
continued to deliver growth ahead of expectations driven by its diabetes and
obesity franchise. The potential market for its weight loss drug Wegovy is
enormous, particularly as the product appears to have a beneficial impact on
related conditions such as cardio-vascular problems. In the short term there
are concerns about Novo Nordisk's ability to fill that demand but the company
has taken steps to expand its manufacturing capacity to address that issue.
The biggest detractor from performance last year was RWE, a German utility,
which underperformed as power prices pulled back faster than we expected
earlier this year. Nestle, another stock traditionally seen as defensive, also
detracted from performance as it reported disappointing results with lower
volumes than expected. Elsewhere the portfolio's holdings in LVMH and
Richemont also performed poorly as earnings expectations struggled in the face
of weaker news from China.
On a more positive note, Unicredit, an Italian bank, was the portfolio's stand
out holding in financials, almost doubling during the year. It has
consistently beaten analysts' estimates and raised guidance throughout the
year confounding concerns that these upgrades would tail off when interest
rates stopped rising. Despite the increase in the share price the stock's
valuation has hardly rerated because earnings have risen almost as much. Given
the strong returns that Unicredit is making and its robust balance sheet the
company is returning significant amounts of excess capital to shareholders
through both dividends and share buybacks.
Portfolio Performance
Year ended 31st March 2024
% %
Contributions to total returns
Benchmark total return 12.7
Asset Selection (stock/sector/currency) 4.7
Gearing contribution(1) 0.5
Return on cash 0.1
Cost of gearing(2) -0.3
Cash/Gearing impact 0.3
Portfolio return 17.7
Management fee/Other expenses -0.7
Share buyback/Issuance 0.1
Other effects -0.6
Return on net assets with debt at par value(A) 17.1
Impact of debt at fair value(3) -0.3
Return on net assets with debt at fair value(A) 16.8
Effect of movement in discount -1.2
Return to shareholders(A) 15.6
Source: JPMAM and MorningStar. All figures are on a total return basis.
Performance attribution analyses how the portfolio achieved its recorded
performance relative to its benchmark.
(1) Gearing contribution is the aggregated effect of daily gearing on the
daily benchmark return during the period.
(2) Cost of Gearing calculation is based on finance costs in the annual
accounts and includes the amortisation of private placement issue costs.
(3) See note 17 on page 79 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 99 of the Company's annual
report and financial statements.
Outlook
Looking ahead, equity returns will likely hinge on whether the economy can
continue to deliver steady growth and slowly declining inflation. At the
moment we remain cautiously optimistic as consumer confidence in Europe
continues to improve. Meanwhile it looks as though the manufacturing inventory
correction has run its course and new orders have started to show signs of
picking up again. At the time of writing the Q1 reporting season has only just
started so it is too early to see if this optimism is reflected in quarterly
reports.
Inflation continues to moderate as expected. Given the recent stronger
inflation prints from both the US and the UK it now looks likely that the ECB
will be the first central bank to cut rates, assuming of course that there
isn't a similar hotter blip in Europe too. An unexpected and meaningful rise
in inflation is perhaps the biggest threat to this soft/no landing scenario.
Numerous political and geopolitical uncertainties do remain a concern - but
for now the market seems to shrug them off. While the gold price hit new highs
recently, the oil price, despite rising in the first quarter, remains well
below the levels seen in early 2022 at the time of the Russian invasion of
Ukraine.
Lastly European equities continue to trade on an extreme discount to US
equities, a discount that has grown following the strong performance from
technology stocks in the United States during 2023. This argument may not be
new to prospective investors; however, the European equity market today can
offer comparable levels of quality and growth potential. This valuation
support is however recognised by European companies, who are buying back more
stock than ever before. Your investment managers continue to believe there are
opportunities to create value through stock selection.
Alexander Fitzalan Howard
Zenah Shuhaiber
Tim Lewis
Investment Managers
31st May 2024
Principal and Emerging Risks
Movement from
Principal risk Description Mitigation/Control Prior Year
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 No movement
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, geopolitical conflicts 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 81 to 87 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 No movement
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 Audit Committee report on page 47 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 No movement
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 40 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 No movement
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 Performance related 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 No movement
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.
