JPMorgan Euro Discov - Annual Financial Report
20/06/2024 07:00
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RNS Number : 1318T JPMorgan European Discovery Trust 20 June 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN EUROPEAN DISCOVERY TRUST PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST MARCH 2024
The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No
596/2014 which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon publication of this announcement, this inside information is
now considered to be in the public domain.
Legal Entity Identifier: 54930049CEWDI46Y3U28
Information disclosed in accordance with DTR 4.1.3
JPMorgan European Discovery Trust plc ("JEDT" or the "Company"), the FTSE 250
investment trust investing in European smaller companies, announces its annual
results for the year ended 31st March 2024 (the "Reporting Period").
The outlook for European small cap companies is considerably brighter as the
underlying economic and financial conditions improve, along with real wages.
There is also further momentum and interest in the sector this year, given the
expectation of at least a couple of rate cuts by the European Central Bank.
These positive market conditions, along with the important enhancements to the
process and risk management that the new portfolio managers are implementing,
have had a positive impact on performance, resulting in JEDT outperforming the
benchmark.
Financial highlights for the Reporting Period include:
· NAV per Ordinary Share of 520.7 pence (as at 31 March 2024), up 19.8%
since 30th September 2023 and 4.5% from 31st March 2023.
· Total return on net assets was 6.8%, outperforming the benchmark
index, the MSCI Europe (ex UK) Small Cap Index in GBP, which returned 5.9%
over the same period.
· Shareholder total return of 13.0%, better than reported total return
on NAV of +6.8% with the Company's discount narrowing from -15.1% to -10.6%.
· Full year dividend increased to 10.5p per share (2023: 9.0p).
o Final dividend of 8.0p per share to be paid on 2nd August 2024 to
shareholders on the register as at 28th June 2024
· During the year, the Company repurchased 9,782,472 shares at an
average discount of 11.8%.
Operational highlights for the Reporting Period include:
· Enhancements to investment process and risk management, seeking to
minimise downside risk during periods of volatility and capture upside risk
when volatility reduces.
o Resulted in a positive impact on performance, with the net asset value total
return outperforming the benchmark.
· Jon Ingram, Jack Featherby and Jules Bloch appointed as named
portfolio managers of the Company with effect from 1st March 2024 following
internal review of the portfolio management team and its investment process.
· James Will to be appointed as an independent non-executive director
with effect from the conclusion of the 2024 AGM.
· Nicholas Smith is to retire from the Board, with the Board's sincere
thanks for his contribution, having served as a Director since 2015.
Tender Offer:
· Following a period of encouraging performance and after consultation
with a number of the Company's largest shareholders, the Board has decided to
undertake a tender offer for up to 15% of the issued share capital (excluding
shares held in Treasury) of the Company.
· The Tender Offer, which is subject to shareholder approval, will be
made at a tender price equal to a 2% discount to the prevailing net asset
value per share as at the calculation date, less the costs of implementing the
Tender Offer.
· In addition, the Board intends to introduce a performance related
tender offer for up to 15% of the issued share capital (excluding shares held
in Treasury) of the Company, should the Company's NAV total return not equal
or exceed the benchmark total return over a five year period, ending 31st
March 2029.
Outlook:
· Outlook for European small cap companies is considerably brighter
than six months ago as economic and financial conditions have improved, and
real wage increases should give the recovery further momentum.
· It seems very likely that the European Central Bank will cut interest
rates at least a couple of times this year which will further improve economic
conditions in the region.
· These positive developments have already had a favourable impact on
investor sentiment.
· European small and mid-cap companies tend to outperform as the
broader market rallies and based on history, the Company's carefully selected,
high quality, investments should do even better in such markets.
· Looking further ahead, nimble businesses that germinate in the small
cap and mid cap space are positioned to benefit significantly from the
emerging trends we are seeing, such as the Artificial Intelligence (AI) and
research in certain areas in pharmaceuticals.
· The new portfolio management team and the ongoing support of
JPMorgan's extensive research resources position the Company to benefit from
this supportive environment and deliver strong results to shareholders over
the rest of 2024 and beyond.
CHAIRMAN'S STATEMENT
Investment Performance
Over the year to 31st March 2024 (FY24) the total return on net assets was
6.8%, outperforming the Company's benchmark index, the MSCI Europe (ex UK)
Small Cap Index, which returned 5.9% over the same period. The total return to
shareholders was 13.0%, as a result of a significant narrowing of the discount
at which the Company's shares trade relative to NAV, from 15.1% to 10.6% over
the year.
The explanation for this performance is in the Portfolio Managers' report
which can be found in the full Annual Report available on the website of the
Company. This also provides a detailed commentary on portfolio positioning and
the investment outlook.
Whilst the past year's performance is pleasing, the Company adopts a long-term
investment strategy, so it is important to also consider performance over a
longer timeframe. On this basis, the Company has underperformed the market
over three and five years, returning 3.0% and 41.0% respectively over these
periods, compared to benchmark returns of 6.4% and 46.7%, although its
longer-term performance remains strong in both absolute and relative terms.
Over the ten years to the end of March 2024, its total return on net assets
was 121.0%, ahead of the benchmark total return of 115.2%.
Enhancements and Change
The Board has been very mindful of this mixed long-term performance. As I
reported in the interim results, over the five years to 30th September 2023
the net asset value total return was 2.0%, compared to the benchmark total
return of 20.1%. This followed a period of underperformance in the six months
to 30th September 2023 of -11.4% with the Company's benchmark returning -5.7%.
The Portfolio Managers noted in their report that the Company's investment
process tended to struggle during periods of high volatility. During the year,
they therefore implemented some important enhancements to their process and
risk management, seeking to minimise downside risk during periods of
volatility and capture upside risk when volatility reduces.
I am pleased to be able to report that these changes have had a positive
impact on performance, with the net asset value total return up 6.8% for the
year to 31st March 2024, outperforming the benchmark total return of 5.9%. A
significant amount of performance came in the last six months of the financial
year, with the net asset value total return up 20.5% against the benchmark
return of 12.4%.
As announced earlier this year, in light of the Company's longer-term
performance, the Board of Directors and J.P. Morgan Asset Management ('JPMAM')
undertook an internal review of the portfolio management team and its
investment process. This led to Jon Ingram, Jack Featherby and Jules Bloch
being appointed as named Portfolio Managers of the Company with effect from
1st March 2024, replacing Francesco Conte and Edward Greaves. The Board is
delighted to welcome Jon, Jack and Jules and looks forward to working with the
new investment team to deliver strong, long-term returns for all shareholders.
Since 1st March, the new Portfolio Managers have continued to refine the
investment process; the changes they have made are set out in their Report
Francesco Conte is retiring and the Board and I would like to take this
opportunity to recognise his immense contribution to the Company for over the
25 years since he has been at the helm. Since 1998 the fund has provided a
share price total return of some 1,666% through several market cycles and
shocks. We would like to thank him for his commitment and efforts during this
period, as well as to Edward Greaves who has been a named Portfolio Manager
since 2016.
Gearing
Gearing can be a differentiator for an investment trust, and the Board
believes that it can be beneficial to performance. The Board sets the overall
strategic gearing policy and guidelines, and reviews these at each Board
meeting. During the year, the revolving credit facility with Scotia Bank
(EUR125m) expired. This facility was renewed for a further two-year term.
During the year gearing varied between 10.0% geared and 0.5% cash. At the end
of the financial year, gearing stood at 7.9%.
Revenue and Dividends
The Board's dividend policy is to pay out the majority of revenue available
each year to its shareholders. This is set against the Company's objective of
maximising capital growth, and the Portfolio Managers are therefore not
constrained to deliver income in any one financial year.
An interim dividend of 2.5 pence per share was paid on 5th February 2024,
higher than the previous year's interim dividend of 1.2 pence, reflecting the
increased income received by the Company during the first six months of the
financial year, compared to the previous year. After taking into account the
income received and the level of the Company's revenue reserves, and subject
to shareholder approval at the forthcoming Annual General Meeting, a final
dividend of 8.0 pence per share will be paid on 2nd August 2024 to
shareholders on the register as at the close of business on 28th June 2024
(ex-dividend date 27th June 2024). This will take the total dividend for the
year to 10.5 pence, compared to a total dividend of 9.0 pence for the previous
year.
Discounts and Share Repurchases
The Company's share price discount relative to net asset value narrowed during
the Company's financial year, from 15.1% as at the end of March 2023 to 10.6%
as at 31st March 2024. The average discount over the period was 13.0%. As at
14th June 2024, the discount was 10.76%. The Board continues to monitor the
level of the discount carefully and seeks to use its ability to repurchase
shares to minimise the short-term volatility and the absolute level of the
discount when appropriate.
During the year, the Company repurchased 9,782,472 shares at an average
discount of 11.8%.
Manager Evaluation
During the year, the Management Engagement Committee undertook a formal review
of the Manager, facilitated by an independent board evaluation firm. The
review covered the investment management, company secretarial, administrative
and marketing services provided to the Company. The review took account of the
Manager's investment performance record, management processes, investment
style, resources and risk control mechanisms. Apart from the changes in the
Portfolio Management team as described above, the Board agreed with the
Committee's recommendation that the continued appointment of the Manager was
in the best interests of shareholders.
The Board
Nicholas Smith will be retiring from the Board at the end of the forthcoming
Annual General Meeting ('AGM'), having served as a Director since 2015. The
Board would like to thank Nicholas for his significant contribution to the
Company during his tenure as Audit Chair and Senior Independent Director and
wish him well for the future.
Sarah Watters took over the role of the Senior Independent Director of the
Company during the year and Arun Sarwal will succeed Nicholas as Audit Chair
following the AGM.
In anticipation of Nicholas's impending retirement, the Board initiated a
search earlier this year to identify a new Director. As announced on 13th June
2024, James Will has been appointed as an independent non-executive director
with effect from the conclusion of the 2024 AGM. James has extensive
investment company experience and my fellow Board members and I look forward
to working with him.
Environmental, Social and Governance ('ESG')
The Board shares the Investment Manager's view of the significance of
financially material environmental, social and governance ('ESG') factors when
making long term investments. The Portfolio Managers regularly discuss
financially material ESG issues with the management teams of potential and
current investee companies on an ongoing basis. Further information on the
Manager's ESG process and engagement is set out in the ESG Report in the full
Annual Report.
Shareholder Engagement
The Board believes that shareholder interactions are very helpful in assisting
it with the management of the Company's affairs. Over the course of the year,
we have engaged with a number of our largest shareholders to listen to their
thoughts and views. The Board values the feedback it has received and insights
it has gained through the engagement process and we thank the shareholders for
their support.
We remain committed to continued engagement over the coming year; in
particular, Board members welcome and seek such meetings as and when such
opportunities arise.
During the year, the Board also undertook an Asset Reunification Programme,
conducted by the Company's registrar, which ultimately traced and reunited
shareholders with unclaimed shares and dividends in the Company valued at
approximately £230,000.
Tender Offer
Following a consultation with a number of the Company's largest shareholders,
the Board has decided to undertake a tender offer for up to 15% of the issued
share capital (excluding shares held in Treasury) of the Company (the 'Tender
Offer'). The Tender Offer, which is subject to shareholder approval, will be
made at a tender price equal to a 2% discount to the prevailing net asset
value per share as at the calculation date, less the costs of implementing the
Tender Offer.
In addition, the Board intends to introduce a performance related tender offer
for up to 15% of the issued share capital (excluding shares held in Treasury)
of the Company (the 'Conditional Tender Offer'). If the Company's net asset
value total return does not equal or exceed the benchmark total return (MSCI
Europe ex UK Small Cap Index (net)) over the five-year period beginning 1st
April 2024 and ending on 31st March 2029. The Conditional Tender Offer will be
held as soon as practicable following the conclusion of the 2029 Annual
General Meeting. The Conditional Tender Offer, which is subject to shareholder
approval, will be made at a tender price equal to a 2% discount to the
prevailing net asset value per share as at the calculation date, less the
costs of implementing the Conditional Tender Offer.
Further announcements in relation to the Tender Offer and Conditional Tender
Offer will be made following the conclusion of the Company's upcoming Annual
General Meeting.
Annual General Meeting
The Company's Annual General Meeting will be held on Wednesday, 24th July 2024
at 12.30 p.m. at 60 Victoria Embankment, London EC4Y 0JP.
The Portfolio Managers' will give a presentation to shareholders, reviewing
the past year and commenting on the outlook for the current year. The meeting
will be followed by lunch, providing shareholders with the opportunity to meet
the Directors and representatives of the Manager. We look forward to seeing as
many shareholders as possible at the AGM.
For shareholders wishing to follow the AGM proceedings but choosing not to
attend in person, we will be able to welcome you through conferencing
software. Details on how to register, together with access details, will be
available shortly on the Company's website:
www.jpmorganeuropeandiscovery.co.uk, or by contacting the Company Secretary at
invtrusts.cosec@jpmorgan.com.
As is normal practice, all voting on the resolutions will be conducted by a
poll. Due to technological reasons, shareholders viewing the meeting via
conferencing software will not be able to vote on the poll and we therefore
encourage all shareholders, and particularly those who cannot attend in
person, to exercise their votes in advance of the meeting by completing and
submitting their form of proxy.