Significant hostile action by shareholder/s - arbitrageurs diverts attention The Board and Manager regularly monitor the Company's share register and Up
from normal business. receipts of formal disclosures of significant transactions. Regular
discussions are held with the Company's Brokers.
Pandemic Risk Whilst noting that in May 2023 the World Health Organization announced that The Board monitors effectiveness and efficiency of service providers' Down
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. continues to receive regular reporting on operations from the Company's major
service providers and would not anticipate a fall in the level of service in
the event of a reemergence of a pandemic.
Climate Change The recent trade tensions between western economies and China, Russia's The Company addresses these global developments in regular questioning of the Up
invasion of Ukraine in February 2022 and conflict in Gaza may cause long term Manager and with external expertise as required will continue to monitor these
changes in global trade and technology. This may challenge future growth issues, should they develop. The Manager regularly monitors the Company's
potential and increased frictions in accessing global markets. Changes in portfolio holdings to ensure compliance with any applicable sanctions.
financial or tax legislation 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.
Geopolitical and Economic concerns The recent trade tensions between western economies and China, Russia's The Company addresses these global developments in regular questioning of the Up
invasion of Ukraine in February 2022 and conflict in Gaza may cause long term Manager and with external expertise as required will continue to monitor these
changes in global trade and technology. This may challenge future growth issues, should they develop. The Manager regularly monitors the Company's
potential and increased frictions in accessing global markets. Changes in portfolio holdings to ensure compliance with any applicable sanctions.
financial or tax legislation 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.
Emerging risk Description Mitigation/Control Movement from
Prior Year
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 Up
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 40 of the Company's annual report and financial statements. The
management fee payable to the Manager for the year was £2,381,000 (2023:
£2,228,000), of which £nil (2023: £nil) was outstanding at the year end.
Included in administration expenses in note 6 on page 72 of the Company's
annual report and financial statements are safe custody fees amounting to
£51,000 (2023: £46,000) payable to JPMorgan Chase Bank, N.A of which
£13,000 (2023: £16,000) 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 £26,000 (2023: £21,000) was payable to JPMorgan Securities
Limited for the year of which £nil (2023: £nil) was outstanding at the year
end.
The Company holds investments in funds managed by JPMAM. At 31st March 2024
these were valued at £11.7 million (2023: £10.6 million) and represented
2.2% (2023: 2.3%) of the Company's investment portfolio. During the year the
Company made £nil purchases of such investments (2023: £nil) and sales with
a total value of £nil (2023: £nil).
Income amounting to £259,000 (2023: £168,000) was receivable from these
investments during the year of which £nil (2023: £nil) was outstanding at
the year end.
The Company also holds cash in the JPMorgan EUR Liquidity Fund, managed by
JPMF. At the year end this was valued at £10.4 million (2023: £25.2
million). Interest amounting to £490,000 (2023: £nil) was payable during the
year of which £nil (2023: £nil) was outstanding at the year end.
Stock lending income amounting to £30,000 (2023: £46,000) was receivable by
the Company during the year. JPMAM commissions in respect of such transactions
amounted to £3,000 (2023: £5,000).
Handling charges on dealing transactions amounting to £10,000 (2023:
£13,000) were payable to JPMorgan Chase Bank N.A. during the year of which
£1,000 (2023: £5,000) was outstanding at the year end.
At the year end, total cash of £4.7 million (2023: £0.3 million) was held
with JPMorgan Chase Bank N.A. A net amount of interest of £3,000 (2023:
£2,000) was receivable by the Company during the year from JPMorgan Chase
Bank, N.A of which £nil (2023: £nil) was outstanding at the year end.