If you have any detailed or technical questions, it would be helpful if you
could raise them in advance with the Company Secretary at 60 Victoria
Embankment, London EC4Y 0JP or via the 'Ask a Question' link on the Company's
website. Shareholders who are unable to attend the AGM are encouraged to use
their proxy votes.
If there are any changes to the arrangements for the Annual General Meeting,
the Company will update shareholders through the Company's website and, if
appropriate, through an announcement on the London Stock Exchange.
Stay Informed
The Company delivers email updates with regular news and views, as well as the
latest performance. If you have not already signed up to receive these
communications and you wish to do so, you can opt in via
https://web.gim.jpmorgan.com/emea_investment_trust_subscription/welcome?targetFund=JEDT
Outlook
The outlook for European small cap companies seems considerably brighter than
when I wrote my last statement to shareholders for the Half Year Report six
months ago. Since then, economic and financial conditions have improved, and
real wage increases should give the recovery further momentum. It seems very
likely that the European Central Bank ('ECB') will cut interest rates at least
a couple of times this year which will further improve economic conditions in
the region.
These positive developments have already had a favourable impact on investor
sentiment. European small and mid-cap companies tend to outperform as the
broader market rallies and based on history your Company's carefully selected,
high quality, investments should do even better in such markets. Looking
further ahead, as you will read in the Portfolio Managers' report, the
innovative, nimble businesses that germinate in the small cap and mid cap
space are positioned to benefit significantly from the emerging trends we are
seeing, such as the Artificial Intelligence (AI) and research in certain areas
in pharmaceuticals.
These macro and structural developments all bode well for the sector and your
Company. Together with a new investment team and the ongoing support of
JPMorgan's extensive research resources, the Board is confident that the
Company is well positioned to make the most of this supportive environment to
deliver strong results to shareholders over the rest of 2024 and beyond.
Marc van Gelder
Chairman
INVESTMENT MANAGERS' REPORT
This year was a major one for the Company as the decision was made in February
to transition the investment management team to a new team consisting of Jon
Ingram, Jack Featherby and Jules Bloch - three experienced portfolio managers
with a collective history of 40 years of investing in European Small Caps.
Through this time, especially following a period of tough absolute and
relative performance, we appreciate the continued support of all our
shareholders. We believe that the change in management team, alongside the
continued commitment to the existing investment process, should be positive
for our shareholders. As we, the new managers, step in, we would like to thank
both Francesco Conte and Edward Greaves for their many years of stewardship
and we wish them well going forward.
As to the Company, we are very excited about the current investment
opportunity in European Small Caps. It is an asset class with a fantastic
long-term track record. As we write in our outlook below, we firmly believe
that the current set up of the asset class, one supported by multiple
tailwinds, align the Company in a good position to deliver strong returns for
you, our shareholders.
Review
The financial year ended 31st March 2024 was marked by dramatic shifts in
investor sentiment and market performance. At the start of the period, global
markets were still reverberating from the collapse of Silicon Valley Bank
(SVB) and Credit Suisse in March 2023.
As concerns around a banking crisis receded, markets were swayed by inflation
figures and the corresponding reactions of central banks. As the year
progressed, investors welcomed confirmation that inflation rates were falling.
Nonetheless, central banks continued to raise rates, motivated by concerns
that inflation would otherwise become entrenched.
There was almost universal consensus amongst forecasters that Europe was
heading into recession, induced by the compounding effects of a regional
energy crisis, Russia's invasion of Ukraine, double-digit inflation and
monetary tightening that pushed interest rates to their highest level in well
over a decade.
This recession failed to materialise, but these macroeconomic fears still had
a significant impact on European Small Cap stocks which are typically more
levered to the economic performance of their national home markets.
Inflation rates around the world cooled as the year progressed, and central
bankers started to recognise the progress made on the inflation front. In late
October 2023, Federal Reserve Chairman Powell adopted a more dovish stance,
marking a significant turning point in investor sentiment. Global equity
markets began a recovery that continued through to the end of the review
period.
Though European smaller companies did benefit from the improvement in market
sentiment in the second half of 2023, they have now underperformed European
large companies by more than 25% since September 2021. This is the longest and
sharpest period of underperformance in the past 20 years. These periods have
historically been followed by strong outperformance of European smaller
companies.
Table 1: Periods of European Small Cap underperformance and the corresponding
performance rebound
Under- 5Y forward
Period Number of months performance outperformance
September 2021 - March 2024 30 -29% Still within period
March 2007 - December 2008 22 -15% 95%
March 2018 - September 2019 19 -10% Still within period
January 2011 - December 2011 12 -10% 53%
March 2014 - October 2014 8 -7% 19%
Source: J.P. Morgan Asset Management, Bloomberg. Large Caps: MSCI Europe,
Small Caps: MSCI Europe Small Caps
Portfolio Performance
Despite the volatility induced by macroeconomic factors, the Net Asset
Value of the Company increased by 6.8% during the year, outperforming the
benchmark by 0.9%.
Performance attribution
Year ended 31st March 2024
% %
Contributions to total returns
Benchmark return +5.9%
Asset allocation -1.6%
Stock selection 1.5%
Gearing/cash effect 1.1%
Currency effect 0.1%
Investment Managers' added contribution 1.1%
Portfolio return 7.0%
Management fees/other expenses -0.9%
Share Buy-Back 0.7%
Other effects -0.2%
Return on net assets(A) 6.8%
Return to shareholders(A) 13.0%
Source: JPMAM/Morningstar.
All figures are on a total return basis.
Performance attribution analyses how the Company achieved its recorded
performance relative to its benchmark.
(A) Alternative Performance Measure ('APM')
A glossary of terms and APMs is provided in the Annual Report.
The relative performance of the Company has been volatile during the year.
Performance was adversely impacted in periods where macroeconomic themes
dominated. For instance, the portfolio underperformed in the last quarter of
2023, when expectations of significant interest rate cuts fuelled a
substantial rally in low-quality and high-risk companies.
However, since the start of 2024, company fundamentals have become the main
driver of share price performance again. In the first three months of 2024,
the NAV increased 10.4% compared to 2.1% for the MSCI Europe ex-UK Small Cap
index.