Full details of Directors' remuneration and shareholdings can be found on
pages 51 to 53 and in note 6 on page 72 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 39 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 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
31st May 2024
Statement of Comprehensive Income
For the year ended 31st March 2024
2024 2023
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 - 62,285 62,285 - 32,295 32,295
Foreign exchange (losses)/gains on JPMorgan Liquidity Fund - (355) (355) - 1,141 1,141
Net foreign currency gains/(losses) - 716 716 - (2,795) (2,795)
Income from investments 16,572 129 16,701 15,138 - 15,138
Interest receivable and similar income 523 - 523 48 - 48
Gross return 17,095 62,775 79,870 15,186 30,641 45,827
Management fee (714) (1,667) (2,381) (668) (1,560) (2,228)
Other administrative expenses (640) - (640) (557) - (557)
Net return before finance costs and taxation 15,741 61,108 76,849 13,961 29,081 43,042
Finance costs (345) (814) (1,159) (359) (837) (1,196)
Net return before taxation 15,396 60,294 75,690 13,602 28,244 41,846
Taxation (1,713) - (1,713) (1,248) - (1,248)
Net return after taxation 13,683 60,294 73,977 12,354 28,244 40,598
Return per share 3.17p 13.97p 17.14p 2.83p 6.48p 9.31p
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 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
Repurchase and cancellation of the Company's own shares (2) - 2 (258) - (258)
Repurchase of shares into Treasury - - - (2,183) - (2,183)
Net return - - - 28,244 12,354 40,598
Dividends paid in the year - - - - (22,245) (22,245)
At 31st March 2023 2,185 131,163 18,273 299,679 3,946 455,246
Repurchase of shares into Treasury - - - (4,934) - (4,934)
Net return - - - 60,294 13,683 73,977
Dividends paid in the year - - - - (13,598) (13,598)
At 31st March 2024 2,185 131,163 18,273 355,039 4,031 510,691
Statement of Financial Position
At 31st March 2024
2024 2023
£'000 £'000
Non current assets
Investments held at fair value through profit or loss 533,691 469,173
Current assets
Derivative financial assets 218 12
Debtors 5,541 4,782
Cash and cash equivalents 15,074 25,523
20,833 30,317
Current liabilities
Creditors: amounts falling due within one year (392) (364)
Derivative financial liabilities (833) (101)
Net current assets 19,608 29,852
Total assets less current liabilities 553,299 499,025
Non current liabilities
Creditors: amounts falling due after more than one year (42,608) (43,779)
Net assets 510,691 455,246
Capital and reserves
Called up share capital 2,185 2,185
Share premium account 131,163 131,163
Capital redemption reserve 18,273 18,273
Capital reserves 355,039 299,679
Revenue reserve 4,031 3,946
Total shareholders' funds 510,691 455,246
Net asset value per share 119.0p 104.8p
For the 2024 year end, the 'Fixed Assets' sub-heading was changed to
'Non-Current Assets' to align to the adapted format under FRS 102. This change
did not result in any measurement changes.
Statement of Cash Flows
For the year ended 31st March 2024
2024 2023
£'000 £'000
Cash flows from operating activities
Net return before finance costs and taxation 76,849 43,042
Adjustment for:
Net gains on investments held at fair value through profit or loss (62,285) (32,295)
Foreign exchange losses/(gains) on JPMorgan EUR Liquidity Fund 355 (1,141)
Net foreign currency (gains)/losses (716) 2,795
Dividend income (16,701) (15,138)
Interest income (493) (2)
Realised losses on foreign exchange transactions 25 494
Realised exchange gains on Liquidity 155 648
Decrease in accrued income and other debtors 2 27
Increase/(decrease) in accrued expenses 33 (41)
Net cash outflow from operations before dividends and interest (2,776) (1,611)
Dividends received 13,858 12,264
Interest received 493 2
Overseas withholding tax recovered 370 661
Net cash inflow from operating activities 11,945 11,316
Purchases of investments and derivatives (129,717) (120,395)
Sales of investments 127,480 131,716
Settlement of forward foreign currency contracts 33 (1,531)
Net cash (outflow)/inflow from investing activities (2,204) 9,790
Equity dividends paid (13,598) (22,245)
Repurchase of shares for Cancellation - (258)
Repurchase of shares into Treasury (4,924) (2,089)
Interest paid (1,159) (1,170)
Net cash outflow from financing activities (19,681) (25,762)
Decrease in cash and cash equivalents (9,940) (4,656)