Sector contribution
Table 2: Sector performance - Top 3 and Bottom 3 sectors contributing to
performance
Account (%) Benchmark (%) Attribution (%)
Group Avg Wgt Return Avg Wgt Return Selection Allocation Total
Communication
Services 6.28 21.78 4.77 8.67 0.84 0.03 0.87
Materials 5.17 7.32 7.91 -4.08 0.51 0.20 0.71
Financials 14.01 35.30 13.92 26.16 0.88 -0.22 0.67
Utilities 0.82 -4.28 2.78 3.18 -0.25 -0.04 -0.29
Consumer
Discretionary 17.42 0.23 8.22 0.41 -0.03 -0.76 -0.79
Information
Technology 12.70 -13.25 10.48 -6.29 -1.30 -0.01 -1.31
Source: J.P. Morgan Asset Management
Our overweight to Communication Services contributed positively to performance
during the year. Our large overweight in CTS Eventim, the German online
ticketing platform, delivered strong performance; the cost of live
entertainment skyrocketed in 2023 due to increased demand as consumers
returned to the experiences they missed out on during the pandemic. Ticketing
platforms benefitted from this 'revenge spending' which shows no sign of
abating.
The positive attribution from Materials is the result of our underweight to
companies that have been hurt by energy prices, have structurally low returns
on invested capital or were delivering earnings that we thought were not
maintainable. Our focus on defensive companies with strong balance sheets and
high cash flow conversion allowed us to outperform the sector. This includes
the German producer of industrial lubricants Fuchs Petrolub, which has a
robust medium-term volume growth potential because of recent capacity
investments, while the deflation in base oils is a tailwind to its margins and
cash flows.
Despite the volatility induced by the collapse of SVB and Credit Suisse at the
start of the period, the Financial sector was one of the largest contributors
to returns at the sectoral level. After it became clear that these bank
failures were isolated events, this undervalued sector stabilised and reaped
the benefits from high interest rates and low bankruptcy rates. Our investment
in BPER Banca, the Italian banking group, performed particularly strongly for
these reasons.
The largest sectoral detractor from performance was the portfolio's stock
selection in Information Technology. Our exposure to automotive semiconductor
companies such as Melexis and Elmos suffered from the sharp slowdown in the
electric vehicle market and fears of a broad-based destocking from automotive
OEMs. Our overweight to IT consulting companies such as Alten, Reply and
Tietoevry also contributed negatively as clients postponed some IT and
innovation projects due to macroeconomic uncertainty.
The portfolio's overweight to Consumer Discretionary also contributed
negatively. Elevated rates of inflation and increasing interest rates eroded
consumer confidence in 2023. Our overweight to auto suppliers such as Forvia
and Plastic Omnium contributed negatively as they were hit by significant cost
inflation, leaving their levered balance sheets under pressure. Other
companies related to construction such as JM (a Swedish housing developer) or
Ariston (an Italian manufacturer of heating solutions) also suffered from the
impact of tightening monetary policies.
Stock contribution
Table 3: Investment performance - Top 3 and Bottom 3 investments contributing
to performance
Account (%) Benchmark (%)
Security Name Avg Wgt Return Avg Wgt Return Wgt Diff Total Effect
Top 3 Contributors
SPIE 3.45 30.07 0.49 29.28 2.96 0.71
Arcadis 2.18 48.14 0.39 48.56 1.78 0.57
CTS Eventim 2.49 41.69 0.47 41.46 2.02 0.56
Bottom 3 Contributors
Bravida 2.26 -21.71 0.20 -22.25 2.06 -0.85
Melexis 1.90 -28.42 0.21 -29.25 1.69 -0.78
Forvia 0.81 -44.14 0.37 -31.44 0.44 -0.76
Source: J.P. Morgan Asset Management
During the year our biggest contributors to performance at the stock level
were: SPIE, the French technical services company, as demand for installation
of electrical systems was boosted by the ongoing energy transition towards
electrification; Arcadis, the Dutch engineering and architecture services
company, which has benefitted from strong infrastructure investments in the US
and in Europe; and CTS Eventim, as demand for live events continued to grow
significantly post-COVID.
The biggest detractors to performance were Bravida, the Swedish
multi-technical services company, as the sharp slowdown in Swedish residential
construction led to significant pricing pressure for installers; Melexis, the
Belgian manufacturer of automotive chips, as automotive manufacturers who
over-ordered chips due to post-COVID supply chain constraints now have to
reduce their inventories in a slowing demand environment; and Forvia, the
French automotive supplier, as the company did not manage to increase prices
enough, while increasing interest rates put pressure on a stretched balance
sheet.
Portfolio Changes
During the review period, we aimed to position the Company to take best
advantage of the opportunities available.
We acquired several Healthcare companies with strong innovation pipelines,
thereby increasing our allocation to the Healthcare sector. These included
Zealand Pharma, a Danish biotech company with interesting weight-loss assets.
We believe the development of anti-obesity drugs has become a key structural
driver of the Healthcare sector, and Zealand Pharma offers exposure via its
long-acting amylin petrelintide. This drug could have a better tolerability
profile than existing weight-loss drugs, and thus offer a superior patient
experience. We also purchased Bonesupport, a Swedish biotechnology company
with a unique and innovative bone graft technology platform which is perceived
as vastly superior to current standards of care, with lower deep infection
rates and a higher rate of bone union. Bonesupport's offering is now approved
for various applications, which will allow the company to grow very rapidly.
We also identified several attractive investment opportunities in the Energy
sector. After years of underinvestment in energy infrastructure, recent
changes in the geopolitical landscape are reshaping energy supply chains. This
has been positive for European companies in the sector, which still trade at
attractive valuations. One such company is Vallourec, a French producer of
premium pipes for oil & gas drilling and distribution. In the past 18
months, a new management team has cut debt, closed loss-making operations
across Europe, and re-focused commercial efforts on high-margin applications.
As a result, Vallourec is now a profitable and cash-flow generative business,
trading at an appealing valuation. We also purchased GTT, a French engineering
company specialising in the design of cryogenic membrane containment systems
for liquid natural gas (LNG) shipping and storage. LNG's share of the world's
energy consumption is increasing as the world strives to cut its dependence on
energy sources with higher carbon emissions. The war in Ukraine has
accelerated investments in liquefaction and LNG transportation, which
materially improved GTT's growth prospects.
Real Estate is the other area to which we increased exposure. With inflation
under control, and interest rates set to decline, we expect real estate
companies with strong balance sheets to start trading closer to the net asset
value (NAV) of their underlying assets. We purchased TAG Immobilien, a German
residential company. TAG's stock trades at a significant discount to NAV
despite a low-risk leverage ratio, high occupancy rates, increasing rents and
an attractive growth pipeline in the Polish market. We also bought Merlin
Properties, which owns diversified real estate assets in Spain. Merlin has a
strong balance sheet and will use its financial firepower to invest in data
centres, which are expected to see sustained demand from the rapidly rising
appetite for data processing and storage. We expect this growth to be value
accretive for Merlin, but the stock still trades at a significant discount to
the portfolio's NAV.
To fund these purchases, we reduced overweights to IT and Industrials. Within
the Technology sector, we adopted a more cautious stance on automotive
semiconductors. In the post-pandemic recovery, automotive component companies
struggled to source chips due to supply chain disruptions. This benefited chip
manufacturers, as availability became more important than price. However,
automotive component makers now have adequate levels of chip inventories and
demand for electric vehicles is slowing. The earnings growth prospects for
automotive chip manufacturers are therefore less attractive and we have
reduced exposure accordingly. We sold Elmos Semiconductors and Melexis due to
their deteriorating operating momentum.
Within Industrials, we reduced our exposure to companies with high exposure to
construction; activity in the sector has suffered due to the rapid rise in
interest rates. Building permits in Germany are down almost 50% from the peak
levels of 2021. During the year, we sold industrial companies such as Georg
Fischer (which produces piping systems), Ariston (a supplier of heating
systems), Aalberts (which makes flow control devices) and AFRY (an
architectural services company). Other names in the Industrial sector such as
Prysmian, Trelleborg and d'Ieteren were sold because they left our investment
universe following strong performance.
Despite the disposal of these companies, Industrials remain the portfolio's
most significant overweight. Any recovery in manufacturing activity would
provide a tailwind for many of the industrial companies we own, but our
holdings have company-specific drivers that should help them perform
regardless of the economic environment. Do&Co for example is an Austrian
airline catering company taking market share from struggling peers thanks to
its unique 'premium fresh cuisine' branding. An economic slowdown is unlikely
to slow the pace at which the company opens new locations and signs new
airlines. Another holding, Bilfinger, is a German industrial services company
whose new management is implementing better risk controls and pricing
mechanisms, which should significantly increase their operating margin.
Although an improvement in economic conditions would help, the stock's
performance will depend mainly on these internal reforms.
The same is true for our overweight to Consumer Discretionary. Consumer
confidence, growth in real disposable income and the unemployment rate are all
significant drivers of consumer spending. With inflation and energy prices
falling, consumer sentiment in Europe has rebounded from the lows of September
2022. This should help the businesses we own in the sector, but their strong
brands and exposure to structurally growing categories are more significant
drivers of stock performance. For example, De'Longhi, an Italian manufacturer
of home appliances, has built a solid reputation for 'premium quality at the
press of a button' coffee machines, allowing it to benefit from the
significant growth in global coffee consumption. Sanlorenzo's tailor-made and
exclusive superyachts are recognised for their exceptional Italian design,
which makes them appealing to a growing population of ultra-high-net-worth
individuals.
Materials continues to be the portfolio's largest sectoral underweight. Many
companies in the sector are commoditised, capital intensive, cyclical
businesses, with a poor track record of shareholder value creation. Strong
post-pandemic demand and the sharp increase in energy prices after the
invasion of Ukraine significantly boosted the price of materials. However, the
subsequent rapid fall in gas and electricity prices will at some point turn
into a headwind for earnings in the sector. During the year we sold our
position in Verallia, the French glassmaker. The shortage of glass in 2022 and
early 2023 gave glassmakers exceptional pricing power. We doubt these earnings
will be maintainable.
Despite some sectoral over and underweights, our sector allocation is balanced
relative to benchmark, as every sector is offering attractive investment
propositions. Investors' focus on macroeconomic variables and their
implications for monetary policy has led to a raft of valuation dislocations.
Not only are small cap valuations extremely attractive compared to history,
but we think the opportunity set for alpha creation through stock-picking is
also wider than usual.
Our ability to use gearing to increase market exposure has the potential to
further enhance returns in a rising market. Gearing stood at 7.9% at the end
March 2024 and has since remained stable.
Outlook
Because of the attractive valuations European smaller companies currently
trade at, we think the expected return for the asset class is higher than
usual. In addition, the macroeconomic headwinds the asset class faced over
recent years are now fading. The market expects the ECB to cut interest rates
during 2024 and this should boost investor sentiment, thereby benefitting
small cap companies.
Furthermore, the latest data points suggest that global and European economies
are more resilient than anticipated. Indicators such as Purchasing Managers'
Index ('PMI') appeared to have bottomed. And for the first time in years,
major European economies are seeing growth in real wages, which should
continue to improve consumer confidence.
The asset class should receive further support from the resurgence of mergers
and acquisitions (M&A) activity. There has been a lull in deal flow within
the European Small Caps space in recent years, but attractive valuations and
the prospect of lower rates could drive a marked pick-up in M&A activity.
Small cap companies are also likely to be supported over the longer-term by
emerging themes such as Artificial Intelligence (AI) and drug-assisted weight
loss. To date, both these themes have mostly played out in the mega cap space.
However, the main point for small cap investors is that most of tomorrow's
winners might be today's small caps. For example, Amazon and ASML were small
caps back in 2000, while Tesla and Meta were not even founded.
It is our strong conviction that many of the companies which will be most
successful in capitalising on the AI revolution, pharmaceutical breakthroughs
and other emergent structural trends over the coming years are yet to be
identified, or even conceived, and are thus most likely to emerge from the
small cap space.
We expect this confluence of attractive valuations, favourable macroeconomic
trends, and long-term thematic developments to act as key drivers for small
caps, which have outperformed every asset class globally over the past 25
years.
All this leaves us feeling positive about the prospects for the portfolio. In
fact, in our view, the outlook has rarely been brighter, and we expect our
shareholders to benefit accordingly.
Jon Ingram
Jack Featherby
Jules Bloch
Investment Managers
PRINCIPAL AND EMERGING RISKS
The Directors confirm that they conduct a robust assessment of the principal
and emerging risks facing the Company. It is with a focus on those risks that
could materially adversely impact the Company's performance, share price,
reputation or the viability of its business. The reviews are based on a risk
matrix developed by the Audit Committee with the assistance of the Manager.
During the year, the Board discussed the risks and identified those that merit
particular attention. At the current time these are - investment performance,
discount control and the impact of geopolitical events. At the same time, they
viewed that the threat of a recession and the adverse impact of further
pandemics as having declined over the year.
The AIC Code of Corporate Governance requires the Audit Committee to put in
place procedures to identify emerging risks facing the Company. The Committee
has conducted horizon scanning and other than the exacerbation of geopolitical
events in Ukraine & the Middle East, growing usage of Artificial
Intelligence and continuing Climate Change, it does not believe that there are
any new emerging risks.
The risks together with how these are mitigated and managed, as far as
practicable, are set out in the table below.
RISK & DESCRIPTION MITIGATION & MANAGEMENT
Investment Performance and Strategy Ongoing performance measurement of the portfolio computed independently of the
investment managers. This is shared within Investment Managers teams for
Performance of the Company's investment portfolio is fundamental to the ongoing oversight as well as to the Board.
success of the company.