Cash and cash equivalents at start of year 25,523 29,685
Exchange movements (509) 494
Cash and cash equivalents at end of year 15,074 25,523
Cash and cash equivalents consist of:
Cash and short term deposits 4,698 280
Cash held in JPMorgan EUR Liquidity Fund 10,376 25,243
Total 15,074 25,523
Notes to the Financial Statements
For the year ended 31st March 2024
1. Accounting policies
(a) Basis of accounting
The financial statements are prepared under the historical cost convention,
modified to include fixed asset investments and derivatives 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 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 31st
May 2025, 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.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Return per share
2024 2023
£'000 £'000
Return per share is based on the following:
Revenue return 13,683 12,354
Capital return 60,294 28,244
Total return 73,977 40,598
Weighted average number of shares in issue during the year 431,452,567 435,967,427
Revenue return per share 3.17p 2.83p
Capital return per share 13.97p 6.48p
Total return per share 17.14p 9.31p
3. Dividends
(a) Dividends paid and declared
2024 2023
£'000 £'000
Dividends paid
Growth & Income first interim dividend for 2022 of 1.10p - 4,812
Growth & Income first interim dividend for 2024 of 1.05p (2023: 1.00p) 4,556 4,369
Growth & Income second interim dividend for 2024 of 1.05p (2023: 1.00p) 4,529 4,358
Growth & Income third interim dividend for 2024 of 1.05p (2023: 1.00p) 4,513 4,354
Growth & Income fourth interim dividend for 2023 of 1.00p - 4,352
Total dividends paid in the year 13,598 22,245
Dividends declared
Growth & Income fourth interim dividend for 2024 of 1.05p 4,510 -
Total dividends declared(1) 4,510 -
(1) In accordance with the accounting policy of the Company, these dividends
will be reflected in the financial statements of the following year.
The fourth quarterly dividend of 1.05 was paid on 2nd April 2024 for the
financial year ended 31st March 2024. In accordance with the accounting
policy of the Company, this dividend will be reflected in the financial
statements for the year ending 31st March 2025.
The first interim dividend of 1.20 pence per share in respect of the Company's
financial year ending 31st March 2025 was declared on 21st May 2024 for
shareholders on the register on 31st May 2024 with payment on 5th July 2024.
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
£13,683,000 (2023: £12,354,000).
2024 2023
£'000 £'000
2024 Growth & Income first interim dividend of 1.05p (2023: 1.00) per 4,556 4,369
share
2024 Growth & Income second interim dividend of 1.05p (2023: 1.00) per 4,529 4,358
share
2024 Growth & Income third interim dividend of 1.05p (2023: 1.00) per 4,513 4,354
share
2024 Growth & Income fourth interim dividend of 1.05p (2023: 1.00) per 4,510 4,352
share
Total 18,108 17,433
The revenue reserve after payment of the fourth interim dividend amounts to
nil, with the excess dividend of £479,000 (2023: nil) to be funded out of
Capital Reserves of £303,625,000 as detailed in the 2023 table of note 16.
(2023: revenue reserve of £3,946,000 after payment of the fourth interim
dividend).
4. Net asset value per share
2024 2023
Net asset value attributable Net asset value attributable
£'000 pence £'000 pence
Net asset value - debt at par 510,691 119.0 455,246 104.8
Add: amortised cost of the Euro 50 million 2.69% Private Placement Note with 42,608 9.9 43,779 10.1
Metlife, repayable on 26th August 2035
Less: Fair Value of the Euro 50 million 2.69% Private Placement Note with (41,110) (9.6) (41,579) (9.6)
Metlife, repayable on 26th August 2035
Net asset value - debt at fair value 512,189 119.3 457,446 105.3
2023 Financial Information
The figures and financial information for 2023 are extracted from the
published Annual Report and Financial Statements for the year ended 31st March
2023 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.
2024 Financial Information
The figures and financial information for 2024 are extracted from the Annual
Report and Financial Statements for the year ended 31st March 2024 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 soon
after the release of this report 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
3rd June 2024
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