The Board reviews the overall strategy and structure of the Company and
An inappropriate investment strategy, or poor implementation of the strategy, reports of comparison of the performance against benchmark, peer group and
for example relating to concentration of investments, asset allocation, the share activity. The Board holds a separate meeting devoted to strategy each
level of gearing or the degree of portfolio risk. year which includes consideration of whether the Company's objectives and
structures are appropriate for the long-term interests of shareholders.
Regular reports prepared by the Manager are received by the Board on stock
selection, asset allocation, gearing, hedging and costs of running the Company
and these are reviewed at each Board meeting.
Discount/Premium Control The Board continuously monitors the level of the discount. Where deemed it
prudent, seeks to address the imbalances in the supply of and demand for the
Share price premium volatility and deep discount to net asset value per share Company's shares through share repurchases.
leads to a sense of uncertainty reducing shareholder confidence. Potentially
triggering shareholder intervention.
Geopolitical The Company monitors global developments with the Manager and external experts
on an ongoing basis.
Market instability and declining investment opportunities from escalation of
geopolitical conflicts such as in Ukraine and the The Board can, with shareholder approval, amend the investment policy and
objectives of the Company to mitigate the risks arising from geopolitical
instability.
Market and Currency The Board manages these risks by diversification of investments and monitoring
compliance with investment guidelines and policies with the Investment
Uncertainty about the future prices and liquidity of the Company's investments Manager.
arising from economic, social, fiscal, climate, inflationary and regulatory
changes. This covers the impact of holding investments in the face of negative The Board includes an assessment of these risk factors at meetings and has
market movements. placed investment restrictions and guidelines to limit these risks. The Board
also reviews the level of liquidity in the portfolio.
The company has an inherent risk exposure to the Euro/Sterling exchange rate.
The majority of the Company's assets, liabilities and income are denominated The Company borrows in Euros in order to hedge the currency risk in respect of
in Euros, rather than in Sterling which is the Company's functional currency the geared portion of the portfolio. The Company does not hedge the foreign
and in which it reports performance. currency exposure of the remainder of the portfolio.
Loss of Key Personnel The Manager ensures appropriate performance reviews and benchmarked
incentivisation and compensation. In addition, ongoing succession planning
Loss of one or more of the investment management team, particularly key through a team-based approach.
individuals.
The Board also takes a keen interest in getting to know the individuals
through attendance at Board meetings and their participation at the off-site
Strategy meetings.
Shareholder Relations The Manager has a programme of visiting major institutional holders and
providing presentations via various platforms to communicate more widely with
Failure to communicate effectively and regularly and appropriately with the its investors. Extensive range of investor information and nation-wide
different shareholder constituencies. presentations are done by the Sales teams and feedback via brokers is reviewed
for improvements.
In addition, the Board arranges regular meetings with major institutional
holders and responds to questions and matters raised at AGMs or in the interim
by shareholders.
Operational and Cyber Crime The Audit Committee receives independently audited reports on the Managers and
other service providers' internal controls, as well as a report from the
In common with most investment trusts the Board delegates the operation of the Manager's Compliance function.
business to third parties, the principal delegate being the Manager.
The Company's management agreement obliges the Manager to report on the
Disruption to, failure of, or fraud in the Manager's accounting, dealing or detection of fraud relating to the Company's investments and the Company is
payments systems or at its service providers (Custodian, Depositary or afforded protection through its various contracts with suppliers, of which one
Registrar) preventing timely implementation of investment decisions, and of the key protections is the Depositary's indemnification for loss or
potentially shortfalls in the accuracy of reporting and monitoring of the misappropriation of the Company's assets held in custody.
Company's financial position.
Details of how the Board monitors the services provided by JPMF and its
Cyber-attack impacting business continuity, breaches of information security associates and the key elements designed to provide effective risk management
and integrity of data. and internal control are included within the Risk Management and Internal
Control section of the Corporate Governance Statement in the Annual Report.
The Board Is kept up to date with the Manager's cyber security defences and
its cyber security programme. The information technology controls around the
physical security of data centres, security of its networks and trading
applications are tested and reported on every.
Accounting, Legal and Regulatory The Board relies on the services of its Company Secretary, the Manager
(JPMF) and its service providers and professional advisers to ensure
Failure to comply with existing and emerging accounting, fiscal regulatory compliance. Relying on relevant processes reviewed on a regular basis
rules. The Company operates in an environment with significant regulation including by Internal Audit and Risk & Operational audits together with
including the FCA Listing Rules, The UK Companies Act, the Corporation Taxes regular consultation with External Auditors and meetings of the Audit
Act, Market Abuse Regulation, Disclosure Guidance and Transparency Regulations Committee.
and the Alternative Investment Fund Managers Directive (AIFMD).
Specifically, the Section 1158 compliance is continually monitored by the
An example is the breach of Section 1158 which would lead to a loss of Manager and the results reported to the Board each month.
investment trust status and, as a consequence, gains within the Company's
portfolio would be subject to capital gains tax.
Artificial Intelligence (AI) The Manager's investment process integrates financially material
considerations of the impact of AI when taking investment decisions.
AI has become a powerful tool that will impact a huge range of areas. It could
be a significant driver for new business as well as a disrupter to current The Board works with the Manager to monitor the developments concerning AI and
business models and processes leading to emerging uncertainty in corporate its potential impact on the portfolio, our service providers and the wider
valuations. There is also an increased potential risk from cyber related market.
crime.
Climate Change The Manager's investment process integrates financially material
considerations of environmental, social and governance (ESG) factors when
Climate change has an increasingly significant impact on the business models, taking investment decisions. This includes considering the approach investee
sustainability and even viability of individual companies, sectors and asset companies take to recognising and mitigating climate change risks.
classes, impacting investment performance and valuations in the short and
longer term. This is outlined in Investment Manager's Report.
The Board reviews ESG reports from the Manager on the way ESG considerations
are integrated into the investment decision making.
It also considers, where relevant, the direct impact on climate change from
the nature of operations of the Manager and other service providers. At the
level of the Company, as extreme weather events become more common, the
resiliency, business continuity planning and location strategies of the
Company's service providers will come under greater scrutiny.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report in the
Annual Report. The management fee payable to the Manager for the year was
£5,773,000 (2023: £6,416,000), of which £nil (2023: £nil) was outstanding
at the year end.
Included in administration expenses in note 6 in the Annual Report are safe
custody fees payable to JPMorgan Chase amounting to £79,000 (2023: £86,000)
excluding VAT of which £8,000 (2023: £30,000) was outstanding at the year
end.
The Manager may carry out some of its dealing transactions through group
subsidiaries. These transactions are carried out at arm's length. The
commission payable to JPMorgan Securities Limited for the year was £44,000
(2023: £67,000) of which £nil (2023: £nil) was outstanding at the year end.
The Company also holds cash in JPMorgan Euro Liquidity Fund, which is managed
by JPMF. At the year end, this was valued at £7.2 million (2023: £46.6
million). Interest amounting to £683,000 were payable (2023: £nil) during
the year of which £53,000 (2023: £nil) was outstanding at the year end.
Securities lending income amounting to £131,000 (2023: £113,000) were
receivable by the Company during the year. JPMAM commissions in respect of
such transactions amounted to £15,000 (2023: £13,000).
Handling charges on dealing transactions amounting to £49,000 (2023:
£59,000) were payable to JPMorgan Chase during the year of which £17,000
(2023: £29,000) was outstanding at the year end.
At the year end, the Company held cash of £311,000 and an overdraft of
£394,000, resulting in net overdrawn amount of £83,000 (2022: cash held of
£445,000 and £nil overdraft) with JPMorgan Chase Bank N.A. A net amount of
interest of £118,000 (2023: £2,000) was receivable by the Company during the
year from JPMorgan Chase of which £nil (2023: £1,000) was outstanding at the
year end.
Full details of Directors' remuneration and shareholdings can be found in the
Annual Report.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Accounts in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law, the Directors have elected to prepare the
financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the financial statements
unless they are satisfied that, taken as a whole, the Annual Report and
Accounts are fair, balanced and understandable, provide the information
necessary for shareholders to assess the Company's position and performance,
business model and strategy and that they give a true and fair view of the
state of affairs of the Company and of the total return or loss of the Company
for that period. In order to provide these confirmations, and in preparing
these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on a going concern basis
unless it is inappropriate to presume that the Company will continue in
business
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The financial statements are published on the www.jpmeuropeandiscovery.co.uk
website, which is maintained by the Company's Manager. 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. The work carried out by the
Auditors does not involve consideration of the maintenance and integrity of
this website and, accordingly, the Auditors accept no responsibility for any
changes that have occurred to the financial statements since they were
initially presented on the website. The financial statements are prepared in
accordance with UK legislation, which may differ from legislation in other
jurisdictions.
Under applicable law and regulations the Directors are also responsible for
preparing a Directors' Report, Strategic Report, Statement of Corporate
Governance and Directors' Remuneration Report that comply with that law and
those regulations.
Each Director, whose names and functions are listed in the Annual Report
confirm that, to the best of their knowledge:
• the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable law), give a true and fair view of
the assets, liabilities, financial position and return or loss of the Company;
and
• the Strategic Report includes a fair review of the
development and performance of the business and the position of the Company,
together with a description of the principal risks and uncertainties that it
faces.
The Board confirms that it is satisfied that the Annual Report and Financial
Statements taken as a whole are fair, balanced and understandable and provide
the information necessary for shareholders to assess the strategy and business
model of the Company.
For and on behalf of the Board
Marc Van Gelder
Chairman
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31st March
2024 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on investments and derivatives
held at fair value through profit or loss - 25,759 25,759 - (45,535) (45,535)
Foreign exchange (losses)/gains on liquidity fund - (172) (172) - 2,265 2,265
Net foreign currency gains/(losses) - 2,225 2,225 - (2,366) (2,366)
Income from investments 23,050 - 23,050 22,389 - 22,389
Interest receivable and similar income 932 - 932 113 - 113
Gross return/(loss) 23,982 27,812 51,794 22,502 (45,636) (23,134)
Management fee (1,732) (4,041) (5,773) (1,925) (4,491) (6,416)
Other administrative expenses (860) - (860) (690) - (690)
Net return/(loss) before finance costs and taxation 21,390 23,771 45,161 19,887 (50,127) (30,240)
Finance costs (1,227) (2,861) (4,088) (530) (1,237) (1,767)
Net return/(loss) before taxation 20,163 20,910 41,073 19,357 (51,364) (32,007)
Taxation (1,493) - (1,493) (1,845) - (1,845)
Net return/(loss) after taxation 18,670 20,910 39,580 17,512 (51,364) (33,852)
Return/(loss) per share 12.04p 13.49p 25.53p 11.11p (32.60)p (21.49)p
A final dividend of 8.0p per share (2023: 7.8p per share) is proposed in
respect of the year ended 31st March 2024, costing £11,815,000 (2023:
£12,283,000). More details can be found in note 10(a) on page 78 of the
Annual Report.
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.
The net return/(loss) on ordinary activities after taxation represents the
profit for the year and also Total Comprehensive Income.
The notes on pages 73 to 90 of the Annual Report form an integral part of
these financial statements.
STATEMENT OF CHANGES IN EQUITY
Called up Capital
share Share redemption Capital Revenue
capital premium reserve reserves(1) reserve(1) Total
£'000 £'000 £'000 £'000 £'000 £'000
At 31st March 2022 7,924 1,312 7,712 805,617 11,154 833,719
Repurchase and cancellation of the Company's
own shares (50) - 50 (4,254) - (4,254)
Net return on ordinary activities - - - (51,364) 17,512 (33,852)
Dividends paid in the year (note 2) - - - - (10,551) (10,551)
At 31st March 2023 7,874 1,312 7,762 749,999 18,115 785,062
Repurchase of shares into Treasury - - - (40,278) - (40,278)
Proceeds from unclaimed shares forfeited(2) - - - 658 - 658
Net return on ordinary activities - - - 20,910 18,670 39,580
Dividends paid in the year (note 2) - - - - (15,976) (15,976)
At 31st March 2024 7,874 1,312 7,762 731,289 20,809 769,046
(1) These reserves form the distributable reserves of the Company and
may be used to fund distribution of profits to investors via dividend
payments.
(2) During the year the Company undertook an Asset Reunification
Program for its shareholders. As a result, shares that could not be traced to
shareholders for more than 12 years, were forfeited. In accordance with the
Company's Articles of Association, these shares were sold in the open market
and the proceeds returned to the Company.
STATEMENT OF FINANCIAL POSITION
At 31st March
2024 2023
£'000 £'000
Fixed assets
Investments held at fair value through profit or loss 829,738 839,582
Current assets
Debtors 6,815 16,100
Cash and cash equivalents 7,554 47,000
14,369 63,100
Current liabilities
Creditors: amounts falling due within one year (2,391) (117,620)
Net current assets/(liabilities) 11,978 (54,520)
Total assets less current liabilities 841,716 785,062
Current liabilities
Creditors: amounts falling due after more than one year (72,670) -
Net assets 769,046 785,062
Capital and reserves
Called up share capital 7,874 7,874
Share premium 1,312 1,312
Capital redemption reserve 7,762 7,762
Capital reserves 731,289 749,999
Revenue reserve 20,809 18,115
Total shareholders' funds 769,046 785,062
Net asset value per share 520.7p 498.5p
Included in the investments held at fair valuation through profit or loss are
investments of £52,989,000 (2023: £41,510,000) that are on loan under
securities lending arrangements.
STATEMENT OF CASH FLOWS
For the year ended 31st March
2024 2023
£'000 £'000
Cash flows from operating activities
Net return/(loss) before finance costs and taxation 45,161 (30,240)
Adjustment for:
Net (gains)/losses on investments held at fair value through profit or (25,759) 45,535
loss
Foreign exchange losses/(gains) on liquidity fund 172 (2,265)
Net foreign currency (gains)/losses (2,225) 2,366
Dividend income (23,050) (22,201)
Interest income (801) -
Scrip dividends received as income - (188)
Realised loss on foreign exchange transactions (486) (567)
Realised foreign exchange (losses)/gains on JPMorgan Euro Liquidity Fund (267) 2,897
Increase in accrued income and other debtors (37) (40)
(Decrease)/increase in accrued expenses (31) 17
Net cash outflow from operating activities before dividends and interest (7,323) (4,686)
Dividends received 23,751 21,467
Interest received 748 1
Overseas withholding tax recovered/(paid) (2,881) (2,841)
Net cash inflow from operating activities 14,295 13,941
Purchases of investments and derivatives (683,947) (733,345)
Sales of investments and derivatives 723,852 675,882
Settlement of forward foreign currency contracts - 2
Net cash inflow/(outflow) from investing activities 39,905 (57,461)
Dividends paid (note 2) (15,976) (10,551)
Repurchase and cancellation of the Company's own shares - (4,412)
Repurchase of shares into Treasury (39,592) -
Proceeds from unclaimed shares forfeited 658 -
Repayment of Bank loan - (42,528)
Drawdown of Bank loan (34,447) 74,509
Interest paid (4,770) (1,184)
Net cash (outflow)/inflow from financing activities (94,127) 15,834
Decrease in cash and cash equivalents (39,927) (27,686)
Cash and cash equivalents at start of year 47,000 75,318
Exchange movements 87 (632)
Cash and cash equivalents at end of year 7,160 47,000
Cash and cash equivalents consist of:
Cash and short term deposits 312 447
Cash held in JPMorgan Euro Liquidity Fund 7,242 46,553
Cash and cash equivalents per the Statement of Financial Position 7,554 47,000
Bank overdraft (394) -
Total cash, cash equivalents and bank overdraft per the Statement of Cash 7,160 47,000
Flows
NOTES TO THE FINANCIAL STATEMENTS
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. In preparing these financial statements the Directors
have considered the impact of climate change risk as a principal risk as set
out in the Annual Report and have concluded that it does not have a material
impact on the Company's investments. In line with FRS 102 investments are
valued at fair value, which for the Company are quoted bid prices for
investments in active markets at the 31st March 2024 and therefore reflect
market participants view of climate change risk.
All of the Company's operations are of a continuing nature.
The financial statements have been prepared on a going concern basis. The
Board has, in particular, considered the exacerbation of geopolitical events
in Ukraine and the Middle East, arising from geopolitical risks, including the
crisis in Ukraine and Russia and the Middle East, and does not believe the
Company's going concern status is affected. They have considered the potential
impact and the mitigation measures which key service providers including
Managers, have in place to maintain operational resilience and believe the
adverse impact of further pandemics has declined. The Directors have reviewed
income and expense projections to 30th June 2025 and the liquidity of the
investment portfolio in making their assessment. Further details of Directors'
considerations regarding this are given in the Chairman's Statement,
Investment Managers' report, Going Concern Statement , Viability Statement and
Principal Risks section of this Annual Report.
The policies applied in these financial statements are consistent with those
applied in the preceding year.
2. Dividends
(a) Dividends paid and declared
2024 2023
Pence £'000 Pence £'000
Dividends paid
Unclaimed dividends returned to the Company - (120) - -
Final dividend in respect of the prior year 7.8 12,283 5.5 8,661
Interim dividend 2.5 3,813 1.2 1,890
Total dividends paid in the year 10.3 15,976 6.7 10,551
Dividend proposed
Final dividend 8.0 11,815 7.8 12,283
All dividends paid and declared in the period have been funded from the
revenue reserve.
The final dividend has been proposed in respect of the year ended 31st March
2024 and is subject to approval at the forthcoming Annual General Meeting. In
accordance with the accounting policy of the Company, this dividend will be
reflected in the financial statements for the year ending 31st March 2025.
(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, shown below.
The revenue available for distribution by way of dividend for the year is
£18,670,000 (2023: £17,512,000). The revenue reserve after payment of the
final dividend will amount to £8,994,000 (2023: £5,832,000).
2024 2023
Pence £'000 Pence £'000
Interim dividend 2.5 3,813 1.2 1,890
Final dividend 8.0 11,815 7.8 12,283
Total 10.5 15,628 9.0 14,173
3. Return/(loss) per share
2024 2023
£'000 £'000
Revenue return 18,670 17,512
Capital return/(loss) 20,910 (51,364)
Total return/(loss) 39,580 (33,852)
Weighted average number of shares in issue during the year 155,063,487 157,569,054
Revenue return per share 12.04p 11.11p
Capital return/(loss) per share 13.49p (32.60)p
Total return/(loss) per share 25.53p (21.49)p
4. Net asset value per share
2024 2023
Net assets (£'000) 769,046 785,062
Number of shares in issue 147,692,459 157,474,931
Net asset value per share 520.7p 498.5p
5. Non-statutory accounts
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 financial information set out above does not constitute the Company's
statutory accounts for the year ended 31st March 2024 but is derived from
those accounts. Statutory accounts for the year ended 31st March 2024 will be
delivered to the Registrar of Companies in due course. The Annual Report and
Financial Statements include the Report of the Independent Auditors which was
unqualified and did not contain a statement under either section 498(2) or
section 498(3) of the Companies Act 2006
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
19th June 2024
For further information:
Priyanka Vijay Anand
JPMorgan Funds Limited 0800 20 40 20 (or +44 1268 44
44 70)
ENDS
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
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Annual Report will be available on the Company's website at
www.jpmeuropeandiscovery.co.uk (http://www.jpmeuropeandiscovery.co.uk) .where
up-to-date information on the Company, including daily NAV and share prices,
factsheets and portfolio information can also be found.
JPMORGAN FUNDS LIMITED
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. END FR SFSFAUELSEEM